Introduction The focus of this article is to identify and evaluate three key drivers to health care workforce costs. I am preparing this article as part of the week one curriculum for the Master of Health Administration program through the University of Phoenix. Although I have not yet worked within the health care sector, I have experience in other industries. I am curious to discover if key drivers to health care workforce costs are like workforce costs in manufacturing, service, or other industries I have experienced. Health care labor is a leading driver in the overall cost of health care. According to LaPointe (2018), "Labor represents about 60 percent of hospital costs and is the greatest driver of operating expenses” (Hospitals target labor costs, layoffs to reduce healthcare costs). Are health care workforce costs the cause of health care organizations’ overall costs or the price of dealing with the current state of community health? What the experts say about the key drivers to health care workforce costs? Three key drivers of health care service/labor costs According to Norbeck (2013), “Chronic disease conditions, lifestyle – including obesity and addictions, and administrative expenses, have moderate to significant impacts on rising overall health care costs” (p. 110). As health care labor costs are estimated to be around 60% of overall health care costs these can be viewed as key drivers of health care labor costs. Chronic disease and lifestyle drivers seem clearer to me as I can imagine these drivers as causally related to capacity and capability organizations need to respond to demand, technology or technique advancements. Increased demand in workforce needed to treat growing community health needs and advanced skills, required for breakthrough innovations in technology and treatment may require advanced capabilities of the workforce. The area I am less clear about is the high costs of health care administration. According to Norbeck (2013) “The Institute of Medicine and the Centers for Medicare and Medicaid (CMS) estimate that administrative costs in the U.S. health care system consume an estimated $361 billion annually, 14% of all health cost expenditures in the nation” (p. 112).” Studies estimate overall administrative costs for physicians to be 25–30% of practice revenues (Norbeck, 2013). Is there a manufacturing or business example for health care administration costs? According to Beers (2019), " Production costs reflect all of the expenses associated with a company conducting its business while manufacturing costs represent only the expenses necessary to make the product.” (Production Costs vs. Manufacturing Costs: What's the Difference?). Therefore, one may compare this example to a health care organization as: All the expenses associated with care delivery & treatment expenses. I will guess the cost of the treatment (Such as the medication, surgery, therapy, etc.) is much less than all the overhead (Including preparation, consultation, follow-up, etc.) needed to support the value-added treatment. Workforce costs are therefore much more related to overhead. A simplistic reflection of this may include direct labor needed to provide treatment and indirect labor needed for support. I believe administrative costs are necessary however are indirect (Not related to the actual treatment) in nature. Therefore, solutions and remediation to reduce health care workforce indirect labor costs may well be achievable without a negative effect of treatment. Solutions and remediation There are several root-cause improvement strategies in place that may be helpful to reduce chronic disease and lifestyle demands within key communities. For example, the Community Health Improvement Plan (CHIP) through the Centers for Disease Control and Prevention. According to "Centers For Disease Control And Prevention"(n.d.), “A community health improvement plan (or CHIP) is a long-term, systematic effort to address public health problems based on the results of community health assessment activities and the community health improvement process” (What is a community health improvement plan?). These community health drivers are inputs to the health care delivery system that lead to workforce costs and are less controllable by health care organizations. Process improvements to the output side of the health care delivery cost equation may be more controllable by health care organizations. Reducing non-value-added waste may improve process efficiency and effectiveness helping organizations lower administrative including workforce labor costs. Technology advancements are a way to reduce waste and re-work. Additionally, process & workspace re-design can lead to realized efficiencies. The Malcolm Baldrige Performance Excellence Program is a national quality program that can help organizations improve processes that can lead to future success. According to "NIST: National Institute of Standards and Technology"(n.d.), “Ensuring that your operations are efficient and lead to short- and long-term success” (What Can Baldrige Do for My Organization?). Furthermore, improvements by governance organizations such as Medicare and Medical can help reduce bureaucratic administrative waste. Future changes Future changes can be made to either exacerbate or simply solutions. Any changes in legal, ethical or governance policy that adds bureaucracy, waste or drives a reduction in community health will made matters worse. However, improvements in policy and governance that increase efficient standardization of medical costs, billing processes, etc. or initiatives that improve community health will help accelerate solutions that can eventually reduce health care workforce expenses. Conclusion In conclusion, health care workforce labor costs are the result of community health and the processes of health care delivery. Changing community health must be a collaborative effort. However, delivery and support process improvements that can lead to workforce labor cost reductions are in the control of those organizations, health care and other industry sectors. References Beers, B. (2019). Investopedia. Retrieved from https://www.investopedia.com/ask/answers/042715/whats-difference-between-production-cost-and-manufacturing-cost.asp Centers for disease control and prevention(n.d.). Retrieved from https://www.cdc.gov/publichealthgateway/cha/plan.html#three LaPointe, J. (2018). Revecycle intelligence. Retrieved from Hospitals Target Labor Costs, Layoffs to Reduce Healthcare Costs NIST: National institute of standards and technology(n.d.). Retrieved from https://www.nist.gov/baldrige/about-baldrige-excellence-framework-health-care Norbeck T. B. (2013). Drivers of health care costs. A Physicians Foundation white paper - second of a three-part series. Missouri medicine, 110(2), 113–118. Tabler, R. J. [roberttabler]. (2020, April 25). Health Care Labor Costs...What's can we control?... The focus of this article is to identify and evaluate three key drivers to health care workforce costs [CafePharma article]. Submitted here hwww.cafepharma.com/boards/forums/healthcare-reform-discussions.540/create-thread
