Does CEO compensation impact patient satisfaction?

Abstract

Purpose – This study examines the relationship between CEO compensation and patient satisfaction in Ontario, Canada. The purpose of this paper is to determine what impact hospital CEO compensation has on hospital patient satisfaction.

Design/methodology/approach – The analyses in this study were based on data of 261 CEO-hospital-year observations in a sample of 103 nonprofit hospitals. A number of linear regressions were conducted, with patient satisfaction as the dependent variable and CEO compensation as the independent variable of interest. Controlling variables included hospital size, type of hospital, and frequency of adverse clinical outcomes.

Findings – CEO compensation does not significantly influence hospital patient satisfaction. Both patient satisfaction and CEO compensation appear to be driven primarily by hospital size. Patient satisfaction decreases, while CEO compensation increases, with the number of acute care beds in a hospital. In addition, CEO compensation does not even appear to moderate the influence of hospital size on patient satisfaction.

Research limitations/implications – There are several limitations to this study. First, observations of CEO-hospital-years in which annual nominal CEO compensation was below $100,000 were excluded, as they were not publicly available. Second, this research was limited to a three-year range. Third, this study related the compensation of individual CEOs to a measure of performance based on a multitude of patient satisfaction surveys. Finally, this research is restricted to not-for-profit hospitals in Ontario, Canada.

Practical implications – The findings seem to suggest that hospital directors seeking to improve patient satisfaction may find their efforts frustrated if they focus exclusively on the hospital CEO. The findings highlight the need for further research on how CEOs may, through leading and supporting those hospital clinicians and staff that interact more closely with patients, indirectly enhance patient satisfaction.