The following is a guest article by Maria Luoni, President at RightSourcing.
The labor shortage in the U.S. healthcare sector isn’t new. We always knew the demand for caregivers would skyrocket as the Baby Boomer generation reached their mid-70s. However, the events of the past few years have significantly exacerbated the challenge.
Discussions about the uncertain future of the industry’s labor force intensified in 2021, as hundreds of thousands of healthcare workers left the field. Analysts and experts once predicted that the full effects of this shortage would be felt by 2030, but it appears that day may now come even sooner. More recent estimates have the U.S. reaching a gap of up to 450,000 nurses alone by 2025 — and that remains true despite the Bureau of Labor Statistics (BLS) projection that healthcare will add over 2.5 million jobs in the coming decade, outpacing all other sectors.
To navigate the ongoing healthcare labor shortage, many organizations have expanded their use of contingent workers. A 2021 Staffing Industry Analysts (SIA) report found that there were 33 million full-time-equivalent (FTE) contingent workers in the U.S., and the organization’s May 2022 U.S. Staffing Industry Forecast update estimated that the healthcare staffing industry grew to $39.8 billion in 2021 (up 85% from the previous year). While this approach has proved effective in supplementing full-time teams to ensure continuity of care, it hasn’t solved all of the sector’s problems. Hospitals are hurting financially, and contingent workers have earned a reputation as exacerbating the issue.
A recent AHA/Kaufman Hall report projects that more than half of American hospitals will end 2022 in the red. The same report found that the increased costs hospitals faced during the peak of COVID-19 haven’t waned, and those expenses are expected to continue rising over the next few years. Kaufman Hall’s report projected that labor expenses in the sector will have increased by $86 billion year-over-year by the end of 2022, while non-labor expenses will have increased by $49 billion.
With this context, it’s no wonder that many leaders believe the sector’s increasing reliance on temporary workers is to blame for its ongoing financial struggles — but that’s far from the reality. The real reason for rising labor costs in hospitals isn’t the prevalence of contingent workers. It’s the lack of visibility into that workforce.
Although contingent workers have long been a staple within healthcare, many hospitals and other organizations still have no centralized means by which to manage the recruitment, deployment, and contracts of non-full-time employees. Instead, healthcare systems often rely on decentralized processes for different labor categories like nursing, allied, non-clinical, IT, and locum tenens (physicians). The issue of high-cost contingent labor has little to do with the workers themselves and everything to do with an organization’s approach to working with them. When managed strategically — with the help of an integrated, fully centralized platform — contingent workers can actually help hospitals save on labor costs in the long term while improving patients’ quality of care.
As flexible models continue to gain traction, employers who prioritize the strategic management, optimization, and adaptability of their workforce through investments in vendor-neutral sourcing models will see business benefits like:
- Cost savings. A fully centralized management solution can offer insights into current pay rates and employee performance among other data points. Armed with a clear view of the state of the organization’s workforce, leaders will be able to ensure they have the talent they need while effectively controlling costs. More advanced platforms will also provide insight into market rates, time-to-fill rates, in-demand skill profiles, and more to help managers ensure their offers and current contracts align with the industry standards.
- More control over the process. Investing in a robust, fully centralized management platform can make a big difference for organizations facing labor shortages. Using direct sourcing to build an internal agency allows organizations to create private talent pools of contingent candidates just as they would for full-time roles. These pools can be curated based on the employer’s specific needs to ensure that every position is filled by the right person at the right time. The ability to identify and engage with contingent workers affords organizations more control over the process as it eliminates the need for third-party staffing agencies (and their mark-ups on labor costs).
- Better talent. Many employees turn to contingent work because they’re highly skilled and in-demand. As such, they expect an exemplary offer — and experience — from their employer. Contingent workers now expect access to the same perks, benefits, programs, and processes full-time employees enjoy. If one organization isn’t offering it, they’ll find it elsewhere. Investing in a more strategic workforce management program will help employers offer the competitive experience that employees are looking for, reducing turnover and improving morale.
Although many businesses outside the sector are carrying on as if COVID-19 is behind us, healthcare leaders know that we are still in the thick of it — and that more challenges are on the horizon. However, if there’s one thing healthcare workers and organizations have proven time and time again, it’s the industry’s resiliency and adaptability.
No one can say what obstacles lay on the road ahead, but the solution to the labor issues the sector now faces is clear. Embracing the evolution toward more flexible, non-traditional work arrangements by investing in technology and sourcing models that put the power back into leaders’ hands will help hospitals succeed, regardless of what’s to come.
