Reducing Hospital Labor Costs: 2 Key Strategies

Retention and optimized provider scheduling will be key to reducing hospital labor costs

For the last ten years, hospital labor costs have been steadily increasing. In fact, they have likely already reached 60% or more of most hospitals’ operating budgets, a level many operations leaders fear won’t be sustainable long term. So, what’s the driving factor behind this? The list is long: a tightening clinical labor market, higher wages, and increasing patient access points are just a few contributors.

To make matters worse, increasing labor costs aren’t the only financial pressures facing hospitals. In November of 2019, hospitals’ operating EBITDA margins fell 14.5% year-over-year due to lower patient volumes and revenues. All-in-all, operating margins were down 21.3% while expenses grew by 2.7% year-over-year. Contending with these looming financial pressures will be a key focus in 2020 for operations and financial leaders.

How can leaders combat rising hospital labor costs?

Two key areas that will aid hospital and health system leaders hoping to mitigate rising labor costs: more effective provider scheduling and retention of skilled clinical staff. Let’s examine how Lightning Bolt’s AI-powered provider scheduling software delivers these results.

Optimized provider scheduling can cut costs and improve productivity.

Improving productivity is a difficult balancing act for hospitals and health systems. Operations leaders must account for the needs of clinicians, patients, and ever-present business objectives. While some healthcare organizations have implemented powerful data analytics to inform decision-making in supply chain management, many are missing key cost savings by failing to understand the supply of their most valuable resource: clinical staff.

Hospitals and health systems aiming to reduce labor costs should start at the root of the problem—aligning clinician supply and patient demand. It’s well documented that gaps in provider supply and patient demand are expensive for healthcare organizations and generate waste while diminishing patient access. Despite these high stakes, many hospitals and health systems lack this key cost reduction strategy.

To combat rising labor costs, operations leaders need data-driven solutions that catalyze change and increase the productivity of their clinical workforce. The term “productivity” often conjures negative associations. Many fear it means squeezing more out of an already stretched clinical staff, but in this case, it’s actually about using data to schedule clinicians as efficiently as possible. This not only helps leaders deliver on business objectives but ultimately ends up creating better practice experiences for clinicians.

How does it work?

With the powerful analytics tools available in Lightning Bolt’s physician scheduling software, organizations can gain insight into patterns of provider supply and patient demand on a daily, weekly, monthly or seasonal basis. Then, organizations can use this information to further optimize shift scheduling. 

Let’s walk through a few examples. While Lightning Bolt’s prescriptive analytics can address more obvious issues, like the number of clinicians on staff being above or under the projected demand for that shift, our system also digs a bit deeper to further optimize shift scheduling. For example, Lightning Bolt takes into consideration that not all clinicians are alike. Different providers vary in their ability to tackle different types of appointments. Some providers work more than others or are more productive given different shift schedules. Lightning Bolt uses this data to build a schedule tailored uniquely to your clinical staff and patient demand.

With rules that consider clinician productivity, specializations, and countless other factors, hospitals and health systems can tackle rising labor costs at the root of the problem. By analyzing the gap between patient demand and clinician supply, Lightning Bolt helps cut waste, avoid patient leakage and increase patient access. 

Retaining skilled clinical staff decreases labor costs

Another key strategy for curbing rising labor costs? Retaining valuable clinical staff. More and more organizations are coming to terms with the financial implications of physician burnout. A recent Stanford Medicine study estimated that turnover could cost their organization $15.5 million to $55.5 million over two years as the physician shortage drives up the cost of recruiting new providers. It’s the reason why the Healthcare Financial Management Association cites retention as a key strategy to control labor costs.

It’s well-documented that a lack of work-life balance is a leading cause of turnover. A 2019 survey shows that burnout and scheduling are two of the top contributors to career dissatisfaction among hospitalists. This is likely the case across medical specialties.

Still, many organizations fail to address the root of the burnout epidemic. Namely, inequitable, unsustainable scheduling practices and a system that rewards physicians who overwork themselves. As Dr. Dianne Ansari-Winn writes in a recent article, many organizations have begun the work of forming advisory boards, offering yoga, meditation, and other resources, but fail to tackle burnout as a systemic problem. 

Combating burnout by giving providers equitable schedules should be a focus for hospitals and health systems looking to reduce costly turnover. Poor scheduling practices leave providers working inequitable shifts and lacking transparency and control over their practice schedule. Inevitably, this causes a decrease in provider satisfaction and increases burnout, leading to the turnover of key clinical staff.

Lightning Bolt delivers AI-optimized scheduling that curbs the growing physician burnout crisis by scheduling physicians fairly and providing them more control over their schedule. At the same time, Lightning Bolt also ensures that patient demand and business objectives are met, so providing clinical staff with fair scheduling doesn’t come at the cost of patient access and productivity.

Ready to tackle your rising hospital labor costs?

See the powerful results Lightning Bolt can provide your organization. Request a demo from one of our scheduling experts today. We can’t wait to learn more about your organization’s unique scheduling needs and operational goals. 

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