Your Trusted Advisor for Expert Results

Where We’ve Been; Where We’re Headed

Presented to:

NORTH CAROLINA HEALTHCARE HUMAN RESOURCES ASSOCIATION

Presented by:

Craig Strom, Vice President

MSA HR Capital Practice

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Layout: Rather than being reported in straight alphabetical order -- positions were first grouped and then listed alphabetically

♦ Leadership: Top Executives, Department Heads, Managers

♦ Staff: Administrative Services, Cardiology Services, Finance, Food Services, HR, IS, Lab, Long-Term Care/Skilled Nursing, Medical Records, Nursing, Patient Care, Pharmacy, Physician Practice, Radiology, Rehabilitation, and Support Services

 

Eight positions added to the 2010 survey: Payroll Clerk, Compensation/Benefits Supervisor, Employee Relations Specialist, Lactation Consultant RN, Counselor, Ophthalmic Assistant, Ophthalmic Technologist (Certified), and Chargemaster Coordinator

2010 Survey Changes

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Suggestions from participations regarding the 2011 survey include:

♦ Add “average years of service” question to the staff positions

♦ “Add Exempt/Non-Exempt/Mixed question for staff positions”

♦ Ask the question "Do you establish Lead positions for certain positions" and if “yes,” ask “what amount or % above the base range for a position do you provide for a lead?”♦ Anecdotal rule of thumb: Professional 5% -15% higher; Support 3% -10%

higher

♦ Answer depends also on whether organizations use career ladders or steps

Will survey again for additional positions of interest by multiple organizations

2011 Wish List - Participants

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“The biggest issue with reporting well rounded data for all the questions in the survey is the lack of full participation (filling out ALL question in the survey) by members.

 

For example, 61 organizations responded “Yes” to the ‘Do you provide a market increase’ question; however, then when asked to actually fill in the projected market increase amount for four job families- only 30 organizations responded. This type of response rate is the norm for the special pay section and not the exception. On the yes/no questions we typically have good response rates but when actually asked to provide a figure or amount the response rates are severely reduced.

 

Also, it is imperative that organizations fill out the demographics section in its entirety. For example, if a net revenue is not given then none of that organizations position data can be used in the net revenue breakouts- because we don’t know what grouping that organization falls under. (FYI- I follow up to get the missing data but that then cuts into our analysis time.)”

2011 Wish List – A Note From Shannon (Plagiarized)

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From the Headlines:

“More Jobs, but no rush to hire…” Star Tribune

“New RN grads feel squeeze for jobs” USA Today

“Hospital Layoffs Creep Back into the Headlines” HealthLeaders Media

Hot Jobs?

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Experienced workers: Returning to the workforce Delaying retirement Moving from part-time to full-time status

NCHHRA survey facts: ■ Median vacancy rate for RNs in 2008 was over 5% -- now under 3%■ Median separation rate for RNs in 2008 was over 16% -- now approximately 2%

Healthcare providers facing: Flat or reduced volumes Limited investment earnings Reduced charitable giving Uncertain reimbursement (Federal, State, Insurers) Increased uncompensated care Increasing capital costs (decreased access to funding) Increasing labor costs

“New Norm” or “Calm Before The Storm”

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Current: Experienced, talented senior executives Service line leaders Physicians Mid-level providers Rehabilitation Pharmacy

Future: All of the above Nursing, nursing, nursing Quality Practice administrators

Hot Jobs

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In the spring of 2010, Integrated Healthcare Strategies surveyed health

care organizations about changes to their compensation and benefit

programs since the economic downturn began. This is the fourth in this

series of surveys on this topic in which we received responses from 151

health care organizations from all regions of the country.

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12.8%

17.6%

18.9%

22.3%

13.5%14.9%

< $50M

$50M-$100M

$100M-$250M

$250M-$500M

$500M-$1B

>$1B

Participating organizations range in size from under $50 million in net revenue to over $1 billion

Most (78.8%) are private tax-exempt organizations Most are either independent hospitals (48.0%) or healthcare systems (33.3%)

Characteristics of Participants

When asked to compare the 2010 salary budget to the previous year, organizations responded that the budget:

2010 Salary Budget Compared to 2009

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48.7%

25.3%

26.0% Increased from the previous year

Did not change from the previous year

Decreased from the pre-vious year

Median Salary Increase Percentages

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2009 Actual 2010 Budget 2009 Actual 2010 Budget 2009 Actual 2010 Budget0%

1%

2%

3%

4%

5%

3.0%

2.5%

3.0%

2.6%

3.0%

2.6%

Executives Middle Managers Staff

* * *

* Includes preliminary and approved 2010 budget numbers

Factors Impacting 2010 Salary Increase Budget Decisions

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

8.3%

3.0%

8.2%

10.5%

6.7%

8.2%

41.5%

48.1%

15.2%

21.1%

31.3%

48.1%

54.1%

57.5%

42.2%

45.2%

17.4%

42.1%

32.1%

31.6%

28.9%

26.9%

9.6%

5.2%

22.0%

26.3%

20.9%

6.8%

7.4%

5.2%

3.0%

0.0%

30.3%

6.0%

5.2%

0.8%

1.5%

0.7%

2.2%

0.0%

Critical Very Important Somewhat Important Not Very Important Unimportant/No Opinion

Expected financial performance in 2010

Actual financial performance in 2009

Regional or local salary trends

Industry salary trends

Recruitment/retention concerns

Current employee compensation lags market

Contractual obligations

Public perception of providing salary increases in difficult economic times

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Delayed Increases For organizations expecting a delay in salary increases, the following median

delays were foreseen:

Staff Salary Increase Budgets Approximately 15% of organizations intend to reduce 2010 staff salary increase

budgets 16% have salary freezes in place

Other Changes to Compensation Programs

Months # of

Organizations

Staff 3 20

Middle Management 4 22

Executives 4 24

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Planned Modifications 15.9% of responding organizations plan to modify their incentive programs Modifications are being planned in the following areas:

Previous Modifications 13.9% of responding organizations previously made adjustments to their

incentive programs that they intend to restore■ A majority are returning incentive opportunity levels to pre-2009 levels (9

organizations)

Incentive Plan Modifications

Other

Reduce incentive opportunity levels for 2010

Cancel earned 2009 awards

Pay out a reduced amount of the earned 2009 award

Defer payment of earned 2009 awards

15

7

0

3

2

Number of Organizations

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Out of 50 responses, organizations reported other pay plan element reductions as follows:

Other Changes to Compensation Programs

Certification Pay

Career Ladder Increases

Differentials (night, evening, weekend, holiday)

Other

Premium or Specialty Pay

16.0%

18.0%

28.0%

34.0%

54.0%

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Of the respondents, 38 organizations (approximately 25%) plan to modify benefits or perquisites in 2010

Changes to Benefit Programs in 2010 – Spring 2010 Survey

Life insurance : PlanSupplemental/individual disability insurance : Plan

Long-term disability insurance : PlanSupplemental life insurance : Plan

Sick leave/short-term disability insurance : Plan'Discretionary contribution to 401(a), 403(b), and/or 401(k) plans' : Plan

Executive retirement programs (e.g. SERP) : PlanEmployer match to 403(b) and/or 401(k) plan contributions : Plan

Dental premium contributions : PlanPaid time off/vacation : Plan

Medical premium contributions : Plan

0

1

1

2

2

2

3

3

8

9

13

0

0

0

0

0

3

2

4

1

0

1

2

0

2

0

3

1

2

6

2

1

2

Reduce Eliminate Restore

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Compensation Philosophy Market Trends

What influence, if any, is the shift in market trends having on compensation philosophies? No empirical data indicating hospitals are making permanent changes in

compensation philosophies Evidence of the following

■ Temporary deviation from long-standing policies▬ For example, freezing salaries even if it means falling below target market levels, temporary

reduction in incentive opportunities, etc.

■ Organizations are reviewing existing philosophies for appropriateness▬ Is it a good idea to pay incentives in the current environment?

▬ Should we target pay above median pay

▬ Are our leadership and staff philosophies consistent?

■ Boards and management are administering pay programs more carefully

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What Are Other Healthcare Organizations Doing?

Executives The most common (over half) is a “median” philosophy Just under half intentionally position salaries above median

■ About one-quarter position salaries at the 60th or 65th percentiles

■ Another one-quarter position salaries at the 75th percentile

Almost one-third of target total cash compensation (salaries plus incentives) at the 75th percentile■ Quite often, organizations which target total compensation at the 75th percentile also

offer the opportunity to earn above the 75th percentile for exceptional performance

A few hospitals define pay targets that are below median due to financial constraints

Middle management and staff Most target median (NCHHRA data indicates approximately 85%)

■ Pay is typically administered around median through either across-the-board market/ merit programs or variable merit programs

Compensation Philosophy

The foundation of all compensation programs is a clearly stated, comprehensive philosophy statement

Rationale: In the absence of a defined philosophy:

Employees will create their own based on their perceptions

Leadership will have difficulty defending or communicating the program (e.g., directors and managers sympathize with staff, rather than leading)

Pay decisions often lead to a patchwork of programs and policies designed to address specific issues at specific times (i.e., inherited, or jockeyed, or band-aided approaches that made sense at the time)

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What is a Compensation Philosophy?

Clearly defines authority and

process for decision-making

Describes the objectives of various pay programs

Identifies the appropriate

peer group(s)

Specifies the competitive positioning

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The compensation philosophy is the framework that guides pay decisions

Median, P65, P75, etc.

- Salary- Incentives

- Basic Benefits- Executive

Benefits- Perquisites- Severance

- Support mission- Recruit, retain,

reward- Alignment with

organizational priorities

- Role of the Board, CEO, HR, management,

etc.

- National, regional, local

- For-profit, not-for-profit, private,

public?- Hospitals,

systems, IDS, etc?

Changing Governance Landscape

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Governance reform - never ending

Boards under more scrutiny

■ IRS, congress, rating agencies, states attorneys general, media, public

Resulting in more Board oversight

■ Intermediate sanctions impose financial penalties on organization, executive, board members for “excessive” pay

■ Rebuttable Presumption shifts burden of proof to IRS

■ Not difficult … requires well defined process▬ Independence - no conflicts of interest

▬ Peer comparators

▬ Documentation

“I’m ‘working’ more here than at my regular job, and the ‘pay’ doesn’t match the effort!”

- Trustee of a major health system

Executive Pay Transparency

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Executive pay - Matter of public record!

New Form 990 - More transparent!

Defending pay - More challenging!

Boards - More cautious and concerned!

Challenge remains: Recruit, Retain, and Reward

(While Motivating…)

Improve Executive Compensation Communication Readiness

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Considered how to respond to inquiries from public, media, and other constituencies, and explain process, philosophy, anomalies

Collaboration of Human Resources, Public Relations, Consultant, and Committee

Executive Compensation Communication Strategy Continuum

ProactiveR

eact

ive

ProactiveR

eact

ive

Legally Required

Transparency

Fully Prepared

and Ready

Full & Immediate Disclosure

Establishing Rebuttable Presumption of Reasonableness -Sample Findings

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NotEstablished

PartiallyEstablished Established

ClearlyEstablished

GoldStandard

Committee Independence

Comparative Data Utilization

Access to Consultant

Charter

Minutes

Total Compensation Review

Documentation of Independence

Committee Independence

Comparability Data

Documentation

Governance Best Practices - Sample Findings

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No PracticeFollows some Best Practices

BestPractice

CEO Performance Appraisal

990 Review

Committee Self-Evaluation

Compensation Philosophy

Committee Calendarand Agenda

Critical

Other

Identification of DisqualifiedIndividuals

Definition of Committee /Board / CEO Roles

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Questions & Answers

???

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About Integrated Healthcare Strategies

A leading specialist in human capital consulting for not-for-profit healthcare organizations

• Founded in 1973• Offices in Minneapolis and Kansas City• Clients include over 1,400 healthcare providers

• Large, integrated provider networks and systems• Academic medical centers • Large, multi-specialty group practices• Children’s hospitals• National and state healthcare associations• Community hospitals• Critical access hospitals and federally qualified health centers

• Four practice areas• Executive Compensation & Governance• MSA HR Capital• Physician Services• MSA Executive Search