Integrated Capacity Management for Health Systems: A Proactive Solution to Today’s Capacity Challenges
Tools to proactively manage capacity can forecast patient demand with up to 98% accuracy
Healthcare executives are facing a perfect storm of changing reimbursement models, decreasing reimbursement, and increasing costs. In order to succeed in this environment, hospitals have to increase their efficiency and effectiveness. Specifically, they have to decrease their operating costs by managing capacity using a new approach that simultaneously reduces costs, improves quality of care, and increases staff satisfaction.
Historically, most hospitals and health systems have attempted to decrease their operating costs by cutting staff, since labor makes up about 60% of the cost structure.1 But staff reductions can have a negative impact on care quality and staff satisfaction. In addition, many hospitals and health systems have attempted to decrease their operating costs by managing their labor costs and reducing patient length of stay on a near term basis. Unfortunately, the tools that they have had at their disposal have made it difficult for them to achieve these goals. Specifically, the implementation of staff scheduling and time and attendance systems has enabled operational leaders to automate these processes. However, due to the reliance on forecasting by historical averages, the impact of these systems on reducing labor costs and increasing staff productivity has been limited. Additionally, while the implementation of bed management systems has enabled operational leaders to automate bed management processes, the impact of these systems on reducing length of stay, including avoidable days, has been limited. And these systems alone may not always result in a significant increase in patient safety, quality of care or staff retention.
The primary problem with today’s approach to capacity management is that it is a reactive process. Hospital and health systems do not have the ability to accurately predict their patient demand and staffing requirements on a prospective basis. They do not have the ability to leverage these forecasts to optimize resource allocation. And they do not have the ability to optimize staffing and reduce length of stay on a near-term basis.
This white paper outlines a proven “Integrated Capacity Management” strategy that empowers healthcare executive and operational leaders to take a proactive approach to managing their supply and demand. Integrated Capacity Management provides healthcare executives and operational leaders with tools that help predict patient demand and staffing requirements on a prospective basis using predictive analytics.
It provides them with the ability to leverage these forecasts to allocate and optimize resources at every point of the strategic planning, annual planning, and real-time decision making process. And finally, it empowers them to optimize staffing and reduce length of stay on a near-term basis by improving organization-wide communication and collaboration. This may lead to a significant decrease in labor costs and length of stay and an improvement in quality of care, patient safety, and staff retention.
No Margin, No Mission
“No margin, no mission” has long been the rallying cry of healthcare leaders who understand that they cannot serve the needs of their communities and patients without at the same time ensuring that their organizations are financially sound. However, a recent study published in Health Affairs found that 55% of for-profit and not-for-profit acute care hospitals were not profitable.2
One of the key reasons that US hospitals and health systems are unprofitable is because they have struggled to develop and implement effective approaches to reducing their operating costs. Historically, most hospitals and health systems have attempted to decrease their operating costs by cutting staff, but staff reductions may have a negative impact on care quality and patient safety. Other hospitals and health systems have attempted to decrease their operating costs by managing their labor costs and reducing patient length of stay on a near-term basis. However, the tools that they have had at their disposal have made it difficult for them to achieve these goals.
There are five key reasons why these traditional approaches to reducing operating costs have failed to reach their full potential:
1. Lack of accurate, predictive analytics-based forecasts. One of the key reasons why staff scheduling and time and attendance systems have had a limited impact on labor costs and productivity is due to a lack of accurate, predictive analytics-based forecasts that can be used to drive workforce requirements and provide guidance for flexing workforce both in advance and on a real-time basis.
2. Inability to make near-time and real-time workforce decisions. Most hospitals and health systems do not have tools to make near-time and real-time workforce decisions based on acuity and occupancy including the number of patients to be cared for and the complexity of each patient.
3. Lack of visibility into the patient journey. Why is that bed not ready for a new patient? Are we regularly evaluating patients with catheters and central lines to help prevent CAUTI and CLABSI? If Mr. Jones is scheduled for discharge today, is there a discharge order yet? These issues are often hidden or difficult for staff to determine, resulting in bottlenecks, quality of care issues, and unnecessary clinical and operational steps.
4. Lack of visual tools and indicators. Hospitals and health systems lack visual indicators and tools that can be used to drive communication and collaboration and empower interdisciplinary team members to identify and resolve operational and quality issues.
5. Resistance to change and new processes. Many efforts to improve capacity management processes have been met with significant resistance from senior managers and operational managers.3 A lack of predictive analytics and tools to facilitate communication, collaboration, and transparency have contributed to this challenge.
The Challenge: Why Isn’t the Current Approach to Capacity Management Effective?
Today’s approach to capacity management is a reactive approach focused on attempting to decrease labor costs and reduce length of stay on the day of shift. At a high level, this approach involves the following steps:
- Developing annual plans and budgets by averaging historical volumes and using ratios like 5 to 1 for day shifts
- Developing staff schedules based on core coverage goals
- On the day before a shift, reacting to manual reports from each unit regarding their anticipated staffing needs. These manual reports are typically based on discharges and a subjective assessment of the acuity of patients on each unit
- On the day of shift, completing bed huddles throughout the day to assess current staffing needs; reacting to understaffing by paying overtime premiums or using high-cost agency nurses; and reacting to overstaffing by sending people home
- Monitoring key performing indicators including ED wait times, admission delays, etc.
- Managing averages, including average length of stay
The Clinical and Financial Impacts of Today’s Approach to Capacity Management
The clinical and financial impacts of this reactive approach to aligning healthcare supply and demand are well known to healthcare executives and operational managers. They are also felt by patients. These impacts are described in the article, “Patient Flow in Hospitals: Understanding and Controlling It Better” in Frontiers of Health Services Management. In this article, Drs. Haraden and Resar write, “Patients and providers [have come to] regard waits, delays, and cancellations as an inevitable consequence of receiving care.”4
“Patients and providers [have come to] regard waits, delays, and cancellations as an inevitable consequence of receiving care.”
The Limitations of Today’s Capacity Management Tools
One of the reasons that hospital and health systems have had to utilize this reactive, ineffective approach to capacity management is because they have not had effective tools to proactively manage their capacity. Specifically, the implementation of staff scheduling and time and attendance systems has enabled operational leaders to automate staff scheduling and time and attendance processes. However, the impact of these systems on reducing labor costs and staff productivity has been limited, due to reliance on historical average volumes.
One of the reasons that hospital and health systems have had to utilize this reactive, ineffective approach to capacity management is because they have not had effective tools to proactively manage their capacity.
In addition, the implementation of bed management systems has enabled operational leaders to automate bed management processes. However, the impact of these systems on reducing length of stay, including avoidable days, has been limited. And these systems have not resulted in a significant increase in patient safety, quality of care or staff retention. The following table summarizes the limitations of these tools.
The Solution: Integrated Capacity Management — A Proactive Approach to Today’s Capacity Management Challenges
Integrated Capacity Management enables hospitals and health systems to leverage a range of information, including acuity and productive and nonproductive staffing data to predict patient demand and staffing requirements on a prospective basis. Integrated Capacity Management also empowers operational managers with projected patient demand and staffing requirements as part of an information-driven staffing process. And finally, Integrated Capacity Management empowers the entire care team to make refinements in staffing based on patient acuity and updates to the patient demand and staffing projections on the week and day-of-care.
With the right resources in place to meet patient demand, Integrated Capacity Management helps care teams become equipped with the information they need to help a patient flow efficiently from admission to discharge, while receiving care that meets quality standards.
The core components of this approach include:
- Accurate predictive analytics-based forecasts that can be used to drive workforce requirements and provide guidance for flexing workforce both in advance and on a real-time basis
- Real-time and near-time workforce decisions based upon acuity and occupancy including the number of patients to be cared for and the complexity of each patient
- Visibility of the patient journey from admission to discharge to minimize delays, improve patient throughput, and maximize capacity and resources
- Visual indicators and tools used to drive communication and collaboration and empower interdisciplinary team members to identify and resolve operational and quality issues and align the care team
Overview of Integrated Capacity Management
This approach results in a decrease in labor costs, and improvement in patient safety and quality of care and an increase in staff retention and satisfaction. This provides the foundation for hospitals to align and manage their resources as efficiently and effectively as possible.
In a health system setting this is primarily the challenge of aligning patient demand and staffing. With labor costs typically exceeding 50% of total expenses, the most effective way to reduce operating costs is to align staffing and capacity with predicted patient demand.6
Integrated Capacity Management empowers managers to make better decisions about aligning capacity with demand as part of the strategic planning, annual planning, staff scheduling, and daily planning process. Integrated Capacity Management empowers executives, senior managers, and front-line leaders to align staffing, capacity, and demand across the continuum of the planning process.
The Long-Term, Strategic Perspective
Predicting patient demand using historical data is straightforward. However, predicting patient demand and staffing requirements with the degree of accuracy needed to improve decision-making is much more difficult.
Accurate patient demand forecasts use predictive analytics, including algorithms. These forecasts also rely on clinical input from executives and senior managers to incorporate anticipated changes in length of stay and other factors expected to result from the implementation of clinical and operational programs over the coming year. This also ensures senior managers accept the forecast, including the annual plan based on the forecast.
This comprehensive approach results in a patient demand forecast reliable for annual, quarterly, daily, and shift planning purposes. In fact, this approach can result in 95 to 97% accuracy one month out, and more than 98% accuracy on the day of care.
The ability to predict patient demand and staffing requirements on a prospective basis allows health care decision makers to forecast arrivals and patient flow over multiple time spans. They can then translate this anticipated activity into the right level of facility (beds, supplies) and staffing requirements.
Overall, the Integrated Capacity Management approach transforms reactive decision making into a proactive one.
The next element of Integrated Capacity Management is the ability to combine patient demand insights with staffing forecasts. This helps drive scheduling and ensures regulatory and contractually obligated nurse-to-patient ratios are met. The challenge is to accurately anticipate workload conditions, consider clinical relevancy and meet staffing variations in real time.
An Integrated Capacity Management approach brings highly accurate and dynamic staffing forecasts directly into a hospital’s system so schedules can be efficiently and effectively created. This results in schedules that balance required staffing with predicted patient acuity, factoring in considerations such as scheduled and unscheduled PTO, training leave, and other typical impacts to scheduling.
Sustainable financial impacts, quality impacts and satisfaction, and retention impacts come from better forecasting, better scheduling and the optimal use of overtime premiums and supplemental labor when needed. Managers are able to anticipate clinically relevant workload conditions and then adjust schedules in real-time.
Integrated Capacity Management can forecast patient demand with 95 to 97% accuracy one month out, and more than 98% accuracy on the day of care.
Integrated Capacity Management is about smoothing schedules a week ahead of time, and adjusting staffing numbers and skill-mix to meet any revisions to the demand and acuity forecast. Tools like self-service scheduling provide staff the opportunity to play a direct role in achieving balance.
On The Day-Of-Care
On the day-of-care, Integrated Capacity Management enables staff to be more proactive in decision making because patient demand and required workforce have already been carefully aligned. Additionally, transparency systems are in place to allow staff to identify and rectify unanticipated events as they arise.
Frontline leaders have the ability to quickly and easily assess patient acuity unit by unit, as well as across the entire organization, ensuring the right staff are assigned to the right patients at the right time. Acuity measurement tools are critical — they offer the flexibility to customize care classification patient requirements while taking into account staff skill, knowledge, and experience.
Senior managers can also understand where resources have been allocated across the hospital, and rebalance those resources to meet immediate needs. Mobile tools allow every team member to identify schedule and patient-flow issues – such as an unexpectedly open shift or dirty beds that need to be turned – for speedy resolution, ensuring proper staffing, minimizing length of stay, and maximizing patient flow velocity.
In The Moment
Integrated Capacity Management provides at-aglance, realtime insight into patient flow, patient quality needs (such as identifying fall risks or making daily needs assessments of central lines), and even patient location within the hospital (such as when a patient is in the cardiac cath lab or imaging). This can allow care teams and supporting services work together more efficiently, delivering care that allows patients to be discharged earlier.
With these tools, managers can become more proactive about bed management by identifying blockages and improving patient flow. Patient stays can be shortened by streamlining admissions and discharges, and synchronizing care staff, e.g., technicians, transport staff, and environmental services. Everyone contributes to the optimal care of the patient, and the most efficient operation of the hospital.
Senior managers can also quickly understand where resources have been allocated across the hospital, and rebalance those resources to meet immediate needs.
Behavior changes involving operational and clinical processes are better facilitated by using graphic indicators to make them visible and remind staff to meet new targets and make them aware of new interventions. Reduced process variation and risk is achieved by increasing compliance with protocols, objectives, and response time targets.
The High-Level View
Finally, with an Integrated Capacity Management approach, executives and senior managers gain a high-level view into the entire process of operational decision making. This involves providing a combined view of all capacity issues and opportunities. It allows senior managers to review specific metrics, including census, admissions, discharges, average length of stay, acuity, bed availability, patient flow blockages, clinical risk, staffing, productivity, and pay.
This exceptional visibility empowers executives and senior managers to better support their teams. They can help manage positive and negative variances in capacity, driving overall improvement in hospital performance. They also gain insights to use as part of the strategic, annual, and continuous planning processes.
In order to succeed in today’s environment, hospitals have to increase their efficiency and effectiveness. Specifically, they have to reduce their operating costs while at the same time improving their quality of care and staff retention. Integrated Capacity Management provides healthcare executives and operational leaders with the ability to achieve these goals by transforming their approach to capacity management with a more comprehensive, proactive approach. The net result is a significant decrease in labor cost and an improvement in quality of care, patient safety, and staff satisfaction and retention.
1. Carayon P, Gurses AP. Nursing Workload and Patient Safety—A Human Factors Engineering Perspective. In: Hughes RG, editor. Patient Safety and Quality: An Evidence- Based Handbook for Nurses. Rockville (MD): Agency for Healthcare Research and Quality (US); 2008 Apr. Chapter 30. Available from: http://www.ncbi.nlm.nih.gov/books/ NBK2657/
2. Ge Bai and Gerard F. Anderson. A More Detailed Understanding of Factors Associated with Hospital Profitability. Health Affairs 35, no.5 (2016):889-897. doi: 10.1377/hlthaff.2015.1193
3. Bellanca, Richard. Managing Six Sigma Change Resistance. iSixSigma. Not dated. Retrieved from https://www.isixsigma.com/implementation/changemanagementimplementation/ managing-six-sigma-change-resistance/.
4. Haraden, Ph.D., Carol, and Resar, M.D., Roger. Patient flow in hospitals: understanding and controlling it better. Frontiers of Health Services Management. Volume 20, No. 4. Summer 2004.
5. Singer, A. J., Thode Jr, H. C., Viccellio, P. and Pines, J. M. (2011), The Association Between Length of Emergency Department Boarding and Mortality. Academic Emergency Medicine, 18: 1324–1329. doi: 10.1111/j.1553-2712.2011.01236.x
6. Guerin-Calvert, ME and Israilevich, Guillermo. Assessment of Cost Trends and Price Differences for U.S. Hospitals. American Hospital Association. March 2011. Retrived from http://www.aha.org/content/11/11costtrendspricediffreport.pdf.