Blog > Strategies for Managing Labor Costs in Healthcare

Female nurse examining medical records in the corridor

Surveys of healthcare financial officers show that year over year staffing shortages in the healthcare industry continue to worsen, as demand for more advanced care grows. Even before the added pressure of the pandemic, 78% of hospital executives predicted increasing labor budgets for their facilities.1 An aging population and concerns about safety due to current events are creating increased pressure from both the supply and demand side of the equation.

Many leaders who are looking to meet the demands of rapid healthcare industry growth are using a combined approach to labor management that also leverages opportunities in AI, robotics, retention, supply chain, and operating expenses. Let’s look at what some top teams are doing to implement cost control measures and managed labor solutions.

1. Right-Sizing Float Pools with Real-Time Data

Contingency staffing is a complex science that requires layering and analysis of volume spikes and seasonal trends. Using advanced business intelligence tools to analyze workload variations, expected FMLA utilization, and trends in overtime costs can provide valuable insights into where your workforce is under-utilized and when it makes financial sense to call in traveling or agency staff.

Rather than analyzing trends quarterly or annually, BI tools allow administrators and executives to spot negative trends in real-time and take appropriate actions to adjust pool sizes, reduce incidental work, and lower overtime costs. The investment in these tools and in training staff to use them is generally much less than the value they add to real-time workforce management.

2. Forecasting Future Demand

Forecasting patient volume levels allows workforce managers time to develop detailed schedules well in advance, and then to plan for additional agency staff or shift changes within the pools. Contingency staff should be kept free for sudden demand spikes not fully utilized in the schedule. By tracking past spikes in patient load per unit and identifying gaps early, staffing plans informed by accurate forecasting can drive proactive recruiting as well.

3. Leveraging Innovative Solutions

Innovative thinking and improving technologies offer cost control possibilities beyond the traditional workforce management paradigm. Some successful examples of innovation in healthcare cost management include:

  • Changing a high-cost contract-worker force into a for-profit travel nurse agency, recruiting full-time employees from this internal pool, which allowed one hospital system to turn a growing cost into a profit center.
  • Making use of a Robotic Process Automation tool (RPA) to reduce costs in the revenue cycle function or in other areas of billing, which allows qualified staff to check the results of the automated process rather than initiating all steps of the cycle manually.
  • Implementing workforce management software or services that improve retention of qualified healthcare personnel and build their skills to fill resource gaps.
  • Using transactional level data and business intelligence tools to manage eligibility for additional shifts, accurately identify the source of cost overruns, and rapidly adjust staffing models and projections accordingly.

4. Accessing Detailed Workforce Data

Smiling female doctor standing in a hospital corridor with a group of medical staff

Of course, understanding the current state of your workforce and forecasting its future needs will be based on a solid understanding of your historical data. Using a service like SNF Payroll to track employee life cycles from hire to retire provides access to past trends and supports your compliance protocols at the state and federal level.

Jobs in the healthcare industry present unique challenges and life-changing benefits for your employees. Keeping all employee records in a single, secure, and accessible system will allow your facility to effectively manage the past, present, and future of your workforce while supporting the professional growth and goals of your valued staff members. To find out more about how the team at SNF Payroll can partner with your organization to improve labor management, contact us today.