Brady & Associates

Why Benchmark Department Productivity?

2007-05-09T13:00:00.000-07:00

Department productivity benchmarking is one of the most powerful and versatile tools available to progressive hospital management teams. Here are just a few of its uses.

As a Cost Management Tool: Labor costs remain the largest single component of any hospital's expense budget. Managing labor costs is important for both financial and moral stewardship reasons. Department productivity benchmarking is an important first step in identifying and resolving excessive labor costs.
As an Overall Performance Screening Tool: Staffing variances are a marker for potential performance issues that go far beyond excessive labor costs. Departments frequently "staff up" to overcome operating problems caused by everything from organizational cultural issues and resource inadequacies to work process factors. Departments that consume an abnormal amount of labor resources because of these factors are more often than not also struggling with quality, physician and patient satisfaction, employee relations and community image issues. Done correctly, department productivity benchmarking will help identify those departments in the most need of management action.
As a Management Data Set Validation Method: More than sixty percent of U.S. hospitals are managing with inadequate or inaccurate management information. A systematic review of data, performed during the course of the benchmarking process, will identify errors in the management data set leading to better decisions.
As a Change Management Resource: Is your team in the process of building a new organizational culture to meet today's challenges? Productivity benchmarking serves as an essential component of any serious management initiative to transform the classic hospital culture. Hospitals that routinely and systematically benchmark department productivity are communicating powerful performance expectations with action as well as words.

Modern technology has placed annual department productivity benchmarking within the easy reach of every hospital management team. IMPACT's process is painless, unobtrusive, employee friendly, and very cost effective with results available within seconds of data input. Executive-level users and decision support staff can directly interact with and operate the system, enabling powerful "what if" modeling tools that are very useful during the budgeting cycle.

Major changes take place in the hospital almost every day. How current are your department productivity benchmarks

Managing the Labor Budget

2007-05-08T13:04:00.000-07:00

Free Software Download: Staffing_Check.xls immediately shows the labor budget impact of any department or nursing unit employee work schedule. This powerful free resource will help hospital managers meet their labor budget challenges. Right-click here to download Staffing_Check.xls and then save it to a local directory on your hard drive. Please feel free to share this page with other hospital executives and managers.

Staffing_Check.xls was designed to help managers overcome the common disconnect between the employee work scheduling process and labor budget management. Department employee scheduling processes that are driven by staff-to-patient ratios or static staffing templates typically do not reveal the labor budget consequences of a proposed work schedule. By using Staffing_Check.xls, the manager can immediately determine in advance the impact a proposed employee work schedule will have on labor budget target performance. The manager can even play "what if" games, comparing the potential budget impact at different levels of anticipated workload.

After downloading the file, open it and go to the "Staffing Check" worksheet (the 2nd tab on the Staffing_Check.xls workbook). Examine its layout. A few simple set-up steps are necessary before use.

Determine your department's budgeted paid hours per unit of service. If you don't know this value, either ask financial services or calculate it as follows:

First, identify the unit of service indicator used for your department during the budgeting process. This will typically be something like "patient days" for inpatient nursing units, "visits" for Emergency Departments, "billed tests" for Laboratory, "examinations" for Radiology, "meal equivalents served" for Dietary, "laundry pounds" for Laundry, "gross square feet serviced" for Maintenance/Engineering and "net square feet serviced for Housekeeping, etc.
Certain administrative and support service departments such as health Information Management, Materials Management, Patient Accounting, Nursing Administration and Information Systems will use "adjusted discharge units" or "adjusted patient days" as surrogate unit of service indicators. The formulas for adjusted discharge units and adjusted patient days are:

Total Acute Patient Revenue/(Acute Inpatient Revenue/Acute Inpatient Discharges) = Adjusted Discharge Units.
Total Acute Patient Revenue/(Acute Inpatient Revenue/Acute Patient Days) = Adjusted Patient Days.
Second, determine how many units of service were estimated for your department in creating the budget. You will probably have to obtain this number from Finance if yours is an adjusted discharge unit or adjusted patient day-type administrative or support service department.
Third, identify the number of paid hours authorized in your labor budget. If you cannot determine this but know the number of FTEs, multiply the number of FTEs by the number of hours one FTE will work as used in the labor budget development process. Depending upon your hospital, this number will most likely be either 2,080 hours or 2,085.71 (That is, (365/7) x 40 = 2,085.71.
Fourth, divide the total budgeted units of service by the number of labor budget paid hours to calculate your department's budgeted paid hours per unit of service. Enter this value in cell "B3" of the Staffing_Check.xls worksheet and save the file.

Determine the historic percentage relationship between productive hours (worked hours) and paid hours for your department. In U.S. acute care hospital departments, this value will typically range between 87% and 91% depending upon such things as the structure of the benefit program and the average tenure of department employees. If you cannot readily determine the historic value, use 89% as an estimate. Multiply the number of paid hours authorized in your labor budget (see above) by the historic value or .89. Enter the resulting value in cell "B4" of the Staffing_Check.xls worksheet and save the file.

You are now ready to begin using Staffing_Check.xls.

Estimate the number of units of service (patient days, visits, billed tests, examinations, adjusted discharge units, etc.) you expect the department to experience during the period covered by the work schedule.
Now divide that estimate by the number of calendar days in the work schedule period to obtain the "Average Units of Service Per Day." Enter the result of this calculation in cell "B2" of Staffing_Check.xls" and save the file.
Now fill out your schedule as shown in the instructions beginning in cell "B8" and going across the page to cell "D8". You will notice that all other values Columns "E" through "G" will be automatically generated.
After completing the information required on Line 8, repeat the process from Line 9 through the number of lines required to list all positions scheduled to work during the period.

Result:

Examine the table displayed in cells "A30" through "B34" to determine the labor budget impact of your schedule. If the number appearing in cell "B32" is greater than the number appearing in cell "B31", your schedule is over budget. The size of the variance for the schedule period is shown in paid hours per unit of service in cell "B33" Importantly, the annual impact of maintaining a variance of that size in terms of paid FTEs is shown in cell "B34."

If you are over budget, first examine your unit of service estimate. If it appears to be realistic (and it is best to error on the conservative side), experiment by changing your schedule until you arrive at a satisfactory result. Note that the further into the year you go over budget, the more difficult it becomes to get back on track.

FJB

Improving Your Bottom Line!!!

2007-04-18T09:50:00.000-07:00

Many hospitals with long history of financial success are going through unprecedented tough times as a result of reimbursement changes, general economic factors, and changes brought about by advances in technology, medicine and pharmaceuticals. If you have responsibility for financial results, here is a quick action step check list of specific things you can do to optimize the hospital's position.

Revenue Management

Is the Charge Master up to date?
Is coding being done correctly? An amazing number of hospitals leave money on the table because of coding errors and omissions resulting in under billing for medically-necessary services that were appropriately provided.
Does your medical staff provide sufficient medical record documentation so that coding and billing can generate all revenue that the hospital is due for care provided?Is the medical staff knowledgeable and supportive about compliance issues?

Expense Management

How do staffing levels in your hospital compare to the competition? Have you benchmarked department staffing recently? Practices change and so do department activity volumes.
Does each hospital department have and use workload-based department productivity standards, department staffing templates and the monitoring mechanisms in place to support their effective use?
Is department activity data being reported accurately? More than 70% of U.S. acute care hospitals are attempting to manage with data that contain significant errors and omissions.
Are your departments' staff scheduling methods designed to produce budget results? Do department staff scheduling methods provide real-time feedback to managers on the budget impact of staff scheduling decisions?
Is your work force designed to support activity-based staffing? Does each department employ an appropriate mix of full-time core staff and part-time staff based on analysis of workload patterns?
Does Materials Management use established economic order quantities and reorder points? Does it track and record inventory turns?
Does the hospital employ a system of utilization benchmarking? For example, the pharmacy may be operating efficiently in terms of the number of unit doses dispensed per paid hour but if your physicians are over-prescribing drugs the net effect is negative, not only in terms of unnecessary labor and drug expense but potentially in terms of quality. Similarly, your laundry may be operating very efficiently in terms of laundry pounds per paid hour but how does the number of laundry pounds generated per patient day compare against other hospitals?

When you can respond positively to each check list item, you will have made a tremendous positive impact on the hospital's bottom line.

Where is the fire?

2007-04-16T11:04:00.000-07:00

Here's a quick management quiz for department heads and managers.

Are you one of those managers that really enjoys fighting fires?

Do you get a secret adrenalin rush when a crisis emerges and you have to "drop everything" to solve it (because you're the only one who can)?

Do the same crises keep recurring?

Are there just never enough hours in the day?

Is your "to-do" list so long that it's becoming an embarrassment?

If you answered "yes" to these questions, you may not be adequately performing the management cycle's planning and organizing functions. Not to overdo the fire analogy, but if you are a manager who loves crises, failure to plan is the management equivalent of arson. That is, you are CREATING tomorrow's fires.

In the first place, well-managed departments don't have that many fires to put out. They're characterized by well-trained people performing their jobs by way of standard processes. If the same problems crop up again and again, you need to investigate to find the root cause of the problem.

Stand back and take a look at how your spending your time. If you've performed the management cycle's planning function, you developed goals and objectives, for your department and for you personally. These goals and objectives are theoretically among the most important things in your world of work.

Now, how much of your day is routinely spent performing functions that advance you toward your goals and objectives? If the answer is "not much," what does it say if you don't spend most of your time on things that will help achieve your goals? A few hours spent fixing root causes can free up hundreds of "fire fighting" hours for more productive activity.

Keys to Productivity Management!

2007-04-13T08:59:00.000-07:00

Human productivity is defined by the ratio of labor hours to units of output. Here are a few keys to effective productivity management.

Eliminate unnecessary calls on labor that consume time but do not increase output.

Optimize the effectiveness of people's time through the application of good technology.

Schedule as much of the department's work as possible. Then match the availability of resources--including human resources--to that scheduled work through employee work schedule design and routine assignments.

Some department work is time-critical (that is, somethings must be done at a certain time). Other department work is not. Inventory the department's tasks and sort them into "time-critical" and "not time-critical" task groups. In departments with multiple shifts, adjustments can sometimes be made to the timing of work that greatly benefit productivity. If there is a concentration of "not time critical" tasks on the day shift, consider the practicality of shifting at least a portion of those tasks to evenings or nights. This can have a profound positive impact, depending upon circumstances.

Evaluate the seasonal, day-of-week and hour-of-day patterns in work flow and corresponding labor demand. Develop a work force of full-time and part-time staff to match those patterns to facilitate optimum staffing.

Measure and manage the relationship between total paid hours and productive (worked) hours. In the typical U.S. acute care hospital department, productive hours generally range from 87% to 91% of total paid hours. What is the relationship in your department?

Make judicious use of overtime. In departments where workload volumes are very volatile, overtime can be a better answer than "staffing up."

Establish attainable productivity goals and integrate them into the labor budget. Routinely measure performance against those goals. Periodically check department productivity goals against external benchmarks to assure "reasonableness" and continued competitiveness.

Connect department labor scheduling methods and practices to labor budget goals. Develop tools to prospectively measure the impact of staffing at expected unit of service volumes on the attainment of budgetary targets.

Develop a culture that values human productivity. Reinforce the idea of stewardship by emphasizing that unnecessary labor costs place a financial burden on patients, third parties, and the community at large.

Assuring optimum productivity should be an integral part of the management process, not a task that should be pursued periodically on a project basis. How does your hospital treat productivity management?

The Incredible Power of Benchmarks!

2007-04-09T11:02:00.000-07:00

Benchmarks are among the most powerful tools available to hospital management teams. Their power as a cost management tool is only the beginning. Here’s how to make maximum use of benchmarks.

It goes without saying that hospitals benchmark labor productivity to maintain financial viability and competitiveness.

The best benchmarking programs answer the question, “What is the range of staffing in departments like ours with the same basic workload?” Today’s ratio of labor cost to net revenue typically lies between 40% and 60%. The hospital’s margin literally depends upon this ratio. For hospitals with labor costs above the observed median (50.2% of net revenue), obtaining department-level productivity benchmarks is the critical first step in identifying cost reduction opportunities.

Perhaps less obviously, an identified labor productivity variance opens the door to improvement opportunities that go far beyond potential labor cost savings in a single department. Labor productivity variances are markers for performance limiting factors that impact everything from quality to physician satisfaction and employee relations. Productivity variances that appear in a single department are often caused by factors outside the department and they can have a significant unrecognized organization-wide impact. Here are some real world examples.

Benchmarking identified a significant labor productivity variance in the Environmental Services (Housekeeping) department. Upon investigation, it was determined that the medical staff’s failure to observe a standard discharge time (and the hospital’s failure to enforce it) was making it impossible for Housekeeping to complete terminal cleaning of patient rooms upon discharge, resulting in excessive scheduling of housekeeping staff. In addition, this practice caused the Emergency Department to hold patients in the ER for unacceptably long periods because of bed availability.

Benchmarking identified a significant labor productivity variance in the Laboratory. It was found that both Laboratory and the Nursing staff spent an excessive amount of time on the telephone talking with each other. The cause? New nurses were not receiving training on the order entry and results reporting systems. Consequently, orders were being entered by unit secretaries who lacked the necessary clinical understanding to order tests correctly. This practice also generated many unnecessary telephone calls for results that were readily available in the system, one key stroke away.

Systematically identifying and resolving those factors resulted in significant cost reductions and simultaneously produced dramatic performance improvements.
Hospitals use the benchmarking process to validate their management data set. A significant percentage of hospitals are managing with data that contains errors, some of which are material. A quality benchmarking program expects to see certain relationships among data and flags data that don’t pass those screens.

Hospitals use benchmarking to plan new services and new facilities; to help evaluate acquisitions and consolidations; to make mid-course corrections when budget projections don’t pan out; and for various modeling processes (“what if” games).

How often should the hospital obtain new benchmarks? The healthcare environment is defined by change. Technology, medical innovation, regulatory requirements and management practices can combine to produce dramatic changes in staffing patterns that affect hospitals generally. It is important to stay abreast of current practices. Overall, benchmarks should be checked annually.

The relationship between workload and the number of staff required to perform the work is not linear. Increases and decreases in department workload can render last year’s benchmarks irrelevant. As a general proposition, hospitals should also benchmark department-level productivity whenever a significant change in workload is observed.

Avoid Benchmarking's Bear Traps!

2007-04-03T10:28:00.000-07:00

On our website you'll find a discussion of online "real time" benchmarking. IMPACT!demonstrates just how far benchmarking has come from the "good old days" of Monitrend. (Editor's note: If you don't remember Monitrend, the author believes you are far too young to hold a responsible healthcare management position). Although that ancient and noble first effort at benchmarking sometimes gets a bad rap today, it really deserves a tip of the hat. Monitrend was the first serious effort to provide the field with benchmarking data using computer technology.

In any case, the occasion of IMPACT's introduction provides a perfect excuse to revisit benchmarking's basic foundations and review its successes (and occasional miscues) as a management tool.

What is a benchmark?

The beginning is always a good place to start any endeavor, so let us first address the most fundamental of all benchmarking questions which is, "What is a benchmark?"

According to The American Heritage Dictionary of the English Language (© 2000 Houghton Mifflin Company), a benchmark is "a standard by which something can be measured or judged." In the case of most hospital benchmarking efforts, that standard is derived by observing the performance of other hospitals in whichever area is under study.

The distinction between a "benchmark" and a "management goal" is an important one. A benchmark comes from outside the organization. In the case of labor productivity benchmarking, for example, the benchmark is based upon the reported staffing performance of other hospitals. A management goal, on the other hand, is established by the hospital.

What can benchmarking tell us?

Some management teams have misunderstood the question that benchmarking can answer. That question is not, "How should Department "X" at my hospital be staffed?" It is obvious upon reflection that a staffing benchmark generated by an aggregation of departments in other hospitals can't say much about how a department in your hospital should be staffed. In fact, assuming peer groups are selected appropriately, the only question that benchmarking can answer is, "What is the range of observed staffing in reasonably similar departments in reasonably similar hospitals?" The implications for management action that arise from the differences between these two questions are profound.

Department "X" in any hospital is a system. It is axiomatic that any system performs exactly in the way it is built to perform. It cannot be otherwise. How the system you call Department "X" in your hospital should be staffed is a function of hundreds of interconnected elements. Now it may well be the case that there are "broken" elements within Department "X" that prevent optimum performance. However, if Department "X" is operating with a broken element, that broken element is as much a part of how Department "X" is built at the moment as is any other element.

Benchmarking is a powerful management tool that has helped many hospitals achieve significant cost reductions (millions of dollars annually in some cases) while facilitating improvements in quality, physician and patient satisfaction, employee relations and community image. As with any powerful resource, its misuse can bring devastating consequences.

One of the most common serious mistakes that hospitals make is to impose benchmark-based department productivity standards without knowing whether the established standards will really allow work to be done at acceptable quality levels. When a department's performance varies significantly from valid benchmarking comparisons, it is imperative that the reasons for that variance be identified and resolved before a potentially crippling standard is imposed. Benchmarking is an indispensable, even vital, management resource but it is the beginning of an improvement process, not the end of one.

How often should benchmarks be updated?

That depends upon who is going to use the benchmarks and for what purposes.

At the department manager level, this question helps drive home the reason for the distinction made earlier between external benchmarks and department productivity standards which are internal management goals. Assuming reasonably stable department workloads, a systematic comparison of management's productivity standards against external benchmarks should be accomplished at regularly scheduled intervals, say twice a year or so. Conversely, if department workloads are volatile or trending sharply in one direction or another, the comparison should be done more frequently to assess whether management's productivity standards need to be changed. While it is true that observed staffing practices change over time because of new technology, increased medical knowledge, regulatory changes, and a host of other factors, bombarding department heads with constantly changing benchmarks may unintentionally discourage them from making good use of data and actually work against effective cost management.

Power users, on the other hand, require more frequent access to current information. For example, Decision Support staff need the most current data available when putting together "what if" scenarios for budgeting, acquisition and consolidation planning, and new service development. In a similar vein, because the relationship between workload and staffing requirements is not linear, Human Resource planners need to apply the most current activity-based benchmarks against historic utilization swings to develop core staffing plans that project the best possible mix of full-time and part-time staff given the range of anticipated workload.

FJB

Implementing Change

2007-03-30T07:25:00.000-07:00

The CEO was thoughtful. “In my experience,” he said, “the three greatest barriers to performance improvement are culture, culture and culture.” His observation was absolutely on target.

As would-be change agents have learned—often at great cost—organizational culture ultimately determines whether or not performance improvement initiatives will be successful. Culture defines the work environment. The hospital can design the most efficient possible work processes, acquire the very best management information systems, and employ state-of-the-art medical technology, but unless the culture is prepared for change, improvement efforts will fall short. Management teams that must reduce costs and improve performance are immediately confronted with a daunting challenge that they will ignore only at their peril: how does one go about changing the organization’s culture?

Understanding Change Management

It is axiomatic that constructive change cannot be imposed from the top. The Dannemiller-Tyson change formula elegantly explains why this is true and points the way to successful change implementation.

The Change Formula:

C = V x D >R

Where:
C = Change
V = A positive vision for the future
D = Dissatisfaction with the status quo, and
R = Natural human resistance to change

If you have ever put forward a great idea only to have it rejected or ignored by the very people whom it would most benefit, you will appreciate the change formula. The formula says that constructive change will occur in an organization only when a positive vision for the future multiplied by dissatisfaction with the status quo (the relationship is not linear) is greater than the natural human resistance to change.

The hospital’s culture is defined by the beliefs of its governing body, executives, managers, staff and physicians; the assumptions upon which those beliefs are based; and the behaviors that rest upon those assumptions. Human beings are creatures of habit. Because established routines help us order our lives we naturally resist threats to those routines. By definition, cultural change requires large-scale modification of routine-based behavior. It may require re-evaluation of long held and deeply cherished beliefs. No matter how great an idea is, if the people who would be affected by it are reasonably satisfied with the current situation, they will not voluntarily change their routines. Conversely, no matter how dissatisfied people are with things as they are, unless and until they believe that change will materially improve their circumstances, they will not change either, preferring less than ideal conditions over the unknown.

Positioning for Healthcares Next Era

2007-03-29T18:18:00.000-07:00

The ability to make and implement sound decisions quickly in a rapidly changing environment is critical to financial survival and mission success. The problem is that the traditional hospital organization and the culture it has fostered are utterly inadequate to deal with these emerging challenges and opportunities.

Clearly, health care providers must adapt by developing new structures and operating methods if they are to survive and prosper. What will tomorrow’s leading health care organizations look like?

Governance – Boards will possess unprecedented sophistication on issues affecting reimbursement, ethics, technology, law, regulation and management. Board orientation and continuing education will assume increasing importance.
Organizational Culture – The classic concentration on uncoordinated department agendas will be supplanted by a dynamic, synergistic hospital focus.
Management – Department managers will function less like chief technicians and more like entrepreneurs. They will possess the mindset and training to perform in a new era of high expectations.
Decision Support – Technology-savvy managers will routinely consume and act upon incredible quantities of financial and management information, including market intelligence and benchmarking data.
Planning – Hospitals will operate from and manage against integrated results-focused business plans with a one-year time horizon.

Making this organizational transition has become “job one” for progressive governance and executive management teams and many hospitals have made significant progress. However, ultimate success requires a significant continuing organizational development effort. Successful change will occur only when a positive vision for the future and dissatisfaction with the status quo combine to overcome the natural human resistance to change.

How ready for the future is your hospital?

Can You Really Flex Staffing?

2007-03-27T11:57:00.000-07:00

Many hospitals attempt to "flex" staffing; that is, department managers are encouraged to adjust employee work schedules to match workload. This often amounts to little more than cajoling employees to go home early during "low census" periods or when workload is light. The problem is that full-time employees expect to earn full-time pay, a reality that makes sending full-time people home a short-term tactic at best.

What is surprising is how few hospitals have explored the extent to which workforce structure ties department heads' hands and drives up labor costs. Here are steps that the hospital can take to facilitate real "flex" staffing that will reduce costs, optimize quality, and improve employee relations.

Analyze department workload patterns by time of year, day of week, and by shift. Compare current workload patterns against current employee work schedules by job class. If the structure of today's employee work schedule was determined long ago, do the assumptions upon which it was based still hold?
To what extent does the department schedule its work? Many departments either do not attempt to do so or employ dysfunctional scheduling systems. Yet a fairly significant portion of most departments' workload could be scheduled. That is, it is either not "time critical" or can be done at times that would allow the department to schedule it to optimize use of department staff time, vastly improving department productivitiy.

As a side note, evaluate routine day shift tasks (particularly clerical and other "paper work" tasks) that are not "time critical" to determine whether some or all of these could just as easily be done on other shifts, particularly shifts that may have a lot of "stand by" time. If there is no real operational reason not to do so, consider the effect on workload of redistributing some or all of these tasks to other shifts.

Start with the assumption that employees who are hired to work full-time deserve to work full-time. Based on your analysis of workload patterns, what is the optimum mix of full-time to part-time employees by job class on each shift? Let's call that optimum mix your "target staffing structure."

Now, how does your "target staffing structure" compare to the current staffing structure? Develop a plan to get from where you are to where you should be. Take into account the realities of the labor market but don't let labor market difficulties prevent you from developing a plan and working toward it.

Develop staffing matrices that project required staffing by job class to match observed workload patterns by time of year, day of week, and shift. Identify "trigger points" (changes in workload) that will prompt management action to consider sending part-time employees home or bringing part-time employees in. Remember that staffing matrices are a tool designed to augment, not over-ride, professional judgment.

Effective scheduling of work and staff can produce productivity gains in the range of twenty to twenty-five percent. This is an opportunity that should be aggressively pursued by every department manager.

About Us

2007-03-27T11:33:00.000-07:00

We provide decision support benchmarks and change management assistance to hospitals

More than 600 U.S. hospitals of all sizes, missions, and ownership types throughout the U.S. as well as major medical centers in Europe and the Middle East have relied upon Brady & Associates for decision support benchmarks and change management ssistance.

We are resources to the American Hospital Association (AHA) and to the Healthcare Financial Management Association (HFMA). We serve as consultants to consultants and have worked with The McKinsey Group, The Lewin Group, and other internationally-recognized firms.

FJB