Strategies to Align Executive Compensation Improve Value-Based Performance, Patient Experience, and Health Equity.

By: James P. Young, Jr, PhD,

Chief Executive Officer

Lead Workshop Developer

Aligning executive compensation to value-based, patient-centered performance KPIs in nonprofit human-centered healthcare organizations is a complex but crucial task, particularly when focusing on health equity and population health for racially and culturally diverse communities (1,2). Below are the steps we include in our workshop that nonprofit organizations can take to achieve this alignment:

Establish Clear Value-Based KPIs

a. Define KPIs: Identify and clearly define value-based KPIs that reflect patient-centered care, health equity, and population health. These could include metrics such as patient satisfaction scores, health outcomes, readmission rates, access to care for underserved populations, and disparities in health outcomes among different racial and cultural groups.

b. Health Equity Metrics: Include specific KPIs related to health equity, such as reduction in health disparities, improved health outcomes in minority populations, and increased access to care for underserved communities.

c. Population Health Metrics: Establish KPIs that measure improvements in population health, such as preventive care utilization rates, chronic disease management, and community health initiatives.

Develop a Performance-Based Compensation Framework

a. Align Compensation with KPIs: Create a compensation framework that ties a significant portion of executive compensation to the achievement of the defined KPIs. This may include bonuses, salary increases, or other financial incentives.

b. Transparent Metrics: Ensure that the metrics used to evaluate performance are transparent, measurable, and achievable. This transparency helps in gaining the trust of both the executives and the communities served.

c. Regular Evaluation: Implement a regular evaluation process (e.g., quarterly or annually) to assess performance against the KPIs. Use these evaluations to adjust compensation accordingly.

Engage Stakeholders in the Process

a. Inclusive Process: Engage diverse stakeholders, including community representatives, to provide input on the KPIs and compensation framework. This ensures that the metrics and incentives are aligned with the needs and values of the communities served.

b. Board Involvement: Ensure the governing board's active involvement in developing and overseeing the compensation framework. The board should include members who are knowledgeable about health equity and population health.

Governance and Oversight

a. Board Responsibilities: The governing board should be responsible for setting and approving executive compensation. They should ensure that the compensation aligns with the organization's mission and values.

b. Compensation Committee: Establish a dedicated compensation committee within the board to oversee the development and implementation of the compensation framework. This committee should regularly review performance data and make recommendations for compensation adjustments.

c. Mission Alignment: The board must ensure that compensation policies support the mission of providing care for uninsured and underserved communities. This includes prioritizing KPIs that reflect these goals and ensuring that executives are rewarded for advancing them.

Monitoring and Reporting

a. Regular Reporting: Implement regular reporting mechanisms to track progress against KPIs and the impact of executive compensation on organizational performance.

b. Public Accountability: Consider publicly reporting executive compensation and performance outcomes to enhance transparency and accountability. This can help build trust with the community and other stakeholders.

Continuous Improvement

a. Feedback Loop: Establish a feedback loop to assess and improve the compensation framework continuously. Solicit input from executives, board members, and community representatives to refine the KPIs and compensation strategies.

b. Adapt to Changes: Be prepared to adapt the compensation framework to changes in the healthcare landscape, such as new regulations, shifts in community needs, or advancements in healthcare delivery.

Step-by-Step Example:

Define KPIs: Set specific goals, such as reducing the diabetes prevalence rate among African American patients by 10% within two years.
Link Compensation: Tie 30% of the CEO's annual bonus to achieve this goal.
Board Oversight: The compensation committee, with members experienced in public health and equity, oversees this initiative.
Regular Reviews: Quarterly reviews track progress, with adjustments made as necessary.
Community Involvement: Include community health advocates in the process to ensure the KPIs reflect the needs of the population served.

By carefully defining value-based, patient-centered KPIs, developing a transparent and measurable compensation framework, engaging diverse stakeholders, and ensuring rigorous governance and oversight, nonprofit human-centered healthcare organizations can align executive compensation with the mission of providing equitable care for all, particularly the uninsured and underserved communities. This alignment incentivizes executives to prioritize health equity and population health and strengthens the organization’s commitment to its core values and mission.

References

1. Hofmann P. Prioritizing Patient Benefits Over Hospital Income: There should be no debate about why serving patients is most important. Healthcare Executive. 2024;39(3).

2. Navathe AS. Why Are Nonprofit Hospitals Focused More on Dollars Than Patients?: Guest Essay. New York Times (Online)2023.