8 things to know about best practices for labor infrastructure

Hospitals across the country hired physicians, nurses, technicians and others in droves to handle the influx of newly insured patients under the ACA. But now provider organizations face tough choices about how to manage their expensive — and highly valuable — staff as declining reimbursement exerts downward pressure on operating costs.

Becker's Hospital Review caught up with Steve Lothrop, managing director at Prism Healthcare Partners, and Clay Holmes and Joni Coccagna, RN, directors at Prism, to learn how to optimize labor management and productivity.

Here are eight things to know about labor infrastructure best practices.

1. What is a labor infrastructure program? "Labor infrastructure is a structured process which focuses the organization on workforce management," Ms. Coccagna says. It establishes guidelines for hiring and managing the workforce to meet expected budget targets and optimize productivity.

Besides improved productivity, a labor infrastructure program enables an organization to quickly adapt their workforce to the ever-changing healthcare environment, Mr. Holmes says. It does this by giving managers the authority and flexibility to evaluate and respond to changing operating conditions.

2. Core components of a best practice labor infrastructure program. Mr. Holmes says the high-level components of labor infrastructure include management education, standardized processes, data-driven decisions, labor management tools and a position review mechanism.

Mr. Lothrop broke down the above categories with several key examples. Specifically, he says successful labor management requires a thorough communication plan, a committee structure to review short- and long-term resource requests, a measurement system that recognizes changing capacity and a performance management system that tracks manager compliance.

3. Critical success factors of best practice labor infrastructure. Mr. Lothrop, Mr. Holmes and Ms. Coccagna identified three factors essential to best practice labor infrastructure.

1. Critical thinking at the management level. In addition to the infrastructure components mentioned above, leading practice encourages managers to think critically about where and when resources are required in their department and to evaluate if patient needs have changed demands for resources. 

Results should be measured at a minimum of every two weeks, Mr. Lothrop says. "Ultimately, we want to get managers away from 'justifying' resources toward a system where managers produce solid business plans that rationalize the dedication of resources."

2. Data-driven strategies. Best practice labor infrastructure includes decisions driven by solid-source data — a single data source accessible by all levels of leadership — as well as a consistent method to evaluate performance across leadership. "This process fosters a clearer understanding for senior executives of issues facing department management and stronger organization to achieve budget goals," Ms. Coccagna says.

3. Position review committee (PRC). A PRC constantly monitors the levels of full-time equivalents in a hospital to ensure staffing remains at the appropriate level as hospital needs change. "A PRC will take into account the entire organization's functions and performance, skill mix, long-term plans and other environmental conditions to make their decisions," Mr. Holmes says.

4. Main challenges to achieving best practice labor infrastructure. The greatest challenge is an ongoing commitment to change.

"Labor management systems take discipline to sustain," Mr. Lothrop says. "The ability to sustain the system depends on how well hospital leaders reinforce the objectives of managing labor efficiently, how well leaders communicate expectations and the effectiveness of follow-up to ensure what is said will be done, and indeed gets done."

Another challenge is changing hard-wired organizational habits, or the susceptibility to "doing things the old way," Mr. Holmes says. "The components of labor infrastructure are not what challenges organizations ... it's the six- to nine-month period post-launch when the organization has not yet established complete muscle memory and change feels like a lot of work to sustain."

5. How to get started on a best practice labor infrastructure. For organizations new to labor management theory, Mr. Holmes recommended establishing a PRC to review each position before a hire is made. This process involves challenging the assumption a new employee is necessary to fill every single position. Instead, Mr. Holmes said organizations should ask themselves, "Can we modify our process, reassign our current employees, or do we even need that [position] at all?"

6. Leadership‘s commitment is essential to sustaining long-term change. Hospital leadership has the primary role in leading the charge to implement best practice labor infrastructure.

"The best way for an organization to get started is for senior leadership to establish the commitment to change their current processes and communicate that commitment. Executive leadership must establish the foundation for change in the organization and set the expectations at all levels of management," Ms. Coccagna says. After their commitment is ensured, the next step "is to create a labor infrastructure charter to define the process, roles and responsibilities and guidelines" for labor management, she adds.

Mr. Holmes pointed out that a lack of executive buy-in is a red flag when it comes to making large-scale change. "Without commitment from executive leadership, I wouldn't advise an organization to pursue a labor infrastructure program," he says. “Executive leadership focus is critical to ensuring the program is successful in achieving goals and delivering improvements.”

7. Costs health systems should anticipate when implementing a best practice infrastructure. Hard dollars are a relatively minor expense when it comes to implementing labor infrastructure; effort, time and skill are required in much greater degree.

"Software costs to report labor utilization are minimal compared to the organization effort to get organized, create a communication plan and invest time verifying data," Mr. Lothrop says.

The upfront investment is well worth the long-term gains. "In all cases, the benefit associated with implementing a labor management system far exceeds the investment in manager time to establish the system," Mr. Lothrop says.

8. The benefits of implementing a labor infrastructure program. When fully deployed in a rigorous and robust manner, a labor infrastructure program creates a more transparent and quicker position request process led by an informed management team who leverages data to develop thorough business cases for position requests. It also builds executive leader confidence by providing an effective control to manage the organization’s biggest expense. Finally, a comprehensive labor infrastructure program can generate substantial financial benefit. Conservatively, organizations can expect to see a 1 – 3% labor expense reduction within the first year from the infrastructure program alone, according to Mr. Holmes, and it is not atypical to see the program generate that year over year as well.

“We find that organizations can experience a much larger improvement when combining a labor infrastructure program with focused process redesign and performance improvement, yielding 5-15% improvement on current labor expenses,” said Mr. Holmes.

Labor infrastructure is important for all health systems — even those meeting their labor targets

Regulatory, legislative and financial environments change rapidly in healthcare. Organizations that can efficiently respond and adapt to market change have a better chance of remaining competitive and compliant.

"Things in healthcare change quickly," Ms. Coccagna says. "You might be meeting your margin this year and falling short the next year. It is always a good idea to think ahead and be prepared."


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