In an already brutal budgeting environment, hospital leaders are going to be faced with a herculean task come December 1, 2016 when the new Fair Labor Standards Act (FLSA) overtime rules go into effect: continue to improve the quality of care and drive positive patient experiences while accounting for the pressure of increased personnel costs on their facility operating expenses.
Let’s Start With the Given
Employees should be fairly paid for what they do. No one can argue that point. And, the U.S. healthcare system depends on staff overtime to meet the growing demands on hospitals and other healthcare facilities. According to some experts, employee misclassification, interrupted breaks and unpaid overtime hours worked are a serious concern within healthcare. These are all issues that need to be addressed and resolved.
However, the fiscal reality of the new FLSA overtime rules, despite being a positive step toward fair pay for work provided, will have a tremendous impact on healthcare personnel costs.
According to the Department of Labor, the new FLSA overtime limits will directly affect an estimated 200,000 hospital workers and 300,000 non-hospital healthcare workers.
Though there are still some grey areas around who will and won’t be exempt moving forward, there is no doubt that this will dramatically increase personnel costs for healthcare facilities. Beyond the financial impact, there is the associated productivity issues resulting from increased paperwork, administrative documentation, increased legal and accounting oversight, data entry needs and other implementation necessities.
And, this happens in a time when hospitals are already facing cost-of-care scrutiny and increased budget demands, including:
- Value-based care initiatives, HCAHPS evaluations and ACA requirements
- Increased personnel salaries due to supply and demand issues
- Needed capital improvements and infrastructure investments
- Health IT demands and EHR implementation
The Risk for Patient Care
There is an old expression that says: you can have anything you want; you just can’t have everything you want. At what point do the demands and requirements being applied to hospitals reach the tipping point and become counter-productive to quality patient care?
Ultimately, hospitals have very few choices on how to address the new FLSA overtime thresholds. An article from Healthcare Dive lists four options hospitals have available to them:
- Raise salaries so employees will continue to be exempt from overtime
- Keep salaries at their current levels and pay workers overtime after they’ve worked over 40 hours
- Restructure workloads or shifts so workers’ hours won’t exceed 40 in one week
- Adjust wages to make up for the change
None of the above solutions are particularly beneficial for the quality of care provided by hospitals. Collectively, they either drive up the cost of care, reduce workforce coverage or negatively impact affected employees. Additionally, as costs go up, hospital administrators will be forced to make budget adjustments to help offset the increases. This will likely have a negative downstream effect on technology investments, future hiring decisions for clinical and non-clinical staff, facility renovation projects and service expansion.
Cool Heads, Careful Consideration
It is still too soon to know the real impact of the new FLSA overtime rules on healthcare. Certainly, fair labor laws protect employees, keep the playing field fair for all companies, and encourages organizations to do what is right. That is good for all industries, including healthcare.
But for an industry already going through tremendous change, it introduces another major shift that healthcare leaders must deal with – and soon given the December 1st deadline. Human resources will play a critical role. New workforce strategies, realigned productivity models, streamlined talent management programs, adjusted project priorities will undoubtedly need to be part of the mix.
Regardless, however, of what tactics are part of the solution, the number one focus has to remain on what matters most, quality patient care.