Navigant analysis of HFMA survey data shows providers focusing on
labor and supply chain productivity to reduce hospital operating expense
CHICAGO--(BUSINESS WIRE)--Aug. 22, 2018--
Hospital and health system executives are facing continued shortages of
physicians, nurses, and mental health providers that may be challenging
them to reduce labor costs, according to a Navigant (NYSE: NCI) analysis
conducted by the Healthcare Financial Management Association (HFMA).
Addressing the shortage of these specialized positions is likely causing
hospitals to project higher labor budgets in the coming year as
administrators anticipate offering increased compensation in order to
fill these roles.
The survey of 101 chief financial officers and operations executives
also suggests leadership is targeting labor and supply chain
productivity improvements to reduce hospital operating expense over the
next 12 months.
Staffing Shortage Volatility
Executives offer a volatile view of current staffing shortages, citing
nurse and physician shortages as areas of both the largest increases and
reductions compared to a year ago:
Nurses: 43% say current shortages are worse than this time last year,
with 27% suggesting improvements.
Physicians: 35% cite existing shortages as worse and 20% as better
than a year ago.
Mental health provider shortages may represent the most dire situation,
with 35% of respondents believing current shortages are worse than last
year, while just 10% cite an improvement. In addition, 20% of executives
suggest revenue cycle management and coding expert shortages as
worsening. Support services, pharmacists, and imaging experts represent
the areas with the least shortage issues.
Labor Budget Growth
When asked how their organizations’ labor budgets are likely to change
in the next 12 months, 78% of executives predict an increase, with
almost one in five projecting surges of 5% or more. Just 14% predict
decreases, and none more than 5%.
Hospital total employment compensation grew 2.3% in 2016 and 2% in 2017,
according to the Bureau
of Labor Statistics’ Employment Cost Index.
“The need to more effectively manage labor by staffing to demand will
only intensify as operating margins continue to diminish, and as the
pressure to enhance care quality and efficiency increases,” said
Danielle Dyer, managing director at Navigant. “These results magnify the
need for provider leadership to objectively analyze their current
practices to better staff departments and meet dynamic patient volumes.”
Targets for Operating Expense Reduction, Labor Management Productivity
When asked about their top target areas for reducing operating expenses
over the next year, respondents cite labor (44%) and supply chain
including purchased services (38%) as the top priority areas. Combined,
labor and supply chain costs represent more than three-fourths of a
hospital’s overall operating expense on average, according to industry
In addition, executives rank productivity improvement and workflow
redesign as the main labor management initiatives their organizations
will focus on for improvement over the next 12 months.
“Staffing shortages are placing hospital leadership in a paradoxical
situation, both due to the economic theory of supply and demand and the
tendency to maintain surplus with shortages looming,” said Navigant
Director Vamshi Gunukula. “As a result, reducing labor costs has become
even more difficult. Leveraging predictive analytics, proactively
matching staffing to patient care demand, and more efficient workflows
can help providers address these challenges.”
Providers can use analytics, predictive algorithms, and other technology
Analyze historical data around patient volumes and visits, procedure
logs, and more to identify timing patterns and determine departmental
Map out workflow steps and identify processes to combine, eliminate,
Plan staffing budgets and track labor metrics, including costs and
here to view the full survey results.
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant’s professionals apply deep industry knowledge,
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focus on markets and clients facing transformational change and
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Source: Navigant Consulting, Inc.
Navigant Investor Relations