Hospitals and health systems struggle amid signs of stabilization

Workforce shortages continue to hurt hospitals' financial performance: ©Spiroview Inc - stock.adobe.com

In a health care landscape marked by change and challenges, a recent report by Kaufman Hall sheds light on the complex dynamics impacting hospitals and health systems in 2023. While some signs of stabilization and margin improvement have emerged, persistent issues related to workforce shortages, mounting expenses, and patient access concerns continue to weigh heavily on the industry.

The findings are part of Kaufman Hall's 2023 State of Healthcare Performance Improvement report, which underscores the evolving health care environment in the United States.

One of the most pressing concerns highlighted in the report is the growing issue of patient access to care. As health care leaders grapple with the transformation in patient interactions with the health care system and providers, the report reveals that 66% of respondents' institutions have operated at less than full capacity at some point in the past year due to workforce shortages. Furthermore, 32% of respondents reported that patient concerns or complaints about access to physicians are on the rise.

Lance Robinson, managing director at Kaufman Hall and leader of the firm's performance improvement practice, expressed his concerns about the workforce challenges, stating: "Having enough health care 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. The older generation of providers is moving into retirement without a robust talent pipeline in place to fill the gaps retirees leave behind."

On a positive note, the report highlights improvements in the utilization of contract labor, with only 4% of organizations experiencing an increase in contract labor usage, compared to 27% the previous year. Almost all surveyed organizations (98%) are actively pursuing recruitment and retention strategies, including raising starting salaries or minimum wages (90%).

However, achieving pre-pandemic operating margins of 3-4% remains a gradual process for hospitals, hampered by staffing and capacity challenges. A large majority (73%) of respondents reported an increased rate of claims denials, which has had the most significant impact on hospitals' revenue over the past year.

Robinson stressed the need for health care leaders to adapt to this changing environment, stating, "Health care 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."

Additional highlights from the report include the increasing preference for outpatient care, as nearly half of the respondents reported volumes for outpatient surgery and provider clinics exceeding pre-pandemic levels. While automation technologies are in use, none of the respondents believe that their organizations have fully optimized these technologies. Supply chain challenges have improved, but distribution delays are still encountered by nearly three-quarters of survey respondents.