Introducing HealthTrust’s new labor utilization & cost management solution

For every hospital and health system in the U.S., labor is the largest cost. As these costs have continued to increase over the last several years, organizations are under more pressure than ever to judiciously manage staffing.

Tim Armstrong

“Labor costs are typically 50% to 55% of a hospital’s total operating costs,” says Tim Armstrong, Manager of Advisory Services at HealthTrust Workforce Solutions. “And, as everyone is well aware, there is a labor shortage on top of that.”

Hospitals need innovative strategies to manage labor costs. That’s why HealthTrust Workforce Solutions created PLUS (Productivity Labor Utilization System) Benchmarking, a new web-based subscription service that enables health systems to compare their operations to leading hospitals across the country through quarterly reporting and identify any performance gaps as well as opportunities for improvement.

“We want to help hospitals manage and control those costs as well as ensure they are using the resources they do have,” says Armstrong. “It’s all about having the right people in the right place at the right time.”

Getting beyond waste & burnout

HealthTrust’s PLUS Benchmarking tool allows organizations to see how they compare to their peers by providing volume-based metrics. This allows hospitals to see if they are overstaffed or understaffed compared to similar facilities. It gives them a target so they can develop a meaningful budget and create staff schedules that are in line with their peers.

Rich Lopez

“PLUS Benchmarking simply is a way to help healthcare leaders manage and maximize their largest expense,” says Rich Lopez, VP of Advisory Services. “If you only benchmark internally, you might be missing opportunities. For example, you could be staffed 20% higher than other hospitals around the country of similar size, scope and complexity. In the healthcare industry, we are unable to withstand a lot of waste, so we need to minimize it wherever possible to maximize every dollar.”

The innovative system compares volumes and allows hospitals to see which departments may have staff at risk for burnout by comparing their working hours spent per patient to other similar hospital departments or units. On the other hand, a hospital may find that one department is understaffed while another is overstaffed, allowing them to see that labor spending is out of line. Too many people staffing one unit might mean that they can be reassigned to another unit that needs help.

“If you look at a medical/surgical unit and its numbers, you may find that its staffing is 35% lower than its peers,” says Lopez. This data can justify concerns that the unit is understaffed, which may lead to burnout. “Turnover is expensive. The goal is to be staffed appropriately—not too high and not too low,” he explains.

David Morgan

PLUS Benchmarking helps uncover process issues and other operational concerns that might have a domino effect. “The system serves as a diagnostic tool to help you dig in and see where you might have a problem,” says David Morgan, AVP of Advisory Services. “For example, the emergency department might be backed up because there are no beds, and there are no beds because you are short on housekeepers.”

One of the benefits of using HealthTrust’s software instead of other labor utilization and cost management tools is that PLUS Benchmarking includes both investor-owned and not-for-profit facilities, representing the mix of the HealthTrust membership.

“The tool is designed to meet a health system’s unique needs and easily organizes and produces data in various formats,” notes Armstrong. “Hospital staff provide the data points, and our team maps them and builds out the automated tool.”

Building on an existing strength

The Advisory Services team at HealthTrust Workforce Solutions has experience ranging from 10 years to over 30 years working with hospitals on benchmarking analysis. They are excited to now offer a more self-service process. “We’ve done this work with many clients over the years, and it has been a manual, labor-intensive process,” says Lopez. “We wanted a web-based subscription service so organizations can compare and look for savings on an ongoing basis.”

The ultimate goal is to expand PLUS Benchmarking to include all HealthTrust members’ data so the tool is as meaningful and valuable as it can be.

“We currently have over 200 hospitals in our database and strive to grow that to include all HealthTrust member data. I would like to note that all hospital data has been de-identified,” says Lopez. “More data equates to improved accuracy because it allows hospitals to slice and dice the data better.” Note that peer data is reported at a combined level and can’t be tied back to any specific hospital in the database.

PLUS Benchmarking can also help hospitals and health systems make critical staffing decisions on whether or how to grow a certain area by comparing them with other organizations to determine if they are as lean as they can be.

“This allows a hospital to proceed on a new venture with eyes wide open and to clearly understand why, for example, your operations may cost 20% more. It enables an understanding of why you’re investing in the service to drive growth versus having to question a manager about the expense,” adds Lopez.

Comparing department-level operational labor costs

PLUS Benchmarking allows users to view information at the department or unit level, as well as at the facility level. Virtually every department within a hospital is included in the tool.

There are three main data points for each department: hours worked, dollars and volume. Volume data depends on the type of department. For example, in an ICU or medical/surgical unit, the volume metric is equivalent to patient days. For a labor and delivery unit, one might measure the number of deliveries. For housekeeping, it might be the square feet that need to be cleaned.

“The goal is to come up with department level benchmarks; as an example, in a surgical unit the 50th percentile peers may be operating at let’s say 9.65 worked hours per patient per patient day,” says Armstrong. “If the surgical unit in your facility is currently at 10.93 worked hours per patient per day, the benchmark will then show the variance in either full-time employees or dollars.”

The tool isn’t looking at the individual staff level, but rather the total number of hours worked in that department per patient day. For example, for a patient in a bed for 24 hours, if a hospital is using 11 hours across the entire department and the peers are operating at eight hours, that shows that you are using three more worked hours per patient day.

“What you would hope to see at that point is for the leader to define the target budget for that department and decide if they need or want to be closer to eight worked hours per patient day,” says Armstrong. “If the decision is yes, we want to move our budget to match those peers, then update your staffing grid to hit that target and thereby reduce the number of hours spent per patient day.” PLUS Benchmarking enables leaders to make evidence-based decisions on staffing up or down based on the number of patients compared to like hospital units.

The hard part is determining why you’re spending three more hours than the peers. “Sometimes it’s because when the patient census is low, staff aren’t being reallocated,” says Morgan. “A department leader might see that staff had a tough morning because they started out with 20 patients, then later in the day they had 10, so the leader decides to keep the staff on even with the lower volume. Or, maybe there are functional challenges such as staff has to walk long distances to get basic supplies and the unit needs some reorganization.”

Regardless of the root causes, it doesn’t change the fact that a lot of hospitals are in danger of closing. Earlier this year, the Center for Healthcare Quality and Payment Reform found that 631 rural hospitals are at risk of closing in 2023.

Managing workforce daily to remain viable

It is critical for organizations to manage their labor costs every day. “It isn’t enough to manage the budget month to month; leaders should be matching staffing levels to demand on a daily basis,” says Lopez. If volume is down, then hospitals need to reallocate staff to where they are needed. The same is true in the other direction. “This is done in other industries all the time. With hundreds of hospitals in danger of closing, it’s about survival.” Hospital leaders must manage labor costs in order to pay their expenses, purchase new equipment and offer their staff raises.

“Think of benchmarking as knowing the speed limit, and then it’s up to you to pump the brakes or give it more gas by staffing to actual needs,” explains Armstrong. PLUS Benchmarking lets you take the guesswork out of it and use data to make good decisions.

Besides benchmarking software, some nursing organizations, respiratory therapy organizations and other professional organizations advise on staffing levels that can often be more generous. These are additional data points that you can use to make decisions on your hospital’s staffing needs.

“Some groups are only focused on what’s best for their members, but we look out for the hospital as a whole,” says Lopez. “We believe it’s better to rely on a tool like PLUS Benchmarking and compare yourself to like peers across the country using real hospital performance. It is what will help the organization survive and remain a viable and healthy workplace.”

In addition to comparisons with outside entities, the tool also offers system comparison. “A health system can compare its respiratory therapy staffing across the enterprise to see if one hospital is doing well while another is struggling, and perhaps they can work together to solve the issue,” says Morgan.

Sharing your data & saving money

The bottom line is when organizations begin to utilize benchmarking to identify opportunities with a goal of improving performance, they can often save 6%–9%, conservatively, on their labor costs. That means if a hospital’s labor costs are $100 million annually, the PLUS Benchmarking program could save them $6–$9 million.

“Each time we go to a hospital looking for opportunity, we always find it,” notes Armstrong. “Recently, we helped a small hospital in Alaska identify potential labor savings of 13% of their total FTE costs.”

Currently, PLUS Benchmarking has over 200 hospitals in its dataset and the goal is to increase it to 2,000. “We need more HealthTrust members to partner with us to help make the tool more valuable by providing additional data,” says Lopez. While there is a cost to subscribe, members can expect a high return on investment in terms of conserving labor costs.

Level up today. Contact the Advisory Services team to get started. Hospitals that sign a multi-year subscription agreement in 2023 will have implementation and setup fees waived as part of the rollout.

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