Workforce Solutions at the Heart of Hospital Efficiency Programs

By Bob Livonius, President, Strategic Workforce Solutions, AMN Healthcare

March 23, 2011 - While the latest high-tech medical equipment and electronic recordkeeping systems have gone a long way toward increasing hospital efficiency, the human side of healthcare continues to hold the most potential for improvement. That’s because healthcare is still a hands-on, labor-intensive industry, with an estimated 60 to 75 percent of hospital expenses going toward labor.

From my many conversations with hospital executives, it’s clear that even with the success of efficiency programs like Lean Six Sigma and continuous process improvement, the need to contain salaries, benefits, contingent labor and staffing administrative costs are high on the radar screens of CEOs and CFOs across America.

But when it comes to staffing, it is not as simple as “do more with less”—especially when your staff is responsible for the level of care provided to your patients. However, hospitals can cut their labor costs while improving efficiencies. The solutions involve accessing, understanding, and analyzing staffing metrics—or reaching out to experts that can help, streamlining vendor relationships to reduce complexities and inefficiency in staffing and billing, as well as finding comfort with your own custom formula for workforce issues. Custom does not always have to equate to more dollars spent. In fact, it can be quite the opposite. As I mentioned earlier, simply understanding your own staffing trends, contracts and inefficiencies can go a long way toward knowing what, if anything you need to change.

Predicting labor needs amid uncertainties

OK, so you’ve gotten a hold of your staffing metrics. You’ve done the legwork. Next comes the ongoing challenge for hospital administrators: predicting patient census on a day-to-day basis, which directly impacts labor costs and patient care. While seasonal changes might affect a facility in Minnesota more than it would a facility in California, each—regardless of location—has patterns within departments that can be used to predict staffing needs.

Adding to the unpredictability of census is the implementation of healthcare reform. Hospitals need to build a staffing plan that can keep ahead of the influx of newly-insured patients, the growing emphasis on quality and patient satisfaction rates, and potentially lower reimbursement rates from Medicare and from other insurers while continuing to identify areas for cost savings. Now what?

Many employers have found that contingent labor can ease personnel fluctuations and streamline costs, but the need for quick budget cuts have caused some to reduce agency labor and rely more on their own internal staff, which can drive up overtime costs and increase turnover of staff. Others have created a growing internal resource pool, including part-time workers and nurses willing to float to different units.

The challenge comes in finding the right balance of employment options and being able to calculate the total cost associated with each. Overtime pay and the administrative costs to manage an internal float pool can be more expensive than using agency labor in many instances—not to mention the hidden costs of over-stressed workers.

Increasing staffing options while streamlining vendor contacts

One question I’m often asked is: “Can I maintain my staffing options while streamlining my vendor contacts?” Fortunately, the answer is yes! While some healthcare facilities have reduced their list of staffing vendors as a cost-cutting measure – with the unintended consequence of reducing access to candidates – others have streamlined their vendor relationships by opting for one master vendor to manage all their vendor relationships, and are actually able to expand the number of vendors (and candidates) to which they have access.

Just in the last few months, several health systems that had previously used three or more agencies to fill their needs opted for AMN’s managed services program (MSP) to manage their vendors. In order to keep fill rates near 100 percent, even for hard-to-find skill sets, AMN worked with 30 or 40 prescreened subcontractors, successfully meeting all their needs. And this model can be applied to nurses, physicians, therapists, imaging techs, lab, pharmacy and medical clerical, with the full range of employment options.

Achieving greater labor efficiency and lower costs

Another question I’m frequently asked is: “What type of savings and revenue growth can I expect when working with an MSP?” MSP clients generally see a reduction in contract labor costs in the first few months, which can average 15 to 20 percent or more over the course of a year. This comes in part from standardized pricing and processes and from better management and utilization of the right level of contract labor, including travelers, local contracts and per diem. These changes, coupled with managing overtime and float pools more effectively, results in significant savings. And, the most reputable firms will guarantee their performance, agreeing to be held accountable for having right level of staff at the right time.

MSP vendors also offer software solutions that can track and report on all orders and activity, giving instant management information while helping with future planning. These systems, which can be off-the-shelf or proprietary, also create efficiencies on the back end for purposes of paying invoices more efficiently and reducing the time managers spend with reconciliation.

An experienced managed services provider should have the tools and expertise to identify the right balance of labor for each particular facility, down to the unit, and manage to a common goal that addresses uncertainties on a daily or seasonal basis. They can also help a facility measure their total workforce costs and oftentimes can assist in hiring permanent staff and managing their float pool.

Additional trends in workforce efficiency

In the current economic and political climate, hospitals are also taking advantage of electronic medical records (EMRs) to be more efficient—and to comply with new regulations—often hiring temporary nurses to help them through the transitional period.

Others are getting creative to put the right mix of skills on the floor for each shift. Some of the options include expanding the use of CNAs or LVNS and LPNs for some routine duties and increasing the use of advanced practice nurses and physician assistants to complement the larger contingent of registered nurses and physicians. This trend in varying the skill mix is also true in pharmacy and other areas of the allied sector.

But what is the proper balance of assistants vs. mid-level professionals vs. the most advanced (yet highest paid) professionals? It is certainly not a balancing act that can be taken lightly when the well-being of your patients is at stake. A managed services provider can serve as a consultant and partner in making these decisions and accessing the resources that are needed.

Finally, one additional trend in healthcare that I am getting more questions about is: “Can RPO (Recruitment Process Outsourcing) be effective for hospitals?” To that I also answer, yes. Recruitment Process Outsourcing —popular in other industries—represents a growing trend in the healthcare sector, one that can cut expenses and reduce time-to-fill for permanent staff. As the process of hiring, orienting and retaining a new clinician can have a significant impact on workforce costs, outsourcing this function can deliver significant savings. RPO arrangements are also better positioned to succeed in today’s competitive labor market, offering a broader reach than stand-alone facilities and greater expertise in everything from social media to virtual recruiting.

You can contact Bob Livonius directly at