February 18, 2019
Instructor: Joseph Harrison, Jr.
Labor Cost and Substance Abuse Treatment
Labor costs are a significant source of financial burden within an organization. High turnover rates coupled with retention-geared programs and staff obligations require a lucrative labor budget. Understanding key areas that influence the labor cost and working to reduce or spread out areas which affect the labor cost is a crucial task that can aid in reducing the total financial output without ruining the overall morale of the agency, especially when faced with scarcity in funding resources.
Key Drivers of Labor Cost: Retention, Insurance, & Training
Turnover and staff retention are frequently addressed as the number one influence on labor costs. High turnover rates result in regularly scheduling at least two staff members for the same shift in order to properly train new hires. If the newly hired employee quits shortly after the onboarding procedure, additional labor funds are spent in talent acquisition and training, and the ROI for the new hire is lost in addition to indirect costs such as reduced productivity, poorer health outcomes, and additional turnover (HealthStream, 2017).
In terms of insurance, although employees who utilize insurance benefits are more likely to remain with an organization, the increasing cost continues to heavily weigh in on the agency. Additional labor costs include retention-driven programs like tuition reimbursement, PTO, and performance rewards.
Staff licensing requirements also play a role in labor costs. Although some training can be provided in-house, the reality is that employees will need to travel outside the organization for necessary trainings. A good moral-standing organization would opt to provide training pay for such activities, thereby impacting the labor-cost two-fold as employees will still need to be covering for those absent in training.
Addressing Labor Costs: Caseloads, Productivity, and Scheduling
Perhaps one of the biggest challenges when it comes to labor costs is that of caseloads. Often, when staff are presented with larger-than-life caseloads, their ability to meet the needs of each patient becomes stinted, begetting poorer quality of care (Oser, et al., 2013). Poorer quality of care given to patients, especially when created by restriction of resources through the agency, tends to result in poorer productivity levels (Nowak, Holmes, & Murrow, 2010). In turn, unmanageable schedules provided to staff thatdon’t aid in balancing work-life needs can create additional problems to productivity, patient outcomes, and overall health of the employee.
To address these issues and prevent them from having significant impacts on labor budgets, organizations should evaluate the effectiveness of each area. If it is discovered that caseloads are significantly higher than local and national averages, it is imperative for the organization to act and lighten the load. A better spread of caseloads would likely develop a better ROI in labor costs as there tends to be less overtime, potential reduction in sick days, and better care for patients. Scheduling will also have a significant impact on labor costs as a balanced schedule will prevent over-staffing, under-staffing, and a provide a more cohesive, less labor-intense shift schedule.
Future Changes and Impact
In substance-abuse-related care, organizations are constantly faced with the need for funding. Reduction in funding for addiction treatment will inevitably result in reduced patient outcomes, fewer individuals served, and lower pay-rates or reimbursement rates for staff, with a potential to reduce the number of staff in an organization either by employee cuts or increased turnover. Labor costs are a significant factor in these types of organizations due to the nature of the workplace and level of staff retention, which tends to be very poor. Without adequate funding, substance abuse programs will become scarcer, have fewer resources, higher caseloads for fewer staff, and less money from which to pull to dedicate to staff.
References
HealthStream (2017). To improve healthcare quality outcomes, we must focus on turnover. Retrieved from https://www.healthstream.com/resources/blog/blog/2017/10/11/to-improve-healthcare-quality-outcomes-we-must-focus-on-turnover
Nowak, P., Holmes, G., & Murrow, J. (2010). A model for reducing health care employee turnover. Journal of Hospital Marketing & Public Relations, 20(), 14-25. Retrieved from https://web-b-ebscohost-com.contentproxy.phoenix.edu/ehost/pdfviewer/pdfviewer?vid=1&sid=fccb167e-c661-4888-a43a-b07e09476102%40pdc-v-sessmgr02
Oser, C. B., Biebel, E. P., Pullen, E., & Harp, K.L.H. (2013). Causes, consequences, and prevention of burnout among substance abuse treatment counselors: A rural versus urban comparison. Journal of Psychoactive Drugs, 45(1). doi: 10.1080/02791072.2013.763558