Not-for-profit CEOs command higher salaries | Behavioral Healthcare Executive Skip to content Skip to navigation

Not-for-profit CEOs command higher salaries

December 20, 2016
by Julie Miller, Editor in Chief
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With the release of its new salary survey report, the National Association of Addiction Treatment Providers has identified a number of trends that might be surprising to industry observers. The data is only available to members, but the National Association has granted a sneak peek to Behavioral Healthcare Executive.

“When we compare the for-profits and the not-for-profits, there is interesting data,” Jessica Swan, outcomes and surveys manager, tells BHE. “But we want to be careful about drawing any conclusions.”

For example, one data point reveals significant variation between for-profit CEO salaries—which average $189,657—and their not-for-profit counterparts—which average much higher at $268,211. It’s a 41% difference. While for-profit enterprises in other industries might offer generous profit sharing, added benefits and perks beyond the base salary, the National Association report doesn’t seem to make such a case.

Swan says future surveys could reveal additional information about the salary gap, but there are some trends that could be examined in the meantime. Some long-standing not-for-profit organizations might have more experienced CEOs with longer tenures, for example, who might command a higher salary compared to newer for-profits. Also, Swan notes that for-profits might be dedicating greater investment into marketing and business development right now rather than CEO paychecks.

Of the 69 survey respondents, 54% have a not-for-profit structure, and 46% are for-profit.

Opportunities for the future

The National Association report also captures a snapshot of revenue sources among respondents. Insurance reimbursement represents 59% of incoming revenue, followed by self-pay at 25% and public funds at 7%. The remaining single-digit shares of funding sources include Medicaid, donations and Medicare, respectively.

“In looking at how people pay for treatment and where those income sources are coming from, we can start to think about how to diversify that in order to treat more people,” Swan says. “We know in this industry that people aren’t getting enough treatment. Only 10% of the people who need treatment are seeking it. That means we’re missing a lot of folks who could be getting into our programs.”

She suggests exploring ways to enhance the connection with health insurance and to provide more scholarship beds for those in need.

Additionally, Swan says organization owners and operators might take a look at the cultural diversity of their leadership teams. While women represent about 50% of leadership, minorities are less represented at just 6%.

“We need to make a better effort as an industry to have more diversity at a higher level,” she says.

 

 

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Comments

Easy enough to pull salary data on NFP CEOs by pulling their Form 990s. For example, the CEOs of Hazelden, Caron, and Rosecrance made approximately $850k, $600k, and $500k in recent years (there's often a 1-2 year lag in availability of 990s). Granted, these are large, well regarded, long-standing organizations but even smaller NFP executives often receive relatively generous cash compensation compared to their FP peers.

A large driver of the variance in NFP vs. FP W2 income is that there is no path to ownership for NFP executives - it's exclusively a W2 opportunity. FP executives often receive personally meaningful ownership stakes in the businesses they are leading.

When you compare the two compensation methodologies over time things tend to come into balance. This dynamic is by no means specific to behavioral health - it's applicable across industries.

Note: NFP is a tax designation and many NFPs are very profitable although their financial statements usually refer to it as "Revenue in Excess of Expenses".