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The Journey to Operational Excellence Part 2 – Spotlight on Labor

In our last blog, we discussed how the journey to operational excellence is a marathon rather than a sprint and touched on the significance of the use of technology in achieving short, and long-term, Operational Excellence (OE) goals. Today, we’re taking a deep dive into employing the power of the data you use every day as an integral part of a successful comprehensive labor management practice and how this perspective and approach supports you on a path to realizing your business operations goals.

It is widely acknowledged that labor makes up the largest percentage of an organization’s operating budget. Given what we have experienced over the last three years, it is not surprising that this number has grown exponentially considering the significant increased expense for enhanced recruitment and onboarding packages and substantial number of agency employees secured to fill critical staffing shortages.

Human Resource (HR) leaders have worked tirelessly throughout the pandemic, attempting to manage multiple organizational priorities (e.g., supporting employee engagement and satisfaction, creating opportunities for professional development, recruiting, onboarding and retaining new hires, and mitigating turnover) each bringing direct impact on labor budgets. A January 2023 report Inflation, Labor Shortages Top HR Concerns in 2023, published by the Society for Human Resource Management (SHRM) validated this current state and cautioned that these concerns and more remain top of mind for HR departments.

The Healthcare Workforce Environment Today

As we collectively emerge from the pandemic, we continue to face a healthcare workforce shortage that includes nurses, certified nurse assistants, food and nutrition, and environmental services staff. It is important to note that the demand for nurses is a long-standing concern that has only been exacerbated in recent years. In fact, the World Health Organization published a pre-pandemic report, State of the World's Nursing 2020 - Executive Summary, where they highlighted that our aging workforce has reached a critical point where, without a significant year over year increase in the number of new nurse graduates and expanded capacity to hire and retain them, by 2030, although the number of nurses will surpass 36 million, we will simultaneously face a global nursing shortage of nearly six million.

A critical shortage of nurses results in an unsafe work environment which leads to an increased risk for poor care quality outcomes and ultimately, an increased risk for reduced reimbursements, diminished community reputation and added financial strain for healthcare organizations.

This does not even include the negative financial implications of chronically high turnover.

In a 2021 Skilled Nursing News article, Nursing Homes Have 94% Staff Turnover Rate - With Even Higher Churn at Low-Rated Facilities, the author acknowledged average turnover rates for registered nurses (141%), certified nurse assistants (129%) and licensed practical nurses (114%). According to the report, even the highest-rated, five-star facilities experienced an overall turnover rate of just over 76%. When you take into consideration the hard costs (salaries), and soft costs (HR time dedicated to advertising, recruiting, and onboarding new hires), the tangible financial impact of turnover and extended time to fill rates skyrockets.

What actions can be taken today to mitigate all of these risks?

Critical Insights Powered by Technology

I’ve always believed that you can’t refute the data. And there it is-data. Who manages oversight for your labor budget? Do you know how much you are spending on agency staff? What are your current turnover rates for nurses and nurse assistants?

In an August 2021 Forbes article, How Smart Technology Could Revolutionize the Sr. Living Industry, author Dr. Eric George shared, “through automation … technology can enable (organizations) to optimize staffing levels and limit labor dependencies”. The use of technology in healthcare operations is an essential strategy to minimize the tangible negative impact on the financial health and stability of your organization caused by sustained labor overages, continued dependence on staffing agencies, and extended time to fill rates for open positions. With the newly established federal minimum staffing mandate for skilled nursing facilities scheduled to be unveiled this spring, harnessing the power of technology to gain awareness into your performance in these areas and proactively addressing labor variances and trends will remain key concerns for healthcare executives for the foreseeable future.

How much time does your team spend tracking and trending your key metrics today? What if by incorporating a unified operations platform into your business operations, you could decrease the current burdensome and time-consuming process of gathering, updating, analyzing, and reporting on labor performance and instead offer your leaders much needed time back in their day?

Harnessing the power of your data, gaining insight into staffing per patient day (PPD), labor trends, overtime, and turnover sets you on the path to successfully addressing your current and future performance. Removing the manual and automating the analysis affords your teams critical time savings where they are empowered to proactively address corporate goals for care quality, staff engagement, patient and resident experience, and more.

Labor represents just one of many areas where senior living operators and skilled nursing facilities can use existing data to chart their course to successful margin recovery.

In my opinion, a powerful operational excellence goal to consider adopting for 2023 is to mitigate the exhaustive manual effort spent on aggregating multiple data points, and manually tracking labor performance. Instead, prioritize investment in real time data analysis solutions that will provide you and your HR leaders with valuable time back in their day to focus on engaging and developing existing employees and retaining top talent.

For the final installment of this 3-part blog series, we will pull back the curtain on the direct impact of increasing regulatory oversight into care quality on your reimbursements.


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