A New Jersey hospital reduces labor costs with a new Web-based shift-bidding system.
Numerous surveys show that labor costs are at the top of the priority list for hospital chief financial officers worried about rising internal costs. That's probably why their ears prick up when they hear about any tool or process that might allow them to save cash on labor, like shift bidding for the nursing staff. Although many hospitals still haven't adopted the method of allowing staff nurses to bid for the shifts they want, the process isn't new. But what's becoming clear is the big savings that hospitals are racking up by bringing their nurse shift assignment into the 21st century.
Bill Christie, assistant vice president of finance at 270-staffed-bed Virtua Memorial Hospital Burlington County in Mt. Holly, NJ, replaced his hospital's "antiquated system" with a new Web-based shift-bidding system from Concerro. Most such systems are Web-based, and hospitals pay a monthly subscription fee to use them. Christi says the shift-bid system is important but only one part of the hospital's greater focus on recruitment and retention.
"We set this up being pretty unsure and had a six-month exit strategy if we weren't seeing things that were beneficial to us," he says. "We've returned our investment, but we're still working to see how much because there are so many moving parts."
The financial results are unequivocal, although Christie doesn't attribute the recent downtrend in agency spending solely to the new shift-bidding process. Still, he says, "the trend of our agency and overtime spend is down for the first time in years." The hospital spent $3.8 million in 2005, $7.1 million in 2006, and $9.5 million in 2007 on agency nurses and overtime. Part of that increase is attributable to patient volume growth, but with volume growth continuing in 2008, "we're trending down to $6.5 million in 2008. So it's a 30-something-percent drop even with increased volume again this year."
"We're filling gaps well into the future as opposed to filling it for the next shift, so we are not forced to pay premium agency rates when we are in a crisis situation."
John Doyle, CFO at Main Line Health's Paoli (PA) Hospital, uses a similar shift-bidding system at his 157-staffed-bed hospital.
"With nursing being 40% to 50% of your payroll expense, we're always looking for ways to cut costs," he says. "We really went after how we could bring overtime and agency costs down."
Main Line Health is able to choose the lower-salaried nurse if there is competition for a particular shift. "Nurses can bid on any unit where they meet the qualifications and the manager can accept or reject that applicant. One of the features is if you have three applicants, you can choose the lower salary. This gives them a lot of flexibility."
That flexibility extends to Main Line's four other campuses, where nurses who had previously been limited to only one campus can now bid for shifts at all campuses. Further, Main Line is extending the shift program to other departments, like radiology, lab, and physician practices. "We saved more than $1 million in the first year, says Doyle. "Not only that, but retention went up and vacancy rates went down."