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Category Archives: Talent Management
The gig economy is back — even for execs
Contract or “temp” employment used to be viewed as a means of supplemental income: a side hustle to an average day job, or a way to pay the bills while searching for full-time work. Now, gig work is back in style, and more workers want in on the flexibility — including C-suite executives, Korn Ferry recently reported.
The gig economy surged when older millennials, born in the 1980s, began rejecting the one-firm careers their parents had, according to Korn Ferry. Although they are currently midcareer, older millennials have switched jobs 7.8 times on average. Baby boomers are also using temporary work to keep busy during retirement, and Generation Z appreciates the flexibility that comes with contract labor.
As temporary work grows in popularity, its influence is spreading to the C-suite. Interim executives are becoming more likely to be tapped when a leader departs, Korn Ferry reported. This gives organizations like health systems, which urgently need leadership in a rapidly changing industry, more time to conduct their searches for full-time replacements.
Sixty percent of executives predict that the number of interim workers at their companies will “substantially increase” within the next three years, Korn Ferry reported. In a period of economic instability, temporary labor can mean less commitment and cost than a permanent worker. But there are downsides to contract labor, too. Since they lack benefits, many contract workers demand higher pay — which can trickle down and lead their permanent counterparts to ask for matched salaries. In the healthcare industry, this is visible in travel nurses’ paychecks, and their controversial effects on health systems’ finances.
For better or for worse, contract labor does not appear to be dying out anytime soon. Fifty-eight million U.S. workers now consider themselves “independent,” Korn Ferry reported — an estimated 36 percent of the total workforce.
Trinity tests daily pay option to attract and retain workers
Livonia, Mich.-based Trinity Health is experimenting with paying its employees by the day in a bid to recruit and retain staff, according to a Dec. 13 Grand Rapids Business Journal report.
Trinity, which will initially roll out the initiative at Trinity Health Grand Rapids, Trinity Health Medical Group and several locations outside Michigan, is partnering with financial services company DailyPay to provide earned wage access (EWA) to its employees, the report said.
Through EWA, employees can access their pay on a daily basis, allowing them to pay bills, for example, without having to wait for the more traditional payday and therefore avoiding the possibility of overdue fees. Employees would pay $2.99 to gain such early access.
The pay model, which will be available for all pay scales across Trinity except for the highest earners, was piloted across select Trinity locations about four months ago. It will eventually be rolled out to all Trinity locations over the next few years, with all West Michigan employees signed up by 2025, the report said.
Do nurses quit their jobs, or their managers?
https://mailchi.mp/cfd0577540a3/the-weekly-gist-november-11-2022?e=d1e747d2d8
There’s an old trope among human resources leaders that people don’t quit companies, they quit managers. There’s certainly truth to it. If an employee has a difficult or inattentive boss, they are at much greater risk of leaving for another opportunity. But a “bad” manager is not always someone lacking in the skills necessary to engage employees; sometimes the problem is that their own roles are structured in ways that make it nearly impossible to succeed.
We’ve recently heard stories from leaders at several health systems describing the untenable management scope for many of their mid-level nursing leaders. It’s common to hear that nurse managers have dozens of direct reports, and a few systems reported that some of their managers have well over a hundred individuals reporting to them. With that scope, it’s impossible to develop relationships with everyone on the team, much less be able to customize roles, or provide tailored feedback and support.
For younger workers, the manager relationship is critical for engagement, skill development, and building loyalty.
Given today’s intense margin pressures, it’s tempting to cut clinical managers and increase the span of control for those who remain—but underinvestment here is short-sighted, and will surely exacerbate challenges maintaining critical capacity in the near-term, as well as building the foundation for future growth.
The cost of hospital contract labor in 22 numbers
Many hospitals and health systems aim to recruit and retain permanent staff to replace contract labor positions, which have seen wages skyrocket because of staff shortages during the COVID-19 pandemic.
Hospitals across the country have relied on contract labor and temporary staffing agencies to support their clinical teams when many burned-out providers are exiting healthcare. An October survey conducted by Bain & Company found that 25 percent of physicians, advanced practice providers and nurses are considering changing careers. Eight-nine percent of the providers thinking about leaving the profession cited burnout as the driving force.
Staffing shortages are driving labor costs to an unsustainable level for hospitals operating on razor-thin margins and reducing temporary staffing costs is top of the agenda for many financial executives looking to reduce expenses in the coming quarters.
Here are 22 numbers that demonstrate the cost of contact labor for hospitals, according to reports from Kaufman Hall, Definitive Healthcare, Vaya Workforce and big hospital operators:
1. The demand for contract labor increased 500 percent in fall 2021 compared with 2019, according to healthcare staffing services company Vaya Workforce. While demand has since decreased, it is still nearly triple pre-pandemic levels and is projected to remain as high as 20 percent above the 2019 baseline.
2. In 2020, the average amount hospitals spent on contract labor was $4.6 million, more than double the average expense of $2.2 million in 2011, according to a report from Definitive Healthcare, a data and analytics company.
3. Rochester, Minn.-based Mayo Clinic Hospital, Saint Mary’s Campus spent $286.8 million on contract labor in 2020, the most of any hospital in the country that year, according to Definitive Healthcare’s analysis of about 3,100 U.S. hospitals
4. From 2019 to 2022, the hourly wage rate for contract nurses increased 106 percent, according to Kaufman Hall. Contract nurses are earning an average of $132 an hour in 2022 versus $64 an hour in 2019. At the height of the pandemic, some travel nurses earned up to $300 an hour, with rates as high as these placing immense pressure on hospital balance sheets.
5. The rise in contract labor from 2019 through March of 2022 led to a 37 percent increase in labor expenses per patient, equating to between $4,009 and $5,494 per adjusted discharge.
6. Hospitals with 25 beds or fewer spent about $460,000 on contract labor in 2020 compared to hospitals with more than 250 beds that spent almost $11 million on average, according to Definitive Healthcare.
7. Hospitals in the western U.S. have the highest contract labor expenses, with an average of $9.6 million reported in 2020. Large cities, high cost of living and high salary rates in the region contribute to this high average.
8. Labor costs were one of the core reasons Franklin, Tenn.-based Community Health Systems reported a net loss of $42 million in the third quarter, but CFO Kevin Hammons said he expects to see a 40 percent to 50 percent reduction in contract labor costs next year compared with 2022.
9. Nashville, Tenn.-based HCA Healthcare reported a 19 percent decrease in contract labor costs in the third quarter compared to the second quarter, allowing the system to absorb much of the market-based wage adjustment costs for its employee workforce, CFO Bill Rutherford said during an Oct. 21 earnings call.
10. According to Kaufman Hall’s “2022 State of Healthcare Performance Improvement” report, published Oct. 18, 46 percent of hospital and health system leaders identify labor costs as the greatest opportunity for cost reductions. This was significantly up from the 17 percent of respondents who noted labor costs as their greatest opportunity to cut costs last year.
11. There are some hopeful signs that the use of contract labor has stabilized and is steadily falling, according to Kaufman Hall: 44 percent of hospitals in its survey reported that their utilization of contract labor is declining while 29 percent said that it is holding steady.
10 hospitals, health systems cutting jobs
Several hospitals and health systems are trimming their workforces or jobs due to financial and operational challenges.
Below are workforce reduction efforts or job eliminations that were announced within the past month and/or take effect over the next month.
1. Fayetteville, N.C.-based Cape Fear Valley Health is eliminating 200 positions. The decision affects 42 employees in non-direct patient care positions. The other 158 positions were unfilled positions. Employees were informed of the changes Oct. 27.
2. Sioux Falls, S.D.-based Sanford Health announced layoffs affecting an undisclosed number of staff on Oct. 19, a decision its CEO said was made “to streamline leadership structure and simplify operations” in certain areas. The layoffs primarily affect nonclinical areas.
3. University Hospitals announced efforts to reduce system expenses by $100 million Oct. 12, including the elimination of 326 vacant jobs and layoffs affecting 117 administrative employees. None of the employees affected by job cuts or layoffs provide direct patient care. The workforce reduction comes as the 21-hospital system faces a net operating loss of $184.6 million from the first eight months of 2022.
4. Ascension is closing Ascension St. Vincent Dunn, a critical access hospital in Bedford, Ind., and nine medical practices in December, a move that will affect 133 employees. Affected employees who do not secure another position within the health system will be offered severance and outplacement services.
5. Quincy, Ill.-based Blessing Health System closed its hospital in Keokuk, Iowa, Sept. 30. The closure affected 151 workers. The layoffs take effect Nov. 4. The employees will do on-site work or be placed on administrative leave until the layoff date, Blessing Health said.
6. St. Vincent Charity Medical Center in Cleveland will lay off 978 workers when it ends many services in November. The hospital, part of Sisters of Charity Health System, is ending inpatient care and most other services in November. After the transition, the facility will offer outpatient behavioral health, urgent care and primary care.
7. Commonwealth Health, part of Franklin, Tenn.-based Community Health Systems, will lay off 245 employees when it closes facilities at the end of October. The health system is closing First Hospital, a psychiatric hospital in Kingston, Pa., and its various outpatient centers on Oct. 30. Affected workers are encouraged to apply for open positions they’re qualified for at other Commonwealth Health facilities, a system spokesperson told Becker’s.
8. Yale New Haven (Conn.) Health eliminated 155 management positions from its nearly 30,000-person workforce. The health system laid off 72 employees and eliminated 83 vacant positions, a spokesperson told Becker’s Hospital Review in September. The cuts were attributed to financial pressures.
9. Citing financial pressures, BHSH System — now named Corewell Health — cut about 400 positions from its 64,000-member workforce in September. The 22-hospital organization was formed by the February merger of Grand Rapids, Mich.-based Spectrum Health with Southfield, Mich.-based Beaumont Health.
10. Bakersfield (Calif.) Heart Hospital is laying off 114 employees. Affected employees were told in September that they no longer had to report to work, but they will continue to receive full pay and benefits through Nov. 5. The layoffs are an effort to optimize operations and to free up resources for patient care and specialized surgery, the hospital said.
CFOs experienced in cutting costs, restructuring in high demand
Fall is typically a period of increased CFO turnover as hospitals and health systems begin searches for new executives for the beginning of the following year, but the pressures associated with high inflation, a projected recession and the continued effects of the pandemic have led to more churn than usual for top financial positions, The Wall Street Journal reported Oct. 23
Many economists and financial experts are expecting a recession to hit the U.S. in early- to mid-2023. This is pushing some executives to switch roles now before the labor market changes. Many healthcare organizations are also preparing for a potential economic downturn by searching for CFOs who are experienced in cutting costs or restructuring operations, according to the report.
Recession planning in healthcare is challenging because it can have both negative (payer mix, patient volume) and positive effects (decrease in labor and supply inflation) on financial performance, according to Daniel Morash, senior vice president of finance and CFO for Boston-based Brigham and Women’s Hospital.
“The best advice I would give is that hospitals need to consider recession scenarios when making long-term commitments on wage increases, capital expenditures and planning for capacity for patient access,” Mr. Morash told Becker’s Hospital Review. “Most of our focus needs to be on the acute challenges we are facing. Still, it’s important to be careful not to overreact or overcommit financially when a recession could change a number of trends we’re seeing now.”
Fitch: Nonprofit hospitals face prolonged labor challenges despite recent respite
Nonprofit hospitals are bracing for a challenging few months as healthcare and social assistance job vacancies remain high against a backdrop of low unemployment, Fitch Ratings said in an Oct. 25 update.
Healthcare and social assistance job openings fell for two consecutive months to 7.7 percent as of August, but the number of openings remains above the highest level recorded before the COVID-19 pandemic.
One encouraging sign is the slowly declining number of quits — 2.3 percent (486,000 quits) in August 2022 compared with a peak of 3.1 percent (626,000 quits) in November 2021. However, current quit rates remain high and are on track to exceed last year, according to Fitch.
“[not-for-profit] hospital quits will need to normalize to well below pre-pandemic levels in order to reduce staffing shortages and a reliance on contract/temporary labor,” Fitch Director Richard Park said in the news release.
The labor shortage saw hospital employees’ average weekly earnings increase 21.1 percent since February, significantly higher than the 13.6 percent earnings growth of overall private sector employees, according to Fitch. But ambulatory healthcare services employees’ earnings increased by only 12.6 percent over the same period.
“Wage increases and employee recruitment challenges may amplify the role of ambulatory care in the overall healthcare sector and continue the acceleration of inpatient care to outpatient settings,” Mr. Park said.
As hospitals make cuts, the losses are loud or quiet
There are few easy ways to cut expenses. But in hospitals and health systems, there are quieter ways.
Workforce reductions are never painless — or never should be, especially for those doing the reducing. Involuntary job loss is one of the most stressful events workers and families experience, carrying mental and physical health risks in addition to the disruption it poses to peoples’ short- and long-term life plans.
But as health systems find themselves in untenable financial positions and looming risk of an economic recession, job cuts and layoffs in hospitals and health systems are increasingly likely. In a report released Oct. 18 from Kaufman Hall based on response from 86 health system leaders, 46 percent said labor costs are the largest opportunity for cost reduction — up significantly from the 17 percent of leaders who said the same last year.
Job cuts at hospitals may seem counterintuitive given the nation’s widely known shortages of healthcare workers. But as hospitals weather one of their most financially difficult years, some are reducing their administrative staff, eliminating vacant jobs and reorganizing or shrinking their executive teams to curb costs.
Decisions to reduce administrative labor tend to garner quieter reactions compared to budgetary decisions to end service lines or close sites of patient care, including hospitals. While the implications of administrative shakeups may be felt throughout a health system, the disruption they pose to patients is less immediately palpable. Few people know the name of their community hospitals’ senior vice presidents, but most do know how many minutes it takes to travel to a nearby site of care for an appointment during a workday or a tolerable amount of time to wait for said appointment.
It doesn’t hurt that hospital and health systems’ administrative ranks have ballooned compared to their patient-facing counterparts. While the number of practicing physicians in the U.S. grew 150 percent between 1975 and 2010, the number of healthcare administrators increased 3,200 percent in the same period. More broadly, administrative spending accounts for 15 to 30 percent of healthcare spending in the U.S. and at least half of that “does not contribute to health outcomes in any discernible way,” according to a report published Oct. 6 in Health Affairs.
A couple of health systems have denoted their plans to cut nonclinical employees and jobs in the past week.
Cleveland-based University Hospitals announced efforts to reduce system expenses by $100 million Oct. 12, including the elimination of 326 vacant jobs and layoffs affecting 117 administrative employees. The workforce reduction comes as the 21-hospital system faces a net operating loss of $184.6 million from the first eight months of 2022.
Sioux Falls, S.D.-based Sanford Health is laying off an undisclosed number of staff, a decision the organization’s top leader says is “to streamline leadership structure and simplify operations” in certain areas, the Argus Leader reported Oct. 19. Bill Gassen, president and CEO of Sanford Health, also said the layoffs primarily affect nonclinical areas and that they will “not adversely impact patient or resident care in any way.”
These developments are only several days old, but have not yet triggered any newsworthy follow-up developments or pushback. Cost reduction efforts that close facilities or reduce services tend to — on the other hand — catalyze scrutiny, debate and conflict in communities that can span for months and even years.
Look to Atlanta. Marietta, Ga.-based Wellstar unexpectedly announced on Aug. 31 that its 460-bed Atlanta Medical Center will end operations on Nov. 1, with plans to progressively wind down services leading up to that date. The system attributed the decision to the $107 million loss incurred operating the hospital over the last 12 months. Noteworthy is that the system has said that 1,430 (82 percent) of Atlanta Medical Center workers affected by the facility’s impending closure have accepted job offers at other Wellstar Health System facilities.
Since, the decision to close one of Atlanta’s level 1 trauma centers has drawn attention from Georgia’s governor and gubernatorial candidate, congressional members and Atlanta Mayor Andre Dickens, who in a town hall Oct. 19 said that in closing Atlanta Medical Center, “Wellstar said they don’t want to be in the business of urban healthcare.”
The decision has also spilled over to affect area hospitals, namely Atlanta’s public Grady Health System, which received a $130 million cash infusion from the state and reported a 30 percent increase in patient volume after the emergency department of Atlanta Medical Center closed.
Health systems have a lot to weigh. Their administrative layers are thick, varied and necessary to a degree, meaning this broad category of workers still poses tough decisions when it comes to cost containment efforts. But in a very simple view, laying off people who care for patients will only hurt health systems’ chances of recruiting and retaining clinical talent — in a time when no health systems’ odds of doing so are especially outsized.
CFOs need to prep for healthcare’s lagging inflation
Healthcare costs are expected to jump 6.0% next year. CFOs must prepare accordingly, advises WTW’s Tim Stawicki.
CFOs need to be prepared for a “higher tail” of medical inflation — even if general inflation eases in the near future, Tim Stawicki, chief actuary, North America health & benefits of Willis Towers Watson (WTW) told CFO Dive.
With the Consumer Price Index (CPI) rising to 8.5% in July and the recent rise in the core Producer Price Index (PPI), the Federal Reserve will probably look to hike interest rates even farther.
“CFOS need to be prepared for the case that if general inflation eases, there may be two or three more years where they need to think about how they are managing the costs of health care plans,” he said in an interview.
Inflation, which can more immediately impact consumer prices, works somewhat differently when it comes to costs of medical care. “Employers are paying healthcare costs based on contracts that their insurer has with providers, which are multiple years in length. So if a deal with the hospital or contract does not come up until 2023, then that provider has the opportunity to renegotiate higher prices for three years,” said Stawicki.
The recent Best Practices in Healthcare Survey by WTW consisting of 455 U.S. employers found that employers project their healthcare costs will jump 6.0% next year compared with an average 5.0% increase expected by the end of this year.
Further, employers see little relief in sight — seven in 10 (71%) expect moderate to significant increases in costs over the next three years. Additionally, over half of respondents (54%) expect their costs will be over budget this year.
Balancing talent retention and healthcare costs
Talent retention has also remained an entrenched challenge for CFOs over recent months and continues to be top of mind.
Given inflationary pressures and a potential looming recession, employers are having trouble finding the workers they need to run their businesses. A rise in healthcare benefit costs will make this all the more challenging, said Stawicki. “Employers are looking around and saying ‘I need to find talent to help me run my business and I can’t do that if I have an ineffective program in healthcare benefits,’” he said.
There is a direct link between business outcomes and in particular employee productivity and employees’ ability to manage their health and financial environment, according to WTW’s Global Benefits Attitude Survey. “Losing the ability to offer programs and benefits that meet employee needs is impacting business,” said Stawicki.
It comes down to finding the balance between cost management in an environment where talent is hard to come by, he said. In order for CFOs to be successful in financing benefit programs they need to look at finding ways to partner with their counterparts in human resources, said Stawicki.
Sixty-seven percent of employers said that managing company costs was a top priority in the company’s August Best Practices in Healthcare Survey, versus the 42% who said that achieving affordability for employees was a top priority. In the near future, CFOs need to establish a relationship with HR counterparts that can facilitate “ways to manage company costs without shifting it to employees,” said Stawicki.
Ultimately, company costs remain paramount for employers but running a successful business will also require keeping employee affordability top of mind.
HENRY KOTULA 