April 29, 2009
A cascade of financial pressures threatens hospital revenue today. Many hospitals are looking at reductions in labor, the largest segment of their costs, as a way to tighten their belts. Yet staffing cuts in hospitals aren't always the right option.
For many organizations, an improved approach to labor management is the solution. Securing Revenue with Improved Labor Use --a new educational report from HFMA--provides hospital leaders with a better understanding of labor cost management. The report, which is sponsored by Kronos, Inc., offers specific strategies and processes to help secure the benefits that improved labor management can produce.
Identify Labor Variances
Significant reductions in labor costs can be gained by identifying where there are variances in efficiency and productivity and variances in wages or prices (i.e., where payment is too high for the labor used).
A key factor in managing labor efficiency is matching the appropriate amount of labor to the workload demand on a daily or shift-to-shift basis. Too much labor can lead to cost overruns, especially if high-cost supplemental labor hours are involved. Too little labor can lead to risks in patient safety, staff satisfaction, and overall quality of care.
For more ideas on staffing the right number of the right nurses at the right time, see "Containing Nurse Labor Costs: 4 Strategies," an article in the April 2009 issue of HFMA's Healthcare Cost Containment newsletter.
Promote Communication and Collaboration
While labor management requires accurate data, statistics, and strategic goals, collaboration and communication among clinical and financial leaders is just as important. Improving labor management requires hospitalwide or healthcare systemwide goals. And everyone must understand why you are taking action--to avoid future layoffs, for example, or improve the bottom line--and what the outcome will be.
Management also needs to gain buy-in from the frontline staff if a productivity initiative is to succeed. Those at the frontline often know where problems lie and are willing to challenge tradition to find more efficient ways to get the work done.
"Creating Better Financial Outcomes through Improved Communications with Operations Managers and Administrators" is one of many sessions at this year's ANI: The Healthcare Finance Conference that will give you the insights and tools you need to lead change within your organization. Learn more and register today.
Use Appropriate Tools and Analytics
A variety of tools can serve both labor management functions and data collection needs. Basic data-collection tools, such as timekeeping, provide mines of information that organizations can examine to improve productivity and resource use.
The data derived from these tools are a starting point. Benchmarking performance data against the performance of others outside the organization helps establish objective goals for hospital outcomes. When adopting a benchmark, managers should be sure to account for differences in staffing level, patient population, or service mix from one department or facility to another.
Ensure Accountability
Managers must be accountable for their staffing levels and costs for labor management to improve. One approach is to integrate productivity performance into operations processes and decision making.
Formal processes also help support accountability, including those that use peers to improve performance. Distribution of productivity reports to all directors lets each compare his or her performance with that of peers. Other hospitals ask managers to report and discuss their results with fellow managers at regularly scheduled meetings.
Existing processes at hospitals too often result in poorly timed decisions that fail to cost-effectively make use of resources. By understanding sources of labor variance, fostering communication and collaboration, making use of the right tools and analytics, and supporting accountability, your hospital will be on track to reap the benefits of improved labor management.
Visit HFMA's web site for more answers to your healthcare business questions.