How hospitals can cure the staffing crisis

July 1, 2006

Healthcare executives face an uphill struggle to reduce costs, grow revenues within a shifting payment landscape and ensure that patients receive quality, life-saving care. A tough assignment, especially when a critical shortage of workers sabotages those efforts.

Healthcare executives face an uphill struggle to reduce costs, grow revenues within a shifting payment landscape and ensure that patients receive quality, life-saving care. A tough assignment, especially when a critical shortage of workers sabotages those efforts.

The situation demands senior executives' attention-labor costs are expanding through a combination of bonus pay, overtime and temporary agency fees to fill shifts. High vacancy rates in spite of spending on search-firm fees, recruitment advertising and referral bonuses complicate the situation. Strategies for increasing revenue and satisfying physicians via new projects bump up against not being able to staff them. Further, with organizations' and consumers' efforts at driving improved performance and quality of care, it is critical that hospitals retain quality staff. The Joint Commission on Accreditation of Healthcare Organizations sees a direct correlation between the nursing shortage and quality of care. Staffing levels were a factor in 24% of 1,609 unanticipated events resulting in death, injury or permanent loss of function reported in March 2002.

A hospital's response to the crisis is usually reactive-calling temporary agencies to fill vacancies-at rates over 50% higher than in-house compensation. Unfortunately, the use of temporary agencies doesn't resolve the staffing problem and often serves to perpetuate it.

Bottom-line pain, top-line growth

Leading hospitals have implemented a two-pronged strategy for successfully stopping the bottom-line impact of the staffing crisis. One prong is strategic and overarching, the other, tactical, focusing on better processes and execution.

By using temporary workers, a hospital allows its core service-patient care-to be delivered by a temporary third party the hospital didn't hire and doesn't know well. Isn't this in fact outsourcing patient care? The people providing patient care is the component the hospital should most want to control.

A recruiting outsourcing service provider only finds candidates; the healthcare system's in-house hiring leader does the hiring, thus retaining control over deciding who delivers patient care. Further, when best practices in process and technology are deployed and metrics reported, visibility improves and control is enhanced.

The hospital gets in front of the staffing problem upstream but also gains access to recruiting expertise and avoids capital outlay for the human resource and recruitment technology that can accelerate recruitment results. In contrast with a human resource department with too much on its plate and too few resources, the recruitment outsourcer can be proactive and respond faster to applicants.

The danger of overusing temporary agencies is not just the cost but also the lack of accountability. A healthcare system cannot control its costs or risks when multiple hospital personnel have access to agencies and there are no criteria for 1) the decision to use an agency, 2) which agencies to use (and for what), and 3) what standards agencies will uniformly apply when reviewing and recommending candidates for the healthcare organization. With individuals negotiating separate prices with agencies-or letting the agency dictate the price-the hospital loses the opportunity to leverage its utilization and total spend.

Warning signs that a healthcare system overuses agency staff include:

To ensure a better ROI, a healthcare system needs to reengineer the process surrounding use of agencies:

Jill Schwieters is executive vice president and leader of the healthcare group at Pinstripe, an HR and RPO firm with specialized expertise in recruiting, acquiring and retaining critical employees for healthcare providers.