Employee Retention in Healthcare: A Blueprint for Improving Success

Part Two: The Business Case for Improving Employee Retention

Author: Douglas Brown

Healthcare organizations realize the growing employee turnover problem won’t go away on its own.? The endless cycle of agency, registry and part-time support is real and firmly a part of most departmental budgets at this stage.? Hospitals and healthcare organizations mission and primary focus has always been the health and wellbeing of their patients and caregivers, and that has not changed.? It’s the way we’re accomplishing the mission that has caused so much pain and concern.?

In this section we want to you to consider the financial business case for why the present model has a poor shelf life and cannot continue in its current state.? Over the last 4-5 years since the pandemic, it has become increasingly difficult to retain staff resulting in a host of challenges from low morale and stress on remaining staff, to spiraling increases in expenses for replacing staff, overtime or premiums to existing staff that can be secured to work, plus ongoing training costs.

Calculating Employee Turnover Costs

Initial Assumptions:? It’s not zero.

It seems simplistic to say, but we must start with the assumption that there is a cost to turnover, absenteeism, stress, burnout and low morale.? If you disagree with this point, there is likely little in this section that will change your mind even though we are quoting the most recent studies.?

NSI_National_Health_Care_Retention_Report.pdf (nsinursingsolutions.com)

The cost of nurse turnover in 24 numbers | 2024 (beckershospitalreview.com)

Noneconomic and economic impacts of nurse turnover in hospitals: A systematic review - PMC (nih.gov)

Whether your turnover is single or double digits across the organization, the costs we’re talking about are those associated with tangible or “hard” costs when someone leaves or is out for an extended time (clinical or not).?? These direct costs include overtime, agency fees, training and other hard costs.? They do not include other indirect costs that we address below.? Absenteeism is also a large part of this challenge and is related in many ways to the same underlying factors.?

The link below allows you to put your own numbers into a simple sheet that is built to provide an estimate of what is real, based on these studies.? Use the study numbers or replace with your own.

Employee Turnover Cost Formula

Here is the formula link to calculate the annual turnover costs for nursing staff for your healthcare organization.

https://www.calconic.com/calculator-widgets/nursing-turnover-costs/6631884e198553001e47ba37?layouts=true

NOTE: ?This formula is designed to calculate turnover costs for nursing staff ONLY (as this is one of the significant challenges workforce healthcare organizations face). Please keep in mind that there are other substantial costs associated with turnover of other hospital or healthcare staff (Technicians, Administrative, Clinical Staff, Housekeeping/Janitors….)?

Calculating Employee Absenteeism Costs

Absenteeism is increasing in healthcare along with other industry sectors due to increased burnout, stress, mental health challenges and more. The result, increased organizational costs, lost productivity, patient care/quality concerns, drug/alcohol abuse… The ability of healthcare organizations to minimize absenteeism has a profound affect on operational success and cost control. ?Like employee turnover, when organizations create a rewarding, enjoyable work experience and where employee needs are supported and met absenteeism rates decrease.

Reference Articles:

Worker Illness and Injury Costs U.S. Employers $225.8 Billion Annually | CDC Foundation

How Much Are You Losing To Absenteeism | Mercer

Employee Absenteeism Cost Formula

Here is the formula link to calculate the annual absenteeism costs for your healthcare organization.

https://www.calconic.com/calculator-widgets/absenteeism-costs/664bbcac302ec3002960ed9d?layouts=true

NOTE: It is important to realize that absenteeism reasons go well beyond sickness to include leave due to mental health, stress, burnout, work overload, relationships with boss or co-workers, disengagement… and more.

?Direct Costs Savings

Ensure you examine and include all of the direct costs associated with employee turnover when you are determining the costs of employee turnover and potential cost savings. This includes considering:

The cost of job postings, recruitment agencies or job site platforms, advertising, background checks, pre-employment assessments, travel expenses for conducting interviews. Onboarding, orientation and training new employees including the time and resources spent on programs, training materials, and any external training or certifications required. Additionally, administrative costs such as processing termination paperwork, updating HR records, and handling employee benefits and payouts contribute to the direct costs.

Reducing these costs provides direct savings in all areas above where expenditures or labor time occurs.

Indirect Cost Savings:

Indirect cost savings may include improved patient care due to higher staffing levels, better employee morale, reduced burnout, and increased productivity/performance that comes from tenured knowledge and experience, reduced safety incidents, less managerial time and resources to deal with missing staff, organization brand/reputation…. While these savings are significant, they're more challenging to quantify precisely without detailed operational data. Indirect savings can encompass:

·???????? Enhanced patient satisfaction and potentially better health outcomes, leading to higher hospital ratings and possibly increased funding or reimbursements.

·???????? Improved staff morale and engagement, potentially reducing turnover and absenteeism rates, which further saves on recruitment and training costs.

NOTE: Once you have calculated and identified the costs associated with employee turnover and absenteeism, explore what costs savings could be achieved with reductions in both turnover and absenteeism numbers. For example, calculate what a 10%, 15% 20% 25% reductions of these costs would generate in savings. Then compare these savings to potential tools, programs and processes designed to improve turnover and absenteeism. For example, what would be the costs of training programs for leaders, assessments tools to understand and disconnects, interactive solutions that better support employee needs… As we move on to part three in our blueprint series, we will examine what solutions could be implemented to improve retention and absenteeism. More advanced retention strategic approaches and support programs will help generate greater improvements in costs reductions and returns on your investments. With effective, multi-dimensional formal strategies, defined goals and metrics and a system of integrated initiatives, turnover and absenteeism reductions of 20-30 % or more are certainly realistic and can provide savings of several hundred thousand dollars or much more. All contributing to improved fiscal management and a healthier bottom line!?

Summary:

There are real costs associated with higher than normal turnover and absenteeism rates and the negative financial impact on the organization, as shown in multiple studies, can be in the hundreds of thousands to millions of dollars annually depending on size, location and overall pay rates.? Reduction in both these key areas can have a dramatically positive impact on the culture, retention rates and ultimately caregiver and patient satisfaction.?

Our goal in this section is again, to get you thinking.? How long can this status quo be maintained.? When is the pain of staying the same greater than the pain of change?? Regardless of what numbers you may plug in or “buy into”, the fact remains that addressing this challenge is a top 5 issue amongst the C-Suite of all healthcare organizations. (The No. 1 problem still keeping hospital CEOs up at night (beckershospitalreview.com)

If you missed the first article in our blueprint series you can access it here “PART ONE: Understanding the Current State”

We at Manage2Retain believe that a large part of the answer lies in retaining more of your current staff and minimizing absenteeism.? You have invested heavily in them, they are the backbone of the organization and figuring out how to honor their commitment and provide an engaging place to work that “sees and hears” them is paramount.? Our final article in this series will feature strategies and tactics to help you plan for success in this area.

About the Author:

Doug Brown is the President and Founder of Manage2Retain, and an expert advisor in the ProNexus Advisory network. Doug is passionate about employee retention and believes strongly that employees who enjoy their careers and find fulfilment in their work are more likely to become loyal employees, who remain with their organizations for extended tenures, and become strong brand ambassadors for their company. He feels mid level managers are the crucial link between the employee and the organization as they influence many of the key elements that lead to retention, including cultivating engagement drivers, helping employees with their career development and leading with caring, support and emotional intelligence. He believes managers and employees must work collectively to create rewarding work experiences and the desired workplace culture, trust and strong working relationships that increase retention, ?For over 30 years, Doug has served in roles from Supervisor to President, in production, quality, sales, distribution and extensive employee engagement capacities. He has successfully overcome the many challenges involved in building loyal, high-performance teams.