With median operating margins dropping to 1.7% last year, hospitals are demanding new solutions with a quick ROI. But with so many purported strategies in the mix, how can a senior leader determine which approach will impact the bottom line?
The most effective solution takes aim at the No. 1 budget line – labor – by optimizing the hiring of staff in order to reduce turnover. Hospitals spend millions searching, screening and training, but the trendline keeps getting worse, as the economy nears full employment and demographics change.
Thus, millions are wasted on temporary staff, including agency nurses. For every 20 travel RNs eliminated, a hospital saves about $1.4 million, according to the NSI 2019 National Health Care Retention & RN Staffing Report.
Arena is the only company working across healthcare that is delivering measurable value to the talent acquisition process. Its solution analyzes data from multiple sources – recent hires, applicants, organizations, and local and regional market factors – and builds predictive models that identify applicants who will thrive at a specific job, unit, and shift, and under a specific manager. This algorithmic method is far more precise and reliable than traditional screening, and continues to improve over time due to machine learning.
Without such a tool, healthcare providers make the same mistakes over and over again.
Humans are hardwired to hire people like themselves and fail to take into account variables such as cultural fit and personality that can impact the chance a new hire will work out.
Assessments may determine whether job candidates have the ability to perform a job function, but cannot reveal whether the individual will be committed to performing the job.
Hundreds of organizations across the country, including Mount Sinai Health System in New York, RWJBarnabas Health in New Jersey, Regional One Health in Memphis, MultiCare Health System in the Pacific Northwest, HCR ManorCare, Sunrise Senior Living, and many other post-acute providers, are using Arena to lower staff turnover, save money and improve patient care.
The problems Arena solves are critical ones for healthcare organizations. Multiple reports from self-reported surveys have estimated the extent and costs of employee turnover.
Compdata Surveys estimated 2018 total healthcare industry turnover of 20.4%. Arena’s data, derived from multiple organizations with more than 500,000 employees combined, has found that acute-care facilities have annual turnover of 35%, while senior living/long-term care facilities experience an average 65% churn annually.
Replacing a nurse is expensive. According to NSI, the average cost of turnover for a bedside RN is $52,100 and ranges from $40,300 to $64,000, resulting in the average hospital losing $4.4 million to $6.9 million. MultiCare estimates that the average cost of filling a vacancy – including overtime, lost productivity, pre-hire recruitment and training – amounts to $80,000.
Of significant concern is that over half (55.3%) of all hospitals have a RN vacancy rate higher than 7.5%. This is up from 39.9% in 2015. In addition, RNs increasingly opt for retirement and become traveling nurses.
The future looks even more ominous. By 2026, the U.S. Bureau of Labor Statistics projects the generation of aging baby boomers will create an influx of older patients and a simultaneous retirement of those available to care for them – resulting in a need for 15% more RNs than today.
Temporary nurses are frequently used by hospitals to cover unexpected staffing shortages. A 2010 study of 286 nursing units found that patient falls and injuries increased with higher levels of temporary staffing. Based on the results, the authors argued that hospitals should staff no more than 15% of beds with temporary nurses.
Arena helps reverse the negative impact of all these trends, and its results, like its algorithms, are improving every year:
- Regional One spent $7.2 million in fiscal year 2018 on traveling nurses, then used the reduced turnover through Arena to halve that amount in 2019 and fully eliminate that budget line item for fiscal year 2020.
- 4 months into implementation, MultiCare reduced 90-day turnover by 36.5% and generated $1.9 million in annual net cash savings.
- Mount Sinai Health System, within two years of working with Arena, reduced 90-day turnover by 77.6%, 180-day by 34.3%, and 360-day by 25.7%.
The future for Arena is more than just refining its algorithms. With the pool of available job candidates shrinking, it is looking at new sources, including data mining job boards and social media sites in other industries.
Visit Arena.io to request a briefing.