For CFOs looking to lower their labor costs, a focus on a few key areas could make a big difference.
Labor costs are eating into hospital budgets in a big way. With inflation and an uncertain economic landscape ahead, CFOs are looking for the best ways to cut costs and boost their retention strategies while maintaining high quality patient care.
In the latest edition of HealthLeaders' The Winning Edge webinar series, a panel of finance leaders discussed best practices for lowering labor costs for health systems.
The Winning Edge for Lowering Labor Costs webinar included two experts on the subject: Kaitlyn Anderson, Director of Finance at AdventHealth, and Brandon Williams, Chief Financial Officer of Providence Health System.
CFOs should ensure their health system is acting on comprehensive strategies that not only recruit the right employees who want to work there, but also ensure a structure of tools, programs, and other offerings that work as incentives to keep them and keep them happy.
A few key takeaways from this discussion:
Technology has great potential to reduce labor costs if implemented in the right areas.
Recruitment and retention strategies have a big pay off, leading to a stable, happy workforce.
Workforce management tools should not be overlooked.
Check out the full webinar below for a deep dive on this topic, a recap of it here, and and don't miss our next episode coming soon.
As labor costs continue to rise, CFOs need to examine new strategies for recruiting and retention.
Many finance leaders are currently preoccupied with labor costs. Coupled with high inflation and an uncertain economy as a new administration ramps up, CFOs are looking for any way they can to lower the cost of labor while maintaining quality care, as well as employee satisfaction.
In the latest edition of HealthLeaders' The Winning Edge webinar series, a panel of finance leaders discussed best practices for lowering labor costs for health systems.
Check out these strategies for dealing with labor costs and how health systems can boost recruitment and retention.
Are CFOs looking at recruitment and retention the way they should be?
As CFOs dive into 2025, many leaders are preoccupied by labor costs. Coupled with high inflation and an uncertain economy as a new administration ramps up, CFOs are looking for any way they can to lower the cost of labor while maintaining quality care, as well as employee satisfaction.
In the latest edition of HealthLeaders' The Winning Edge webinar series, a panel of finance leaders discussed best practices for lowering labor costs for health systems.
Anderson said her organization has tackled this challenge with a four-pronged strategy. Firstly, AdventHealth looked at reducing agency workers and converting them to full-time employees using its internal staffing agency.
“We were able to convert over 500 contractors into our internal staff flex agency,” she said. “And then 40% of those staff decided that they wanted to take on a permanent full-time role at AdventHealth.”
Second, the team looked at how to reduce length of stay, which was a major component for the organization's success.
“So not only does length of stay reduction help with reducing the cost of labor, but it has also helped us create a ton of capacity,” said Anderson.
Thirdly, robust recruitment and retention strategies, especially around nurses, have played a large role, ensuring they are aligned to the health system’s mission, culture and vision. Lastly, AdventHealth created a workforce management department which specifically examines inefficiencies in the system and helps promote consistency.
Providence has also made significant strides in reducing labor costs, including flexible staffing models that offer part-time or work-from-home options where applicable, and using technology to complete smaller, repetitive and administrative tasks. When the health system saw labor shortages in its medical group, it stepped up its strategies.
“We've chosen to attack that on a few fronts, mainly for us, we've done a lot of focus on recruiting, also training a lot of our employees up, also looking at new grads as well,” said Williams.
Creating a Caring Culture
Organizational culture is a big factor in employee satisfaction, and one CFOs should not overlook when examining retention. Both panelists spoke about training programs that help employees feel confident in their roles.
“[It’s important to] really listen to our employees to try to understand what it is that they need, ‘how can you be more efficient?’” he said.
Collaborating with other leaders to ensure a positive, well-led culture is another factor. Williams says having a close relationship with his CNO and CMO so the team can truly look at how finance plays a part within the organization’s labor is critical.
“We want to make sure our team members are happy and that we're fostering a culture that has growth and development opportunities for them,” said Anderson.
How Tech Intervenes
Technology can have an important impact on labor costs, but leaders need to think past simply bringing in the newest AI. For these two execs, benchmarking and data analytics have had substantial impacts.
Using technology to compare appropriate staffing models is one use. When looking at efficiency, it's vital to have conversations with employees, says Williams. He says its important to really listen to employees to try to understand how they can be more efficient in their roles.
Notably, benchmarking is one task that may be crucial to understanding labor challenges.
“Through benchmarking work, we have been able to find a lot of opportunity for efficiencies and consistency just across our own eight hospitals in the Orlando area,” said Anderson.
Using benchmarking data can help health systems look at a variety of factors that can impact labor, even small factors that may not seem as vital as others at first glance.
“We're benchmarking ourselves on overtime, agency percentage, even work, even missed meals, and break penalties,” said Williams
R&R: Recruitment and Retention
Recruitment and retention efforts are the main avenue for a successful workforce.
“I think for us, number one is recruitment and retention strategies,” said Anderson.
CFOs should ensure their health system is acting on comprehensive strategies that not only recruit the right employees who want to work there, but also ensure a structure of tools, programs, and other offerings that work as incentives to keep them and keep them happy.
“We have been paying out market adjustments to ensure our team members are being paid a living wage and that they feel fairly compensated,” said Anderson. “We also offer tuition assistance as part of our benefit package. That has been a really big part of our recruitment and retention strategy.”
Advent Health has gone even farther to help their employees outside of the workplace.
“We also have a student loan repayment program as well, especially for our nursing team,” she said. “This year we rolled out a new health insurance option for our employees. So we're now offering a third health insurance option that's more affordable.”
Labor costs are likely going in only one direction: up.
The healthcare labor shortage is in full swing, and it's projected to get worse.
Healthcare labor costs have skyrocketed and health systems are struggling to keep up. At the forefront of this challenge, looking to balance quality care with satisfied staff and reasonable costs, are CFOs. But how many options do CFOs really have?
The industry point of view
According to Deloitte’s 2025 U.S. Health Care Outlook, more than half (58%) of health system executives expect workforce challenges, like talent shortages, retention issues and the need for upskilling, to influence their organizational strategies in 2025. And a Strata Decision Technology report lists labor costs as the largest percentage of healthcare expenses, hovering at 60%, or $839 billion.
Numerous large industry layoffs are also indicative of these struggles. This past month Lehigh Valley Health Network laid off approximately 100 workers, and Cleveland Clinic eliminated 114 administrative management roles.
According to a report from PricewaterhouseCoopers' (PwC) Health Research Institute released last year, healthcare costs are expected to grow by 8% in 2025 — which is the largest projected increase since 2012.
What CFOs are doing
High labor costs can not only dampen care access, but also leave little to no room for health systems to invest in care improvements like new technology. While these numbers are indicative of what providers are facing and what may lie ahead for the industry, executives know there are options to explore for every health system to help lower these costs.
The next webinar in our Winning Edge series will discuss how CFOs can use technology and other strategies to lower labor costs and allow for a thriving health system.
Here are a few strategies CFOs are discussing to tackle high labor costs:
Hiring practice shuffles. Health systems can focus on changing up their hiring practices. Exploring different methods for recruitment initiatives can help attract the right talent that wants to work in that specific type of health system. Beyond this, some systems have seen lower costs after cutting out or reducing contract labor, which can quickly add up.
Negotiation. Negotiations are a big piece of the CFO role, and this skill can help CFOs negotiate better benefits packages for their organization. CFOs can collaborate with payers to explore the best benefit package for their organization, and make the system’s dollar stretches as far as possible.
Workforce tools and training programs. Ideally, leaders can aim for simple, effective programs with minimal upfront costs. Health systems can offer programs that address things like burnout, mental fortitude, and wellness. CFOs should explore all local community options for partnerships in programs like these to build a strong staff that feels taken care of by their organization.
Utilizing Tech. Many systems are using automation to keep up with the labor shortage. A new report from Grant Thornton’s inaugural health care CFO survey showed that about 71% of healthcare CFOs plan to mitigate labor costs and improve operations through automation.
This is a popular option, but CFOs must ensure they are bringing in the right technology to solve a specific problem, ensuring that agility and innovation are at the forefront of implementation. Coupled with this is the task of empathizing with staff when introducing new technology to workflows.
This initiative shows the possibilities when healthcare invests in data.
Five medical centers in the University of California Health system have collected more than a decade’s worth of cardiac surgical data. Now, that data is being used to optimize hospital efficiency, and reduce costs by millions.
The surgical data, comprising more than 200 elements from each patient at the health system, has undergone advanced analytics to give financial executives insight into local and systemwide performance, according to the university. So far, executives have used the data to streamline care and improve financial margins, resulting in 132 bed days saved, and $15 million in savings so far.
How it works
The collective, known as the University of California Cardiac Surgery Consortium (UCCSC), consists of UC Davis Medical Center, UC San Francisco Medical Center, UCLA Medical Center, UC Irvine Medical Center and UC San Diego Medical Center.
The consortium is working to build standardized and sustainable quality improvements. To ensure this quality, these metrics are vetted, audited, and fall in line with a national database known as Society of Thoracic Surgeons (STS).
“We can benchmark ourselves against national data, and that allows us to be sure that we are among the best quality, elite institutions performing cardiac surgery, not only in the state and in our local markets, but nationally,” said Richard J. Shemin, MD, chief of the division of cardiac surgery and professor at the David Geffen School of Medicine at UCLA.
The UCCSC aims to increase the volume of procedures and reduce their variability, where it has seen some success. When analyzing the generated cost savings, the UCCSC found that early extubation resulted in a margin improvement of roughly $6.7 million, and decreased ventilation saved about $3.6 million. The 132 bed days saved equaled cost savings of about $486,000.
Beyond this, the UCCSC also aims to optimize costs and explore contracting opportunities, such as joint purchasing, according to the university.
“It's amazing that through collaboration and data analysis we have been able to improve patients’ lives as well as optimize the health systems’ economic efficiency,” said Nancy Satou, RN, director of informatics & database management in the division of cardiac surgery at UCLA Health.
For The CFO
This initiative shows the power of the healthcare industry when it invests in organized data and the effect it can have on patient care. CFOs should pay attention to projects like this, as well as others like the Truveta Genome Project, another initiative to improve care and lower costs through robust datasets.
While the funds for these projects don’t always appear from organizations like the UCCSC, this is where health systems can glance into what’s possible from a collective effort aimed at fixing a fundamental challenge in healthcare, — the lack of organized, analyzed, specific data.
CFOs should recognize the long-term importance of investing in initiatives like this. When the healthcare industry can efficiently make use of accurate data in every step of every patient's healthcare journey, that’s when the industry will be able to embrace real change.
Zehner started at the health system in January, bringing in more than 30 years of healthcare finance and operations experience. Previously a Regional CFO with Robert Wood Johnson Barnabas Health (RWJBH), he has also held the title of Chief Operating Officer for Newark Beth Israel (NBIMC). On top of this, Zehner has also held CFO positions at Washington Hospital Center, and HCA Healthcare.
Zehner says one factor that influenced his decision to join Holy Name was its size.
Coming from positions at large organizations, Zehner shared that often, in independent health systems, decisions can be made more rapidly, more nimbly.
“One of the calling cards of the health system is its ability to react to situations and move quickly to solve problems or to create opportunities, and that's appealing to me, “ he says.
Curious and Collaborative
Zehner was a COO for a number of years, adding to his knowledge of what can and cannot work for a health system. Now, he’s taking his leadership skills to Holy Name and applying them to finance.
“My style is curious and collaborative, and so [I like] to understand what problems are out there and what we're trying to solve,” he says. “I've learned a lot about how these types of organizations and hospitals work and how people attack issues, and where some of the blind spots exist in organizations. And so I think for me, to bring that operational experience in, it gives me credibility in the room.”
Zehner says it’s difficult for finance leaders to know which new solutions or new hires are the right ones to prioritize. Sometimes, they can feel like they wasted time, money and resources on investments that didn’t bring the kind of value to the community and organization as expected. This is why it’s imperative for CFOs to not make decisions in isolation.
Zehner says it’s important to allow the people that are going to be affected by decisions to participate in the dialogue, which helps to avoid missteps.
In terms of leadership style, Zehner knows collaboration is key.
“That's what I've learned from working with robust medical staff: Leadership is bringing folks into the conversation,” he says.
“We have to take that nimbleness that we've got and make sure that it's an asset for us and not a liability. Make sure that we move quickly when we're ready to strike, but [also], we want to make sure that we're making the right decision, and we're thinking about all the affected parties. So that's what collaboration kind of looks like to me.”
Zehner created the financial planning division at his previous health system, which, in a nutshell, took financial analysts and tasked them with deep dives on major decisions. From acquisitions to partnerships, this team examined it all in detail, preparing every decision for retrospective analysis.
Zehner says this team also examined the pathway of new initiatives to the community and the impact made there.
“It does slow things down a little bit to do that, but it makes the organization a little bit smarter about what it's doing,” he says.
Looking Ahead
What’s up next in Zehner’s playbook for Holy Name? Staying competitive, he says. Being in a smaller health system, Zehner knows the organization won’t have all the same financial advantages as its competitors, so it will be important to look at operations through an innovative lens.
“I want to look at whatever we can to try to make sure we can stay hyper competitive,” he says.
CFOs are looking at all the opportunities in 2025.
As we dive into 2025, CFOs are gearing up to focus on their top finance priorities. The general consensus? Confidence is high, and the economic outlook is positive, according to surveyed CFOs.
According to a recent Deloitte survey, 72% of CFOs in all industries have a positive outlook for the 2025 economy. In healthcare, that may translate to growth, enhanced operational efficiencies and improved patient care.
Finance execs will still need to walk the tightrope of making savvy investment decisions to push their organization forward, while keeping a decent safety-net on top of a smooth patient experience.
Check out the three top priorities for CFOs as they strategize in 2025.
This report zooms in on the financial distress in healthcare.
A new report is pointing out where distress lies in the healthcare industry, and bankruptcies are still a major concern.
Gibbins Advisors, a leading healthcare restructuring advisory firm, has published its annual 2024 report of healthcare sector Chapter 11 bankruptcy filings, examining only cases with liabilities exceeding $10 million.
Although filings dropped by 28% from the peak in 2023, this year produced the second-highest level of healthcare bankruptcy filings within the past six years (2019-2024).
The numbers breakdown:
-The average number of healthcare bankruptcies from 2019-2022 was 42 per year
-There were 57 healthcare bankruptcy filings studied in 2024.
-This is down from 79 filings in 2023
The markets breakdown:
-Middle-market cases (liabilities between $10 million and $100 million) declined by one-third from 51 in 2023 to 34 in 2024.
-Large bankruptcies (liabilities exceeding $500 million) remained high post-COVID-19: 12 filings in 2023, and nine in 2024. (The average here was three per year from 2019-2022).
-Filings in the $100 million to $500 million range held steady: 14 cases in 2024, 16 cases in 2023.
The study had a few more key findings:
On track with previous trends, two sub-sectors were the source of almost half of healthcare bankruptcies: senior care and pharmaceutical. Both have caused much stress for providers over the past few years. Drug prices are skyrocketing, and Medicare Advantage denials keep pouring in.
Many CFOs have said they turn to the 304B drug pricing program when able, and this may be the best tactic given today’s hectic healthcare climate. As for Medicare Advantage, strategizing here is even tougher. CFOs should keep active in policy-making discussions and contacting their senators, on top of closely strategizing with and keeping tabs on payers and denials.
Clinics/Physician Practices bankruptcy filings reached their highest level in six years, growing to 10 cases in 2024 compared to a four-per-year average from 2019 to 2023, according to the study. This likely came from numerous factors, including labor costs, supply costs, payer tactics, and private equity mishaps. This steady growth of bankruptcies in this sub-sector calls for the need for policy action to counter costs in some areas and make resource opportunities available in others.
Ronald Winters, principal at Gibbins Advisors, highlighted the financial stress of smaller and rural providers, and called for collaboration:
"While the new presidential administration introduces some uncertainty to the healthcare system, the core factors driving healthcare distress remain unchanged," he said. "Standalone and rural providers will continue to face significant financial challenges, and collaborating with communities on effective restructuring solutions is vital to preserving essential healthcare services in those regions."
The results are clear on the game plan for rural providers: collaboration will be key to enduring financial woes. CFOs of these types of systems should ensure they are proactive in creating collaboration opportunities for their health systems.
Here's how CFOs are currently feeling about Medicare Advantage.
Medicare Advantage payers are getting a rate increase, and providers feel the unease.
MA plans are set to receive a 4.33% payment increase from 2025 to 2026. Some plans could see a more than $21 billion pay increase in 2026 under a plan proposed by the Biden administration last week. Since a new administration jumped into office on Monday, plans could still change, and analysts expect the ultimate pay increase to be even higher under the Trump administration. Major MA payers like UnitedHealthcare, Cigna and Humana would all benefit from the increase.
Providers are seeing this increase as unfair, wondering why insurers are getting an increase as physicians get left behind, and while medical costs continue to rise. Prior authorization, the continuation of increased denials, and other administrative burdens have plagued providers in Medicare Advantage for years. MA enrollment has also been steadily increasing, which generally puts providers on the short end of the stick with lower margins. The increase suggests government reimbursement could be catching up with the increase in utilization among the Medicare population, putting minor stress on payers' earnings.
Late last year, the Department of Health and Human Services Office of Inspector General released a report finding MA insurers pocketed $7.5 billion from risk-adjusted payments in 2023.
Politico released a list of spending reform options which includes Medicaid, site-neutral payments, and the Affordable Care Act. MA and pharmacy benefits managers are not on the list. Providers will need to pay close attention as the new administration swiftly lays out new policies and reversals.
Who’s Saying What
The American Medical Association (AMA) emphasized how physicians treating Medicare patients are seeing cuts for the fifth straight year. Outrage is setting in, although it may have never left.
"It's unbelievable they're giving insurance companies that had record profits an increase while at the same time cutting payment to physician practices that are struggling to survive," said AMA President Bruce Scott, M.D., in a statement. "This contrast highlights the urgent need for Congress to prioritize linking payment to physician practices to the cost of providing care."
Mary Beth Donahue, CEO of lobbying group Better Medicare Alliance, said the following in a statement last week:
"President Trump can immediately deliver on his promise to protect Medicare for seniors by examining these policies, including ensuring the rates keep up with increasing medical costs and that the final rate notice provides much needed stability for seniors."
The CFO To Do List
Many CFOs are, unsurprisingly, fed up with MA and the constant hurdles from payers.
Generally, MA has faced criticism from both sides, for denials and overpayments. This goes without saying, but CFOs must ensure they go over contracts carefully. Stay on top of payers' tactics as much as possible, especially as the country and economy shift under the Trump administration.
To go a step further, CFOs should ensure they are communicating with their senators about these policies and the effects they have, especially for major health system CFOs that serve large populations.
As more hurdles and policy changes come about, CFOs will have to conjure their fighting spirit to protect the fiscal health of their organizations and staff.
An investment here could have big implications for drug costs, value-based care, and population health.
Seventeen health systems are investing in a genomic database that could significantly drive down clinical costs.
Truveta, a Washington-based software company, unveiled the Truveta Genome Project on January 13. The large collaboration aimed at creating a diverse database of genotypic and phenotypic information could transform billions of data points with industry-leading normalization and aid in everything from drug discovery to accelerating value-based care.
Health systems like Advocate Health, CommonSpirit Health, Henry Ford Health, Northwell Health, Providence and Trinity Health have all invested in the project.
The project is taking shape through two health companies:
-Illumina, which does DNA sequencing, which is investing $20 million.
-Regeneron, a biotech company focused on medicine creation, which is investing $119.5 million.
Regeneron’s investments are enabling the discovery and development of new therapies, as well as new solutions for healthcare delivery and population health management.
Together, Illumina and Regeneron, and the 17 health systems have invested $320 million in Truveta preferred equity at a valuation exceeding $1 billion, according to Truveta.
Additionally, Microsoft Azure will be the exclusive cloud provider for the Truveta Genome Project.
Why Does It Matter?
The process: Truveta, alongside its health system partners, will gather leftover biospecimens from routine lab tests that are linked to de-identified medical records for genetic research that will remain anonymous. Then, the first 10 million volunteers will have their exomes sequenced by the Regeneron Genetics Center.
The Truveta Language Model, an AI system designed to process and standardize large volumes of genetic and clinical data, built on Microsoft's Azure, is a key ingredient. By applying AI to this dataset, researchers hope to better understand genetic contributions to health and disease.
This database differs from ones that preceded it. There’s been a lack of large and representative datasets in healthcare that are fit to apply current AI tech to uncover connections between genetics and medical outcomes.
With more information comes more options and more informed medical outcomes that accelerate efficiency and operational excellence.
This project could be huge for the healthcare industry. With more precise datasets focused on genetics, healthcare could cut back on the massive drug discovery price tag ($25 billion last year, by the way), and accelerate tailored medical research, inching the industry towards value-based care models.
Why CFOs Should Pay Attention
Not only are projects like this vital for advancing research for more informed and generally better medical decisions, they also work towards driving down costs and accelerating care models that will benefit the entire industry.
Many CFOs have expressed high confidence in the economy this year, and are feeling more comfortable with taking risks and investing. When able, CFOs should look to invest in projects like this that further the advancement of medicine to help better the overall healthcare industry outlook. Healthcare is a group effort, and in the long term projects like these are helping the entire industry, which can collectively help drive down costs.
