Burn-Care Unit: Reducing Operational Costs- Focus on Labor Expenses1.0. Executive Summary
To remain relevant in the long-term, the Burn-Care Unit ought to adopt either of these two strategies, or combine both in a hybrid mix: reduce costs or boost the current level of revenues while keeping the current cost levels constant. The most viable strategy for an organization of this nature would be to rein in costs via the adoption of an effective cost minimization strategy or approach. It is important to note, from the onset, that being a reputable burn-care facility at the national level, there is need for the Burn-Care Unit to maintain the integrity of its processes as well as its operational efficiency, even as it seeks to minimize costs. For this reason, the relevance of embracing the most viable course of action towards the minimization of operational costs cannot be overstated. Reducing operational expenses, and most specifically labor costs as is desired in this case, is likely to bring forth a number of benefits. In addition to permitting a more strategic resource allocation approach, reducing operational costs could further help accelerate processes and eliminate waste. As a matter of fact, operational cost minimization remains one of the most effective ways to further enhance margins.
Just as is the case in other organizational settings, healthcare institutions need to rein in their operating expenses so as to remain relevant. It is important to note that in healthcare services provision, labor remains to be one of the most prominent inputs. In that regard, therefore, to enhance profitability, there is need to control labor costs. The mandate of this report is to recommend strategies and approaches necessary to bring down the costs relating to the Burn-Care unit’s main operating activities by $500,000. This is especially important at this point in time given the need to ensure that the unit remains economically viable even under the managed care contracts. In seeking to bring down the unit’s operating expenses, it is important to note that deliberate measures have been adopted to ensure that the quality of services and care advanced to patients is not adversely affected. Effort has also been made to avert employee dissatisfaction. In reducing the operating expenses, two approaches were explored. These include the adoption of a new nurse scheduling system and the adoption of additional strategies to bring down overtime hours. It should be noted that a high turnover rate could be a huge recurring expense. It is for this reason that specific measures ought to be taken so as to enhance retention. Implementing a nurse self-scheduling system would be a welcome move in this direction. Absenteeism associated costs are a key expense that would be sufficiently addressed via the adoption of such a system. To determine and highlight the prevailing labor costs vis-à-vis the desired labor cost levels, the report suggests a method of estimating the annual cost of running the Burn-Care Unit. The method takes into consideration all the labor-associated expenditures, notes the need for a standard rate, and suggests other indicators that could be utilized in the analysis of labor costs.
The nurse scheduling system suggested is not only robust, but also flexible and user friendly. Its implementation is meant to ensure that there is optimal utilization of one of the most important organizational resources, i.e. personnel. A system of this nature, it should be noted, is of great relevance as the unit seeks to ensure that service delivery is enhanced, nurses are satisfied and motivated, and operational costs are brought down. The two approaches suggested in this case are interlinked and, in essence, complement each other. Being one of the many units of the hospital, the Burn-Care Unit could be used as the test ground for the operational cost minimization strategies highlighted herein for later organization-wide implementation.
2.0. A Methodology for Estimating the Annual Labor Cost of Operating the Burn-Care Unit
In seeking to estimate the annual labor costs of operating the unit, all expenditures (as opposed to wages only) will be included. This is to say that such items as social security paid for by the hospital, as well as pension plan and health insurance contributions will be included. It is also important to note that other related allowances including, but not limited to, the recruitment of staff and training efforts (if any) will be taken into consideration in the estimation of annual labor cost of operating the unit. While this report uses “wages” in reference to what health workers in...
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