Anna Marie Butrie
Productivity improvement can help healthcare organizations achieve significant efficiencies and cost savings. What CFO wouldn't like those results?
At a Glance
Healthcare organizations that want to implement a productivity program should:
- Name an executive champion to lead the initiative
- Develop a business model
- Establish a productivity steering committee in each hospital
- Use standardized definitions and auditable data
- Define and monitor goals
Improving workforce performance management in some of its hospitals saved Catholic Health East (CHE) $34 million in one year alone. In today's challenging economy, many healthcare organizations would benefit from adopting a similar approach.
Comparing productivity among facilities was a daunting task for CHE, a health system headquartered in Newtown Square, Pa. Like other U.S. integrated delivery systems, CHE has been operating in an environment dominated by an ongoing nursing shortage, rising labor costs, reduced payment from third-party payers, and increasing demand.
With $1.6 billion in annual acute care hospital salaries and benefits expenses for a staff of 50,000 working in healthcare organizations in 11 states, CHE recognized that the system's proliferation of approaches and technical solutions to productivity management needed improvement. Senior management determined that an enterprisewide productivity program based on standardized definitions and metrics was needed to improve workforce performance management.
CHE created a Mission Synergy Initiative (MSI) team composed of the executive champion, co-productivity improvement leaders, CEOs, CFOs, and operational experts. This team reviewed internal and external benchmarks and identified an opportunity for improvement. In addition, CHE conducted a survey, revealing that a standard tool and monitoring process did not exist. A business case was developed, which incorporated these findings and outlined productivity improvement goals for the next five years.
CHE's enterprisewide productivity program consists of two phases. In the first phase, CHE conducted pilot programs and implemented the productivity program in 19 of the system's 33 acute care hospitals. In the second phase, which began in 2008, the program will be implemented in other acute and nonacute care facilities (see Exhibit 1).
When CHE started planning the productivity program, they recognized that several challenges stood between the existing methodologies and implementation of an enterprisewide productivity program and tool:
- Choosing appropriate productivity monitoring indicators
- Defining productivity program roles and responsibilities
- Standardizing definitions and units of service for hospital departments
- Creating an internal infrastructure and communications program
- Developing guidelines for maximizing program effectiveness
Choosing productivity monitoring indicators. The primary indicator for which CHE leaders are held accountable is salaries and benefits as a percentage of total operating revenue (see Exhibit 2).
Defining productivity program roles and responsibilities. Productivity champions, a productivity steering committee, and a data coordinator play key roles in managing productivity at CHE hospitals.
Productivity champions-usually hospital COOs-take responsibility for implementing the productivity program, achieving facility indicators and goals, and implementing related systemwide goals in each hospital. The productivity champions meet on a monthly basis to share productivity challenges and tactics.
Each hospital has a productivity steering committee that meets at a minimum every two weeks to examine departmental performance, review action plans for underperforming department managers, and provide guidance to departmental managers. Committee members include:
- Productivity champion
- Data coordinator
- Chief nursing officer
- Other members of the senior management team
An expert in optimizing the use of the productivity tool, the data coordinator at each hospital ensures that facility-specific productivity reports are timely and accurate. All of the system's data coordinators meet monthly to address issues in the enterprise database and ensure data consistency and integrity across the system.
Additionally, a select group of hospital CEOs meets quarterly to provide input and feedback on program implementation.
Standardizing definitions and units of service. CHE developed standardized definitions and units of service for 100 hospital departments. All departments are considered 100 percent variable. Each department is expected to flex staffing based on volume changes. The volume indicators were selected based on the ability to tie them to patient revenue, automate them, and audit them. Typical units of service include patient days for nursing, department procedures for ancillary departments, and adjusted patient days for overhead departments. Some challenges with standardizing units of service are ensuring procedures counted are tied to CPT-4 codes and getting overhead departments to flex staffing to a variable standard.
Creating an internal infrastructure and communications program. CHE implemented a variety of resources and tools to educate all stakeholders about the new productivity program and keep them informed about progress and performance. The internal program includes the following:
- Internal productivity community portal
- Computer-based educational program for department managers
- Productivity newsletter
- Comparative reports
- Tactic-sharing reports
These vehicles are an integral part of the program's success because they provide different forums and mechanisms to communicate performance, celebrate successes, and exchange productivity improvement practices systemwide.
Developing guidelines for maximizing program effectiveness. CHE has developed guidelines to maximize the effectiveness of the productivity program (see Exhibit 3).
Close Monitoring Helps CHE Stay on Track
All CHE hospitals monitor productivity at a minimum on a biweekly basis and manage labor with metrics. Because departmental targets are established on the basis of budget goals, managers can better understand how volume affects labor management. Outliers and variances are identified and discussed with each department manager. If departmental performance does not meet expectations, managers develop improvement plans that are shared with their vice presidents, thus providing valuable feedback to frontline managers. Many hospitals have established mentoring programs that enable underperforming department managers to learn from the successes of their peers.
When a hospital is not meeting budgeted indicators, it develops action plans that are monitored in operational reviews. Monthly productivity snapshot reports are produced that capture the following:
- Actual performance to budget on key indicators
- Projections for a hospital to attain budget and stretch targets if targets are not met
- Department-level hour variance and dollar impact
- Department-level rate variance and dollar impact
A comparative skill mix and labor cost analysis can be developed from the enterprise database as needed.
First Phase Results and Benefits
The first phase of CHE's enterprisewide productivity program culminated in the successful development and implementation of a productivity program in 19 acute care hospitals within CHE. With the productivity management capabilities it gained, CHE saved approximately $34 million by reducing acute salaries and benefits to 45.1 percent of total operating revenue in 2007, a reduction of 1 percent from 2006. Preliminary data show that acute paid FTEs per adjusted occupied bed are showing a similar trend. These results were achieved in about a year by using productivity data to educate department managers to flex better to volume changes.
Other benefits of the productivity program include the ability to share best practices among CHE facilities by generating standardized reports that allow for "apples-to-apples" comparisons among CHE hospitals, and leverage external benchmarking capabilities. Each hospital uses the same definitions and metrics for internal and external benchmarking. The productivity tool provides the data needed to populate the external benchmarking database.
Keys to Success
The cornerstone of CHE's success is implementing a program that is supported by a standardized tool that allows for comparability across CHE facilities. Key steps in the development of this productivity program include:
- Appoint a member of the executive team to be a champion who leads the initiative.
- Develop a vision and a business model. Build a business case that projects savings.
- Select a reliable and flexible productivity tool.
- Determine resource requirements and infrastructure needs. Build sponsorship, and put the necessary infrastructure in place before installation begins.
- Develop standardized definitions and auditable data. Standardized items need to be defined and communicated up front and be nonnegotiable.
- Incorporate productivity improvement and sustainability practices into the organizational culture.
- Define, track, and monitor goals-a critical step.
- Educate frontline managers, and hold them accountable for results.
Establishment of a productivity program-not just implementation of technology-has allowed CHE to make significant improvements in the management of its workforce. CHE is striving to achieve top quartile performance when compared with external benchmarks. With a defined vision and leadership, healthcare organizations can use this approach to effectively align organizational goals and objectives with frontline management decisions. Because the workforce comprises roughly 50 percent of the expenses in most organizations, this approach can provide improvements to managing labor, leading to a significant contribution to the bottom line.
Anna Marie Butrie is vice president, operations improvement and productivity improvement co-team leader, Catholic Health East, Newtown Square, Pa., and a member of HFMA's Philadelphia Chapter (email@example.com).
Debbie Coakley is director of divisional services and productivity improvement co-team leader, Catholic Health East, Tampa, Fla. (firstname.lastname@example.org).
Brian Graves is global practice leader, health care, Kronos Incorporated, Chelmsford, Mass., and a member of HFMA's Massachusetts-Rhode Island Chapter (email@example.com).
Special thanks to Howard Watts, CHE executive vice president and the executive productivity improvement champion, for his visionary leadership. Also, special thanks to all of the productivity champions and labor analytics coordinators for making this initiative successful.
A Catholic Health East Snapshot
Catholic Health East (CHE) is a multi-institutional, faith-based health system headquartered in Newtown Square, Pa. CHE serves communities through regional health systems in 11 eastern states: Alabama, Connecticut, Delaware, Florida, Georgia, Maine, Massachusetts, New Jersey, New York, North Carolina, and Pennsylvania.
- 33 acute care hospitals
- 4 long-term acute care hospitals
- 36 freestanding and hospital-based long-term care facilities
- 12 assisted living facilities
- 5 continuing care retirement communities
- 7 behavioral health and rehabilitation facilities
- 25 home health/hospice agencies
- Numerous ambulatory and community-based health services
- 50,000 FTEs
Publication Date: Tuesday, July 01, 2008