Productivity is key for optimizing staff

Wednesday, June 30, 2004

Impending reimbursement cuts from the Medicare Prescription Drug Act are prompting HME providers to go over every facet of their business with a fine-toothed comb searching for dispensable costs. And since labor is typically a company’s biggest expense, it’s the easiest target.

But because the majority of HME companies are small operations, they already tend to run lean, and layoffs may result in a company becoming too shorthanded. So in looking at how to optimize staff, the answer lies in getting more productivity out of each employee, said Melbourne, Fla.-based financial expert Wallace Weeks.

“That doesn’t mean cracking the whip harder,” he said. “It’s an issue of control - not in a cattle-herding sort of way, but by managing information and developing a matrix that tells you when something is off target. It’s about keeping the company on plan.”

Revenue per employee is a standard economic analysts use to gauge a company’s financial health. Network World, a trade magazine serving the information technology sector, publishes an annual “Top 200” list of companies rated by revenue per employee. Dell Computers ranked first, generating $900,809 per employee.

The HME industry doesn’t fare too poorly by comparison. The 2003 AAHomecare Financial Survey calculated an average of $116,000 per employee - good enough to land a spot in Network World’s Top 150. Still, results from the past few surveys show a stagnant pattern, which is “not a pretty picture,” said surveyor Bill Cron.

“Over the past couple of years, people in the industry are working harder and not making productivity gains,” said Cron, professor of marketing at Texas Christian University’s M.J. Neeley School of Business. “The key to improving productivity is incorporating information technology, activity-based costing and understanding your business.”

Tom Pryor, president of Arlington, Texas-based Integrated Cost Management Systems, said there are three main reasons for productivity lags: too much time spent on “non-value activities,” disorganized corporate processes and unprofitable product lines.

Weeks suggests that providers also look at their payer mix and identify unproductive processes related to them.

Combining jobs is an idea some providers have implemented, such as using respiratory therapists as delivery technicians. That may be a bit extreme though, said Joel Mills, CEO of Advanced Homecare in Greensboro, NC.

One option that may be viable, however, is contract employment.

“Instead of hiring for a full-time position, it may make sense to hire someone on a per-visit basis,” Mills said. “There are certain areas where this works well, such as respiratory therapy and deliveries.”

Based on 2003 standards, the HME industry’s productivity rate is solid, but the bar has to be raised under Medicare reform, Weeks said.

“Today’s norm is a good benchmark and there are a lot of companies at that benchmark,” Weeks said. “What we need to see is for the benchmark to go up. Necessity, bringing the virtues that it does, will improve productivity - it has to or there won’t be an industry much longer.”
Getting more with less

Tom Pryor, president of Arlington, Texas-based Integrated Cost Management Systems, offers three suggestions for increasing productivity:

- In order to avoid the “law of the lid,” which states that an organization will never surpass its leaders, managers need to raise the bar for themselves first.

- Utilize every technology available for eliminating paperwork, including wireless tablet PCs and global positioning systems for delivery vans.

- Synchronize the organization by developing processes for everything.