COVID-19 cases are skyrocketing, sapping the staff and resources at nearly all hospitals. But this care brings in little revenue, and it comes at the expense of elective procedures that do.
As the COVID-19 pandemic continues to surge, this time from both the Delta and the Omicron variants, hospitals and health systems are once again being stressed to the brink. And as bad as things have been in the healthcare sector over the past two years, 2022 could be even worse.
Three financial trends will impact hospitals significantly in 2022. The first two are directly related to the pandemic, and the third is an indirect consequence. Taken together, they spell extreme financial distress for the industry. Some hospitals may find themselves on life support.
"The number one issue that will have a financial impact is the pandemic itself," says Kristina Wesch, an attorney with Wiggin and Dana who spends the bulk of her time working in the healthcare space, including work on bankruptcies as well as mergers and acquisitions. "We're going on almost two years now. Everybody knows that there was a tremendous loss of revenue for hospitals and health systems due to the postponement of elective surgeries. Even now, many people who would be able to have elective surgeries are not feeling comfortable going into a hospital environment and are choosing not to move forward."
Elective surgeries are way down, accounting for significant lost revenue
The impact of this loss in elective surgeries can't be understated. Elective surgeries are often the bread-and-butter for a hospital in terms of revenue generation.
"Elective surgeries such as joint replacements and things of that nature are really big revenue generators that health systems and even standalone hospitals are missing out on right now," Wesch stresses.
In contrast, COVID care is dominating the resources at many care providers, especially with the allotment of ICU beds. The need for COVID care is skyrocketing, but revenues generated by that care are not.
"We hear a lot about how hospitals are overwhelmed and overflowing with patients. It's a little counter-intuitive, but I guess if you don't work in this space you'd be wondering, well, if hospitals are so busy, how could they be financially distressed? But the type of care that COVID patients require generally does not generate high reimbursements," Wesch explains.
The bottom line is that the growing number of COVID patients filling hospitals and care centers are certainly receiving care. But they're not tapping into anything that drives a lot of revenue for hospitals.
Reimbursements are primarily for the hospital space itself. In terms of revenue generated by medical procedures, most hospitals and healthcare centers aren't receiving anything significant, Wesch says. "It's really just keeping airways open, maybe putting a patient on a ventilator, providing medication, making sure they're comfortable, monitoring them, things of that nature. It's primarily nursing care."
While top quality nursing care is obviously important for a patient, it isn't quite so good for the health of a hospital's bottom line.
Consumerization of medicine was already diluting revenue streams
The loss of revenue-generating procedures during the pandemic would be bad enough, if it weren't for another trend that was already underway – the consumerization of medicine and the growing shift to outpatient settings.
"For hospitals and health systems that weren't prepared for that, it's a big loss of revenue-generating opportunities if they don't have ambulatory surgery centers, urgent care, or walking care centers," Wesch says. After all, many patients don't have a particular loyalty to a specific hospital. They just want instant healthcare gratification.
"So providers that were focused more on a traditional model might have lost out on those higher profitability factors by not having diversified in time," Wesch explains. "Maybe before there were hospitals that were reluctant to acquire more ambulatory surgery centers or affiliates, or even open their own urgent care centers. But the pandemic has really driven home the point that you need to shift to these outpatient settings in order to generate revenue."
Hospitals need to diversify operations and locations
In addition to the need to diversify where care is provided, hospitals and healthcare centers also need to diversify operations if they are to increase revenue generation, Wesch believes.
"We're seeing a lot of that, where hospitals and health systems get into spaces that may be related, but not considered traditional in the past," Wesch explains. Examples include getting into the payer space, tackling insurance-type transactions with tech startups, and partnering with pharmacy management companies.
In terms of mergers and acquisitions, there is a great deal of interest in these activities now, Wesch says, but the pandemic has slowed down the ability to make many of the deals happen.
"Where I am in New York, from a regulatory perspective, things have really slowed down because of the pandemic. The Department of Health is overwhelmed, but there's still a lot of interest," Wesch says.
"We are seeing providers that want to affiliate, but we're also seeing a lot of different types of transactions that going back three or five years ago we really didn't see very much," Wesch continues. "I think they tie back to the shift to outpatient settings and the need to diversify. So we're seeing hospitals and health systems take advantage of non-traditional parties that may not be care providers, such as private equity firms.”
Making progress starts with candid soul-searching
Whichever strategy that a hospital or health system favors, there is a commonly used expression that sums up the first step in overcoming financial distress: "physician, heal thyself."
For hospitals that are already in financial distress, Wesch recommends that they focus on the following:
Look at your lenders, not as the enemy, but as a partner that might help get you to the place that you need to be.
Consider potential opportunities for expansion, either with new business lines or by providing more outpatient care.
Conduct a critical analysis of what is broken in your organization, and what is within your control to fix.
"Obviously, we have to treat COVID patients, and we can't fix the fact that they're not going to generate a tremendous amount of revenue," Wesch says. "But really getting a handle on what is threatening your business plan. Seeing with fresh eyes what works and doesn't work is often a much better strategy than just jumping into something new."
In the midst of all this change and challenges, the burden is squarely on the healthcare CFO to review their organization's business plan on a regular basis. The CFO needs to ensure the business plan is aligned with the current reality and to make sure that the goals are either being met or that they are restructured in such a way that they're achievable, to help the system become profitable or remain profitable, Wesch says.
The need to bring in outside help to right the ship
The unfortunate reality for some hospitals and health systems is that, no matter how they look at it, the best financial option for the organization is to bring in outside help and to restructure.
It's really hard to convince officers and directors to spend more money, but hiring outside expertise that specializes in hospital turnarounds can be a great resource, Wesch stresses.
"Sometimes, what I see in giving restructuring advice to providers is that maybe they jumped into some new things and they weren't successful. They're generating revenue, but they're not getting the maximum bang for their buck, because they still have business lines or operational inefficiencies that are causing them to run at a deficit overall," Wesch explains.
"It's a great strategy to expand if you're aware of the legal and compliance consequences, and all the other things that could be hidden costs when you do diversify. There are tons of great outside advisors who can come in and give hospitals a deep dive into what's going on and what can be fixed, or if something should be eliminated," Wesch continues.
"Obviously, I'm a big proponent of the outside consultants that come in and look at your overall record," Wesch acknowledges. "A good place to start is to conduct a compliance review before you start bringing professionals into your business. Make sure that all of your issues are being addressed from a compliance perspective, and that you don't have any issues that may sidetrack you being able to successfully reorganize or restructure, whether in or out of bankruptcy."
Finally, "don't be afraid to pay a little bit of money for your financial advisors or accountants or whoever you rely on. Let them come in and give you some business advice on restructuring options, because that's usually well worth the money," Wesch says.
The pandemic and growing staffing crisis are impacting a number of key financial areas in healthcare, possibly forcing a reevaluation of the care that hospitals can provide.
Editor's note: This article is part two of a two-part series about 2022 healthcare finance trends. Read part one.
Anyone paying close attention to the economy knows that the cost of virtually everything is going up significantly, and that includes the cost of delivering healthcare.
Several factors are at play here, including the escalating cost of paying healthcare workers. If left unchecked, the combined reasons could force hospitals and healthcare systems to cut some services, scramble to find new operational efficiencies, and perhaps even overhaul how care is delivered.
"Labor inflation is currently unprecedented," says Denise Chamberlain, executive vice president and CFO at Edward-Elmhurst Health, a $1.7 billion health system in the suburbs of Chicago.
"According to Kaufman Hall, a healthcare advisory firm, for the month of September 2021, labor costs were up 18.4% compared to the same month in 2020 (healthcare labor costs have typically risen 3% to 5% per year). EEH's number is not quite as high yet, but it is climbing as additional pay increases and incentives are being put in place to try to stabilize the workforce," Chamberlain stresses.
Staffing challenges are just one of the major issues and challenges that healthcare CFOs will wrestle with in 2022. Following are several other trials and trends to expect.
The rush for higher pay hits hospitals hard in the pocketbook
Payroll hikes at current levels are reason for great concern, especially since the staffing crisis in healthcare shows no sign of easing anytime soon. Many healthcare workers are leaving their jobs for higher-paying ones or joining agencies that place temporary nursing staff where most needed at any given time—at higher rates. This trend, and the need to pay staffers excessive overtime to maintain levels of care, is placing a huge financial burden on hospitals.
"One main issue facing healthcare CFOs and how it impacts their organization is managing through the labor shortage and the escalating costs it is causing," Chamberlain says. "Shortages of key clinical resources was an issue pre-pandemic. COVID-19 accelerated the exodus of healthcare workers from the industry and didn't allow time for health systems to educate and graduate the next wave of frontline team members."
Unfortunately, employee emergency funds, bonuses, and extra pay isn't going to solve this, Chamberlain says. Instead, the staffing crisis will create long-term economic challenges that have the potential to change the healthcare financial model.
"Solutions will require redesign of care models, developing the ability for families to have a larger role in providing care, and redesigning the value proposition for direct caregivers," Chamberlain says. "It likely also requires macro-economic changes in national policy around education funding, immigration, and other opportunities to address the supply of clinical resources."
Declining revenues make it hard for healthcare systems to grow
While hospitals and healthcare systems are forced to dig deep for payroll dollars, they are also finding those dollars harder to come by. The rise in costs to deliver services, combined with declining revenues, will be a barrier to growth at many systems.
"The cost of labor has made a meaningful shift up, challenging the already-very-slim margins in health systems. But staffing shortages can reduce revenue (such as through unstaffed beds or unstaffed operating rooms) at a time when healthcare has already taken a hit," stresses Mallory Caldwell, US Health Leader at EY (Ernst & Young).
While Caldwell says he thinks spending in the sector will start to revive over the next two years, total real consumer spending on healthcare today is still nearly 5% below its pre-pandemic level, according to EY analysis, he says.
In the meantime, this high turnover of healthcare workers is also impacting recruiting, training, and education costs.
"A related impact of increased turnover of experienced nurses is that replacement nurses are new to the organization and often new to nursing," Chamberlain says. "This leads to increased time in orientation (increased labor costs without the immediate benefit of production) as well as a higher percentage of less experienced nurses on our units."
To protect the quality of care being provided by less experienced nurses, Edward-Elmhurst Health (and probably other healthcare systems) have hired additional nurse educators as resources to augment shifts with less nursing leadership or experienced staff.
"Of course, these added nurse educators also increase the costs per patient," Chamberlain confirms.
Inflation forces are at their worst with rising drug prices
Inflation will have severe impacts in many areas of healthcare, but especially with the price of drugs.
"Drug inflation has been the most severe," Chamberlain explains. "According to the Kaufman Hall report, the average drug cost per patient in September 2021 was up 40.4% compared to September 2020."
Another area of increased cost and lost productivity was with vaccine requirements, Chamberlain explains.
"Like most health systems, EEH required our employees to become vaccinated. We experienced the same issues as other organizations with some employees not wanting to get a vaccine for various reasons. We were able to reach 99% vaccination rates without a material impact to our labor force, but it required a lot of time, which was a distraction from other work," Chamberlain says.
Also impacting healthcare systems is the highly correlated demand to simultaneously sustain market share and grow, while reducing (or slowing the increase in) the overall cost of care delivery.
But this is a significant challenge in light of the impact of inflation forces on the industry.
"A major issue facing CFOs is the interplay with cost inflation versus what I would call inelastic (or even declining) revenue streams," says Brad Haws, CFO at Emory Healthcare. "Implicit in this item is the current labor crunch that is happening with contract labor and the great resignation. I believe that cost pressures will be heightened in the short-term with higher inflation, and I don't believe that revenue in most cases (and certainly not with Medicare and Medicaid) will be adjusting at the same rates. Our ability to manage this will be difficult from a clinical quality and coverage basis."
Healthcare suffers supply chain woes like all other industries
In addition to dwindling staff and declining revenues, another significant challenge impacting healthcare providers is supply chain issues.
"Like the staffing shortage, the negative effects in this area are growing as well," explains Clifford 'Cliff' Loader, CFO at Northern Arizona Healthcare. "It's becoming difficult to acquire computers or medical devices that require a micro-chip. Even certain medications are simply unavailable, and we're having to utilize other treatment alternatives in these areas. For the things we can find, the prices are growing exponentially. It's quite remarkable."
As with many factors, a challenge in one area can impact another, and supply chain challenges are helping to drive up inflation, Chamberlain says.
"Supply chain logistics have impacted healthcare the same as other industries, and these issues have driven up inflation," Chamberlain explains. "According to the same Kaufman Hall report, the average supply cost per patient in September 2021 was up 14.2% versus September 2020. Supply inflation pre-pandemic had been running around 2% for EEH."
Payer reimbursements aren't keeping pace with inflation
With increasing labor, supply, and pharmaceutical expenses, hospitals will be looking for increased rates from payer partners and will continue to focus on improving operational efficiencies to counteract those growing expenses, according to Charlton Park, CFO and chief analytics officer at the University of Utah Health.
Unfortunately, reimbursement rates are not keeping up with inflation, and cost cutting is required across the board.
"We are experiencing market-placed difficulties which range from private equity competing for our remunerative services to consolidation of payers and large systems," Haws says. "These market dynamics are challenging and make the competitive landscape even more difficult to manage. The fear is that this will create an environment that is riper for the haves and have-nots. Have and have-not could be expressed as a dichotomy between rural and urban; surgical specialties versus primary care; large systems versus isolated, sole provider hospitals."
Making matters worse: "At the same time that operational costs are increasing, many of our patients have lost, or left, their jobs and access to commercial medical insurance due to the pandemic. These patients are now coming to us without insurance, or as Medicaid patients," Loader explains. "So, while it's costing more to provide care, we're getting paid less when we get paid at all. This downward pressure on our already thin margins is threatening our ability to reinvest in critical equipment as it ages and needs to be replaced."
Steps that CFOs can take to help their organizations meet these challenges
As bad are things are financially now, hospitals and healthcare systems need to brace for more difficult times ahead. The pandemic shows no signs of easing. The staffing crisis won't be resolved for a few years. And new revenue opportunities will be few and far between.
As a result, Caldwell offers several tips on what CFOs need to do to help their organizations successfully navigate these tough times. In 2022, Caldwell says healthcare CFOs should:
"Dig deeper in identifying near-term operational efficiencies."
"Continue driving longer-term strategies to reimagine the care and wellness delivery system."
"Explore new technology, digital, and data investments to improve processes."
"Seek out a variety of potential partnerships, both within the sector and with less conventional collaborators, who can help extend and expand hospital and health systems' market presence."
Healthcare executives agree that the greatest challenge to hospitals and health systems heading into 2022 is the staffing shortage, but there are steps CFOs can take to lessen its impact.
Editor's note: This article is part one of a two-part series about healthcare finance trends in 2022.
Ask any healthcare CFO to name the issue that will demand their continued attention in 2022 and the answer will be swift: staffing.
Indeed, HealthLeaders talked to CFOs at several hospitals and healthcare systems to name their top issues for the new year, and the consensus was the staffing crisis. As we have reported, recent studies show the industry has lost anywhere from 20%–30% of its workforce over the past two years. Of those healthcare workers still employed, many say they are actively considering a change in jobs, or perhaps leaving the field entirely.
Clearly, the news on the staffing front isn't good, and it's not getting any better.
"The number one issue for healthcare CFOs right now is the health staffing crisis," stresses Mallory Caldwell, US Health Leader at EY. Most experts agree that healthcare has been one of the hardest-hit sectors amid the crisis. By one estimate, nearly one in five healthcare workers have quit their jobs since COVID-19 first hit. In addition, 35% of nurses surveyed in fall 2021 have considered leaving their jobs since the pandemic began.
Fewer healthcare workers mean higher healthcare costs
The current staffing crisis is doing a lot more than forcing healthcare workers to put in more shifts and longer days. It is pushing up the cost of providing healthcare.
"The national staffing shortage is beginning to affect us in fundamental ways," says Clifford (Cliff) Loader, CFO at Northern Arizona Healthcare. "At NAH, we currently have over 700 open positions. Not only is this significantly increasing our operational costs as we turn to 'travelers' or other contract employees to fill certain gaps, but it's also affecting the operations of our nonclinical areas as well."
No wonder that the workforce shortage continues to be at the top of the issues that NAH faces as it tries to keep up with the demand for services and continue to serve its community. That is putting greater focus on increasing retention rates and decreasing operational costs.
"Our people-first strategies are critical as we focus on the retention of our current colleagues while continuing to innovate new ways to attract both clinical and nonclinical team members," Loader says.
Media attention tends to focus on the statistics around nurses that have left their jobs, voluntarily or not. But the reality is that staffing shortages are impacting hospitals and healthcare systems across the board.
"We have open positions in general accounting, accounts payable, payroll, and it's becoming increasingly difficult to find candidates. This puts basic functions like closing our books on a monthly basis, paying our bills and paying our staff at risk," Loader says.
Staffing shortages are across the board, but especially among nurses
Most importantly, Edward-Elmhurst Health is facing a significant nursing shortage.
"Nurses are required in the hospital setting 24/7, and the nursing shortage is having a profound impact on hospitals nationwide," Chamberlain says. "We are seeing shortages of nurses in the ambulatory and physician office environment as well."
The recruitment of nurses has always been a strategic priority at Edward-Elmhurst Health but the pandemic has been the straw to break the camel's back, Chamberlain says.
"During the early COVID surges, nurses were generally willing to put in the extra hours and take the extra risks because this is their calling. But they are now exhausted and things have not slowed down with the continued surges," Chamberlain explains. "Many nurses have exited the workforce. Some have retired. Some chose to move to another industry. And many reduced their hours. So the demands are as high, or higher, than they've ever been."
With fewer staff, healthcare workers go far beyond their job roles
Meanwhile, Edward-Elmhurst Health—and most hospitals for that matter—are having to do more with fewer nurses. Those nurses are now experiencing compassion fatigue and exhaustion, Chamberlain continues. Making matters worse, because of other labor shortages such as with housekeeping, nurses must step in and do more work, including non-nursing tasks such as cleaning of patient rooms.
"All of these factors have come together to create a perfect storm. Nurses are expecting higher pay. And some are willing to change jobs or become travelers or agency nurses to get the higher pay," Chamberlain says.
This phenomenon creates a circular problem, Chamberlain explains. Consider: nurses leave an organization. The organization must use an agency to backfill. That backfill demand creates higher demand for the higher priced labor, and that incentivizes more nurses to leave and join the agency.
To understand the immediate impact of this trend on a hospital or healthcare system, the cost of an agency nurse has historically been about 50% higher than an employed nurse, Chamberlain explains. The ratio is now 200%–400% more.
At one extreme, some agencies are offering 13-week commitments that will pay a nurse's wages for a year or more, Chamberlain says.
Turnover rates near double as many workers strike out on their own
As noted, there are also shortages and high turnover of other clinical staff. Examples include patient care assistants that tend to patient needs such as bathing, help with eating, etc.; housekeepers; dietary; and laundry specialists.
"These are lower-paying jobs with most training on-the-job, and many are not healthcare-specific," Chamberlain says. "With so many vacancies in other industries, these staff can take jobs offering the same pay for less strenuous of work or more flexible hours, or work from home, or even get better pay as supply-and-demand economics kick in and pay for these jobs continues to ratchet up."
Because of the issues described above, turnover rates have risen dramatically across the country. Edward-Elmhurst Health is no exception, Chamberlain says.
"Our turnover rates aren't quite as high as the regional averages, but they are still high," Chamberlain notes. "EEH normally has about a 6% to 8% vacancy rate. Even though we are hiring as quickly as we possibly can, our vacancy rate is now around 12% because of the high turnover and difficulty recruiting."
The strain this puts on the recruiting team at Edward-Elmhurst Health is tremendous, Chamberlain acknowledges.
"They spend their days trying to find new ways to source good candidates (such as job fairs), and better ways to connect with them to show that EEH is a great place to work. That includes advancing our technology to make the application process a better experience with things such as a better website, more direct connection to the job you may be interested in. We have had to add staff to handle the extra workload," Chamberlain explains.
Steps hospital CFOs can take to soften the blow of the staffing shortage
Faced with such a devastating staffing shortage, there are steps that healthcare systems and CFOs should take immediately to soften the impact until conditions can improve. Some of these steps go to the heart of what has been considered typical patient care. Others involve new ways of thinking about traditional human resource issues.
"Our EY Health team held a webcast on this topic—"The Great Resignation"—recently. While there's no single answer to fixing staff attrition, there are several tactics leaders can employ to staunch the bleeding, to retain remaining staff—and to attract (and develop) new hires," Caldwell says.
For one thing, "We must forge long-term strategies amidst the unpredictable COVID-19 pandemic environment with deeply tired and weary caregivers," explains Doug Watson, senior vice president and CFO at UnityPoint Health. "Healthcare workers have experienced a moral injury. Our providers, nurses, respiratory therapists, and support staffs have shown an amazing work ethic, but they are beyond burned out."
These strategies will require changes in how hospitals and healthcare systems approach the work of treating patients," Watson stresses. UnityPoint provides care to both metropolitan and rural communities across Iowa, western Illinois, and southern Wisconsin. Headquartered in West Des Moines, Iowa, UnityPoint Health has a network with more than 450 physician clinics, 20 regional and 19 community hospitals, community mental health centers, accredited colleges, and home care services.
"We need to provide a safe, protective, and inclusive environment, and be creative about what benefits are truly meaningful," Watson says. "We must be intentional about identifying and developing a diverse pool of individuals who can rebuild the talent pipeline. And we must give team members opportunities to grow and collaborate. That will be critical as we lean into redefining how they can make an impact for their patients."
Finally, healthcare systems must consider how they can still achieve the goal of high-quality, affordable, and accessible care in a model that may look different from over the past 40 years, Watson says.
Creative retention strategies are more critical than ever. Here are steps CFOs can take to hold onto healthcare workers.
(Editor's note: This is the sixth and final article in a series on the healthcare labor market from the CFO perspective.)
The retention of skilled workers has always been one of the most important tasks on any executive's to-do list. But it has become job No. 1 at many healthcare systems, as healthcare workers are reportedly leaving the field in droves.
Now, with COVID-19 case numbers, hospitalizations, and even deaths rising again, a winter surge is well underway and the country is seeing its first cases of the Omicron variant. With everything going on around the pandemic, many hospitals and health systems must ensure they are holding onto key staff.
"The healthcare industry is facing broad, complex staffing challenges, many of which existed prior to COVID and have been greatly exacerbated during COVID. Frontline team members are working long hours, taking extra shifts, and still riding the uncertain waves of COVID," notes Doug Watson, senior vice president and CFO at UnityPoint Health, an integrated health system.
UnityPoint Health had approximately $4.6 billion in revenue in 2020, and its various entities employ approximately 33,000 employees. UnityPoint Health has made efforts to keep its employees engaged and motivated as a top priority.
"Our people matter, and leaders are prioritizing recruitment and retention efforts across our system," Watson says. "We are deliberately focused on these efforts—not just for nursing, but all key fields that support the patients we're seeing. We are implementing new solutions and revamping current efforts such as agency partnerships, nurse float pools, and new hire best practices. We will need to be flexible and nimble to meet the workforce challenges of the future. This work was underway before COVID-19, but the pandemic has accelerated the pace and urgency with which we are implementing these strategies."
Show healthcare workers they matter
One of the most significant steps healthcare executives can take in retaining the workforce during the pandemic has been to place greater value on the personal lives of workers—their interests, goals, and family and outside commitments.
"It is important to recognize that the demands placed on our healthcare professionals go beyond the workplace," Watson stresses. "In addition to navigating patient care during COVID-19, many healthcare professionals must juggle school and other challenges such as raising school-aged children in a pandemic, caring for aging parents, and managing their own mental and physical health needs."
Toward that end, UnityPoint Health executives are committed to creating an easier and more personal team member experience. The goal is simple: to show team members and their families how much they matter.
"Statistics show that work environment and a strong supportive culture are critical to retention," Watson says. "We believe our efforts in three key areas are particularly important in retaining our talented team members."
1.Offer flexible benefits. Alongside a comprehensive compensation package, UnityPoint Health offers benefits aimed at meeting the varying needs of diverse team members and their families. This flexibility is crucial to attracting and retaining the best talent, Watson says. Benefits include 401(k) and health savings accounts, health insurance, dental and vision insurance, flexible spending accounts, short and long-term disability, adoption assistance, leaves of absence, and child and elder care assistance.
2.Provide benefits focused on employee well-being. UnityPoint Health is committed to promoting team members' physical, emotional, and financial well-being through a host of programs, Watson says. These include paid time-off, an employee assistance program, wellness credit and rewards programs, an online fitness platform with access to over 600 classes, retirement and financial planning, team member discounts, and more.
"Throughout COVID-19, we have also provided offerings to support resiliency and recovery. Those include free visits with a therapist, a digital mental health platform, crisis support, relaxation and meditation resources, an online program to promote healthier thinking, and other tips, resources, and tools." Watson says.
3.Ensure that team members have a voice at the table when decisions are made.
"We've implemented a robust shared governance decision-making model to ensure that team members' voices are elevated and heard across our organization," Watson says. "Despite all the challenges health systems are facing, we are proud of the environment we've created together. Our team members remain highly engaged in their work with well over three-quarters engaged. In addition, 83% of team members report being comfortable in discussing concerns with their leader."
Training and career development opportunities now mostly on-the-job
A full slate of perks and benefits goes a long way in attracting and retaining employees, but equally important are providing training, skills development, and career development opportunities. This last point is challenging, since workers are already putting in lots of extra time on the job. That makes it difficult to take on formal career development programs. But the extra work and long hours are actually providing new career skills. It is up to the healthcare organization to figure out how to make that experience count toward formal recognition.
"During this challenging time, opportunities for advancement have been especially important for team members," Watson says. "As a large health system with hospitals, clinics, and colleges across Iowa, Illinois, and Wisconsin, we can offer a broad choice of advancement opportunities and career tracks. We support team members' personal and professional development through direct tuition assistance payments, discounts at educational partners, online learning, leadership development, provider development, and a referral bonus program."
"We are actively looking at ways to assist our team members to up-skill themselves through our own college's programs as well as partnering with other educational institutions and investing in 'on the job' training and advancement opportunities," Watson continues. "Nearly 91% of team members state they are acquiring the knowledge and skills necessary to be effective in their jobs, significantly above the healthcare benchmarks."
Involve employees in picking the retention and development programs right for them
Still, Watson acknowledges that the healthcare workforce is in flux, and the pressures on both employers and employees are intense. That makes it important for leaders get to know their workers, show empathy for what workers are experiencing, and engage with them. That role also falls on CFOs.
"I think it is critical to engage actively in the brainstorming efforts with your clinical leaders, operational leaders, and your human resources team to identify career development initiatives. Try to understand the unique environments in the communities you operate within and what programs you can create that will resonate with your employees and make a difference in your ability to sustain and serve the needs of these communities," Watson says.
"Some of the best ideas come from the people most affected or that have a vested interest in being able to develop and grow within your organization," Watson continues. "As a CFO, your other responsibility is to look at creating accountability so that as the organization invests in these initiatives, you can see results or identify issues early so that you can course-correct as needed."
Finally, Watson says it is important to recognize the role that values, culture, and a genuine organizational focus on attracting, cultivating, and retaining talent has on an organization's ability to be successful in a difficult and evolving time.
"This is hard work, and if your core culture is not aligned, or this is just a responsive strategy, it will be difficult to achieve sustainable results," Watson concludes.
The growing labor shortage in healthcare is forcing many providers to work long hours and put in extra effort. In the process, many healthcare workers are receiving rapid career development.
(Editor's note: This is the fifth article in a series on the healthcare labor market from the CFO perspective.)
There is no debating that the COVID-19 pandemic has caused significant disruptions in the healthcare workforce. Probably the most disturbing trend is that between 2019 and 2020, job vacancies increased by up to 30% for various nursing positions, and by 31% for respiratory therapists, with shortages expected to persist.
That has resulted in a huge increase in responsibilities for those still employed in the field. And that increased workload has dramatically changed the picture for career development efforts. For many healthcare systems, there is little time to focus on formal career development programs. But for many healthcare workers, new job opportunities are endless.
The talent shortage changes the rules for career development
Quite simply, the top issues and challenges around career development for healthcare professionals today are time and resources.
"The nationwide talent shortage is one of the very biggest challenges that we face overall, and it impacts career development in several ways," explains Denise Chamberlain, executive vice president and CFO at Edward-Elmhurst Health, a $1.7 billion health system in the suburbs of Chicago. "Folks are so busy and so short-staffed that it's hard to do anything but get the most urgent work done. On the other hand, opportunity has arisen for people to step up and take responsibility for additional projects or to lead from the front as a trainer of new employees."
This is perhaps an unforeseen benefit for healthcare workers. Still, they might not see it in the moment, since so many are required to work long hours and put in extra effort. In the process, many healthcare workers are getting a lot of career development, just not from a formal program, Chamberlain explains.
"New leadership opportunities are there for the taking at every level," Chamberlain stresses. "Since the beginning of the pandemic, employees at every level stepped up and took responsibility for projects, new processes, training, and new roles outside of their basic responsibility. All of this was career development. In the moment, you might not think about it like that. Reflecting back, our employees learned and grew at such a rapid pace and flexed and developed at every turn. I'm sure the same is true for the industry."
Limiting formal programs to leadership development
In better times, Edward-Elmhurst Health would place a lot of emphasis on a formal career development strategy. Edward-Elmhurst Health has two acute care hospitals, one behavioral health hospital, and over 70 ambulatory sites. The health systems employs more than 10,000 workers.
These days, formal career development efforts are more likely targeted to leadership development.
"We never took our foot off the gas in terms of the design and building of leadership development programs. Even in the face of cost cutting during the pandemic, we always kept our eye on the future—we knew we wanted a workforce intact afterward and moved forward," Chamberlain says.
The reality is a bit different for rank-and-file.
"We have been hesitant to even ask our workforce to spend extra time in any type of career development activity, since many are already working overtime," Chamberlain acknowledges. The challenge for the health system will be to soon find ways to harvest the development that employees have learned 'on the job.'
Workers want acknowledgement of, and compensation for, their extra efforts
As Edward-Elmhurst Health and other healthcare systems figure out the best ways to formally act on this on-the-job learning, they had better not wait too long. Recent studies have found that a majority of healthcare workers are at risk of flight. The two top reasons cited by workers who are planning or pondering a job change are more compensation and better opportunities.
Health workers continue to go the extra mile. Many say they want acknowledgement of those efforts built into their job assessments, and they want a paycheck that reflects the additional contributions.
In the meantime, another area where Edward-Elmhurst Health hasn't eased up is in its succession planning.
"We have invested in succession planning over the past few years," Chamberlain explains. "The effort includes career discussions, a rating of talent potential, and an Assessment and Development Plan (which includes identified strengths, development needs, competencies, next roles, and developmental actions) for all directors and above. It also includes creating "bench charts" (identification of successors and readiness timing) for critical roles throughout the organization, as well as the identification of emerging talent (i.e., below director)."
These succession plans are consulted first when managers are considering candidates for open roles.
"One of the many benefits of this work is that it helps inform us of where the needs or weaknesses are in development across the enterprise, so we can consider this when designing new development training and plans," Chamberlain says.
Career development success starts by asking workers what they want
The pandemic has completely changed the rules for managing a workforce, so health systems shouldn't assume that the ways of old are the ways of gold. Edward-Elmhurst Health leaders recognize this, and surveyed staff this summer on exactly what they would like in revamped career development programs.
"We know specifically what they have asked for," Chamberlain stresses. "They want recognition for their development and growth efforts, and they want it on a day-to-day basis from their direct leadership. They want more skills development and more training."
At the management level, Edward-Elmhurst Health is instituting an intensive, custom leadership development program to give every leader the tools they need to lead exceptionally well, learning how to lead themselves, their people, and the business, Chamberlain says.
"Each leader gets a personal assessment and coaching session prior to starting the program. We're focusing our formal development efforts on our leaders, so that they can better develop our front line," Chamberlain says.
"As a CFO, I feel strongly that every leader (at any level) needs a basic understanding of how a health system makes money, and why it is important that we do so," Chamberlain says. "Here at EEH, I'm contributing to our leadership development program with a training module on leading the business based on my book, Money to Care: Hospital Finance for Non-Financial Hospital Leaders."
In addition, Chamberlain says CFO support for the funding of official programs is also important.
"Development is fundamental for retention and reducing turnover. Turnover is terribly expensive and good leaders are priceless. There are truly few investments we can make in our people that would not have an ROI if we do them sincerely and well. We can actually save money by investing in development," Chamberlain says.
Developing a program that focuses on the new roles and responsibilities
For CFOs and other healthcare leaders that want to bolster their career development programs, Chamberlain offers several tips.
For starters, "this might be least obvious to some and extremely obvious to others … listen to people, and then act. Ask questions of your staff, listen to what they need, and then deliver on that development opportunity," Chamberlain says.
Second, development can be offered in the form of training, or it can be about providing the space and tools an individual needs to grow. Perhaps that means taking charge of a new program or implementing a process improvement. Maybe it means sponsoring a diversity, equity, and inclusion initiative.
"Development is individual, and we have to listen to understand what each individual needs and meet them there," Chamberlain says.
Third, health organizations should develop career tracks internally for staff that enable them to acquire new skills, more responsibilities, and improved opportunities without leaving their current employer.
Toward that end, Edward-Elmhurst Health has formed partnerships with local community colleges. These programs enable a worker to enhance their skills and become certified in their role or beyond. For example, a patient care assistant technician can become certified, and then go on to become a nurse and do a residency all without leaving Edward-Elmhurst Health.
Finally, Chamberlain stresses that career development programs that produce real results, help with recruiting and retention, and is affordable, starts with a commitment at the top.
"Senior leadership must prioritize this work: develop a plan, put the money in the budget, hold themselves accountable to delivering it, including making it a priority of your time. People see whether or not you walk the talk, or never actually do anything," Chamberlain says.
Nearly 1 in 5 healthcare workers quit their jobs during the pandemic, many driven by the desire for more pay. There are ways healthcare organizations can combat this trend, but it requires thoughtful care.
(Editor's note: This is the fourth article in a series on the healthcare labor market from the CFO perspective.)
The desire for more pay and better opportunities have generally topped the lists of why workers leave a job. But in the healthcare sector, this trend appears to have reached near crisis point, as nearly one in five healthcare workers have quit during the pandemic.
Indeed, according to a recent survey of 1,000 healthcare workers by Morning Consult, 18% have voluntarily left their jobs since February of 2020, while another 12% were laid off. Making matters worse, another 31% of healthcare workers say they have considered leaving their current job, and an additional 19% have considered leaving the field entirely.
The COVID-19 pandemic certainly has a lot to do with these statistics. It was the No. 1 reason given for leaving a job or wanting to, cited by 54% of those polled. That was followed by the desire for higher pay (50%) and better job opportunities (50%). The fourth most-cited reason was job burnout or being over-worked (49%), and the fifth reason was desired career growth (44%).
With statistics like these, the immediate message is that many healthcare organizations need to reevaluate their pay structures. Healthcare CFOs need to find ways to be innovative and flexible in how their organizations compensate healthcare workers if they are to retain them and stay competitive.
But there is a downside here. Being more innovative and flexible in awarding compensation could come at the expense of other financial needs at an organization. Healthcare CFOS must adopt flexible compensation policies with thoughtful care.
The healthcare labor market is changing, and so must the industry
"Healthcare has seen significant changes. Whether it is thegreat resignation, or what some see as the great retirement coming, there has been a fundamental shift in our labor market and we must adapt," says Brad Haws, chief financial officer at Emory Healthcare in Georgia, part of Emory University, and one of the leading health systems in the country. Emory Healthcare has a net patient service revenue of approximately $5 billion.
The result is that "the simple economic principles of supply and demand are driving changes in the financial models and expectations," Haws continues. "Burnout, fear for one's health, and even macro-aggressions against staff all have a role in the way someone views the jobs that are available. Many employees are reevaluating their individual situations and making new decisions. Some of those decision involve compensation."
There are steps that healthcare organizations can take to compensate individual healthcare workers fairly and creatively. But from a big picture perspective, this greater thirst for compensation by workers is a difficult challenge for the industry.
"One thing that is difficult to understand at a macro level is the driver of the market. As we all compete for staff, we are, in some ways, driving our own market cost increases," Haws says. "Again, fundamental economic principles are at play. When staff can leave a role and become a temporary or traveling resource in the same market they were in previously, all we have done is raise the cost of the same resource. I don't know how to address a cycle that continues to spiral toward increased costs."
This is not a good trend, Haws says.
"At some point, these costs will drive difficult decisions within all of our organizations. If revenue remains inelastic, we will have to make tradeoffs regarding the use of our financial resources. Capital, equipment, staff, etc., all are required for the services we provide and will have to be balanced," Haws says.
Exploring employee needs to keep them engaged
At Emory Healthcare, time is of the essence in terms of addressing the concerns and fears of healthcare workers during the pandemic. The organization wants to head off worker departure to the best of its ability, and that includes understanding new ways of compensating workers for their time, efforts, and contributions. Haws is actively involved in the efforts.
"We have developed a systemwide response team to the issues that is second only to the incident management effort that the COVID pandemic required clinically," Haws explains. "We have many teams focused on a variety of work streams, with parallel efforts and regular report outs." The teams are:
• Retention and engagement
• Recruitment
• Care model reviews
• Leadership development and support
• Analytics
• Communication
• Human resources
"Each team is working on its own work stream and bringing back solid ideas. But it is a heavy lift," Haws acknowledges.
Success with innovative pay involves creativity, and a lot of 'trial and error'
As healthcare CFOs explore innovative and flexible compensation practices, it is important to remember that the answers don't always involve just cash, Haws stresses. As noted in the Morning Consult survey, career opportunities are a top driver for job change as well. Haws knows this from experience, having joined Emory Healthcare in August, coming from the University of Iowa Health Care, where he was associate vice president and CFO.
Still, it is on the compensation front that healthcare organizations have more ability to control the dynamics.
"We are, by necessity, trying to keep close tabs on the market and make compensation adjustments as needed," Haws notes. "Some of those adjustments are outside the normal cycle. However, we need to remember that pay is only one of the variables that staff are looking at when they evaluate a job. Other things, like flexibility, learning and training, career growth and the workplace environment also play a role. I recently had an interesting conversation with our CHRO wondering if we are headed back to an environment of a 'cafeteria type' model where staff can choose what matters to them."
To best implement innovative and flexible pay practices, Haws says an organization needs to embrace "creativity, paired with trial and error. I don't think all of our strategies will be successful, but you don't know until you try. The key is being able to measure the impact."
Top tips for driving a successful innovative and flexible pay strategy
To other CFOs looking to spearhead innovative and flexible pay practices at their healthcare organizations, Haws offers three tips:
"Understand where the market is going—skate to where the puck will be, not where it is. Demographics are changing and the market is changing. Staff may value things other than pay (such as flexible schedules, educational opportunities, service-related activities). There may be generational differences in the relative valuing of retirement," Haws says.
"We need to have metrics that track the effectiveness of the compensation plans that we choose. My experience is that we believe we know what the market wants (we might even have some market data or focus groups), but do we track the effectiveness of what we do? Market comparators often lag, so those are not always the best. Turnover metrics are common, but there are many variables that might drive turnover," Haws advises.
"Partner with operations to understand their needs and drivers. We need to marry the financial impact to those. If possible, healthcare systems might consider pilots or small-scale experiments," Haws concludes.
Haws also offers a personal anecdote of an innovative and inexpensive recruiting effort that paid off for both a healthcare provider and potential hire.
"One of my daughters is graduating from nursing school with her BSN in December. She is attending school at Brigham Young University in Provo, Utah, and we have had many conversations about her future," Haws says. "She was recently invited to an open house to a highly reputable system on the East Coast. This open house turned into a remote interview and a job offer for a great position in a cardiac step-down unit with a great system starting next spring, once she has passed here licensure exams."
"I have been impressed by a creative recruitment strategy and wondered what the ROI has been on those efforts. It is interesting to recruit all the way across the country, and I wonder how many candidates are considering that type of a move, but it worked in at least one situation," Haws says.
Brad Haws is a HealthLeaders Exchange member. The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at https://www.linkedin.com/company/healthleaders-exchange/. To inquire about attending a HealthLeaders Exchange, email us at exchange@healthleadersmedia.com.
Most healthcare organizations were already experiencing a supply-and-demand gap for top talent before the pandemic. Now things are getting desperate.
(Editor's note: This is the third article in a series on the healthcare labor market from the CFO perspective.)
For the past several months, the federal government has tried a variety of measures aimed at helping workers and families cope during the pandemic. But government measures apparently aren't going far enough in the healthcare sector, where thousands of nurses have reportedly left the profession due to fears and concerns around the pandemic.
If accurate, this trend could be crippling to not only the industry, but the nation's well-being. One obvious solution is to fill the pipeline with more nurses—lots of them—as quickly as possible. A second solution would be to convince thousands of frightened and frustrated healthcare workers to stay the course. But there are several factors working against that goal, says one hospital executive.
"The pandemic has had a profound impact on our industry," stresses Clifford (Cliff) Loader, chief financial officer at Northern Arizona Health. "The pace and intensity of the sickness has overwhelmed, exhausted, and burnt out many clinical staff. We are hearing from other organizations that 30% of RNs nationwide have left the profession due to the pandemic. This leaves healthcare organizations fighting for what nurses are available."
Making matters worse, "we now find ourselves competing with local businesses who also need staff. Just the other day, McDonalds was advertising $20 per hour to start, which makes it difficult to retain some of our non-licensed staff," Loader says.
As a major healthcare center, one might think that Northern Arizona Healthcare could keep pace with hiring needs, or at least have first crack at skilled talent. Nothing could be further from the truth, Loader says.
"We're finding it difficult to find people to fill open positions. We currently have over 600 positions posted for hire. This difficulty isn't limited to clinical staff, but runs the gamut of positions in our organization," Loader explains.
Job openings abound across the board, not just in nursing
Northern Arizona Healthcare, a healthcare organization that encompasses more than 50,000 square miles. The organization employees more than 3,500 doctors, nurses and other healthcare experts. It serves more than 700,000 people in communities across the region and provides comprehensive healthcare services through two hospitals —Flagstaff Medical Center, a Level 1 trauma center, and Verde Valley Medical Center.
Northern Arizona Healthcare also has primary care and specialty physician clinics, outpatient surgical centers, the Heart & Vascular Center of Northern Arizona, Cancer Centers of Northern Arizona Healthcare, EntireCare Rehab & Sports Medicine, Fit Kids of Arizona, and Guardian Air and Guardian Medical Transport. As a nonprofit healthcare system, the organization is governed by a volunteer board of directors.
All of those services require a large number of professionals with a variety of both advanced and basic skills. And with the impact of the pandemic on the industry, Northern Arizona Healthcare is finding it challenging to fill openings across the board.
Registered nurses are in especially high demand, Loader says. But the organization is also challenged in the sourcing of allied health professionals in the areas of imaging, laboratory, and respiratory therapy.
"We are also frequently looking for medical assistants and CNAs to join our team," Loader says.
But there's hope. Perhaps more than ever, healthcare organizations across the country are dependent on local sources for producing new healthcare professionals, whether they be private or state universities and colleges, or specialty training facilities. Northern Arizona Healthcare is fortune to draw on the state university system, and that relationship will be even more critical going forward.
"Northern Arizona University is located in Flagstaff and has always been a great source of talent for us," Loader says. He says he does not believe the pandemic has significantly impacted the healthcare-related programs at the university.
"Though in-person education has been limited, the programs have continued virtually," Loader points out. "We also benefit from being in a beautiful place that attracts outdoor enthusiasts of all types. That contributes to us often being able to recruit to the area."
But what remains to be seen is how many new future hires will enter the pipeline, and enroll in medical degree or certification programs over the next few years, or whether the number of students attracted to the healthcare field will offset the numbers of workers now leaving.
The immediate role of government and industry
A beautiful location and outdoor recreational benefits are nice-to-have recruiting draws, but they only go so far when it comes to securing the numbers of workers that a healthcare organization needs to maintain services, let alone grow. That challenge is likely to get worse over the next couple of years.
A recent survey by the American Association of Critical-Care Nurses found that out of 6,000 critical care nurses polled, a full two-thirds (66%) have considered leaving their jobs due to the pandemic. A number of reasons were cited by respondents:
67% said they are afraid of putting their family's health at risk
76% said patients who are unvaccinated undermine nurses' physical and mental well-being
92% said they believe the pandemic will shorten nurses' careers
With such a large supply-and-demand gap for skilled workers in the healthcare sector, Loader says both the government and the healthcare industry have important roles to play in addressing the problem.
At the industry level, "we need to find ways to improve processes, introduce new technology, or find other ways to make the nurse's job less burdened, so they can take on a broader scope of responsibility," Loader says.
"Nurses, today, do many tasks that can be done by lesser skilled employees, can be automated, or can be eliminated," Loader explains.
At the government level, Loader says government could help immediately by being more flexible around overtime work rules. This would involve working with human resource and finance departments in redefining a standard work week.
"Some staff would like to work longer hours for several days, then have several days off, "Loader says. This is a situation not unique to healthcare. Among the lessons of the new remote and hybrid workforce is the desire by employees in several sectors to work longer days, but with longer weekends off.
Work-from-home employees have gained a considerable amount of time back from not having to commute to a job, and they want to take advantage of that gain. This trend is causing some organizations to rethink what should constitute a normal 40-hour work week, and whether it can or should be done in less than five days.
"Currently, overtime rules make that prohibitively expensive to do," Loader says.
The pandemic has shown healthcare organizations that many jobs can be done successfully from home, at least partly. Here are tips to make the program work, says one CFO.
(Editor's note: This is the second article in a series on the healthcare labor market from the CFO perspective.)
Most healthcare organizations are hoping to bring remote workers back into the workplace in some capacity. After all, the pandemic has been disrupting the workforce for almost 20 months now.
But having tasted their first experience with remote work, many workers say they now don't want to go back to the workplace, at least full time. Those workers saved money, gained back time, and better juggled personal commitments during the shutdowns and ensuing surges. Still, there are downsides to remote work, such as the loss of face-to-face communication and camaraderie in a virtual work environment. Remote workers often complain about the loneliness of it.
Meanwhile, healthcare organizations discovered during the pandemic that many employees can be productive working from home. This lesson has come as a surprise to many since organizations have historically discouraged remote work arrangements. Before the pandemic, a small percentage of the U.S. workforce did their jobs remotely.
Many roles obviously can't be done from home in healthcare since most jobs are hands-on and centered on patient care. But healthcare organizations know now that many can, and they are reevaluating how they organize and manage their overall workforce.
"The pandemic impacted all facets of the organization. If the job could be performed in a remote way, the staff was asked to work from home. In some situations, the entire function transitioned to a remote environment, and in others—where the function needed some on-site presence—there is a more nuanced model," explains Brad Haws, CFO at Emory Healthcare in Atlanta.
In many of those situations, the remote environment persists today.
"The initial waves of what I would call administrative or back office (management, business, IT, and financial operations) functions were the first to move," Haws says. "I believe that many of those roles will have ongoing work-from-home presence."
The movement within other jobs such as customer service or healthcare providers has been most interesting, Haws notes.
"Some of those have been enabled by modifications to the underlying business, [that is], reimbursement rules that allow for remote models. The ongoing nature of those will have a lot to do with how the government and payers view the underlying service," Haws says.
The challenge of managing remote and hybrid workers
Most managers have little experience with managing in a remote or hybrid (alternating remote and in-office work) environment. As a result, organizations need to retrain managers to be sensitive to employee needs for flexibility. But the biggest challenge is probably how to best engage with remote or hybrid workers.
"You can find articles that discuss the benefits and pros of remote work alongside other literature that discusses the risks or cons to the same dynamic," Haws confirms. "The change will require us to be much more intentional about our management. We will need to be much more intentional about the culture we are creating, the training we offer, the personal connection, and the tools we provide to the staff."
The key is to foster a culture of empathy in the management ranks and encourage supervisors to get 'close' to their workers, Haws says. They should take a humanistic approach to managing workers, and understand what people are going through and help them succeed.
On a personal note, as someone who recently on-boarded to a new role, organization, city, and team, Haws says there are new challenges that come with the change.
"We have to be proactive in addressing the risks or we might find unintended consequences that we are forced to manage after the fact," Haws warns.
The role of the CFO in promoting the right strategies
As each healthcare organization figures out the new model that works best for it, Haws says there is a role for any CFO to promote practices for managing remote or hybrid healthcare workers in a manner that ensures or increases productivity and efficiency and adds to improved patient care.
"First, the organization needs to be strategic in the approach," Haws advises. "The organization should ask itself, 'How should this impact our space planning, our recruitment, our IT, and our management systems.' Many organizations, because of the rapidity of the change, have left it to the local units to make decisions about what works best. Or many have coordinated central functions such as recruitment, but left the local units to manage training, onboarding and evaluations."
"I don't know if that is necessarily the best approach long term, but that remains to be seen," Haws says. "Certainly, different areas have different drivers, but a larger approach to things like space and IT will require coordinated approaches. Just recently Google and Microsoft announced that they were allowing some units to go remote permanently; it will be interesting to see if many follow suit."
Secondly, Haws says that healthcare organizations need to revisit their management approach.
"Some roles have measurable activities, and remote management is more of an extension of the same metrics. Others are more difficult to measure in terms of management success. The outcomes are more nuances and the team dynamics associated with the work are different. Not necessarily better or worse, just different," Haws says.
But one thing is clear: "We can't simply do the same thing we have always done," Haws stresses.
The advice to CFOs on how to make a hybrid work model successful is simple, Haws says.
"Approach it like any other management challenge. Identify gaps and opportunities. Understand successful and unsuccessful models deployed elsewhere and learn from those," Haws says. "There is no reason to reinvent the wheel or suffer from some of the same mistakes others have made. I don't believe blanket strategies work across varied entities or units. There can be common themes, but we must recognize that some areas have different needs."
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 https://livingwage.mit.edu/counties/25023.
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.
Healthcare reimbursements continue to decline, putting pressure on healthcare system CFOs to find new revenue streams.
The need for healthcare services has skyrocketed. The cost of providing that care has gone up. But the reimbursements paid to providers has gone down. That is putting tremendous pressure on healthcare systems to stretch every dollar—and to find new sources for more dollars.
These unpleasant realities were among the topics addressed by Charlton Park, CFO and chief analytics officer at the University of Utah Health, at this summer's HealthLeaders CFO Exchange. Park recently expanded on his message from that event, and shared advice on how healthcare CFOs can diversify revenue opportunities at their organizations.
Making revenue diversification especially important now is "the declining reimbursements that we're receiving from our payers," Park explains.
"Payers aren't interested in subsidizing research and academics. They want to just pay for direct care," Park says. "The type of revenue increases that we were able to get years ago are shrinking, making it necessary for us to do a few things differently, to reexamine the cost of providing care, and to drive cost out of our cost structure. It also has us looking for new and different revenue streams."
Increasing profits without sacrificing patient care
The challenge for many healthcare systems is how to best explore new potential revenue opportunities without diverting from the organization's primary mission—providing the best possible care to patients.
"In an academic environment it might be tempting for the finance team to act in a silo—to begin making deals to create new revenue streams, to come up with things and just implement them. But any of these strategies need to build a consensus within the organization," Park stresses. "We need to make sure that, whatever we're doing to diversify revenue aligns with our mission, and who we are within the state. We want to make sure any opportunities we pursue reflect positively on the university and our mission to provide the highest quality patient care."
At the same time, to keep costs down and continue to support the community, diversifying revenue is important, Park continues. In fact, it is critical to avoid raising prices for providing healthcare services.
"It's a far better option than raising prices," Park says. "So, it's important that we use it, but we also need to make sure we're building a consensus across all of our stakeholders within the health sciences and broader University, and that it is in line with who we are in the community."
Exploring new revenue opportunities is unfamiliar territory for many healthcare CFOs, Park confirms.
"I think some are doing better than others, but we're still pretty new in this space," Park says. "It's difficult for a healthcare provider or hospital that is just used to seeing patients to come up with different strategies to bring in revenue other than seeing patients. It's causing us to think differently."
At the University of Utah Health, the organization is forming internal partnerships to aid in the efforts.
"It is becoming increasingly important to look beyond patient care for revenue generation," Park explains. "We're in a good position with our School of Medicine and adjacent campus to innovate. We're partnering the hospital with the School of Business, the College of Engineering and Health Sciences in order to identify different opportunities to collaborate in new areas."
Here are three strategies that University of Utah Health is using to diversify its revenue.
1. Rethink the need and best use of office space
Space is one of the top areas where many healthcare facilities can hope to realize additional revenues, with the sale or leasing of office space that won't be needed in the future. That is one of the few benefits the pandemic has brought to many organizations, in a variety of industries, not just healthcare, and it was a central point in Park's message at the CFO Exchange.
"Like any health system, we've been space constrained and have had to purchase space and lease space off of our main campus to support our services groups," Park says. "Over the course of the pandemic, like other entities, we've learned how to largely telecommute. It is fundamentally changing the way we do business."
"We've got a lot of new-found freedom with square footage," Park continues. "Some of this is lease space but most of it is space that we own. So, a lot of thought is going into how we can best put that space to use. For example, is there office space that we could turn into clinical space? Is there office space that we can sublet, and let others pay those leases while we make a little bit of profit in return? Or should we sell some of that space, and then put that money into new clinical facilities?"
Basically, the choice boils down to, does the healthcare system make better use of space; does it turn the space into an ongoing revenue stream; or does it part with the space and put the capital into a clinical investment?
2. Find revenue opportunities in the careful sharing of data
Another major source of potential revenue for healthcare systems is with data monetization—finding opportunities to use data to drive insights and efficiencies internally and/or partner externally with third-party analytics firms to drive insights, improve processes, and grow volumes.
Healthcare data is obviously a highly sensitive area, due to HIPAA and privacy concerns and protections, Park acknowledges. But raw, deidentified healthcare data that is not associated with a specific patient can be a valuable commodity.
"We are extremely sensitive with our data and take protecting and securing all of our data very seriously," Park says. "But we have a lot of information and used appropriately that data can create value. There are third-party partners out there that are interested in partnering with us in order to use that information—to drive algorithms that we can use to gain powerful insights, improve our business, and market new products or services."
The University of Utah Health also has internal projects underway that could benefit from data the organization has on patients and care.
"We have an amazing value-driven outcomes tool that we've built within our analytics teams, that really gets at the cost of care and the value of care," Park says, as an example. "We've been kicking around working with different external firms. We might be able to commercialize the data tools that we've created for our internal teams and engage other health systems, enabling them to have the same benefits that we've enjoyed."
Park sees this as the perfect opportunity for a healthcare system CFO and CIO to work together and develop different data assets and data tools to support both the internal business and provide opportunities for commercialization.
3. Sell specialty healthcare services and resources to other hospitals
Another potential area for new revenues is for healthcare systems to sell health services to other providers. That is an area that the University of Utah Health has been providing for a few years.
"Perhaps a little unique to the University of Utah, because of our footprint, we are the only academic medical center in the Intermountain West area, and we help support a wide area of the continental United States," Park says. "We are several years into an initiative to create relationships with healthcare partners throughout the Intermountain West region."
"This is moving them in a number of different ways, and it all starts with patient care," Park explains. "We have the ability to be a resource for them as far as higher-end patient care for their communities. In each case, we can ask, how do we provide support to their staff and physicians? Can we send our own doctors to spend time in their facilities supporting their patients? And how do we provide more expertise or training to their staff and faculties at different hospitals."
The University of Utah Health system has entered into telehealth agreements with several different facilities in Idaho, Wyoming, Nevada, and Montana, Park says.
"There are opportunities to create different revenue streams with those affiliate partners or other outlying hospitals. Many are in rural areas that need access to specially trained physicians or other resources that can be difficult to find. Through our relationship with these facilities, we are able to provide services when they need them and help them keep patients in their communities, but also be that resource when they need to move a patient to a higher level of care."
Charlton Park is a HealthLeaders Exchange member. The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at https://www.linkedin.com/company/healthleaders-exchange/. To inquire about attending a HealthLeaders Exchange, email us at exchange@healthleadersmedia.com.
