Bill Klaproth (Host): This is Today in Nursing Leadership, a podcast from the American Organization for Nursing Leadership. I'm Bill Klaproth. And this podcast is brought to you by Medely. Visit them at medely.com and with me is Brett Loder, Chief Financial Officer at Medely, as we discuss the evolving dynamics of healthcare staffing, focusing on the cost benefit of contingent labor. Brent, welcome.

Brent Loder: Thanks, Bill. Really happy to be here.

Host: Good to talk with you, Brent. Looking forward to it. So, let's start with this. From a financial standpoint, what are the most significant pressures hospitals face today regarding staffing?

Brent Loder: Good question, Bill. This is something we at Medely spend a lot of time thinking about as you can imagine. I'd say right out of the gate, there's just rising labor costs, wage inflation. This shouldn't surprise anybody given the inflationary backdrop that we've all been operating in, living in for a number of years now.

But it wouldn't surprise anybody that this is impacting the healthcare system as well. Hospitals are paying more to attract and retain staff, particularly nurses and allied professionals, signing bonuses, retention incentives, shift differentials. These have all become more commonplace in the labor market.

And then, you also have a little bit of the COVID hangover here as it relates to sort of contract labor. So during COVID, obviously, travel nurses spiked and became a huge source of labor. While that dependence has decreased, we still aren't back to where we were sort of pre-2020.

Other impacts, staffing shortages and burnout. I think anybody that is working in the healthcare industry today will attest to the fact that there's just a structural shortage of nurses and physicians and just basically any aspect of the healthcare facility or the environment right now is really understaffed. And there's, in addition, an aging workforce and insufficient pipeline of contributors. So, this is putting a lot of stress on the overall system. And in fact, the HRSA projects a shortage of over 78,000 RNs in 2025, and this is only going to increase over time. So, this leads to a lot of turnover and burnout. So, there's high attrition, and this leads to high costs as people are forced to constantly recruit, onboard, and then, churn, rinse, repeat. So, this is just vicious cycle that the overall marketplace finds itself in. And then, you have high overtime costs. So, as these people churn and move out and you're forced to replace this labor shorthanded, this leads to overtime costs, and this is really expensive. It's both financially draining and it's really unsustainable in the long-term.

There's also productivity and efficiency pressures, staffing to volume. So with patient volumes fluctuating, as you can imagine, patient volumes aren't consistent day to day, week to week, month to month. And hospitals and the healthcare system, by and large, struggle to match staffing efficiently with these ebbs and flows of demand.

Clinical staffing ratios and regulations. Some states even mandate minimum staffing levels. And it's really hard when your staffing force overall is not flexible. There's also like a recruitment and training investment. There's a lot of upfront costs, so hiring new staff involved really expensive onboarding, training, ramp-up period.

So, you know, I'd say in summary, the biggest financial pressure is sustained labor cost inflation, and this is paired with limited flexibility to reduce staffing without compromising quality or compliance. Staffing typically represents upwards of 50% or 60% of a hospital's operating expenses, and these pressures directly threaten margins, particularly for rural and safety net hospitals.

Host: Holy cow! There's a lot going on there.

Brent Loder: It's a lot. I mean, it's a very large dynamic system that we're part of. And Medely is here to try to solve this.

Host: Oh my goodness. I mean, some of the things you mentioned, COVID hangover staffing shortages, burnout, productivity requirements, recruitment training, and that nursing shortage of 78,000. Oh, my goodness. So then, on top of that, Brent, how do budget cuts combined with a national clinician shortage affect hospital operations?

Brent Loder: Yeah. As you can imagine it, it's not good. The compounding effects of budget cuts and a national clinician shortage in the healthcare sector can be severe. Far reaching, individually, both issues strain healthcare systems. But when you combine them, they create like this feedback loop that worsens outcomes for patients, for staff, and for the institutions.

Impacts include reduced access to healthcare. You see worsening patient outcomes and then, increased clinician burnout and attrition, something we just touched upon. But I think the most obvious impact is that there's simply fewer resources to attract and retain full-time staff. Budget cuts are inevitably going to impact the pool of money available to compensate professionals. And so while the demand for talent is high and growing, there is simply not enough funding to close the gap with the supply shortage.

Another result is an increased reliance on overtime, so something I touched upon earlier. But fewer staff to support a facility means that when there is a need or a sudden increase in need, it's going to be filled by overtime, which drives up costs and burnout, and puts more stress on those budgets that are being cut. In addition, things like gaps in coverage lead to delayed care, lower patient satisfaction. So, a lot of surveys come back with patients that are becoming less appealed or fulfilled by the healthcare system overall. And the operational strain on nurse leaders, managing constant staffing shortfalls is just a constant strain in headache for these individuals as they navigate this really tough environment.

Host: It's like a big wave coming at you, all of these things.

Brent Loder: Yes, never ending.

Host: Right. Never ending. Oh, my gosh. I mean, there's just so much going on. And then, on top of it, we need to talk about the Medicaid cuts on hospitals and health systems. What are the impacts of those financially and operationally?

Brent Loder: Yeah, the hits really do just keep on coming, Bill, don't they? So, Medicaid cuts have a significant and often destabilizing impact in hospitals and the healthcare system at large, especially those serving low income, rural and underserved populations. These cuts reduce the amount of money hospitals are reimbursed for caring for Medicaid patients. These often require more complex care and they generate less revenue compared to privately insured patients. So, right out of the gate, you have reduced reimbursement rates. And and these reduced reimbursement rates strain margins. So, hospitals, healthcare systems receive less revenue for the same procedures. This is going to put more focus on cutting costs, and as I already alluded to, staffing accounts for 50-60% of operating expenses. This is the biggest pool of expenses to go after when there is strain on these budgets. You know, the impacts of Medicaid are also leading to a significantly higher volume of uninsured patients, especially again, in this rural and safety net area. Those are the ones who are losing coverage and are the most vulnerable. For example, low income families, people with disabilities. This will likely lead to an additional strain on the system. As these people put off procedures, they don't get healthy quickly and thus end up coming into ERs with even more significant conditions. So, it's sort a virtuous negative cycle.

There's also delays in hiring and capital investment due to financial uncertainty. Nobody likes an uncertain outlook. It's really hard to plan against. And this can manifest itself in many ways. One way is less investment in facilities and systems for healthcare workers. So, you can just think about the environment in which these healthcare workers are working in day to day. There's just going to be less investment in them, so there's going to be wear and tear and just, quite frankly, a place that people become less excited to show up to work for every day.

Finally, there's increased reliance on flexible workforce models to manage volatility, and there's just a better need for forecasting and staffing agility.

Host: You know, we've been talking about this nursing shortage now for a couple of years. But hearing you talk about this, it's really starting to reach critical mass, it sounds like.

Brent Loder: Every day, we see it.

Host: Yeah, for sure. Something absolutely has to be done. So let me ask you this, can you explain how reactive staffing decisions, such as last minute shift coverage, affect the financial bottom line over time as well?

Brent Loder: I can sure try, Bill. So, what do these reactive staffing decisions mean? At its core, it escalates labor costs, and this is done through overtime, premium rates, right? Those reactive moves come at a cost because you've already set schedules and there's an increased demand all of a sudden and you're forced to put even more weight on your current staffing situation and pay higher overtime, which as we talked about, just puts more pressure on the P and L and the budgets that are already strained. The American Hospital Association estimates that overtime wages and agency staffing can add over $10,000 per nurse per year. So again, that's $10,000 per nurse per year just through overtime.

Other things that this impacts, it drives up turnover and associated hiring expenses. Overworked healthcare professionals, as you can imagine, are more likely to churn, leave their jobs, walk away. This creates added expense in the form of having to go out and fill that post and then retrain. There's an air pocket there. It's not like somebody shows up to work on the first day and they know exactly what to do. There's training involved. So, the costs sort of stack up on top of each other.

There's also hidden admin costs from constant scheduling triage. Nurse managers spend roughly to 15-20% of their time resolving last minute staffing issues. That's just a crazy amount of time and headache. And this equates to thousands of dollars of management labor costs every month. Over time, all this sort of equates to margin erosion due to lack of planning, lack of proper planning. And it leads to strategic financial staffing volatility and really impacts the overall healthcare system by and large.

Host: So, what should our nurse leaders do then? What are some trends or data points that facility leaders should monitor for more strategic staffing solutions to help the problem?

Brent Loder: Data is key. So, I would definitely encourage folks to pay attention to as much data as they can. And some of the things that we look at or would recommend them look at is patient volume and acuity trends. So, the goal here is to align your staffing levels to real time demand. And then, constantly adjusting the changes in forecast to better align upcoming needs with the staffing. So, it's that constant feedback loop of trying to take real time data and making adjustments, as quickly as you can.

I'd also look at things like shift fill rates. Can you identify the chronic gaps and where are those peak problem areas and try to address them? What are the pay trends that these facilitators seeing with respect to overtime and premium pay? Are there opportunities in there to sort of reduce this? How can they spread this out, so that they're not paying those peak rates? What is the time to fill for open roles? How can we track this, gauging hiring bottlenecks and trying to address those? And I would say combining all these with predictive tools to proactively flex staffing is really key, and I'd say this is something that Medely really helps these leaders act on this data in real time and address this to try to drive down those staffing costs.

Host: So, patient volume, we should pay attention to acuity trends. You talked about shift fill rates. So, enter predictive tools. I love it. Enter Medely. So, how can predictive tools aid facilities in reducing costs and minimizing volatility in staffing expenditures?

Brent Loder: It's a great question. And I think it kind of goes back to what I just mentioned with utilizing this data. So, there's a tremendous amount of data out there and how can you put this into a format where it can best serve you as opposed to being just overwhelming. So, taking this data, putting in these predictive models and helping to hopefully optimize the shift distribution. So, you're optimizing it across both full-time and flexible staff, for example. Improving your budget accuracy through data-driven forecasting. You don't just set a budget once and then stop. It's helpful to reforecast, take new information as it comes in and adjust on the fly. You can use things like waterfall staffing to help fill shifts cost effectively. So, what this means is, can you staff this internally first with your internal staff and then it waterfalls down to a marketplace such as Medelys? And then, if it doesn't get filled there, then ultimately cascading down to sort of the higher cost options to ultimately get filled.

Can you enable nurse leaders to staff to demand and take out the guesswork? So, shifting the labor strategy from a reactive to proactive, getting on that front foot, so to speak. We do have a new planning tool here at Medely. It helps simplify the workforce scheduling with predictive analytics and automation. It builds optimal schedules based on staff preferences and rules like nurse-patient ratios, saving admins many, many hours of work. And it maximizes the internal team and automatically taps into Medely's marketplace to fill any gaps. Simply set staffing targets, and then the Medely programming takes care of the rest.

Host: Yeah. That's really interesting. It sounds like having the right staffing levels at the right time, so there's really no waste or shortage.

Brent Loder: Absolutely. I would say, I would just kind of plug what we call is like the contingent foundation strategy. So, the idea is pretty straightforward here. What we think as opposed to aiming for a hundred percent full-time traditional staffing at any given location, and then you having to panic when somebody leaves, or all of a sudden you see a surge in demand, instead, intentionally make about 20% of your workforce flexible. So in practice, this becomes like an 80/20 model. So, 80% is core full-time team. You keep a solid core of full-time staff. This is like essential roles, your leadership, people who want full-time hours, but you keep that core leaner than you might've historically. Maybe you staff again at that 80% of peak need instead of at the a hundred percent level. And then, that remaining 20%, that's your contingent foundation. So, this is built upon a pre-built pool of contingent professionals who are pre-vetted, credentialed, and familiar with your facility so they know your processes. Maybe they've even met with your team, worked with you before, but they work on demand when you need them. So, this is, again, kind of going what we call our contingent foundation strategy, but it is really looking at flexible contingent labor as a key part of the overall labor strategy.

Yeah.

Host: I'm wondering also, Brent, as I hear you talk about this, how do you work with your clients? Do you come in and then do you do an audit first and look at everything and then make recommendations and propose solutions?

Brent Loder: I'd say there's many different ways we can work with clients and the ultimate goal here is to ascertain how can we be most helpful. And so, whether that is, like you mentioned, sort of an internal audit, maybe it's something where we work together to get to know them. And over time, we build up that trust, our fill rates exceed expectations. They really like the labor that we're providing. And then, they start to learn and use some of our other offerings, like our internal resource management tools, or these predictive planning tools. And then, the relationship grows from there. So, there isn't any one set way that we're working with people. At the end of the day, we want to be a resource and a partner to everybody in whatever way works best for them, we're willing to accommodate.

Host: Yeah. And I bet these predictive tools like yours are very well received. Would that be right?

Brent Loder: Oh, absolutely. I think we've seen tremendous uptake and people really enjoy them. And we've had phenomenal savings reported back to us from people that have really engaged with them and relied on them and seen the savings that they can generate.

Host: It's almost like having an assistant on board that's constantly looking at this, coming up with ways to make the puzzle work, if you will, and then saying, "Here's what I found. Here's my recommendation on what I think we need to do right now."

Brent Loder: Yes. Yeah, and providing recommendations. And our partners can choose whether they want to take those recommendations, because that's it, we're not in a place of power. But I think over time we've proven out that these recommendations really are built on data. They have integrity, and at the end of the day, they really help generate the results people are looking for.

Host: Yeah, I could see where this is really, really beneficial and helpful for all the reasons that we know of some of the things, like you said, this will help with better outcomes, which is really important. This will help with staffing shortages, with burnout, with all of those things that you talked about. These predictive tools really seem to be the wave of the future. And the things we need to be doing right now, it just seems to really make sense. Let me ask you this, are there any financial planning models or frameworks that you would recommend for facilities navigating variable labor costs?

Brent Loder: Yeah. I have a few recommendations here. And something I alluded to earlier is rolling forecast. So oftentimes, what we see people do is they'll set a budget and then they won't come back and adjust that. So, they might set a budget for a quarter or even a whole year. And as they progress through that year, look, the environment is dynamic, things are always changing, and so if you can go back and continuously reforecast with updated information, updated data, talking about those, what is the demand looking like, what are the costs that are on your labor force looking like and continuously update really helps with accuracy.

Other things that we've seen that have been helpful for folks is flexible budgeting, so adjusting your labor spend based on actual patient volume and acuity. And so, this dynamic model more accurately reflects reality versus like a more static sort of peanut butter, spread-it-across-everything approach. Scenario planning models are really helpful. So, it's not just a single scenario, but maybe you're taking into account multiple scenarios and trying to figure out, which is most likely probability weighting things. And then, contingency planning. So if something does change, you have something off the shelf that's ready to go. And so, it's not quite proactive, but there's not a need to go back and recreate the wheel in terms of financial forecasting.

And then finally, you know, workforce stratification. Can you separate core staff from flexible labor in models to better manage cost tiers, and that's a little bit what I was talking about before where if you can really ingrain some of this flexible workforce into your overall strategy, I think it really helps build a dynamic model that is cost savings and is dynamic enough to deal with the changing environment that is continuously changing.

Host: That is true. I like how you said earlier, the environment is dynamic, things are always changing. A truer statement has never been said. Well, I want to thank you for those thoughts and recommendations. Brent, before we wrap up, is there anything else you want to add?

Brent Loder: Yeah, thanks, Bill. You know,

Host: I say at the end of the day, there is no financial model that's going to fix everything on its own. There's no one key silver bullet here. It really does take leaders who are willing to get creative, to stay flexible and make smart staffing decisions based on real-time data.

Brent Loder: That's how you turn unpredictability into opportunity and keep your facility financially healthy for the long run. And at Medely, we're positioned to help facilities do exactly that, giving you flexible on-demand staffing that fits your budget and your needs. So hopefully, I can just part with that final thought.

Host: Absolutely. Brent, thank you so much for your time. I really appreciate it.

Brent Loder: Bill, thank you. I really appreciate it.

Host: You bet. Once again, that is Brent Loder. And this podcast has been brought to you by Medely. Incorporating contingent labor into your workforce can be cost efficient and proactive. Leverage predictive tools and talent marketplaces like Medely.

If you want to learn more about them, I encourage you to do that. Please visit them at Medely.com. That's M-E-D-L-E-Y.com M-E-D-E-L-Y. M-E-D-E-L-Y.com Check them out today. And if you found this podcast helpful, please share it on your social channels and check out the full podcast library for topics of interest to you.

This is Today in Nursing Leadership. Thanks for listening.