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An Agency All Your Own

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A Michigan system slashes costs with a new approach to contingent labor.

Hospitals should act like an agency if they want to get contingent nursing salary costs under control, says Peter Rubando, a principal with Critical Resource Inc., a Brighton, MI-based consulting firm.

Rubando should know--he once ran a staffing agency. He sold Warren, MI-based St. John Health and its seven-hospital system on the idea that he could slash the system's spending on agency nurses by retooling the its handling of contingent labor. The bulk of St. John's staffing agency spend was in nursing.

"We got out of the agency business in 10 months," says Nini Coury, corporate manager in St. John's system staffing office, who developed the transition to a new model with Rubando's help. It was as basic as meeting the needs of the work force and being flexible on work schedules, she says. "We needed to give [nurses] the option to be the driver of their own schedules, rather than having them feel they had to leave us and go to an agency to achieve that goal," she says.

The changes were simple in concept but challenging in culture change, says Rubando. If it costs $60 an hour to hire an agency nurse, out of which that nurse is paid $40, St. John is paying a high labor rate for convenience. If, instead of sending those hours out to the agency to fill, St. John ships those hours to its internal "agency" and pays the nurses a bit more than an agency would, Rubando says, "we get nearly $20 an hour savings. So why don't all hospitals do it? Well, operationalizing this sort of thing is difficult."

In fact, the idea is not new; many other hospitals have tried and failed. When St. John launched FlexChoice in November 2006, it made sure nurses saw the program as more desirable than working for an outside agency. St. John doesn't punish nurses for wanting flexible hours, and isn't worried full-time nurses will covet the internal agency rather than their regular jobs. "If they wanted to work for an agency, they would've already left," Rubando says. Also, the system's recruiting of contingent nurses is nonstop--the larger the pool, the easier it is to fill a job. "We've talked to other hospitals that have tried to do this and failed," says Coury. "We ask them how many contingent nurses they have and they say 40 or 50 in their system pool. We have more than 200."

In 2006, St. John spent $8.7 million on agency nursing. After starting FlexChoice, the system spent $5.9 million in 2007 and is on target to spend less than $250,000 in 2008, replacing 157,000 agency hours.

-Philip Betbeze

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