On March 30, 2020, CMS granted healthcare organizations greater flexibility to compensate providers in response to the COVID-19 pandemic through blanket waivers. The waivers, which pertain to a number of previously prohibited financial relationships, come at a time when every hospital in the country is contemplating how to ensure sufficient staffing and fair treatment of its frontline providers.
The removal of fair market value constraints detailed in the waivers enables healthcare organizations to address more critical needs such as workforce instability and unprecedented patient care needs. However, the question remains: “What is reasonable to pay?”
Based on market evidence, there is clear support that compensation premiums are common in situations where there are workforce shortages and extreme conditions. We recommend our clients follow the guidelines outlined below as they implement pay premiums for frontline workers during the pandemic.
Temporary Pay Increases
- Excess Work Hours Premium: Up to 150% of the median hourly rate for hours worked above a threshold of 40 hours per week
- Temporary Staffing Premium: 130% of benchmark median hourly rates
- Hazard Pay Premium: Incremental compensation between 10% and 35% of base pay, depending on severity of conditions
- Prior to implementing any of these temporary measures, consider all options available and the associated financial impact. (ECG will address financial sustainability in future blog posts.)
- Apply premiums uniformly to ensure they do not become a disproportionate benefit for providers who generate high referrals.
- Develop formal written support to demonstrate that your organization was diligent in considering the specific facts.
- Develop a policy around how and when these premiums apply to help achieve business objectives and limit unnecessary compliance risks.
In developing the guidance outlined above, we considered the following:
Employed Providers: Excess Work Hours
As the number of providers needed per shift increases to cover the surge in patients, hospitals are seeing gaps in coverage and asking their employed providers to work additional shifts. Many of these providers do not have mechanisms in their employment agreements to compensate for the excess work hours.
While the concept of overtime typically relates to nonexempt employees, we recommend extending it to exempt employees for excess hours that need to be covered in these dire conditions.
Standard overtime provisions generally require that all nonexempt employees be compensated at a rate of 1.5 times their regular rate of pay for all hours worked in excess of 8 per day and/or 40 per week. Accordingly, any exempt providers working more than their typical contractual hours or shifts can reasonably be compensated for these additional hours as follows:
- At a premium rate of up to 150% of regular hourly pay (defined as the fixed salary or the base pay amount earned over the preceding 12 months divided by standard contractual hours), not to exceed 150% of the median hourly rate (defined as specialty-specific benchmark median indication divided by 2,000 hours)
Temporary Staffing Solutions
Our client hospitals are also turning to hiring temporary staff, bringing older physicians out of retirement, and contracting with community physicians. Given the established market for temporary providers, data is readily available to establish the premiums associated with temporary staffing. Based on our research, physicians electing to contract with locum tenens companies can potentially receive a compensation premium of up to 30% above median benchmarks for their services. ECG recommends hospitals use this premium as the ceiling when establishing compensation for their temporary providers.
While overtime and temporary provider premiums are easily defined, hazard pay is not, as it is less common in the healthcare industry. Similar to police officers and firefighters, healthcare professionals have some level of inherent risk in their everyday work. However, many hospital administrators are now wondering at what point the risk rises to the level of extraordinary, and how the situation can be mitigated.
Healthcare workers are being put in vulnerable positions daily with increased exposure to COVID-19. As reported by NBC, in Italy as of March 30, 2020, 8,358 of responding healthcare workers were infected, and 61 have died. Spain is seeing similar numbers. The US is also starting to see more healthcare providers fall ill from COVID-19.
The Society for Human Resource Management defines hazard duty pay as “a supplement to the employee’s base pay” for “full- and part-time employees assigned to positions or job locations classified as ‘hazardous’.”
Hazard pay premiums from industries such as offshore drilling, mining, and commercial fishing can range from 10% to well over 100% depending on the level of danger associated with the service being provided. Several government agencies utilize a rate between 10% and 35% to compensate for work in a hazardous environment, whether that work involves virulent biologicals or other dangerous situations. We believe this range is also relevant to healthcare workers during this time of increased personal risk.
Selecting the Premium
When selecting an appropriate hazard pay premium, it is important to take into account the severity of the situation unique to the facility. Factors to be considered (among others) are as follows:
- Availability of adequate PPE
- Severity of COVID-10 spread in the state
- Availability of beds for COVID patients
- Availability of overall workforce (physicians, APPs, nurses, etc.)
- Level of workforce redeployment
It is permissible to apply hazard pay premiums in addition to overtime and temporary staffing premiums. However, when a hazard pay premium is applied to overtime or temporary staff, the compensation associated with the hazard pay premiums is calculated as a percentage of base compensation and applied in addition to the previously mentioned premiums.
To assist, ECG has developed a hazard pay support document that includes a hazard pay calculator and sample policy statement. For a copy of the document, please contact Emma Miller at firstname.lastname@example.org or Todd Mello email@example.com.
ECG continues to monitor our country’s response to the COVID-19 pandemic. Visit our COVID-19 thought leadership page regularly for trusted advice on how healthcare leaders and providers can weather this crisis.