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How are Workforce Shortages Strangling Hospitals?
The topic of inflation has dominated the everyday political discourse as consumers are feeling the weight of rising food, housing, energy, and even healthcare prices.
More specifically in healthcare, the pressures of staffing shortages and the rising price of various materials are squeezing even the largest hospitals. The prominent Atlanta Medical Center is set to shut down while CommonSpirit, one of the largest health systems in the US, reported a $1.3 billion loss in the fiscal year ending June 30.
Paying a Price for Burnout
Clinician burnout was an area of concern for healthcare provider organizations before the pandemic, but the pressures of COVID-19 led to record-shattering staffing shortages as clinicians dropped out of the labor market.
The lower number of nurses, doctors, and other clinical professionals to fill critical roles in hospitals have driven up waiting room times and administrative pressures while the cost of labor has ballooned.
Trinity Health, a 92-hospital health system, reports almost 4,000 vacant nurse positions and a 14% vacancy rate for critical support staff across its health system.
Short term staffing options, such as contract labor, are considerably more expensive. Higher demand is only worsening outlook as these firms reportedly are charging 500% more than before the pandemic for services which can help alleviate staffing shortages.
As is common with many other trends in healthcare finance, rural healthcare providers are disproportionately affected by rising costs for labor and supplies.
Larger healthcare institutions in urban cores have greater patient volumes to sustain paying clinicians higher salaries. Already facing the pressures of high-cost rural care delivery, rural providers must pay salaries or contract workers at rates that strain their budgets more or must face debilitating staff shortages.
Rather ominously, a 2019 article noted that the US was potentially going to be "short more than 100,000 doctors in the next decade", before a wave of resignations during the COVID-19 pandemic likely accelerated such trends.
Looking at a map of health professional shortage areas, it's clear that rural areas were already struggling to fill gaps in access to clinicians, and rising costs are certainly not helping organizations in rural America.
Even against the backdrop of a tough environment, the Wellstar health system in North Georgia has remained in good financial standing. The nonprofit health system runs multiple hospitals and 350 other facilities.
The flagship Kennestone Hospital in Marietta, GA raked in $190.7 million operating income in 2021, up from $124.7 million over the same period in 2020. Across the entire health system, Wellstar has a $377 million operating income.
Yet, the health system made the announcement to close Atlanta Medical Center, a major hospital in Atlanta. As one of two Level 1 Trauma Centers in the city, the closure places greater strain on the other Level 1 Trauma Center, Grady.
Grady already runs over capacity, according to a statement by Grady Health System. The statement claimed that Wellstar "clearly prioritized profits over people" in a move that would put even greater pressure on Grady's operations.
To handle the influx of patients formerly going to Atlanta Medical Center, Grady received a $130 million aid package from local and state officials.
It likely comes as no surprise that the lower income levels of Atlanta Medical Center's patient population fed into the brutal cycle of lower usage of profitable medical procedures leading to a closure of health services and even poorer access to care for the local community in the long-run.
It probably also comes as no surprise that a health system chose to close the facility to improve overall financial performance, despite the intense pressure the move puts on locals.