Workplace Issues

How to Cut $8 Million in Labor Costs

CFOs can allocate resources more efficiently and curb labor costs via scheduling-management software.
Taylor ProvostFebruary 7, 2013

Alegent Creighton Health, a large medical organization with over 100 sites of service — hospitals, clinics, and offices — spread across Nebraska and southwest Iowa, employs 10,000 doctors, nurses, technicians, and other caregivers. Until relatively recently, each Alegent Creighton Health facility kept its own staff’s schedule, and there was no common directory.

When a nurse at one Alegent Creighton Health clinic would call in sick, that clinic had no idea who to call at another clinic to fill the spot. It didn’t know who was available. It didn’t know who had the right skills to be a competent replacement. And if it did somehow know who, it didn’t know if he or she was available or at what location. Consequently, when staff members got sick, or were otherwise unavailable, Alegent had to hire temps. And that costs money: a fact that disturbed Alegent Creighton Health CFO Scott Wooten.

But he was much more concerned that one of those temps might make a medical error that could put lives at risk. Wooten, who is intimately involved in Alegent Creighton Health’s operations, made the decision several years ago to automate the company’s scheduling across all its campuses, deploying Avantas, a human-capital-management system built specifically for health-care providers. As a result, he says, the organization saved $8 million in labor costs (those temps) in the first two years it was deployed.

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Scheduling and staffing allocation are a critical part of workforce management, says Mollie Lombardi, principal analyst at Aberdeen Group. Automating the function should be a no-brainer, she says. But less than half of all health-care organizations have done so, according to recent Aberdeen research.

Lombardi believes most health-care providers know they should automate scheduling but says it’s “amazing” that so many haven’t. There’s obvious risk in not knowing if someone is going to be able to fill a shift, particularly from the standpoint of patient care, she says.

Further, a lot of scheduling and staffing automation software comes with predictive analytics capabilities. “That way, organizations can optimize the schedule to make sure they’re staffing from a patient-service perspective,” Lombardi says, adding that the cost savings gained from not having to pay overtime, or hire temps, is significant.

A predictive algorithm within Avantas’s Smart Square scheduling software tracks the demand a certain department is likely to have and compares it to request orders from nurse leaders. It then allocates staff accordingly, helping Alegent avoid typical human-resources issues such as staff burnout, overstaffing, and understaffing.

“We’re already dealing with limited resources,” Wooten says, predicting that an environment of scarcity in health services will continue as an aging population demands more care even as more and more physicians and nurses retire. “That’s another reason to strategically manage that [talent] pool through automation.”

Smart Square lets Alegent Creighton Health’s managers schedule staff far into the future and, therefore, commit resources with a high degree of confidence that they’ll be used. The software also helps Wooten with Alegent’s budget. “A CFO can create a wonderful budget for a year or a month, but you still have to implement it on a micro basis,” he says. “[The forecasting tools] allow us to transition from budget goals and resource goals to their practical implementation.”

Staffing and scheduling automation, Lombardi points out, isn’t just a tool for health-care providers: it also lends itself to any business with many departments or offices. Organizations experience an 11% average annual loss of productivity as a result of unplanned absences, according to a 2012 Aberdeen study of 202 nonhealth-care companies. Such organizations estimate that the average cost to their business for these absences is an added 74% of the replaced worker’s salary. Both hits to an organization’s bottom line could be mitigated using automated staffing-allocation tools, according to Lombardi.

Small businesses have a number of human-capital-management software vendors to choose from, such as ADP or software-as-a-service vendor Workday, while larger companies may already have access to the software through their enterprise resource planning systems (if they can figure out how to use those notoriously rigid modules).

Lombardi acknowledges that when it comes to automating staff schedules, change management can be an issue. “If people aren’t using the system, you’re obviously not going to be able to reap the full benefits,” she says. As is the case with any automation initiative, or anything new in general, “some people will feel like they’re giving up control, so you have to think critically and help the staff see what they’re gaining.”