Can Outsourcing Solve the Healthcare Labor Shortage Crisis?

November 16, 2023

A strong healthcare system is the backbone of a healthy economy, but what happens if the sector that protects our health struggles to survive? For the past few years, the US healthcare sector has been facing many challenges like inflation and labor shortage, all while trying to stabilize itself into sustainable business models after COVID-19.

The crisis has now reached a tipping point where hospitals are forced into making difficult decisions involving layoffs, high healthcare labor costs, mergers and acquisitions and even total closure of certain departments or facilities. Currently, the US needs 17,000 additional primary care practitioners according to Health Resources & Services Administration

To solve these healthcare workforce issues in 2023 and beyond, we must understand where the problem stems from.

Contents

To solve these healthcare workforce issues in 2023 and beyond, we must understand where the problem stems from.

Cause of the looming Issue of Labor Shortages in Healthcare

1.Declining Revenue

Healthcare organizations’ revenue sources have taken a substantial hit in the past few years. On top of that, the existing revenue sources are also shrinking. Some of the factors responsible for revenue shrinking include

Patients choosing to delay treatments or change clinical preferences
Most pandemic-era state and federal support has expired
Stagnant reimbursement rates along with rising inflation
Time-consuming and costly returns

2.Rising Costs

According to the Milliman Medical Index, annual healthcare costs have increased from $6,472 in 2021 to $7,221 in 2023 in the US. Notably, experts believe that the trend may continue in 2023 and beyond and advised organizations to prepare for it.

The alarming increase in healthcare costs has strained hospitals across the nation. Coupled with inflation and increases in input prices of supplies, drugs and labor, more than 33% hospitals are pushed into negative margins as reported by Becker’s hospital CFO report.

3. Compounding Labor Charges

The sharp and sudden increase in healthcare labor costs is significantly responsible for the decline in the hospitals’ year-to-date operating margins, but it does not end there. The worrying news is that it is predicted to be unstable in the future too.

But wait, there’s more. Many healthcare professionals are seeking better opportunities or a more balanced work-life equation. This pattern is likely to intensify the labor shortage problem and put further strain on the already overworked healthcare staff.

The low number of applications per opening (APO) for nurses is a concern. When you add recruiting and re-hiring costs for the same roles, we have a big problem. Lack of resources to hire people with dependencies on recruitment agencies and lengthy hiring processes intensify the ongoing crisis. A report by industry market analytics firm Mercer predicted the US to have a shortage of 95,000 nurse assistants and 98,700 medical and lab technologists and technicians by 2025.

In the meantime, the elderly population of the country will continue to grow. Certain projections show that the population of individuals over the age of 65 years will increase from 54 million in 2019 to 80 million by 2040, stressing the need to accommodate additional urgent medical care.

One potential solution to manage these issues is by exploring the advantages of outsourcing organizations. This would also eliminate the hurdles that organizations face right now while getting the professional help they need to sustain and grow.

Job Shortage and Outsourcing Solutions

The challenge of hiring the right people and retaining them is the base of the current healthcare labor shortage issue. Moreover, the strategy of outsourcing administrative and technological departments comes with its own set of pros and cons. Let’s take a closer look at them.

Pros

Helps reduce short-term costs
Undivided attention to patient care
Less administrative burden on existing employees
Effective long-term solution with the right partner
Tailored solutions to meet specific requirements.
Sustain growth and exceed expectations

Cons

Loss of control with an uncooperative outsourcing partner
Outsourced organization may not align with your vision
Lack of customized solutions to meet your specific needs
Risk of a less-qualified team incapable of handling work

Outsourcing in healthcare presents a promising solution, but it requires careful assessment to select the right partner to optimize returns. Give our detailed blog a read to help choose the right outsourcing partner for a successful collaboration

Solution to the Labor Shortage Problem

Healthcare labor shortage is the latest problem to put the whole industry in chaos. This challenge not only threatens the industry but also the well-being of patients. The declining revenue, escalating costs and a sudden surge in labor expenses have put the healthcare sector at a crossroads.

In such a situation, the decision to outsource functions or operations to an organization can play a critical role. The right partner can help cut costs and boost your business even in uncertain times.

At Valerion Health, we boast over 20 years of experience in the industry and provide tailored solutions to help streamline processes. Our team of experts is ready to handle your needs, from medical billing to coding, auditing, educational solutions and more. Get in touch today.

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