Hospitals are facing the worst financial year of the pandemic. Here’s what they’re doing.

Health systems are struggling with labor shortages and higher costs. Leaders say they are boosting pay and offering incentives to recruit and retain workers, a Kaufman Hall report finds.

Healthcare executives say that 2022 is proving to be the most challenging year financially since the COVID-19 pandemic began in early 2020, according to a new report by Kaufman Hall.

The hospital consulting firm released its 2022 State of Healthcare Performance Improvement Report, which surveyed health system executives on financial and operational issues.

Health system executives said they are boosting pay and offering other incentives to recruit and retain workers.

Health systems have already reported substantial losses this year. More than half of all hospital systems are projected to finish the year in negative margins, according to a previous Kaufman Hall report prepared for the American Hospital Association.

Many say they are paying higher labor costs as they struggle to deal with shortages of healthcare workers. Nearly all executives surveyed (98%) said they have raised starting salaries or the minimum wage, and two out of three (67%) said they have raised wages for clinical staff by more than 10%.

Most healthcare executives (84%) said they introduced signing bonuses, and 76% said they were offering more opportunities for remote and hybrid work. Nearly three-quarters (73%) also said they were offering retention bonuses. More than half (58%) said they were offering better pay on off-hour and weekend shifts that have been difficult to staff.

Health systems must be creative in finding ways to retain workers, said Kaufman Hall Managing Director Lance Robinson, the leader of the firm’s performance improvement practice.

“Long-term staffing shortages create bottlenecks in patient care and increase inpatient length of stay, leading to higher costs and poorer outcomes,” Robinson said in a statement. “For the rest of 2022 and beyond, hospitals and health systems need to prioritize building out retention strategies and transitioning away from unsustainable levels of contract labor to more stable staffing.”

Health system executives said raises in administrative pay have been more modest, with roughly two-thirds (68%) reporting that administrative raises are no more than 5%.

Hospital leaders said staffing shortages have a big impact on operations. Two out of three (66%) hospital executives said facilities have run at reduced capacity due to staffing shortages, according to the report.

With hospitals struggling financially, executives offered differing views on cost savings. Less than half (46%) viewed labor costs as their top option for reducing expenses. Less than one-fifth (17%) viewed trimming labor costs as the best opportunity. Many are recognizing that higher wages and salaries are simply a reality they’ll have to accept.

Some are seeing opportunities in outsourcing some functions, such as billing, while some are looking more at automation of some functions and self-registration kiosks as possible remedies.

Still, many hospitals have yet to fully embrace automation technologies, such as robotic process automation and artificial intelligence, in their operations. Less than one in five (18%) described their automation investments as significant or robust, according to the report. Almost half (46%) of executives described their systems’ automation investments as modest, while 36% said their investments were “negligible.”

Most health system leaders (69%) said they are seeing patients stay longer in the hospitals. Hospital leaders said they are seeing a growing number of patients who deferred healthcare in the pandemic, and are now showing up in hospitals with more advanced illness.

Executives cite another factor delaying care: delays in finding beds at post-acute care facilities, because of staffing issues at those organizations.

Health systems aren’t seeing much improvement in volume, executives said. Oncology is the only service line with substantial improvement over the last year, the report noted. Forty percent of executives said oncology volume has rebounded to pre-pandemic levels.

Conversely, cardiology saw a significant drop, according to the report. Only 26% of executives said cardiology volume had returned to pre-pandemic levels, while 44% of executives shared that sentiment a year ago. One executive cited a significant drop in screenings, including mammography and colonoscopy.

Many health systems are continuing to encounter supply chain disruptions, with 71% saying they have experienced delays in receiving supplies. A majority (58%) said they are encountering issues with product availability, while half are reporting issues with suppliers outside the country.

Only 9% of executives surveyed said they have not experienced any supply chain issues.

Kaufman Hall surveyed 86 hospital and health system leaders from across the country.