In Los Angeles, hospital CEO pay could be capped

In Los Angeles, the top leaders of hospitals may find a ceiling on their compensation in the near future.

The Los Angeles City Council has approved a measure that would allow voters to impose a ceiling on hospital executive compensation. Hospitals say the measure would make it more difficult to recruit and keep top leaders. (Image credit: ©Andrey Popov - stock.adobe.com)

Next spring, Los Angeles voters are slated to get the chance to vote on a ballot question that would cap the pay of hospital CEOs and other top executives. The measure would limit the compensation of top hospital executives to $450,000 annually, mirroring the pay for the president of the United States.

The Los Angeles City Council approved a measure Wednesday to put a question on the ballot for voters in March 2024, The Los Angeles Times reports. The SEIU-United Healthcare Workers West has backed the measure. The union has criticized executive compensation and pushed to boost the pay of healthcare workers.

Hospital organizations, including the California Hospital Association, have opposed the measure.

“This measure won’t do anything to reduce healthcare costs or improve the quality of care in the community,” Jan Emerson-Shea, vice president of external affairs for the California Hospital Association, said in a statement emailed to Chief Healthcare Executive®.

“On the contrary, it will only make it more difficult to recruit qualified hospital leaders, including physicians and nurse leaders,” she said. “Sadly, this union has a long history of filing politically motivated measures as a tactic to exert pressure on hospitals.”

The Hospital Association of Southern California, Kaiser Permanente, Cedars-Sinai and other providers said in a joint letter to the city council that the policy is “deeply flawed.”

The association and hospitals contend a cap on hospital executive pay “would have severe consequences for the recruitment and retention of qualified leaders in our local hospitals.”

The California Hospital Association filed a court challenge to block the measure, but it was rejected in April.

Under the proposal, the salary cap would affect chief executive officers, chief financial officers, presidents, senior vice presidents, administrators, and other top posts.

The measure would not impose any caps on the salaries of those whose primary duties involve “direct patient care” or research.

The SEIU-HCW has said high executive pay is one of the factors driving up the price of healthcare.

The union has been pushing for state legislation (SB525) to raise the minimum pay for California healthcare workers to $25 per hour. The SEIU-HCW has said the pay for healthcare workers isn’t keeping pace with those in food service and retail, and has noted that a few Los Angeles hospital CEOs are paid more than $1 million.

The SEIU-HCW said in April that hefty executive compensation packages “drive healthcare costs higher for everyday Californians, while frontline caregivers scramble to make ends meet and serve patients while critically understaffed.”

California hospitals have said they are facing serious financial difficulties. As many as one in five California hospitals are facing a risk of closure, according to an analysis by Kaufman Hall, a healthcare consulting firm.

In addition to suffering substantial losses in the COVID-19 pandemic, hospitals say they haven’t received adequate state and federal funding. They have urged California Gov. Gavin Newsom and Congress to step up.

Hospital CEO compensation has gained more attention in recent years, particularly for leaders of nonprofit health systems.

Leaders of nonprofit hospitals earn an average of about $600,000, and the median pay of the chief executives of nonprofit hospitals was $362,887, according to a 2021 report from the Economic Research Institute. Some leaders of larger hospitals earn more than $1 million.