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October 20, 2021

Are health care wages going up—permanently?

Daily Briefing

    Many hospitals are offering higher pay to attract and retain staff amid a nationwide staffing shortage—and the trend isn't likely to reverse any time soon, Alex Kacik reports for Modern Healthcare.

    Employer strategy is poised to change in 2022. Here’s what that means for you.

    Hospitals struggle with labor shortages

    According to a Kaufman Hall poll, nearly all of the 73 health system administrators surveyed said they have experienced difficulty filling vacancies for both clinical and support staff.

    "Labor shortages are management's top one, two, and three priorities at the moment," said Kevin Holloran, senior director at Fitch Ratings. "It is absolutely a chronic problem."

    In particular, many nurses, technicians, and other health care staff are leaving the industry for less stressful and more lucrative jobs in other sectors.

    In addition, labor shortages are affecting hospital referral partners, such as behavior health and long-term care facilities, Kacik reports. This may lead to longer hospital stays for patients as clinicians struggle to find appropriately staffed facilities to transfer them to.

    "Staffing shortages are limiting the volume of services that can be provided, while support staff shortages in areas such as environmental services, for example, are making it more difficult to turn over patient rooms in a timely manner," said Lance Robinson, a managing director at Kaufman Hall.

    Hospitals turn to new strategies to retain workers, reduce costs

    To address labor shortages, around 75% of surveyed health system administrators said they raised clinicians' base salaries, and almost 90% said they raised wages for support staff, Kacik reports.

    In addition, nearly 60% said they paid staff for more overtime hours, and more than two-thirds said they offered signing bonuses to attract new workers.

    "Wages are likely resetting at a higher level across the board," Robinson said. "Shortages of clinical professionals may encourage efforts to widen the pipeline for new professionals."

    Providers may also turn to automated services or outsourcing to reduce labor expenses, Kacik reports.

    Beyond the workforce challenges, many health systems are struggling with persistent supply shortages. At least 81% of respondents said they recently experienced shortages of necessary items, faced significant price increases, or stockpiled their inventories amid Covid-19.

    To address the problem, many health systems are moving away from a "just-in-time" approach to inventory and keeping more robust stock in their warehouses and reserving capacity on manufacturing lines, Kacik reports. In addition, some health systems are experimenting with 3D printing to make personal protective equipment and partnering with some U.S.-based manufacturers to prevent potential overseas supply chain delays.

    "I think you're going to see some combination of old and new approaches to manage uncertainty or the swings in demand that contribute to the bull-whip effect," said David Dobrzykowski, associate professor of supply chain management at the University of Arkansas. (Kacik, Modern Healthcare, 10/18)


    Advisory Board's take

    3 strategies to accelerate revenue to match increase in costs

    By Christopher Kerns, Vice President of Executive Insights

    The KaufmanHall survey results on workforce shortages and costs should be seen as a clear a wake-up call that pre-pandemic conditions aren’t coming back across the health care delivery system. Ever. Staff shortages (especially of clinical labor) predicted to manifest in two to three years hence—with requisite time to mitigate—are here now. Wages, consequently, are also up. And while aggregate demand is high, it’s mostly in high-LOS, low-margin services; providers are still working through procedural volume backlogs. Ergo, revenue has yet to match increases in costs.

    Three strategies that can be adapted to the entire care delivery system

    For providers, the solution will require accelerating strategies Advisory Board first reported in The Future of Primary Care—but adapted to the entire care delivery system. Among other strategies, here are three important ones to focus on now:

    1. Embrace digital health as a means of not only substituting local care, but also generating scale through the use of artificial intelligence. This will greatly increase clinical scale and reach;
    2. Utilize new care models with aggressive use of advanced practitioners operating at top of license. This model is no longer optional; it is necessary to maintain access, and not just for rural and underserved areas; and,
    3. Deploy low-cost administrative models (such home-based revenue cycle workers) to cut down on cost to collect while working through increases in denials.

    Power in partnerships

    Few organizations will be able to do this alone. To meet the care needs of the population while coping with a long-term reduction in clinical labor supply, providers will need to partner with health plans to finance digital, home-based, and AI-led health (and yes, this will likely mean taking on risk-based payment). They will need to work with national telehealth providers to give them the short-term scale they need. And they’ll need to work with both vendors and remaining staff to manage the transition to home-based administrative work.

    The pandemic has evicted most of us from our old ways of doing things. There’s much to miss, but I suspect that most of us have found—or will find—that the old ways left a lot to be desired. The health care industry has a chance for a reboot, whether it wants it or not. 

    Join us for a keynote on November 9 to explore the evolving state of what health care employees expect from their employer, and vice versa, across the coming decade. We will discuss the forces that are shaping these rapidly evolving expectations and how organizations can best respond to position themselves as an employer of choice for 2031. Register for this virtual summit here.

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