Why More People Is Cheaper

In the United States, labor is one of the costliest expenses for healthcare organizations. Healthcare organizations have developed a variety of strategies to mitigate these costs including, operating chronically understaffed, compensation incentives to encourage overtime, and workforce flexibility practices aimed at maximizing productivity for existing staff. While these approaches may have worked pre-COVID, today they are driving attrition due to the following staff perception: working in these conditions sucks and no amount of money is worth it anymore. The fix, counterintuitive though it may be, is for healthcare organizations to ensure a reasonable workload for current employees and matching staff growth with service expansion. This approach requires innovation to balance the budget and stay in the black but is cheaper in the long run. Reasons for why these practices compound the acute staffing shortages being experienced today are varied.

Operating chronically understaffed is common practice in healthcare. Despite evidence that understaffing results in burnout, which is associated with a decrease in job satisfaction and quality of care, organizations often struggle to change this as the status quo. If the revolving door that sees employees leave, also keeps employees coming in, the wheels don’t come off. COVID accelerated two factors that make these practices less viable. First, burnout levels among healthcare providers skyrocketed. Coupled with increased burnout was a reordering of priorities in peoples’ personal lives, which resulted in less priority on work. Examples of this reset for workers are nurses turning down $1,000 dollar shift incentives, physicians decreasing their call load and time commitments, and increased absenteeism. Organizations operating critically short staffed as the norm will continue to lose employees faster than they can be replaced.

Another strategy used to address staffing shortages has been the use of overtime. Incentivizing employees to increase work hours in return for money is a time proven strategy. Research has shown though the more employees work overtime, the less they like their job, the quicker they become burnt out, and the easier it is for them to start considering another job. A staffing model that requires overtime to work is also a staffing model that has burnout baked in. Even if burnt out employees don’t quit, their levels of collaboration, cooperation, and creativity decrease, while inattention to detail, exhaustion, and disengagement increase, leading to poor care.

Workforce flexibility practices have been some of the most controversial in healthcare. An example of these practices is sending nurses from low census units to units that are short staffed. Another example is sending nurses home when census is low, often requiring nurses to choose to go unpaid or to use personal paid time off. In a world where the attrition created by these practices was supplemented by the ability to attract new laborers, this practice was sustainable. However, practices like these during the pandemic added to the sense among healthcare providers that their organizations did not have their backs and is a significant factor in healthcare providers quitting.

The biggest argument against continuing business as usual in terms of staffing is that it is no longer cost-effective. Research has estimated the cost of turnover at approximately on year’s salary for the departing employee. Adding to the financial costs of turnover are the less tangible, but equally costly factors like a decrease in quality care. Take the nurse strike in Minnesota as an example, where increases in safety events have been tied to chronic critically short staffed hospitals. All of this begs the question: if the way we have always done things isn’t working, what is the solution?

The solution to today’s staffing shortages is to rebalance the budget in favor of adequate staffing. Incorporating evidence-based care delivery models which are supported by professional and safety organizations is the first step. Ensuring competent leaders who have the resources needed to accomplish the organizational goals of their units is the second step. Finally, focusing on the organizational climate by ensuring that staffs’ perception is that they have the resources to safely do their jobs, that the organization has their backs, and their wellbeing is a priority is the third step. From there, with happy employees and sound leadership, new employees can be counted on to stay.

Innovation is often touted as a requirement for navigating the complex and dynamic healthcare environment. What healthcare workers need right now is leadership that can bridge the gap between the rising cost of labor and ensuring that there are enough laborers to do the job right, to take care of people the right way, which is why they got into healthcare for in the first place. Organizations ensuring that adequate staffing is the rate limiting factor for service will reap the financial benefits associated with decreased turnover and quality care.


Copyright Michael Lambert