Healthcare executives face an uphill struggle to reduce costs, grow revenues within a shifting payment landscape and ensure
that patients receive quality, life-saving care. A tough assignment, especially when a critical shortage of workers sabotages
those efforts.
The situation demands senior executives' attention—labor costs are expanding through a combination of bonus pay, overtime
and temporary agency fees to fill shifts. High vacancy rates in spite of spending on search-firm fees, recruitment advertising
and referral bonuses complicate the situation. Strategies for increasing revenue and satisfying physicians via new projects
bump up against not being able to staff them. Further, with organizations' and consumers' efforts at driving improved performance
and quality of care, it is critical that hospitals retain quality staff. The Joint Commission on Accreditation of Healthcare
Organizations sees a direct correlation between the nursing shortage and quality of care. Staffing levels were a factor in
24% of 1,609 unanticipated events resulting in death, injury or permanent loss of function reported in March 2002.
A hospital's response to the crisis is usually reactive—calling temporary agencies to fill vacancies—at rates over 50% higher
than in-house compensation. Unfortunately, the use of temporary agencies doesn't resolve the staffing problem and often serves
to perpetuate it.
As an example, consider a hospital with 5,000 employees. It had 300 vacancies, many open longer than three months and temporary
agencies just kept filling those positions time and time again, resulting in ballooning labor costs. In contrast, Covenant
Healthcare System recruited a dedicated team of nurses who love flexibility in hours but wanted to work within one system,
converted them to employees, and saved $3.6 million in 18 months. Bottom-line pain, top-line growth
Leading hospitals have implemented a two-pronged strategy for successfully stopping the bottom-line impact of the staffing
crisis. One prong is strategic and overarching, the other, tactical, focusing on better processes and execution.
- Change of mindset. Historically, healthcare has looked within its own industry for best practices but needs to look at other industries to learn
how they reduce labor expenses and handle talent shortages. One such best practice in other industries is outsourcing recruiting.
Within healthcare there has been a reluctance to adopt it because of the perceived loss of control over human resource recruitment
and staffing functions. This is the most misunderstood aspect of the staffing shortage, and this mindset among healthcare
executives has caused an interesting paradigm.
By using temporary workers, a hospital allows its core service—patient care—to be delivered by a temporary third party the
hospital didn't hire and doesn't know well. Isn't this in fact outsourcing patient care? The people providing patient care
is the component the hospital should most want to control.
A recruiting outsourcing service provider only finds candidates; the healthcare system's in-house hiring leader does the hiring,
thus retaining control over deciding who delivers patient care. Further, when best practices in process and technology are
deployed and metrics reported, visibility improves and control is enhanced.
The hospital gets in front of the staffing problem upstream but also gains access to recruiting expertise and avoids capital
outlay for the human resource and recruitment technology that can accelerate recruitment results. In contrast with a human
resource department with too much on its plate and too few resources, the recruitment outsourcer can be proactive and respond
faster to applicants.
- Process reengineering around temporary agencies. The staffing crisis worsen over time, as the population and healthcare workers age. Thus, appropriate use of temporary agency
workers is unavoidable and, in fact, desirable as a staffing strategy. But, as with any procurement or supply chain process,
there are best practices.
The danger of overusing temporary agencies is not just the cost but also the lack of accountability. A healthcare system cannot
control its costs or risks when multiple hospital personnel have access to agencies and there are no criteria for 1) the decision
to use an agency, 2) which agencies to use (and for what), and 3) what standards agencies will uniformly apply when reviewing
and recommending candidates for the healthcare organization. With individuals negotiating separate prices with agencies—or
letting the agency dictate the price—the hospital loses the opportunity to leverage its utilization and total spend.
Warning signs that a healthcare system overuses agency staff include:
- Agency labor expense approaches more than 10% of overall labor costs
- Agencies contact the hospital weeks in advance to fill shifts
- Anyone may call any agency and book a shift
- The hospital's regular staff "moonlight" as temporary agency workers—often at their own hospital or system
- Processes have not been clearly defined
- No metrics are in place to evaluate agency performance
To ensure a better ROI, a healthcare system needs to reengineer the process surrounding use of agencies:
- Establish a well-defined request process with approvals
- Centralize the process in one department responsible for agency utilization decisions and negotiating optimal rates
- Establish detailed files on each temporary worker to ensure credentials and competencies are in compliance with regulatory
requirements
- Provide orientation for agency workers to ensure they are knowledgeable about the hospital so the quality of care they deliver
will be higher
Jill Schwieters is executive vice president and leader of the healthcare group at Pinstripe, an HR and RPO firm with specialized
expertise in recruiting, acquiring and retaining critical employees for healthcare providers.
