Kaiser Permanente Strike: How to Prepare for Potential Domino Effect

There are major trends that emerged from the strike that hospital c-suite leaders need to be preparing for.

The Kaiser Permanente strike—the largest healthcare workers’ strike in history—recently ended without a deal. Nonetheless, the three-day walkout set the stage for future workforce demands, especially since the group is considering a second strike.

While workforce shortage was at the heart of the recent three-day strike, there was no lack of significant financial implications to the union’s asks.

What does this mean for the future?

It’s clear that labor issues—and the cost of that labor—will continue to be a prominent concern for healthcare organizations moving into 2024. As a handful of various industries have participated in massive strikes this year, the trend in healthcare is likely to continue.

Hospital CEOs and CFOs should anticipate—and prepare—for the following trends being grown from the Kaiser strike:

Heightened labor negotiations

As the healthcare workforce continues to grapple with issues such as wage disparities, benefits, and job security, labor negotiations and disputes are likely to increase in frequency and intensity.

The union’s disagreement over across-the-board raises is a significant financial concern. Hospital leaders must carefully assess the impact of wage increases on their budgets, especially when facing demands for higher pay. Balancing fair compensation for healthcare workers with financial sustainability is going to have to be top priority.

Bringing down labor costs is an area of focus for many hospital CFOs, but not at the risk of creating staffing turnover. Cost savings can be undercut by the resources required to replace workers, including interviewing candidates and training new employees. New workers are also less productive in their initial transition period than established staff, which leads to less revenue. These factors should be considered when hospital leaders weigh the threat of losing workers by not meeting wage demands.

David Koschitzki, CFO at MJHS Health System, told HealthLeaders: "Staffing is primarily the largest investment that we've been making. As I said, we have to address compensation issues, and we must address the competitiveness of the industry. So, we've enhanced staff salaries as an investment in our staff, and we've enhanced programs to attract staff."

More workforce and technology challenges

As the industry evolves and technology adoption increases, healthcare organizations may face more challenges related to workforce pushback on subcontracting and outsourcing—especially in the revenue cycle.

Outsourcing is one area of contention for the Kaiser Permanente strike and protecting against subcontracting and outsourcing is a huge financial consideration for CEOs and CFOs.

The union said that Kaiser has agreed to extend protections against subcontracting and outsourcing but are insisting on removing the revenue cycle workforce from that agreement.

“They want to outsource the revenue cycle function the way that other health systems have done,” the union website says.

An alternative to outsourcing revenue cycle staff for hospital leaders is to invest in technology to improve workflows and efficiencies, creating less burden on staff while collecting payments faster.

Implementing automation through an end-to-end solution or a bolt-on vendor will not only allow staff to spend less time on administrative tasks, but in the event of a strike, it will require less utilization of contract labor to keep the revenue cycle running smoothly.

Increased strategic workforce planning

Hospital leaders will need to engage in strategic workforce planning, considering the potential impact of labor disputes on budgets and operations. This includes evaluating the financial feasibility of various labor-related demands.

One example of this was the union’s dispute over performance bonuses. CEOs and CFOs must explore how performance-based bonuses align with the organization's financial goals and ensure that they are structured to motivate employees while maintaining fiscal responsibility.

Hospital leaders must also be prepared to utilize contract labor in the event of a strike. While the pandemic forced execs' hands in using contract labor to supplement and fill in the gaps of their existing staff, hospitals have since been trying to loosen their reliance on independent workers to ease expenses. But, when faced with a potential strike, leaders should account for how contract labor costs will add to the bottom line and if they have enough wiggle room to ride it out.

Added pressure on the C-suite-to-worker pay gap

Undoubtedly, the vast divide between staff wages and the salaries c-suite executives take home is a source of frustration for striking workers. CEOs have to be willing to understand why that gap is creating so much friction and stand by their salary in relation to what their employees make.

Economic inequality is a hard pill to swallow for workers during a time when inflation continues to raise the cost of living. Even if staff wages are steadily increasing, they pale in comparison to skyrocketing c-suite salaries.

Recent research commissioned by the North Carolina State Treasurer found that some hospital CEOs saw their salaries jump by more than 700% in the span of a few years, whereas doctors and nurses experienced a rise of 15 to 23% over a decade.

Whether it means restructuring salaries and bonuses for the C-suite or investing back into employees, CEOs have to find ways to bridge the gap to show their workers they're on the same team and not in direct opposition.

In summary, labor disputes in the healthcare sector have significant financial implications for hospital CEOs and CFOs, and these issues are likely to persist. Healthcare organizations will need to strike a delicate balance between meeting the demands of their workforce and maintaining financial stability to ensure the long-term sustainability of patient care services.

Editor's note: This story was updated on October 10, 2023.