Losing Money in Healthcare Delivery
The healthcare industry is facing a difficult time due to ongoing financial losses, labor shortages and rising costs.
The healthcare industry faces several challenges still because of the COVID-19 pandemic, including financial losses, labor shortages and rising costs.
Cleveland Clinic, for example, recently announced that they anticipate losing $200 million in 2022 due to these factors. In fact, Tom Mihaljevic, MD, Cleveland Clinic President & CEO, stated on January 18, 2022, that more than half of hospitals lost money in 2022 despite patient demand because of healthcare services paused during the pandemic, labor shortages, and associated higher wages and inflation affecting supply and pharmaceutical costs.
While President Biden declared the end of the pandemic on September 19, 2022, that doesn’t necessarily mean the end of the financial struggles for healthcare providers.
Add 6.5% inflation, an average wage increase of 4.2% (projected to be 4.6% in CY 2023) and continuing supply chain issues, and healthcare providers face significant challenges.
The industry challenges
Every large employer faces fundamental issues, such as
- Talent availability
- Inflationary wages
- Flexible working demands
- The push for unionization
Due to the pandemic, many healthcare workers have left the industry, and there’s a shortage of personnel to replace them. This strain has led to high turnover rates and a lack of experienced staff.
The uplift in the minimum wage has pushed wages up for all, particularly those on the lower pay scale, and it’s becoming increasingly difficult for healthcare providers to find and retain staff.
Flex worker demands are another challenge facing healthcare employers. The pandemic has accelerated the work-from-home and work flexibility trend, challenging employers’ ability to deliver a consistent and affordable customer/patient experience.
Meanwhile, the current administration also pushes for more widespread unionization, which will continue to increase employers’ cost structure if successful. According to data from the National Labor Relations Board (NLRB), union representation petitions filed between October 2021 and March 2022 increased by almost 60%.
The aging US population is also a factor contributing to healthcare delivery challenges. Over 16.9% of the US population is over 65, including healthcare workers (or former healthcare workers). Despite 94% of this age group being covered by Medicare, seniors spend nearly twice as much on healthcare costs as the general population.
Send me a lifeline
So, what can we do to alleviate these challenges? The answer is technology — it’s the change agent.
We’re living in an age of volatility — innovation, technology and economic uncertainty are the new normal. If we think we’re returning to the old pre-pandemic normal, we’re not being realistic.
In a world where we expect instant gratification and seamless experiences, it’s time for the healthcare industry to catch up.
As we move forward, the rate of change will only accelerate. It’s not enough to react to change; we must be change agents to thrive.
Large organizations must partner with innovators to drive the change needed. With old technology, existing processes and historic workflows, accelerating internal transformation is an uphill battle.
At D2, we understand this. As a leading consulting company, we’ve worked with more than 500 clients to develop technology solutions focused on driving revenue, enhancing operational margin that requires less human capital and decreasing exposure to regulatory risk. We’ve partnered with clients to create solutions that address the specific challenges faced by hospital systems, specialty pharmacies and pharmaceutical manufacturers.
While we can’t solve all problems, we have learned that by working together, we can solve a lot – calling Cleveland Clinic — we can help.