It's not news to anyone in the industry that hospitals and health systems are treading on shifting sands. An already volatile economic environment is being exacerbated by the looming uncertainty of government reforms and reduced Medicaid and Medicare reimbursements. This is further compounded by lagging inpatient volumes, bad debt and sliding bond ratings. Though there are some organizations that are persevering, and a few that are even thriving, the majority, especially the not-for-profits and smaller community access hospitals, are bearing the brunt of the storm.
In response, many hospitals and health systems are focusing on strategies to cut capital and operational expenditures for short-term gains. However, the attention should be focused on long-term, sustainable, strategic initiatives that provide both immediate savings AND have a transformational impact on the financial picture of the organization over many years.
Healthcare organizations have very little control over the decisions being made in Washington, but what they can control are the decisions being made and the technologies being utilized inside of their organizations. One way that healthcare organizations of all sizes can instill control is by shifting their mindset to "focus on the controllable," meaning that they need to direct their attention to the single largest expense of their organization: the wages and benefits paid to staff, i.e., labor.
The wages and benefits of caregivers and other staff account for roughly 60 cents of every dollar spent by hospitals, according to the American Hospital Association. The sheer size of labor spend makes the magnitude of even small, incremental improvements substantial.
There are five key labor management strategies that are proven to effectively drive savings across the continuum of labor through the implementation of customized best-practice labor management strategies.
1. Analyze the amount and types of core staff resources to ensure alignment with staffing plans.
The first step in implementing labor management improvements is to understand the makeup of your workforce. Conduct a comprehensive workforce analysis that looks at resource utilization - what staffing sources your organization has and whether or not you are using them effectively - and how well you are meeting your current staffing plans.
2. Right-size and strategically layer contingency staff to handle the ebb and flow of patient demand.
The development of a "right-sized" and properly layered supply of internal contingency staff can contribute drastically to decreasing dependence on last-minute agency and overtime utilization in addition to providing the flexibility to expand and contract to patient demand.
3. Tailor department-specific strategies to align operational best practices with your desired future state.
Without exception, every organization has some degree of misalignment between its written policies and actual practices. These deviations from policy happen unit to unit and even shift to shift. Aligning your current practices with policies tailored to your desired future state and embedding those along with your specific business rules into a flexible labor management system allows for consistent and repeatable outcomes that always align with your goals. The most basic result of policy automation is reflected in holding staff accountable for fulfilling their FTE commitments along with consistent application of floating, time off, and other policies.
4. Develop a solution to manage and deploy resources from a central hub.
One challenge many healthcare organizations struggle with is their silo-approach to labor management. By shifting to an enterprise-level model of resource management - centralizing your management, deployment, and alignment strategy - your organization can leverage economies of scale and benefit from the real-time coordination of staffing to efficiently utilize at-hand resources.
5. Customize operational solutions for enterprise and site-based pools.
At the core of developing and implementing a solution for enterprise and site-based pools is having the right mix of skills and traits within the ranks of nimble, flexible pools of contingency staffing sources and ensuring those individuals are best suited to fulfill the unique demands of their role.
Within each of these strategies there are basic as well as advanced practices. By simply focusing on the basics - going after the low-hanging fruit - most organizations can expect to realize a 4%-6% savings with regard to their labor spend. Even fractions of these strategies, like holding staff accountable for fulfilling their FTE commitments saves, on average, nearly $13K per unit annually.
By focusing on what your organization can control and embarking on projects that provide immediate and sustainable ROI, as well as "soft" cost benefits that positively affect issues such as staff burnout, morale, and turnover, your organization will be able to properly hedge against the uncertainty plaguing the industry.
Jackie Larson is vice president of client services, Avantas.