Labor Shortage: Why You Need the Right Labor Management Partner Now

Healthcare today faces a two-sided labor crisis. On one side, labor costs have increased one-third from pre-pandemic levels, constituting almost 50 percent of a health system’s total expenses. On the other, healthcare workers are leaving the profession at an unprecedented rate. According to the 2022 NSI National Health Care Retention & RN Staffing Report, hospital turnover has increased by 6.4 percent to its current rate of almost 30 percent.

A healthcare labor management solution is urgently needed. When hospitals are understaffed, patient safety and quality of care diminish, and the healthcare workforce is forced to assume an unsustainable burden. For example, when the workforce was overburdened during the COVID-19 pandemic, healthcare-associated infections rose by as much as 47 percent. Meanwhile, nursing turnover costs the average hospital between $2 million to $9 million per year. Health systems must leverage quality data and work collaboratively to understand and proactively approach staffing.

To address this double-sided crisis, health systems need a comprehensive data-driven approach that reduces unnecessary costs while maintaining high-quality care and patient and employee satisfaction.

Capture Short-Term Labor Management Wins

As the industry develops long-term labor management strategies, organizations can achieve short-term wins by leveraging current resources.  To provide insight into how organizations can employ their workforce to become more efficient at serving patients in a high-quality way, short-term strategies need to leverage data analytics.

With data at the core of these efforts, the following short-term labor management strategies can effectively enable labor management wins, according to A Healthcare Worker Shortage Action Plan: Short-term Wins and Long-Term Strategy.

• Implement shared governance: Initiatives within nursing and other fields to support workforce engagement. Known as shared governance, tactics include staff participation with scheduling, which gives individuals input on the flow and activity in their department.   
• Improve patient flow (throughput): Patient flow, or the movement of patients through a healthcare facility, can hold significant opportunities for improvement, especially when it comes to optimizing staffing. For example, overscheduling in one area (e.g., elective surgery) will cause a bottleneck in another (e.g., post-operative overcrowding), leading to staffing strain.   

• Find the appropriate setting for each patient (patient aggregation or placement): Determining how to allocate resources requires understanding the most appropriate setting for patients. During the pandemic, health organizations created new strategies for increased patient volume that can inform future patient placement strategies.
• Optimize the nursing skill mix: As the RN vacancy rate continues to rise (currently at 17 percent, up 7.1 points from last year) leaders must evaluate their nursing roles to ensure an optimal combination of education and experience. Ensuring that RNs, licensed practical nurses, and nursing assistants are in the appropriate setting will enable each provider to perform at the top of their license.
• Create new care models: Telehealth presented new possibilities for provider engagement with patients. Exploring new models, such as remote work, for nurses and providers will be pivotal to managing labor demands.
• Enhance workforce flexibility: Provide opportunities for different shift lengths, part-time positions, and other flexible scheduling practices that can open access to individuals otherwise not interested in filling available shifts.

Implementing these short-term strategies can help organizations gain a better understanding of shifting labor dynamics across their organizational departments and teams.

Upgrade Labor Allocation Tools and Services for Long Term Success

Optimizing labor allocation over the long term requires robust data platforms and AI-enabled applications, which can help organizational leaders help understand everything from predicting patient volumes and matching supply to demand to optimizing skill mix and scheduling.

One such AI-enabled tool is the Health Catalyst PowerLabor™ application. PowerLabor was designed to provide healthcare organizations with a comprehensive view of the organization’s labor cost allocation and the data insights necessary to identify opportunities to optimize labor resources. PowerLabor pairs real-time, actionable data with a robust analytics platform that offers leaders a more nuanced overview of healthcare labor data by system, department, team, and job role, including special contract and pay categories. The platform also includes embedded AI forecasting to predict patient volumes.

To gain the actionable insights needed to optimize the effectiveness of long-term strategies, organizations are utilizing labor management experts, such as Health Catalyst’s Labor Management Expert Services. This service provides organizations with a customized analysis to determine where labor demands are not being met and are potentially undermining the quality of care as well as guidance to devise and implement strategies, structures, and practices for short-and long-term labor management success. This approach provides a tailored approach to each organization’s unique circumstances and labor challenges, equipping them to tackle their unique challenges and create a plan forward.

Labor Management Strategies in Action: Hawai‘i Pacific Health

As one of the largest healthcare providers in Hawaii, Hawai‘i Pacific Health (HPH) understood that its labor management strategies were not effectively using budgeted resources and sought to determine where clinicians and operational leaders could better accommodate staffing challenges. To gain insight into its performance, HPH partnered with Health Catalyst to conduct an opportunity analysis. The data uncovered opportunities to reduce costs in healthcare labor management and identified the top ten areas across four hospitals with the biggest potential to improve. They implemented the Health Catalyst Data Platform, along with the PowerLabor application, to analyze where labor allocation could be optimized. For the first time, HPH was able to access a detailed overview of the organization’s labor resources and allocation across four hospitals, including hours, volume, and budget data from four different data systems.

Using a data-driven approach to labor management, HPH now has detailed insight into operations, supporting the creation of interventions aimed to decrease expenses, while improving operational efficiency and satisfaction. The health system improved labor utilization across four pilot facilities in only six months—significantly reducing labor costs. Building on its initial success, the organization has rolled out the program across its entire system, resulting in substantial savings and operational efficiencies, including:

• $2.2 million savings in 16 months, while maintaining high-quality outcomes.
• With on-demand, real-time access to data, managers spend 15 minutes—instead of four hours—proactively managing operations, reducing the administrative burden on managers. The organization can now answer basic business questions (e.g., the number of FTEs in a given hospital department) in minutes rather than weeks, allowing managers to immediately identify budget errors, in terms of where people are assigned versus where they should be, before making decisions based on faulty data.
• Utilization of the application continues to grow with hundreds of employees using the tool daily to actively manage their resources.

Data-Driven Labor Management Delivers Financial and Operational Improvements

With labor expenses making up approximately 50 percent of hospital and health system operation expenses and projected healthcare worker shortages reaching millions in just a few short years, the industry is facing a complex labyrinth of labor-related challenges. And, for any long-term benefit, efforts to address these challenges will need to bridge the widening supply and demand labor gap in a way that supports high-quality care and patient well-being, as well as employee engagement and provider job satisfaction.

Implementing AI-enabled labor tools will effectively garner short-term wins, bolster employee engagement, and provide organizations with an integrated view of their labor landscape in order to inform strategies to accommodate unpredictable changes in volumes and find the right balance between quality care, safety, patient and employee satisfaction, and fiscal responsibility

Additional Reading

Would you like to learn more about this topic? Here are some articles we suggest:

• Optimize Your Labor Management with Health Catalyst PowerLabor™
• Easing Labor Shortages and Staff Burnout with Data and Analytics
• Three Crucial Mindset Shifts to Reach Peak Financial Healthcare Management
• The 100-Percent Solution to Improving Healthcare’s Operating Margins