Healthcare reform can be seen to have multiple initiatives. Some may see it as a way to expand health insurance coverage to a larger number of citizens, and some could view it as just a different way to finance health treatment in America. But everyone agrees that the costs of providing health care to the nation has to be reduced significantly. The payroll costs of wages and benefits for most healthcare providers is at least 50% of overall costs. To equal the cost reductions of just 1% of payroll, the typical hospital would have to reduce supply costs by over 5% or utility costs by 20%. Simply put, hospitals will have to find a way to provide high-level care and service with fewer people. The changes brought on by the Patient Protection and Affordable Care Act (PPACA) will necessitate layoffs and a change in our healthcare delivery process. It’s not as if healthcare executives are unfamiliar with reducing costs – look at the reimbursement changes that came as a result of Diagnosis-Related Groups (DRGs) in the 80’s, and how managed care in the 90’s resulted in layoffs and changes in the delivery models. Patient care delivery is one of the remaining labor intensive industries in the nation. Almost all large enterprises, whether in the industrial sector or service sector, have strategically developed technology and processes that diminish the need for people. The advancement of robots and automation in the industrial setting has exponentially increased during the last thirty years, so that in many settings the number of employees has been reduced by over 90% while quality is maintained or even improved. Even in the service sector, where arguably the need for people and human interaction is the core of “services,” the push to create technology and even a change in consumer expectations, has resulted in the need for fewer employees. In 1970, few people would have predicted that almost all gas stations would be self-serve (except for New Jersey and Oregon, where state laws prohibit the practice). Or more importantly, that consumers would tolerate a self-serve environment. Increasing numbers of self-checkout lanes at grocery stores and big retailers seem to be a permanent part of the retail landscape. Even the technology behind bar codes has dramatically changed the number of people needed to constantly determine inventory levels and reorder needs. Clearly, technology and a concerted effort to change consumer attitudes has been at the forefront of diminishing payroll costs. The U.S. Postal Service is a glaring example of an organization taking extensive measures to reduce the number of people needed to process mail with the use of zip codes and optical readers, along with delivery to common mail boxes instead of individual homes, but without actually reducing the number of employees correspondingly. As demand continues to decrease for “snail” mail, the Postal Service has not been able to respond quickly enough. A debate can occur on how all these changes have impacted society and overall employment, but the purpose of most businesses is not to maximize employment opportunities, but to be as productive and efficient as possible. Now, healthcare providers are under the same pressure. Other organizations that worked to change consumer expectations, or that used technology to reduce their number of employees, faced significant up-front costs and internal and external resistance from many fronts. But history has shown that a well thought-out plan can create a significantly different model that relies less on people. If healthcare leaders can devise a model using technology and/or changed consumer expectations that would result in a 10% reduction in the number of employees, the individual and cumulative savings would easily exceed the reductions of reimbursement from healthcare reform. None of these changes will come easy, and innovators are not always rewarded for the risks they take to make fundamental changes, but healthcare is headed down a path that will require all care providers to reduce their number of employees – either through a well devised plan or through a crisis. The first reaction by many healthcare leaders might be, ”I don’t see how we can do that,” but the response may need to be, “It will be difficult and it might not work for us, but we should explore these ideas and others like them.” If you need reassurance, think of all the other industries and organizations that have made it through dramatic changes, and those individual organizations with the most success started out with a vision and a well thought-out plan. If you’re interested in ideas for how to reduce the need for employees in your healthcare organization, then keep watch for future blog posts.
We recently closed our 2011 healthcare compensation survey season and would like to share a few highlights from the published reports on staff, nursing, and leadership pay. Data on staff compensation showed that, of the average single year wage growth rates, four of the top ten positions are rehabilitation jobs. These jobs had an average base wage growth rate of 2% or higher, year over year. In 2011, 75% of all staff survey respondents indicated that their actual salary increase budget remained unchanged or increased from the previous year. Data on nursing compensation showed that 80% of respondents provided nursing positions with market increases over the last 12 months, while 87% of respondents indicated nursing positions were provided with merit increases. Nationally, organizations provided a 1.8% average total increase to staff level nursing positions within the last twelve months. Also nationally, new hire rates for staff nurses are approximately $3.00 per hour higher for nurses with at least five years of experience, compared to entry level staff nurses. The same holds true for nurses with at least ten years of experience, compared to nurses with five years of experience. Data on leadership compensation showed that median same incumbent salary levels increased on average 3% at healthcare systems, and by 2.8% at independent and subsidiary hospitals. Chief Executive Officers who are eligible for both short- and long-term incentives have a total incentive opportunity as high as 80-100% of salary at target or expected value. C-Suite executives, on average, received a short-term incentive award between 25% to 35% of salary at healthcare systems, and between 18% to 27% of salary at independent and subsidiary hospitals. Compensation plays an important role in attracting, retaining, and engaging the best talent that will perform at the highest level to help your organization succeed, so it's critical to have reliable, comprehensive data to back your compensation plan decisions against. If you would like to get your hands on a full report of leadership, staff, or nursing compensation data, or have interest in participating in our 2012 surveys, contact us at Comp.Surveys@IHStrategies.com or call 1-800-327-9335 and ask for our Compensation Survey Department.
Integrated Healthcare Strategies recently published data reported in our 2011 National Healthcare Executive Benefits Survey. Following is a small sub-set of data provided from the survey that we hope will provide some valuable insights into the healthcare executive benefit marketplace.
- Approximately 70% of employers supplement their qualified plans with additional employer-funded, non-qualified retirement benefits for their senior executives. Supplemental plans providing an annual contribution were slightly more prevalent than those targeting a specified benefit at retirement.
- Median medical plan premiums for family coverage increased an average of 8% per year over the last three years.
- A majority of organizations continue 100% of salary for executives during a short-term disability period through one or more disability programs. The median salary replacement during a long-term disability is 60% and it is provided by group and supplemental disability plans at the executive level.
- The trend is moving away from perquisites, except for items that can be treated as business expenses. The most prevalent perquisite remains an automobile or automobile allowance with 86% of CEOs receiving either one or the other.
Having access to accurate, comprehensive data is critical to maintaining competitive benefits that will retain talented executives while ensuring compliance and reasonableness. We provide the full survey report that includes benefit programs ranging from retirement plans to healthcare benefits and covers perquisites, employment agreements, and severance plans to participating organizations only. If you're interested in getting the full 2012 results, you can email the Compensation Survey Department at Integrated Healthcare Strategies at Comp.Surveys@IHStrategies.com or can call (800) 327-9335.
Hospitals and health systems are acquiring physician practices at an accelerating rate across the nation. However, before entering into any practice acquisition, there are a number of key pieces of information that should be obtained, and critical questions that should be answered. Integrated Healthcare Strategies is offering a complimentary webinar hosted by former MGMA President, William Jessee, MD, FACMPE. During this webinar, Dr. Jessee will review 22 questions designed to stimulate careful consideration before entering into a practice acquisition. The answers to these questions can help organizations make rational, evidence-based decisions about specific practice acquisition opportunities. Taken collectively, the answers to these questions can help make an informed decision, and one which is less likely to lead to surprises after the deal is closed. We invite you to join us for our webinar: 22 Questions to Ask BEFORE You Buy a Physician Practice Date: Tuesday, December 6, 2011 Time: 10:00 a.m. - 11:30 a.m., CST This is a complimentary webinar with no fee to register and attend. Individuals most interested by this topic would beCEOs, CFOs, CMOs, and VPs responsible for managing physician services. Click here to register for the webinar: Registration link For questions about this event please contact Vicky Radcliff at 612.339.0919 or at vicky.radcliff@IHStrategies.com. We hope you'll join us! Integrated Healthcare Strategies