Labor outsourcing shifts to non-clinical roles

Outsourcing at hospitals and health systems has shifted from a focus on clinical roles a couple years ago to non-clinical jobs, according to a survey-based tracker of financial trends.

The recently released 2025 Health System Performance Outlook by Kaufman Hall identified a range of labor and other trends at those organizations. Its findings were based on responses from 103 hospital and health system executives and finance staff from across the country.

The share of hospitals and health systems undertaking staff outsourcing include:

• 65% for food and nutrition
• 58% for revenue cycle
• 58% for environmental services
• 58% for IT
• 45% for clinical staff

That’s a big shift from their 2023 survey report, when the leading outsourced roles were clinical services, which 53% of organizations pursued.

“When the hospital administrators think about what they do for their communities, obviously it’s delivering good quality patient care; the nursing staff is key to that, and the clinical staff is key to that,” said Lance Robinson, managing director and operations improvement practice leader for Kaufman Hall. “So, if they can maintain more control over that front-facing staff that’s interacting with the general public, I think that’s what they’re trying to achieve with the outsourcing piece.”

Robinson also highlighted the big jump in revenue cycle outsourcing — from 32% of organizations in 2023 to 58% this year — as notable.

“I’ve had clients that would have never even thought about entertaining that because they’re typically the largest employer in the community and so you have that whole dynamic going on,” he said. “But given where we are, the dire straits that the healthcare environment is in, I think they’re having to look at every single opportunity, and that’d be one of them I see.”

Although clinical labor is much more expensive than non-clinical labor, hospitals have had a growing challenge to fill non-clinical roles because of competition from other industries that are less demanding and pay at least as much.

Overall, 76% of respondents said their organizations were considering eliminating fixed positions.

Many health systems have announced staffing cuts this year, with some citing the need to reduce expenses ahead of Medicaid cuts under the One Big Beautiful Bill Act, which are expected to start in 2027.

However, hospitals also have continued to hire this year, adding 186,000 jobs from September 2024 to this September, according to non-seasonally adjusted totals from the Bureau of Labor Statistics (BLS).

Hospital labor expenses per calendar day were also increasing sharply, rising 5% in 2025 through September compared to the same time frame in 2024, according to the latest Kaufman Hall National Flash Report.

Clinical challenge

Robinson said that after hospitals managed to corral a surge in contract labor use stemming from the COVID-19 pandemic, those organizations have since started to see record levels of clinical staff turnover.

“Whether it’s burnout or just the continual retirement of the baby boomer generation, [they’re] leaving a gap on the clinical-to-nursing front; 83% of our clients are looking to raise salaries, 81% are looking to offer sign on bonuses, which is which pretty high considering the state of affairs and the healthcare environment,” Robinson said.

That turnover challenge is showing up as high quit rates. During the pandemic’s so-called great resignation, healthcare and social assistance workers quit their jobs at an average monthly rate of 464,044 people per month. But their quit rates met or exceeded 500,000 in this August and September before dipping to 403,000 in October, according to BLS.

“But it’s more than just the pay,” Robinson said. “We’re finding that there needs to be more developed around the models of care and using team-based staffing and technologies such as ambient AI.”

Health systems are struggling to get their clinical staff working at the top of their license and reducing overtime and premium pay in clinical areas, he said.

Non-labor expense trend

Although a lower cost than labor, non-labor costs are increasing faster. Almost 60% of respondents report non-labor expense increases between 6% to 10% over the past year. However, that is similar finding to the 2023 survey.  

It’s unclear how much of this year’s nonlabor cost increase stems from Trump administration tariffs, Robinson said. However, some of those increases could come from vendors using tariffs as an excuse to increase prices.

“Having very strong relationships with partners like your GPO and your distributor and wholesaler on those products is important, as well as having robust value analysis teams in place that are physician led, or have a physician member, so that they can partner with the health system to drive down cost driven on those PPIs [physician preference items] is important,” he said.

Payment challenge

At the hospital level, 26% of respondents say the top challenge regarding denials is front-end issues, while at the physician level, the top challenge for denials is incomplete or missing documentation.

“There’s a lot more focus and activity around making sure that the claim is clean before it is submitted for eligibility, and those sorts of things, authorization eligibility, particularly around cases that are pre-scheduled,” he said. “There will always be denials on the back end, but clearly, if you can try to fix those beforehand, working with utilization review and the physician adviser [you can address] those sorts of things before submitting the claim.”

Of the respondents who invested in clinical documentation integrity (CDI) technology in recent years, 30% reported a material ROI and 26% said the return is unclear.