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Striking a Balance Between Cost and Quality of Care

September 30, 2014
by John DeGaspari
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How HR professionals are setting priorities on care quality and employee retention amid budgetary constraints
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Although labor ranks among the highest-cost items in the budgets of most healthcare organizations, tight budgets and the lack of time and resources from tackling of too many initiatives have posed significant challenges to healthcare provider organizations when it comes to human resources and staffing issues. That’s among the conclusions of two recently released industry reports that look at issues of hiring, staffing and employee retention in the healthcare sector.

Yet employee productivity and skill sets are especially relevant to healthcare providers that are intent on improving the quality of care. Joe Van De Graaf, senior research director and author of a report from the Orem, Utah-based KLAS on human capital management released in August, points out that while human capital management—the set of practices and processes around managing people in an organization—may not be the absolute number-one priority from a strictly IT perspective, it is an important initiative and shared goal at the senior executive level at many provider organizations that are seeking to manage and train the employees they have.

He also thinks that human capital management is likely to become even more crucial going forward than it has been in the past, given the ramifications of the Affordable Care Act. He observes that transparency around physician performance, for example, is one of the competitive differentiators of providing care in an integrated value-based environment.

Many provider organizations have higher expectations when it comes to human capital management solutions. Broadly speaking, providers are beginning to require solutions that will support their efforts around accountable care, Van De Graaf says. “Healthcare organizations are looking for more than just efficiencies,” he says. One example of how HR and payroll systems might address provider needs:  a searchable database that will allow provider organizations to compensate employees based on performance. “The idea around accountable care is that we are going to provide healthcare in a way that not only gives better care and is patient centered, but we are going to be compensated for the way we perform,” he says.

With human capital management, Van De Graaf sees significant activity in terms of demand and vendor offerings in the area of staffing to predicatively manage employee time, and avoid unnecessary overtime expense. One particular area of interest is clinically advanced staffing, which goes beyond basic nurse staffing to mobile scheduling, and allows communication among the nursing staff without reliance of an IT administrator, he says.

While talent management systems have been used in the past to automate hiring and track performance goals, he is seeing early adoption of talent management for compensation and succession management as well. Although he acknowledges that human capital management and clinical systems are not a natural connection, he notes that that the employee is indeed at the center of the organization’s operation. “That’s what human capital management is about,” he says. “Not only can we have the right employees, but how we can help to train them, look at their employment record, and use these systems to optimize the training, the retention and the skills that are needed.”

Meanwhile, healthcare HR initiatives are moving forward on a number of fronts, according to a survey on healthcare initiatives sponsored by the American Society for Healthcare Human Resources Administration (ASHHRA) and HealthcareSource. The survey is based on the responses of HR professionals in 500 healthcare organizations in the U.S. 

Among the survey’s findings are: streamlining HR processes ranked number one in efforts to reduce costs, cited by 74 percent of respondents. It was followed by efforts to improve retention rates, cited by 69 percent of respondents. Interestingly, while the percentage of respondents concerned about healthcare reform was significant at 44 percent, that percentage was 20 percentage points lower than it was in last year’s survey.

Improving employee satisfaction (cited by 79 percent of respondents) and fostering a culture of employee accountability (68 percent) were top priorities for improving patient satisfaction. Other highly ranked initiatives for improving patient satisfaction include creating a service-oriented culture and providing employee education.

As for current HR initiatives to improve patient safety, 69 percent of respondents identified a focus on employee education and development, followed by improvement of employee satisfaction (59 percent) and hiring for cultural fit (54 percent).

Challenges to putting their initiatives into place are significant, according to respondents. The top challenges were too many initiatives (cited by 67 percent of respondents), followed by no budget to implement the programs (49 percent) and insufficient systems and inadequate technology (43 percent).

Alameda Health System: A Focus on Labor Utilization

Labor optimization is a major component of a comprehensive effort to control costs and improve revenues at the Alameda Health System in Alameda County, Calif. The Alameda System, which consists of 849 beds system-wide, consists of five hospitals: John George Psychiatric Hospital (JGPH), an 80-bed acute psychiatric care facility; Highland Hospital, which includes a medical-surgical trauma center; Fairmont Hospital, which is a skilled nursing and acute rehabilitation facility; and two recently acquired community-based hospitals: San Leandro Hospital and Alameda Hospital. Alameda also includes several federally qualified health centers throughout the county. Three years ago Alameda set out on a comprehensive initiative to cut costs and improve its revenue streams. (The hospital system has partnered with MedAssets, Alpharetta, Ga., to help identify and implement cost-saving strategies.)

Guy Qvistgaard

Guy Qvistgaard, hospital administrator for JGPH, says the initiative was put in place at all three hospitals in an approach that he describes as transformational and system-wide. Qvistgaard notes that JGPH is a safety net hospital system, and needed to restructure its costs as the healthcare industry moves toward supporting the accountable care model. “We also, as a public hospital, needed to strengthen our revenue streams and internal processes,” he says. Those needs served as the impetus for embarking on the cost-cutting initiative, which was undertaken by all three hospitals in the Alameda system.

Alameda set an initial goal of saving $19.5 million during the first 18 months; $12 million of that figure was labor costs, which was the largest component. Longer term, the health system set a goal of saving $165 million by 2022. Working with MedAssets, Alameda identified focus areas of the initiative, set up a governance structure, established signoff and formal reporting processes, established timelines, and measured results.

John George Psychiatric Hospital, part of the Alameda Health System, has streramlined its labor practices as part of a comprehensive cost-saving effort. Photo: Alameda Health System

Qvistgaad says that one of the biggest challenges of the labor component of the project was standardizing on labor processes. Among the steps it took were establishing a centralized staffing office, agreeing on labor utilization practices, and standardizing around the use on online scheduling tools, he says. It agreed on data to measure the labor processes and make sure that the data had integrity. “Those were relatively new processes for us, and the rigor around them was very new,” he says.

From the beginning, Alameda included all stakeholders in the project, which Qvistgaard says was key to the success of the initiative. “We were changing the mix of our staffing and the schedules of our staffing,” he says. “We had to have the unions, employees and management all on board.”

Labor utilization data was brought up and benchmarked against other provider organizations providing like services in similar communities and similar organizations, to analyze where labor was being over-utilized or under-utilized, and staffing levels could be adjusted so that quality was being provided without overspending, Qvistgaard says.

Developing a New Labor Management Strategy

Qvistgaard says that JGPH, working with MedAssets, has come up with a new set of labor metrics in its ED that takes length of stay into consideration, rather than basing it only on the volume of visits. The problem with the volume approach, which he says is typical, is that the lengths of visits vary widely, making it difficult to staff effectively. The hospital’s new approach, which includes length of stay as a workload driver “made more financial sense to us, rather than just linking it to patient arrivals for a visit,” he says.

JGPH started putting the new metric into effect in 2012; Qvistgaard links it to the hospital’s ability to significantly reduce overtime and the need to use registry nurses to fill labor gaps. Last year, for example, JGPH was budgeted for 18.9 registry full-time nurses, against about 270 employees. Its current year-to-date utilization is 5.9 registry nurses. “We credit that to having very accurate utilization data throughout all of our units, and especially our psychiatric ED,” Qvistvaard says. In addition, JGPH came in under-budget by 10 full-time regular employees, he adds.

Qvistgaard says the labor reductions have had no negative effect on quality at JGPH. In fact, he says patient satisfaction scores have increased at JGPH significantly, from the bottom decile to the top quartile nationally. Employee satisfaction scores have also increased significantly throughout the Alameda Health System, he says. In his view, using more regular staff lends itself to better continuity of care and better relationships between the patients and the nursing staff.

One of the goals of the labor initiative is to eliminate variability in the labor allocation process as much as possible. One example is the use of “sitters” for one-on-one care of patients with special needs. Previously, according to Qvistgaard, the process of determining who needed one-on-one care was not consistent at JGPH; often the charge nurse made the call with no checks or balances to the decision, and was not necessarily tied to good clinical outcomes, he says. JGPH has now implemented a formal workflow for one-on-one staff approval, auditing and checking, which is tied to the central staffing office, to help ensure that the care is both provided and pulled back in a timely manner, he says. He adds that while the formal process has added some time to the process, it was not untenable to good patient care. Since implementing the process, instancesof one-on-one care has dropped significantly, he says.

Penn State Hershey: Medical Group Transparency

Penn State Hershey Medical Group, which is associated with Penn State Milton S. Hershey Medical Center in Hershey, Pa., consists of 50 practice sites, including 165 subspecialties, located across the state as far as 90 miles away. Labor represents 80 percent of the medical group’s operational expense, according to Sherri Luchs, chief administrative officer for the medical group, yet there was a lack of transparency in how the staff was allocated. Last year the medical group implemented scheduling and labor analytics software that it says has saved more than $800,000 from lower overtime costs and more efficient staff allocation.

Sherri Luchs

Interestingly, the initiative centralized the staffing allocation tasks, which Luchs says is an unusual approach for medical groups where individual practices often delegate their labor allocations autonomously. Luchs says the medical group required a better understanding of whether the practices had sufficient clinical and non-clinical staff allocated during the day. One of its early tasks was to analyze the time spent during the entire patient encounter, both face-to-face and over the phone or through patient portals, she says.

In June of 2013 it deployed scheduling software (Smart Square, supplied by Avantas, Omaha, Neb.), which has allowed visibility into it the staffing needs of each practice. Luchs explains that each medical practice has a core staff of full-time and part-time employees. A contingency labor pool is managed centrally, so that when there are fluctuations in the number or frequency of visits, contingency staff can be added to the core staff to meet those needs. “We can now see centrally the visits and staffing on a daily basis, morning and afternoon, and at regular intervals,” she says.

The medical group uses analytics to measure the peaks and valleys of its visits and better match its full-time and part-time staff to meet the needs of the individual practices, Luchs says. The analytics also provides insight into the scope of practice, to make sure that the employees with the right skills are provided in the right place at the right time.

Penn State Milton S. Hershey Medical Center has centralized labor management of its 50-practice medical group Photo: Penn State Hershey Medical Center

Six months prior to deploying the scheduling software, it began laying the groundwork by educating its physicians and managers. Prior to rollout it did staffing analysis and developed a staffing matrix based on industry benchmarks and internal benchmarks including front office staff, medical office associates and phone volume. That information is fed into the scheduling software, which provides live feeds of the number of visits, staff that is being deployed, and the number of float employees that need to be deployed.

In addition to staff scheduling, the medical group has begun work on a predictive model for the number of visits and required staff at each practice site. This model will refresh data as the visit date approaches, allowing the staff to be more accurately deployed. “We are still fine-tuning that model,” Luchs says, especially for walk-in clinics and family community medicine sites, where there is more variability than traditional physician offices.

Within the first year of deployment, Penn State Hershey Medical Group saw a combined savings of $828,000 because staff was allocated more efficiently to meet the volume of visits. In addition, the medical group has been able to lower the use of agency nurses from 3 percent to 1 percent and has lowered its overtime as well.

“It’s changing how we allocate our staff, based on looking at our processes and procedures for the way we work, and making full-time and part-time employees available through the contingency pool,” she says.


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