Labor Savings Playbook

Crafting a Labor Cost Contingency Plan

A catalog of labor expense reducing strategies and a guide to developing a cost-cutting contingency plan.

Executive Summary

Reactionary strategies hinder long-term labor savings efforts

Hospitals and health systems are under acute pressure to realize savings from operations, and a reactionary approach to current margin challenges can leave institutions vulnerable. Absent the lead time required to implement the most promising labor savings opportunities, hospital and health system executives are often left with little choice but to employ suboptimal tactics.

For many organizations, this vicious cycle is further complicated by the need to implement more than one round of savings strategies. Moreover, multiple rounds of cost cuts implemented in a piecemeal fashion frequently force executives to renege earlier promises, ultimately compounding workforce challenges and putting recovery efforts at risk.

A catalog of labor saving options

To assist hospital and health system executives seeking a more principled approach to reducing labor spending, the Center provides two resources in this study.

The first resource, Forty Labor Savings Tactics, is a catalog of labor savings options gathered from over 100 interviews with hospital and health system executives. It is designed to serve as a picklist to help hospital leaders identify the most leveraged labor savings opportunities for their individual institutions.

Tools to implement your action plan

The second resource, Crafting a Contingency Plan, details a three-step process and implementation tools for creating a well-sequenced labor savings action plan by first determining best, middle, and worst-case revenue decline scenarios and then isolating a subset of labor savings tactics to pursue in each scenario.

Health care institutions continue to experience margin pressures, even after implementing a series of cost-cutting measures. The greatest expense on most institutions’ books consistently remains labor costs.

This study includes:

  • 40 recommendations for cutting costs in compensation, health benefits, fringe benefits, employee headcount, and staff utilization
  • A step-by-step guide on proactively creating spending contingency plans based on various possible economic scenarios

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