Tuesday, July 6, 2010

Ten Practices for Increasing Hospital Profitability: Tip #1

In the webinars I present on preparing for the impact of healthcare reform and developing a highly functioning ED there is a common theme to survive in the current climate of economic recession, growing uninsured, cuts in payments and increased competition: You must focus on reducing costs AND increasing reimbursement. Over the next series of posts I will cover 10 best practices in these two areas to make your hospital stronger and more profitable.

Tip #1: Reduce staffing costs based on data driven decisions.

There is an old adage that if you can't measure it you can't manage it. Well since labor is the single largest expenditure for any hospital it is critical that it not only be measured in great detail on a timely basis, but that this information be used instantaneously to adjust staffing levels. Understaffing can be just as financially devastating in the long run as overstaffing.

Since workload in hospitals tends to be flexible in most areas, the staffing in these areas must be flexible as well. Some areas, such as the ED have some rather predictable flexibility in patient volume based on the time of day. In other areas the seasonal variation is somewhat predictable. But no matter how good a forecasting model you use for long term, you must still be prepared to make daily (or more often) adjustments. Some high performing hospitals look at their census and projected admission and discharges every 8 hours and make staffing adjustments accordingly. This may be beyond the scope of some hospitals to perform. But suffice it to say that reviewing staffing only after every pay period will not be adequate.

Flexible staffing also works very well for areas such as the OR. Look at staff starting times versus actual case start times. Also consider the typical mid-day slump for the number of cases being performed versus the staffing levels. Most ORs are busiest in the morning and late afternoon with a down time in between.

We at Compirion have found that significant salary savings can be had through improving efficiency. This does NOT mean that the staff have to do more than they are already doing. It means that you can provide better care for patients while having your staff actually do less. Increasing ED throughput, decreasing OR turnaround times and shortening length of stay are common areas that we find can be further addressed. By taking this approach rather than just laying off employees you can have the added benefits of increased employee morale, higher patient satisfaction and stronger physician support for your hospital. The key is to involve your employees and physicians in streamlining the operation.

One last warning: Do not start with the bottom line and work backward with mandatory cuts based on the savings needed. This may result in cutting necessary resources from already efficient areas while allowing inefficiently operating areas to continue that way just with less staff. Focus on the operating areas individually and streamline the procedures. We have walked into many hospitals that feel their ED throughput and LOS are as good as they can get. That seldom turns out to be true.

I stated that staffing is your greatest expense which is true. But they are also your greatest resource. So work WITH them in improving efficiency and make them part of the process.

More on profitability practices tomorrow.

Mark Brodeur

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