Cutting Labor Costs Without Layoffs: The Benefits of Digitizing Labor Management

Ellis Medicine in Schenectady, N.Y., has cut down labor costs without layoffs by using technology to drive employee management.

Managing employees, as well as the associated budget, can be a challenge for many hospitals and health systems. Labor costs can account for about 60 percent of a hospital's budget, and keeping track of employees in varying departments is not easy.

In 2008, Ellis Medicine in Schenectady, N.Y., was formed from a three-hospital merger. Suddenly, the amount of workforce management required to run the hospital got much more difficult with the increased number of employees. "We needed to find a way [to] manage our workforce more efficiently," says Sara Zappi, director of human resources at Ellis Medicine. After all, the system now had more than 3,000 employees to manage.

So, the system turned to technology. "We found an electronic way of managing our workforce, using one technology for workforce management and implementing it across the three organizations that became one," Ms. Zappi says. Ellis Medicine turned to API Healthcare, a healthcare-specific vendor focused on workforce management solutions.

In addition to managers and executives having access to track employee schedules, pay and benefits, Ellis Medicine made that information available to every employee, creating a transparent scheduling process for the entire system. "It gives employees a sense of empowerment," she says. "It helped establish credibility and a sense of fairness after the merger."

Cost-saving effects

At first, the workforce management technology was simply a way to see Ellis Medicine's workforce more clearly and for the system to understand more about its employees. "Initially, all we wanted to know was who was working here and what they needed," Ms. Zappi says.

However, after implementing the platform in the beginning of 2011, it soon became clear the technology could play a larger role. The management system has helped cut costs at Ellis Medicine by tracking two things: overtime and unplanned absences.

Overtime. Through the management system, Ellis Medicine managers and executives can see which employees are working overtime in which departments in real time. Before, schedules could only be assessed retroactively. "With salary taking up around 60 percent of the budget, that's a huge amount of money to not know how you're spending it, in terms of where your people are," Ms. Zappi says.

Now, by tracking scheduling in real time, Ms. Zappi and Ellis' managers are able to staff more appropriately. Ellis has cut hundreds of thousands of dollars from its budget by more closely managing overtime. In fact, in just six months, the system cut $721,000 from its budget in overtime costs alone.

In addition to reducing costs, paring down overtime can also lead to happier, well-rested employees. "People working overtime are more tired," Ms. Zappi says. "Though working overtime comes with more money, it's more pressure on family life and balance for the employee." In other words, it's a win-win for the hospital and the employees.

Unplanned absences. Before managing scheduling electronically, it was difficult for everyone — colleagues, managers and executives — to keep track of when an employee had an unplanned absence and called in at the last minute puts pressures on colleagues to cover the shifts. With the new, transparent system, those absences are tracked and made visible to managers and colleagues alike.

At Ellis, simply making the unscheduled absences visible to all led to their decline. "It put pressure on colleagues to not call in unscheduled," Ms. Zappi says. "When people call in unscheduled, it puts pressure on colleagues to cover the unit. That pressure itself led to a positive outcome."

And because of that decline in unscheduled absences, the system has saved hundreds of thousands of dollars, and enhanced quality patient care according to Ms. Zappi.

Overall, what started as a project to become more transparent and fair turned into a cost-saving initiative for Ellis Medicine. In addition to making scheduling and employee management easier, Ms. Zappi says, "it's been a wonderful way of enhancing our financial health" as well.

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