PONE-D-24-07430The determinants of nonprofit hospital CEO compensationPLOS ONE

Dear Dr. Jenkins,

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VH is a member of the Blue Cross Blue Shield of Texas Community Advisory Board; Community Health Choice: Houston Business Coalition on Healthcare Advisory Board; Texas Employers for Affordable Health Care Advisory Board and the Blue Cross Blue Shield Research Alliance. VH receives support for attending membership committee meetings from the National Academy of Medicine. VH owned stock in IBM. 

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Reviewers' comments:

Reviewer's Responses to Questions

Comments to the Author

1. Is the manuscript technically sound, and do the data support the conclusions?

The manuscript must describe a technically sound piece of scientific research with data that supports the conclusions. Experiments must have been conducted rigorously, with appropriate controls, replication, and sample sizes. The conclusions must be drawn appropriately based on the data presented.

Reviewer #1: Partly

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2. Has the statistical analysis been performed appropriately and rigorously?

Reviewer #1: Yes

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3. Have the authors made all data underlying the findings in their manuscript fully available?

The PLOS Data policy requires authors to make all data underlying the findings described in their manuscript fully available without restriction, with rare exception (please refer to the Data Availability Statement in the manuscript PDF file). The data should be provided as part of the manuscript or its supporting information, or deposited to a public repository. For example, in addition to summary statistics, the data points behind means, medians and variance measures should be available. If there are restrictions on publicly sharing data—e.g. participant privacy or use of data from a third party—those must be specified.

Reviewer #1: No

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4. Is the manuscript presented in an intelligible fashion and written in standard English?

PLOS ONE does not copyedit accepted manuscripts, so the language in submitted articles must be clear, correct, and unambiguous. Any typographical or grammatical errors should be corrected at revision, so please note any specific errors here.

Reviewer #1: Yes

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5. Review Comments to the Author

Please use the space provided to explain your answers to the questions above. You may also include additional comments for the author, including concerns about dual publication, research ethics, or publication ethics. (Please upload your review as an attachment if it exceeds 20,000 characters)

Reviewer #1: General Comments

1. The topic of the paper is an interesting and an important one. The paper potentially contributes to the literature on determinants of CEO compensation (although the existing economic literature on the topic is not reviewed. There is one citation (13) from this literature.

2. On page 3, lines 69-70, the authors indicate that hospital CEOs are offered generous incentive pages to meet financial, managerial, and strategic goals. If so, would not such covariates as profit, cash reserves and hospital and and system characteristics be endogenous? A survey of hospital CEOs is cited on lines 72 ff, the results indicating that achieving financial goals is a major determinant of incentive pay. Then profit and CEO relationship is certainly bidirectional. Although decompensation studies do not typically deal with endogeneity, the case for doing so seems strong here.

3. Teaching status is never defined. There are alternative definitions, including presence of an accredited residency program, the number of residents per bed, membership in the American Association of Medical Colleges.

4. There are other cases for which details about empirical specification is lacking. I assume the authors picked the highest paid CEO when there are several CEOs in the hospital system, but this is not stated. Is the observational unit the system when the hospital is part of a system and a hospital otherwise? Are there systems in which the total number of beds is say 250? Or do most systems have 500+ beds. Some systems, e.g., HCA have many multiples of 500 beds. Is profit defined for one year, the current year or a lagged year, or the year the CEO was appointed? It would be good to see the main equation specification that was estimated.

5. There is no theoretical framework. Changes in coefficients between the two years could reflect structural changes in markets for hospital executives. Demand for such executives could have shifted outward relative to a stable inelastic supply curve. How would one know whether ‘’executive compensation is excessive.”? (line 396). This could explain the base case change in coefficients. Journalists will be looking for a statement that compensation is excessive, but the paper does not present empirical evidence for this. The price of eggs may rise rapidly because of a supply shock. This does not mean that the price of eggs is “excessive.”

6. Will readers understand the purpose of and how an Oaxaca decomposition is performed? I am among potential interested readers who does not know what a waterfall form is.

7. What happened to the asset covariate?

Specific Comments (the numbers are line numbers)

52. Use mean rather than average.

53. The $1.75 billion figure is hard to understand. Divide by 9?

55. What is a “handful?”

61 ff. More precisely, in the Newhouse model, the trustees have a utility function which depends on quantity and quality. Optimal quantity and quality are determined by maximizing trustee utility subject to a zero- profit constraint.

64. Which patient outcomes have been studied. Hospital quality is hard to measure from a distance. And there are many quality attributes.

78. One study I have read finds that payer mix does not change after hospital mergers.

86. What do you mean by charity care?. There is uncompensated care which is the sum of charity care (care the hospital expects to subsidize at patient admission) and bad debt care (revenue the hospitals expect to collect but does not). Uncompensated care is a more comprehensive definition.

98. How do you deal with the EIN problem?

129. Then hospitals in systems have multiple CEOs. Chose the highest paid CEO? I checked a chain I am familiar with. The head of a hospital that is part of the chain but not the leading hospital has a “President.”

144. Be more specific about how hospital bed size is defined in the case of systems.

156. You know from your data that profits are skewed to the right and that there are negative values. This is more than “likely.”

160. What does “back transform” mean?

165 ff. More explanation needed.

Table 1. You mention cash reserves in the table. But they disappear elsewhere. Cash reserves can be highly endogenous in that a highly paid entrepreneur may use such funds for hospital/system improvement/expansion. Why use cash reserves and not other items from the balance sheet?

223. A 0.06% change is trivial. Also, the 95%Cis overlap for all results in Fig. 2 (see bars and whiskers), implying no statistically significant changes in structure between 2012 and 2019.

247. The definition of teaching status must include a definition of teaching hospital.

286.larger hospital or health system. Again, we need a precise definition of how size is constructed. Does system trump hospital when a hospital belongs to a system?

295. Are there systems with 100-299 beds? If so, what is the N for this category?

394. This statement may reflect equity considerations. But relative wages can change over time for many reasons. There is a literature on monopsony in a hospital context. Is this being implied here?

378. Some of the points I make under General Comments apply here. In particular, it is likely that some hospital executives receive generous pay offers because boards think the execs can help solve the hospital’s financial problems.

388. Profits are volatile. For this reason, the parameter estimate may be biased toward zero (consider it an error in variable).

Fig. 1. How do you handle the open-ended category at the far right in the regression analysis?

Fig. 2. I prefer regression results for the preferred specifications. But perhaps this is a matter of taste. I have a stronger preference for discussing methods in the text. None of the parameter estimates are statistically different between 2012 and 2019. What is the sample size? I do not see it here or elsewhere in the paper. Hospitals dropped?

Fig. 3. Can there be better titles than unexplained coefficient effects? Effects implies causation.

They are really changes in how CEO time is priced. The right side is changes in the mean values of pay determinants. Again, methods should be explained in the text.

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Reviewer #1: No

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The determinants of nonprofit hospital CEO compensation

PONE-D-24-07430R1

Dear Dr. Jenkins,

We’re pleased to inform you that your manuscript has been judged scientifically suitable for publication and will be formally accepted for publication once it meets all outstanding technical requirements.

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Kind regards,

Gabriel A. Picone

Academic Editor

PLOS ONE

Additional Editor Comments (optional):

Reviewers' comments:

Reviewer's Responses to Questions

Comments to the Author

1. If the authors have adequately addressed your comments raised in a previous round of review and you feel that this manuscript is now acceptable for publication, you may indicate that here to bypass the “Comments to the Author” section, enter your conflict of interest statement in the “Confidential to Editor” section, and submit your "Accept" recommendation.

Reviewer #1: All comments have been addressed

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2. Is the manuscript technically sound, and do the data support the conclusions?

The manuscript must describe a technically sound piece of scientific research with data that supports the conclusions. Experiments must have been conducted rigorously, with appropriate controls, replication, and sample sizes. The conclusions must be drawn appropriately based on the data presented.

Reviewer #1: Yes

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3. Has the statistical analysis been performed appropriately and rigorously?

Reviewer #1: Yes

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4. Have the authors made all data underlying the findings in their manuscript fully available?

The PLOS Data policy requires authors to make all data underlying the findings described in their manuscript fully available without restriction, with rare exception (please refer to the Data Availability Statement in the manuscript PDF file). The data should be provided as part of the manuscript or its supporting information, or deposited to a public repository. For example, in addition to summary statistics, the data points behind means, medians and variance measures should be available. If there are restrictions on publicly sharing data—e.g. participant privacy or use of data from a third party—those must be specified.

Reviewer #1: No

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5. Is the manuscript presented in an intelligible fashion and written in standard English?

PLOS ONE does not copyedit accepted manuscripts, so the language in submitted articles must be clear, correct, and unambiguous. Any typographical or grammatical errors should be corrected at revision, so please note any specific errors here.

Reviewer #1: Yes

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6. Review Comments to the Author

Please use the space provided to explain your answers to the questions above. You may also include additional comments for the author, including concerns about dual publication, research ethics, or publication ethics. (Please upload your review as an attachment if it exceeds 20,000 characters)

Reviewer #1: I have read all the comments I had on the previous draft, and my concerns have been addressed. I also read the revised paper.

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7. PLOS authors have the option to publish the peer review history of their article (what does this mean?). If published, this will include your full peer review and any attached files.

If you choose “no”, your identity will remain anonymous but your review may still be made public.

Do you want your identity to be public for this peer review? For information about this choice, including consent withdrawal, please see our Privacy Policy.

Reviewer #1: Yes: Frank A. Sloan, Ph.D.

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