How to Start Trimming Labor Costs

If you haven't looked at your payroll lately, you might be surprised to learn that you are likely leaking money in your labor budget. Using data from your time management system and making a couple of strategic strikes based on the info, could yield some hard savings in your labor costs.

"Last year physician recruiting was the top priority for everyone. That added a ton of labor cost to hospital budgets," explained Robin LaBonte, CFO, at the 79-bed, York (ME) Hospital, who I interviewed earlier this year for the 2011 HealthLeaders Media Industry Survey. "Everyone wants to be positioned well, but no one knows what's really going to happen [with healthcare reform]. Most CFOs are conservative, so they focus on costs [in order] to position the organization well."

And when it comes to costs, the largest expense in a hospital budget is labor (40%-60% according to the same survey). So, financial leaders need to find ways to trim. Payroll leaks are the unintentional overspending on labor through lost productivity or unnecessary overtime—and they are good place to look for little losses that add up.

Where should you begin? Working hand-in-glove with human resource leaders can help financial leaders get this area in order. Bernie Becker, chief human resources officer at the Topeka, KS-based Stormont-Vail HealthCare says there's a lot to learn from time management data. He found that on-call and overtime costs at his 405-staffed-bed hospital were continually rising.