A Powerful (and Often Overlooked) Way to Lower Health Care Costs
By: Michael Rosenbaum, Founder and CEO, Arena
While health care organizations focus on their mission of providing high quality care in their community, it’s critical that they remain financially healthy to do so. Pressures from rising costs are nothing new, and there’s no shortage of ideas for saving money. In fact, there are so many choices it can be a challenge to figure out where to start. Some prioritize value-based purchasing and reducing hospital readmissions while others try to improve materials management to eliminate waste.
Why not start with the biggest cost in your budget? Labor expenses are typically between 45 and 65% of the total budget at health care organizations. We often assume that lowering these costs means eliminating positions, but there’s a more powerful strategy that is often overlooked: reducing employee turnover.
Some may think this is easier said than done; at many organizations employee turnover is considered an unavoidable cost of doing business. Research from The Advisory Board Company shows that one in four new employees will leave their job within their first year, and 13% annual turnover overall is typical for hospitals.
Arena’s clients have reduced their employee turnover by a median of 38% by simply rethinking how they hire people.
How did these organizations achieve such impressive savings? They use data and predictive analytics. Netflix and Amazon do it when they recommend films and products you might like. Professional sports teams do it to find players. And now you can bring it to your hiring process.
Health care organizations have long used these proven techniques to enhance diagnoses, improve clinical outcomes, coordinate care, manage risk, and create precision medicines. It’s time to bring that same power to the lifeblood of health care organizations: their people.