Predicting the future:Comp & Benefits in the New England THOMAS CUMMINS | 6-8-2015

unemployment is 5.5%.

But, 99% of statistics only tell 49% of the

story.

January Feb March April May

201,000

266,000

119,000

221,000

280,000

Job Creation

# of Jobs (000)

-100

0

100

200

300

400

500

-94

20 22

143168

216

288

354393

GovernmentManufacturingEducationSupportConstructionProfessionalHealthcareFood SrvsRetail

2013 Job Growth

# of Jobs (000)

-100

0

100

200

300

400

500

80

228

51

346308 316

342373

293 GovernmentManufacturingEducationSupportConstructionProfessionalHealthcareFood SrvsRetail

2014 Job Growth

2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

4.5%4.4%

4.9%

7.6%

8.5%

7.9% 7.2% 7.1%

6.2%

5.2%

New England Unemployment Rate

Connecticu

tMain

e

Massac

husetts

New Hampsh

ire

Rhode Islan

d

Vermont

9.1% 8.2% 8.7%

6.1%

11.1%

6.2%

Unemployment (March 2010)

Connecticu

tMain

e

Massac

husetts

New Hampsh

ire

Rhode Islan

d

Vermont

6.4%4.8% 4.8%

3.9%

6.3%

3.8%

Unemployment (March 2015)

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%7.5%

5.5%

US Unemployment

Full Employment

The only point of economic

forecasting is to make fortune tellers look

respectable.

April 2015Jobs Gap

3.9 Million

January Feb March April May

201,000

266,000

119,000

221,000280,000276,000

196,000151,000

279,000

406,000

Job Creation 2015 vs. 1999

December 2007 April 2015 Net Gain

Total Employment(FT & PT) 146.2 148.5 2.3

Part Time Employment 24 26.7 2.7

The good news is inflation is

very low.

The bad news is so is your

salary increase.

2007 2008 2009 2010 2011 2012 2013 2014 2015

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5% 4.0%

-0.1%

2.8%

1.4%

3.2%

1.8% 1.8%

0.8%

-0.2%

Annual Rate of Inflation (CPI)

Beef

Prescriptions

Hotels

Coffee

College tuition

Hospital care

Movies

Electricity

New Cars

Beer

Milk

Computers

Televisions

Gasoline

13.1%5.7%

5.0%

4.5%

3.4%

3.4%2.5%

0.9%

0.3%

-0.1%

-4.5%

-10.3%

-15.2%-31.8%

Inflation-31.8%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%5.4%

4.7%

3.8% 3.9% 4.2%4.2% 4.3%

3.6%

2.5%2.4%

2.1% 2.1% 2.0%

1.8%

Salary Growth for NE Healthcare Em-ployees

2009 2010 2011 2012 2013 2014

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

-0.3%

1.0%

-1.1%

0.3%

0.2%

1.0%

Real Increases for NE Employees

2009 2010 2011 2012 2013 2014

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

-0.3%

0.7%

-0.4%

-0.1%

0.1%

1.1%Cumulative Real Increases for RI Staff

10 Years 6 Years

8.7%

1.1%

Real Salary GrowthNew England Hospitals

Expecting a big salary increase in exchange for all of your hard

work?

Don't Count on it.

Non-Exempt Exempt Management Executive

2.0% 2.0% 2.0% 2.0%

Salary Increases Granted in 2014

Non-Exempt Exempt Management Executive

2.0% 2.0% 2.0% 2.0%

Structure Adjustment Implemented in 2014

2015 New England Matched Sample

Position Avg MS Position Avg MS

Registered Nurse - ALL 1.3% Nuclear Medicine Tech 1.4%

Occupational Therapist 1.8% APRN/Nurse Practitioner - All 2.8%

Houseworker 1.3% Surgical Tech 0.9%

Radiologic Technologist 1.5% Clinical Dietitian 0.8%

Physical Therapist 1.3% Dietary Assistant/Cafeteria Assistant 1.5%

Pharmacist 1.1% Telephone Operator 1.7%

Unit Clerk 1.3% Executive Secretary 2.0%

Electrician 2.3% HVAC Mechanic 3.1%

Pharmacy Technician 1.9% Phlebotomist 2.2%

Nurse Manager - All 1.9% Secretary 1.7%

Medical Technologist (MT) 2.3% Computerized Tomography Tech 1.3%

Case Manager 0.6% Pharmacy Director 2.2%

Ultrasound Tech 1.2% Mammography Technologist 1.2%

Respiratory Therapist, Reg. 0.8% Physical Therapy Asst. 2.1%

Licensed Practical Nurse 1.5% Staff Accountant 2.4%

National

New England

Pennsylva

nia

Rhode Islan

d

Connecticu

t

1.8% 1.8% 1.9% 2.0% 2.0%

Matched Sample Increase

2007 2008 2009 2010 2011 2012 2013 20140.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

4.3%

3.6%

2.5% 2.4%

2.1%

2.1% 2.0%

1.8%

3.4%3.1%

1.8% 1.9%

2.2%

1.7% 1.9%

2.0%

NE National

Wage Growth

I see changes in the Coding

market.

V97.33XD: Sucked into a jet engine, subsequent

encounter.

NEW ICD-1O CODES

Benefits Strategy & Benchmarking Survey

2014

NEW ICD-1O CODES

W56.21XA: Bitten by orca, initial encounter

W22.02XD: Walked into lamp post.

NEW ICD-1O CODES

Z63.1: Problems in relationship with in-laws.

NEW ICD-1O CODES

V98.2XXA: Accident to, on, or involving ice yacht

NEW ICD-1O CODES

W61.01XA: Bitten by parrot, initial encounter

NEW ICD-1O CODES

New England Pennsylvania Connecticut Rhode Island

2.0%2.4%

2.1%2.5%

Coder Matched Sample Increase

Coder - All Incumbents

# of Orgs # of Incs 25th 50th Average 75th

2014 31 534 $23.32 $24.68 $25.22 $27.22

2015 29 676 $23.80 $25.30 $25.91 $28.35

% Change 2.5% 2.7%

ICD-10/Coding Compensation and Policy SurveyNortheast Healthcare Organizations – Spring 2015    

ICD-10/Coding Compensation and Policy SurveyNortheast Healthcare Organizations – Spring 2015    

Bonus/Incentives 2015 2014Complete training 24.1% 16.7%Productivity 3.4% 13.3%Retention 17.2% 29.0%Sign On 3.4% 9.7%Other Incentives 13.8% 16.0%

ICD-10/Coding Compensation and Policy SurveyNortheast Healthcare Organizations – Spring 2015    

23%77%

Yes No

Are Coders Unionized?

68%

32%

Yes No

Certification Required?

39%

58%

3%

No Some All

Do Coders Work at Home?

ICD-10/Coding Compensation and Policy SurveyNortheast Healthcare Organizations – Spring 2015    

20%

80%

Yes No

32%

68%

Yes No

Out of cycle increase in past 12 months?

Out of cycle increase in next 12 months?

I see Nurses unhappy with

their pay.

In other words, business as

usual.

2008 2009 2010 2011 2012 2013 2014 20150.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0% 4.7%

3.5%

2.5%2.1% 2.1%

1.2% 1.3% 1.3%

New England RN Matched Sample

New England Pennsylvania Connecticut Rhode Island

1.3% 1.4%1.2% 1.0%

RN Matched Sample Increase

California Texas New York Florida Pennsylvania

252,940

190,090169,820 162,530

124,750

States with the most RNs

New York

Boston

Los A

ngeles

Philadelphia

Houston

Chicago

Dallas

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50 $45.15 $44.76 $44.26$38.77 $36.56 $34.46 $33.65

RN Salaries in the 7 largest markets

San Fr

ancis

co

San Jo

se

Oaklan

d

New York

Boston

Los A

ngeles

Philadelphia

$0

$10

$20

$30

$40

$50

$60

$70 $61.38 $59.23 $58.19

$45.15 $44.76 $44.26$38.77

RN Salaries in the large markets

2015 Benefits Strategy &Benchmarking Survey

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™© 2015 GALLAGHER BENEFIT SERVICES, INC.

Participation 3,038 Participating Organizations

The LARGEST private domestic employee benefits survey

66

Willis Aon Hewitt Mercer AJG0

500

1000

1500

2000

2500

3000

3500

10331234

2569

3046

70

30

Total Comp Mix

WagesBenefits

Total Wages Benefits0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2.0% 1.9%2.2%2.2% 2.1%

2.6%

2013 2014

Annual Growth

Total Compensation

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5% 4.2%

4.0%3.9%

4.0%

3.3%3.0%

2.1% 2.1%

1.5%1.6%

1.8%

1.5%

Growth in Hospital Total Compensation

Controlling employee benefit cost

Attracting/retaining a competitive workforce

Overall Operating Costs

Government regulation

Revenue/Sales growth

Maintaining profit margins

Maintaining/Growing market share

Increasing innovation

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

62.3%

54.6%

48.0%

37.6%

35.0%

26.8%

21.7%

14.0%

Top Business Challenges

Controlling healthcare expensesRecruiting qualified employees

Keeping up with healthcare reformRetaining employees

Increasing employee job satisfactionKeeping up to date on HR regulationsReducing HR administrative workload

Compensation expensesIncreasing employee productivity

Effectively communicatingImproving employee health

Work-life balanceAn effective wellness program

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

60.5%32.7%

24.6%22.1%

19.0%17.5%

14.9%14.8%13.8%

11.7%10.5%

8.6%5.8%

Top HR Challenges

97%

3%

Yes No

23%

77%

Yes No

Considering moving to defined contribution for healthcare within

the next 5 years

15%

85%

Yes No

Do your medical plans include a spousal

surcharge?

Will offer healthcare benefits in the future.

I see a happy CFO, unhappy employees and

you getting blamed for

anemic Salary increases.

In other words, salaries will grow very

slowly over the next few years.

March

AprilMay June

JulyAug

Sep Oct

NovDec

JanFe

bMarc

hApril

May JuneJuly Aug

Sep Oct

NovDec Jan

FebMarch April

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%US Unemployment

Full Employment

5.4%

Dec Jan Feb March0.0

0.5

1.0

1.5

2.0

2.5

3.0

1.9 2.0 1.9 2.0

Job leavers

Dec 2007 April 20150

5,000

10,000

15,000

20,000

25,000

30,000

4,665 6,580

19,52620,056

PT for Economic Reasons Other Part-Time

Part-Time Workers

Unemployment U6 Rate0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

5.0%

8.8%

5.4%

10.8%

2007 2015

Slack in the Labor Market

40.0%

45.0%

50.0%

55.0%

60.0%

51.0%

42.8%

Wages as a % of GDP

Hospital Revenue

Hospital Expenses

Hospital Margins

Corporate Profits

$0

$0

$0

4.2% 4.6%2.2%

13.2%

2014 Financial Results

December 2006

December 2007

December 2014

Jan 2015

Feb 2015

March 2015

April 2015

3,242

3,609

4,325 4,242 4,180 4,189 4,136

Job Losers

Healthcare Consolidation

While Hard Work pays off in

the future, A cocktail by the pool Pays off

now.