- More than 80% of executives say talent acquisition and retention is the biggest risk to healthcare companies, according a report from audit and business services firm PwC.
- To attract and retain workers in a competitive environment, healthcare companies are investing in internal development pipelines and schooling, while others are setting “aggressive” digital and automation goals to improve productivity and decrease administrative burden on clinicians, the report found.
- Inflationary pressures, rising wages and other expenses associated with meeting the industry’s staffing needs are expected to contribute to a 7% increase in medical costs in 2024.
Other industries have been impacted by labor shortages since the onset of the COVID-19 pandemic, but the healthcare industry in particular faced a talent crisis, as skilled professionals burned or aged out of the profession, the report found.
Although healthcare employment has begun to recover since 2022, total employment has not returned to pre-pandemic levels. Recovery has particularly lagged behind in nursing and residential care staffing.
Healthcare executives are more concerned about staffing than their peers in other industries, with 82% of respondents telling PwC talent retention is the biggest risk facing their business, compared with 71% of executives surveyed in other industries.
Staffing shortages, paired with other financial challenges like inflation, will also force hospitals to seek higher reimbursements from payers during contract renewals.
“Assuming the persistence of the staff shortages in 2024, hospitals will continue to be financially challenged and seek higher reimbursement from payers. Hospitals and physicians are expected to seek higher rate increases (potentially also at a higher frequency) in contract negotiations,” the report noted.
During second quarter earnings this year, some of the nation’s largest for-profit hospitals told investors that labor costs remained high despite efforts to reduce expenses. This year, Universal Health Services is spending “roughly twice” the $55 to $60 million on physician contract expenses that CFO Steve Filton expected to spend. Filton said that paying slightly higher base wages than pre-pandemic is the new normal to recruit talent.
To address staffing needs, some health systems are investing in their own schools for clinical staff training and development, PwC found. Others are investing in artificial intelligence and digital approaches to deliver care that requires fewer on-site resources.
Community Health Systems announced in its second quarter earnings it had increased nurse hiring by 5.3% in the first half of the year by offering tuition reimbursement, nursing school programs and other opportunities for existing employees to become nurses. The health system also announced “Project Empower,” which aims to leverage Oracle integration to streamline workflows and enhance decision making.
Other industry stakeholders are attempting to help alleviate staffing shortages. Earlier this month, the HHS pledged $100 million to help grow and train the nursing workforce, as part of the Biden administration’s ongoing efforts to grow the healthcare workforce. Several states have also introduced legislation to support nurses, including staffing laws and tuition reimbursement programs.