No margin sustainability strategy is complete without first examining labor costs, which on average account for over half of total cost growth. While labor cost management is vital to long-term financial success, leaders cannot simply “cut” their way to prosperity.
Short-term cost-cutting tactics will provide only temporary relief, as current average annual cost growth rates of 4.5% guarantee hospitals will continue to face upward cost pressure.
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Common roadblocks to achieving sustainable labor cost growth
Labor is not only the most essential lever required to bend your cost curve, but it is also the most sincere and significant investment you make in delivering sound patient care. Wholesale labor cuts can cause irreparable harm to both workforce stability and care quality.
The right workforce management strategy can slow and control labor cost growth without the risk of hurting workforce stability or care quality.
How we help
Our approach guides organizations through a top-down financial forecast to set the strategy, which then informs the bottom-up labor expectations for each department. This approach, coupled with establishing the workforce management infrastructure needed to control variation, results in a consistent and successful strategy to bend your labor cost curve.
1. Gain visibility into your most important indicators
Reduce labor costs and increase productivity with custom reporting.
- What is does performance look like at the department and provider level?
- How can daily tracking inform labor strategy?
2. Determine economic projections across 3 years
Set top-down labor expense forecast based around revenue projections.
- What is the required margin over the next 2-3 years?
- How does this inform the total investment in labor that we can afford?
3. Ensure infrastructure can control staff deployment
Establish core workforce management principles based on margin goals.
- Are your labor standards designed at the department levels?
- Do you have the right skill mix given future shifts in volume?
4. Define the tactics you need to deploy across next 3 years
Build a plan with components needed to achieve an affordable, sound workforce.
- Are workflows streamlined to meet departmental level performance targets?
- Are staffing levels set such that they support the margin goals?
Senior Vice President
John leads engagements to enhance hospital's strategic direction, operational efficiency, and financial performance. His areas of expertise include strategies to achieve sustainable financial performance under Medicare rates, large-scale margin improvement initiatives, hospital care redesign and length of stay reduction, and service line growth and profitability strategies. John has assisted hospitals and health systems in developing and implementing strategies to succeed in the post-reform world.
Sharon brings more than 31 years of experience in acute care and outpatient health care, and is responsible for assisting hospitals in the improvement of the efficiency and effectiveness of clinical operations, evaluating productivity, improving throughput, leadership coaching and process redesign. She maintains a clinical certification in both emergency and trauma nursing and is a frequent regional and national speaker on a variety of topics.
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Executive Roundtable Session
Learn more about workforce management strategy with a 90-minute Executive Roundtable Session. Our experts will come on-site to lead a discussion with your leadership team on addressing challenges that are specific to your organization and preparing for the long term.
This session is designed specifically for the CEO, CFO, COO, CMO, and CNO as well as service line leadership. It is intended to address the “how to” in defining an organization-wide workforce management strategy and spark a discussion among your leadership team on crafting a permanent solution.
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Request a session with one of our experts to hear about workforce efficiency.
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