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FQHC Employee Costs Continue to Rise

FQHC Employee Costs Continue to Rise

Employee Costs Continue to Rise in Federally Qualified Health Centers

The cost of FQHC employees continues to grow as a percentage of total expenses, according to the results of our recent study of tax filings of more than 1100 FQHCs nationwide.  Median total salaries and benefits as a percent of total expenses rose by 1.8% in 2011, from 65.6% to 66.8%.  Total salaries as a percent of expenses increased at a rate of 3.4% from 2010, from 53.7% to 55.5%.

The middle 50% range of responses tightened considerably over the last three years.  In 2009, the middle half of total salaries and benefits ranged from about 57 to 70% (a “spread” of about 23%).  By 2011, that range had narrowed to 16%.  Most of this shift occurred at the lower end of the scale, with the 25th percentile increasing at about 2.5% per year; at the 75th percentile, growth has been at about 1% per year.

Most surveys, supported by government reports, suggest that the increase in employment costs in recent years has come primarily from benefits cost increases (generally health insurance benefits).  The results of this study are less conclusive, but do indicate a very slight change in the last year, with the percent of total salaries to total employment costs decreasing from 83.5% to 83.1%.  However, this difference may be a result of the makeup of the population of FQHCs included in each year.

As employment costs continue to be by far the largest expense for most FQHCs, it is essential that organizations carefully manage employee compensation.  Proper compensation management techniques can help an organization weather difficult times and make much better choices.

For more information on the FQHC study, contact Ed Ura at ebura@mercesconsulting.com.

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