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Leveraging Software to Drive Savings in Labor Management

July 2, 2013
by Rajiv Leventhal
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Labor management software, analytics, lead to millions of dollars in savings at Alegent Creighton Health
Ken Lawonn

The ability to effectively manage labor costs—the single largest expense for healthcare organizations— while maintaining efficient operations and quality clinical services is a challenging but critical factor in the growth and sustainability of healthcare organizations. Within this spectrum, staffing and scheduling responsibilities for nurse managers present tough day-to-day challenges that involve matching often unpredictable patient demand to the nurse resources needed to care for those patients. The difficulty of that task only grows with the size and complexity of the hospital organization.

Alegent Creighton Health, an 11-hospital health system based in Omaha, Neb., made what some would consider a bold decision in 2008 to contribute to the development of a labor management software system that has since resulted in millions of dollars in savings. The software, Smart Square from Avantas—which started as a group within Alegent more than a decade ago—was the third labor management system that Alegent experimented with, but it was the first one that effectively managed labor at an enterprise level, says Ken Lawonn, senior vice president of strategy and technology at Alegent.

BRIDGING THE GAP BETWEEN NURSING AND FINANCE

In examining some of their organization's processes, Alegent executives uncovered inefficiencies across the system’s nursing departments resulting from its unit-based approach to labor management. It was apparent that in order to seamlessly manage a workforce of approximately 10,000 employees, while meeting financial benchmarks and ensuring quality patient care, Alegent would need to centralize staffing capabilities to foster cross-organizational resource sharing; transparency to ensure that all decisions aligned with enterprise-wide benchmarks while fostering a greater sense of accountability; and built-in business intelligence and analytics tools to strategically determine the appropriate levels of core staff to meet emerging patient demand, says Lawonn.

“We needed to invest in an enterprise approach to managing labor, and we put in place strategies to centralize staffing and schedules of our nurses,” he says. “We thought there were opportunities to leverage our staff more effectively and reduce dependency on contingency staffing. We are now leveraging software to manage that process; while most healthcare organizations have a productivity system or a staffing ratio grid, they think that as long as they’re doing that effectively, they are effectively managing labor. But in reality, they are leaving a lot of opportunity on the table.”

According to Lawonn, there are a few core components of the system that are beneficial to Alegent. First, establishing schedules requires looking at several weeks in advance, using tools within the software to predict volumes that Alegent will have based on a predictive model that’s built into the system.  From there, nurse managers will look at what is going to be the demand for the staff’s specific schedules, and will begin to build a schedule for who is working which shifts.

As the shifts get closer, there is a capability of the software that allows the staff to select shifts, and that is done on a proactive basis, says Lawonn. “For example, if we know we’ll have a need for a night shift or in a specific unit, we will [make notifications] through the software, and we proactively incent people to fill those shifts. That allows nurses to have some input on what their schedules are, and it’s a good satisfier, as it even provides incentives for those who take the more difficult shifts to fill.”

Another element is Smart Square’s analytics capability, being able to provide the nursing leadership with analysis on how the staff is doing on productivity, managing staff to their full-time equivalent (FTE) ratios, and see how they’re doing with the use of contingency labor. “So there is a very strong aspect of managing the workforce and understanding on a day-to-day basis on how you’re doing as a nurse leader,” Lawonn says.

The results at Alegent have been impressive. Just two years after implementing the best practice strategies that were eventually automated by the labor management tool, an independent audit reported that Alegent Health had saved an estimated $8.4 million in nursing labor costs without any reduction in force. And after sustaining continued cost savings year after year within the inpatient nursing departments, Alegent Health began rolling out the solution across the enterprise to ancillary departments such as labs, therapy, pharmacy, environmental services, and outpatient clinics.

“Now, nurses don’t spend nearly as much time with staffing on a day-to-day basis,” Lawonn says, adding that they are freed up to spend more time with their staff and with their patients, which translates to a much more efficient business.

“Also, by using analytics, we have been able to set our core staffing ratios at the appropriate levels so we don’t have more than we need,” continues Lawonn. “If that happens, you end up paying benefits for more people than you need or you end up cutting staff because you have too many. Coupled with the reduction of contingency labor, substantial dollars have been saved there. We are able to manage clocking in or out on a more real-time basis. Just in implementing the process, we saw the savings gained, and the analytics tools took that to the next level.”

Lawonn says that when he talks to colleagues across the country, they say those staffing and labor issues are under control with their productivity system and nursing ratios, and there isn’t much more they can do. “But I tell them that is false—all they are managing is the FTE count, not the utilization of labor. If they need eight nurses for a unit and they have eight, that’s really all they know. They don’t necessarily know what they’re paying those nurses and that they’re paying benefits for nurses that aren’t there. There is a great additional opportunity to manage labor by effectively managing the utilization of the labor you have.”

EASING THE BURDEN

Heavy patient loads, smaller staffs and higher stress levels may be causing healthcare workers to check themselves out of their facilities, according to survey by recruiting firm CareerBuilder, conducted online by Harris Interactive earlier this year.

In fact, 60 percent of healthcare workers say they are burned out on their jobs. Twenty-one percent always or often feel burned out. Of workers who feel always or often burned out, 67 percent plan to look for a new job this year, the survey says.

“We absolutely have that issue here,” admits Lawonn. “But with the use of this software, you give nurses some sense of ownership of their schedule, which is a huge satisfier. It also reduces the amount of times that were asking people to come in for a second shift or go home because we don’t have enough volume for the staffing. Healthcare and nursing is hard enough. If you can take away the stress of having to work a double shift or getting everything arranged to go to work and then being reduced because we didn’t have the volumes, it really helps to decrease that stress and burnout. Our numbers would show that we have had significant improvements in turnover over the years.”

At the end of the day, the main goal in healthcare is improved patient outcomes, and the more familiarity there is in a health system and the more people who understand the process are on staff, the better the results will be and the better the care will be, says Lawonn. “Reduce the amount of outside labor that goes into the units, so you gain more consistency and spend less time on bringing people up to speed. Principally, if you have a less stressed and burned out staff, you’re just going to have a better workforce taking care of patients, and that will lead to better outcomes.”


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