Expect a permanent boost to healthcare wages, experts say

Expect a permanent boost to healthcare wages, experts say

Healthcare workforce labor costs will remain higher than pre-pandemic levels, which has prompted new recruitment and retention strategies.

Nearly all of the 73 health system administrators surveyed have had trouble filling vacancies as more clinical staff burn out, according to a new poll from Kaufman Hall. Nearly three-quarters of executives have raised clinicians’ wages as a result, while around 90% have boosted pay for support staff.

“Labor shortages are management’s top one, two and three priorities at the moment,” said Kevin Holloran, senior director at Fitch Ratings, who expects a permanent increase on salary and wages to decrease hospitals’ bottom lines by a percentage point. “It is absolutely a chronic problem.”

Nurses, technicians and other healthcare staff are in short supply as more leave the industry for jobs with better pay and less stress. There are also labor shortages among hospital referral partners. Patients are staying in the hospital longer because clinicians can’t find appropriately staffed behavioral health and long-term care facilities, healthcare workforce experts said.

“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.

In addition to raising base salaries, more than two-thirds of respondents offered signing bonuses and nearly 60% paid for more overtime hours. One interviewee for the Kaufman Hall survey expects a long-term, upward adjustment to wages.

“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 increasingly turn to automation or outsourcing, where appropriate, to curb labor expenses. They’ll also try to boost their partnerships with nursing schools, experts said.

“We are losing more money than we can count through premium labor charges,” a chief financial officer of a large urban health system told Kaufman Hall researchers.

Persistent supply shortages are also draining resources. At least 81% of respondents recently experienced supply shortages of key items, saw significant price increases and built-up inventories.

Many health systems are shifting from a “just-in-time” inventory strategy to a more robust reserve stock. They’re storing more in their warehouses and reserving capacity on manufacturing lines.

Some are experimenting with 3D printing for personal protective equipment and adding some U.S.-based manufacturing. Although, many of those ventures have faded out since the start of the pandemic.

“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.

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