As organizations across industries face various challenges related to supply chain risks, geographic macroeconomics, labor shortages, the expansion of artificial intelligence, international conflicts, and election year uncertainties, none seem more precarious than those in healthcare. With tremendous pressures facing every aspect of its business – people, patient care, technology, supply chain, facilities,  legal, and financial, the industry is facing well-documented issues that require simultaneous attention and, in the case of HR leadership, drive the people-related agenda in many directions. The healthcare HR challenges abound and require an astute, well-orchestrated, and planned set of approaches to improve medical, talent, and business challenges facing providers.

Business issues facing the healthcare industry

When considering healthcare HR challenges and priorities, start with the range of issues that affect how the healthcare business is conducted. Unlike many other industries, healthcare is highly regulated, its financial model driven by others (e.g., commercial and governmental insurers), its delivery standards and models regulated, its professional credentialing and hiring standards for most jobs driven by external bodies, etc. On top of that is the mission of any provider – to prevent and treat illnesses and injuries and save lives – that operates in a range of ecosystems that it can neither control nor manage. 

When asked about their biggest concerns and challenges, healthcare leaders point to a substantial list of issues impacting their ability to achieve their mission. For example, hospital executives recently updated their list of top concerns, including:

Financial challenges

They point in particular to lower managed care and insurance reimbursements, shrinking Medicaid and Medicare payments, rising operating costs, revenue cycle management and collection issues, and funding for capital improvements.

Workforce challenges

There are well-documented and reported turnover issues with nurses and physicians, physician and staff burnout, and talent shortages in a whole host of primary care and support roles. As a healthcare business issue, turnover has been shown to have a negative effect on the patient experience, with every percent increase in turnover driving a 2-percentile rank drop in inpatient rating of care.

Behavioral health and addiction issues

The opioid crisis has received the most recent attention and, in fact, represents 7.9% of all hospital expenditures ($95 billion per year). Hospitals are feeling the heat with the legal requirement to treat the uninsured. At the same time, some insurers are slow to respond to reimbursement requests for opioid-use disorder (OUD) visits, as those average 32.5% higher per ER visit. One study showed visit volumes growing the most for eating disorders (52.6% increase), anxiety (47.9%), alcohol and substance use disorders (27.4%), depression (24.4%), and bipolar disorder (12.2%).

Access to care

The ability of an individual to access the needed level of care for illnesses and injuries is itself a critical concern for medical leaders. That includes a) having health insurance, b) being in geographic proximity to the proper type and level of care, and c) having a regular provider who can oversee timely diagnosis and treatment. For example, nearly 10% (25.6 million) of the non-elderly (e.g., Medicare-eligible) population are uninsured as of 2022. The shortage of doctors in rural areas is worsening, while more medical school graduates are foregoing general medicine for more lucrative and lower-stress specialty practices.

Governmental mandates and regulations

Keeping up with compliance requirements continues to make medical teams’ workloads heavy, with substantial training, administrative oversight, and reporting requirements. There is a rapid expansion of requirements related to an enforcement focus on Medicare/Medicaid fraud, data protection, patients’ rights, etc.

Patient safety and quality, satisfaction

An increasing focus on the patient experience is partly driven by social media and review sites that can drive patients towards or away from a medical practice, hospital, or individual doctor. The threat of malpractice lawsuits abound, with over 250,000 Americans dying each year due to medical errors and negligence.

Other major business concerns

Surge in healthcare demand

The U.S. population is expected to add another 25 million residents every 10 years and a rapidly aging population, with a doubling (2X) of Americans over 65 years old by 2030, driving growth in the need for healthcare services. Remember that elderly people require medical services at a rate three times (3X) more than their younger counterparts, given the higher incidence of chronic conditions that call for more specialized and longer-term treatments. A significant increase in medical visits is also now seen in those over 45, while the treatment of increasingly obese and diabetic populations is further stretching medical provider teams.

Patient and worker safety

It will come as no surprise to healthcare industry veterans, but the Bureau of Labor Statistics (BLS) reports that healthcare workers are at a higher risk for on-the-job injuries than many other industries. In fact, over 600,000 healthcare workers are injured on the job each year, and the risk of workplace assaults for healthcare workers is three times (3X) the rate in other industries. Although less than 20% of workplace injuries occur in the healthcare industry, 50% of workplace assaults are committed against healthcare workers.

Compliance requirements

Keeping up with new or updated regulations and compliance requirements is challenging for most healthcare providers. Training for physicians, nurses, coders, techs, and administrative staffers frequently gets in the way of required professional development and growth-related certifications, training, and development. The myriad of laws and regulations that require tracking, reporting, and adherence include those that cover topics ranging from anti-Medicare/Medicaid fraud, patient charges, telehealth delivery, patient information privacy, outpatient evaluation and management coding, doctor financial interest disclosure, referral “kickbacks,” and patient care and workplace safety standards.

Talent challenges facing the healthcare industry

HR teams must prioritize responding to the issues and structural barriers to quality patient care and business success listed above, but associated healthcare HR challenges must also be addressed. While many of these are well-known to experienced professionals in the field, others may be less recognized as key elements of solution set to the larger business issues.

Talent shortages

The most widely discussed of all the healthcare HR challenges is the shortage of registered nurses, which the BLS estimates to be 193,100 openings per year, with an annual growth rate of 6% through 2032. In other healthcare roles, there is a significantly increased demand for home health workers due to increases in outpatient care, elder care facility nurses and technicians, medical coders owing to updates to medical diagnosis and procedure billing coding standards, and IT workers impacted by increased digitization that is driving new technology adoption in healthcare practices and facilities. The data suggests that the total number of healthcare jobs across the spectrum will increase by 12% through 2028, double the growth of all other career fields and roles.

Physician shortages are estimated to hit 120,000 by 2030. Adding to the challenge is the rapid aging of practicing physicians, with the American Medical Association (AMA) reporting that nearly 50% are currently over age 55. And those are being replaced by a generation of physicians who are increasingly choosing specialties and roles that are less demanding in terms of schedules and time commitments.

Access and staffing in rural areas

The AMA estimates that 83 million people in the U.S. currently live in areas without sufficient access to a primary care physician. This trend seems to be driven by a combination of factors, including new medical school graduates choosing specialties (versus general medicine) for more lucrative pay, recent state laws disrupting physician decisions over medical care (and driving them to major cities in less restrictive states), and surveys that suggest that 50% or more of new physicians are deciding to avoid general practice due to increased liability and insurance rates. The healthcare HR challenges of recruitment and retention abound in these geographies.

Worker burnout

Burnout has always existed in an industry where primary workers can be assigned 12-hour shifts (day and night) and are relied upon to manage severe illnesses, injuries, and complicated recoveries. However, the issue rose to unprecedented levels with the COVID pandemic, increasing awareness and heightened sensitivity to it across the global healthcare community. The World Health Organization (WHO) added it to its classifications of diseases as an occupational phenomenon. The American Hospital Association notes staffing shortages, too many administrative tasks, chaotic work environments, and excessive workloads drive clinician burnout.

High turnover

Annual turnover rates continue to hover at the 20% level, led by nurses, with 25% quitting within their first two years. Even senior management incumbents, who generally exhibit higher retention and tenure than other roles, suffer a 20% turnover rate in healthcare. Though well-established and publicized as healthcare HRV challenges, the rate of burnout, work stresses, business challenges, governmental regulation and oversight, and the pressures of caring for seriously injured or ill patients clearly take their toll.

Engagement

Not surprisingly, given the turnover issue, maintaining a solid level of employee engagement can be difficult in healthcare settings. Nearly one-third (1/3) of healthcare employees surveyed by industry leader Press Ganey report low engagement with their workplace, with those disengaged individuals being twice (2X) as likely to resign from their positions as highly engaged individuals. And this phenomenon is not limited to physicians, nurses, technicians, therapists, etc. The engagement levels of leaders have dropped three years in a row. The new generation of Millennials, who are increasingly taking on those leadership roles and, as a whole, comprise over 33% of the total healthcare workforce, report significantly lower levels of engagement than those in other age groups. With the increasing retirements of Boomers and GenX workers, the existing talent shortages and turnover rates appear to worsen.

Physicians as leaders

For doctors, leadership responsibilities can come into play for many as early as the second year of a residency. Given their role as a lead and decision-maker for treatment plans and their execution, physicians rise into leadership roles, providing medical care guidance to nurses, therapists, technicians, etc. However, most doctors do not traditionally receive leadership training and development as part of their medical education and residency programs.  While some exceptions currently exist, most programs do not address the fact that once certified, physicians will be providing direction and guidance to a diverse team of treatment support specialists who need to work in a fully collaborative and integrated manner. 

Add to that the fact that 49.1% (as of 2020) of physicians work in physician-owned practices. Many of them are business owners and leaders with formal oversight responsibilities for finances, staff hiring and management, facilities, OSHA and regulatory requirements, etc. Again, they must operate in those roles without the requisite training before taking on such responsibility.

These insights alert us to the fact that physicians are very commonly acting in roles where they may not have the natural talent or self-developed capability to lead a team or group of teams effectively and successfully. While many hospitals and large practices are led by leaders with advanced degrees and experience in management (e.g., MBA), medical finances, and/or hospital administration, many others are led by M.D.s. As a result, those organizations are led by physicians without the management and leadership skills held and honed by their administrative peers. The possibilities of poor leadership and management exist on a very large scale across the healthcare industry.  

Not surprisingly, as an article in the Harvard Business Review asserts, leadership quality directly affects operational and financial outcomes for patients and the healthcare system. It found that hospitals with better management deliver higher quality care, better medical outcomes, lower mortality rates, higher financial performance, and lower physician burnout rates.  Similarly, large reductions in heart attack death rates, physician burnout, and turnover while increasing growth and employee satisfaction are observed in hospitals where leadership generates a more engaged staff. In hospitals where senior management support and psychological safety increased the most, significantly greater reductions in risk-standardized mortality rates (RSMR) were demonstrated over others lacking such quality leadership. 

Research suggests physicians-as-CEOs produce superior patient and operational outcomes over non-physician-led health systems. They deliver 33% higher quality measures, including patient experience, lower Medicare costs per beneficiary, and receive the highest rankings in the U.S. News and World Report “Best Hospital” Honor Roll.  Substantial evidence exists that developing physicians as leaders is a winning proposition from both business and talent perspectives.

Identifying priority solutions 

The competition for talent is substantial nationwide. At the core, the key to addressing healthcare HR challenges is to create an environment rich in professional and personal growth opportunities, provide inspiring and motivating leadership and management, and focus on professional excellence and patient outcomes. While best practices inform many of the strategies that can create such an environment, it is a commitment from the very top of the organization chart to a humanistic approach to getting the job done that needs to define the culture.  Given the nature of the healthcare mission, a human-centered approach makes more sense in leading healthcare organizations than in any other industry. At the same time, it is a business where financial viability, legal compliance, and stakeholder requirements need simultaneous attention. So where should the HR leaders and teams focus their attention and efforts to drive such outcomes?

1. Define an employee value proposition (EVP) and live up to it

Clarify where the greatest opportunities exist to maintain a suitably sized, qualified, and engaged staff. Involve employees in helping the organization understand what makes working at the hospital, practice, lab, or facility great. Conduct regular listening surveys and sessions to drive continuous improvement in a manner that focuses on achieving the higher standards they value the most. Measure the desired outcomes and hold management personnel accountable for upholding the stated organizational values and action plans. Strive to create a culture supportive of employee needs and preferences.

2. Focus on the employee experience (EX)

Create an infrastructure that continuously measures and identifies opportunities to reduce the “friction” employees face when conducting business. A key part of addressing healthcare HR challenges is to address process shortcomings that create unnecessary administrative difficulties or roadblocks to effective patient care and treatment delivery. Identify the processes and steps that represent the greatest pain points in the full employment journey and prioritize those as opportunities for optimization. Create plans to address overly bureaucratic barriers to patient care, take tangible action, and communicate the efforts and their results to build employee trust in the commitment to improving their work lives.

3. Prioritize employee engagement

Build a sustainable culture of employee engagement that is scientifically- and measurably-based. The core to building a solid and reliable response to healthcare HR challenges is to focus on employee engagement. However, do not take chances with over-simplified strategies – research best practices and build an ecosystem that supports the development and sustainment of those in the workplace.  For example, from 100 million employee interviews, Gallup found that the manager's skill and behavior are 70% of the difference between high and low-engagement teams. The outcomes are substantial and reliable drivers of business outcomes – such as the finding that the medical facilities with the highest levels of engagement are three times (3X) more likely to be top providers of outstanding patient experience.

4. Proactively manage wellness and well-being

Given the well-known stressors inherent in providing and supporting medical care and the newly-elevated awareness of employee burnout and mental health issues arising from work, comprehensive well-being programs and processes are drivers of significant business outcomes. The good news is that tracking by the Centers for Disease Control (CDC) finds that healthcare already leads other industries, with 83% of U.S. hospitals offering wellness programs (vs. 46% of all other employers), and 56% having stress management programs in place.  Healthcare practices and facilities should consider offering more comprehensive wellness and well-being support covering physical, mental, financial, and even spiritual (non-denominational) well-being.

5. Enhance the recruitment function

Perhaps the most painful challenge is the non-stop search for qualified candidates across the full range of necessary roles. The pressure to deliver on this particular HR healthcare challenge is substantial, given the hiring volume challenges driven by growth and turnover combined.  Best practices call for selection and hiring practices that drive engagement and retention to reduce panic hiring or lowering standards. Installing validated (statistically derived) pre-hire assessments that address culture fit, alignment with corporate and medical values, the likelihood of retention, growth potential, etc., while reducing the volume of applicants can deliver longer-tenured, higher-performing employees. For non-clinical roles (billing, IT, technology, HR, transcription, etc.), look for candidates passionate about the medical mission, patient welfare, etc. Create a focus and methodology for evaluating and managing the candidate experience to optimize attraction, assessment, and hiring practices. And leverage multi-source talent strategies that engage apprentices, contractors, internal growth and mobility programs, and non-traditional talent sources such as career-changers, retirees, and (able and disabled) veterans at scale to expand candidate pools.

6. Invest heavily in management and leadership development

Address the need for physician and staff managers to provide effective coaching and guidance for employees across the system. Acknowledge the oversized influence of managers and leaders on culture, engagement, retention, and medical and business outcomes in healthcare. Address the physicians-as-leaders phenomenon that represents an under-prioritized healthcare HR challenge by creating required training and development options for physicians, HIPOs, and existing leaders. Prioritize well-constructed managerial selection/promotion, development, oversight, and performance measurement and management practices that provide transparency of the quality of management delivered. Hold them accountable for their results, and drive tailored interventions (e.g., coaching, performance improvement plans) for leaders and managers who fall below expectations for delivering quality coaching, development, and leadership to their assigned teams.

7. Deliver more effective and efficient learning

As learning and development are key drivers of employee retention, growth, and skill enhancement, the value of great programming and processes cannot be understated as healthcare HR challenges. However, considering the competition for employee attention and time created by heavy doses of compliance training, this needs to be delivered in ways that fit everyone's often-harried schedules, from technicians to physicians. Modern techniques that create bite-sized, technology-enabled learning are available to deliver learning where and when needed - embedded in workflows, accessible around shifts, and built to meet the learning styles of different employees, roles, and the new generations of workers. Focusing on non-classroom and technology-based offerings can be very successful when using peers as instructors, coaches, or mentors in either individual or group settings.

Relevant Practices & Tools

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Identifying and Calibrating Successors and HIPOs for Each Role Through Structured and Standardized Assessment Sessions. >

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Creating Informal Learning and Experiential Development Opportunities for Cost-effective Delivery. >

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Defining and Developing a Leadership Culture that Drives and Supports High Performance. >

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The Critical Talent Plan Summary Tool: Generate Estimates for Each Workforce Plan Mitigation Strategy to Manage Future Critical Roles. >

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