Optimizing Labor: Accounting For The Whole Picture

Labor shortages require a reevaluation of what people are available, why they work, and how they can be better deployed – paradoxically, the path to savings is paved with investments and flexibility rather than cuts and rigidity.

The data is excruciatingly clear: the already-troubling healthcare labor shortage was greatly exacerbated by the pandemic in a vicious cycle that’s been nearly impossible to break, especially on the frontline. Someone inevitably gets burnt out, and either goes on leave or seeks employment elsewhere; the patients don’t disappear, so the remaining staff must work overtime to cover their gaps, leading to the same burnout that put the Provider in that position to begin with. Travelers offer some relief, but subsequently worsen a balance sheet already plagued by high rates of premium work.

“It feels like a maelstrom,” explains Ian Cook, Vice President of People Analytics with Visier, a global leader in workforce analytics software. “The folks I’m talking to in the healthcare space who’re focused on the people side of it relay that the level of chaos, and the range of demands, are almost unimaginable.”

Making matters worse, Cook’s work has illuminated several other trends in addition to burnout-driven exits that will challenge healthcare leaders to reassess how they recruit, manage, and retain their people. On one end of the spectrum, older adults who may have been extending their career on a part-time basis to gain some sense of daily fulfillment have largely self-selected out of the pool. On the other, young soon-to-be professionals finishing their coursework are seeing a healthcare industry that looks radically different from when they started, prompting interest in alternative career paths that carry less risk and significantly less stress. In Cook’s assessment, the data doesn’t paint a favorable picture, as there is no up-and coming wave of qualified, ready-to-work talent just around the corner to bail out the industry. However, as history has shown us time and time again, out of adversity comes innovation.

Assessing the holistic cost of labor disruptions “The first piece of guidance is to take a pause, and a breath, and try to understand where you can make a difference. Rather than simply reacting to the fires,” Cook argues that Providers calmly take a “classic triage” approach to identify which departments and roles are under the greatest pressure. Uniquely though, he recommends delving into the data and more holistically contextualizing the true financial costs of labor instability. It’s one thing to identify if there are enough nurses, or what the average tenure is, and another entirely to calculate the operational and quality costs of a vacancy – what are the financial opportunity costs of care undelivered, as well as the costs of lackluster care from burnt-out teams that cannot meet their quality metrics?

“We’ve often had the conversation in planning scenarios where Finance goes, ‘This position is going to be empty for three months! Fantastic! I’ve got three months of savings I can put on my budget which brings my cost header down’.” But as Cook explains, Operations instead sees an output that isn’t happening that therefore can’t be billed. “It’s not about saying my picture’s right and your picture is wrong. Let’s not look at them as independent, or opposite to each other, but as a complete financial mechanism that drives the business.”

Visier has assessed clients’ absence, overtime, staff inexperience, and burnout data in conjunction with care misuse metrics to identify the connections between them, and while every institution is unique, the trend would indicate there is a clear link. Short staffing and overtime overreliance not only impact labor spend, but harm care quality in a way that hurts volume and efficiency. As a result, one of the first orders of business after quantifying the gaps is to tackle these realities head-on.

Cook recommends meeting healthcare staff where they’re at, redesigning care delivery and labor deployment to achieve better outcomes, resilience, and cost efficiency. Advances in technology, the introduction of automation, and reconfigured staffing ratios can all help, but from a labor perspective, it’s about reevaluating working conditions. “Shifts have been designed […] to serve care delivery, as opposed to the employee,” but as Cook has uncovered, this has inadvertently had the opposite effect given the way today’s demands drive quality-eroding disengagement, burnout, and care team vacancies. Listening to the populations that are choosing to step away from work can uncover what it is about how teams are expected to work that makes it unpalatable. “It’s not that you have to do [everything] they ask, but you should at least understand. Because if you can make a change,” Cook explains, “you can orient pieces of work” in a way that more accurately reflects the bandwidth they have to give.

“Why is it [a binary] eight-hour shift or you’re not showing up? It’s more complex, but could you take that eight hours and cut it into two four shifts?” This embrace of nontraditional schedules and gig-style employment is being used across several other sectors as a means of capturing employees that are eager to work, but on their own terms. Finding unique ways to apply it to care delivery could allow Providers to better compete against some of their biggest external attrition sources – chiefly, traveler agencies that couch their employee value proposition in a promise of flexibility. “It leads to more complexity, which makes the floor management more difficult” since you may have more employees scheduled to account for the same number of hours, but Cook argues it could be a meaningful avenue for achieving full coverage while simultaneously destressing and improving the employee experience.

Fundamentally, labor optimization begins with a reevaluation of the risk-reward dynamic for both the Provider and the employee. Take, for example, the many caregivers that took some time away and are now cautiously reevaluating whether or not to jump back into healthcare. Pervasive fears underlie their hesitation – why reengage with the same, hectic, overworked conditions that forced them out of their passion in the first place? “If you can reshape that experience for them in a way that removes some of those more painful elements,” Cook says, “you’re likely to bring a portion of those people back. There is a skilled, ready, and able population who are choosing not to participate because work doesn’t work for them.”

Caring for the caregivers

It’s here that the lines between labor optimization, organizational culture, and human capital management begin to blur, and rightfully so given that people and their wellbeing are core to healthcare organizations on both sides of the equation. It’s for that reason that Michelle Sanchez-Bickley, Chief Human Resources Officer of the not-for-profit, integrated healthcare network Renown Health, was well-positioned to tackle these growing challenges.

Renown is, no pun intended, renowned for their commitment to employee and community wellbeing. They are locally owned and governed, serve a 17-county region in northern Nevada and northeastern California, and operate by reinvesting earnings back into the people, programs, and equipment needed to advance the health of the community. They’ve cultivated an employee-centric culture that permeates their daily workflows, so rather than try to reinvent themselves in the face of this labor crisis, Sanchez-Bickley’ strategic recommendation was to stay true to themselves, continue to live their core values, and strive to be a compassionate force in employees’ lives. It’s a labor management twist on the Field of Dreams strategy: focus on building a purposeful, employee-centric place to work, and staff will not only come, but begin to put down roots.

A subtle, yet powerful branding shift turned the negative and toxically self-fulfilling “Great Resignation” slogan into the “Great Reengagement” battle cry. Leaders have been briefed on how hybrid schedules can help change the tactics of employee engagement, while preserving the fundamentals. Likewise, leaders have learned how to make time in their hectic schedules to develop, refine, and build the skills of their direct reports to both maximize performance, and provide the career progression that so often underpins one’s decision to stay. Both clinical and administrative leaders alike have been reminded and encouraged at every turn to lead with the same empathy and grace that got them named “Best Hospital in Nevada” by U.S. News & World Report for 2020 and 2021.

Renown is further strengthening the programs and resources designed to support employees, introducing a behavioral health telemedicine program to expand access for staff members and their families; a program to counter financial stress by rebuilding credit, improving financial literacy, and providing loan refinancing assistance; and even a lifestyle coaching program that helps employees reach their own health and wellness goals. And to Cook’s points about labor flexibility, they’re even working on ways to support gig-style shift selection. Employees needing to balance work with their many other obligations would gain unprecedented flexibility in an industry that’s been historically dominated by rigorous schedules, and in return, Renown leaders would gain employee satisfaction and an adaptable labor pool that could travel or flex onto openings without the high costs of overtime or temp workers. Although offering more choice may lead to an additional investment in hourly earnings, the program could lead to better financial security for both the employee and the organization as premium labor and burnout-related costs decrease – and employee engagement increases – proportionately.

Out with the old, in with the risks

For some of Cook’s clients, that more targeted and strategic spend of investing in the employee experience is more valuable than increasing wages. He recounts how one’s evaluation of retention and employment data directly challenged the historical notion that bigger paychecks resulted in higher loyalty. They broke out their labor pool by job category, and evaluated their historical resignation data as segmented by compa-ratio (which compares an individual’s salary to the midpoint of a given salary range) and how that did or didn’t shift with pay adjustments. Interestingly enough, “for every 99 jobs they had, there was [just] one job that was susceptible to changes in pay.” Unsurprisingly, it was their sole hourly rate category where they saw a statistically meaningful difference. For positions where living paycheck-to-paycheck is the norm, competing on compensation is one of the few ways to entice the nonclinical talent too often being lured away by corporate giants like Amazon.

Mileage will vary, but there’s a strong argument to be made that it’s increases that can help Providers best control their costs – paying some roles more; introducing new technology to help manage more flexible staffing; having more people than before cover the same blocks of time; and making greater investments in employee support infrastructures. It all revolves around a more holistic understanding of how costs and revenue are generated within healthcare, and strategically pulling those levers to account for one’s unique market conditions.

“I personally wanted to be in the room when he had the conversation with the CFO,” jokes Cook, “because it’s not a typical frame that people have. ‘So, I increase my labor budget, but overall, I’m better off? But that’s a bigger number in my budget line items. Where does the cost savings show up?’ And it shows up in other places.”

“In the past, you didn’t need to take risks, because you were able to get the right service delivery with the people you had. But that equation has shifted, because you’re now putting care delivery at risk when you can’t get people. I think we’re learning our way into how work will be mediated between employees and [Providers], and I think the opportunity is really ripe for doing things differently.”