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Plugging Payroll Leaks

Karen Minich-Pourshadi, for HealthLeaders Media, June 13, 2011
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There’s a fine line between justified overtime brought about by operational demands, and overtime in which employees “work the clock” to their advantage. With labor costs gobbling up between 40% and 60% of a hospital’s budget, defining that line and catching those overtime missteps is increasingly important. Moreover, taking a strategic approach to scheduling employees can further slim costs without the need for layoffs.

Payroll leaks, or the unintentional overspending on labor through lost productivity or unnecessary overtime, can cost a hospital millions. Most healthcare finance and human resource leaders say their labor costs are too high, yet many can’t pinpoint where to trim. According to human resources industry experts, some of the culprits behind these payroll losses include employees:

  • Failing to report time accurately
  • Logging unnecessary overtime—employees staying late or arriving early without cause 
  • Having attendance problems (e.g., late arrivals or long breaks)
  • Being overstaffed for demand

Trimming labor costs by even 1% is a challenging task, but some hospitals and health systems have begun the time-consuming process of analyzing time and attendance data by department to uncover patterns of payroll leaks. 

Bernie Becker, chief human resources officer at the Topeka, KS-based Stormont-Vail HealthCare, found his 405-staffed-bed hospital was having a problem with its on-call and overtime; the cost was continually rising. He turned to his time management data to explain the cost increases at the organization, which consists of a medical center and 27 physician and clinician offices and outpatient surgery centers.

“Our payroll system tracks hours and types of pay, but it doesn’t go deep enough,” says Becker. “Whether there is higher volume, heavier procedures, or unexpected absences, we are trying to get control over when we are paying that premium pay.”

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2 comments on "Plugging Payroll Leaks"


Erin C. (6/13/2011 at 3:40 PM)
One of the easiest ways to stop leaks in the payroll system is by having a way to accurately keep track of the data. There are tons of services out there that offer this sort of help. For smaller businesses, I definitely recommend OneClick Commissions. They provide a variety of free excel spreadsheet templates that can assist you in organizing payroll data. Just click on: http://www.oneclickcommissions.com/template-heathleaders-00.html

shellywilson12 (6/13/2011 at 6:39 AM)
In fact, under new health care reform your health insurance company will no longer be allowed to cancel your policy if you get sick, we should be doing this already! search online "Penny Health Insurance" it is a good place to find insurance if you have illness like me.