10 Ways to Improve Hospital Financial Performance Through Productivity Management

By , Vice President, Hospital Productivity and Accounting January 14, 2019 Financial Performance, Operational Improvement

The transition to value-based care has required hospitals to improve patient experiences and outcomes, all at a lower cost. In this model, hospitals are responsible for the cost differential, so the urgency around hospital financial performance improvement has intensified. One of the biggest opportunities for hospitals is managing staff productivity, which means maintaining the right number and mix of all staff based on patient diagnoses and volume. Optimizing productivity is paramount because labor is usually the greatest expense for hospitals.

In CHC’s experience, almost every hospital has room to improve staffing productivity by using a productivity monitoring tool. In cases where client hospitals do not have a productivity tool, CHC Consulting typically identifies savings opportunities of 15 to 20 percent in salaries and benefits. In hospitals where there is some practice of monitoring productivity, CHC Consulting still finds savings opportunities of 5 to 10 percent through use of a more effective tool, improved processes, or both. As labor costs usually represent over half of total operating costs, the savings can be significant.  

CHC’s proprietary Productivity Tool provides feedback of staffing levels, volume, and productivity across all hospital cost centers. Managers should track performance daily to see how labor is being allocated and immediately make adjustments, mid pay-period, to fix scheduling problems. In addition to using a productivity tool, ideas to optimize productivity to improve both the bottom line and patient care include:

  1. Compare staffing levels in all departments to patient census information. Daily monitoring allows for immediate staffing adjustments when needed, and reviewing staffing data over time helps identify positive or problematic trends and opportunities for improvement.
  2. Use data review, manager input, and national benchmarks to set a standard staffing ratio for the hospital overall and for each department. Reevaluate these standards on a routine basis.
  3. Measuring full-time equivalent employees per adjusted occupied bed is a good target to keep overall staff in check, and when there are discrepancies to budget, bring department managers to the table to discuss solutions such as shifting and flexing based on the time of year or physician activity.
  4. Hold department managers responsible for meeting staffing benchmarks and implementing flexible staffing based on patient census figures.
  5. Look at total hours paid as well as hours worked, keeping in mind that hours worked is the best benchmark to use for improving staff productivity. Each department will have its own work standard—for example, the number of procedures, or census figures on an inpatient unit.
  6. Consider work process redesign. The best department managers and Chief Nursing Officers  manage staffing levels from shift to shift and cross-train personnel across departments, especially in smaller facilities.
  7. Rethink span of control. It may be possible for one director to manage several departments.
  8. Analyze compensation practices across the organization for standardization and consistency.
  9. Link productivity management to position control and hiring processes. Do not automatically refill a vacated position without reevaluating its necessity and ROI, for example.
  10. Make sure staffing decisions do not compromise quality of care. Monitoring quality of care goes hand in hand with productivity management. Scrutinize readmissions and other quality of care metrics, as well as HCAHPS, patient perception, and employee and physician satisfaction.

Learn More

CHC offers services to improve productivity. Learn more here.

By , Vice President, Hospital Productivity and Accounting January 14, 2019 Financial Performance, Operational Improvement

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