Redesigning the Clinical Workforce to Offset Mass Retirements and Increasing Labor Costs
Healthcare organizations consistently encounter challenges related to right-sizing their clinical workforce. Organizations are focused on how to appropriately allocate resources and optimize staffing while reducing labor costs, but maintaining high-quality patient care and safety. Now, as more than one-third of the nursing workforce is rapidly approaching the age of retirement, healthcare organizations are tasked with building cost-effective clinical networks comprised of flexible resources that can match emerging patient demand and deliver high-quality, low-cost healthcare.
According to the Bureau of Labor Statistics, 203,700 new registered nurses will be needed each year through 2026 in order to fill newly created positions and to replace retiring nurses.1 This increased demand for nurses is forcing healthcare organizations to compete for talent by providing higher salaries and other benefits, including significant sign-on bonuses. However, spending more money to retain full-time clinical resources is not necessarily equating to higher productivity or improved patient outcomes.
In KPMG’s 2017 U.S. Hospital Nursing Labor Cost Study, researchers state that non-productivity is a hidden cost for full-time nurses. Based on survey responses from hospital executives across the country, KPMG estimated that approximately 10 percent of a permanent nurse’s time is dedicated to non-productive labor.2 In addition, the hospital executives surveyed indicated on average that attrition of full-time nurses is 13 percent annually.3 The workforce vacancies created by this turnover are exacerbated by prolonged hiring timelines, during which time the remaining nurses may become overburdened in an effort to provide adequate care to patients with limited resources.
To avoid nursing shortages and minimize labor costs, many health systems are relying upon flexible, on-demand clinical resources. Traveling nurses have become a hot commodity in places like Florida and Arizona where many retirees reside in the winter months. Due to the seasonal population influx, hospitals in these areas rely heavily on travel or per diem nurses to assist with the increased patient demand.4 According to KPMG’s 2017 U.S. Hospital Nursing Labor Cost Study, flexible, on-demand nurses (meaning travel or per diem nurses) appear to be a more cost-effective labor source for healthcare organizations. Additionally, it requires less time to hire on-demand nursing resources, which means hospitals have more agility when responding to the ebbs and flows of patient volumes. Furthermore, as healthcare organizations seek to combat burnout among their clinical staff, presenting more flexible, on-demand work opportunities could be a mutually beneficial arrangement for all parties.
Reducing the Loss of Institutional Knowledge
Beyond supply and labor cost issues, healthcare organizations are also concerned about losing institutional knowledge as older nurses contemplate retirement. To counter this loss, many healthcare organizations are undertaking initiatives to identify and record the nuances of specialized roles, as well as establishing other programs to ensure knowledge transfer occurs between the retiring nurses and new frontline clinical staff.
For example, Montefiore Health System (“Montefiore”), located in New York, took a proactive approach to prevent clinical knowledge loss after recognizing that almost half of the system’s nursing staff was nearing 50 years of age. Montefiore approached its older nursing workforce and offered them flexible work options if they chose to delay retirement. Through the program, nurses were able to continue receiving their pension while earning higher hourly pay as freelance nurses. The program proved highly valuable for Montefiore because not only were they able to avoid nursing shortages, the health system maintained access to the nurses’ “wealth of knowledge,” and facilitated institutional knowledge transfers through dedicated mentoring.5
While the strategies and tactics used may differ, the fact remains that hospitals and health systems will need to re-architect the structure of their clinical workforce to face projected nursing shortages and combat rising labor costs. With a new goal of cost efficiency and more purposeful labor, organizations will need to consider how to create smaller clinical networks of resources to meet emerging patient demand, while providing reliable, high-quality care.
1 American Association of Colleges of Nursing. “Nursing Shortage.” www.aacnnursing.org April 1, 2019.
2 KPMG. “US Hospital Nursing Labor Cost Study.” 2017.
3 KPMG. “US Hospital Nursing Labor Cost Study.” 2017.
4 The Advisory Board Company. “Why Travel Nursing has Surged.” https://www.advisory.com/daily-briefing/2015/06/01/travel-nursing May 29, 2015.
5The Advisory Board Company. “For Montefiore nurses, retirement may be just the beginning.” https://www.advisory.com/daily-briefing/2018/07/25/retirees July 25, 2018.
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