Two Examples of Improved Labor Cost Productivity
Example One
A 170-bed East Coast hospital struggled to bring operational costs down while improving quality and patient safety. A consultation engagement by a staffing company recommended prescriptive staffing ratios that did not match the realities facing the hospital. As a result, the hospital labor productivity recommendations were not implemented. Additional funding cuts brought the organization into crisis in which managers felt hopeless in trying to staff at levels considered appropriate for patient care – especially troubling areas included nursing, emergency services, obstetrics and radiation oncology. Another labor cost management approach was needed and external consultants were brought in to recommend and implement solutions.
Compass Clinical Consulting worked in tandem with hospital leaders and staff to define realistic and achievable hospital cost and productivity targets for each department. Managers were coached on how to use the productivity targets so that they met patient care while saving resources for future times of need. A staffing plan was put into effect to replace or eliminate vacant positions and to decrease agency usage. A daily staffing matrix was implemented for “flex” departments. Cultural issues impacting staff behavior, attitude and hospital productivity were addressed with a focus on increased communications and staff satisfaction.
The results were fast and dramatic:
- $3.1 million in financial improvements
- FTEs were decreased by 49 – with no layoffs
- A new patient care delivery model was implemented in nursing and obstetrics
- Overall payroll reductions through pay practice reform and overtime management
- Additional savings of $400K were achieved by eliminating dependency of travelers and agency staff
Example Two
A 272-bed Midwest hospital needed to decrease its labor expenses and length of stay. There was a productivity reporting tool in place, but it was virtually ignored by management. The organization lacked the ability to hold anyone accountable. ER patients were being diverted to other hospitals because inpatient beds were not available. The nursing staff was being paid bonus pay to care for patients, many of whom were there unnecessarily. Plans were in place to build a new intensive care unit to try and free up some of the bottle necks. Work was not standardized and roles and responsibilities within the department were vague and inconsistent. This resulted in redundancy, inefficient practices, and a higher than appropriate length of stay.
Compass Clinical Consulting performed a labor cost assessment including in-depth interviews with managers, directors and executives. Achievable hospital productivity targets were set for each department. For those departments that had a large gap between their actual and recommended worked hours/work load a detailed labor productivity project plan was put in place to change process, implement tools, and educate managers and employees so they could move to the recommended target.
As a result of these actions:
- The hospital achieved $8.0 million in labor cost improvements
- A decrease of 159 FTEs – with no layoffs
- A transparent biweekly productivity tool was put in place – all information was shared with the entire management team and managers “bought-in” to their productivity targets; this replaced an expensive, but ineffective system, saving $150K annually
- Education and tools were but in place so labor productivity gains could sustained and continued
- A culture of accountability and team work was developed to assure labor cost management targets
- A new case management model was implemented resulting in reduced length of stay and denials from $1.5 million to $40,000, and the overall financial risk for RAC was reduced by changing the Observation Process.
- Premium pay was reduced because of the decrease in length of stay
- The need to build a new intensive care unit was eliminated.
- Overall hospital payroll was decreased through pay practice reform and incremental time management
