balancing labor costs

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Balancing Labor Costs With Quality Patient Care

Michael Bernstein

Health Care DirectorMoss Adams LLP

April 23, 2009

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Agenda

Issues Impacting the Health Care Industry

Organizational Change Workforce Management Solution Benefits & Results

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Agenda



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Reductions in Federal & State Payments

Reductions in Insurance Payments

HIPAA

Consumer Expectations

Quality Initiatives

Information Technology

Liability Insurance

Community Needs

Sales & Use Tax Increases

Increasing Wages and Benefits

Pharmaceuticals

Physician Shortages

Labor Shortages

Corporate Compliance

Aging Plant & Equipment

Medical Technology

Providers

Organized Labor

Patient Safety

Uninsured

State Mandated Staffing

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Daily Balancing ActQuality Patient Care

(Proper Staffing Levels, With Skills, State Mandates, and JCAHO)

LaborCost

(Control in-house labor costs; use Agency workers effectively)

EmployeeSatisfaction

(Keep physicians & nurses happy (and retain them)

by not overburdening them)

QualityHealthcare

QualityHealthcare

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Agenda



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Strategic Objectives

Ensure quality patient care Be “Top Employer” in region Control labor costs to improve bottom line

results Increase labor productivity

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Change Management Buy-in: all levels equally important Benchmark for success: establish baseline &

stretch performance metrics• “Don’t expect what you are not willing to inspect!”• Timing & timeliness of data

Carefully consider (and plan for) your change agents• Cross-functional subcommittee to identify program

success & challenges Involve internal constituencies and leverage

their expertise and relationships• Nursing & Finance to inform peer-to-peer

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Change Management (Continued)

Create sense of ownership: timely data input critical to its success, involvement in establishing productivity targets

Aggressively train: quicker adoption results in higher acceptance and accelerated ROI

Test & Test again: building trust in the data reliability translated into its acceptance

Communicate: initiatives and targets constantly evolve

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Agenda



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Workforce Management Solution

• Labor Productivity methodology and tool

• System combines right-time time and labor, billing, budget, payroll, and work volume information

• Tracks efficiency (hours) variances and rate (dollar) variances

• Creates actionable, single-view, volume-adjusted daily and shift productivity reports

• Provides cost-effective recommendations to resolve labor shortages/excesses

• Identifies variances in performance and alerts managers

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Agenda



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Actual Results at a 300-bed urban hospital

Reduced premium labor pay by $400,000 within 1st year of implementation

Improved labor productivity by $1.8 million ROI within 5 months through premium reduction

alone Within 2 Years:

• 7.5% reduction in premium labor costs

• 2.75% reduction in FTEs per AOB

• 1.5% reduction in labor expense as percent of net revenue

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Medical Center

Total Or ganization Pr oductive Ftes

1,300

1,350

1,400

1,450

1,500

1,550

1,600

Y r 0 Y r 1 Y r 2 Y r 3

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Medical Center

Ftes per Adjusted Occupied Bed

5.25

5.11

5.02

4.86

4.6

4.7

4.8

4.9

5

5.1

5.2

5.3

Y r 0 Y r 1 Y r 2 Y r 3

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Results Year 0 – Year 3

Overall patient volume increased 12.8% Discharges increased 15.9% FTEs increased 6.9% Increased RN regular staff by 30% Labor costs only increased 2.6% Improved employee and patient satisfaction

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Results

Improved accuracy of data flows and calculations providing “credibility” and “reliability”

Helped revenue cycle be more timely and accurate

Developed infrastructure that supports consistent and timely report distribution

Created accountability process and culture

balancing labor costs

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