Living Within Department Budgets


Vol. 18 •Issue 27 • Page 10
Management Focus

Living Within Department Budgets

If you come back in five or 10 years, you won’t be able to find your job or possibly your institution,” Joe Flower, futurist, warned a crowd of RTs at the AARC Congress last year.

The hard truth is health care will go though rapid, neck-snapping changes over the next five to 15 years, he added. “It is a perfect storm of change elements.” But how can managers batten down their department’s hatches and prepare?

Survival in this harsh climate depends on a whole different kind of fitness than that associated with the wild. A cheetah’s explosive speed and a gorilla’s strength and dexterity have no power in this realm of change. A whole different set of factors come into consideration in the respiratory world.

Departments will need to run efficiently yet maintain a high quality of care. Managers will have to account for expenses and live within tighter budgets. In some cases, a graduate business degree can give a manager the needed edge. But only those who are blessed with a hawk’s vision for the future and new technology and a bloodhound’s sense of smelling out cost cuts will be able to rise to the occasion.

Scott Leonard, MBA, RRT, director of Pulmonary, Cardiology and Neurology Services at Holmes Regional Medical Center and Palm Bay Community Hospital in Melbourne, Fla., said the biggest issue at his facility right now is length-of-stay.

Hospitals are reimbursed by diagnosis, so the more patients they admit along with shorter stays, the better will be the reimbursement. Departments can attend to more patients if they can discharge other patients earlier and eliminate emergency room diversion of patients to other facilities during the busiest times. Even small improvements in bed turnover yield a big impact.

“That is one key way to increase your operational margin,” he said. “We’re a 504-bed hospital. If we can shave off even a half day off the length-of-stay, it is like adding 60 beds to the hospital.”

Of course, staff members work hard to ensure patients are not discharged too early, only to be readmitted again, he added. Leonard tracks all admissions and readmissions. The latter are reviewed by the quality assurance board.

“We don’t want to discharge them too soon. We are here for quality patient care. The art is finding that right time when that patient is ready to go home.”

Setting Annual Budgets

There are two annual budgets at the facility, and both rely on long-range team efforts. This is a pretty complex project, and Leonard’s graduate degree in business administration sure comes in handy.

The hospital’s fiscal year starts in October, but managers start working as early as May on the department’s capital budget for items like pulse oximeters, balloon pumps and ventilators that need to be purchased and anything that costs more than $1,000.

For proposed purchases, Leonard must submit a business plan, including the return on investment (ROI). “I need to substantiate why I need that new piece of equipment, what it will do for our patients and department margin. If it is (a replacement), then I have to indicate the number of years the equipment has been in use to justify why it needs to be replaced,” he said. Additionally he must estimate the cost of maintenance for any pre-owned equipment they would purchase and dollars saved.

The operating budget, which covers all benefits, salary, pharmaceutical and medical/surgical supplies, etc., begins a month later. The operating budget is broken down into expense accounts for each area.

Here Leonard must account for productivity and staffing goals. He measures productivity and uses the national AARC guidelines for treatment time per procedure; his target is 100 percent average daily productivity, right on the dot. Based on the cost of a treatment and the reimbursement, he can also set a revenue value unit (RVU) standard for each procedure.

The health system’s electronic time keeping system, which is tied into its electronic charting charging, charts productivity by matching the day’s charges against the number of hours associates have worked.

It’s a delicate balancing act, he said. “If we’re at 120 percent productivity for the day, that tells me that I was understaffed and we needed another person or two. If it came in at 80 or 90 percent, I was overstaffed, and I should have sent one or two people home.”

Staffing is tricky in Florida, because seasonal travel brings people in clumps, ranging from the snow birds—people escaping harsh winter in the northern climes—to families visiting the Disney World Resorts during summer vacations. “We have to make sure that not only do we have enough staff when it is busy but also that we control our cost hours when it is slow.”

Ensure Your Assests

At Holmes Regional, respiratory protocols, which govern everything from ventilator weaning to asthma, do not just ensure appropriate, consistent care, they save money too.

Managers can identify the exact cost per procedure for salaried and non-salaried employees and understand just how the department’s budget is impacted. Leonard considers, for example, time needed to administer a hand-held nebulizer treatment along with the added cost of benefits (about 30 percent of salary). On the other side of the spectrum is the expense account: the nebulizer itself, the medication and any additional medical supplies.

This very fine breakdown allows him to determine where he might cut costs. For example, let’s say you have a protocol that requires X number of treatments for an asthma patient. If you do them all in a row, cutting the overall number of therapies, then you have cut costs. Exactly how much? That is a variable, dependent on the number of treatments times the cost of each treatment.

What equipment a department uses can affect costs in ways that seem less tangible. Kenneth Thigpen, RRT, of St. Dominic Hospital in Jackson, Miss., said breath-actuated nebulizers, which cost about three times as much as typical “wet” nebs, actually save his department money.

The devices are three times more effective in medication delivery than their less expensive counterparts, he explained. As a result, staff members do not need to administer as many treatments. “It empowers you to empower your staff to give one-on-one therapy,” Thigpen said.

But the first issue the manager has to overcome is the initial price. “It’s a tough sell from a monetary stand-point to a CFO: nobody has more money to spend than they had a year ago. Still, as long as I have been a manager, this is the best decisions I have ever made clinically for my patients.”

Leonard agrees and said that his degree has proven invaluable with requests like this. “Administration has a language of its own; finance has its own as well,” he said. “If you can put what you are doing into a language they can understand—because most of these individuals are not from clinical backgrounds—then they can relate to what you are asking.”

Another way to reduce costs is through the use of non-invasive ventilation. RTs do everything they can to keep patients off a ventilator, which is much more expensive, relying on non-invasive equipment like BiPAP and CPAP first, he explained. The hospital staff consider initiating non-invasive ventilation early on, before the patients’ status becomes more critical.

If a ventilator does become a necessity, then the therapist knows exactly what comes next: weaning. “As soon as you put in the tube, they start the weaning process; we want to get them off as soon as possible,” Leonard said.

He emphasized that numbers aren’t everything though. “A lot of people, when they look at the budget and the numbers and the expenses, forget the greatest operating expense—salary dollars.”

He urged managers to consider staff retention as a priority. If the department’s orientation and turnover salary budget is high, paying for sign-on bonuses and moving expenses, that will throw off the budget. Happy, motivated, contented staff members enjoy coming to work and are, in turn, productive and loyal. Their performance can make or break your budget.

“You can save X number of dollars because you’ve decided to change your ventilator circuits every seven days instead of 48 hours. But if your staff turnover rate is 20 percent, you are blowing any savings you had right out the window,” said Leonard.

You can reach Shawn Proctor at sproctor@merion.com.

Discovering the Heart of a Leader

SAN ANTONIO—Being a department leader takes more than just the title of supervisor or manager. That’s why traditional advancement approaches to respiratory care “have disaster written all over them,” Kenneth Thigpen, RRT, told delegates when he spoke at the AARC Congress here in December.

Finding the heart of a leader in yourself and others takes hard work. However, in the end, it is worth all of the effort. “There are a lot of staffs that are looking for a hero right now around the country.”

Introducing himself as a “recovering respiratory therapist,” Thigpen, who works at St. Dominic Hospital in Jackson, Miss., said he found himself being a really good manager—on paper anyway.

“My budget numbers were in place. If I went in to talk to any CEO, he would have said, ‘This guy is talented; he can do really good stuff,'” he said. “But you know what? I wasn’t a leader worth a flip: my staff deserved so much better than what I was giving them.”

For starters, the leaders in the department—he called them the “coffee club”—offered no real leadership. They were simply taskmasters, good only at dolling out chores to the staff. Some supervisors even took the stance that when staff members whined, it was a good thing: that meant they cared.

“Our staff motivation was off the charts—the bottom of the charts,” he added.

One day in 2003, the situation came to a head when a member of the coffee club mentioned to Thigpen how overloaded the staff were going to be that shift. Thigpen asked what this supervisor had done to help. In response, the man simply raised his mug of java as if to say: “Cheers.”

Times A-Changin’

It dawned on Thigpen that something had to change. He could no longer accept merely good enough. “I wasn’t going to settle anymore.” He called his leaders into the office and then, right before their eyes, ripped the organizational chart in half. They were on notice that no one’s job was safe anymore.

Soon, the malcontents, the deadwood and the whiners left. As Bob Dylan once sang, “The times, they are a-changin’.”

Thigpen met with his staff and found out what they loved and loathed about the department. He asked what he could do to help make them love coming to work. He also discovered his department’s informal, natural leaders. He simply asked who kept the department running smoothly on weekends or holidays.

In response to this feedback, he worked to remove the annoying obstacles and red tape, making their jobs easier. He tailored positions to his staff members’ strengths so that they might find their sweet spots and tapped those informal leaders to become his new supervisors.

“If you engage people in their giftedness, then you’ll have an engaged employee, an employee who will make a difference,” he said.

He also held people accountable for their actions like harassment, chronic lateness or calling out of work. “Until you outline that the behavior is unacceptable and what is going to happen if the behavior doesn’t change, it is not going to change,” he said. “If we think it will, then we’re pretty silly.”

– Shawn Proctor

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