The Value of Human Capital in Medical Practices

January 10, 2014
Rachel V. Rose, JD, MBA
Rachel V. Rose, JD, MBA

Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.

In part one of a three-part series, human capital expert Angelo Scozia explains how medical practices can decrease risk and increase revenue.

Healthcare in general is undergoing a multitude of changes, which, in turn, is impacting a provider's workplace dynamic. With greater penalties and more specific care metrics come potential for greater harm to the revenue cycle. What is the most crucial element in mitigating mistakes and keeping the revenue cycle streaming in a positive direction? Human capital.

Because of the crucial role people have in a provider's workplace, Angelo Scozia, an expert in the area of human capital for Willis North America, lends his insights to providers on how to maximize their greatest asset: people.

Rachel V. Rose:What is human capital?

Angelo Scozia: Human capital, in my view, is the economic value of the human being in a market economy, in terms of both personal income accrual and organizational productivity. My perspective on human capital theory is that it encapsulates a person’s value in terms of investment and returns. The human being, when joining an organization, has invested or been invested in to a point where he provides real and/or perceived value to an organization. The organization views this investment in terms of the economic and/or productivity returns it can achieve.

Therefore, through my lens of human capital theory, in order to obtain optimal human capital to achieve organizational goals, enterprises evaluate a person in terms of return on investment in both the short and long terms. Initial investment is through compensation and benefits, which pays for the best available human capital inputs and, if done right, retains these people for the long term. Organizations may increase their investment at specific junctures or in light of new circumstances in order to obtain additional return from their human capital.

For example, providing funding for education or training that may improve the performance of human capital is typically thought of as a prudent investment. This specific type of human capital investment is supported by government policy, such as tax incentives for expenses associated with paying for education. A full commentary on human capital is beyond the scope of this question, but it is critical to note that obtaining and maintaining the right human capital to meet organizational needs is critical, expensive and increasingly complex for organizations. The global economy presents both opportunities and risks for human capital recruitment, retention, and optimization.

RR:What are effective ways that medical practices can assess performance in this area?

AS: First and foremost, the organization must know what success looks like in terms of results and human resources. This begins with the customer. In the era of bigger-than-ever data, it is critical to ask customers and clients what is and is not working. What employees have consistently the best customer feedback in terms of the organization’s goals? The next step is analysis. What do the employees with the best scores have that the others do not? Sometimes, the answers can be less than obvious.

For example, if  Company A pays well but has an employee benefits policy that shifts cost and health improvement totally to the employee, maybe the employees who perform well have generous coverage through their spouse, and, because of the high compensation, low benefits policy of Company A, this sub-segment of employees are particularly satisfied and engaged for the moment. It is the employees who do not value the low levels of benefits provided that could be the problem; more analysis would be needed. Secondly, it is important to look at recruitment strategy - is the organization using all available technology and tools (within reason) to identify, communicate with, and engage the best available talent? In a global economy, firms are looking everywhere for the ideal human capital inputs to leverage competitive advantage. Optimal recruitment uses time and resources, but may be worth it if the right people are hired.

Next, is the organization using technology in every area where human capital is not necessary? Reducing the cost of human capital in areas where it is not needed and redeploying the talent in areas where more human capital is crucial may assist organizations in maximizing the value of its human capital investment. If employees are doing redundant tasks that can be accomplished by technology, redeploying those people to areas in which their creativity and energy can more effectively increase the quantity or value of outputs should be considered. Finally, surveying employees is an underutilized, but rapidly growing, method of understanding your organization. Obtaining forthright input on what is and is not working from employees, and evaluating the results appropriately, may reveal areas in need of improvement that may never have been considered. Several technologies and firms exist today that can do just that. For the investment, an annual employee survey may be worth its weight in gold. For the organization, just as for the patient, diagnosis must occur before treatment, which must occur before health improvement.

Angelo Scozia, CEBS, is a vice president for Willis North America's Human Capital Practice. E-mail him here. NOTE: The views expressed herein are of the interviewee only and not that of Willis North America, Inc.