- Hospitals and health systems anticipate higher labor costs for the foreseeable future as administrators boost compensation in the face of an ongoing shortage of doctors, nurses and mental health providers, according to a new Navigant analysis.
- The analysis looks at labor budget expectations among 101 CFOs and operations executives who took part in a Healthcare Financial Management Association survey. Nearly eight in 10 (78%) expect their organizations' labor budget to increase over the next year, with nearly one in five predicting upticks of 5% or more.
- Total employment compensation rose 2.3% in 2016 and another 2% last year, according to the Bureau of Labor Statistics Employment Cost Index.
Labor costs are already a major burden for hospitals, and shortage of top talent can affect an organization's bottom line as well as access to services. To meet staffing needs, hospitals may be forced to offer more generous compensation packages to attract a limited pool of talent.
According to the Association of American Medical Colleges, the physician shortage in the U.S. could reach 121,300 by 2030. The shortfall among primary care doctors is expected to be between 14,800 and 49,000, while nonprimary care specialties face a shortage of as high as 72,700 physicians — including 30,500 surgeons.
Among survey respondents, 35% said physician shortages are worse now than a year ago, while 20% said the situation is better. Similarly, 43% said it is harder to fill nursing positions currently, while 27% see an improvement in the past year.
The greatest concern is for mental health providers. While 35% of respondents see the shortage as worse than last year, only 10% felt better about their hiring prospects.
To lower operating expenses, executives are targeting labor (44%) and supply chain along with purchased services (38%), Navigant says, noting these account for 75% of a hospital's total operating expenses on average. Leaders are also looking to improve productivity and workflow efficiency in the coming year.
"The need to more effectively manage labor by staffing to demand will only intensify as operating margins continue to diminish, and as the pressure to enhance care quality and efficiency increases," Danielle Dyer, managing director at Navigant, said in a statement. "These results magnify the need for provider leadership to objectively analyze their current practices to better staff departments and meet dynamic patient volumes."
Navigant suggests providers leverage predictive analytics, map workflow processes to identify areas for improvement and track labor metrics to inform staffing budgets.