Hospitals and health systems are continuing to experience shortages of physicians, nurses and even mental health providers, which may be a challenge in regard to reducing labor costs, per Navigant analysis conducted by the Healthcare Financial Management Association (HFMA).

Because of potential shortages of these positions, hospitals are projecting higher labor budgets for the coming year and these same hospital leaders anticipate needing to offer increased compensation to fill these roles.

According to the Navigant report, healthcare executives feel the current staffing shortages – particularly nurse and physician shortages – are areas of concern, facing the largest increases and reductions compared to a year ago. For example, in regard to nurses, 43 percent say current shortages are worse than this time last year. In regard to physicians, 35 percent of healthcare leaders say existing shortages are worse than a year ago.

According to the Association of American Medical Colleges, the physician shortage in the U.S. could reach around 121,300 by 2030. The shortfall among primary care doctors is expected to be between 14,800 and 49,000, while non-primary care specialties face a shortage of as high as 72,700 physicians, including 30,500 surgeons.

The Navigant survey of 101 chief financial officers and operations executives also suggests professional in leadership are targeting labor and supply chain productivity improvements to reduce hospital operating expense over the next 12 months.

Mental health provider shortages "may represent the direst situation, with 35 percent of respondents believing current shortages are worse than last year, while just 10 percent cite an improvement. In addition, 20 percent 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," per the report.

Danielle Dyer, managing director at Navigant, said, "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. These results magnify the need for provider leadership to objectively analyze their current practices to better staff departments and meet dynamic patient volumes."

When asked how their organizations’ labor budgets are likely to change over the course of the next year, 78 percent of executives said they are likely to increase with almost 20 percent of these leaders anticipating growth in their staffing budgets of 5 percent or more. Contrarily, fewer than 15 percent of health system leaders predict decreases in staff budgets for the year to come.

For a measure of the salary landscape, according to the Bureau of Labor Statistics’ Employment Cost Index, total hospital employment compensation grew 2.3 percent in 2016 and 2 percent in 2017.

An increase of 5 percent in salaries would be a staggering rise in such a short period. Given that the figure is simply an estimate by healthcare leaders, there’s likely a strong degree of swing here between perception and reality, but, as with all things, only time will tell.

When asked about the best ways they can reduce operating expenses over the next year, respondents said labor and supply chain, including purchased services, 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 statistics," Navigant reported.

These same executives also rank productivity improvement and workflow redesign as the main labor management initiatives their organizations will focus on for improvement over the next year.

"Staffing shortages are placing hospital leadership in a paradoxical situation, both because of 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 tools to analyze historical data around patient volumes and visits, procedure logs, and more to identify timing patterns and determine departmental staffing demand; map out workflow steps and identify processes to combine, eliminate, or streamline; and plan staffing budgets and track labor metrics, including costs and productivity.

Click here to view the full survey results.