As hospital leaders are increasingly focusing on cost and performance, best-in-class organizations are developing innovative department-specific payment programs to reward staff for meeting organizational targets. Effective programs align staff performance with the hospital strategies to improve quality, capture market share, and contain cost. As these initiatives are designed, healthcare organizations must address metrics, eligibility, measurement and evaluation process, and return on investment.
The metrics will determine the progress of the program. Metrics are defined as a type of measurement used to gauge a quantifiable component of a business performance and serve as the measurable component in a pay-for-performance program.9 The metrics should be
Aligned with the hospital's core strategies10,11
Measurable using data that can be validated with a high degree of integrity
Box 74-6 lists examples of metrics that may be considered when developing a department-specific pay-for-performance program.
Box 74‐6 Examples of Metrics that May Be Used for Unit‐Specific Pay‐for-Performance Programs |Favorite Table|Download (.pdf)
Box 74‐6 Examples of Metrics that May Be Used for Unit‐Specific Pay‐for-Performance Programs
Patient satisfaction scores
Left without being seen (LWBS) rates
Total length of stay (LOS)
Time of disposition to actual discharge
Point of service cash collections for eligible patients captured
In the selection process, it is important to recognize which variables the team controls and which they do not, as described in Table 74-1.
Table 74-1 Examples of Metrics (Not) under the Control of Team Members |Favorite Table|Download (.pdf)
Table 74-1 Examples of Metrics (Not) under the Control of Team Members
|Volume||Not directly controlled by the team|
|Patient satisfaction||Portions controlled by the team, ie, keeping patients informed|
|Absenteeism||Controlled by the individual employee|
Discussing these variables and the team's influence on the outcomes can help foster a larger sense of team and individual responsibility for departmental performance success, rather than placing the entire responsibility on the shoulders of the managers. Finding those measures that can be specifically affected by those eligible for the bonus serves to make it a more successful program.
Determining eligibility for rewards can become a thorny part of the larger plan. While determining who is included may seem easy, the leaders must also determine who should be excluded, which may cause divisions among the team members.
Eligibility considerations and weighting of eligibility may be determined by full-time versus part-time classification, job category, cost center, and intra-departmental versus inclusion of all staff affiliated with the ED (eg, sitters, housekeepers, respiratory therapy). Eligibility decisions may be dictated by the metrics chosen, organizational structure, human resources, payroll process, and the process of return on investment (ROI) development.
For example, if one of the metrics chosen relates to the responses to the patient satisfaction question “Are you likely to recommend the ED to others” on patient satisfaction surveys, inclusion of sitters might not be appropriate.
Measurement and Evaluation Process
Once metrics are defined, the process for determining targets and administering the program and related policies must be undertaken. Targets are the goals that must be met in order to trigger payment in a pay-for-performance plan. For example, one of the metrics chosen may be reaching the 90th percentile on the customer service survey.
Targets can come from a variety of sources. Internal sources may be from the board of directors or quality departments. Externally, the source may be a national benchmark; a professional association's published guidelines for performance, or an industry norm. It is important to understand that benchmarks are guides, rather than absolutes since each institution has different operational conditions and different resources. As such, leaders might consider variables within the benchmark when designing the program. These variables might include overall volumes and census by time of day, time periods measured (by shift, day, hour, etc), patient acuity, physical ED space, hours of operation, and so on. This variability requires the manager to find appropriate targets for comparison.
If the gap between current performance and target/goals is too wide, staff may become discouraged and the team may see the target as unattainable. An option is to create step targets to get the overall desired outcome. This approach can help create the sense of success and greater team performance. An effective feedback and evaluation process can help the ED staff focus on the core strategies, understand the importance of the outcome, and obtain rewards for their efforts.
Choosing the measurement frequency (daily, monthly, quarterly, etc) requires consideration of 2 issues, target adjustments and frequency of payout:
Target adjustment: How frequently should the target goals be modified (updated) or replaced? Adjusting targets that have been met and sustained works well unless the new target is deemed to lead to minimal return for the effort. For example, the manager for an automobile assembly line could be told to increase his daily production of cars from 100 to 120 (ie, improve throughput). Though the manager might achieve success and meet the stated goal, the unintended consequence could be a higher incidence of cars produced with faulty engines (ie, clinical quality). Once an “acceptable” target is reached and maintained, it may be appropriate to go on to an entirely new metric. ED leaders should leave a metric in place long enough to ensure both the process and culture change necessary to get achieve sustainability. As a leader, the “art” is knowing when the optimal change in performance has occurred. This definition of “optimum achievable outcomes” should be determined through consensus of leadership and staff before moving to other metrics.
Payout frequency: How often should the rewards for successful achievement of the targets be paid? Payouts may occur on paycheck cycles, quarterly, or annually. The payout frequency should be defined when the program is set up. An example of a successful program is provided later with an explanation.
Creating the “business case” is another critical aspect of program development and implementation. Chief Financial Officers and other hospital administrative leaders will require a return-on-investment analysis. Successful programs are self-sustaining. In the ED there are a number of ways to help measure this success, including hard returns and soft returns. Hard returns can be directly measured in financial terms and utilized to develop an incentive-based bonus plan as described in Table 74-2.
Table 74-2 Examples of Hard Returns that Can Be Utilized for a Staff Bonus Program |Favorite Table|Download (.pdf)
Table 74-2 Examples of Hard Returns that Can Be Utilized for a Staff Bonus Program
|LPMSE||Left prior to medical screening examination|
Annual volume: 60,000 patients
LPMSE (current): 1800 (3%)
LPMSE (goal): 300 (0.5%)
Avg per patient ED facility revenue: $325
Current - goal = Additional revenue
1800 - 300 = 1500 × $325 = $487,500
A portion of the additional revenue can be set aside for staff bonuses
|Premium labor spending||Spending on staff overtime, travelers or agency nursing|
Annual expenses based on absenteeism, unfilled slots, etc
- Overtime: 12% = $285,000 cost
- Traveler and agency = $430,000
- Total annual expense = $715,000
80% reduction of premium labor spending results in savings of $572,000
A portion of the additional revenue can be set aside for staff bonuses with low records of absenteeism
|Staff turnover||Voluntary or involuntary staff turnover, including factor for replacement|
Turnover cost per RN = $50,000
Annual staff turnover = 12
By a two-thirds decrease in staff turnover, $400,000 can be saved.
A portion of the savings can be set aside as a retention bonus.
Soft returns may be harder to objectively measure in financial terms and therefore more difficult to use in the development of bonus plans. Some examples of soft returns are listed in Table 74-3.
Table 74-3 Soft Returns and Incentive Plans |Favorite Table|Download (.pdf)
Table 74-3 Soft Returns and Incentive Plans
|Soft Returns||Description||Incentive Bonus Plan|
|Volume||In the short term, ED providers are only indirectly responsible for volume changes. In the long term, operational efficiency, high patient satisfaction, and word-of-mouth may directly affect census.||Increased volume requires increased expenditures on staff and equipment and limit bonus potential.|
|Patient satisfaction||Several aspects of patient satisfaction may be outside of the control of the ED providers. As an example, inpatients boarding in the ED will create dissatisfaction related to prolonged LOS and increased staffing needs.||Plans can be developed around patient satisfaction factors that are under the control of the ED providers. However, patient satisfaction is rarely associated with increased institutional revenue in the short term.|
|Length of stay||Improving length of stay has several indirect effects on volume. It can decrease staffing needs and improve patient satisfaction.||An incentive plan can be developed related to the direct returns, ie, higher efficiency requiring lower staffing needs.|
Figure 74-1 provides a sample incentive program.
Sample incentive program.