Healthcare providers are facing tough times financially this year, with staffing shortages, higher-than-ever workforce costs, supply chain disruptions, high inflation and more. Many hospitals are experiencing losses for 2022, a year that some are calling the most difficult operating environment they’ve ever experienced.
That’s according to the 2022 State of Healthcare Performance Improvement report from Kaufman Hall, which highlighted performance improvement trends across workforce, volume and revenue, supplies and purchased services, as well as the physician enterprise.
Workforce issues are top of mind for healthcare organizations, with 100% of survey respondents in the report noting they have adopted some sort of recruitment and retention strategy. Another 98% said they’ve raised starting salaries or minimum wage, while 67% have seen wage increases of 10% or more for clinical staff.
Another worrisome finding from the report is that 66% of respondents said they have run their facilities at less than full capacity as a result of staffing shortages. Workforce-related issues have been the biggest difficulty for many organizations over the last few years, but there are some signs that the environment may be stabilizing. More respondents (44%) said they are decreasing their use of contract labor––which boomed during the pandemic as organizations needed to fill specific roles––compared to 29% who said they are holding steady with their contract labor and 27% who are increasing it.
“There simply are not enough candidates available to fill empty positions, with particularly acute problems in nursing,” wrote Lance Robinson, managing director, performance improvement service line lead at Kaufman Hall. “Two-third of our respondents report that staffing shortages have required their facilities to run at less than full capacity, with direct effects on revenue. The need to rely on contract labor to help plug staffing gaps has resulted in labor costs that are unsustainable over the long term, but several interviewees said that their organizations are planning for at least a three-to-four-year transition from the current state to a more stable labor market.”
Overall, elevated labor costs are the top choice for areas to reduce costs, with 46% of respondents identifying it as the biggest cost reduction opportunity. That’s compared to just 17% who said the same in the 2021 survey. Unfortunately, not everyone actually sees the workforce issues as an opportunity to cut costs in the short term. With wages now higher, bringing them back down in the future could be near impossible. The best options to reduce costs in this area may be to:
- Cut down on contract labor
- Outsource or offshore certain functions, such as revenue cycle or IT
- Leverage automation technologies, such as AI and self-registration kiosks
- Optimize staffing by changing care delivery models
Impacts Outside the Workforce
Another area impacting healthcare organizations is patient volumes, which have dropped since the pandemic began and have worsened due to staffing shortages. This drop has had an effect on revenue, and the 2022 volumes show little improvement from 2021, according to Kaufman Hall, with the exception of Oncology.
The pandemic may have also accelerated the ongoing trend of cases moving from inpatient to outpatient settings, with the public perceiving hospitals as high-risk areas for catching COVID-19. People also missed routine examinations and screenings at higher rates over the past two years, and telehealth and other technologies have also helped keep people out of in-person care settings. The impact on hospitals has been drastic.
“I’ve been doing presentations for years predicting that hospitals would go from being revenue centers to cost centers,” one interviewee of Kaufman Hall’s survey said. “I think we’ve turned that corner.”
Only 7% of respondents said they had not seen any pandemic-related impacts to their revenue cycle this year, compared to 25% in 2021. More than half (51%) also reported an unfavorable change in payer mix, with a lower percentage of commercially-insured patients and a higher rate of bad debt or uncompensated care.
Beyond the workforce, supplies and purchased services have also taken a hit. Supply chain disruptions worsened or caused by the COVID-19 pandemic have not yet subsided, the report found. A whopping 71% of respondents said they are experiencing delays, 58% are encountering issues with raw product and sourcing availability and 50% report problems with reliance on non-domestic suppliers.
Non-labor expenses are also higher this year, with the consumer price index, which measures the national inflation rate, topping 8% in recent months.
Despite all these challenges, some healthcare organizations have been able to maintain their margins, thanks to a focus on a talent pipeline, revenue cycle and more.
See the full report here.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."