Caregiver industry workforce management and non-standard work hours strategy

Passion Home Health is a provider of home health care services in Camarillo, CA. The company`s challenge typically revolves around a shortage of care workers given the number of clients. There are two sides to this issue - one is the demand side. That challenge can be addressed in a different ways, but ultimately the goal of management is to have as many clients as possible for the capacity that it has. Thus for this task, the challenge will be on the supply side, for labor. It will be assumed that there will be sufficient demand for whatever the optimal labor configuration is going to be.

Care givers come in a number of different varieties, with different degrees of training. They typically visit the home site of the client. They perform a variety of duties for the client, including sometimes daily chores, for other care givers more of physiotherapy, and in some cases ensuring that the customer stays on their prescribed medication. So there are a variety of light medical tasks that are performed, along with other tasks related to the care and well-being of the patients.
The home care industry is worth an estimated $93 billion nationwide, and is growing at 4%. This growth rate is fueled by the aging of the baby boomer generation. However, the profitability of this industry has been challenged in recent years. Increased competition, and limited capacity to pay, along with the need to pay higher wages for skilled workers due to a shortage of workers, are all factors contributing to the tight margins (IBIS World, 2017). So while there are ample opportunities for growth, it is important for managers of home care companies to understand that growth has to be profitable, and that profitability is by no means a given in this industry.

The home care industry is quite competitive and there are a number of key success factors. Home care is one of the fastest-growing industries in the United States, the result of the demographic bubble that is seeing the baby boom generation enter into its senior years. This large cohort is already providing opportunity for home care providers, as many are in a state of questionable health already in their lives. The prevalence of chronic disease is one of the factors driving the industry, which means that the standard of care given is one of the key success factors. People suffering from chronic illness are the best customers because they have high need for home care services, and in many cases this need persists for years.

What this means is that one of the key success factors in the home care industry is the quality of service. Quality of service is driven by having talented staff. The members of staff will arrive into the industry with a variety of levels of training and knowledge, particularly about medical issues. Thus, more experienced staff are especially valuable, as they are able to provide better service to the more ill patients. Inexperienced staff requite more training, and may be in a position where they provider a lower quality of service, or are less efficient in the performance of their duties. It is assumed that most companies will have a mix of experience levels in their workforces. Cost competition is prevalent, what with margins being squeezed, and therefore the providers of home care need to manage their labor costs, as there is a limit to how much they can charge for their services to the average customer.

One of the biggest reasons why there is limited upside pricing power for home health care is that for many patients this is covered under Medicare. Medicare sets limits on what it will pay for different home health care services. If a patient requires home care that has limited Medicare coverage – such as for non-medical care – then that might be more free market, but the reality is that you cannot price non-medical care above the rates set for medical care, because most customers would see that as foolish. So there are fairly stringent limits set on upside price for this industry, for most patients, so the average home health care company needs to be not only high skilled at providing care, but they need to be highly efficient at doing it as well. Home health care companies need to be lean, with as little waste in their operation as possible

In order to take advantage of growth, home health care companies also need to be able to hire. They can only provide home care to the extent that they have the people to do it. Thus, hiring becomes critical. There is an acute shortage of home care workers relative to demand (Miller, 2017), which means two things. One, this creates upward pressure on labor costs, because companies have to pay more in order to service their demand. Two, this creates a situation where labor in the industry often has little loyalty – people will jump ship for a better offer because the work is not particularly well differentiated.

Interestingly, home care workers are often poorly paid, and a quarter of them earn wages below the poverty line (Newkirk, 2016). Retaining talent at low wage levels can be difficult. Workers in the industry are also often afforded limited protections, which means that employers can and often do exploit them for longer hours and that sort of thing. A provider can certainly seek to differentiate by offering a better working environment and better wages as a means of skimming the cream of the labor pool – which at the very least would allow the company to meet demand. This ends up coming back to the need to be as efficient as possible as to how that labor pool is utilized.

There are some key challenges to achieve success for Passion Home Health. The first is recruitment, which appears to be an ongoing challenge in the industry, and the second is going to be retention. These are ultimately going to be two different functions. While wages and benefits might factor into retention, working conditions also can factor in, which means that scheduling matters. There are several challenges with respect to scheduling that will need to be overcome in order to arrive at the most economically efficient scheduling that also manages to make the workers happy enough that they are willing to stay with the company:

· Mandatory break of 15 minutes every 3 hours worked
· Mandatory break of 30 minutes after 5.5-6 hours worked
· Non-standard work hours
· Travel time between homes
· Break patterns are different from most other businesses

Non-standard work hours actually helps break free from constraint, because it provides the ability for management to schedule workers with early starts or late finishes. The breaks are normal according to government mandate, but the workflow is not always conducive to taking breaks. First there is the travel time in between sites, which can be variable depending on traffic. Second, the work itself can take differing amounts of time, depending on the task and the patient. Scheduling visits by length of time might leave some work undone, but scheduling based on tasks might also leave work undone, and furthermore it might make it almost impossible to schedule breaks. If workers are given more control over their schedule, then the company will lose control over a critical cost, and could easily become unprofitable, given the slim margins that exist in the industry.

To resolve these challenges, the first step is to understand the objectives that the business faces. There are both long-term and short-term objectives for the strategy. The short-term objective is to develop a solution to the issue of staffing efficiency. Right now, there is the belief that the company can do better. A short-term solution would at the very least provide a framework for future optimization. It might not be possible to optimize right away, given that there might be some critical variables that will reveal themselves, but at least the short-term objective is to lay down a framework that can serve as the first iteration of the plan.

The long-term objectives are to increase employee satisfaction, and to deliver superior service. Delivering superior service is what will keep the business growing, but it is difficult to deliver superior service if the caregivers are always pressed for time, or stressed about things. While superior service can be achieved by simply adding more caregivers, the reality is that to do so would be unprofitable, but also likely very difficult, given the shortage of caregivers on the market; the company cannot simply hire its way out of this problem nor could it pass the costs onto customers even if it could find the workers.

So it must get the most out of each worker possible, while allowing for workers to be satisfied. Reducing turnover intention is critical, and there is a mountain of evidence to suggest that overwork and stress are leading contributors to turnover intention. Indeed, job autonomy is one of the main ways to reduce stress in this sort of job, because it allows the caregiver to help people without being so stressed; the only catch is that this often costs more (Kim & Stoner, 2008).

There are a few different alternative for optimizing scheduling at Passion Home Health. One is to simply bring in more people, which would allow for more creative schedule. Adding labor capacity is the easiest way to make the math work, and if done right would allow management to pursue more business as well, offsetting to some degree the added cost with incremental new revenue.

The second alternative is to add in floaters. These can be new hires, or existing ones, though new ones will be more effective in alleviating schedule problems. A new pool of floaters would potentially be part-time caregivers, or even floating full-time They would have the ability to cover off particular clients. In some cases, they could be on call for whatever the greatest need is on a given day, helping out someone who has gotten behind. Alternately, floaters can be used to cover patients that require longer stays that the average, or odd hours, or far-flung geographies that create the greatest travel inefficiency. The role of the floater would in all likelihood be to soak up the extraneous work that would otherwise slow down the best and most efficient people. By allowing the best, most efficient workers to do their thing, the company would be able to optimize them, the floaters basically freeing up the top performers to do the heavy lifting. Floaters are an easy solution, but would cost more, without necessarily generating more revenue initially. Reducing margins makes this an interesting option – management will want to find a way to make the floaters concept more profitable. One of the issues that can arise with floaters is that because they don't work the rounds or with the same people all the time, they will be incredibly inefficient, relative to other workers. If these are also going to be the least experienced, they might be down to 50% capacity relative to the better workers. That is a problem for management, because you'd need more floaters, direct pathways to get them off of floating, and it would be probably a higher-stress, higher-turnover job that would be perpetually hard to fill.

Another alternative would be a staggered start, so that some workers are available extra early, others late, and this would allow for more reasonable workload management. Workers handling evening clients would not be paid overtime because they would still be doing so within the context of an eight-hour shift. There are few downsides to this option, unless there is a problem getting some workers to take odd hour shifts. There are likely many cases, however, where odd hour shifts would suit certain workers, and patients for that matter.

Another alternative, one that is not mutually exclusive to the others, is training or cross-training. The present workflow is that it is generally easier to schedule the same person to do the same rounds, and the patients prefer this as well, but that leaves only limited flexibility with things like scheduling. It is perhaps more valuable for all concerned that different people are able to work different routes. Some of these people could theoretically be floaters, but some could just be more like partners, or teams of three, where they are trained to work with each others' patients. That would provide flexibility without burdening some people with more than they can handle.

One other idea is that longer-term employees could have flexible time, where they would get the first choice of hours. This would work well for them, but would take some of the power out of management's hands. Moreover, this would create more of a burden on the newer workers. These would end up with the worst assignments, and in turn would probably take on more stress and have higher turnover. Furthermore, basing anything on tenure hierarchy is going to have challenges, and a big one is that you would never be able to attract experienced workers. An experienced, highly-qualified person would never come work in a place where they would essentially be starting at the bottom, with inability to negotiate any aspect of their working conditions. The reality is that the company wants a system where it can attract the best workers, not dissuade them, and giving shift priority to the most-tenured staff runs counter to that aim. The best way to ensure high productivity and high efficiency is to make sure that the company can attract and retain top talent. Imagine losing your #2 because the #1 always took the best shifts and always got Christmas off – if you're in a position of having a lot of seniority but you know that you can never have the most, that would be disheartening.

The first recommendation is to eliminate the framing where there is a short-term solution and a long-term solution. There is no benefit to this from a managerial point of view. Any change to the system will be disruptive, and risks alienating good workers, so any plan that involves two changes doubles the risk. It is better to simply conceive of a system that best supports the operational objectives, taking into account the different interests that drive the stakeholders.

The approach that best balances the multiple competing interests here is to do the following. First, create an overlap schedule that allows for coverage for more of the work day. Depending on the needs of the customers, this could look something like 7am-9pm, or something maybe more conservative than that, but extending more into the evening. This creates an opportunity for caregivers to visit clients when they it is most convenient for the clients. Further, the caregivers can be given the option with respect to their schedule – the most tenured can select what works best for them. This should not carry the same negative impacts as the current proposal to let tenured workers choose too much of their work; in this scenario the expansion of business will create more opportunities for other workers to take shifts that they prefer. In fact, a middle class of worker can be created that rotates through evening and day shifts, so that there is variety in their day.

Splitting the caregivers into units, maybe four or five, so that they can all learn each others' patients in cross-training, will provide an opportunity to have total coverage for vacation. The final member of the team could be a part-time floater who covers for others. There worker will be less efficient, but only working for a handful of patients instead of all of them will at least allow this floater to function better than otherwise would be the case.

It is also recommended that the company hires some extra workers. This may not be easy, given the chronic shortages that exist, but it might be possible to hire part-timer floaters or casuals either by offering more in terms of wages and benefits, or by allowing them to work for competitors, and thus pick up full-time hours by working at different companies. This strategy is risky because typically Passion would want to ensure that it has a pathway for casuals to become full-timers, or they will take their skills someplace else to work full-time.

Passion likely cannot afford to pay much more than it does and still be profitable in this competitive environment where payouts are capped by Medicare. So there is little room for flexibility there, only in the working conditions that people work under. If management works with each worker to ensure that they get their government-mandated breaks, this would actually help worker-management relations, something that can be strained in this business. By showing that Passion wants the workers to succeed, and is does not intend to drive them too hard, Passion provides a sense of goodwill with the workers.

The other thing that Passion can do to help attract and retain the top talent that delivers the highest standard of care is to ensure that top performers are recognized. Not only should there be regular recognition of excellence within the team, but there should also be opportunities for overtime and these handed out based on merit. Sometimes the relatively-low wage worker like in the home care industry likes to be able to earn a few extra dollars, like around the holidays, and by giving them the opportunity to do so Passion will create a lot of goodwill but at limited extra cost. The key is to find ways to recognize and reward talent without building in systemic spending; periodic small-scale spending on rewards can actually be just as effective.

When put together these different recommendations create a better working environment that can help the company to attract more and better workers, even in a situation where there is chronic shortage and a general inability to raise wages. If possible, the company should bolster its margins by seeking out the patients that are not on Medicare or Medicaid where payments are often capped. Elite performers can be leveraged to perform private care for higher fees, and better margins, and some of these gains can be used to help cover the cost of extra staff. In essence, the business' entire strategy should be aligned to create the conditions where the key issues that it faces are addressed, and the key success factors are performed better.

There are few downsides to these recommendations. It is true that additional revenue is an important component of any plan to increase the supply of labor, but increasing labor supply is the only way to ensure that demand is met. There may be extra costs, such as the need for scheduling software, if that software can be proven to deliver a positive ROI by eliminating scheduling waste. There are a lot of variables, and things that can go wrong with scheduling, so there might be an opportunity there as well. If three or four of these key things are done to help support what needs to be done on the human resources side, then Passion Home Health will be in a much better position to execute all of these recommendations – they all go together.