It’s a familiar scene. A hospital inpatient unit chronically misses its productivity target or budget by approximately ten percent. The nurse manager for the unit repeatedly attempts to explain, but the targets remain unmet, and the financial ramifications of unnecessary hospital labor costs continue to mount.

Ingrained Attitudes Impede Improvement
In today’s hospitals, it’s not uncommon to encounter this type of defensiveness among inpatient unit managers who miss their targets. While some frustration amongst managers is understandable, the productivity losses that can accompany negative attitudes and biases pose a serious threat to hospitals’ bottom lines. So, before embarking on any hospital productivity improvement initiative, it is important to understand how misconceptions about productivity information and deep-seated biases can hinder progress.

When observing situations like the one described, we, as consultants, are not surprised to find certain attitudes and frustrations within hospital divisions like Nursing, Finance and Human Resources. Managers who think they are managing properly can begin to question the origin and validity of the data and targets contained in productivity reports and monthly financials. Likewise, nurse managers can express exasperation with relentless questioning of their productivity performance. And, attempted explanations of variances can solidify over time into institutionalized excuse-making and high hospital labor costs.

Different Perspectives Mean Different Biases
Within the Finance division, negativity regarding the motives and perhaps even the competence of unit managers who struggle with chronic productivity variances can arise. Members of hospital Finance divisions generally feel that they are supplying an abundance of valuable management information and frequently interpret productivity variances as evidence of overstaffing. In addition, those in Finance may express consternation when the request is made for a vacancy to be filled.

Similarly, members of the hospital’s Human Resources department may harbor negative misconceptions about nurse managers who have difficulty meeting their labor expense budgets. Such doubts may dampen the enthusiasm with which vacancies are recognized, posted and pursued to a speedy conclusion. Because, in general, members of hospital Finance and Human Resources divisions have little “clinical” education or background, there is a tendency for them to be inhibited about asking challenging questions that may actually illuminate the underlying causes of FTE variances and reduce hospital labor costs.

On the other hand, nursing administrators can also operate under their own set of faulty assumptions in the absence of a clear, fact-based understanding of productivity performance variance. This can lead to less time and energy spent on leadership and management development, and more emphasis on protecting managerial prerogatives. When you consider that typical hospital inpatient units are comprised of 40-45 FTEs, and their negative productivity variances can be 4-5 FTEs per unit, misconceptions and defensiveness can translate into significant, unnecessary hospital labor costs.

Positive Change from Objectivity
Constructively addressing hospital productivity means properly interpreting variance. It requires carefully examining multiple factors within the hospital as potential contributors to departures from expectations. A 4.1 FTE variance rarely means that there are four too many nurses working on a given inpatient unit, rather it is a mathematical relationship between actual and expected productivity within the hospital. Factors like overtime, incremental time, errors in scheduling, actions of the central staffing office, actions of the shift supervisor, etc. can all contribute to variances in hospital productivity measures, so it’s rarely possible to “blame” underperformance on a single factor or person.

So, when addressing hospital productivity, it is very important that analysis of data is undertaken in a neutral, objective manner, devoid of preconception or prejudice. Such efforts can help to diffuse defensive attitudes amongst hospital staff and aid members of multiple departments—like Finance, Nursing and Human Resources—in understanding the true implications of productivity data. Giving nursing managers and others the benefit of the doubt, and working to reverse negative attitudes can be crucial to the success of any hospital productivity initiative.

For more information about how to achieve improvements in hospital productivity, contact Eric Dam at 513.241.0142.

Given this information, the question for hospital executives and other healthcare leaders becomes:

How can we decrease labor costs without affecting quality, patient safety, and satisfaction?

In fact, a better question is:

How can we improve quality, patient safety, and satisfaction while decreasing labor cost?

Many times productivity and workforce management are not addressed in hospitals because clinicians fear the process of looking at these crucial elements will affect patient care negatively. But, a few techniques, if implemented successfully, can help hospitals lower costs while continuing to provide high-quality care and creating a very positive experience for everyone in the organization.

• Using a balanced scorecard or operations dashboard shows concern for protecting the interests of all stakeholders. The dashboard should measure employee metrics, patient/quality metrics, and business practices. This helps to demonstrate organizational responsibility and recognition that changing one dimension can affect others unless they are all monitored and managed simultaneously.
• Put in place a productivity system that is transparent, that everyone understands how to use, and that encourages everyone in the organization to find ways to improve processes or find waste to out-perform their benchmarks/targets.
• Often, optimizing value-add or revenue generating activities is difficult because too much time is spent on waste. Implement lean concepts.
  • 5 S’s (Sort, Straighten, Shine, Standardize, Sustain) for improved people, proficiency, and productivity
  • Identify non-value-added activities (waste or muda), and eliminate them; the seven key areas in which to look for muda are overproduction, inventory, repair/reject/defects, motion, processing, waiting, and transport.
• Address throughput issues that create inefficiencies. Throughput issues are hospital-wide problems, not just departmental problems. Inefficient or broken processes in one area of the hospital can have an impact on the ability of another department to function efficiently. The culture of the hospital must focus on the systems, not the “silos.”
• To sustain improvements, implement tools to help managers achieve and monitor their progress. Examples of tools that are helpful to managers are:
  • A staffing plan based on average workload
  • A position control of employees that matches the staffing plan
  • A flexible staffing plan for a department that has fluctuating volume
  • A daily and biweekly productivity tracking monitor

Planning for success and involving employees in changes can increase the likelihood of achieving savings through workforce management. Productivity gains come when everyone at the hospital works to be part of the solution, when there is a groundswell of support and a hospital-wide commitment to become better. Improving hospital labor productivity, while maintaining quality of patient care and employee satisfaction, is an important accomplishment. A hospital that achieves success with productivity and workforce planning, becomes a hospital that can embrace change in the future, opening it up to the potential for even greater improvements.

But when “reducing the cost of healthcare” by mandating lower fees to providers, this should be more carefully analyzed to prevent a future of continuous change. Best to get it right at the start instead of rushing to judgement. This will best be done if policymakers are using the right data to make wise decisions rather than picking a data point from one place and another datapoint from another place and yet another datapoint … searching for datapoints that support what they wanted to do anyway.

This excerpt from The Healthcare Value Blog indicates what I mean:

We are surprised and dismayed at how policymakers are using the findings as the map for healthcare reform in Washington, D.C. We are also frankly appalled at how The New Yorker article by Dr. Atul Gawande has seemingly become the guidepost of reform for policymakers. The reason is that the conclusions that The White House and much of Congress have drawn from The New Yorker article are, at best, suspect and, at worst, completely wrong. Reengineering 20% of the economy is a large task, in our view, and getting the facts straight is important.

So, what have we done? Instead of using an “Atlas” to analyze McAllen and El Paso, we suggest using a “GPS” to triangulate the position that hospitals played in overall excess cost and utilization. Doing so provides some critical facts that The New Yorker failed to report.

Check out the observations by Hal Andrews & John Morrow from The Healthcare Value Blog: Lost in D. C. with the Dartmouth Atlas.

That said, all of us can read enough of the crystal ball to realize that hospital leaders will need to carefully examine their own hospital systems for ways to eliminate non-value producing processes. The goal must be to reduce the cost of delivering safe, quality healthcare. As has happened at several clients we have worked with recently, hospital managers do have the potential to reduce labor cost without layoffs, and at the same time create a renewed, long term commitment by staff to achieve safer, quality healthcare for patients.

Hospitals are big, complex businesses — typically the largest employers in any city. Running such a business is no easy task. Taking cost out of such businesses must be done smartly less the wrong decision leads to patient safety issues or to unleash unintended consequences such as doctors, nurses and specially-trained staff voting with their feet and going elsewhere to make a living.

Where we might differ from some of the global directives coming from national policy is that these savings need to be delivered one hospital at a time, each with its own unique people, processes and culture. What we don’t want to see is our national system of healthcare providers flung into chaos without the time to get leaner and better.

We believe most healthcare providers understand the need to reduce the cost of delivering safe, quality healthcare and we see them already tackling this issue without being subjected to policies that might cause them to do this the wrong way.

A hospital team can use this concept by combining labor cost management with case management. The two together become highly strategic multipliers. One plus one equals 3 or maybe even 10. The combination enables your team to lead transformational change faster.

Improving patient throughput with effective and aligned case management maximizes the use of hospital assets – time, space, capacity, equipment, and human assets. Maximizing those assets leads to significant productivity gains. When patient flow is increased, unnecessary work can be eliminated and existing staff can process added patient volume more effectively.

Flow improvement is especially effective for hospitals experiencing or anticipating substantial growth or for hospitals approaching the limits of their capacity.

Adding labor resource technology can also further multiply results, but only if social change is part of the technology implementation. The frequent lack of success experienced by management in using these systems usually results from the inability to generate “buy-in” as well as build the management and organizational capability to change culture and processes.

Without the required social change, technology alone is a force detractor. It takes your eye off the real problems while searching for magic bullets. Systems don’t produce results . . . people who know how and why to use systems produce results.

The Impact of Throughput on Labor Cost

Improving hospital throughput maximizes the use of hospital assets – time, space, capacity, equipment, and human assets. Maximizing those assets leads to significant productivity gains. When throughput is increased, unnecessary work can be eliminated and existing staff can process added patient volume more effectively.

Throughput improvement is especially effective for hospitals experiencing or anticipating substantial growth or for hospitals approaching the limits of their capacity.

Increasing patient services throughput simultaneously achieves important corollary objectives, such as:

• Increased capacity
• Improved patient satisfaction
• Improved physician satisfaction
• Decreased length of stay

Although Compass Clinical Consulting can conduct house-wide throughput initiatives, it is usually best to focus efforts where the greatest benefits can accrue. The following four areas most often present this kind of opportunity:

• Emergency Department
• Perioperative Services
• Inpatient Units
• Outpatient Diagnostic Imaging

When strategically executed, throughput work can produce quick wins as well as sustainable systemic improvements.

Compass Clinical Consulting

For 30 years, Compass Clinical Consulting has worked successfully with executive and clinical leaders at prestigious non-profit hospitals across the nation. We are passionate about creating better American hospitals, knowing that even the best can still get better. Our experienced consultants can pinpoint opportunities with an objective assessment and a plan that will lead to dramatic improvement that can cut millions from operations while enhancing your valuable staff.

We invite you to contact us so together we can look for opportunities to improve your most critical clinical processes. Call Cary Gutbezahl, MD, at 513-241-0142.

Hospitals must examine their revenue cycle management processes to determine if cash flow tie-ups are related to organizational practices, people or technology. Smoothing out the claims cycle should involve careful scrutiny of claims before they are sent to payors to ensure they are properly coded and edited.

To streamline the process, hospitals are adopting claims automation processes to confirm insurance eligibility prior to treatment and enable claims filing through payor Web portals rather than through clearinghouses. Electronic funds transfer, electronic remittance advice, templates in electronic medical records that offer codes for diagnoses and procedures and other tools can streamline the claims process and improve cash flow.

Additionally, hospitals and payors should open communication lines to eliminate wasteful steps in the process, and hospitals should install procedures to track claims denial trends.