High rates of absenteeism in the HSE often attract significant media and political attention due to the associated costs to the taxpayer. In addition to a substantial sick-pay bill, absenteeism may lead to increases in agency and overtime costs as replacements are found for sick and absent workers. This sentiment was expounded in 2012 by Health Minister James Reilly who claimed that the high expenditure on agency staff in the HSE is largely attributable to high levels of absenteeism.
In this note I examine the relationship between absenteeism and agency/overtime costs in the forty largest (in terms of annual budget) acute hospitals in Ireland. I quantify the potential saving in agency and overtime costs associated with bringing absenteeism rates in line with the HSE target of 3.5 percent. The forty hospitals in the dataset spent a total of €313 million in agency and overtime in 2012. A cursory analysis of the data suggests this figure can be reduced by €36 million if the underperforming hospitals bring their absenteeism rates under control.
As a first step, we take a look at the individual hospitals in 2012 to identify the best and worst performers. Table 1 ranks forty acute hospitals in terms of their absenteeism rates (from highest to lowest). Only eight of the forty hospitals are below the 3.5 percent target. The worst performing hospital, at 7.06 percent, is the Mid-Western Regional Hospital in Ennis. Five other hospitals have absenteeism rates above six percent.
Let us now turn to the relationship between the absenteeism rate and expenditure on agency and overtime as shown in the scatter plot in Figure 1. The graph includes a fitted OLS regression line. We observe a positive relationship; a one percentage point increase in absenteeism is associated with a 1.47 percentage point increase in agency and overtime as a percentage of total pay1. Of course we can’t state with certainty that the relationship is causal. However it seems plausible that high absenteeism would cause high spending on agency and overtime. Moreover, Health Minister James Reilly appears to suggest a causal link2.
Figure 1: Agency/Overtime and Absenteeism in the HSE
As mentioned, only eight of the forty hospitals meet the target absenteeism rate of 3.5%. It seems reasonable to suggest the other 32 hospitals can reduce their absenteeism rates and in doing so reduce their expenditure on agency and overtime. A cursory analysis of the data indicates a potential saving of €36 million based on the underperforming hospitals improving absenteeism rates to the standards required3. This represents a 15 percent reduction in agency and overtime costs4.
Paul Redmond is a researcher for publicpolicy.ie. More information on Paul can be found on his personal webpage: www.paulredmond.org
1 The following simple OLS regression is run
where agencyovertimei is the percentage of the total pay bill spent on agency and overtime at hospital i and absenteeism is the rate of overall absenteeism at hospital i. The coefficient ß=1.47 is statistically significant at 5% level (p-value=0.02). If we use agency costs alone (as opposed to agency and absenteeism) we get very similar results.
2 The INMO reject Minister Reilly’s claims that agency costs are caused by absenteeism. For an overview of this discussion see here.
3 This is achieved if the total amount spent on agency and overtime in the 32 underperforming hospitals is reduced from the current figure of 10.3 percent to 8.8 percent of the total pay budget. The figure of 8.8 percent is the predicted spending on agency and overtime associated with a 3.5% rate of absenteeism (as per the fitted regression line in Figure 1). It is also worth noting that total spending on agency/overtime is 8.6% of total wages in the eight top performing hospitals.
4 Agency and overtime spending in the 32 underperforming hospitals in 2012 was €248 million..