A new national survey of Australian healthcare directors, managers and professionals suggests that agency and locum staff expenses are the highest drivers of unplanned costs in healthcare organisations. While 1 in 3 healthcare professionals in the study recognise the problem, fewer admit to having plans in place to address the problem. This occurs in an environment where more than 1 in 3 healthcare decision-makers admit that funding constraints rate higher as an issue than nursing shortages.

The survey was conducted by Allocate Software, a leading provider of e-rostering software to the healthcare industry. Participants were 168 members of the Australian Healthcare and Hospitals Association – largely CEOs, executive directors, managers and chief nurses – across private and public hospitals, aged and community care, and primary and allied health, with every State represented.

Funding constraints the biggest issue for more than 1 in 3 healthcare decision-makers
The survey asked participants which of six issues their organisation faces most concerns them: funding constraints, organisational efficiency, patient safety, staffing allocations, technology investments and personnel shortages.

Only 6% of respondents chose personnel shortages, compared with 39% of respondents who chose funding constraints – the most popular answer chosen. This issue of funding was highest in Western Australia, with more than 1 in 2 (56% of respondents) citing this as their biggest issue, followed by 47% of NSW respondents and 45% of Victorian respondents.

Respondents in community health and primary care were most concerned about funding constraints, with 43% and 60% of respondents in these sectors, respectively, citing this as their biggest issue.

Peter Croft, Allocate Software Managing Director, said: “Our survey confirms that Australia’s healthcare sector is under constant cost pressure. There is increasing demand for services and increasing costs for delivery of more complex treatment. In the context of the increasing cost of delivery, salary and wages remains the largest single cost healthcare organisations face, with the payroll bill representing over 65% of total operating costs in many instances. Using technology for the efficient allocation of agency staff, and to identify options for use of substantive rather than agency staff, is critical to achieving system-wide cost savings.”

Unplanned costs a concern against funding constraints
With funding constraints high on the list of healthcare concerns, the survey revealed the key factors driving unplanned costs and whether these factors were being addressed.

Participants were asked which factor most drove unplanned costs in their organisations from among five options: unplanned overtime due to complex award interpretations, agency/locum staff due to vacant shifts at short notice or poorly planned holiday schedules, recruitment of permanent staff due to high attrition, or penalties for missed performance targets.

Only 18% of respondents recognised that recruitment of permanent staff due to high attrition drove unplanned costs – even though 22% admitted to high staff turnover in their organisations.

In comparison, 33% of respondents admitted that agency and locum staff were the highest driver of unplanned costs. Of these, 92% (or 30% of all respondents) said vacant shifts at short notice was the reason agency and locum staff were the highest driver of unplanned costs.

Further, when asked which out of five HR areas they plan to make efficiencies in – from overtime and absenteeism costs, to payroll administration, shift overlaps and agency/locum costs – only 23% admitted they planned to make efficiencies in agency/locum costs.

Mr Croft said: “Often healthcare organisations resort to using high-cost agency staff to fill casual vacancies simply because they don’t have visibility of their casual pool of staff available to work the vacant shift. Organisations with paper- or excel-based rostering systems are the most likely to have this problem. Of concern is that at least 10% of respondents who faced these costs as their biggest issue admitted they were not addressing it, the consequence being continual unnecessary spend, resulting in stubbornly high operational costs.

Victoria the State worst hit by agency/locum costs
Findings in Victoria, Queensland and Western Australia followed those of the national findings – with agency and locum costs topping the list of drivers of unplanned costs. However, Victoria had the highest proportion of participants (44%) who admitted locum and agency costs are the biggest cause of unplanned costs. Only 34% of Victorian participants are planning efficiencies in locum and agency costs.

In Queensland, 36% of participants identified agency/locum costs at top of unplanned costs (with 23% planning efficiencies in this area), followed by 33% of WA respondents, with the same proportion planning to implement more efficient processes in this area.

In NSW agency and locum staff (25%) came in second to recruitment of permanent staff due to high attrition (28% of respondents). Only 19% plan to make efficiencies in agency and locum costs.

“One potential driver of staff attrition is uneven working patterns, or a perceived lack of fair access to overtime opportunities,” Peter said. “By being able to accommodate individual staff preferred working patterns and to offer overtime opportunities more equitably, staff have the benefit of more predictable and fairer rosters. As an e-rostering provider to healthcare organisations, we know that higher staff engagement and satisfaction reduces staff attrition and helps to reduce the costs associated with high staff turnover.”

Private hospitals and aged care the sectors worst hit by agency/locum costs
Among participants who work in the private hospital sector, 42% admitted agency/locum staff were the highest driver of unplanned costs, with just 11% planning efficiencies in costs in this area. This was followed by the aged care sector, with 40% of participants recognising agency/locum as the key driver and 29% planning efficiencies. Thirty-eight per cent of participants in public hospitals see agency/locum staff as the highest driver, with 29% planning efficiencies in this area.

Peter said: “In general, average salaries tend to be lower in aged rather than acute care, due to the lower proportion of registered nurses in the workforce mix. In the context of lower average salaries, agency fees introduce a high and often unpredictable cost. Implementation of electronic rostering capable of identifying substantive staff to work vacant shifts helps to eliminate avoidable agency cost.”