Taking the Fear out of Hospital Productivity

By Eric Dam, MHA, Principal, Workforce Planning and Productivity Management

In interviews conducted with senior Chief Financial Officers of hospitals it is abundantly clear that there is a fear to pursue improved productivity / Labor Cost Management. Many hospital leaders, especially in the non-profit sector of the healthcare industry, fear productivity or are otherwise reluctant to pursue a formal productivity assessment and coordinated program to improve their labor cost management.

Among the possible causes of fear and reluctance cited are:

• Productivity has a richly deserved bad reputation based on failed attempts that executives have participated in or heard about e.g. the slash-and-burn approach
• Hospital leaders are in a precarious and insecure position: high turnover, short tenure, concern about trustee, leadership, and employee reaction
• Hospital leadership often assumes that trade-offs are necessary due to potentially competing goals e.g. Decreasing labor costs will lead to decreased quality and patient satisfaction
• Hospital leaders have a concern that if an objective assessment of hospital productivity reveals significant improvement opportunities, the result will be interpreted as a failure of management
• Many hospitals have an existing productivity measurement system in place and in the absence of an objective assessment, feel that productivity has already been maximized
• In the context of a perceived nursing shortage many executives are reluctant to pressure nursing productivity for fear of losing nurses to competing hospitals
• In some highly mission-driven hospitals, an emphasis on productivity can be seen to be in conflict with concern for employee well-being

How to help alleviate the fear:

Respect for operational and strategic realities. Any productivity target should be carefully tailored to individual departments based on a thorough understanding of circumstances, strengths and challenges of the department. These circumstances can include strategic initiatives of the hospital—for instance expanding a cardiology program—that have definite consequences for a department. This core principle makes good sense to managers. The establishment of arbitrary quartile or percentile targets is generally resented or dismissed by department managers.

Fair and all-inclusive. Another guiding principle, and one that managers find to be reassuring, is that the process of establishing productivity targets should be fair and all-inclusive; that no sector or department should be left out of the process; that politics should not influence the setting of targets. While one or two individual departments may feel singled out by this principle, the vast majority of managers applaud it.

It’s not just cuts. Although expense reduction is the ultimate goal, the credibility of the standard-setting process is enhanced by the stated willingness to add to staffing whenever it is indicated.

There are also other payroll expense reductions that are not related to FTEs e.g. overtime, premium, skill mix changes.

Respect and genuine interest. Really listen to your mangers concerns about issues in their department. How could process changes assist them in meeting a reasonable target? How can you help?

Trust building. Don’t be locked into a departmental standard for life. You will build trust with managers if you are open to changing a standard as new information evolves, changes occur within the department or new insights emerge.

Support for “managing to the numbers.” Provide tools and education to managers so that you are not only giving them the objective, but also the means of reaching the objective.

To read more about hospital productivity, see Labor Cost Management.

Filed Under: Financial Performance • Hospital Leadership

Tags: Hospital Leadership, hospital productivity, hospital staff experience, hospital workforce planning, Labor Cost Management