As reimbursements shrink and margins are squeezed, healthcare organizations are going beyond the low-hanging fruit and taking a holistic approach to total cost management. Examining opportunities within labor allocation is one strategy organizations are prioritizing because it often accounts for the largest amount of spend in a hospital’s or health system’s budget. Unfortunately, for many organizations, the push to reduce expenses has resulted in a relatively reactive approach to workforce management, where the emphasis is more on cost control than performance optimization.
Working with hospitals and health systems on navigating opportunities to streamline and enhance workforce management, Premier leverages unique insights—helping leaders analyze productivity and benchmark internal data to national trends, compare costs, and identify areas for labor savings. “Wrestling with unnecessary overtime and premium pay, lack of budgeting and planning, and misplaced skill sets are factors which can increase labor costs,” says Daniel Carcioppolo, national director, labor solutions for Premier. “As patient volumes and payment models shift, and consolidation and acquisition of physician practices take shape, health systems need reliable data to make informed staffing decisions. Many organizations that have not yet embraced workforce management have not grasped the concept that labor optimization is focused more on gaining efficiencies and not solely eliminating full-time employees (FTEs) and worked hours. Hospitals that are novice in workforce management are amazed by the cost savings opportunities that exist by monitoring overtime hours, education and orientation hours, and staffing agency hours, as well as appropriately aligning the skill mix in their departments. Paying nurses to do work that can be done by a technician or aide, who does not require a nursing license, is one of the most overlooked areas of cost savings in an organization. Leveraging daily or biweekly productivity monitoring brings those opportunities to the table at leadership meetings and allows for committees to shift their focus to a solution-oriented strategy instead of trying to figure out where problems exist.”
One Health System’s Experience
Premier recently worked with Roper St. Francis Healthcare in Charleston, S.C., to rethink the organization’s workforce-management efforts. “We initiated a program about three years ago because we saw an opportunity in how we managed labor,” says Julie Graudin, Roper St. Francis’s service line director. “We acknowledged that health care was going to continue to be challenging regarding reimbursements, and increasing the bottom line was not going to get easier. So we needed to make sure that we were as efficient as possible in all areas. Although we sought opportunities across the organization, labor stood out because it is one of our largest expenses.”
The health system’s goal was to continuously optimize its hospital and physician workforce, enhancing productivity and efficiency. Roper St. Francis engaged Premier to employ data analytics and benchmarking so the organization could be more intentional about its labor spending.
To begin, Premier conducted a deep dive and met with every department in each of the health system’s three hospitals—assessing current staffing levels and positions, the types of patients served, daily activities, and what each department felt most affected its productivity. “This exercise gave Premier a sense of our current state so they could establish peer groups against which we could benchmark,” says Graudin. “Once they created the peer groups and shared data with us about those organizations’ performance, we were given a new level of transparency into the opportunities to streamline staffing, enhance productivity, and generate savings. Based on directional benchmarks to guide us in quantifying our success, we set incremental goals for a target percentile ranking within each department.”
After Roper St. Francis and Premier collaborated on the goals, they worked together to analyze current operations in each area. “We reviewed whether everyone was working to their maximum productivity, whether they were engaged in activities that weren’t necessary, and what opportunities there were to reengineer existing processes,” says Graudin. “Basically, we considered how to function better and quicker but still maintain the same quality. In this optimization work, we used both internal resources and also tapped Premier advisers.”
Part of this work also included the creation of a labor-management committee, which Roper St. Francis oversaw. This is a multidisciplinary group of managers and senior directors within clinical, financial, ancillary services, and various sites of care that review all personnel requests weekly and make recommendations based on productivity benchmarks and what’s happening in the department. “Prior to this process, full-time positions were sometimes approved without looking deeper into whether the positions provided a return on investment. It has put some structure and accountability into the hiring process. We have a Premier representative who is a member of the committee and remains a valuable resource when making these staffing decisions,” says Graudin.
Roper St. Francis has seen some benefits since launching its workforce-management program. “During the past year, our total salary expenses have declined,” says Graudin. “We’ve seen a reduction in the number of full-time employees, and we also are attempting to limit reliance on ‘agency’ staff or ‘travelers’—which are costly. We want to be sure we’re using our own employees to their full potential and employing the appropriate number of qualified individuals, given our size and scope of services, as well as upholding our mission in delivering quality care.”
With significant progress to date, the health system isn’t stepping away from prioritizing workforce management as a margin improvement strategy. Even though the health system staff is pleased with the program thus far, they are not resting on their laurels. “This is a marathon, not a sprint,” says Graudin. “You have to constantly monitor things, benchmark against others, seek new methods, tweak processes, and be vigilant about continuous performance improvement.”
Key elements in workforce management
Although Premier takes a customized approach in working with all its members, there are two essential aspects that underpin every effective workforce-management initiative. “Objective data analysis is critical to identify opportunities, drive decision-making, and have the right people in place to turn actionable analytics into results,” says Carcioppolo. “What you want out of a department leader is someone who understands their team, their patients, and has the ability to transform care delivery processes. C-suite leaders should be asking three key ‘yes or no’ questions regarding workforce management: 1.) Have we looked at our department-level data to understand how we currently operate under a staffing-to-volume model? 2.) Have we made any efforts to improve each department’s processes? 3.) Do department leaders have the ability to change their mindsets to look at a process and ask, ‘Can we do this better or more efficiently?’ If the answers to these three questions is ‘no,’ there is tremendous untapped opportunity to save money and increase volumes at the organization.”
Another crucial component is engaged executive leadership to guide the project. “Organizations that are most successful in using workforce-management solutions tend to have strong commitment from the CFO and senior executive team,” says Carcioppolo. “These leaders are able to set short-term, mid-term, and long-term goals, as well as approve benchmarking standards, which keep programs on a track for continuous improvement over time.” Leaders can also hold department managers accountable, tying performance against targets to reviews, bonuses, and job status.
“Without leadership buy-in and support, a workforce-management program can fall short of expectations,” says Carcioppolo. “When organizations merely implement data and technology solutions and then expect them to fix their workforce problems, they are often disappointed. Data and benchmarking do not govern and lead—they inform. As such, it is best that these tools be used in the context of strong leadership.”
Large-scale healthcare transformation is not easy. Labor is a significant area of spend, but many health systems aren’t sure where to start and bring about transparency around data to drive workforce-management optimization. Premier Inc. is partnering with health systems to reimagine workforce management, offering integrated data and advisory services to improve efficiency, reduce costs, and drive performance.