Labor costs are likely going in only one direction: up.
The healthcare labor shortage is in full swing, and it's projected to get worse.
Healthcare labor costs have skyrocketed and health systems are struggling to keep up. At the forefront of this challenge, looking to balance quality care with satisfied staff and reasonable costs, are CFOs. But how many options do CFOs really have?
The industry point of view
According to Deloitte’s 2025 U.S. Health Care Outlook, more than half (58%) of health system executives expect workforce challenges, like talent shortages, retention issues and the need for upskilling, to influence their organizational strategies in 2025. And a Strata Decision Technology report lists labor costs as the largest percentage of healthcare expenses, hovering at 60%, or $839 billion.
Numerous large industry layoffs are also indicative of these struggles. This past month Lehigh Valley Health Network laid off approximately 100 workers, and Cleveland Clinic eliminated 114 administrative management roles.
According to a report from PricewaterhouseCoopers' (PwC) Health Research Institute released last year, healthcare costs are expected to grow by 8% in 2025 — which is the largest projected increase since 2012.
What CFOs are doing
High labor costs can not only dampen care access, but also leave little to no room for health systems to invest in care improvements like new technology. While these numbers are indicative of what providers are facing and what may lie ahead for the industry, executives know there are options to explore for every health system to help lower these costs.
The next webinar in our Winning Edge series will discuss how CFOs can use technology and other strategies to lower labor costs and allow for a thriving health system.
Our distinguished panel includes:
- Brandon Williams, Chief Financial Officer at Providence
- Kaitlyn Anderson, Director of Finance at AdventHealth
- Bill Pack, Chief Financial Officer at Conway Regional Health System
- Marie DeFreitas, Event Moderator and HealthLeaders CFO Editor
This isn’t just another webinar—it’s your chance to learn from the best in the business and walk away with strategies you can implement immediately.
Join us as we face the problems, share solutions, and help you perfect your labor cost strategy.
Register here today to reserve your spot.
Here are a few strategies CFOs are discussing to tackle high labor costs:
Hiring practice shuffles. Health systems can focus on changing up their hiring practices. Exploring different methods for recruitment initiatives can help attract the right talent that wants to work in that specific type of health system. Beyond this, some systems have seen lower costs after cutting out or reducing contract labor, which can quickly add up.
Negotiation. Negotiations are a big piece of the CFO role, and this skill can help CFOs negotiate better benefits packages for their organization. CFOs can collaborate with payers to explore the best benefit package for their organization, and make the system’s dollar stretches as far as possible.
Workforce tools and training programs. Ideally, leaders can aim for simple, effective programs with minimal upfront costs. Health systems can offer programs that address things like burnout, mental fortitude, and wellness. CFOs should explore all local community options for partnerships in programs like these to build a strong staff that feels taken care of by their organization.
Utilizing Tech. Many systems are using automation to keep up with the labor shortage. A new report from Grant Thornton’s inaugural health care CFO survey showed that about 71% of healthcare CFOs plan to mitigate labor costs and improve operations through automation.
This is a popular option, but CFOs must ensure they are bringing in the right technology to solve a specific problem, ensuring that agility and innovation are at the forefront of implementation. Coupled with this is the task of empathizing with staff when introducing new technology to workflows.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
Labor costs take the cake for the largest healthcare expense, hovering at 60%.
Overall healthcare costs are projected to grow 8% this year, putting more pressure on CFOs.
CFOs can explore options like automation and workforce tools to help mitigate costs.