The impact of healthcare reform legislation on the compensation received by hospital execs

Health Care Reform NewsThe Obama Administration healthcare reform legislation – which already includes Centers for Medicare and Medicaid Services programs for coordinated care and requirement changes for hospitals that are tax-exempt – may also be altering the compensation of hospital leaders.

Though this won’t be impacting hospital compensation directly, they may have an indirect impact on salaries from regulation increases and different care delivery models. Director Gary Young of the Northeastern University Center for Health Policy and Healthcare Research looked into the differences that will be seen among non-profit and for-profit hospitals at the start of the healthcare reform laws.

• Tax-except status – hospitals that are tax-exempt will now undergo a community health needs assessment. This regulation, proposed by the Internal Revenue Service, will need to be repeated every three years. According to Young, the changes that were made under the Patient Protection and Affordable Care Act don’t directly affect the compensation of hospital executives, but have a symbolic importance regarding the increasing concern being voiced by policy makers in terms of the justification for qualification for tax exemption.

He explained that the regulations aren’t concentrating as much on the actual size of the salaries as much as they focus on “whether they can be justified based on what is necessary to hire someone to do the job the hospital needs that individual to do.”

• ACO effect – the use of the organization model for accountable care could also alter the compensation for the hospital executives, by way of the changing leadership structures and patient volumes. These issues could actually have the opposite intended effect, making it challenging to forecast the way in which hospital leaders will be compensated throughout the next few years.

As an example, Young explained that hospitals may lower their capacity because of financial incentives offered to keep people out of the hospital. Equally, they might receive greater compensation if hospitals take on greater responsibility regarding the formation of ACO, in order to reflect the additional effort.

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