7 effective strategies to cut costs in your hospital's contingent staffing plan

At Locumsmart, helping healthcare organizations reduce expenses in their contingent staffing strategies is one of our primary goals. Here are seven actionable steps to help your organization optimize its contingent workforce and achieve significant cost savings.

1. Manage clinical labor costs

“Hospitals' margins are affected largely by labor, which represents over 50% of their total cost,” says Thomas Lanvers, SVP of business development and customer success at Locumsmart. When labor costs increase, contingent or otherwise, it presents massive problems to hospital organizations. Given the tight margins in healthcare, managing these costs effectively is crucial. One way to do this is by reducing the price per labor unit. While adjusting physician pay is challenging, negotiating better rates and implementing competitive bidding can help drive down costs. Forcing the market to compete is far more effective than controlling it with static rate sheets, which often become outdated quickly.

2. Implement cost-saving strategies

Utilizing data to reduce locum usage and audit contracts and invoices can prevent overcharges. Resa Konkright, director of HCO management at Locumsmart, says she reduced one organization’s locum spend by $700,000 in the first year. One way to reduce spend is to share insights. For example, looking at an organization’s detailed shift information can reveal underutilized specialties. Business intelligence tools can also identify the most utilized locums and their associated costs, helping recruitment teams offer full-time or part-time employment contracts to build a more stable workforce.

Make more informed decisions: How business intelligence can create efficiencies in locum staffing

3. Adopt competitive bidding practices

Static rate sheets quickly become outdated when markets change, making them ineffective. Competitive bidding is a more effective approach — it motivates agencies to offer better rates by competing against each other, significantly reducing the per unit labor cost.



Using technology in this process allows all agencies to be brought into one space with a fluid communication process. This not only reduces costs but also enhances transparency and decision-making. When agencies are unaware of each other's prices, rates are driven down more effectively than static rate sheets. Locumsmart’s candidate screening and cost assessment tools can help identify the best match and the least expensive candidate, enabling healthcare organizations to make more informed hiring decisions.

4. Improve clinician scheduling and forecasting

It is crucial to use data analytics to accurately predict and project staffing needs. Tools like those provided by Locumsmart can help in planning and budgeting by projecting the costs of shifts for the organization. A centralized system to track schedules is essential to prevent inefficiencies and reduce costs. Without such a system, many healthcare organizations rely on outdated methods like calendars on walls and Excel spreadsheets, leading to a lack of organization. Additional visibility into confirmed shifts helps healthcare organizations avoid unnecessary costs and improve flexibility. By confirming shifts as far in advance as possible, your organization can secure better rates and avoid last-minute cancellations.

5. Develop and manage physician float pools

A float pool typically includes retired or part-time 1099 providers who can step in to cover gaps within the health system. This approach is attractive because it allows health systems to independently meet their staffing needs, eliminating the need for locum agencies. While building a float pool is relatively easy, managing it can be difficult without the right tools. Technology can be implemented to automate the management of a float pool to address these challenges. Automation allows providers to accept shifts via their mobile devices, which reduces the administrative burden on recruitment teams.

6. Refine locums invoice management

Errors in invoices are common and can amount to substantial overpayments if not caught. "32% of all locums invoices that come through our system are rejected at least once due to errors,” says Konkright. Without active invoice checks, you're likely missing some savings. Streamlining these processes through technology can save time and reduce errors. Using a tool such as consolidated invoicing means that all invoices are combined into one, which an approver receives once a week instead of handling numerous invoices daily. This approach both saves time and reduces the likelihood of errors slipping through the cracks. "Time is money, and especially related to locums, you really can't afford not to have this process either reviewed internally or by using a technology such as Locumsmart," Konkright says.

7. Ensure proper physician payor enrollment

Lanvers shared a cautionary tale of a healthcare organization that failed to enroll a locum surgeon with its payors, resulting in 18 months of unbilled services that were not accounted for and ultimately written off. To prevent such costly errors, it's important to have a standardized payor enrollment process. This process should include correctly classifying providers, gathering all relevant information, and making informed decisions about which payors to enroll with. Considering hospital systems have numerous payors, enrolling a provider with all of them may not be feasible or cost-effective. Meeting deadlines is also critical. Payors benefit financially if they delay payments, so they may not prioritize quick and easy enrollment. Deadlines can range from 90 to 120 days, depending on the state, and these must be considered during onboarding. Proper billing also has a significant financial impact. Bringing in a provider on a locum tenens basis is costly, and while you can work on reducing per-unit costs and ensuring compliance, failing to bill for services means missing out on a substantial part of the financial equation.

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Partnering with a VMS for locum tenens can save your organization money, improve efficiencies, eliminate redundancy, and strengthen your relationship with your locum tenens partners. If you're ready to write your own locum tenens success story, email sales@locumsmart.net.