Proactive Workforce Planning—Grounded in Data—is Essential for Hospitals to Meet Three Business Imperatives: Revenue, Reputation, and Resilience
Theodore Chien, President and CEO, SullivanCotter
As the health care workforce crisis endures, hospitals and health systems continue to struggle with employee burnout, high turnover, economic and wage pressure, and recruitment and retention issues. The cumulative effect of these challenges is driving up the cost of labor, increasing competition, and forcing organizations to reconsider the relationships between compensation, performance, talent management and workforce design.
Investment in the workforce helps to ensure employee health and well-being. To protect both reputation and revenue, hospitals must think proactively about workforce design and invest in building a more resilient model.
For health care organizations to deliver high-quality care that is affordable and accessible for all patients – while simultaneously maintaining a financially sustainable institution – a deep dive into workforce size and shape is imperative. Robust benchmarking data can be used to support these assessments, inform long-term planning, and provide the backbone for structural decisions.
Lay the Foundation
To build an effective long-term workforce model, understanding the existing makeup of your own employee population compared to other health care systems helps to set a baseline to measure changes.
Your organization can begin by asking some foundational questions:
- How do our labor costs compare to similarly sized health care organizations?
- What impact is our salary expense distribution across different job families and job levels having on the organization’s overall costs?
- How does the diversity of our employee population as represented across race, gender, and other demographic characteristics stack up across roles and titles?
- Does our current leadership structure truly support or represent the clinical workforce?
- Is compensation for key leaders designed to retain top talent, or is the organization missing important elements of the pay package?
It may take a great deal of thought and consideration to uncover the answers to these critical questions. Collaboration across internal teams, discussions with external partners, and the utilization of health care workforce benchmarks are recommended to help shed light on both strengths and opportunities for improvement.
Understand the Landscape
SullivanCotter’s annual Workforce Metrics Benchmark Survey is a comprehensive collection of data across three demographic groupings, six career-level categories, and 10 job families - helping health care organizations determine a baseline for the size, shape, cost, and demographic representation of their workforce compared to the market. Recent information was gathered from more than 60 national health care organizations, representing a combined workforce of more than 830,000 full-time equivalent employees.
Year-over-year comparisons from the survey data suggest that base payroll expenses rose almost 10% from 2021 to 2022, with 7.1% of this increase not attributable to growth in headcount. For an organization with an annual base payroll expense of $1.6 billion, this adds nearly $115 million to the bottom line.
This upward trend is unsustainable for most, if not all, hospitals and health systems. The reality is that many health care organizations are trying to pay their way out of the labor shortage and base salary expenses are unlikely to drop in 2023. Understanding this metric is important in order to plan for the remainder of this year and well beyond.
Last year saw almost double-digit growth (9.3%) in base salary expense related to individual contributors. While salary increases may be working as a short-term retention strategy amid the ongoing health care labor shortage, many organizations may simply be shifting the problem by risking greater burnout and increased attrition among those high performers who were “rewarded” with salary increases.
Another important area for consideration is whether or not the organization is making progress on key diversity initiatives. While female representation at the Manager level was strong at 72.4% in 2022, this number steadily declines to just under 50% for Executive level roles. Minority representation by race remained stable from 2021 to 2022 across all career stages, with year-over-year growth highest at the Executive title level with a 1.6% increase. Organizations can better support their diversity, equity and inclusion goals by building specific metrics into the workforce framework and being more deliberate about tracking and sourcing wider representation.
Adjust to Stay Competitive
Recruiting and retaining skilled employees within such a competitive marketplace is only growing more challenging. Turnover among experienced staff is anticipated to continue. For instance, last year, nursing titles saw one the most notable drops in headcount (down by 8.8%) at the largest health care organizations. And according to an April 2022 survey by Elsevier Health, an additional 47% of health care workers are expected to leave the industry by 2025.
In addition to these turnover challenges, additional competition is emerging. To help transform care delivery and meet the urgent need for a more accessible and affordable experience, new industry disruptor companies like Amazon, Google, CVS, and Walgreens are pulling many employees away from traditional health care providers.
This makes it even more vital that hospitals and health systems accelerate the adoption of new career frameworks to better retain and attract talent and build a more resilient workforce. Simple changes to compensation alone are not enough and may have a detrimental impact on revenue. Culture, career growth, recognition, development and well-being are also critical components of new workforce strategies that can directly affect the quality of patient care and improve an organization’s reputation.
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About the author
Ted Chien is president and CEO of SullivanCotter, Inc. and Clinician Nexus, Inc., both subsidiary organizations of SullivanCotter Holdings, Inc. With more than 35 years of health care and consulting experience, Chien previously oversaw corporate client relationships at UnitedHealth Group and served in executive roles with Ingenix (now OptumInsight) and Ingenix Consulting.