Taking a proactive approach to labor management
By Chris Fox, June 18, 2012
By focusing on sustainable labor management strategies and technologies that provide rapid margin recovery and long-term ROI, healthcare organizations can utilize the resources they already have on hand to leverage against external, uncontrollable industry factors.
Hospitals and health system leaders, especially in the nonprofit sector, are under an incredible amount of pressure to strengthen their organizations in the face of a number of external factors, including: reduced Medicaid and Medicare reimbursements, impending government reforms, bad debt and lagging patient volumes. These concerns are exacerbated by the cost and efforts to prepare for and conform to imposed regulations such as ICD-10 and meaningful use. Such concerns have healthcare executives across the country engaging in difficult budget conversations, especially those organizations where July 1 signals the start of a new fiscal year.
The result of these conversations is frequently the initiation of protocols to cut capital and operational expenditures for short-term gains. Often these cuts come in the form of a reduction in force, which more often than not can negatively impact the real bottom line: patient care and outcomes. Instead of cutting expenses and staff, organizations must look for ways to optimize resources to drive savings.
By focusing on sustainable labor management strategies and technologies that provide rapid margin recovery and long-term ROI, healthcare organizations can utilize the resources they already have on hand to leverage against the external factors coming to a head.
There is a combination of labor best practices and tools that provides immediate and substantial ROI and increases efficiencies for the entire end-to-end labor management continuum.
1. Analyze and optimize core staff resources: Before investing in a technology solution that tackles labor, healthcare leaders must first understand the makeup of their workforce. A comprehensive workforce analysis should be conducted that looks at resource utilization, analyzing things such as what staffing sources the organization has and whether or not they are being used effectively. This type of analysis typically uncovers tremendous opportunities for increased efficiencies and savings.
2. Develop nimble contingency staff resources: 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 meet patient demand and fill holes left due to core staff PTO, FMLA and education and meeting obligations.
3. Manage and deploy resources centrally: By adopting an enterprise-level model of resource management — centralizing management, deployment and alignment strategies — healthcare organizations are able to leverage economies of scale and benefit from consistent practices and the real-time coordination of staffing to efficiently utilize at-hand resources.
4. Implement effective incentive management programs: A tremendous amount of waste, both in time and dollars, is tied to the filling of open shifts. Typically this is due to the reactive nature of the process stemming from a scheduling system that does not provide an accurate projection of patient volume. With an accurate prediction of patient demand, organizations have the power to tie the dollar amount of incentives to how far in advance staff are willing to schedule. This creates an automated, budgeted model of declining incentives that effectively fills needed shifts weeks in advance, solidifying staffing plans sooner, and greatly reducing the last-minute chaos and scrambling for resources that is common in hospitals today.
5. Implement a scheduling and productivity solution: In terms of capital expenditures, there are few that can produce as much one-year and continuing ROI as the right scheduling and productivity software. Good scheduling software will do a lot more than provide a user-friendly portal to create balanced schedules. The right scheduling software will:
- Enable proactive staffing;
- Create transparency across the enterprise, allowing for the sharing of resources;
- Turn data into understandable, actionable information for clinicians;
- Empower managers to spot and correct issues negatively impacting productivity; and
- Return substantial time back to managers.
The combination of strategies that optimize core and contingency resources, fill open shifts proactively and automate the management of labor resources can provide most healthcare organizations with conservative savings of 4-6 percent with regard to their labor spend. As labor is the largest expense for any healthcare organization, a savings of this size is substantial. For an average 300-bed hospital with 20 nursing units, this equates to an opportunity of $100,000 per unit or $2 million in annual labor savings.
If hospitals and health systems make strategic investments in technology solutions that optimize their single-largest resource (and expense), they will be able to effectively manage against the uncertainty that is plaguing the industry.
About the author
With over 14 years of industry experience, Chris Fox serves as the senior vice president of Growth and Innovation for Avantas, leading the development and innovation teams and providing guidance for software product development, marketing strategies and strategic partnerships. Learn more at http://avantas.biz/. See Avantas at HFMA's 2012 ANI Healthcare Finance Conference June 24-27, Las Vegas, at booth #1661.
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