Labor Management Systems Can Align Resources and Reduce Costs

Even hospitals and healthcare systems that don’t have much trouble recruiting nurses and other staff can find it challenging to align staffing with patient demand in a way that’s cost effective.

UW Health, a health system of the University of Wisconsin-Madison, doesn’t struggle much with recruiting nurses because of its nationally recognized new graduate residency program and proactive predictive modeling processes, according to Beth Houlahan, DNP, RN, CENP, senior vice president and chief nurse executive at UW Health.

“UW Health is fortunate to be in a community with several excellent schools of nursing,” she said. “In addition, because of our exemplary national rankings and Magnet status, we have been able to recruit exceptional experienced nurses.”

To optimize recruiting and staffing practices, UW Health implemented a labor management system that addresses another key component of cost effective quality of care — resource alignment.

The labor management system improved processes related to aligning resources (staffing) to patient activity (demand). With oversight of an appointed committee, it applied guidelines to the hiring process to avoid costly over-hiring and reduce inflated flexing and floating of current full and part-time staff.

These practices resulted in an overall reduced labor cost, according to Jason Brent, DNP, RN, NEA-BC, director of Prism Healthcare Partners in Chicago. Prism worked with UW Health to implement a labor management infrastructure.

Jason Brent headshot
Jason Brent, DNP, RN, NEA-BC

“Aligning resources to the right time and place while performing the appropriate job functions results in overall improved quality patient care, increased patient satisfaction and increased staff satisfaction, while reducing overall costs,” Brent said.

Key components for optimal staff alignment

The end-to-end labor management system helped UW Health save millions of dollars in labor costs. UW Health executives and Prism shared their experiences during the Aug. 8 webinar, “How UW Health System Drove Millions in Savings with an End-to-End Labor Management System Solution.”

UW Health’s Chief Human Resources Officer Wayne Frangesch said implementing the labor management solution represented a cultural change for the organization, where standard practice had been to assume the system would be short staffed and, therefore, automatically replace turnover without a review process.

In essence, UW Health committed to implementing new guidelines and a process involving multiple stakeholders that would develop, manage and oversee the system’s staffing.

The guidelines in the hiring and vacancy review process are not meant to impede recruitment and replacement efforts. They’re meant to guide decision making, to avoid costly over-hiring and ensure organizationally all staff are able to work to their full-time equivalent status, according to Brent.

“Kickstarting this process is a real challenge especially at the beginning,” Frangesch said during the webinar. “Asking managers to reconsider whether an open position needs to be filled, when that position has been already budgeted for, was a new experience for managers. We also communicated throughout a real goal and intent to let the natural attrition of turnover, retirements and staff moving into other roles to be the main contributor to labor reductions.”

Employees, including managers and senior executives, work together to ensure the organization stays on course with the labor management solution. The position review committee is a foundation for the labor infrastructure program, according to Sachin Sharma, director of Prism Healthcare Partners.

“The position review committee provides a clear process for leaders to request new and replacement positions,” Sharma said during the webinar. “Many organizations have something like this in place but it may not be driven with both a quantitative and qualitative approach. A typical position review committee meets on a weekly basis with membership consisting of a VP of HR, operations VP, finance representative, a nursing/clinical representative, decision support or analytics representative and an HR business partner.”

What to consider when setting targets

Another way in which this system differs from standard staffing practice is that the labor infrastructure program doesn’t rely on using benchmarks, which are usually based on comparisons to national peers, to set staffing targets. Rather, the labor management system uses an infrastructure program, according to webinar presenter Steve Lothrop, managing director at Prism Healthcare Partners.

“While the target may be updated annually, internal performance targets are evaluated by the manager more frequently through management and coaching,” Lothrop said. “It’s more meaningful to hold a manager accountable for targets that they created themselves, versus a benchmark that was handed down to them.”

There are multiple components and considerations that go into the process of target setting, according to Sharma.

“For departments to buy into the productivity concept we want to make sure the department targets are realistic and attainable,” Sharma said. “At UW, it takes on average eight to 10 weeks to create a custom department target. These targets are built from the ground up, being sure to account for any unique circumstances. Let’s use the ED for example, if we were to use a benchmarking approach, we’d assign a target of 3.9 worked hours per patient visit for UW. If we were to do this, it would not be successful as there is no departmental input for consideration of what’s different about UW’s emergency department.”

Sticking to the plan began to show benefit. During the last year, UW Health had a more than 3% improvement in terms of paid full-time employee over time. The system’s costs for overtime and its reliance on travel providers also diminished, according to Frangesch.

Nurse managers learned to work more closely with one another, thinking of themselves more as a system, than as their individual units, according to Susan Rees, DNP, RN, CPHQ, CENP, vice president and chief nursing officer-inpatient at UW Health.

“Sharing of resources (floating and/or pre-assignment of staff to other areas) has expanded beyond what we had previously done, and beyond what was thought our staff would feel comfortable with,” Rees said. “Nurse recruiters have been more closely connected with hiring managers to fill our open positions in as quickly a time frame as is possible.”

HR can support this process, but the hiring leaders must feel a personal ownership for each position they request, Frangesch said.