This brief describes GE Healthcare Partners’ Pay Practices Optimization solution, which is a high-ROI approach that leverages a robust analysis of system-wide timekeeping and payroll transactional data against HR policies and payroll system configuration. (For a PDF download of this article, please click here.)
Labor typically represents the largest hospital operating expense—an expense that continues to rise due to labor shortages making the focus on more effective pay practices increasingly important.
The ever-increasing complexity of labor hours management and accounting, special premium pay arrangements, pay-related policies, manual processes, shared “ownership” of practices, and the inter-relationships of timekeeping, payroll and employee scheduling systems leads to the incurrence of unintended, avoidable and unnecessary pay.
Industry merger and acquisition activities often bring additional complications with divergent pay practices, internal inequities and different system platforms. These divergent practices often go unresolved for years after the merger, deterring necessary flexibility among employees to meet staffing needs.
In our experience, healthcare organizations have from 1% to 3%, sometimes more, of annual total labor expense invested in avoidable labor cost resulting from sub-optimal administration of employee pay practices. Additionally, we find union environments often provide further opportunities due to misperceptions associated with practice versus actual contract language.
Consulting Solution: Pay Practices Optimization
GE Healthcare Partners’ Pay Practices Optimization Solution is a low-risk, collaborative engagement that is consists of two partially concurrent phases - discovery and implementation.
Many of the identified pay optimization performance improvements can be addressed in a short time frame and can be completed without any or material direct pay “takeaways.”
Phase 1 – Discovery
During the Discovery phase, our team completes a comprehensive review of policies, payroll and timekeeping data to identify pay related integrity shortfalls, labor cost savings and other performance improvements opportunities The discovery phase is conducted with minimal on-site requirements allowing assessment of data and programs without significant time and interruption of staff. The discovery phase encompasses the following work steps:
- Key Stakeholder Interviews: Gaining insights on environment and operational challenges enables our team to better assimilate data findings and identify operational improvement opportunities
- Data Collection: Critical data gathering on policies, roles, procedures, technologies and systems that drive pay practices and pay transactions
- Data Analysis: Mine and analyze actual pay and benefit transactions leading to the initial identification of performance improvement items
GE evaluates and tests the logic of pay systems, supporting policies or lack thereof, manual and automated systems that track the multitude of hours, pay types, approvals and review processes. The review generally involves testing of millions of pay related transactions even for a moderate sized hospital over a one-year period.
The discovery phase includes presentation of early findings and provides an opportunity to move forward with implementation of operational improvements concurrent with the continued analysis of timekeeping and payroll data and systems.
Upon completion of the discovery phase, a final report out would be provided of improvement recommendations, including:
- Variability summary of practice across the Enterprise
- Misinterpretations/incorrect implementations of policy
- Lack of adherence to appropriate procedures
- Pyramiding of premium pays
- Historical pay incentives that may no longer be needed
- Inaccurate system set-ups and mapping from Timekeeping to Payroll systems
- Reporting tools that optimally mine the system but are easy for managers to use
Phase 2 – Implementation
The implementation phase provides dedicated resources with subject matter expertise in the identified areas to further refine improvement opportunities and facilitate the change management process. The implementation phase is typically concluded within 6-18 months, depending on the size of the organization, involving workgroups that meet on a regular basis to facilitate the change management process, including formalizing recommendations on policies and practices in support of the identified improvements.
We support the implementation phase in the following ways:
- Governance Structure: GE works with the executive sponsor to identify stakeholders for workgroup(s) to oversee the implementation of the improvement recommendations. GE also facilitates the workgroup meetings.
- Detailed Analytics: GE provides detailed analytics for each pay practice item and the cost impact to effected employees along with mitigation strategies
- Policies and Procedures: GE oversees the creation and revision of the policies and procedures to support improvement opportunities.
- Training and Education: GE works with client resources to create training and education programs that aide in the implementation and sustainability of the agreed upon changes.
- Communication: GE works with client resources to create communication materials, i.e. FAQs, Talking Points, Employee Letters for a variety of audiences.
GE Value Statement
GE’s Pay Practices Optimization approach is a unique assessment and implementation solution with focus on enhancing the integrity of pay practices, identifying cost reduction opportunities, and thoughtfully implementing improvements in collaboration with leadership. The depth of GE’s analysis and our experience with successful implementation enhances our clients’ ability to realize identified savings opportunities. Tools and educational materials also provide management with valuable information and actionable data for sustaining the improvements.