Keeping workers engaged allows leaders to potentially prevent staff from walking out the door.
It’s no secret that an engaged employee is more likely to stay at their place of work.
That’s why CEOs understand the importance of fostering engagement among their staff, which increases an organization’s chances of retaining talent and cutting down on turnover.
Retention remains a major challenge for leaders, with one in five workers who were at their organization in 2022 leaving the following year, according to Press Ganey’s “Employee experience in healthcare 2024” report.
The data is based on annual, pulse, and lifecycle surveyed that fielded responses from over 345,000 registered nurses and 131,000 physicians providers in 2023. Researchers measured employee engagement on an employee’s connection to and satisfaction with their workplace, intent to stay, and “likelihood to recommend” their employer.
Here are four employee engagement trends from the report.
General engagement is up, but..
Engagement took a hit during the pandemic when healthcare experienced an exodus of workers, but it’s now on the rise for the first time since then.
Thanks to nearly half of all healthcare roles improving on engagement over a year, general engagement jumped from 4.02 (out of five) to 4.04.
However, there’s still plenty of room for improvement, with nearly one-third of employees reporting low engagement in their workplace.
Nurse engagement is improving
Nursing has suffered some of the most turnover in recent years and forced CEOs to reconsider workplace strategies.
The good news for organizations is that clinical registered nurses saw the second-most improvement in engagement among all roles, climbing 0.04 to 3.89.
It’s a welcomed trend for CEOs who want to cut down on utilization of contract labor and expenses associated with turnover.
Leader engagement is dropping
On the opposite end, leader engagement continues to trend in the wrong direction.
Engagement among leaders has dipped three years in a row, dropping 3.7% during that period, representing one of the few roles which hasn’t started to rebound from the pandemic.
The trickle-down effect is that without engaged leaders to create and sustain engagement among their staff, workers across the organization will have little reason to be involved.
Generational differences
Engagement doesn’t just vary by role, but also by generation, with the data revealing a stark difference between older and younger workers.
Millennials, who now make up over one-third of the healthcare workforce, have an engagement experience of 3.89, compared to 4.12 among non-millennials.
CEOs should understand that the same strategies used to engage the previous generation of workers may not work with the next wave of employees. Appealing to the younger generation is critical though as more longtime workers exit the profession.
Solving for these challenges is a must for leaders to maintain a healthy bottom line.
Low operating margins at hospitals and health systems right now are the result of several factors that are giving CFOs headaches.
While margins have stabilized for many operators, certain drivers are putting immense pressure on health systems’ finances, forcing leaders to rethink and refine their strategies to stay out of the red.
Chief among those concerns is labor costs, according to a report from the Healthcare Financial Management Association (HFMA) and healthcare strategy and market research company Eliciting Insights.
The report reveals the biggest financial pain points for hospitals, based on survey responses of 135 health system CFOs and qualitative interviews with CFOs during the first quarter of the year.
Here are the top three causes of low operating margins cited by CFOs and how they can respond.
Higher labor costs
Chosen by nearly all respondents (96%), lowering expenses associated with the workforce remains a priority for health systems.
One of the primary reasons hospitals’ margins are suffering is due to the shortage of workers, especially nurses. Ninety nine percent of surveyed CFOs said that among all roles, nursing is experiencing the most shortage, followed by LPN/med tech nursing (75%), lab techs (74%), and radiology techs (73%).
By focusing on recruitment and retention, leaders can bolster a workforce that is both strong and sustainable. That entails investing in your staff by raising salaries to be commensurate with industry demand and offering creative benefits to keep employees happy.
Cutting down on turnover will also lessen hospitals’ reliance on contract labor, which was necessary during the COVID-19 pandemic but is now ballooning costs.
Organizations should also be putting resources into building up the next generation of workers through involvement in education.
Lower reimbursement from payers
After labor costs, reimbursement was the next biggest concern among surveyed CFOs, chosen by 84% of respondents.
Many leaders believe they aren’t being adequately reimbursed for services by payers, which is draining their finances. Taking a hard stance at the negotiating table can often be beneficial, but it may not always be possible.
So, what can CEOs and CFOs do? Some strategies include reducing costs without negatively affecting quality of care, allowing hospitals to not need a change in rates. Or, operators can consider adding speciality services that payers reimburse at a higher rate, which will also attract more patients seeking diverse types of care.
Maybe most importantly, however, leaders should establish a collaborative relationship with payers that is mutually beneficial. If payers see that you’re able to improve patient outcomes and do it in a cost-effective way, reimbursement will follow. Open communication will also create more transparency around rates, leading to more effective dialogue in negotiations.
Higher supply costs
Selected by 47% of surveyed CFOs, supply chain expenses finished ahead of lower inpatient volumes (25%), lower outpatient volumes (17%), and lower patient collections (10%) as the third-most pressing challenge.
To optimize the supply chain, CFOs should do value analysis on the products they’re currently using or products they’re considering switching to so they can understand how necessary the costs associated with those products are.
Can you use cheaper products that won’t impact quality of care? That simple change may have a significant impact on the bottom line.
The health system has sold several hospitals of late to improve its finances.
Tenet Healthcare’s selling spree has shown little sign of slowing down.
After recently divesting several assets, the for-profit health system continued its strategy by agreeing to sell two California hospitals to Adventist Health for approximately $550 million to further reduce its debt and improve its leverage position.
The transaction, which is expected to close in the spring, will send Sierra Vista Regional Medical Center and Twin Cities Community Hospital to Adventist and net Tenet after-tax proceeds of about $450 million and a pre-tax book gain of about $275 million. The operators also announced that they reached an agreement for Tenet’s subsidiary, Conifer Health Solutions, to provide revenue cycler services for Adventist.
Tenet has had a busy stretch as a seller. The system completed the sale of three hospitals in South Carolina to Novant Health for approximately $2.4 billion last month, while also agreeing to offload four hospitals in Southern California to UCI Health for about $975 million.
Tenet had agreed to sell San Ramon Regional Medical Center to John Muir Health as well, but that sale was tripped up by the Federal Trade Commission blocking the deal for eliminating competition in the area.
Speaking on the fourth-quarter earnings call last month, Tenet CEO Saum Sutaria said the system has “demonstrated thoughtful divestiture activity in a way that remains consistent with our strategy and enhances not just our leverage position, but our belief in our ability to generate free cash flow going forward.”
The sales were part of the reason for Tenet’s performance in the fourth quarter of 2023, which saw it beat Wall Street expectations and report net income of $244 million.
Selling off hospitals is allowing Tenet to turn its attention to its ambulatory care business. That segment experienced a 15.4% increase in net operating revenues in the fourth quarter compared to the same period in 2022.
As Tenet continues to reshape its business, more divestures could be in the works to create greater financial flexibility.
“Tenet is entering a new era, with a greater proportion of our performance coming from our highly efficient ambulatory surgical business and a reduced debt profile, we are well positioned to continue to expand free cash flow further over time,” Sutaria said.
To grow and sustain the business, leaders should be asking necessary questions about key facets of their financial strategy.
Hospitals across the country are under immense financial stress and as long as that fiscal pressure remains high, CEOs have no choice but to always be operating with the bottom line in mind.
Even as the median operating margin for hospitals continues to stabilize and we move further away from the pandemic, expense growth continues to outpace revenue for many facilities, widening the gap between profitable and struggling organizations.
To keep the doors open CEOs need to be constantly evaluating and revaluating key areas with the aim of achieving fiscal sensibility. That’s why this topic and its solutions will be featured in a roundtable discussion at our upcoming HealthLeaders CEO Exchange, held in May in Kohler, WI.
Attendees talk shop at the 2023 HealthLeaders CEO Exchange.
Until then, here are three ways CEOs can strive for fiscal sensibility:
Understand your market
Whether your hospital is thriving or not, it’s necessary for leaders to gauge their market and where they stand within it.
If your market is growing, it’s important to take advantage by broadening your reach to capture new patients. If your market is being compressed, you must find ways to hold onto your share, such as keeping referrals for speciality care.
Seeking out M&A is strategy for both growth and survival, with one of the trends in the dealmaking right now being health systems’ reorganization of regional markets. By committing resources to core markets with growth potential, health systems can expand delivery of care across their organization.
Assess revenue streams
One of the primary ways to combat high expenses is to introduce new revenue streams, but CEOs should first recognize what is and isn’t working for them currently.
If your hospital is finding success with digital health solutions, for example, consider how you can capitalize on patients’ needs by expanding your offering so you can provide care outside of your walls.
At the same time, many hospitals, especially in rural locations, are having to cut back on services because they’re not generating enough revenue to keep up with costs. A study by Chartis found that nearly a quarter of rural hospitals closed their obstetrics unit, while 382 have stopped providing chemotherapy.
Sometimes, scaling back or eliminating services will create more financial stability than adding new streams.
Improve payer relations
Costs ballooning at a faster pace than reimbursement will always be challenging for CEOs to navigate, which is why it’s as vital as ever to have a strong payer strategy.
Establish a relationship with payers that creates transparency, allowing you to know the rates they’re asking for and why. That will enable both parties to reach an agreed upon endpoint without wasting time and energy.
Rather than adding to the adversarial dynamic, leaders can benefit from a more collaborative approach that emphasizes open communication with payers, which can reduce administrative burden like denials.
Are you a CEO interested in attending our event and strategizing with other attendees? To inquire about attending the HealthLeaders Exchange event, email us at exchange@healthleadersmedia.com.
The HealthLeaders Exchange is an executive community for sharing ideas, solutions, and insights. Please join the community at our LinkedIn page.
Strategy around technology may be influencing leadership changes this year.
Following a significant jump in CEO turnover at hospitals and health systems in 2023, this year has kicked off with several other leaders exiting organizations.
As hospitals shape their long-term vision to include more technology and innovation, that approach is affecting the makeup of the C-suite. CEOs also continue to deal with overwhelming challenges that are contributing to voluntary exits and retirements.
In January, hospitals and health systems reported 11 CEO changes, according a report from executive coaching firm Challenger, Gray & Christmas. While that figure marks a 52% decrease year-over-year, the 23 exits announced in January 2023 were the most for the sector since August 2018 (24).
Last month’s 11 changes were a slight increase from December 2023, when 10 CEOs departed to close out a year that featured 146 changes. That total represented a 42% increase from the 103 exits announced in 2022.
For January, the hospital sector finished behind only government/non-profit (48), healthcare/products (22), and technology (21) for most CEO exits among 29 industries.
In total, companies experienced 194 CEO changes, which was down 5% from December 2023 (204) but up 73% year-over-year (112). It’s the highest amount of turnover to start a year since 219 CEOs departed in January 2020.
Technology’s growing presence could be impacting these moves, with companies wanting leaders in place who can stay ahead of the curve.
“Companies’ priorities are cost savings and digital transformation in 2024, and that often means choosing new leadership to implement these plans,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas.
For hospital CEOs, embracing investment in technology can be worthwhile for both your organization and your tenure, even if return on investment is not yet fully realized.
A recent survey of payer and provider executives by Ernst & Young found that while 71% of respondents haven’t seen lowered hospital expenses yet as the result of new technology implementation, 96% believe that the investment is worth the cost.
Hospital operating margins are stabilizing and up year-over-year.
Hospital finances started the year in encouraging fashion, showing that many operators’ bottom lines are holding steady.
However, Kaufman Hall’s National Hospital Flash Report for January highlights that challenges persist for struggling facilities, which means hospitals leaders should continue pursuing strategies to optimize healthcare delivery and the workforce.
“While hospital financials continue to show stabilization across all volume-adjusted metrics, a deeper dive into the data shows that not all organizations are experiencing the same stabilization,” Erik Swanson, senior vice president of Data and Analytics at Kaufman Hall, said in the release. “High-performing hospitals are doing better and better while lower financial performers have stagnated or seen their margins worsen.”
Here are three key figures from the report:
5.1%
The median calendar year-to-date operating margin index for January, it represented a slight decline from December but a higher relative mark to the same periods in 2022 and 2021.
Many of the hospitals that are operating a loss are ones in rural areas. According to a recent report by healthcare advisory firm Chartis, 50% of rural facilities are currently in in the red, up from 43% in the previous year.
Resources may be limited for hospitals and while the return on investment might not be showing up just yet, adopting and implementing new technology is something all leaders should be considering right now as a long-term solution for profitability.
1%
The month-over-month increase in net operating revenue per calendar day, it pales in comparison to the 5% gain in gross operating revenue per calendar day since December.
Kaufman Hall notes the difference in growth between the two could signal payers exerting their power in contract negotiations, as well as a shift to value-based payment models.
Solving for low reimbursement is an age-old problem for hospitals, but leaders can attack it through several strategies such as cost reduction and diversification of services.
3%
The month-over-month rise in labor expenses per calendar day, it’s relatively low considering the jumps in supply expenses per calendar day (4%) and drugs expenses per calendar day (6%) over the same period.
Year-over-year, labor expenses are up just 4% whereas total expenses have increased 6%, illustrating hospitals’ focus on cutting down on contract labor.
The partnership allows Northwell to expand and Nuvance to receive financial support.
Northwell Health and Nuvance Health announced they've agreed to merge in a move that could strategically benefit both nonprofit health systems.
By combining, Northwell will expand its presence outside of New York, where it proclaims itself as the state's largest provider and private employer, and into Connecticut, where Nuvance is based but currently operating under financial pressure.
If the deal passes regulatory review, the resulting integrated regional system will comprise of 28 hospitals, 14,500 providers, and over 1,000 sites, according to the announcement. The organizations said the partnership will combine purchasing power, clinical capabilities, expertise, and infrastructure to "accelerate innovation in patient care and advance medical research that can help transform lives."
The merger is the latest transaction featuring a financially strained system, with a recent report by Kaufman Hall—which served as a financial advisor for Nuvance in its deal—finding that more hospitals are seeking out M&A due to financial distress.
Nuvance reported a net loss of $121.5 million for the fiscal year ended Sept. 30, 2023, following a loss of $153.3 million for fiscal 2022. The system operates seven hospitals across Connecticut and New York after forming in 2019 through a merger between Western Connecticut Health Network and Health Quest.
Northwell will make "significant investments" in Nuvance, the organizations said, giving the Danbury, Connecticut-based system some much-needed financial stability.
"This agreement enables us to make significant improvements to health outcomes for community hospitals and to deliver unparalleled care and drive positive change in the health care landscape," John M. Murphy, president and CEO of Nuvance, said in the news release.
New Hyde Park, New York-based Northwell, which operates 21 hospitals and about 900 outpatient facilities, is coming off a year in which it reported a net gain of $449.2 million in the first nine months.
Extending into Connecticut will allow Northwell to further grow and build upon its patient base of more than two million annually in the New York metro area and beyond.
"We have similar missions in providing high-quality care for patients in the communities we serve," said Michael Dowling, Northwell president and CEO. "We look forward to building on the care that Nuvance Health's 14,000 staff members and providers deliver each and every day."
Healthcare executives have reasons to believe digital health solutions will eventually pay off.
For healthcare leaders, investment in technology right now requires more than just resources—it also demands patience and willingness to trust the process.
As technology continues to evolve, so will organizations’ understanding of how it impacts the bottom line. For that reason, hospital CEOs must remain committed to investing in new technology for the long haul despite slow return on investment (ROI) out of the gate.
Decision-makers across the industry agree, according to Ernst & Young’s survey of over 100 payer and provider executives. While seven in 10 respondents (71%) said the implementation of new technologies hasn’t lowered hospital expenses, nearly all (96%) believe that the investment in new technology is worth the cost.
The sentiment is important for leaders in an industry that is typically slower to adopt and implement technology. Hospitals may not have to be at the forefront of new technology, but with financial and workforce challenges wreaking havoc at facilities across the country, many organizations can’t afford to fall behind the curve. And CEOs seem to understand that.
“In a very touchy-feely space like healthcare, or at least traditionally is, [technology] is sometimes foreign to us old heads,” Phil Wright, CEO of Memorial Regional Hospital South, told HealthLeaders.
“We're used to still touching patients and talking to patients and the more and more we create these solutions around AI and technology, it can be a little scary. On the flip side, all of this technology and innovation, if used properly, can do nothing but help the patient process, help us become more efficient, help us make better decisions about how we deliver care, help us be more precise and accurate in the types of medicines, the types of treatments that we're able to give. So I'm kind of excited about it.”
Measuring ROI
Leaders may not be seeing any ROI yet, but that doesn’t necessarily mean it’s not coming—or isn’t already here, even.
Ernst & Young’s survey found that 86% of respondents acknowledge the potential cost reduction from digital health investments, highlighting that many executives recognize that the value is there.
However, that value could be difficult to quantify, as half (50%) of respondents said the lack of ROI so far is influenced by “siloed tracking metrics.”
To keep up with technological advancements, organizations must improve and refine their approach to tracking to go beyond the traditional means. Switching to unified monitoring can allow hospitals to collect and analyze data in a more standardized way, leading to more informed decisions over what is and isn’t working.
Investment in technology is not as effective without the investment in solutions to properly track it.
Beyond the numbers
Arguably the best area CEOs can invest in right now, through technology or otherwise, is in their people.
Workforce continues to be the top priority for hospitals as shortages of clinical workers and burnout slow down operations.
By utilizing technology to supplement the workforce, leaders can do more with less while keeping staff happier. In Ernst & Young’s survey, nine out of 10 executives said that after shifting administrative responsibilities to a digital system, their department has more time to focus on the needs of their providers.
Solutions that reduce administrative burden and allow physicians and nurses to spend more time caring for their patients will pay off in the long run by cutting down on turnover.
“We want to make sure that the non-productive work or the administrative burden that is placed on our caregivers, we're removing that out into a centralized location, so our nurses don't have to be burdened with those administrative tasks,” Michael Charlton, CEO of AtlantiCare Health System, told HealthLeaders. “They should be at the bedside, they should be delivering exceptional care, providing compassionate care and empathy. But how do they maintain that? We feel that pulling that work outside and using tech to do that, that's really the next iteration.”
The returns on technology may not be fully realized yet, but as long as CEOs are thoughtful in how they invest, the results will eventually come, whether that’s reflected on the bottom line or on the understanding of what the future of healthcare is.
Surveyed leaders cited labor as the most pressing area of concern.
Above all else, hospital CEOs right now are worried about how they’re going to staff their organizations.
During a time when healthcare is susceptible to a talent drain among clinical and non-clinical employees, leaders are prioritizing addressing workforce shortages.
The American College of Healthcare Executives’ (ACHE) annual survey of hospital CEOs revealed that for the second consecutive year, workforce or personnel challenges ranked as the number one concern.
Workforce garnered an average score of 2.3 on an 11-point scale, finishing ahead of financial challenges, which ranked second for the third straight year at 2.6, and behavioral health/addiction issues, which ranked third at 5.3.
The survey fielded responses from 241 community hospital CEOs in the fall of 2023 to gauge what areas are top of mind for leaders and identify the specific concerns within each of those challenges.
Under workforce, here is how often the following issues were selected by CEOs:
Shortages of registered nurses: 86%
Burnout among non-physician staff: 79%
Shortages of physician specialists: 71%
Shortages of therapists (e.g. physical therapists, respiratory therapists): 68%
Shortages of primary care physicians: 65%
Shortages of advanced practice professionals: 32%
Managing remote staff: 27%
How CEOs can respond
Addressing these concerns requires a commitment from hospital leaders to both the people in their building and the next generation of clinical workers.
As more longstanding physicians and nurses especially get older and exit the profession, hospitals must find a way to develop talent to sustainably keep their organizations functioning.
“Longer-term solutions include strengthening the workforce pipeline through creative partnerships, such as those with colleges to grow the number of nurses and technicians,” Deborah J. Bowen, president and CEO of ACHE, said in the news release. “More immediate solutions include supporting and developing all staff, building staff resilience, organizing services to reflect the realities of the labor market and exploring alternative models of care.”
The shortage of workers is also exacerbated by burnout, which is harder to solve for without the ability to hire new staff. According to more than 200,00 physicians and more than 32,000 nurses surveyed by KLAS Arch Collaborative, improving staffing is the number one solution to addressing burnout.
However, CEOs can utilize the other methods respondents chose without having to hire more people, such as aligning leadership with physicians and nurses, providing better pay, and improving EHR efficiency.
What’s clear is that leaders will have to turn over every rock to counter workforce challenges that don’t appear to be going anywhere any time soon.
Solving for labor dynamics in 2024 requires keeping up with the current landscape.
Many of the workforce challenges hampering healthcare now are the same ones that have been around for years, but the circumstances around them continue to shift.
That is why CEOs at all organizations must closely follow how the solutions to these challenges evolve over time to stay ahead of the curve.
Here are three trends in workforce to monitor throughout the coming year:
