DUMBEST HEALTH CARE POST OF THE WEEK

Once again, the Health Wonk Review has proven to be a cornucopia of clueless posts on health care. By far the dumbest contribution to the latest edition is this post by Roy Poses about the salaries received by hospital CEOs:

We recently posted about the latest example of generously paid health care leaders, million dollar plus hospital CEOs in the Baltimore area … So it should be no surprise that the defenders of rich hospital CEOs are starting to rally.

The ostensible purpose of the post is to shoot down a variety of “logical fallacies” used by the president of the Maryland Hospital Association and other “defenders” of what Poses refers to as the “huge salaries” paid to CEOs.

The Baltimore Sun published two letters defending the million dollar plus compensation received by many local hospital CEOs. But what arguments they made.

The actual point of the post is to give Poses an opportunity to ride a hobby horse much beloved of cocktail-party progressives—-executive salaries. The implication is obvious—-these “huge” salaries contribute to the high cost of health care.

Ironically, the post demonstrates nothing more than Poses’ ignorance of market dynamics and the realities of hospital CEO selection. It also confirms, once again, that progressives in general tend to be illiterate about economics.

The source of his salary data is this chart published in the Baltimore Sun showing the annual compensation of 27 hospital CEOs. Predictably, he draws conclusions from the chart that are not supported by the data contained therein.

Despite his repeated references to “million dollar” salaries, most of the listed executives make under $1 million. But, for the sake of argument, lets say that the average salary for a hospital CEO is $1 million (it’s actually far lower).

There are about 5,000 community hospitals in the US. And, if you multiply that number by $1 million, you come up with $5 billion. So, what percentage of our $2.5 trillion health care bill would go away if these CEOs worked for free?

Answer: Two-tenths of 1 percent.

In other words, the impact of hospital CEO salaries on overall health care costs is virtually nonexistent. So, either Dr. Poses is too ignorant to know this or he is a cynical poseur. You decide.

Comments 4

  1. Marc Brown wrote:

    Sorry – but this won’t do. First, there are many more senior executives than just CEOs. Second, as Poses documents exhaustively on his blog, the large rewards often bear no relation to performance. Third, the huge differential between top and low pay is hugely socially divisive. And fourth, Poses makes no direct link with healthcare inflation, but you seem to forget it is these very CEOs who are driving up costs with expensive and unnecessary treatments.

    Posted 20 Sep 2010 at 6:24 am
  2. Catron wrote:

    First, there are many more senior executives than just CEOs.

    A red herring that is particularly stinky coming from a guy who defends the NHS, a “health care? bureaucracy that has recruited “managers? at 5 times the rate of qualified nurses.

    Second … the large rewards often bear no relation to performance.

    A gratuitous claim that Poses (and every other “progressive? parrot) often makes, but never supports with credible data.

    Third, the huge differential between top and low pay is hugely socially divisive.

    Pure BS—a hackneyed class warfare meme unsupported by any objective data.

    And fourth, Poses makes no direct link with healthcare inflation …

    Then why are you trying to defend him by accusing the CEOs of “driving up costs??

    Posted 20 Sep 2010 at 3:08 pm
  3. BHO's ILLEGAL aunt wrote:

    What is troll-Brown complaining about? Mr. Medicare Berwick made 50% MORE than than those CEOs — and has lifetime gold-plated medical insurance! No waiting line for Dr. B!

    Posted 20 Sep 2010 at 8:06 pm
  4. Marc Brown wrote:

    ‘Then why are you trying to defend him by accusing the CEOs of “driving up costs??’

    Well, possibly because the underpinning theme to the whole healthcare debate is the much higher costs in the US. Of course you’re right though: CEOs aren’t incentivised to bring in more and unnecessary business – they purely have the health and wellbeing of the public in mind and the absolute pillars of equality.

    Posted 21 Sep 2010 at 7:40 am

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