In the rapidly changing landscape of healthcare, a critical challenge is reshaping the industry as we know it: labor shortages.
As the world wrestles with the aftermath of the pandemic, the demand for healthcare services has surged to unprecedented levels. Yet, behind the lifesaving heroics and cutting-edge medical advancements lies a daunting truth — healthcare is facing a staffing crisis.
In this article, we’ll explore the economic trends and labor shortages impacting the industry and the challenges they pose for healthcare providers.
The Impending Shortage of Clinical Labor
The healthcare industry is currently facing a multitude of challenges that could potentially have devastating consequences. The imminent shortage of clinical labor, followed by the rising labor costs, are the pressing issues at hand.
Since the current labor force is aging and there is not enough new talent coming in to replace those retiring, healthcare organizations are starting to face a shortage in labor.
It’s estimated that nurses will be in short supply by 10% to 20% by 2025, and doctors will be in short supply by 6% to 10%. This shortage in nursing staff and healthcare practitioners will be caused by a rise in demand and a decline in supply. As a result, the number of registered nurses will decrease while the number of required positions will increase, resulting in attrition surpassing the number of new licensures.
Impact on Quality of Care
As the demand for nurses increases, healthcare staff will not be able to keep up — leading to not just increased costs but also decreased access to healthcare for those who need it the most.
Such a shortage of clinical labor could result in $170 billion in additional costs in 2027. This can hinder health system growth and lead to access risks for patients — especially those from disadvantaged communities.
But that’s not all. The shortage of nurses could lead to a decrease in the quality of care that patients receive, which could increase the cost of healthcare due to more medical errors and longer hospital stays. It could also lead to a decreased ability for health systems to provide services, as they may not have enough staff to meet the increasing demand for healthcare services.
Impact on the Labor Costs
As a result of this labor shortage, healthcare organizations are finding themselves in competition with one another to attract and retain a limited number of candidates. This competition has significantly impacted the cost of contract labor, with a staggering 257.9% increase in total cost between 2019 and 2022.
In addition, there has been a 138.5% growth in full-time equivalents for contract labor during the same period. Furthermore, the median wage rate for contract staffing firms has risen by 56.8% — a clear reflection of the intense competition among organizations for the limited pool of qualified healthcare professionals.
These rising wage rates have made it increasingly challenging for organizations to manage their budgets effectively. As such, many struggle to balance the need to provide high-quality care with the need to remain cost-effective. The current shortage of qualified healthcare professionals is a significant challenge for the industry and will require a focused effort to address in the coming years.
The Challenge of Unresolved Claims and Denials
Combined with the costs associated with the labor shortage, hospitals are facing yet another major financial challenge — the issue of unresolved claims and denials. On average, hospitals suffer an annual loss of $5 million as a result. The healthcare payment system has become more complex due to emerging payer models and an increasing number of patients with high-deductible health plans.
Moreover, healthcare providers must contend with the ever-changing rules and regulations governing healthcare reimbursement. This adds another layer of complexity and makes ensuring that claims are processed correctly even more challenging. Unfortunately, hospitals often lack the resources to handle the high claims they receive, exacerbating the problem.
As a result, hospitals are often left grappling with the challenges of the billing process, which can lead to significant financial losses.
This brings us to yet another huge problem: bad debt.
Raking Up Bad Debt
Recently, there has been a significant rise in patient copays and deductions, leading to a notable increase in bad debt. This, in turn, has made it increasingly challenging for hospitals to recover their losses, given that many patients cannot pay the full amount of their debt.
According to recent reports, 36% of hospitals have reported that their bad debt amounts to over $10 million. Furthermore, 56% of these hospitals feel this is mainly due to insurance reform and the subsequent increase in patient copays and deductions. Shockingly, half of these hospitals believe they can only recover up to 10% of their bad debt, essentially admitting defeat before the battle even begins.
Insurance reform has made it all the more difficult for patients to pay their bills due to higher copays and deductibles, leading to more patients defaulting on their payments. This has caused hospitals to write off even more debt, making it significantly harder to recoup the money owed.
Managing Finances Strategically in Healthcare
Managing finances strategically in healthcare is essential, especially in the face of challenges like labor shortages and high wages. One effective approach hospitals can take is to focus on recovering bad debt. Rather than assuming that the money owed to them will never be reclaimed, hospitals should take proactive steps to improve their financial position by pursuing debt recovery.
By partnering with reputable debt recovery companies, hospitals can enhance their financial position, optimize their resource allocation, and ultimately provide better care to their patients.
At Capital Recovery, we specialize in healthcare debt recovery and have a proven track record of assisting hospitals in improving their financial health. Contact us today to learn more about how we can start maximizing your revenue potential.