Staffing Shortages Are Driving Up Salaries, but Creating Major Headaches for Administrators

If you’re reading this, then you probably already know that healthcare administration is a lucrative field to go into, especially if you come equipped with a master’s degree. Six-figure salaries are the norm for hospital and clinic executives, and some total compensation packages push those numbers far higher when considering options and benefits.

According to a 2014 article in the New York Times, administrators typically make even more than doctors at most facilities.

Both professions benefit from salary boosts stemming from two factors in the modern healthcare environment: increasing demand for care and a decreasing number of professionals to provide it.

The Affordable Care Act of 2010 dramatically increased the number of Americans who had access to healthcare services. At the same time, the number of physicians and nurses available to provide that care hasn’t been keeping up with demand. The Association of American Medical Colleges projects that by 2030 there will be a 100,000 shortfall in the number of doctors, a situation exacerbated by increasingly stringent immigration restrictions that may cut off some of the foreign-born physicians who would otherwise help meet the demand.

Healthcare administration is also feeling the squeeze. According to the Bureau of Labor Statistics, medical and health service management roles are expected to grow by 20 percent between 2016 and 2026.

But while both doctors and administrators are seeing the market forces of limited supply and increasing demand driving up their paychecks, the demands forced onto healthcare organizations to find and hire highly-skilled workers is something that falls solely on the shoulders of healthcare managers and executives.

Coping with those staffing shortages may come to define the field of healthcare administration over the next decade, and there are no easy answers in sight.

Staffing Costs Present a Complicated Problem With No Clear Solutions

According to Health eCareers 2017-2018 Salary Guide, executive compensation has gone up 18 percent since 2016. That’s drawing a lot of new talent into the field… but it’s a number that is unsustainable for creating long-term staffing solutions.

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Health eCareers 2017 Healthcare Recruiting Trends Report notes that healthcare organizations are experiencing increasing employee turnover and a longer median time to hire replacement staff. Forty-one percent of healthcare workers reported that their pay increased over the previous year as a retention effort. And 64 percent of employers reported that they were increasing starting salaries in an effort to fix the gap.

Just boosting salaries to try to attract top talent is a game of diminishing returns, however. At the same time as the shortage of doctors and nurses is projected, insurers and the American public are having trouble coping with the high cost of care, which is rising largely as a result of increasing labor costs.

PriceWaterhouseCoopers estimates that medical costs will rise by 6.5 percent in 2018, fueled largely by price increases. Healthcare costs continue to take a larger and larger slice of GDP, an unsustainable trend that consumers won’t be able to cover forever.

A March 2018 study in the Journal of American Medicine (JAMA) identified four aspects of healthcare provisioning in the U.S. that drive this trend:

  • Labor Costs
  • Material Costs
  • Administrative Costs
  • Pharmaceutical Costs

All four of these cost centers are the direct responsibility of healthcare administrators, as is providing quality care and service to patients. It’s an unstoppable force meeting an immovable object, and healthcare admins are right in the middle.

Getting Paid Big Bucks to Solve Big Problems in Healthcare Staffing

Healthcare administrators create the budgets and write the checks that cover all of those cost centers and are responsible for inking the deals with suppliers and staff. While executives and managers are themselves making great money to negotiate the best arrangements possible, it’s not clear that they’ve been holding up their end of the deal.

The JAMA study found that despite spending twice as much as other high-income countries on health care, utilization rates in the U.S. aren’t any higher. Patient outcomes and coverage are actually worse.

And time may be running out to find a solution. As the PWC study suggests, the days of throwing money at staffing problems is coming to an end. The bucket the money is coming out of is limited. As insurers feel the pinch from uncertainty and disruptions to Obamacare, and as Medicare and Medicaid face possible cuts in the face of ballooning government deficits, compensation for services will shrink.

Healthcare managers are going to have to find innovative solutions to deal with that gap those competing forces leave behind.

At least one study has shown that it’s possible to attract and retain top talent by using factors other than wages. The 2014 study, which looked at nurse staffing, found that wages were important factors to prevent burnout and dissatisfaction, but that the work environment and work loads were ultimately more important. Nurses tend to cite organizational climate as a more important factor than wage level when leaving a position.

That organizational climate is squarely on healthcare administrators to create and maintain. It’s good news in the sense that it’s a way that you can recruit and retain quality staff without dramatically increasing your salary costs, but it is also a greater challenge. It’s easy to throw money at staffing issues, if you have money. It’s much more difficult to create a healthy, supportive, and respectful working environment in the stressful and tradition-bound atmosphere of medicine.

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There are also other successful recruiting and retention mechanisms that innovative administrators can use without breaking the budget. These include:

  • Employee referral programs
  • Recruiting through social media
  • Flex-staffing and vacation benefits boosts

Administrators are also exploring other labor cost-cutting options, like entering into managed services programs. A 2013 AMN Healthcare industry survey found that ten percent of healthcare executives had already entered into an MSP, while another ten percent were planning to do so.

It’s unclear which, or what combination, of these various efforts might finally break the logjam between staffing and costs. But the next generation of healthcare administrators have to have the training and education to figure it out, because the future of American medical care rests on their shoulders.