Healthcare costs continue to rise despite discussions and strategies employed towards cost containment. The major drivers of high healthcare costs have been cited as the prices of labor , pharmaceuticals and administrative costs ("Prices of Labor, Prices of Pharmaceuticals, and Administrative Costs are The Key Drivers of High US. Healthcare Spending", 2018.
Labor costs account for 50-60% of a hospital’s expense budget and nurses make up the largest group of healthcare workers . Hospitals need to hire more staff due to the increasing demand for quality patient care, competition, an aging population and the increasing incidence of complications of chronic diseases.
Key Drivers of Labor Costs in Hospitals
Tightening labor markets coupled with the shortage of skilled labor has contributed to the demands for higher wages resulting in higher overall labor costs. This situation is exacerbated by the increasing numbers of acutely ill patients who require care at higher levels with lower nurse- patient ratios. Measuring and evaluating the productivity of healthcare workers especially nursing time has been a challenge and a source of discontent for nurses leading to improper staffing levels, increased work stress, burnout and turnover. High turnover rates are an increasing problem, and important cost driver in a tight labor market (Hunt, 2016). When workers leave, it creates a void, increased stress on the remaining workers and increased expenses for the organization due to recruitment and onboarding processes.
Solutions to Labor Challenges
Current industry solution to challenges associated with labor supply, productivity and turnover should be geared towards stimulating recruitment for training in healthcare, balancing productivity, improving working conditions and employing appropriate employee retention strategies. Healthcare organizations need to demonstrate a higher level of support for the recruitment and training by endorsing new graduate internships, providing clear paths for career advancement, recognizing trends and adjusting staffing appropriately to balance the demands of staff shortage and patient acuity, recognizing and rewarding worthy employees and improving working conditions to reduce turnover. Building labor controls into staff evaluations and creating centralized staffing pools are effective strategies.
Future Changes
The healthcare industry is characterized by increasing costs and demands for the provision of quality care. Addressing the current and emerging challenges associated with labor supply, productivity and turnover requires a thorough understanding of the multifaceted causes in order to develop appropriate strategies for solution.
Though the use of effective technology, data collection and evaluation of the strategies employed in the healthcare industry over the past decade would be a good starting point to gain valuable insights into what has worked and what has failed. At the policy level, collaboration of healthcare organizations with educational institutions could potentially bring the benefit of a constant flow of graduates to fill positions in hospitals.
Adopting standard benchmarks to measure productivity such as care hours per patient day (CHPPD) should become the principal measure of how hospitals use nurses and healthcare assistants. According to Hunt (2016), to ensure optimum use of staff resources, such as nursing, benchmarks and indicators should be standardized so that the same metrics are produced across all hospitals. Also standardizing recognition programs, addressing job satisfaction issues and implementing flexibility to boost work life balance are important strategies to stem employee turnover.
References
Becker's Hospital Review. (2010). Ways to Cut Labor Costs in Your Hospital . Retrieved from 8 Ways to Cut Labor Costs in Your Hospital: Labor costs are one of the largest expenses for most hospitals, so tight management of staffing is essential to maintaining financial health. Dennis Patterson, chairman of The Collaborative for Healthcare Leadership, discusses eight ways hospital CEOs can cut labor costs and staff appropriately.
Hadley J, Mullner R, Feder J. (1982).The financially distressed hospital. N Engl J Med 1982;307:1283 -7.
Himmelstein, D. U., M.D., & Woolhandler, Steffie,M.D., M.P.H. (1986). Cost without benefit. The New England Journal of Medicine, 314(7), 441-445. doi:http://dx.doi.org/10.1056/NEJM198602133140710
Houngbo, P. T., Coleman, H. L. S., Zweekhorst, M., De Cock Buning, T., Medenou, D., & Bunders, J. F. G. (2017). A Model for Good Governance of Healthcare Technology Management in the Public Sector: Learning from Evidence-Informed Policy Development and Implementation in Benin. Plos One, 12(1), e0168842. A Model for Good Governance of Healthcare Technology Management in the Public Sector: Learning from Evidence-Informed Policy Development and Implementation in Benin
Hunt J (2016). How should nursing productivity be measured? Nursing Times; 112, 39/40: 18-20.
Moore, L. (2019). The Cost of the Healthcare Workforce. Retrieved from 3 Drivers of Labor Costs in Hospitals
Minich-Pourshadi, K. (2010). Taking on the Cost Drivers. Retrieved from Taking On the Cost Drivers - www.hcpro.com
Prices of labor, prices of pharmaceuticals, and administrative costs are the key drivers of high U.S. healthcare spending(2018). Retrieved from https://www.hsph.harvard.edu/news/p...aceuticals-administrative-costs-health-costs/
Willard-Grace, R., Knox, M., Huang, B., Hammer, H., Kivlahan, C., & Grumbach, K. (2019). Burnout and Health Care Workforce Turnover. Annals of Family Medicine, 17(1), 36–41. Burnout and Health Care Workforce Turnover
Posted by Claudette Saint, February 2, 2020. Final year MSN student,University of Phoenix.
Labor costs account for 50-60% of a hospital’s expense budget and nurses make up the largest group of healthcare workers . Hospitals need to hire more staff due to the increasing demand for quality patient care, competition, an aging population and the increasing incidence of complications of chronic diseases.
Key Drivers of Labor Costs in Hospitals
Tightening labor markets coupled with the shortage of skilled labor has contributed to the demands for higher wages resulting in higher overall labor costs. This situation is exacerbated by the increasing numbers of acutely ill patients who require care at higher levels with lower nurse- patient ratios. Measuring and evaluating the productivity of healthcare workers especially nursing time has been a challenge and a source of discontent for nurses leading to improper staffing levels, increased work stress, burnout and turnover. High turnover rates are an increasing problem, and important cost driver in a tight labor market (Hunt, 2016). When workers leave, it creates a void, increased stress on the remaining workers and increased expenses for the organization due to recruitment and onboarding processes.
Solutions to Labor Challenges
Current industry solution to challenges associated with labor supply, productivity and turnover should be geared towards stimulating recruitment for training in healthcare, balancing productivity, improving working conditions and employing appropriate employee retention strategies. Healthcare organizations need to demonstrate a higher level of support for the recruitment and training by endorsing new graduate internships, providing clear paths for career advancement, recognizing trends and adjusting staffing appropriately to balance the demands of staff shortage and patient acuity, recognizing and rewarding worthy employees and improving working conditions to reduce turnover. Building labor controls into staff evaluations and creating centralized staffing pools are effective strategies.
Future Changes
The healthcare industry is characterized by increasing costs and demands for the provision of quality care. Addressing the current and emerging challenges associated with labor supply, productivity and turnover requires a thorough understanding of the multifaceted causes in order to develop appropriate strategies for solution.
Though the use of effective technology, data collection and evaluation of the strategies employed in the healthcare industry over the past decade would be a good starting point to gain valuable insights into what has worked and what has failed. At the policy level, collaboration of healthcare organizations with educational institutions could potentially bring the benefit of a constant flow of graduates to fill positions in hospitals.
Adopting standard benchmarks to measure productivity such as care hours per patient day (CHPPD) should become the principal measure of how hospitals use nurses and healthcare assistants. According to Hunt (2016), to ensure optimum use of staff resources, such as nursing, benchmarks and indicators should be standardized so that the same metrics are produced across all hospitals. Also standardizing recognition programs, addressing job satisfaction issues and implementing flexibility to boost work life balance are important strategies to stem employee turnover.
References
Becker's Hospital Review. (2010). Ways to Cut Labor Costs in Your Hospital . Retrieved from 8 Ways to Cut Labor Costs in Your Hospital: Labor costs are one of the largest expenses for most hospitals, so tight management of staffing is essential to maintaining financial health. Dennis Patterson, chairman of The Collaborative for Healthcare Leadership, discusses eight ways hospital CEOs can cut labor costs and staff appropriately.
Hadley J, Mullner R, Feder J. (1982).The financially distressed hospital. N Engl J Med 1982;307:1283 -7.
Himmelstein, D. U., M.D., & Woolhandler, Steffie,M.D., M.P.H. (1986). Cost without benefit. The New England Journal of Medicine, 314(7), 441-445. doi:http://dx.doi.org/10.1056/NEJM198602133140710
Houngbo, P. T., Coleman, H. L. S., Zweekhorst, M., De Cock Buning, T., Medenou, D., & Bunders, J. F. G. (2017). A Model for Good Governance of Healthcare Technology Management in the Public Sector: Learning from Evidence-Informed Policy Development and Implementation in Benin. Plos One, 12(1), e0168842. A Model for Good Governance of Healthcare Technology Management in the Public Sector: Learning from Evidence-Informed Policy Development and Implementation in Benin
Hunt J (2016). How should nursing productivity be measured? Nursing Times; 112, 39/40: 18-20.
Moore, L. (2019). The Cost of the Healthcare Workforce. Retrieved from 3 Drivers of Labor Costs in Hospitals
Minich-Pourshadi, K. (2010). Taking on the Cost Drivers. Retrieved from Taking On the Cost Drivers - www.hcpro.com
Prices of labor, prices of pharmaceuticals, and administrative costs are the key drivers of high U.S. healthcare spending(2018). Retrieved from https://www.hsph.harvard.edu/news/p...aceuticals-administrative-costs-health-costs/
Willard-Grace, R., Knox, M., Huang, B., Hammer, H., Kivlahan, C., & Grumbach, K. (2019). Burnout and Health Care Workforce Turnover. Annals of Family Medicine, 17(1), 36–41. Burnout and Health Care Workforce Turnover
Posted by Claudette Saint, February 2, 2020. Final year MSN student,University of Phoenix.