HAS 2024

A Healthcare Labor Shortage Action Plan

May 10, 2023

Article Summary


With a predicted shortage of registered nurses reaching 450,000 by 2025 and a physician deficit of up to 120,000 by 2034, healthcare leaders must act now to reverse these workforce trends. Organizations need staff to deliver care and maintain revenue today, making an immediate workforce action plan an urgent strategy.

group of workers discussing action plan

The healthcare labor shortage isn’t a pending threat but a current and worsening emergency. McKinsey researchers predict a 200,000 to 450,000 shortage of registered nurses by 2025, and the Association of American Medical Colleges projects a 38,000 to 120,000 physician deficit by 2034.

The staffing shortfall is wreaking havoc on health system finances. Labor costs make up more than half of organizations’ total expenses, and many systems saw an increase in labor spending of 10% to 15% in 2022. Moreover, if you don’t have enough clinicians to care for patients, you are turning away revenue and, even worse, unable to care for people that need it.

Healthcare leaders need to act now to retain and attract an experienced and skilled workforce. Labor management is a big-picture, long-term challenge, but organizations can also target immediate action for improvement. Prescriptive solutions to one of today’s most pressing problems, retaining the existing healthcare workforce, will build talent pools now and attract and retain future professionals.

A Healthcare Labor Shortage Action Plan

In the spring of 2022, 50% of nurses stated that they planned to leave their current roles by the end of that year. Of those moving on, 32% intended to leave the field entirely. The problem extends beyond nursing to nearly every aspect of care delivery and operations, from coders and billing to medical assistants, radiology techs, and more.

An aging population is a prominent driver of healthcare professionals leaving their roles. Within the nursing population, 55% are 50 or older, and 62% of this segment plan to retire by 2026. As more of the workforce inevitably reaches retirement age, organizations must respond to other reasons for leaving, namely issues around culture and working conditions.

Six Actions to Alleviate the Current Strain

Members of the healthcare workforce cite burnout and lack of support as the primary driver of quitting or retiring. Specifically, these professionals name the following issues:

  • Need for more staffing.
  • Worker safety.
  • Lack of support from administration and clinical leaders.
  • Unsatisfactory benefits and pay.

Leaders can address some of the above challenges that are contributing to the healthcare labor shortage with the following six actions:

  1. Implement shared governance around staffing, scheduling, and workflow. Give staff more input on shift deployment, workflows, the tools they use to do their jobs efficiently, and more areas impacting their daily experience.
  2. Match staffing resources with demand—also known as labor productivity—to drive better alignment of the right resources at the right time to meet demand. Done effectively and routinely, labor productivity ensures necessary roles are covered and helps organizations avoid expenses like overtime and contractor pay to fill staffing gaps.
  3. Improve patient throughput and review care models and services to do more with the same resources. Consider ways to become more efficient from registration through discharge. For example:  Where in the care journey does implementing telehealth make sense? Are some services losing too much money need to be closed down?
  4. Reward and pay current team members better by finding efficiency opportunities. Rather than investing more in additional or outside resources (e.g., travel nurses), improved efficiency allows leaders to invest in their current teams in financially sustainable ways. Better compensation reduces the risk of staffing turnover, which is a high financial cost and negatively impacts patient care.
  5. Outsource non-clinical functions. Ninety-eight percent of hospital leaders want to leverage vendors for outsourcing one or more functions. Organizations recognize they can’t be the best at everything, so they’re turning to outside sources for non-clinical tasks such as billing, IT, and analytics. Identifying the right long-term partners for outsourcing non-clinical functions can save costs and improve services, as the vendor is responsible for staffing recruitment and retention. The arrangement frees the health system workforce to focus on delivering care.
  6. Leverage pragmatic and proven automation to reduce the need for more staff and allow the workforce to focus on a higher level (at the top of their license). Good candidates for automation include medical coding and certain billing functions, report writing and analytics, clinical abstraction services, and self-service scheduling for patients.

Take Healthcare Labor Shortage Action Today with an Eye to Long-Term Improvements

Given the urgency of the healthcare labor shortage and its devastating impacts on health system finances and care delivery, leaders must focus on short-term improvements. Today’s top priority is taking the actions above to improve the workforce experience, retain talent and improve a dire financial outlook. Meanwhile, leaders must also consider long-term opportunities to build robust, sustainable workforces. These are real actions that health systems can enact today to improve the current challenges, but more systemic and complicated solutions are still needed for long-term success.

Additional Reading

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