With labor costs in 2013 accounting for approximately 60 percent of hospital and health system operating budgets, many healthcare systems and hospitals have begun assessing high-labor cost areas with an eye to curbing those costs.
API Healthcare, a workforce management solutions company headquartered in Wisconsin, hired Kelton Research to analyze ways in which healthcare organizations can achieve long-term fiscal sustainability even with shifting revenue and care delivery models. Managing labor costs is among hospitals’ top organizational priorities.
There are number of factors tied to why it will be important for healthcare organizations to focus on labor costs going forward with the implementation of the Affordable Care Act (ACA), said J.P. Fingado, president and chief executive officer of API Healthcare. Those factors include the 32 million newly insured people due to the ACA, a growing aging population, not enough staff members – particularly when it comes to nurses – and the large percentage of operating costs currently tied to labor.
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“These factors are flourishing into significant variables that touch every aspect of the healthcare business,” said Fingado. “The results from the research confirm what we have known for some time. The strategic development and deployment of the workforce is the key to achieving long-term sustainability in a continually evolving marketplace, and implementation of technology provides an immediate positive return on the investment.”
Implementing technology helped Ellis Medicine, a hospital based in Schenectady, N.Y., with its labor management.
Following a merger of three hospitals in 2007, executives at Ellis had to find ways to blend their organizational cultures and successfully align their patients, medical staff and employees in order to keep down operational costs, said Sara Zappi, director of human resources for Ellis Medicine.
After several years of exploring options to manage labor costs, Ellis implemented staffing software that provided real-time data available to both employees and management. The hospital was able to decrease employee salary expenses by 40 percent through less overtime spending, said Zappi.
“We were able to decrease our overtime just by repositioning where we put our staff – just being able to know where we need people and where we don’t with data updated in minutes,” she said.
Zappi added that transparency between hospital employees and management can lead to a more productive and happy staff, leading to higher retention rates and therefore, lower labor costs overall.
Jacob Krive, manager of project information systems at Chicago-based Advocate Health Care, said with being a large healthcare organization, it was important for executives there to come up with a way to combine workforce management systems into one converged technology in order to get a handle on both staffing and financial issues.
Bringing all 11 of Advocate’s hospitals together, as well as additional clinics and outpatient facilities, was a complex two-year project, but the benefits seen were worth the effort, said Krive.
“We were able to ensure compliance and standards in our business decisions, and we were able to anticipate possible employee overtime and the costs involved with that. We integrated best practices from a scheduling side and we eliminated our paper-based processes. Everything is done through automation,” he said. “Our staff enjoys the system as well. A happy staff equals happy patients in the end.”