Premium Pay - Are You Paying Too Much for Your Labor?

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Sandy Yanko
Vice President Operations
HCA - Far West Division

Understanding and optimizing overtime, reducing on-call vs. call-back, minimizing contract labor usage, and understanding bonus pay practices are all key components of premium pay. This presentation will equip you with tools and strategies to reduce your premium pay.

In times of decreasing revenues there is a renewed focus and interest in managing labor expenses since salaries and wages make up the largest controllable expense. There are different expense reduction strategies based on the type of premium pay. For example, overtime can be classified into four different types: inappropriate overtime, incidental overtime, scheduled overtime, and census overtime. In order to reduce overtime, several strategies can be employed:

  • Management pre-approval for all overtime
  • Ensure staff are clocking in and out appropriately
  • Monitor/trend frequent fliers and notify/counsel staff when appropriate
  • Follow-up with staff on a daily basis
  • Post reminders and trends
  • Have educator work with staff with chronic overtime

For contract labor, there are five types of usage: contracted department, missing targets using contract labor, non-clinical contract labor, core positions, and volume. Strategies to reduce contract labor include: recruiting, retaining, re-educating, tracking, and developing policies.

Lessons learned include:

  • Having constant attention and constant focus from senior leadership is a must
  • Setting stretch goals and monitoring progress is key
  • Understanding that not all premium pay is "bad" and there are multiple strategies that should be used to address different types of premium pay