Streamlined labor processes could save hospitals millions

A typical 200- to 300-bed community hospital can save millions of dollars by targeting staffing inefficiency, according to an analysis from Premier healthcare alliance.

For instance, cutting out unnecessary labor expenses, such as processes that require too many employees, could shave up to 5.1 percent off a hospital's total labor budget, or $6.18 million per year.

Moreover, a hospital could save another $2.38 million a year--or up to 6.2 percent its total labor budget--by making sure higher-paid employees don't waste time on work that is more appropriate for less expensive or less experienced workers, according to the analysis.

To streamline labor processes, the analysis recommends hospitals make sure the right number of employees with the right skills are working at the right place at the right time.

"We all know that there is opportunity for big savings in healthcare, but we have lacked specific measures to effectively go after these opportunities," Premier President and CEO Susan DeVore said Tuesday in a statement.

With half of all hospital spending going toward labor costs, Banner Health is re-evaluating its labor budget as it plans to make cut $150 million in the next year, the Phoenix-based system told The Fiscal Times.

In addition to staffing inefficiency, hospitals could find savings by focusing on quality issues that account for more than 20 percent of escalating healthcare expenditures, like overtreatment, inferior care coordination and poor execution of care processes, former CMS Administrator Donald Berwick and Andrew Hackbarth, an assistant policy analyst for the RAND Corporation, wrote in an article yesterday in the Journal of the American Medical Association.

For more information:
- here's the Premier press release
- check out the report (.pdf)
- read the Fiscal Times article