Our team of Healthcare Industrial Engineers created this newsletter to share the industry’s best practices with leaders who can apply operational efficiencies in their daily work.
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Labor benchmarks are commonly used in healthcare to inform leaders about opportunities to gain efficiencies. However, we often see leaders incorrectly use benchmark as a management tool.
When this happens, we miss the opportunity to dig deeper to understand the opportunity and create a plan to improve. This can leave department leaders exasperated with chasing quarterly moving targets, but worse still, this approach can invite short sighted decisions that ultimately pose risks to patient care.
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Top Tip: Top decile performance in labor benchmarking IS NOT the same as 10th%tile!!
Some benchmark vendors label the lowest hours per unit of service in a peer group as “best”, however quality and avoidable premium spend are rarely considered in this scenario.
Psst...Be careful not to confuse lowest with best. Lowest is very often an outlier caused by a data submission error or a unique practice such as a reference lab (overcounting stats) or centralized order entry (undercounting hours)!
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Benchmarking Basics
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Using Industry Benchmarks to Identify Potential Staffing Efficiencies
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1) BENCHMARKS ARE NOT DAILY PRODUCTIVITY MANAGEMENT TOOLS!
High performing organizations review benchmarking data quarterly and leverage it to set goals for improvement. Arbitrarily setting departmental productivity standards at a certain benchmark percentile can set up department leaders for failure and even risk quality of patient care.
Department productivity targets should be determined annually during the budget process, using benchmark data as one of several data elements for comparison. Additional consideration should be given to historical hours per UOS performance as well as the capability of the department to perform at a certain level considering both services and volume. Once productivity targets are budgeted, hospital leaders should work with department leaders to manage performance to target throughout the year. Targets should not be modified without being accompanied by an achievable action plan to reach new performance goals.
Benchmark data can impact budget
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2) UNDERSTANDING OUTLIERS
If your department is the lowest in the peer group, or the highest in the peer group, further investigation is required. There are many good reasons to be “different”, but there are also mistakes that can be made in data submissions. See our last newsletter for more on this! Is Your Department "Special"? Normalizations Matter.
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3) WHAT PERCENTILE SHOULD BE THE GOAL? 50th, 25th, other?
For A+ students, benchmark can be incredibly challenging because some vendors highlight low outliers as best. However, those who understand statistical distributions know that the middle – the 50th percentile – is where the majority are operating. As we work to reduce operational variation, we work to “tighten” the distribution. This means more departments are operating more similarly. As a six-sigma principle, it means we only have a small amount of performance outside of certain standard deviations.
As we work to drive greater standardization in healthcare, our team recommends targeting the 50th percentile of your peers. This ensures that you are operating in a way that is likely standardized with your peers.
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4) CLOSING THE LOOP WITH ACTION PLANS
A productivity target should never be changed without an action plan that specifically details how you are going to reduce staffing coverage in a department!
In 2010, a colleague of mine was working with OR directors on throughput efficiencies. When she arrived at the hospital, the director was incredibly upset. My colleague’s coworker, who was responsible for labor management, told the OR director in an email earlier that day that she was required to reduce the department by roughly half – 30 FTEs – to ensure that they were performing at the 50th percentile. The OR director was distraught. She knew that doing this would cause cancelled surgeries, irreparably harm surgeon relationships, and reduce critical revenue that the hospital needed. Upon further review, it became clear that the hospital had accidentally counted hours for the Preop and PACU in the OR, overstating their staffing model in the peer comparison.
This story demonstrates the importance of asking questions and critically evaluating your data. It is irresponsible to simply change a target administratively without a plan for the department to achieve this target. Individualized action plans for each department should be developed for target reductions based on benchmarking. The action plan should include specific changes to the grid or schedule that will result in the hours savings required or specific volume growth and how it will be absorbed using existing staff hours.
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5) MONITORING PERFORMANCE
Once a thoughtful action plan to improve a department’s productivity performance has been developed, it is crucial to monitor progress. In the preliminary monitoring phase, modifications may be required to adapt to staff availability, department hours of operation changes, etc.
Never Change a Target Without a Plan
If you only picked up one tip from this entire series, we hope it is this one. Before adjusting a productivity target, develop an action plan and demonstrate results. Always consider the impact to other success metrics - such as patient satisfaction, quality care, staff effectiveness, market dynamics, and physician engagement before formalizing a change.
Top Tip: Consider the impact to other success metrics - such as patient satisfaction, quality care, staff effectiveness, market dynamics, and physician engagement – before adopting updated processes to drive efficiency.
Benchmarking against peers at the department level is a best practice. How you use that data differentiates high performing organizations from the rest of the pack. Arbitrarily reducing resources to meet a benchmark target without thoughtful consideration on how to achieve the new target is short-sighted and can result in a multitude of negative outcomes. Completing an in-depth departmental review and developing an action plan BEFORE a target change is made ensures that the chosen improvement goal is attainable, and the department leader is setup for success. Continued performance monitoring will ensure accountability to the goal.
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We hope these benchmarking tips will help you make the most out of your next staffing review. For more information about benchmarking, follow us on LinkedIn!
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