The Staffing Crisis Will Dominate 2022 Finance Trends. Here's What to Do About It.

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

It's a similar tale at Edward-Elmhurst Health, a $1.7 billion health system in the suburbs of Chicago.  Denise Chamberlain, executive vice president and CFO, says that the organization is also facing a labor shortage crisis, and the crisis covers the spectrum of healthcare job and skills.

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.