The health system environment has rarely been as challenging and uncertain given pending Medicaid reductions, tariffs, and broad regulatory uncertainty. But despite those headwinds, workforce innovation offers a clear path to success.
Executive summary
The operating environment for health systems has never been more uncertain, with potential federal Medicaid cuts targeting nearly $1 trillion and potentially reaching $1.5 trillion. Given the unprecedented financial uncertainty and critical role of staff in delivering safe and effective care, a new focus on human capital is essential. Labor represents 55-60% of total hospital operating expenses and appropriate staffing is linked directly to patient outcomes, so optimizing this spend without compromising care is paramount. Although improved from 2022 lows, post-COVID labor shortages remain widespread and hospitals can expect a shortage of at least 100,000 workers by 2028 driving a significant inpatient bed shortage by 2032 that will constrain revenue. This article outlines the need for a modernized approach to workforce management that integrates and prioritizes internal team members with flexible access to augmented talent, and enables smart vendor management to replace outdated, costly and inflexible approaches to staffing.
A moment of unprecedented uncertainty in Medicaid policy
The current uncertainty surrounding the federal regulatory landscape for health systems has never been more volatile. Potential Medicaid cuts of up to $1.5 trillion are on the horizon when considering proposed changes to federal matching funds, provider tax reductions or eliminations, and other cuts. This unprecedented funding shift will drastically impact state governments, triggering ripple effects that will negatively impact health system reimbursement and margins, making safe and effective care more difficult to provide. As a former health system CEO with a career-long focus on quality, I understand how difficult it can be to effectively manage costs while maintaining or improving quality. Fortunately, solutions have evolved to make things easier.
Labor: The critical leverage point for cost and quality
Labor accounts for 55-60% of operating expenses in a typical health system, placing it squarely in the cost-control spotlight. But staffing is also tied directly to revenue realization and patient outcomes, so reducing staff without a thoughtful and considered strategic plan carries real risks, including lower revenue, burnout, unsafe nurse-to-patient ratios, and ultimately compromised care. From a quality perspective, appropriate staffing has been shown to reduce mortality and complications, increase patient satisfaction and enhance consumer loyalty. It also reduces nurse and physician burnout which contributes to increased turnover and other costs. Labor costs have escalated significantly due to ongoing wage pressures and extensive use of agency nurses and other outsourced team members. To navigate these pressures, health systems must rethink their workforce strategies and embrace agile, data-driven staffing models to meet the needs of team members to build loyalty and make your organization the employer of choice while optimizing costs and meeting real-time patient demand.
Technology as a strategic enabler
Legacy staffing agencies and manual internal processes can no longer manage the scale, speed, and complexity of today’s health system workforce management demands. Fortunately, a new, technology-driven operating model is emerging that promotes team member engagement, ensures cost control, establishes operational resilience, and more effectively deploys labor. As an innovator that has pioneered access to affordable talent for more than 8 years, Medely, a company that I advise, offers a comprehensive workforce modernization solution that replaces outdated staffing approaches and legacy tools with a technology-driven solution that first prioritizes and optimizes internal staff deployment, then provides flexible and controlled access to cost-effective, verified external talent, dramatically reduces the use of agency personnel, and ensures comprehensive and smart vendor management to create a more agile, cost-effective, and engaged workforce to navigate the challenges ahead.
Core components of Medely ’s state-of-the-art workforce management system include:
- Internal Resource Management: Automate forecasting, scheduling, credentialing, and time tracking to fully leverage your internal team and maximize cost advantages. Monitor scheduled vs. actual hours to improve productivity, enhance team satisfaction, ensure appropriate staffing ratios, and reduce reliance on outside resources.
- Talent Marketplace: Access a national pool of Medely-verified nurses and allied health professionals without agency markups, so that you stay in control and have faster, more transparent staff deployment.
- Vendor Management System (VMS): Where needed, Medely’s VMS centralizes agency management and waterfalls any agency assignments only after lower cost internal and marketplace options are exhausted.
The Talent Fusion platform
Medely’s Talent Fusion Platform leverages a waterfall approach to help organizations staff more effectively and cost-efficiently:
- prioritize internal staff for open shifts
- waterfall unfilled roles to team members on the verified, cost-effective talent marketplace
- engage agencies only as a last resort.
The Platform also improves shift equity in addition to optimizing shift coverage at the lowest cost and significantly reducing agency dependence. Key benefits of the Platform include:
- Making faster, data-driven, real-time staffing decisions with centralized visibility and cost control.
- Secure full shift coverage even in unpredictable conditions to ensure desired nurse-to-patient ratios.
- Reduce friction and avoid last-minute gaps through transparent and flexible scheduling to generate higher clinician satisfaction.
- Leverage platform scale to maintain care quality and protect profit margins.
Redefining workforce strategy for a new era
The healthcare industry stands at a very challenging crossroads with reimbursement cuts, staffing shortages, tariffs and other inflationary cost pressures growing. Human capital remains the single most important driver of overall costs and outcomes. As such, systems that embrace flexible, tech-enabled workforce solutions will lead the way. So now is the time to modernize by aligning labor with real-time demand and leveraging a unified platform. Medely’s Talent Fusion Platform can enable sustainable care delivery and financial sustainability.
Visit medely.com to see how Medely can help you lead through transformation.
About the author:
Ronald A. Paulus, MD, is President and CEO of RAPMD Strategic Advisors, providing advisory services to health system Boards, CEOs and technology companies. He also serves as an Executive in Residence with General Catalyst. He has served on numerous diverse Boards, including a public company, private equity backed enterprises, health systems and academic institutions. He is co-founder and Chairman of Maribel Health, a health system technology-enabled operating partner to design, build and operate clinical models supporting advanced care at home.
Dr. Paulus has held senior leadership positions in leading health systems, serving as President and CEO of Mission Health, and Chief Administrative and Chief Innovation Officer for Geisinger Health System. Prior to joining Geisinger, Dr. Paulus was co-founder, President and later CEO of CareScience, Inc. (a NASDAQ company), that provided an analytics platform to support health systems’ quality and efficiency improvement work used today by nearly 1,000 hospitals nationwide.
Dr. Paulus received his MD degree from The School of Medicine, University of Pennsylvania, and his MBA, concentration in healthcare management, and BS in Economics from The Wharton School, University of Pennsylvania. He has published peer-reviewed book chapter and journal articles (including in the Annals of Internal Medicine, New England Journal of Medicine and Health Affairs), and speaks regularly on the topics of health care quality and efficiency, innovation, physician and health system leadership and new models of care. Dr. Paulus has testified before both the US House (on the 340b Drug Program) and the US Senate (the Stark and anti-kickback laws) and he has been named one of Modern Healthcare’s Top 50 Most Influential Physician Executives and Leaders several times, and was recently among the Top 15 on that list.
