According to the U.S. Census’ 2021 American Community Survey (ACS), the number of people working from home more than tripled from nearly 9 million to an astounding 27.6 million people. Thanks to the COVID-19 pandemic, all industry sectors, including healthcare, had to quickly pivot to allow remote and hybrid work models.
With a newfound ability to work from anywhere, many employees opted to move to other states, or even other countries, with the goal of cutting expenses, being closer to family or simply enjoying a different lifestyle. The end result is that many companies may now need to register as employers in a dozen or more states. Healthcare organizations are facing the same issues.
“Ten years ago, most healthcare organizations had employees in a single state, or perhaps they had employees who lived across a group of contiguous states, like the Virginia, Maryland and Washington, D.C., area,” said Mary Torretta, principal, healthcare tax leader at Grant Thornton.
“That’s all changed, she said, adding: Today, your employees could be living anywhere across the United States. They may be even working internationally. And that’s something your organization needs to carefully consider as you look to manage your tax and compliance obligations.”
No doubt there are significant cultural and financial benefits to supporting continued remote and hybrid work in healthcare, particularly in billing/coding, call center, scheduling and administrative roles. Healthcare, however, faces specific challenges as they seek to demystify multi-state tax rules.
“Healthcare organizations will always have patient-touch employees who will have to live relatively close to where patients are,” said Torretta. “But health systems employ more than just clinical employees. These organizations need staff to run huge information technology (IT) systems as well as manage complicated revenue management and operational activities. Those people don’t necessarily need to be on site to do their jobs. That means you ultimately have two classes of workers — and need to define policies for both.”
Complying with tax regulations — and more
Ashley Edwards, senior manager, human capital services at Grant Thornton, said there is no national consensus to taxes and payroll. Each place may have different filing requirements — and healthcare organizations need to be able to comply with all of them.
“Every state has separate rules,” said Edwards. “In addition to every state, many cities and counties have their own rules, too. Knowing what those rules are before you get started is very important. The filing obligations are immense — there are a lot of forms to fill out. But it’s not just a volume issue. There’s also a huge challenge involved with capturing all the data you need to about where your employees are working.”
In the past, healthcare organizations would collect an employee’s address during the on-boarding process and might not ever update it again — even if the employee moved during their tenure. Modern human resources (HR) IT systems now allow employees to easily update their address information as needed but the onus remains on healthcare organizations to make sure that data is accurate and up to date when tax time rolls around. Unless directly asked, a remote employee with a home address in New York City might not think to share that he or she has been working in Vermont for the past three months. Torretta said it is crucial that healthcare organizations put systems in place to track such information.
“This is a challenge to monitor — and different organizations handle it in different ways,” she said. “Do you ask your employees once a year when they fill out their W-4 where they reside? When they input their timesheets, do they have to type in a location for a given time period? Do you have a way to track IP addresses to see where they are logging on and see if it matches with what they have on their tax documents? You want to put systems in place to show that you are doing everything you can to comply with your obligations.”
Edwards added systems should also be able to easily keep up with tax updates and changes.
“Cities and local jurisdictions add and take away taxes all the time,” she said. “Payroll systems designed to automatically update when those changes occur are of benefit. If your HR system can note an employee has made an address update and then ping the payroll system to let your team know that payroll taxes need to change, too, that’s even better.”
But knowing where employees work affects more than just an organization’s tax liability. Many states have different rules about parental leave, worker’s compensation, pay transparency, and disability pay, just to name a few. Healthcare organizations with employees residing in these areas need to be able to keep up with these rules — and any changes that may occur. Edwards said it is imperative that healthcare organizations put policies in place to manage it all.
“This goes beyond just HR and payroll,” said Edwards. “You also need to consider how to address benefits and compensation, too. You may have a great health plan in one geographic area that doesn’t have coverage in another. You may need to think through what happens if an employee falls and breaks an arm while working at home — is that worker’s compensation or homeowner’s insurance? What if your employee is responsible for patient information and is hacked? If your employee has been working from Costa Rica for the last year, do you have any international rules or taxes you need to deal with? You really have to think through anything and everything — and then put a written policy in place that addresses it.”
Developing an intentional strategy
There is no one-size-fits-all policy that can address each organization’s specific needs. It takes time and effort to think through all the potential issues. While developing policies to address all the variables that remote workers add to an organization’s tax equation, Torretta said doing so provides a remarkable opportunity for hospitals and health systems to differentiate themselves.
“Healthcare organizations are struggling with how to get the best talent to further their business,” said Torretta. “When you are intentional about developing remote work policies, you are in a position to upgrade your workforce. It’s also an opportunity for you to increase the diversity of your employees. This goes beyond checking a box — it’s a real cultural opportunity to outflank your competitors in a tight labor market.”
It starts with creating a comprehensive, intentional strategy that considers all aspects of remote work. When healthcare organizations invest in systems that can track the information they need to track — and that gives them the agility necessary to adjust to any rule changes — they are in a strong position to not only comply with all legal and tax requirements, but become a coveted place to work.
About Grant Thornton
Our clients take advantage of our collective knowledge, gained from long experience in and with healthcare organizations. More than 1,000 Grant Thornton health care professionals deliver solutions focused on growth, transformation, and protecting core assets.
This published piece is provided solely for informational purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions by participants are those of the participants and not those of HFMA. References to commercial manufacturers, vendors, products, or services that may appear do not constitute endorsements by HFMA.
. U.S. Census Bureau American Community Survey, The number of people working from home tripled between 2019 and 2021, Press release, Sept. 15, 2022.
. Green, C., “As practices turn to remote and hybrid work models, engagement and culture are key considerations,” MGMA, Feb. 10, 2022.