Having the ability to recruit employees regardless of where they live opens up the talent pool at a time when many health systems are struggling to fill key positions, one FALCO member said. It also has allowed his health system to retain employees who want the option to move, he said.
Some executives who were resistant to remote work previously said the pandemic has completely changed their perspective. “If you asked me a year ago about remote work, I would have told you I was uncomfortable with it — I like that face-to-face interaction with my employees,” one member said. “My position has changed. I have a team of 50 now that is entirely remote, and they are just as productive — if not more productive — working remotely than they were in the office.”
Rising labor expenses
Hospitals and health systems nationwide saw labor expenses rise in 2020 as they sought to minimize staff reductions in the face of unpredictable volumes and expand their nursing pools in response to surges in COVID-19 cases. As a result, Total Expense per Adjusted Discharge and Labor Expense per Adjusted Discharge both increased 14.4% from 2019 to 2020.
Nearly half of survey respondents said they expect labor expenses to continue to increase. Another 30% anticipate labor costs will decrease over the next several months compared to last year’s highs, and 23% said they will remain unchanged. During a roundtable discussion, multiple FALCO members said they anticipate 2021 labor expenses will increase compared to pre-pandemic levels, but they are working hard to reduce the exceptionally high costs seen in 2020.
One finance executive estimates labor costs at her health system jumped 20% during the pandemic as the organization paid incentives and bonuses to retain clinical personnel and increased its reliance on temporary staffing agencies to fill nursing needs as COVID-19-related hospitalizations rose. “We got hit in December and January from the COVID-19 surge in the Midwest,” she said. “The labor costs were just insane at up to $180 an hour for contract nursing. That is not a sustainable cost.”
Survey respondents reported significant volume declines across multiple service lines in 2020, contributing to higher per-patient labor costs. Nearly three-quarters saw declines in emergency department visits, 66% reported declines in inpatient orthopedic cases, and 65% saw declines in outpatient surgeries and screenings or visits for chronic conditions.
Addressing staffing shortages with innovative efforts
Demand for registered nurses (RNs) remains high. More than half (55%) of HFMA members responding to the survey said the need for RNs increased over the past 12 months, and 43% expect the need to increase in 2021 and 2022. Forty-two percent reported an increased need for ancillary staff, such as housekeepers and nursing assistants, during the pandemic.
Health systems continue to explore a variety of efforts to address staffing shortages and reduce their reliance on contract labor. In addition to nurses, finance executives say that filling low-paying clinical and non-clinical positions is increasingly difficult. One FALCO member said turnover within the first year at his organization is as high as 90% for some entry-level positions. He and other executives said their health systems are raising starting salaries in response and offering performance incentive programs to help boost pay and recruit and retain a reliable workforce.
To reduce the need for contractors, one health system is offering bonuses and additional per-hour incentive payments for nurses and other clinical personnel to work extra hours. Others have established more flexible staffing models, and internal float pools to shift clinical staff to other facilities as needs arise. In one case, an executive said her health system is developing an automated online scheduling system akin to an Uber or “gig economy” model that would allow workers flexibility to pick up shifts when they choose.
Optimism for the future
Despite the myriad challenges and ongoing repercussions of COVID-19, many healthcare leaders remain optimistic that their organizations will recover. More than half of survey respondents predict key measures of profitability will return to pre-pandemic levels:
- 53% anticipate a return in patient volumes
- 51% expect expenses will drop
- 53% anticipate revenues will increase
In response to mounting pressure from patients, providers and payers to hold down costs, healthcare leaders must closely evaluate pricing strategies, especially for outpatient services where they face the most competition from retail providers, private equity entities and others.
Healthcare leaders must apply the lessons learned during the pandemic to prepare for future unknowns. Many are making fundamental changes to their financial planning processes. Some top priorities cited by survey respondents include introducing rolling forecasting capabilities, streamlining operational budgeting, and integrating comparative analytics and predictive models to inform planning decisions. Such initiatives will help organizations remain agile and informed in the face of any new disruptions that may emerge.
About Syntellis Performance Solutions
Syntellis Performance Solutions, previously Kaufman Hall Software, provides innovative enterprise performance management software, data, and analytics solutions for healthcare organizations. Syntellis’ solutions include Axiom and Connected Analytics software, which help finance, clinical, and operations professionals elevate performance by acquiring insights, accelerating decisions, and advancing their business plans. For more information, please visit www.syntellis.com.
This published piece is provided solely for informational purposes. HFMA does not endorse the published material or warrant or guarantee its accuracy. The statements and opinions by participants are those of the participants and not those of HFMA. References to commercial manufacturers, vendors, products, or services that may appear do not constitute endorsements by HFMA.
