According to Werner, Kolstad, Stuart, and Polsky (2011), the pay-for-performance rewards approach has been widely adopted in the public healthcare sector to improve healthcare quality. For instance, as the authors point out, in 2003, the Centers for Medicare and Medicaid Services (CMS) started to experiment on pay-for-performance in hospitals via the Premier Hospital Incentive Demonstration project. In addition, according to Sommers and Kronick (2012), the 2010 Affordable care Act, established pay-for-performance program in public hospitals, and took effect in 2013. It includes all acute care hospital in the U.S., and is similar to the CMS approach to compensation of public sector employees in healthcare. The pay-for-performance model offers financial incentives to medical groups, physicians, hospitals, and healthcare providers upon meeting specified performance measures.
This compensatory method provides incentives in accordance with the input by employees. As Werner et al. (2011) articulated in their study, varied outcomes have been achieved with low incentives amounting $2 improving quality while bigger incentives to the tune of $10,000 resulting in discernible effects. CMS calculates the incentives based on composite measures, which are calculated as a weighted average across the performance measures. The method, since it focusses on process efficiency and quality, such as counseling patients, does not satisfy the complete set of rewards that employees should receive. Besides, it becomes difficult to measures aspect that should be remunerated, such as longer survival of patients. It also penalizes the healthcare providers for medical errors, poor outcomes, and increased medical costs. It is often subjective, and thus, offers inconsistent evaluation, which can lead to dissatisfied employees. In addition, it often displays inconsistent performance because employees who had a strong performance previously may slip. It is often difficult to maintain high performance at all times in the health sector.
Therefore, the performance-for-pay approach of rewarding in public healthcare is not effective, and a total rewards approach should be adopted to offer a sustainable rewards system (Mujtaba & Shuaib, 2010). It is recommended that it should include all aspects of remuneration. The healthcare sector should include compensation, which includes base, merit, incentives, promotions, and pay increases. Base pay encompasses wages and salaries; merit pay includes base pay increases based on performance; incentives include cash bonuses; promotions entail a base pay increase and offer of a new job; and pay increases encompass an increase in base pay based on the length of service. Benefits entail health and welfare, paid time, and retirement. Regarding health and welfare, employees should be paid or illnesses and injuries on and off the job. For paid time off, they need vacation time, and lastly, in retirement, they need to get paid or work no-longer performed, usually based on their employment period. In addition, on personal growth, the employees need to be offered training or skill development, career development via coaching to acquire new skills, as well as performance management via an ongoing goal setting.
The total rewards approach is justified as it leads to an increased work-life balance via a flexible work schedule, recognition of the employee efforts that offers motivation (Lyons & Ben-Ora, 2002). It also offers the employees an opportunity for growth and advancing their careers. It is sustainable compared to the pay-for-performance method. In essence, as opposed to the payment for performance approach, it is consistent in terms of evaluation and performance, and thus, it is rare that employees will slip off once promoted.
It is risky not implementing the total rewards approach because of the sensitive nature of the medical field, which deals with life and death situations. An employee could be promoted only to be more erroneous, hence more deaths. The employees are not satisfied and motivated. Besides, employees morale will be adversely affected. Also, not adopting the total rewards approach may hinder the employees from achieving their career goals.
The metrics for assessing the effectiveness of the total rewards approach to be used include an increase in quality. Quality is an important aspect of performance and dictates the success of the approach as it increases and failure if it diminishes. Satisfaction can also be a good metric and indicates success if the employees are satisfied and failure if they are not. An increase in productivity, such as customers served in a day indicates success and vice versa. In addition, profitability, where an increase in profits indicates success is also an important metric.
The total reward is a term that has been adopted in the field of human resources to describe a strategy for remunerating employees, and brings together all the investments a public or private organization makes in its workforce, such as learning and development, pay, and pensions (Gross & Friedman, 2004). In addition, it encompasses the totality of what employees value in working for the organization, including career opportunities and flexible working hours. A total rewards approach will enable employers and employees in looking beyond the monetary rewards, and incorporate non-monetary rewards.
The successful implementation of the methodology guarantees that the public health sector organizations recoup each dollar spent in facilitating the total rewards approach. It requires a disciplined implementation of the strategy by identifying inefficiencies and the missing links between the business strategy and rewards. As such, it entails balancing compensation, benefits, and work experience with various integrating factors, such as business strategy, industry benchmarks, financial impacts and employee interest.
The following timeline will be used in implementing the strategy:
Timespan Task Importance
September 5-30 2016 Assembling the right team. To implement the remuneration approach, coming up with an implementation team is vital. These are the various stakeholders in the public health sector, including CMS, employees, unions, hospitals, governmental policing departments among others. The stakeholders input on how to best implement the strategy will be vital. Besides, it ensures that everyone is represented while adopting the strategy, as well as avoiding negative impact to any of the stakeholder. Therefore, communication is key to achieving stakeholder participation.
October 2015 Taking inventories of everything in the benefits mix. It entails analysis of the benefit of the plans, programs, and benefits of each package, as well as the financial ramifications to ensure that the strategy is viable, both in the short-term and in the long-term. This also entails communicating between the stakeholders, which facilitates a knowledge pool to ensure that the approach is implemented successfully.
November 2015 Pilot testing with a sample of employees, such as a single public hospital. This is important as it verifies the effectiveness of the total rewards approach. In essence, if there is an improvement in terms of quality, efficiency, motivation, and satisfaction in the sample, it signifies that when the remuneration package is implemented in public sector healthcare will be a success.
December 2016 Assessing and ranking each benefits program imposed in the total rewards. It involves performing industry benchmark surveys, as well as internal employee surveys for assessing the effectiveness of the program. For instance, low participation rates from employees may signify low satisfaction of the program. Communication between the stakeholders is key, especially from the employee involvement.
In addition, the remuneration packages recommended should be linked up with the business strategies, and thus, each of the policy should be mapped to the public healthcare strategies. The total rewards approach intends to motivate the employees, and thus, it is paramount that this is achieved. The employees, therefore, should not compromise quality, and their production should be better compared to when the pay-for-performance was in place.
Therefore, conducting impact analysis is vital to gauge whether the implementation of the total rewards approach was a success.
In summary, the total rewards approach is forecasted to be more effective than the pay-for-performance methodology in the public sector healthcare. Once implemented, the employees will be characterized by an increased motivation and satisfaction in addition to increased efficiency, quality, and productivity in the public healthcare sector in the US. Also, medical errors will reduce, poor outcomes will be mitigated, and decreased medical costs will be achieved. Therefore, from this activity, I have learned that total rewards approach is more advantageous compared to pay-for-performance as it ensures optimal benefits are provided to employees, while also ensuring that they play their part to their level best. I have also learned how the remuneration strategy can be implemented, usually encompassing assembling the right team, taking an inventory of benefits, pilot-testing, and finally assessing the benefits.
Gross, S. E., & Friedman, H. M. (2004). Creating an effective total reward strategy: Holistic approach better supports business success. Benefits Quarterly, 20(3), 7.
Lyons, F. H., & Ben-Ora, D. (2002). Total rewards strategy: The best foundation of pay for performance. Compensation & Benefits Review, 34(2), 34-40.
Mujtaba, B. G., & Shuaib, S. (2010). An equitable total rewards approach to pay for performance management. Journal of Management Policy and Practice, 11(4), 11-121.
Sommers, B. D., & Kronick, R. (2012). The Affordable Care Act and insurance coverage for young adults. Jama, 307(9), 913-914.
Werner, R. M., Kolstad, J. T., Stuart, E. A., & Polsky, D. (2011). The effect of pay-for-performance in hospitals: lessons for quality improvement. Health Affairs, 30(4), 690-698.
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