100 Top Hospitals supplement: Pay more, get more

The nation’s top hospitals not only deliver higher quality care at lower cost to more and sicker patients, but they also do it with fewer people.

They use 35% less contract labor and pay 14% less overtime. They pay their people better; salary and benefit costs per employee are more than $3,000 higher than at the average hospital. Their ratio of registered nurses involved in direct patient care is higher. And their case mix and patient volumes are both higher than the average hospital’s. But they have a lower cost per discharge and a shorter length of stay.

If all hospitals were able to duplicate the statistics of the top performers, the U.S. healthcare system would save more than $7.25 billion a year in labor costs, or an average of almost $2.68 million per hospital.

These results come from a study of Medicare data by Solucient, an Evanston, Ill.-based company that provides tools for analyzing healthcare cost and quality, and each year designates 100 Top Hospitals honorees based on a variety of quality and efficiency measures. For this study, the firm analyzed data for the top 100 group, looking at metrics such as total paid hours, hours worked per patient day, hours worked and wages paid per adjusted discharge, and wages and benefits per full-time employee. It then compared these benchmark numbers with the average performance of the 2,834 hospitals in its database (See the roster, starting on p. 9.)

“These hospitals are leaner in every area—not just one, which is frankly what I expected,” says Jean Chenoweth, who led the research team and is senior vice president of performance improvement and the 100 Top Hospitals program at Solucient. “These hospitals really have developed approaches that are systemic.”

And it all starts at the top. “The top hospital CEOs think about quality and efficiency simultaneously and always have,” Chenoweth says. “Average hospitals focus on one or the other.” But she acknowledges that an institution has to start somewhere. “If you are just getting your board to focus on quality, that’s a beginning step. Then there’s a natural progression of communication and ongoing monitoring of progress.”

Some top hospitals say their stellar stats are a matter of necessity. “The main reason we operate as efficiently as we do is that we have to,” says Greg Loomis, chief operating officer of 230-bed Mercy General Health Partners, Muskegon, Mich., which made the 100 Top list for the first time this year. “Our payer mix is tough and the reimbursement just isn’t there.”

The University of Kentucky Hospital, Lexington, made the list this year for the first time since a three-year streak in the mid-’90s. Sergio Melgar, vice president of health affairs at the 436-bed hospital, points to hard times back then as the genesis of its efficient practices. “We had a lot of financial pressure and we weren’t growing, so we put a big effort into staying productive while minimizing costs,” he says. When the institution began to grow rapidly a few years ago, it couldn’t immediately staff up to the levels it would have preferred, and the efficiencies it had adopted in the lean years allowed it to get by with fewer people.

But many hospitals face similar pressures and don’t post similar results. Here are some strategies that have made the difference in the institutions honored on the 100 Top Hospitals list.

Whether it’s a standard quality-improvement system—a balanced scorecard, the Quint Studer “five pillars” or the lean management espoused by automaker Toyota—or an internally developed system, top hospitals tend to have a consistent approach that governs all of their quality and efficiency initiatives.

Both Mercy General and 222-bed Robert Packer Hospital, Sayre, Pa., are “five pillars” proponents. (The five pillars are financial, growth, people, quality and service.) “Everything we do is filtered through one of the pillars,” says Mercy General’s Loomis.

Mary Mannix, president and chief operating officer of Robert Packer, says the system helps her employees focus. “The pillars help us turn up the heat on our expectations,” she says. “We want to be in the top quartile on each of them, and in the top decile for some.” The approach leads to concrete improvements. For example, to help achieve the goals of the “financial” pillar, operating room nurses and technicians have partnered with physicians to make sure they don’t squander supplies.

“They don’t open a box unless it’s truly going to be used,” she says. “The people who care for the patients are the ones coming up with innovative ideas to be good stewards of our resources.” The hospital is now studying ways to tie management’s compensation to performance on the pillar goals.

“An employee whose heart is captured is an employee that’s productive,” says Janice Bultema, vice president of human resources at 466-bed University of Wisconsin Hospital and Clinics, Madison, which does regular employee engagement surveys and has its managers address issues directly with the employees they supervise. “It focuses on how employees feel about their work environment. Do they understand how their job is tied to the organization’s mission? Do they feel that someone’s investing in their development? Do they feel recognized, trusted, involved?”

Mercy General’s Loomis also swears by engagement surveys as a management tool; the hospital has used them for eight years. The results are a central focus of a leadership development retreat where managers learn tools and strategies to help them address any issues raised.

Geisinger Medical Center, Danville, Pa., knew five years ago that it was going to have to more than double its supply of RNs to staff several planned expansions, including five new nursing units and a new patient pavilion scheduled to open in 2010. Located in a remote area of central Pennsylvania, Geisinger wasn’t in a position to raid the hospitals down the street. Instead, it created its own pipeline in the form of an on-campus nursing associate degree program in cooperation with Thomas Jefferson University, a health sciences university in Philadelphia. The first class graduated last year, and 90% of them, or 34 new nurses, elected to stay at 359-bed Geisinger. Another 50 nursing students will graduate this year.

Many top hospitals get around the need for contract labor by acting as their own agencies. “We do everything in-house as much as possible,” says Amy Brayford, associate vice president of compensation and benefits at Geisinger, which has pools available for everything from secretarial staff to nursing. “When we bring in contract labor, it’s not a staffing strategy at all—it’s usually a temporary response to very rapid growth.”

EMH Regional Medical Center, Elyria, Ohio, and Munson Medical Center, Traverse City, Mich., use similar techniques (See stories, here and here).

Top hospitals also keep a close eye on salary surveys, and while some shoot for the median, those in competitive markets make sure they’re paying top dollar. “We want to make sure we don’t lose people because we don’t pay them enough,” says Melgar of the University of Kentucky Hospital. “We pay at the top of the market for our area, and our benefit package is considered very good, especially in health benefits and tuition assistance.”

The University of Wisconsin Hospital continually reviews its salaries. It recently worked with the union that represents its surgical technicians to raise them two salary grades, because their compensation had fallen behind the market and the gap was hurting the hospital’s efforts to recruit for vacancies and an expansion. “We had to capture all the new graduates we could,” Bultema says. “The techs were delighted we had brought this to the attention of the union.”

When Susan Hallick was starting out as an RN, night and weekend shifts were an accepted part of paying dues, and “normal” hours had to be earned. Now that she’s chief nursing officer at Geisinger Medical Center, the philosophy is different. The management recognizes the disruptive effect of having to work evening, night and weekend shifts, and pays an 8% premium to those who adopt those hours as their own. “We pay based on inconvenience to your lifestyle,” Hallick says. “We have to if we want to recruit and retain the new generation.” Both nurses and technicians often undertake the off-hours because of the extra money, and those who move to a weekday-only schedule take a pay cut.

While the University of Wisconsin Hospital shoots for median wages and salaries, its benefit programs are something special. One program, called School at Work, targets the least-educated employees in bottom-tier jobs, as long as they’ve demonstrated a commitment to the hospital’s mission and values. A 32-week program gives them training in basic skills—reading, writing, math, time management—and prepares them to pursue college or technical school. A custodian was promoted to supervisor after completing the program; a low-level medical records worker is now pursuing a degree in human resources.

“They had the ability, but they lacked confidence,” Bultema says. “Completing the program was an accomplishment that gave them the confidence to succeed.”

Another benefit the hospital tried out recently is free tax help, targeted at workers earning less than $34,000 a year. Between finding new deductions and tax credits and not having to pay a tax-preparation fee, the 58 employees who participated saved enough on their taxes to equal getting a 3% raise. Bultema will offer the program again next year and expects it to grow.

“People loved it, and word gets around,” Bultema says.

Most hospitals in the throes of implementing electronic medical records probably don’t list increased efficiency as an initial result, but Solucient’s Chenoweth says they may be a factor in the success of top hospitals that have had them in place for a while.

“When you go through the process of installing an EMR, by definition you have to review all of your processes, and probably a lot of systemic improvement occurs,” she says.

Robert Packer Hospital was an early adopter of EMRs, and has had a physician order-entry system since 1999. Virtually all physician orders are now entered directly, and Mannix says laboratory and radiology utilization has improved significantly. “What’s great is that it standardizes care and takes variation out of the equation.”

Geisinger’s Hallick calls the EMR “a recruiting tool for the new generation.”

“It’s been huge,” she says. “Not just for nurses but for physicians and midlevel technicians.”

Elizabeth Gardner is a former Modern Healthcare reporter and a freelance writer based in Riverside, Ill. She can be reached at gardnerem@sbcglobal.net.

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