Gain Control of Labor Costs While Saving Jobs

Track expenses: Create the right systems to track expenses. Every payroll system is a bit different, but here's an idea that may work for you. When employees receive on-call bonuses, the pay should be coded differently from other bonuses or even standard overtime pay. By tracking these pay codes, you may find that you actually save money by scheduling one additional person to work versus putting two people on call. Because many healthcare workers dislike being on call, scheduling an additional person can solve two issues—it reduces bonus expenses and improves employee morale.

Staff proactively: Review your total talent management needs and determine the best way to staff strategically. Then schedule and staff accordingly. Create your own flexible internal workforce by building support around your core regular staff to handle demand as volumes increase and turnover occurs. This is much more cost effective because you are not pushing core staff into overtime.

Asses your internal pool: To quickly assess whether an internal pool is working, organizations can start by looking at agency utilization. Internal pools should be staffed to support high-usage areas rather than to fill in for routine, easy-to-fill shifts that regular staff can work. Another quick assessment relates to the requirements of the internal pool staff. When the program was designed, did it include specific criteria and minimum expectations that staff should work in exchange for the higher pay rate? These commitments typically relate to the number of shifts, hours, and weekend responsibilities.

Are those commitments and requirements being audited to ensure the organization is getting its ROI? Most healthcare systems don't have automated tracking systems in place to track staff commitments to the actual worked hours. Consider working with a partner who can purchase the technology on your behalf to ensure you are getting the most from your internal pool and saving money.

Review overtime policies: Appropriate rationale and levels of approval for overtime use should be in place. Consider two different standards for overtime usage based on clinical and non-clinical (non revenue-producing) areas. There are times when it makes sense to approve overtime in a clinical area to keep beds open and generate more revenue. Build a pre-approval process so that overtime is being approved before it is worked—and consistently follow that process so staff understands the expectations for receiving approval.

Shift fixed to variable expenses: When you are hiring your own staff your expenses don't go down just because your recruiting needs do. By switching to an outsourced talent management organization, your recruiting expenses become variable based on how many people you hire. BUT make sure you find the right partner who will reflect the variable charge approach and charge you primarily by requisition. You also want to work with someone who offers consulting services that include an assessment of your organization and a plan based on specific recommendations.

Proceed with caution: With the economy being what it is, you probably won't balance the budget without making some staff cuts, but don't overdo it. Many organizations are taking a slash-and-burn approach, at their own peril. Remember these decisions must not be taken lightly. The demand for nurses will bounce back and sooner than you probably think. So have systems in place to provide great customer service to candidates that you may not need today, but will have to rely on in the future. How you treat a healthcare worker during a hiring downturn will leave a lasting impact on them for the future.

These are uncertain times, and historic metrics don't necessarily apply, but implementing the techniques above as part of a disciplined approach to managing labor costs helped one Midwestern healthcare system achieve savings of $14 million over an 18-month period.

Imagine what that could mean for your organization's ability to ride out the downturn and emerge ready for growth in the recovery.