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Hospitals Face Pressure to Pay Market-Competitive Salaries

Analysis  |  By David Weldon  
   October 28, 2021

Small healthcare organizations are struggling with recruiting and retention efforts, as many workers up their demands for more pay and better benefits.

(Editor's note: This article is the first in a series about the healthcare labor market from the CFO perspective.)

Healthcare workers have been the first line of defense in the battle against COVID-19. Doctors, nurses, and other caregivers have put in extremely long hours with little rest, and little relief in sight. The result is that some healthcare workers are leaving the field entirely, while many others are taking jobs at competitor healthcare centers that are willing to pay more or offer better benefits.

This trend isn't unique to healthcare—it is happening in many industries. But competitive labor markets are putting significant pressure on smaller hospitals and healthcare providers, which typically lack the resources to win at a bidding war for job candidates.

Paying market competitive salaries to healthcare workers obviously differs from one region to another. It can be made especially challenging in a region where the larger hospitals are known for their superior levels of care, and they excel at recruiting and retention as a result.

That is the dilemma faced by Pembroke Hospital, an acute behavioral healthcare facility in Pembroke, MA, which just initiated a new pay structure for its RNs and mental health assistants (MHA) to remain competitive in one of the world's leading healthcare areas.

Paying competitively in a region known for top hospitals and healthcare

As Boston is a top center for healthcare, it would seem to be a good thing for all healthcare providers within the area. But it isn't when it comes to hiring and retention strategies. In both cases, size and reputation counts for a lot, and the leading healthcare institutions get to vie for the crème of the crop.

"Healthcare hiring is difficult in Massachusetts," explains Erin McGarry-Sullivan, CFO at 120-bed Pembroke Hospital. "We have the best-in-the-world hospitals and services, and it takes lots of hard working, caring, and competent people to continue this tradition. Every hospital is looking for these people, and they are highly sought after."

Making matters worse, as the pandemic has progressed, the number of available job candidates has declined as some healthcare workers have left the field, and the pipeline for producing new workers has slowed. All the while, new healthcare facilities are opening, especially satellite facilities for Boston-based hospitals, keeping the demand level high.

"Hiring is highly competitive," McGarry-Sullivan stresses. "We currently are looking for 60 MHAs and 21 RNs. MHA is an entry-level position, and no prior experience is necessary. It is a great job for a psych major that is working on a master's degree. Two-week training is offered, along with a certification in CPR and Handle With Care.  A new hire would work a shadow shift on the units with senior staff."

"RNs are wanted with some experience," McGarry-Sullivan explains. "Psych nursing is unique, and we need special nurses who care [for] and understand patients with psychiatric illness. We recruit year- round and offer paid internships. The time-to-hire period is long, and from acceptance to on-grid takes about one month."

Adjusting compensation strategies in a time of great challenges

Because of the supply-and-demand gap for skilled healthcare workers, Pembroke Hospital found it necessary to overhaul its salary structure during the pandemic. Steps for revamping a compensation program can include monitoring what competitors are paying, following local and industry salary surveys, polling employees, and paying close attention to what job ads are offering in the market.

"We just initiated a new pay structure for RNs and MHAs," McGarry-Sullivan says. "Starting pay for an MHA is $19 per hour, with no experience and no college degree; or $20 per hour if you have a degree, but no experience. We offer full benefits to employees, with a $5,200 tuition reimbursement allowance per year and $200 per month student loan forgiveness. Our baseline hourly rate for RNs is $34 per hour, and it rises with years of experience."

With the recent salary adjustments, McGarry-Sullivan says the hospital now feels "that we are setting the market, especially here on the South Shore [of Massachusetts] for the MHA position. This is now a living wage job that can turn into a lifelong career with investments made in education."

But fair market compensation is only one piece of the puzzle. Successful recruiting and retention efforts require that a healthcare organization address every aspect of a worker's personal and career development needs, McGarry-Sullivan stresses.

Her advice: "Pay people a living, fair wage. Offer them training and mentoring. Encourage advancement through education. Offer continuing education on-site. Have administrators on the units, talking to staff.  Support them emotionally and physically. Keep dialogue open. We have town halls every few weeks to keep lines of communication open."

Fair pay and healthy benefit offerings tell a worker they are appreciated

A healthy slate of benefits offerings and a competitive wage goes a long way toward making a worker or new hire feel appreciated, and it is critical in these challenging times.

"Staff are people that are living their lives, and need to be compensated a living wage," McGarry-Sullivan says. "I recommend using this guide as a baseline for setting rates." McGarry-Sullivan cites the following resource at

When evaluating what is a market competitive salary, McGarry-Sullivan says it is important to not just think in terms of salary dollars going out with each paycheck, but also the financial burden for the hospital if it loses a key worker.

"People are not commodities. They can't be swapped in or out like widgets," McGarry-Sullivan says. "When you find a good one, do not lose them. The cost of attrition is astonishing. So, when someone asks for a raise, think about both the tangible and intangible assets of that individual. Think of the loss of that person, and how it will impact their coworkers. Estimate the cost of the lost training and experience. Usually, you will find that the amount that is requested pales in comparison to the loss of that good employee."

Finally, McGarry-Sullivan says it is also important to think in terms of the value that a healthcare worker brings to the role.

"Just because the employee's levels of education and training may not be equal with others on your staff, remember what your business is. We treat patients. The people in this building that have the most contact with our patients are our nurses and mental health associates. They create 95% of the value we deliver. Don't ever forget that and treat them with admiration and the upmost respect—always," McGarry-Sullivan says.

David Weldon is a contributing writer for HealthLeaders. 


Many healthcare workers are leaving the field, while others are changing employers in the hopes of better salaries.

Smaller hospitals are often at a competitive disadvantage when it comes to recruiting or retaining healthcare workers, especially in top healthcare regions.

Paying market competitive salaries sends the message that a worker is appreciated, but recognition should be about a lot more than just money.

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