Kaufman Hall: Workforce Issues Remain Key Challenges for Hospital Performance

Oct. 24, 2023
A new report from Kaufman Hall finds that a cluster of factors is limiting hospitals’ operational and financial performance, particularly ongoing challenges around staffing

Even as operating margins are ticking up ever so slightly and financial performance is showing signs of stabilization, a number of factors related to staffing, the shift towards outpatient care, and patient experience issues, are continuing to cause concerns, according to a new report from the Chicago-based Kaufman Hall consulting and advisory firm entitled “2023 State of Healthcare Performance Improvement: Signs of Stabilization Emerge.”

A press release shared with the media on Oct. 24 began thus: “Hospitals and health systems are seeing some signs of stabilization and margin improvement, but challenges around workforce, expenses and patient access persist according to Kaufman Hall’s 2023 State of Healthcare Performance Improvement report. Patient access to care is a growing concern as hospital and health system leaders work to figure out what sustainable operations look like following a complete transformation in how patients interact with the healthcare system and providers. The report found that 66 percent of respondents’ institutions have run at less than full capacity at some point during the past year due to shortages, and 32 percent of respondents say that patient concerns or complaints about access to physicians are increasing.”

The press release quoted managing director Lance Robinson, leader of Kaufman Hall’s performance improvement practice, as stating that “Having enough healthcare workforce to meet patient demand continues to be one of the most pressing concerns for hospitals and health systems. It’s clear that for many, this is a long-term issue,” Robinson said in a statement contained in the press release. “The older generation of providers is moving into retirement without a robust talent pipeline in place to fill the gaps retirees leave behind.”

That said, the press release went on to note that “[O]ne area that is showing improvement is the utilization of contract labor, which appears to be declining. Only 4 percent of organizations are experiencing increased utilization of contract labor, compared to 27 percent last year. Almost all surveyed (98 percent) are pursuing one or more recruitment and retention strategies, including raising starting salaries or the minimum wage (90 percent). Kaufman Hall experts expect that it will be a slow climb for hospitals to return to the 3-4 percent operating margins that help ensure long-term sustainability. While staffing and capacity issues have clear implications for revenue, an increased rate of claims denials—reported by 73 percent of respondents—has had the most significant impact on hospitals’ revenue during the past year,” the press release added.

“Healthcare leaders must assess the realities of this new environment and begin making the strategic decisions and investments necessary to improve operations, or risk not being able to meet the care needs and preferences of their patients,” said Robinson.

Other report highlights of the report include:

•            Patients are increasingly seeking care in outpatient settings, as almost half of respondents say that volumes for outpatient surgery and provider clinics are above pre-pandemic levels.

•            Despite the ongoing labor crisis, no respondents believe that their organization has fully optimized the automation technologies it has invested in.

•            Supply chain issues have improved, but nearly three-quarters of survey respondents are still encountering distribution delays.

The Kaufman Hall State of Healthcare Performance Improvement report is an annual publication that analyzes the performance improvement and cost transformation efforts of hospitals and health systems. This year’s results are based on survey responses from 106 hospital and health system leaders nationwide, including representatives from all regions of the country as well as from urban, suburban and rural markets. 

Further, Kaufman Hall leaders noted on their website that, “As in last year’s survey, an increased rate of claims denials has had the most significant impact on revenue cycle over the past year. Interviewees confirm that this is an issue across health plans, but it seems particularly acute in markets with a higher penetration of Medicare Advantage plans. A significant percentage of respondents also report a lower percentage of commercially insured patients (52 percent), an increase in bad debt and uncompensated care (50 percent), and a higher percentage of Medicaid patients (47 percent). Supply chain issues are concentrated largely in distribution delays and raw product and sourcing availability. These issues are sometimes connected when difficulties sourcing raw materials result in distribution delays. The most common measures organizations are taking to mitigate these issues are defining approved vendor product substitutes (82 percent) and increasing inventory levels (57 percent). Also, as care delivery continues to migrate to outpatient settings, organizations are working to standardize supplies across their non-acute settings and align acute and non-acute ordering to the extent possible to secure volume discounts.”

They also noted the following survey findings:

98 percent of respondents are pursuing one or more recruitment and retention strategies

90 percent have raised starting salaries or the minimum wage

73 percent report an increased rate of claims denials

71 percent are encountering distribution delays in their supply chain

70 percent are boarding patients in the emergency department or post-anesthesia care unit because of a lack of staffing or bed capacity

66 percent report that staffing shortages have required their organization to run at less than full capacity at some time over the past year

63 percent are struggling to meet demand for patient access to their physician enterprise

60 percent see decreasing utilization of contract labor at their organization

44 percent report that inpatient volumes remain below pre-pandemic levels

32 percent say that patients concerns or complaints about access to their physician enterprise are increasing

24 percent have encountered debt covenant challenges during the past 12 months

“None of our respondents believe that their organization has fully optimized its use of the automation technologies in which it has already invested,” they noted.

The full report can be accessed here.