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Calculating the Cost of Clinical Vacancy

Clinical vacancy is caused by many factors such as the shortage of providers, geographic location, unanticipated increase in demand, market competition for talent, and more.

Now more than every healthcare organizations are struggling to manage clinical vacancy. The Atlantic reported in November 2020 that 22% of U.S. hospitals were experiencing a staffing shortage according to HHS data obtained.[1] As the COVID-19 pandemic continues, clinical vacancy is an ever-increasing challenge that will not end even as vaccines are distributed.

In this article, we will go through the qualitative and quantitative effects of clinical vacancy on a practice and how one can start working towards a smarter staffing plan in the future.

The Qualitative Impacts of Clinical Vacancy

There is no direct research available that shows the effects of clinical vacancy on clinical productivity or wellness. Anecdotally, providers working in an environment where vacancy is high can all relate to the challenges caused. The long hours and the shifts that always need to be filled, the fatigue and burnout as the few try to pick up the clinical work to help the many patients, and the eventual signs of burnout caused by the absence of downtime.

Operationally, leaders feel the constraints of vacancy as well. As clinical vacancy increases, it may feel as if there is a repetitive cycle, where the fatigue on clinicians leads to resignations and perpetuates the problem. The constant need to advertise positions and interview providers in a smaller and smaller pool of candidates can feel never-ending. The stress of keeping an eye on the metrics means more than just watching the bottom line, it means protecting patient outcomes and quality at greater expense.

It is often these qualitative impacts that lead healthcare organizations to finally take a critical look at solving the challenge of clinical vacancy. GSC acknowledges these factors and seeks to give readers the first measurements to quantify their challenges and understand the levers available to them to tackle clinical vacancy head-on.

The Quantitative Impacts of Clinical Vacancy

Decisions to invest in solutions for clinical vacancy may be initiated by the qualitative, but the final decisions on what and how to invest should always be based on the quantitative. In an effort to help healthcare providers understand their Cost of Vacancy better, Golden Source Consultants has developed a calculator that is available upon request. This free resource seeks to place real numbers on clinical vacancy by reviewing two key costs: the cost to fill a vacancy and the cost of alternative labor during a vacancy. In this section, we will briefly discuss these values and how GSC proposes organizations structure the strategic questions associated with each.

Step 1: The Cost to Fill a Vacancy

Finding the right clinical talent is an investment of time and money even before a hire is made. As you seek to understand what it costs to fill a vacancy, Golden Source recommends thinking about three key categories that drive cost before the first clinical day can be worked.

  1. Advertisement & Recruitment – these are the costs associated with paid advertisements and the labor costs for employees to interview candidates.
  2. Offer Incentives – these are paid incentives offered to selected hires that encourage them to take the offer such as moving allowances or sign-on bonuses.
  3. Ramp Up Periods – this is the cost of credentialing and onboarding incurred before a provider is able to actually fill a vacancy. Be sure to include the cost of the hire’s pay during this period if they are on salary during the credentialing window.

Step 2: The Cost to Cover Vacancy – Understanding Strategic Levers

When there are gaps in the clinical schedule a healthcare organization has several levers at its disposal to be able to meet the demand. Each option comes with a price tag and each may be appropriate to take advantage of at different times and circumstances. Knowing when to increase or decrease a particular labor option is a fine art acquired by your own institutional knowledge, however, it can be best informed by seeing your numbers in black and white.

In our second step in our COV tool, Golden Source advises you to understand your current cost per hour of Overtime, Locum Tenens, or Post Call Physician (if appropriate) rates. When vacancies occur these three options are how work continues, and you need to know these numbers before addressing mechanics in Step 3 and 4.

Step 3: The Cost to Cover Vacancy – Understanding Your Labor Mix

As you review the vacant hours that need to be filled allocate the percentage of time that each labor option accounts for in its current state. Understanding your labor mix allows you to see which numbers are influencing your total COV.

Step 4: Finding the Right Balance

With these important numbers plugged in, you’re able to see your current costs. Now it’s time to start making adjustments to see how simple changes can impact your cash outlay. Is a shift incentive a more affordable option to cover vacancy than hiring a new full-time employee? Should you rely more on locums labor during the hiring process to alleviate overtime pressures? Is paying a higher rate for labor in the first place justified to avoid costly vacancies? Is increased investment in recruitment a wise and necessary step? As you create scenarios by adjusting the inputs in the tool, the answers to these questions and more begin to take shape. There is no one right answer, but a tailored answer is now within reach.

Using Cost of Vacancy to Drive Decisions

Calculating the Cost of Vacancy is helpful as a first step because it shows the scale of the problem and what drivers may be contributing to costs. Here are a few steps to take after the initial cost calculation.

  1. Identify Normal Vacancy Numbers – Understanding that there will always be some vacancy, establish what a manageable and fiscally acceptable vacancy rate is. Based on the factors/inputs of your organization, finding this number will help you establish consistent staffing plans as well as sustainable long term staffing strategies.
  2. Set Short-Term Targets – Set a target for decreasing days to fill vacancy. By adjusting the “Average Vacancy in Days” in your calculations, you can form an idea of how reducing this number by even 1 day can affect savings.  Establish a short-term goal allows you to begin to realize savings and reinvest funds to further the harder changes needed to make a dent in clinical vacancy.
  3. Review Labor Options – As you review the different levers that drive Cost of Vacancy, consider which labor options optimize your efforts to manage the schedule and fill roles. Understanding these options can help you determine if increasing salary for full-time employees, adding shift incentives, or leveraging short-term labor options such as locums are options you should consider. Each organization will have different needs and options to fill those needs. Finding the balance and employee mix will help move you in the right direction for your staffing costs and needs.
  4. Budget for Help – No matter what your ideal labor mix is, your new understanding of costs should cause you to reevaluate your budget. Expect that certain cost categories may go up as you make investments in new labor options or add budget for recruitment or additional headcount. Knowing the Cost of Vacancy can help you keep these numbers realistic and justify a reasonable increase in one category as you seek to improve the overall bottom line.

In conclusion, clinical vacancy is common and difficult to overcome.  However, with the negative qualitative and quantitative effects having massive impacts on practices and organizations, attention must be given to minimizing the costs and improving headcount. Golden Source Consultants hopes that by leveraging our free Cost of Vacancy calculator healthcare providers can begin to form meaningful strategies to overcome clinical vacancy challenges.

Learn more about Golden Source Consultants’ Strategy and Project Management Services.

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[1] https://www.theatlantic.com/health/archive/2020/11/third-surge-hospitals-staffing-shortage/617128/

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