The Ohio State University Medical Center (OSUMC) is dedicated to its mission of delivering the highest quality of care, as is demonstrated by it being one of only 50 hospitals recognized on the Leapfrog Group's "Top Hospitals" list for quality and safety. One factor helping OSUMC achieve this level of success is the priority that the organization places on maximizing the performance of its workforce, which includes 8,800 employees in patient care and support areas. Monitoring and measuring the performance of staffing resources, which account for the largest percentage of hospital operating budgets, is vital to the success of the organization from clinical, financial and operational perspectives.

OSUMC, comprised of five hospitals, a network of primary care sites and the affiliated James Cancer Hospital, is among the largest academic health systems in the country. Labor analytics and performance-improvement efforts have become vital components in the growth of these organizations. However, the journey from the foundations of the program to the eventual outcome was not a direct path, and many lessons were learned along the way.

During the past 15 years, OSUMC's performance improvement efforts have evolved from its initial implementation of automated time and attendance in 1993, to complex labor analytics that incorporate productivity monitoring into the organization's overall management processes. These efforts have yielded substantial results. One facility that consistently exceeded its labor expense budget by millions of dollars has ended the last two years at $8 million and $5 million below budget, and its community hospital was able to decrease its labor budget by $1.5 million through more effective staffing deployment.

The path to productivity monitoring

Between 1993 and 1998, OSUMC made several attempts to incorporate labor productivity monitoring into the overall performance management processes of the organization. Those efforts ranged from internally developed solutions, to the purchase of a solution that was later abandoned. In the end, the efforts produced limited gains, but OSUMC was intent on improving its results.

In 1998, OSUMC formed a committee to evaluate how the organization could enhance its performance improvement efforts by focusing on increased accountability for staffing and salary decisions. The committee included broad representation from finance, administration, information systems, quality improvement and the patient care staff. The committee decided to purchase Visionware, a solution that helps organizations maximize employee productivity and performance, reduce labor costs and align labor decisions with strategic objectives. The Visionware labor management solution accomplishes this by helping managers optimize the number of hours worked and the cost of those hours, balancing productivity, cost, quality and other objectives. The solution is a part of the products and services offered by Kronos, Inc. OSUMC had been using the Kronos iSeries Timekeeper solution since 1993 to automate time-and-attendance functions.

Following the purchasing decision, OSUMC's Management Services department, an internal consulting group within Finance, was charged with implementation, but an organization-wide staffing reduction stalled the project's momentum. After the reduction, only a single Management Services staff member continued working on the project "behind the scenes."

Challenge creates opportunity

The project was re-energized in 2000 when OSUMC reported a $43 million operating loss. An evaluation of the situation revealed that many of the problems were attributable to poor staffing decisions, an escalating level of nursing agency use and a lack of manager accountability. In response, OSUMC's CEO tapped Management Services to deliver a viable productivity monitoring process within 60 days. Management Services proposed a plan that revolved around continuing the Visionware implementation to achieve the CEO's goals. The CEO agreed to the plan and implementation resumed.

The plan also included strategies that would link productivity management to the budget process, provide to managers online access of their performance information, place key labor information at the point of position-approval decisions, customize reports and information based on customer needs and improve manager accountability.

After meeting the 60-day reporting challenge, Management Services continued its productivity-improvement efforts by collaborating with others in Finance to integrate the labor management solution with the organization's budgeting process. A new budget system was implemented to provide a seamless exchange of information that would facilitate more effective staffing resource allocations. Other initiatives included creating customized manager roll-up reports based on the unique needs of each administrator. They also created a contract/agency reporting process, whereby managers self-reported their agency usage via Web page, which was then uploaded into Visionware. Multiple other innovations were implemented over the next couple of years.

The new solution was put to the test in 2004 when the top executives at OSUMC asked Management Services to lead a focused cost-reduction initiative using information from the labor management solution to identify areas of opportunity. With the solution, Management Services identified $20 million in opportunities, with the top three areas accounting for $3 million in potential savings alone. The top 10 areas of opportunity were targeted, and managers engaged in an improvement process that included root-cause analysis, action planning and implementation of alternatives. Within weeks of beginning the initiative, OSUMC realized $1 million of annualized savings.

OSUMC's executives were impressed with the results and encouraged an expanded use of the solution throughout the organization. Management Services teamed up with the Human Resources and Information Services departments to create a productivity-based position-approval process. This allowed managers to use an online, interactive system with readily available performance data when they needed to post new positions or fill vacant positions. The enhancement provides year-to-date staffing and salary dollar variance information at the point of initial request. Prompts guide managers and their superiors through decision-making related to hiring and appropriate staffing levels, and the process adds an increased element of accountability to staffing selection.

OSUMC realized additional gains in the years following 2004 as managers became more accustomed to using the solution. By fiscal year 2007, the OSUMC flagship hospital's labor costscame in $8 million under budget, and in 2008, labor costs came in $5 million under budget - quite an accomplishment, considering that labor costs exceeded budgets by $5 million to $15 million in the years before 2007.

Applying practices to other facilities

In another situation, Management Services worked with nursing departments, where productivity levels were dropping to nearly 90 percent - significantly below the 100 percent target. Using the labor management solution to analyze staffing levels in one nursing unit, Management Services determined that nursing was overstaffed by five full-time equivalents (FTEs), and that costly agency nurses represented 7 FTEs, or 15 percent of the nursing staff. Despite the overstaffing, the nursing unit was incurring significant overtime costs.

Further analysis revealed that staffing grids were not matched to budgets or productivity targets, and that registered nurses were being staffed in situations when less expensive "patient care associates" could fulfill the role.

Management Services used this information to work with the nursing manager to build new staffing grids that were aligned with budgets and productivity targets, and adjusted staffing levels based on skill mix. The efforts in this department achieved a $200,000 annual savings.

Syncing staff additions with growth

Labor productivity monitoring has helped support OSUMC's tremendous growth. Since 2000, the organization has created 3,800 new faculty and staff positions, increasing its workforce by 50 percent and making it the largest-growing employer in central Ohio. During this same period, OSUMC has seen its inpatient volume grow 32 percent and its outpatient volume grow 42 percent.

Currently, more than 450 departments within OSUMC use reports from the labor management system to manage their staffing needs. Recently, OSUMC introduced exception reports to show all staffing approvals that were above Visionware flexible staffing targets, and the CEO is holding his direct reports accountable to limit the exceptions and reduce unnecessary labor expenses. These efforts have contributed to OSUMC's return to profitability, with the organization posting a $117 million positive bottom line for its year-end 2008 financial report. OSUMC's ability to grow at this accelerated rate while improving its profitability is a testament to its performance-improvement efforts.

Takeaways

Based on OSUMC's experience, here are some key points you can apply to labor analytics at your organization:

Put key productivity information at the point of decision-making. Executives benefit from scorecards and summary reports that display relevant key productivity metrics, and department heads receive concise reports about their staffing. Providing the right information in a timely manner improves decision-making.

Define and use common terms. Early in the implementation process of the labor management solution, Management Services worked with executives and managers to define terms and made them consistent across the organization, and even instituted consistent terms between the budgeting and productivity systems. This has resulted in common terminology and data sets, aligned goals and strong manager buy-in.

Streamline reports. Accurate reports, timely data and consistent formats improve decision-making. Management Services transformed a lengthy monthly report that was previously compiled manually into a consistent two-page biweekly report.

Increase accountability for decisions. With consistent information throughout the organization, executives can more easily create and apply performance standards to the workforce. The result is increased accountability for decisions that impact performance and costs.

Involve executive leadership. Obtaining executive buy-in is essential for any successful productivity effort. However, executive involvement does not end there, as top leaders need to stay abreast of key performance metrics that impact productivity and costs. They also need to hold their direct reports accountable for results.

Involve front-line managers. Common terms, data formats and key metrics are meaningless if front-line managers are unable to derive value from them. It's important to involve them in every step of the process and obtain their buy-in for the program.

Looking ahead

OSUMC has several plans to expand its performance-improvement efforts. To create the foundation for this work, OSUMC recently restructured its organization to merge the Management Services group with another internal consulting area that focuses on process analysis and improvement. One of the responsibilities of this consolidated team is to utilize the processes developed to transform OSUMC's staffing and labor performance in order to identify target areas for productivity and process improvement.

Additionally, OSUMC is exploring the potential rollout of a structured process-improvement mechanism across the organization to further improve performance. The labor management solution will be employed to help prioritize opportunities for improvement and track the success of the improvement projects as they relate to labor performance.

Going forward, the lessons learned during its past efforts, coupled with structured process-improvement practices, promise to help OSUMC to realize further gains and better optimize its staffing and productivity throughout the organization.

Mr. Trzcinski is the director of Management Services at The Ohio State University Medical Center.

Mr. Graves is the global practice leader for health care at Kronos, Inc.