SI Review: September 2014

Print

Working in Parallel: Staffing firm gets boost when it retools to help hospitals better manage temps

By Leslie Stevens-Huffman

Brendan Courtney sees America’s healthcare upheaval as a call to action and an opportunity. Since becoming president and CEO of Parallon Workforce Solutions in 2013, the staffing industry veteran has taken steps to position the firm as an emerging force in the healthcare revolution.

The subsidiary owned by Nashville-based HCA Holdings Inc. is helping hospitals cope with declining census levels, value-based purchasing mandates and reduced Medicare and Medicaid reimbursements by developing a suite of solutions to improve overall workforce utilization and productivity.

“Since labor is the single largest component of hospitals’ costs, their survival hinges on their ability to become more efficient,” Courtney says. “We’ve adapted our structure and enhanced our tools and services to focus on external clients and become a strategic partner.”

The problem in U.S. hospitals of overbedding is so severe that Strategy& (formerly Booz & Co.) predicts one out of five hospitals will seek out mergers or be acquired by 2020.

Excess capacity has resulted in layoffs at some hospitals and tempered the demand for supplemental staffing in others. The healthcare staffing segment achieved just 3 percent year-over-year growth in 2013 based on estimates from Staffing Industry Analysts. (The segment’s estimated growth will increase to 6 percent in 2014 and 8 percent in 2015.)

However, the sector’s challenges go beyond the impact of government mandates, according to Tim McHugh, analyst with William Blair & Co.

“Healthcare staffing firms haven’t grown as fast as the rest of the industry because they haven’t done a great job of explaining their value add,” McHugh says. “In fact, their relationship with healthcare providers could be characterized as adversarial.”

While the need for a relationship reboot and a new approach is clear, morphing is easier said than done.

Here’s a look at Courtney’s plan to create a competitive advantage by forming strategic alliances with healthcare providers.

Benchmarking Productivity

Although Parallon continues to offer healthcare staffing and managed services, Courtney divided the organization into three separate units and adopted a management engineering approach to meet clients’ evolving needs.

The cornerstone of Parallon’s new structure is advisory services, which utilizes data analysis and peer benchmarking to evaluate a healthcare provider’s effectiveness at managing clinical labor.

“We spend one to two weeks on site meeting with the CFO, the CNO and HR leaders,” explains Kathy Kohnke, executive vice president of advisory services.

“We analyze productive and nonproductive hours and patient loads along with intangible factors that influence productivity such as the culture and layout of nursing floors, before making a series of recommendations to help them improve.”

Offering prospective clients a cost-effective solution like a labor analysis or MSP creates a bond with hospital executives and positions Parallon as industry experts.

And because Parallon’s parent company owns and manages 165 hospitals and 155 outpatient surgery centers, the advisory team has the ability to mine its database and compare a client’s productivity levels to similar organizations.

HCA-owned hospitals also provide a testing ground for new programs and proof of concept. As the nation’s second-largest hospital operator, it’s regarded as an industry leader in managing costs and creating efficiencies.

Parallon’s benchmarking program illuminated several key cost savings opportunities for St. Luke’s Hospital-Anderson Campus according to Ed Nawrocki, president of the $150 million hospital.

“Parallon came back with a roadmap to improve our labor efficiency,” he says. “We had always compared favorably with nonprofits of similar size based on our benchmarking results, but they came up with some eye-opening stats and novel ways to reduce fixed costs and improve productivity.”

For example, Parallon recommended the formation of centralized float pool and staffing office to service St. Luke’s six nearby medical campuses.

Instead of hiring nurses for a specific facility, some new hires join St. Luke’s pool. The flexible workforce rotates throughout various nursing units helping hospitals match supply with demand. Moreover, the development of an in-house pool is targeted to reduce overtime and underutilization through the introduction of a core staffing model.

“I thought we were doing a pretty decent job of sending people home when they weren’t needed,” Nawrocki says. “But Parallon’s analysis showed that we were staffing to the average census level, not the lowest point. They’re helping us reduce base staffing levels and staff up in a hurry when necessary.”

Over time, Nawrocki plans to expand the float pool to other clinical areas that are impact by census fluctions such as radiology and physical therapy.

Web Labor System

It’s no wonder hospitals are in dire straits. Many departments still use paper and pencil or spreadsheets to schedule hundreds of employees on round-the-clock shifts. In the absence of real-time data, it can take days to calculate productivity rates and modify staffing levels.

To create a structure around productivity, Parallon developed a Web-based labor management system that provides enterprise-level planning, hiring and scheduling and labor control functionality in a single suite. The tool gives healthcare providers “an air traffic controller’s view of the operation,” according to Kohnke.

One of the system’s modules provides a productivity snapshot of the prior day by comparing staffing to census levels and measuring units of service delivered throughout the hospital.

“Educating our managers on productivity and installing Parallon’s tool has helped us be more nimble and agile in responding to census changes,” Nawrocki notes. “Our goal is to have most of our 9,000 employees on this system, learn how to interpret the daily activity reports, and increase productivity across the entire system.”

Installing the tool produced a series of quick wins for St. Luke’s. For instance, it highlighted opportunities to reduce overtime by adjusting nursing schedules. Augmenting with per diem nurses not only lowered costs, it improved employee morale and patient care.

The scheduling module helps unit managers forecast staffing needs and volume, create a six-week schedule and communicate shift changes to staff members.

“When the census falls, that affects dietary, pharmacy and rehabilitation [units], but nobody reacts because you can’t make real-time staffing adjustments with a pencil-and-paper schedule,” Kohnke says.

If the surgical department is expecting a surge, staff members can log in from home before their shift to see if they’ve been redeployed to the unit, she adds.

The advisory team recommends the most cost-effective and expedient staffing solutions based on labor market costs, availability and what’s best for the client. Implementing Parallon’s action plan may even diminish the need for travel nurses or other contingent workers.

“Our goal is to decrease total labor costs by providing the right labor, at the right time and at the right cost,” Kohnke said. “On average, providers who implement our recommendations are saving 8 percent of labor. Depending on the size of the organization, total savings range from $16 million to $35 million.”

Specialty Programs

Skill gaps and talent shortages are key drivers of labor costs for healthcare providers. And if forecasts hold true, the situation won’t improve anytime soon.

“The nursing population is aging, and there aren’t enough physicians,” says Courtney. “Without a solution, healthcare providers will face empty shifts and runaway labor costs.”

Indeed, the U.S. Labor Bureau projects the need for 525,000 replacements nurses in the workforce bringing the total number of job openings for nurses due to growth and replacements to 1.05 million by 2022.

Parallon has developed a specialty training and apprenticeship program for registered nurses to stave off looming shortages.

“Nurses coming out of school often have a hard time finding a job,” Courtney says. “The ones that do get hired often have a hard time assimilating and becoming productive because they lack hands-on experience.”

According to the Robert Wood Johnson Foundation, about 17 percent of registered nurses turn over within the first year, 31 percent by the second year, and by four and a half years, the turnover rate is close to 49 percent.

To boost assimilation and retention rates, Parallon’s managed services division developed a 14- to 16-week residency program that helps recent grads find employment and train for general med-surg positions or specialized nursing roles. The newbies shadow working professionals, receive classroom instruction, a robust simulation experience and hands-on clinical training.

Parallon puts the nurse on its payroll and administers the training in conjunction with a regional academic partner. The hospital pays Parallon a fee and transfers the nurses to its payroll once they complete the course. In exchange, nurses agree to work for the hospital for two years.

Retention rates are very high among nurses who complete the program, according to Courtney.

Parallon is also developing a training program that will give experienced nurses a chance to upskill into specialized nursing roles in OR or ICU. Since requests for contract nurses with specialized skills often go unfilled, the skills enhancement program will benefit hospitals as well as staffing firms.

Of course, offering healthcare providers strategic solutions frequently begets staffing opportunities, and despite accelerating growth in advisory and technology services, staffing is still Parallon’s biggest revenue source.

“We will continue to offer staffing and MSP, in fact we have about $500 million flowing through our MSPs on an annual basis,” Courtney says. “But whenever an entire industry needs to transform itself, it provides an opportunity to take on a leadership role and counter commoditization.”

 Leslie Stevens-Huffman is a freelance writer. She can be reached at lesliestevens@cox.net