Workforce Prescriptions(WRx) produces updated Operational Effectiveness Scorecards quarterly on 2940 acute facilities in the United States. The purpose of these reports is to provide an objective analysis of the impacts of operations on each individual institution.
Operational Effectiveness Scorecards are constructed of 4 distinct sections:
The "Dynamic Operational Landscape" is the accumulation of key macro measures that frame the unique environment of operations at a particular organization. They "paint a picture" of some of the more visible components of operations. These components however, only illustrate the current conditions of operations, they are the "what" of operations, but not the "why".
The "Dynamic Operational Landscape" is constructed of 7 measures designed to provide a visual & intuitive view of the complex and often dynamically opposed forces that conspire to create labor expense outcomes. Those measures are:
Labor management is a complex and challenging function within healthcare. When you deliver your service to people, by people, using people . . . then beliefs, perceptions and incentives each play a pivotal role in producing outcomes. We call this phenomenon, "death by a thousand paper-cuts" because the majority of labor waste in healthcare is created at the department level, one decision at a time.
While publicly available data can provide only the barest of hints of the CAUSE of changes in labor, it is possible to highlight some of the more dangerous EFFECTS. As a part of the Operational Effectiveness Scorecard, WRx monitors 6 patterns known to represent risk to ongoing labor management. Those 6 patterns are:
| Patterns monitored in your data | MEDCENTRAL HEALTH SYSTEM |
|---|---|
| Personnel Expense RISING Faster or DECLINING slower than Revenue | OK |
| Personnel Expense that is becoming a LARGER PORTION of Revenue | OK |
| A FALLING Average Daily Census | AT RISK |
| The intrusion of GREATER Medicare or Medicaid volumes | AT RISK |
| RISING Length of Stay | OK |
| RISING Labor cost per Patient | OK |
If the data for your organization validates that any 2 of the above are 'At Risk', then you may want to consider an Operational Effectiveness Audit to avoid escalating erosion of profitability. On the following pages you will see your organization's Labor Expense Per Patient Day, Pay IQ ® score and the amount of waste that is recoverable annually.
The most accurate single indicator of labor efficiency is the measurement of labor costs per patient day. While acuity/work intensity does play a role in determining the labor expense associated with a given patient day, it's impact is meaningless when applied to a universe of large numbers.
Here's why . . .
Changes in acuity are nearly always reflected in both "Length of Stay" (sicker patients tend to stay longer) and "Labor per Discharge" (sicker patients require more labor per day). Therefore, dividing the "Labor per Discharge" by the "Length of Stay", produces a scalable measure that truly captures an organization's change in labor utilization (against volumes) over time. The measure is "automatically" acuity adjusted and tells a far more detailed story than any other single risk factor (See section above).
When "Labor per Patient Day" measures are analyzed side-by-side with the other risk factors a clear picture of "cause/correlation/effect" can be seen. This is often the first step utilized by senior leadership teams of a more detailed analytical process.
Calculations of both the Pay IQ ® algorithm and recapture estimate have been validated through over 200 of Workforce Prescription's Operational Effectiveness Audit. The OEA is a service offering designed to allow an adult acute hospital to identify areas of waste/redundancy and ineffective processes that can be optimized without creating a derogatory impact on staff, physicians or patients. The audit comes with a $1,000,000.00 annual recapture guarantee (to the bottom line) and has never required staff downsizing.
It is well known that profitability is the side effect of operations and processes. The great challenge is knowing "how" to measure the impact and effectiveness those processes so an organization can gain a clear understanding of the root causes of noticed changes in outcomes.
For 7 years, and at over 200 health systems, we at WRx have been performing detailed operational audits that have resulted in the clear identification of sources of disruption to ideal outcomes. Identifying and overcoming these disruptions has returned hundreds of millions of dollars to client's bottom lines (nearly $7,000,000 per year/client). We do this inexpensively, guarantee results and implement all desired changes for free. for more information see: http://www.workforcerx.org/OEA_FAQ.php
The Pay IQ ® is the measure of labor efficiency of a hospital. It is calculated using an algorithm that incorporates financial data from publicly available sources. The algorithm is designed to evaluate labor utilization in a manner that accounts for differences in reimbursement and cost of living for each distinct institution. Based upon the results derived from labor spending, the algorithm determines the "Labor intelligence" level of each hospital and assigns their personal Pay IQ ®. Pay IQ's range from 80 (challenged) to 140 (genius) and are a valid indicator of the effective use of labor spending.
The recapture estimate is a calculation of annual recoverable for your institution. It is based on a percentage of the variance between what the most efficient hospitals in a size cohort are spending as compared to your facility.
Differences in payor mix, service lines, acuity, cost-of-living, reimbursement level and volume have been accounted for. What cannot be addressed are differences in physical layout, workforce seniority, staffing schema utilized (ratio's, etc.), policy variance, level of automation or processes deployed.