The American College of Healthcare Executives has reported that financial challenges and healthcare reform are among the chief concerns of healthcare executives today. Indeed, many current concerns of hospitals are financially based. Hidden in plain sight, we have found that many of those financial concerns can be directly tied to the human capital spend, if you know where to look.
Productivity, wage freezes and benefit reductions have been the staples when looking to reduce and maintain labor costs. We'd like to offer an additional approach to optimize the actual dollars spent on human capital. A forensic HR analysis of data, processes, delivery systems and technology can identify the actual spend of wages and benefits. Historically, HR systems were manual, and audits were non-existent. Fast forward to the implementation of best practices, policies, human resources information systems, automated time and attendance systems and the assumption of the accuracy of data.
HR forensics' focus is on identifying the hidden costs when administrative departments' technology capabilities (whether payroll, benefits, IT or finance) are not fully integrated, data is not accurate, process is not defined or followed, and there is a lack of checks and balances. This article explores immediate steps that healthcare organizations can put into place to identify those lost invisible dollars, identify and fix inefficiencies, maximize the utilization of technology and realize the benefits of capitalizing on opportunities when you have good data with a blueprint for implementation.
Forensic audits matter
You can take immediate steps that can help stem those losses, identify where those inefficiencies lie and put in place solutions that will add significant dollars back into your healthcare organization.
Conduct a ''deep dive'' audit of employee data and processes that impact your human capital spend
When was the last time you checked your internal systems? The expression ''garbage in, garbage out'' is true for any automated process. The assumption is if it's automated, it's correct. Conducting a forensic audit across all HR administrative functions allows you to see what controls are in place, how regulatory requirements are being met, how data is gathered, how pay rules are set up and implemented and what checks and balances are in place to ensure accuracy, consistency and compliance.
According to the American Hospital Association, in excess of 60 percent of a hospital's operating costs are related to human capital expenses. Taking a close look at how you actually pay employees and implement programs can be very revealing. Here are a few examples of what you could find:
- Systems and pay rules are not set up correctly.
- Data is not being entered correctly.
- HR policies and practices are not being administered properly with an adverse financial impact.
- Personnel changes (i.e., leaves of absence, terminations, status changes) are not identified or processed in a timely manner.
- Undocumented ''casual'' practices exist resulting in unexpected or unrealistic financial expense.
- Hourly practices for exempt employees exist that impact their exemption status.
Consider for a moment what could be happening with premium pay, employee terminations and leaves of absence.
Weekend premium pay programs
Pay rules are not set up to ensure that premium rates are not paid on extra shifts worked during the week. Paid time off is accrued on extra shifts with no annual accrual max, which results in a financial payout or staff not working the required weekend shift commitment.
For example, consider a hospital that has 200 employees in premium pay programs being paid $50/per hour. They work one additional shift per week and should be paid on average $38/per hour (rate for non-premium programs). The estimated annualized overpayments can reach over one million dollars, without including the potential cost impact for overtime paid on premium rates, excess accruals and staff replacement costs.
Employee terminations
When terminations are not being reported or processed timely, the employer continues to pay benefit premiums, overpayments to union funds, ''auto pay'' for salaried employees who continue to receive a paycheck, or the repayment of tuition or sign-on bonuses are forgotten and not recouped.
Leaves of absence
A thorough audit of policy implementation will determine if ineligible employees are taking a leave, employees are on undesignated leaves, or if salaried employees with extended absences are receiving ''auto pay''. An audit can also determine if there is a lack of coordination of employer paid wages with state disability benefit payments or payments from an employer-paid disability insurance benefit, if applicable.
These are just a few examples of silent revenue killers.
Policy, technology and data set-up
Now you know what you didn't know before. The next step is to:
- Optimize the utilization of automated systems
- Develop controls and minimize the ability for manual overrides
- Develop automated audit reports and staff accountable to identify inconsistencies in pay practices, policies or undocumented personnel changes, incorrect benefit premiums or unemployment benefit payments
- Create interdepartmental teams with IT, HR, payroll and finance to create controls, checks and balances, opportunities to assess current reporting systems and participate in the identification of new technology tools
- Educate managers on HR policies and processes with an emphasis on understanding their accountabilities
- Provide electronic tools to managers to enable them to report necessary events
Technology is a live tool. It is extremely important to maintain and ensure data quality on an ongoing basis. Data-driven reports, consistent administration of policies and processes and a clear delineation of duties within departments will ensure the continued accuracy of the human capital spend in your healthcare organization.
End result
This is where the rubber meets the road. With your audit you've identified the inefficiencies within the administrative departments. Armed with that knowledge you can make changes to:
- Ensure accurate payment of wages and benefits and regulatory compliance
- Utilize data analysis to help influence changes to HR operations, processes, or programs
- Develop HR analytic reporting tools to create effective human capital decision making
Using HR forensics enables any healthcare organization or, for that matter any organization, to uncover the hidden in plain sight costs that damage the bottom line. The issues affecting the business of healthcare are very complex but when you have the data, the drive, the systems and the right people in place, success comes a lot easier.
Theresa Angelone and Caren Staskin are founding principals of TC Human Capital Solutions, a consulting firm specializing in human resources for the healthcare industry. Over the past 10 years, they have worked with organizations as external advisors conducting forensic HR analyses and providing interim senior leadership. Their experience as human resources executives, has allowed them to provide assistance to healthcare organizations on the development of HR strategies to support business goals and the re-engineering of human resources functions and processes.