Because of the Affordable Care Act, Medicare reimbursements are down by two percent, leaving hospitals with a $9.9 billion loss[i] to make up for. At the same time, bad hospital debt is expected to reach $200 billion by 2019[ii] – even with a decrease in charity care. While the average hospital operating margin hovers around a slim three percent[iii].
What is the bottom line? Hospital cash flow is virtually nonexistent.
These combined pressures could make or break organizations. Already, many hospitals and health systems are grappling with ‘doing more with less’ and quickly learning that following the status quo, while health reform surrounds you, isn’t sustainable.
Honing in on Workforce Costs
Hospital executives are all plagued with the same daunting question: How can we better control operating costs during this time of fiscal uncertainty? The workforce accounts for 54.2 percent of hospital operating costs[iv], making workforce optimization essential to hospitals’ long-term financial viability.
In reality, thousands of U.S. health systems still rely on antiquated or paper-based processes to accomplish basic workforce management tasks. Over 45 percent of hospitals are still creating employee schedules manually[v]. During this ambiguous period in healthcare history, it’s crucial that hospital systems nationwide adopt workforce operation management strategies to proactively control labor costs and improve the quality of care.
Leverage Data to Influence Outcomes
Without workforce automation, employee data is not easily accessible or actionable. Staffing decisions become subjective, inconsistent and can often lack transparency. Hospitals run the risk of poorly matching its nursing and clinician staff with patients who are out of their medical skill range. Furthermore, studies have shown that inadequate staffing impacts patients’ readmission rates, mortality rates, and length of stay.
By integrating key operational and clinical information into a single database, health systems can make meaningful staffing decisions in real-time. Clinicians and nurse management alike can then analyze the direct impact of staffing on patient outcomes. With this acuity-based approach, clinicians can breathe a sigh of relief and actually trust the system to provide reliable information to base staffing decisions off of. This peace of mind, with the predictive nature of data-driven workforce management provides, is even more profoundly felt as patient volumes fluctuate.
Control Overtime Costs
With the ability to make data-driven workforce decisions, labor costs accrued by overtime can also be dramatically reduced. Ellis Medicine, located in upstate New York, underwent a mandated consolidation of three hospitals into a single organization. This merge forced management to streamline its disparate personnel, systems and processes.
By combining the information into one centralized database, Ellis Medicine was able to exchange vital workforce data throughout its various facilities, offering invaluable data transparency enterprise-wide. This, in turn, equipped schedulers, managers and executives with early access to information about employees’ potential overtime, allowing them to proactively take corrective measures and reallocate resources.
After one year, Ellis Medicine was able to reduce overtime expenses by $2 million, decrease payroll errors and slash unscheduled absences.
Anderson Regional Medical Center, a community hospital in rural Mississippi, also used staffing analytics to boost their bottom line.
Anderson Regional felt a substantial financial blow after they had acquired another healthcare facility. The organization also saw millions in reimbursements disappear after the governor of Mississippi rejected Medicaid Expansion, which added to the mounting fiscal pressure.
To combat this, Anderson Regional invested in a productivity and workforce operational excellence project to efficiently match staff to patient care needs. Business analytics were used to track productivity gaps across each hospital department, and management used the data to make preemptive decisions regarding their workforce.
Over a short 8-month period, the staffing project yielded a cost savings of $2.5 million dollars compared to the prior year.
Optimize the Staff
Hospital leaders are under pressure to execute plans that have an immediate, positive impact, while building a foundation for long-term success – which is no easy task when new regulations are cropping up at lightning speed.
By eliminating inefficient and inaccurate manual processes, hospitals will realize significant dollar and throughput savings. Health systems must be able to develop an agile workforce management strategy that will meet current and future staffing needs. Healthcare workforce optimization is a stead fast solution that will not only help a hospital system survive, but thrive amongst the chaos of the ever changing industry landscape.
[i] Pricewaterhouse Coopers. Web. 9 Jul 2013. .
[ii]Felix, June yee. “Surviving in Tough Times Needed: Patient-Centric Revenue Model.” Citi Bank, 1 Oct. 2013. Web. .
[iii]McKinsey & Company
[iv]Herman, B. (2013, December 10). 10 Statistics on Hospital Labor Costs as a Percentage of Operating Revenue. Becker's Hospital CFO.
[v] HIMSS Analytics Staff Scheduling Market Opportunity Report, Created January, 2014.