Gallagher study reveals healthcare CEOs' pay increases of nearly 40%, eclipsing those in the Russell 3000® and S&P® 500 indices. CEO pay took off as the economy roared out of its brief 2020 downturn.

Author: Ron Reynolds


While a large number of healthcare organizations are privately held (pre-IPO, logistics/distribution and managed care companies) or nonprofit (hospitals and other health care delivery companies), a substantial number are publicly traded. Biotechnology, pharmaceuticals, healthcare equipment, healthcare services and facilities, and other publicly traded healthcare companies have experienced unprecedented growth both in the size of the market and in executive compensation.

New technologies and drugs, the potential for merger and acquisition activity, and even the pandemic all spurred significant success. Government policy and demographic trends also provide a tailwind as companies capitalize on the current environment.

Chief executive officers (CEOs), chief financial officers (CFOs) and other named executive officers (NEOs) benefit from the sector's success. To understand healthcare sector executive compensation trends from 2017 through 2021, Gallagher analysts reviewed compensation levels and structure for the top leadership positions of approximately 600 healthcare-related companies. Included in the Russell 3000, these organizations represent about 21% of the index.1

Nearly half of these healthcare companies fall within the biotechnology sub-industry:

Russell 3000 healthcare sector by sub-industry: 47% biotech, 14% healthcare equipment, 13% pharma, 11% services and facilities, 10% life science services, 6% life science tools

Key takeaways from our analysis include:

  • Over the past five years, CEO compensation across all industries experienced a positive compound annual growth rate (CAGR), with healthcare showing the highest at 17.3% growth each year (2017-2021).
  • CEOs in healthcare realized substantial year-over-year increases in pay at 33.9% (2021 over 2020), surpassing the broader Russell 3000 CEO pay increase by more than 5% and eclipsing the S&P 500 CEO pay increase by more than 16%.
  • Compared to other industries, healthcare CEOs exhibit a higher share of long-term incentive (LTI) compensation, coupled with lower annual bonuses.
  • Environmental, social and governance (ESG) issues represent an area of interest for many investors, and healthcare industry companies are responding by incorporating ESG metrics into their executive incentive programs.

Talent shortage and innovation are among the factors driving growth

The table below summarizes factors catalyzing healthcare sector growth.

Figure 2. Talent shortage and innovation are among the factors driving growth

Tight executive talent market

Demand currently exceeds the supply of global executive talent in nearly every industry. The shortage is pronounced in healthcare because this industry seeks a higher-than-average percentage of highly skilled workers. Companies frequently make robust offers to attract top talent.


Medical advancements continue to broaden the potential profitability for healthcare companies. Technological advances and the US Food and Drug Administration's (FDA's) expedited drug approval have led to lower costs and higher success rates at earlier trial phases. Cost reductions create profit opportunities for industry players.

Market growth

Larger companies continue to acquire competitors and smaller public and private firms aggressively to boost their R&D pipeline. Healthcare delivery systems have experienced rapid consolidation, driven by regulatory changes, technological innovations and financial pressures. Economies of scale fuel growth and the need for top leadership talent.

Further, the number of publicly traded healthcare companies has exploded, as illustrated by the industry's presence in the Russell 3000 Index. While healthcare companies made up just 15% of the index in 2017, this percentage jumped to 21% in 2021.

Globalization The healthcare sector is expanding globally. The ease with which organizations have integrated products and people worldwide has allowed companies to combine, maximize talent and increase product demand. Helping to drive healthcare utilization, Baby Boomers have entered their 70s, and we expect the number of those aged 65 and older to increase over the next four decades. Unsurprisingly, Gallagher analysts and others expect the median age of a person living in the US to rise as well. Further, birth rates in the US increased during the COVID-19 pandemic.2 Both the increase in births and growth in the elderly population fuel higher levels of utilization, signaling enormous growth potential for healthcare within emerging US markets.
Expansion of healthcare coverage

From Nov. 1, 2022 to Jan. 15, 2023, more than 16.3 million Americans signed up for insurance on HealthCare.gov3 and on the state-based marketplaces. This rate is more than double the number of Americans who signed up for coverage during the first Affordable Care Act open enrollment in 2014.3 As more individuals become insured, healthcare becomes more prominent as an industry.

Even more impressive, healthcare industry CEOs experienced a 5-year CAGR of 17.3% growth each year. By contrast, the CAGR for the CEO role since 2017 reached only 11.2% at Russell 3000 companies and 7.4% at S&P 500 companies. See Figures 3 and 4 in the addendum.

In 2021, the median CEO total direct compensation for the industry topped $5.65 million, just below the overall Russell 3000 median CEO total direct compensation of $5.95 million. See Figure 5 in the addendum.

Compared to other industries, the healthcare sector exhibits a higher share of long-term incentive (LTI) compensation, coupled with lower annual bonus shares. At 80%, the LTI share of total compensation for the industry eclipses 74% for both the overall Russell 3000 Index and the S&P 500 Index. The healthcare industry LTI share increased steadily from around 75% in 2017.

Total LTI as a percentage of base salary has nearly doubled since 2017, from 350% to 650%. This growth represents a much more significant increase than exhibited in the overall Russell 3000 Index, which grew from 322% to 486%. See Figure 6 in the addendum.

For 2021, the median named executive officer (NEO) total direct compensation for the industry fell just below $2.2 million, surpassing the overall Russell 3000 median CEO total direct compensation of $2.0 million. See Figure 7 in the addendum.

Similarly, the median CFO total direct compensation for the industry rose to just over $2.2 million, slightly surpassing the overall Russell 3000 median CEO total direct compensation of just under $2.2 million. See Figure 8 in the addendum.

Because environmental, social and governance (ESG) issues interest many investors, healthcare companies are incorporating ESG metrics into their executive incentive programs. Gallagher's review of 56 healthcare industry companies in the S&P 500 index shows that 38% include ESG metrics in their short-term incentive program.

A deeper look into measure selection affirms that social metrics related to diversity continue as most prevalent. Environmental measures are catching up quickly, with climate-related measures in the top spot. Examples include such climate stewardship activities as reducing greenhouse gas emissions, prioritizing green energy and supporting sustainability initiatives.

Looking ahead: Innovation will continue to drive growth

There's no end in sight for further expansion of the healthcare sector. With growth and innovation come opportunities and demand for senior executive talent. Only a few talented executives can manage diverse interests while delivering life-changing products and services to the market. Those few will be handsomely rewarded.

While the industry has consolidated in some ways, innovation of products, treatments and efficiencies has expanded the service offerings and the healthcare customer base. New single-product companies will continue to emerge and become part of larger platforms, which will fuel consolidation. ESG issues will continue to draw focus; however, we don't believe ESG will become a primary driver of incentive payouts. Companies and compensation committees will evaluate their incentive plan designs to ensure alignment with organizational priorities, while considering market and regulatory developments.

Gallagher's Executive Compensation Consulting team can help to guide your organization through the changing landscape of publicly traded healthcare. We have the data and expertise to help drive smart compensation decisions so your company can face the future with confidence. Contact us.

Author Information


1"CEO and Executive Compensation Trends," Gallagher, 2022.

2Bailey, Martha J., "The Covid-19 Baby Bump: The Unexpected Increase in US Fertility Rates in Response to the Pandemic," National Bureau of Economic Research, Oct 2022. PDF file.

3Simmons-Duffin, Selena. "More Than 16 Million People Bought Insurance on, A Record High," NPR, 25 Jan 2023.


Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services" and in Massachusetts as "Gallagher Benefit Insurance Services." Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.