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Would your hospital pass a workforce compliance audit?

October 4, 2016

Alan Bateman, MHA, Healthcare Industry Strategy Director

This is the first of a two-part series on the risks and costs associated with workforce management compliance. This blog post will explore the legal risks of non-compliance; the next post will analyze the operational costs of non-compliance.

Hospital and health systems spend millions of dollars every year on financial audits. They do this to ensure compliance with accounting practices, regulations, and to avoid costly fines. When it comes to workforce management, compliance discussions oftentimes fall on deaf ears. So, it’s no surprise to read about hospitals paying millions of dollars in back wages and penalties for violations of state wage and hour laws, Federal Fair Labor Standards Act (FLSA) regulations and overtime laws.

According to the Department of Labor (DOL) Wage and Hour Division, almost $1.6 billion in back wages have been recovered since 2009. It’s not uncommon to hear radio and television advertisements from law firms looking for employees who may be owed back pay. They even target exempt employees.

So, how can hospitals minimize their risk of compliance violations and the bad public and internal relations that come with having to back-pay employees?

If you ask a Chief Financial Officer how they ensure compliance with financial regulations and accounting practices, the response will be something like this, “We have strict operational and financial system procedures that we follow. There are processes in place to ensure our finance system is current and compliant with regulations. Our procedures and systems are audited on a regular basis.”

Compare that with the response from Chief Human Resources Officers to the question, “How do you ensure that your employees are paid to policy?” By far, the most common response I hear from our clients is, “We have a time and attendance system.”

This raises many questions.

  • Who is responsible for verifying that the system is compliant with your pay policies?
  • Are your managers compliant with written timecard editing procedures?
  • When was the last time, if ever, the system was audited?
  • When was the last time end user system editing procedures were audited?
  • Who is responsible for compliance?

Before getting into how to manage compliance, it’s important to understand the state of most time and attendance (T&A) systems in hospital and health systems today. Most organizations have had an automated T&A system for at least 10-15 years. At the time of installation, the primary focus was on the transactional processes of collecting time punches, paying employees, posting schedules, and generating reports. Although there has been some effort at standardization in recent years, compliance monitoring and enforcement have been almost non-existent. It is not uncommon to find after a standardization effort that managers have migrated back to the old policies by editing timecards accordingly.

There are three steps an organization can take to manage and enforce compliance of their workforce management systems. An important concept to understand before undertaking any compliance effort is that any manual edit to a timecard is a potential override of the system and your policies. This includes adding missed punches, adding or changing hours, and so on.

  • Perform a complete audit of your policies, procedures and systems. Validate that your T&A and scheduling systems configurations are aligned with your policies, that employees are assigned the correct pay rules based on their classification, employees are assigned the correct scheduling profiles, manual system interventions and editing procedures are clearly documented, and that policies and practices are consistent across the organization.
  • Assign a person to be responsible for monitoring compliance on an on-going basis. A client organization of mine ran a series of audit reports after every payroll close and would identify departments that fell outside of the acceptable range of manual edits. They would work with the department manager to identify root causes and implement corrective actions.
  • Train and certify all users of your workforce management systems. Most organizations will not allow access to certain systems unless the user has completed training. This should also apply to workforce management systems. Your training team should educate users on your policies in addition to how to use the system.

Non-compliance of workforce management systems, policies and procedures can put an organization at risk for DOL and state regulations violations that can cost organizations millions of dollars. In my next blog, I’ll explore the operational costs of non-compliance.
  • Healthcare
  • EMEA
  • North America
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