10 WAYS TO SAVE $10,000 IN HUMAN RESOURCES 1
The Largest Line Item in any Surgery Center s Budget is Hiding the Most Savings Operating efficiently has become increasingly important as the ambulatory surgery center (ASC) industry has matured. More competition for patient volume along with dropping reimbursements have taken a toll on revenue, and proactive centers have responded by finding ways to save, including tactics such as reprocessing surgical items, automating supply chain, and improving revenue cycle. However, for most centers, human resources (HR), one of the top three largest line items along with building rent and medical supplies, remains untouched. Small and mid-sized companies don t usually have access to the expertise of a full human resources team, said MedHQ CEO Tom Jacobs. For healthcare organizations, this expertise is incredibly important because more than revenue is at stake. One missed regulation could affect accreditation resulting in downtime for the entire facility. Mistakes in HR can damage finances, patient satisfaction, surgeon satisfaction, employee satisfaction and the reputation of the entire organization. MedHQ has worked with 70+ healthcare facility partners to find additional savings that also deliver the benefits of improving employee satisfaction and reducing risk. Through the process, MedHQ gleaned a host of key findings that guided the creation of the MedHQ 10-Point HR Audit. The 10-Point HR Audit identifies inefficiencies that, when addressed, can result in six-figure savings for a healthcare facility. We were very surprised to find out how much money we could save. MedHQ identified nearly that we could re-capture and put to work in other parts of our business. Scott Glaser, M.D. Pain Specialists of Greater Chicago
1. 401K 401K plans are often run very inefficiently and three components drive up costs: Third-party management (TPA), investment fees, and the registered investment advisor (RIA). The company sponsoring the plan may be paying a third-party to manage their plan. TPA administrative costs range from $3,000 - $5,000 a year. Additionally, fund companies commonly charge 50 100 basis points on asset balances. Strategies that lower the weighted average mutual fund expenses closer to 30 basis points can save participants $1,000 - $7,000 a year. Also, registered investment advisors or brand name fund managers, who select the funds, charge 50-100 basis points. Those RIA fees can be negotiated down. The best option to lower cost on the 401K program is to wrap RIA and TPA/compliance services into one program. Depending on the size of the program, this can save participants $3,500 - $12,000 annually. 2. Health Plan The employer share of the health plan typically costs $80,000 - $200,000 per year. Employees contribute another - $60,000 annually. The first priority is to limit annual increases to 2-4% a year rather than the 10-20% found at many surgery centers. This saves the employer up to $36,000 annually, and also provides significant savings for employees up to $11,000 a year. Another opportunity is properly adjudicating the monthly insurance bill. Instituting tracking to ensure employees who leave are removed from coverage at the appropriate time can result in savings totaling $8,000 $20,000 a year. Organizations who research, negotiate and purchase a plan on their own have recently been subject to significant increases due to Patient Protection and Affordable Care Act coverage mandates. Participation in a Professional Employment Organization (PEO) with their collective power, gives employers access to optimal plans, plus they have the ability to gain credit for promoting wellness and mitigating health risk. 3
3. Paid Time Off (PTO) Surgery centers can save money by utilizing process automation ideas such as outsourcing PTO administration and employee self-service (ESS). A center with three managers can save 100-200 hours per year when those employees are relieved from administrating programs such as PTO, onboarding, offboarding and Occupational Safe and Health Administration (OSHA) reporting. If these employees earn on average $50 an hour, the savings are $5,000 - $10,000 annually. Properly administering PTO in a non-automated environment is incredibly time-consuming for ASC managers who are starving for more time to negotiate better contracts, recruit new physicians or implement a new service line at the center, said Jacobs. Managers need to spend time on strategic work rather than administrative tasks. 4. Worker s Compensation Insurance Analysis of claims over the past five years shows the cost of claims generally follows the 80/20 rule. An average surgery center may have one worker s compensation claim per year and about 20% of the time that claim will materially impact the worker s compensation insurance premium. MedHQ Worker s Compensation Claim Analysis (2010-2015) $0 - $5K 80% $5K - $25K $25K - $75K $75K+ 10% 5% 5% For a $1,000,000 payroll, the insurance premium can range from $3,000 -. The goal is to keep it on the lower end of this range. Promoting workplace safety to reduce the risk for potential accidents will save a center money. Keep an eye on worker s compensation insurance to make sure it is managed well and give the proper attention to claims that are red flags, said Jacobs. Typical big claims resulting from slips and falls or back injuries from lifting can really impact insurance, it s burdensome to manage the situation, and then centers are left with an employee who can t be productive.
5. Vendor Consolidation Some aspects of the 10-Point HR Audit are complex and some, like vendor consolidation, are simple and straightforward. Many surgery centers utilize more than 20 vendors to provide support services ranging from payroll and insurance to hiring, firing and training. Vendor relationships take time to develop and manage. Bundling services can lead to discounted fees and fewer mistakes and save center management hundreds of hours each year. 6. Open Enrollment Preparing for and administering an open enrollment period can take weeks of preparation. During this time, 40-80 hours of productivity can be lost. That number can be higher for surgery centers with more employees and high turnover. Open enrollment preparation, combined with outsourcing the time it takes to evaluate and decide upon benefits renewal, can save a center up to $10,000 each year, and allow center management to stay focused on high-value priorities. 5
7. Employee Relations Risk Management Extensive MedHQ research cites employee discipline as the top HR challenge for surgery center managers, greater than benefits issues, payroll issues, policy advice, and workers compensation. A 2013 MedHQ ASC leadership survey revealed the top discipline issues (fig. 1-2). It can be challenging to address employer-employee relationship issues, such as properly administrating discipline, conducting annual reviews and keeping abreast of the laws affecting these issues. Law changes with the Affordable Care Act and the Fair Labor Standards Act must be managed and policies must be created to ensure compliance. Most ASC administrators lack the strategies required to optimize labor productivity. There have been numerous changes in employment law in the last several years, said Jacobs. Without the proper experience, training and practice in handling these issues, centers can find themselves dealing with a high turnover rate and a toxic work environment. The risks of ignoring or improperly managing under-performing employees are many and can have significant impact on operating income: Weighing Risk Areas Level Related Risk Cost Factored Risk Factor Discrimination Employee Attendance 1.00 0.10 Employee Work Productivity 0.25 FMLA, ADA, etc. 0.50 Hostile Work Environment 1.00 Inappropriate Work Behavior 0.15 Involuntary Termination 0.25 Sexual Harrassment 1.00 Unemployment 0.10 Work Comp 0.20 Centers can expect to have one really difficult employee termination, on average, every seven years, noted Jacobs. When these difficult events are managed by HR professionals, the expense can be minimized; legal fees and severance, for example, could total $5,000 - $10,000. In contrast, if the situation is poorly managed, relative to the seriousness of the situation, the claim can result in $80,000- in fees or more. The employer may not see the direct expense, but there is typically a $10,000 - deductible on employment practice liability insurance and any claim against insurance tends to raise future premiums, said Jacobs. When centers manage the risk related to these issues, they mitigate this expense in the long run.
Fig. 1: Average Rating of Employee Discipline Problems by ASC Leaders Based Fig. 1: on Average a Scale Rating of 1 (Least of Employee Concern) to Discipline 5 (Greatest Problems Concern) by ASC Leaders Based on a Scale of 3.67 1 (Least Concern) to 5 (Greatest Concern) 3.59 3.22 3.67 3.59 3.22 1.89 1.89 2.63 2.63 Performance and a hostile work Performance environment and a hostile work environment At-work attitude At-work attitude Attendance and tardiness Attendance and tardiness Employee interactions and Employee disputes interactions and disputes Policy compliance Policy compliance Fig. 2: What is the Top Employee Discipline Problem at Your Center? Fig. 2: What is the Top Employee Discipline Problem at Your Center? Performance and a hostile work environment Performance and a hostile At-work environment attitude 9% 9% 9% 9% 24% Attendance At-work attitude and tardiness 28% 24% Employee Attendance interactions and tardiness and disputes Employee interactions Policy and disputes compliance Policy compliance 28% 30% 30% 7
8. Compensation Compensation programs perceived as unfair can drive away qualified and desirable employees and high turnover can force surgery center management to be in a perpetual hiring mode. MedHQ developed and utilizes a 100-question job analysis guide to understand how much a job is worth relative to other jobs. Each job is scored and compared to ASC association data to determine pay. When employees understand the thoughtful, fair process, they are more satisfied and turnover is less likely. Centers can save $10,000-12,000 per person by minimizing unwanted turnover and related replacement costs including advertising, hiring temporary and permanent placement agencies, as well as onboarding new employees. A good process is to score each job well and then use data from credible sources such as the Ambulatory Surgery Center Association regarding the average pay for specific positions, keeping in mind the same job may be weighted differently at different centers, said Jacobs. MedHQ uses the data as a starting point, then takes into account information gleaned from the 100-question job analysis guide to structure compensation guidelines for each surgery center. 9. Unemployment Claims Management When an unemployment claim is filed, states lean heavily in favor of the employee. However, there are things a surgery center can do to keep claims minimal. Unemployment tax is better described as insurance as unemployment claims oftentimes drive up the premium. States have different taxable wage formulas and the rate at which wages can be taxed can vary from 1-7%. The tax rate percentage can be negotiated to a lower rate, said Jacobs, and not all employers stay on top of this. MedHQ has audited centers with an unemployment tax rate as high as 9% or as low as 3%. Centers can save $3,500 $10,000 annually by better managing unemployment tax.
10. Good Culture Counts A strong company culture attracts and retains good employees and an HR partner, like MedHQ, can help surgery centers define their culture and leverage it when hiring top talent. From behavioral interviewing and organizing a peer-reviewed recruiting process, to identifying employees who are a good fit not only for a particular job but for the company culture, MedHQ brings its experience to bear. Centers will foster a stronger culture by recruiting a group of 20-40 people who have similar values rather than a group with varying values, said Jacobs. A strong company culture accompanied by good HR practices, good compensation plans, and good benefits work together to reduce employee turnover. Table 1. Average differences in actual and expected employee turnover rates, PEO clients, 2012. 2012 (%) Expected turnover rate (U.S. overall) 1 41.6 Difference for PEO clients, controlling for industry Difference for PEO clients, controlling for company size group -9.7-13.5 Table 2. Average differences between actual and expected annual business failure rates, PEO clients, using most conservative data specification. Annual Business Failure Rate (%) Expected business failure rate (U.S. overall) 2 8.0 Difference for PEO clients, controlling for industry Difference for PEO clients, controlling for state -4.0-4.1 PEOs reduce employee turnover. Firms that utilize a PEO have a greater chance of growth than others. Saving one full-time employee translates to $10,000 - $12,000 in savings related to replacement costs. If a center has a 30% annual turnover rate and 30 employees, that s nine people per year. If the center can cut that rate in half, that equals considerable savings, both in terms of employee recruiting and training. 9
Bonus #11. Utilize a Professional Employer Organization (PEO) Virtually all of the savings MedHQ identifies during a 10-Point HR Audit can be realized by engaging a PEO to handle your company s employer services. A PEO allows an employer to outsource employee management tasks, such as employee benefits, payroll and workers compensation, recruiting, risk/safety management, and training and development. The model is attractive to small and mid-sized businesses such as surgery centers that are not big enough to have in-house HR and accounting departments. A PEO can save organizations time and money. The broad expertise can be leveraged to lower operating costs, increase revenue, and reduce risk. The bandwidth saves staff time that would be used to prepare payroll and administer benefits. PEOs typically offer a better overall benefits package that serves to attract top employees. HR Administration Costs, Per Employee All Employers $1,500 (or more) PEO s Clients $1,187 $0 $500 $1,000 $1,500 $2,000 PEOs provide human resources services for less cost compared to other options. Top 10 Ways Average Savings ($) 401K Health Plan Paid Time Off (PTO) Worker s Compensation Insurance Vendor Consolidation Open Enrollment Employee Relations Risk Management Compensation Unemployment Claims Management Good Culture Counts 3,500-12,000 5,000-50,000+ 5,000-10,000 5,000-20,000 2,000-12,000 Up to 10,000 6,000-30,000+ 4,500-54,000 3,500-10,000 4,500-54,000
About MedHQ MedHQ is the only HR, Finance and Accounting business services company that specializes in the ASC market. MedHQ was launched in 2003 to help centers improve revenue, lower costs, and take time-consuming tasks off the plates of administrators, allowing them to focus on the high-value priorities of running and managing surgery centers. About the MedHQ 10-Point HR Audit It takes approximately one hour for back office staff to gather the information necessary for the 10-Point HR audit. Typical savings = six figures. Request your risk-free 10-Point HR Audit today. If MedHQ fails to identify in savings, the audit is free. REQUEST AN AUDIT MedHQ.net 708.492.0519 11