Healthcare staffing shortages leading to financial instability
The American healthcare system faces a precarious future, heavily influenced by an escalating staffing shortage that began before the COVID-19 pandemic, but has since intensified. Bharath Krishnamurthy, the director of health policy and analytics at the American Hospital Association (AHA), spoke with Health Exec to sheds light on the financial and operational challenges hospitals are facing due to problems maintaining staffing levels and the related rising costs.
"What's interesting is that labor costs on average account for about 60% of a hospital's budget, so the increasing costs for labor are particularly impactful to hospitals' overall financial health. And what we've seen is that between 2021 and 2023, labor costs increased by $42.5 billion for hospitals. It's harder and harder for hospitals to get physicians and nurses and even nonclinical staff to come in and work," Krishnamurthy explained.
He said burnout and workplace safety concerns have also made it increasingly challenging to get physicians, nurses, and nonclinical staff to work in hospitals. Krishnamurthy noted there was a large increase in violence against healthcare workers during and since the pandemic.
To combat this, the AHA is advocating for the passage of the Safety from Violence for Healthcare Employees (SAVE) in Congress, which would classify assaults on healthcare workers as a federal felony. This measure aims to create a safer work environment for healthcare staff, addressing the uptick in violence against them seen during the pandemic.
"Protecting healthcare workers is essential for maintaining a stable workforce," emphasizes Krishnamurthy.
Hospitals are also investing heavily in recruitment and retention, recognizing the existential threat posed by staffing shortages. This includes increasing salaries, which adds additional costs for healthcare, but is needed too maintain staffing levels.
"Without adequate staff, hospitals cannot maintain access to care as demand grows," Krishnamurthy warns.
Travel nurses and and rising pay rates have significantly increased hospital costs
The reliance on high-cost temporary employees like traveling nurses has further strained hospital budgets. To fill open positions, many hospitals have hired travel nurses or travel techs at extremely high cost until they can find a permanent person to fill the slot.
"In 2022, travel staff costs soared to 200-300% more than traditional staff. Although these numbers have recently declined, baseline wage rates remain high due to the increased demand for contract staff," Krishnamurthy explains. "That ends up making that 60% of the budget for wages costing more and more. And that means you could potentially spend less and less on other important areas like acquiring drugs to address drug shortages, acquiring state-of-the-art, medical equipment, et cetera."
These higher costs for temporary staff and rises in pay to attract and retain staff has impacted the bottom line of a lot of hospitals. This is also making the fact that Medicare does not have inflationary increases built into physician reimbursement payments, which are already declining for most physicians year-over-year.
"It's certainly compounding the overall issue and it's ultimately leading to the instability of the hospital field from a financial and operational perspective," Krishnamurthy explained.
Rural America is facing even worse shortages
The staffing situation is dire in most of rural America, where recruiting staff is particularly challenging. Rural hospitals often struggle to attract providers due to the lack of amenities in smaller cities and towns, compared to larger urban areas where pay is often higher. At the largest annual meetings for radiology and cardiology, the numbers of recruiters for health systems has more than doubled since 2019. Some recruiters for rural health systems said they have had open positions for years they cannot fill.
But Krishnamurthy stresses that workforce shortages are a nationwide issue, affecting hospitals in urban and suburban areas alike.
"This isn't just about physicians and nurses, lab techs and other nonclinical staff are also in short supply, impacting patient care," he said.
As hospitals navigate these financial and operational hurdles, he said this adds to the growing financial instability of the American healthcare system. While multiple potential solutions have been proposed, including limiting the administrative burdens of physicians and implementing Medicare payment reform, it remains unclear how the United States will bounce back from this glaring issue.
Dave Fornell has covered healthcare for more than 17 years, with a focus in cardiology and radiology. Fornell is a 5-time winner of a Jesse H. Neal Award, the most prestigious editorial honors in the field of specialized journalism. The wins included best technical content, best use of social media and best COVID-19 coverage. Fornell was also a three-time Neal finalist for best range of work by a single author. He produces more than 100 editorial videos each year, most of them interviews with key opinion leaders in medicine. He also writes technical articles, covers key trends, conducts video hospital site visits, and is very involved with social media. E-mail: dfornell@innovatehealthcare.com