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Human capital and process improvement

Bledsoe, Dana Nicholson MBA, MS, RN, NEA-BC; Sullivan, Denis MHA; Mathias, Debra COO

doi: 10.1097/01.NUMA.0000394054.92218.04

How can you help maintain and improve your staff's financial viability?

Dana Nicholson Bledsoe is vice president, Patient Care Services/chief nursing officer, CHOC Children's Hospital. Denis Sullivan is executive vice president, Novia Strategies (formerly Sullivan Lakier Group). Debra Mathias is executive vice president, chief operating officer, CHOC Children's Hospital.

The authors have disclosed that they have no financial relationships related to this article.



Organizations are struggling with financial challenges that most current leaders haven't faced unless they were working during the Great Depression. The ongoing recession changed the financial landscape abruptly and impacted healthcare organizations on many fronts—reduced revenues, access to capital and philanthropic support, and increased interest rates. At the same time, hospitals are experiencing more demanding regulatory requirements for increased transparency, comparative outcomes, and advancement of technology. This multifactorial environment forces organizations to take a hard look at program and service profitability, productivity standards, management structure, and process improvements.

This article will discuss the efforts undertaken by a children's hospital in Southern California (see Organizational profile) and the proactive work that it undertook to maintain and improve its financial viability and thus ensure its ability to provide service to the community.

In the fall of 2008, the organizational leadership took a proactive stand to develop and implement mitigating strategies that would allow for rapid cycle impact, as well as identify mid- to long-range strategies in anticipation of further erosion of the global economy. In determining the best approach, the group set about to engage internal and external resources to ensure the long-term sustainability of the organization.

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Project oversight

To ensure successful adoption and implementation, the chief operating officer (COO) chaired the steering committee and carefully selected membership, which included the chief financial officer, chief nursing officer, vice president of Human Resources (HR), and the vice president of Ancillary and Support Services. It was critical that these areas share the leadership and champion the necessary change across the organization. To ensure an objective and neutral approach, the vice president of HR was named the Executive Champion. Additionally, Finance dedicated two analysts to partner with the consultants and the Oversight team.

The goals, approach, and scope were as follows:

  • Goals:
    • Develop, achieve, and sustain appropriate staffing targets for all departments.
    • Ensure short-term financial viability.
    • Implement strategies to align with the long-range financial plan (2020) targets to fund the master campus plan (under construction) and allow for advancement of tertiary and quaternary services for tower opening.
    • Maintain and promote organizational trust of associates during this economically uncertain time through transparent and timely communication.
    • Formalize the “sole-source” of data.
  • Approach: Organizational guiding principles
    • First and foremost, improve or maintain current levels of quality, service, and satisfaction.
    • Make minimal disruption to the organization's morale.
    • Communicate effectively with stakeholders; make all areas available to review.
  • Scope:
    • Develop a productivity governance structure and supporting tools.
    • Benchmark labor utilization throughout the organization.
    • Identify and select conservative and aggressive staffing targets, and develop action plans for implementation.
    • Assess and compare operational processes with best practices and identify opportunities for improvements.

As the steering committee determined the scope and time frame, it was clear that dedicated resources were needed. Selection criteria for a consulting firm were defined, with the key driver being the ability to effectively partner with internal experts. (It was imperative that the organization gain and maintain the gleaned knowledge to ensure long-term viability of the work.) Selection criteria included:

  • deep and credible knowledge in Clinical Services, Finance, HR, and support departments.
  • ability to establish relationships with organizational stakeholders.
  • systems and organizational knowledge of best practices.
  • ability to assess situations and opportunities for improvement objectively and with consideration for the internal environment.
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The approach

After the consulting firm was selected, the engagement was initiated with two distinct phases outlined below. The consulting team consisted of five productivity specialists who were partnered with decision support personnel.



  • Phase I–High level assessment, approximately 8 weeks
  • (Interviews, data collection, and analysis)
    • Assess hospital-wide labor control practices.
    • Benchmark individual departmental productivity levels utilizing customized national benchmark data.
    • Identify hospital-wide and individual departmental issues affecting efficiency with mid-term impact.
    • Recommend conservative and aggressive staffing targets.
    • Conservative targets were achievable in the near term and could typically be achieved “within the four walls” of the department.
    • Aggressive targets would require more time and sometimes involved interdepartmental cooperation and/or capital investment.
  • Phase II–Implementation-Consulting team consisted of original assessment team members partnered with subject matter experts specific to the deeper assessment areas
    • Reorganize steering committee to facilitate immediate implementation of “fast track” opportunities.
    • Conduct deeper assessments in high-opportunity areas identified during Phase I and developed improvement plans.
    • Establish organizational productivity goal (FTE/AOB).
    • Select and roll out departmental labor targets.
    • Continue to refine and implement hospital-wide and departmental action plans.

A cornerstone of success was the newly developed productivity monitoring tool, which moved the organization from a largely manual process to biweekly reports with automated volume and payroll feeds. (See Sample “roll-up” report.) The development of this tool required an extensive review and validation process of the Charge Description Master. It has created a common platform for communication that serves as a barometer, a compass for course correction for the organization, and the “sole source of truth” for data. It provides a summarized “roll-up” for each organizational level and signals with visual cues, using red, yellow, and green indicators denoting level of performance. The rolling 26 pay period view allows quick identification of seasonal trends. (See Sample departmental trend report.) The Productivity Report is validated by department managers on a biweekly basis via Charge Detail by Department and Labor Distribution Reports. Detailed cost-center-specific information is now readily attainable for areas that need more granular detail to understand the nuances of variances and which support corrective action.

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Other key insights

A sense of ownership was created within the senior management team by working collaboratively throughout the target-setting process, not just having targets “set” by the consultants. The transparent review process by the steering committee of all assessments also clearly demonstrated the entire team was contributing to the work at hand. New labor targets were established (using a combination of benchmarks, historical data, assessment findings, and managerial and consultant input) and incorporated into a new operational budget and productivity report. Because manager knowledge and skills of key labor management tactics varied widely, training on specific strategies and tools was provided.

The following examples reflect significant changes implemented in fixed departments and a nursing area:

  • All fixed overhead departments were moved to variable.
    • Historically, only the direct patient caregivers' time was routinely flexed to match workload.
    • It was decided that these departments would be required to flex their staff as workload volumes changed.
    • Areas whose workload volumes aren't very volatile focus primarily on their year-date productivity performance and flex as needed to stay on track.
    • Staffing/scheduling practices in some nursing areas were inhibiting their ability to consistently attain labor goals, necessitating a redesign in which the:
  • Actual patient acuity was validated.
    • Direct care nurse-to-patient ratios were adjusted based on acuity and unit activity.
    • Scope of nurse's unlicensed assistive personnel responsibility was reviewed and modified in collaboration with the unit-based practice councils.
    • Staffing decisions became more driven by actual as opposed to anticipated census.
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Results and lessons learned

With any organizational undertaking that aims to improve both operational efficiencies and financial stability, it's critical to set and attain an identified goal and learn from the process. For this effort, the results have been very positive. The hospital is exactly on target organizationally; many individual managers are achieving their new stretch goals, and others continue work on mid-term strategies to achieve targets. The new report format facilitates increased focus and more dynamic flexing of staff to volumes for both direct and indirect departments.



A number of lessons were learned along the way that are likely applicable to other organizations.

  • Ensuring senior management consensus around goals and processes was essential to ensure ownership of the process and decision-making.
  • Involving department heads in the assessment, brainstorming, and goal-development sessions achieved buy-in.
  • Involvement of the unit-based practice councils for dialogue on which models could be implemented in their area (most chose the aggressive model) promoted adoption of changes.
  • Using consultants with specific industry/department experience and a partnering approach quickly gains trust.

As Debra Mathias, COO, summarizes the project, “The key to this success was partnership—with the consultants, the management team, and our associates. Structured and diligent oversight coupled with transparent decision-making and outcomes held the organization accountable to meet our goals. As we continue to manage in very difficult economic times, we're extremely pleased with these sustained results.”

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Organizational profile

  • A 238-bed tertiary referral facility
  • University affiliated
  • Healthy patient volume, further growth anticipated
  • A significant facility expansion underway
  • Developing new tertiary and quaternary services
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Unique organizational challenges beyond the global economic environment

  • Highly competitive Southern California market, including legislated minimum nurse staffing ratios
  • Challenging reimbursement environment, including current and anticipated reductions in revenue “real dollars,” particularly in Medicaid
  • Consistent volume increases but not always achieving economies of scale in terms of labor expense
  • The requirement to “staff up” for new services prior to generating offsetting revenue
© 2012 by Lippincott Williams & Wilkins, Inc.