Navigating Healthcare Reform with Technology

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Navigating Healthcare Reform with Technology

By Dorothy Creamer, Managing Editor - 04/08/2015
Regardless of where one stands on political battle lines, healthcare reform is an issue that evokes strong opinions on both sides. For hospitality operators, the passing of the Affordable Care Act (ACA) has brought with it several tangible operational issues. New mandates and regulations are forcing operators to focus more on tracking, reporting, and proactive scheduling, else they risk increased costs and/or fines.

The ACA changed the definition of a full-time employee from someone who works a 40-hour work week to anyone who works 30 hours a week. A lower threshold delineating full-time employment greatly impacts foodservice and lodging companies who rely a great deal on part-time employees. With more employees being designated as full-time, small businesses may become classified as a large business and consequently be forced to either pay for health insurance for many 30-plus hour employees who never had to be covered before or employers could be levied a substantial fine. The mandate does not apply to employers with fewer than 50 full-time employees.

“One concern that jumps out to every small business is the line between part-time and full-time and when you have to start offering benefits to your employees,” admits R. Spenser Hanson, CEO/Owner of The Cask and Barrel (www.thecaskandbarrelpolaris.com). “That can be the difference between an operationally sound restaurant and one that is losing too much profit to catch up with.”

Marcus Wasdin, CIO of Church’s Chicken® (www.churchs.com), noted that his company is still in the fact finding phase with the ACA.  “We’re learning more and more about the ACA and know companies need more tools to ensure they comply with the many requirements. Church’s is a company that believes in doing things right.   We support our team members every way we can, as they are the face of our business with guests,” Wasdin said. “Having expanded or enhanced software to help with the oversight of the ACA is something we want to explore but, to be fair, everyone is learning how to balance being a great employer and being in compliance to all the regulations. We want to be excellent at both.”

For Umami Restaurant Group (www.umamiburger.com), which includes 22 full-service restaurants, two quick-service locations, and a food truck for private events, teams vary depending on the size and design of operations.  “Our first concern and priority is our team members,” says Lisa Lefner, director of human resources. “We want to ensure that we are doing everything we can to meet their needs as employers. Many employees have to get second jobs just to make ends meet. As employers we are only able to offer part-time positions due to the financial hardships ACA could pose through automatic enrollment and/or penalties.”

A group of operators discussed “The Impact of Affordable Healthcare on Your Business” at Hospitality Technology’s recent Restaurant Executive Summit during a roundtable luncheon. The discussion moderator, Lee Holman, lead retail analyst, IHL Group (www.ihlservices.com), reports that the participants, representing a wide spectrum of restaurant types, agreed that their foremost desire is clearly to take care of their people, but the constraints that the Federal government is placing on them require some hard choices. “One suggestion that was made involved identifying three-to-four key employees per restaurant, and cutting everyone else to 28 hours per week,” Holman recalls. “Another part of the conversation involved balancing the costs associated with covering all employees versus choosing to cover certain employees and paying the fine for not covering the rest.”

At Umami Restaurant Group, Lefner sought out a system to effectively track data on team members and prepare for new reporting requirements with the IRS.  “Having a proactive system is key to being efficient, compliant and in control of costs,” Lefner says. “We were looking for a system that would help us create schedules based on forecasted sales, track cost of goods, alert us in advance if a team member was working full-time hours per week, and track inventory on a weekly basis.”

Ultimately, Lefner and her team selected Ctuit (www.ctuit.com) based on the fact that the system not only assisted with the labor portion of restaurant management, but also tracks costs and inventory and has manager logs for communication purposes. “The two proactive functions together — labor scheduler and the hours worked trend report — alert us to anyone working full-time hours per week and offer a report where you can track hours worked in any given time period,” she explains. “This gives us the control we need in advance to strategize people and costs.”

Proactive reporting
Cask & Barrel is expected to open in the beginning of 2015 and Hanson anticipates about 70 people will ultimately be hired to run the operation. With a mix of full-time and part-time employees, the majority of which will be part-time, Cask & Barrel utilizes WMX software from Agilysys (www.agilysys.com) to keep the ratio between part-time and full-time employees in balance.   “If you’re a small business owner and you don’t think about workforce management, then you’re making a very costly mistake because it can get out of hand very quickly,” Hanson says.

For Hanson, the selection of Agilysys came down to a combination of two things. First, the WMX system automates processes that can take general managers hours a week to perform manually. This frees managers to spend more time with customers and ensure operations run smoothly. Second, the software uses built-in algorithms to flag when an employee is scheduled for more than 29 hours. “It takes a lot of what would be manual processes for management and staff, and automates them, leaving little room for human error,” Hanson says.
 
Lefner agrees stating, “You really need to plan ahead and use systems that will help you be proactive and help prepare you for the reporting requirements.” She went on to praise Ctuit for providing as close to real-time data as possible for P&L. “It helps us strategize and react faster if needed and provide better support to our management teams in the field,” she notes. “When sales are up, we can flex and have more labor on the floor; if sales are down that will help us schedule differently. It helps us be more efficient and less wasteful, making sure that our teams have enough hours and enough labor to make sure we are delivering flawless execution every single time.”

For Church’s Chicken, with 1,700 locations worldwide and 1,200 in the U.S., of which about 260 are company-owned, the need for a sophisticated labor management system was evident as the ACA mandates took shape. Wasdin explains that prior to the ACA, restaurant managers could use a more passive system to pull information on hours worked; at that time, they were only concerned with minimizing overtime over a traditional 40-hour work week.  New regulations are more complex and require more sophisticated tools to help managers comply.

Church’s is currently creating a system that will send messages to managers to alert them to workers approaching the new threshold. “We want to be more proactive in helping managers oversee that as opposed to relying on them to check it themselves,” Wasdin says. “Being in a fast-moving quick-service environment, you don’t have a lot of time to go back and check those things. One of the things we believe will be helpful is a system that can push out text messages that will go to general managers’ phones to alert them as opposed to waiting for them to pull the information.”

Healthcare financial impact strikes investments
According to Holman, restaurant operators are concerned that Federal mandates for healthcare could shift their focus away from improving the guest experience, toward cutting costs. “One of the participants [in the roundtable] indicated that the mandates as they now stand will result in a 12.5% hit to their cost structure,” Holman recalls. “That is a pretty heavy distraction, especially since one of the direct results of those increased costs will be a decided decline in IT investment, which seems to be confirmed in recent research that IHL Group conducted.” Holman cites a recent study IHL conducted in partnership with RIS News magazine which revealed that in the hospitality segment alone, owners anticipate a decline in store-level IT investments from 3% in 2014 to 1% in 2015 and in enterprise spend from 4.7% to 4.5%.

Wasdin also admits that preparing for the ACA required some creative reshuffling of the company’s capital budget. “We allocate our capital budgets on an annual basis like we do our overhead. The rollout of a human capital management system (HCMS) was something that we had to add and increase our capital budget to accommodate,” he says. In the case of Church’s, the company also had to take into account the fact that the HCMS it selected has an ongoing operating expense.

“When all is said and done, the new HCMS should only be incrementally more expensive in 2015 and 2016 than the prior system,” Wasdin notes. “We believe it will be infinitely better, but only incrementally more expensive from an OpEx perspective; then, as we get into 2017 and beyond, because of contractual agreements with existing vendors that we will be exiting, the new system will be less expensive. The capital was where we had to say we were willing to make that investment, so we could roll out in 2015.”