With the third year of COVID-19 just around the corner, hospitals and health systems remain locked in a labor crunch that industry groups, executives and analysts don’t expect will disappear in 2022.
In early December, Moody’s Investors Service published an industry outlook for the new year predicting that staffing shortages and increased labor costs will fuel higher expenses and a resulting decline in operating cash flow for nonprofit hospitals and public healthcare.
“Labor costs indeed are the challenge that the sector is facing over the next year and will result, in our opinion, in driving expenses at a rate higher than revenue growth,” Brad Spielman, vice president, senior credit officer at Moody’s and an author of the outlook, told Fierce Healthcare. “I don’t know if we have the opinion that the cost is going to get worse, but [it] is going to remain challenging over this next year and will continue to drive expenses overall up.”
Moody’s outlook follows prior warnings from industry analyst groups and hospital executives alike that healthcare’s labor woes are unlikely to dissipate soon.
Altogether, the hospital subsector’s workforce has dipped nearly 90,000 people since March of 2020, according to preliminary November data from the U.S. Bureau of Labor Statistics. Among nurses alone, the American Nurses Association expects there will be more than 100,000 registered nursing jobs available annually by next year.
“I suspect if you asked most hospital leaders at this point what one of their biggest worries is as they think about their organizations now and in the future, workforce would be at the top of almost all of those lists,” Akin Demehin, director of policy at the American Hospital Association (AHA), told Fierce Healthcare.
The shortages, stakeholders say, are a result of pandemic challenges, demographic shifts and other broader economic trends, stakeholders say.
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For starters, long hours and the stress of fielding COVID-19 patients and their families have worn down the clinical workforce. Recent surveys suggest that a greater number of nurses are weighing the decision to retire or leave the industry while the pipeline of new doctors and nurses alike is insufficient to meet the growing demands of 2022 and beyond.
All the while, healthcare is also facing off with the rest of the U.S. economy to fill non-clinical positions such as cleaning staff, food service workers or IT amidst a so-called “Great Resignation.”
“The challenge is that other sectors also have a shortage of labor, so healthcare is needing to compete not only with other hospitals but other industries, so folks are looking toward other opportunities,” Spielman said. “Also, the increase in the minimum wage that is happening in lots of areas is also pressuring expenses but also making opportunities elsewhere more attractive than they had been before.”
Although salaries and benefits already make up more than half of a hospital’s total expenses, increasing wages or temporary staffing costs can also threaten bottom lines by limiting facilities’ ability to deliver high-revenue services.
Demehin said that these staffing-related service shutdowns are only becoming more urgent as demand rebounds from the pandemic.
“After those first few successive waves, hospitals have really been working to rebuild their capacity to treat non-COVID conditions and there are a lot of patients who are now coming to the hospital because they cannot afford to put off care that may have been delayed during the pandemic,” he said. “Managing the ebb and flow of COVID patients along with meeting the demand for all of the other reasons that patients come to the hospital certainly is a major challenge for hospitals.”
Some degree of ongoing labor issues is a certainty for the coming year, but stakeholders say there are key steps provider organizations and policymakers can take to address the crisis for next year and beyond.
Here are five factors that could help mitigate the healthcare industry’s labor shortage in 2022 and beyond.
1. Strengthening the pipeline of new healthcare workers
Even before the pandemic, the healthcare industry was not educating enough nurses or doctors, Demehin said. Tens of thousands of qualified nursing students were turned away last year due to a shortage of clinical sites, faculty or other resources, he said, driving home the need for policymakers to devote more resources to healthcare workforce education.
Similarly, recent versions of the federal government’s $1.75 trillion infrastructure and social spending package include a record 4,000 additional Medicare-supported graduate medical education slots. Passage of such a provision has been a “longstanding ask” of the AHA and other industry organizations, Demehin said and could play a major role in heading off a physician shortage.
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But there’s also room for individual organizations to take a more proactive role in educating clinical and non-clinical workers alike, said Therese Fitzpatrick, senior vice president at hospital consulting firm Kaufman Hall.
“We’re seeing some really creative things with new and refreshed partnerships with local colleges and universities, some really entrusting multi-system initiatives—there’s one in Chicago right now with several of the big health systems coming together in this program they call the Bridge Initiative to really build that pipeline from high school and make resources and coursework and money available to students coming up in their professional career.”
2. Exploring less human-intensive technologies, care models
Fitzpatrick noted that it could be years before educational efforts begin to bear fruit, meaning that the industry will need to figure out how to make the most of the talent that’s already available.
For example, many health systems began upskilling and training “sideload workforces” within their workforces that, in a pinch, could tackle specific intermediate and critical care tasks. Leaning further into those efforts could serve as an immediate alternative to additional hiring.
“We can’t manufacture clinical workers overnight, so how do we look to leverage the talent that’s available and sort of rethink how those models look within and across the spectrum of care?” Fitzpatrick said.
Demehin echoed the sentiment and pointed to the uptake of technologies like telemedicine that can “extend the footprint of the healthcare system in ways that may not be as person-intensive, but still provide access to care.
The industry’s adoption of these tools—as well as increased policy permitting their use—could go a long way toward lessening the impact of worker shortages, he said.
3. Meeting demand with nimble workforce deployments
Travel nursing arrangements have become a costly necessity for many organizations looking to avoid service closures throughout the pandemic. Over the past year, however, some of the industry’s larger systems have made proactive investments to build their own internal supply of temporary workers that will place them in a better spot to address staff shortages or COVID surges, Spielman said.
“A lot of organizations are trying to be more efficient to reduce their reliance on these staffing agencies, starting their own short-term staffing agencies,” Spielman said. “Systems, multi-states, that have a greater bandwidth, [having the] ability to pool resources across different regions may be a more attractive option.”
Kaufman Hall has seen several clients put together similar “travel-at-home” programs, arrangements which Fitzpatrick noted may also be the preference for some of the younger nurses entering the workforce.
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At the same time, state and federal governments have been increasingly open to emergency staffing permissions during times of crisis.
Some of these efforts could stand to become longer-term policy changes, such as agreements allowing licensed healthcare workers to practice across state lines, Fitzpatrick said.
Others such as temporary deployments of the National Guard or government-funded contract workers could help many healthcare organizations avoid service shutdowns—although Spielman stressed that these are short-term measures and, in the case of the latter, could also increase the bidding price of healthcare labor.
4. Addressing workplace culture to improve retention
With stress and burnout a near-constant among healthcare workers, organizations will need to take greater steps to accommodate their employees and stem a growing wave of resignations and walkouts.
Demehin said that hospitals and health systems have become “keenly aware” that their staff are looking for greater benefits and wellness support, whether that be through subsidies for child care, more flexible scheduling, mid-day mental health breaks or general recognition.
“There is no single solution to all of this, and hospital leaders really do engage what their particular workforce needs,” he said. “I guess what I’d say is hospitals are eager to do their part here. They will need support from policymakers to ensure that we can really make this happen in a sustainable way.”
Outside of greater buy-in from organization leadership, Fitzpatrick highlighted an ongoing shift in the employee demographic.
Hospital workplaces that have primarily catered to the mid-career or Baby Boomer workforces will now need to broaden their offerings to include benefits like student loan forgiveness or nontraditional shift schedules if they want younger workers to stay in the industry.
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“The workplace has now become a millennial, Gen Z workplace. It’s completely flipped from the accommodations being made for the mid and late careerist,” she said. “I think in the next year we’re going to see a lot of attention being devoted to that, and that’s going to express itself in flexibility in terms of staffing and scheduling. … There are some really interesting conversations that I don’t think two years ago we’d be having.”
5. Getting a handle on COVID-19
Of course, the largest single factor in 2022’s labor crunch will likely be the trajectory of the COVID-19 pandemic, the experts said.
Large-scale public health efforts such as vaccination and other developments like novel viral mutations “certainly will shape the conditions on the ground for our healthcare workforce,” Demehin said.
Reduced COVID cases would also remove much of the volatility hospitals have seen across their volumes, Spielman said, while reducing the need for emergency staffing and restoring demand for revenue-driving services.
“We’re still going to potentially see volumes return in a choppy way,” Spielman said. “We do think there will be continued recovery. It might just be slower recovery.”
Even were the pandemic to stabilize in the upcoming months, however, the numerous factors playing into the current shortage has stakeholders anticipating a protracted return to normal for the healthcare labor market.
“In terms of what the exact trajectory of the workforce issues looks like and whether we see reductions—I think at this point it’s just a little too hard to say,” Demehin said. “There are clearly opportunities on the table and … we’re eager to [address] them so we do see that positive trajectory going forward.”