Vital Signs December 2023: Healthcare Sector Outlook

Labor Challenges: Shortages, Specialization and Strikes

Labor availability in the healthcare space has been a perennial issue for more than a decade. Both healthcare professionals and hospital support staff are constrained talent pools, from doctors to custodians. Because of this, many healthcare systems increasingly utilized contract labor between 2020 to 2022—typically in the form of travel nurses—to help bridge staffing gaps. While successful in providing staffing, the reliance on travelers further increased costs to systems in the immediate post-pandemic period. As the labor cost pressures have mounted, hospitals have been pressed to end these costly contracts. According to Becker’s, 47 hospital executives have called labor costs “crippling,” and some systems have reduced their labor costs by over half through ending contract labor and other layoffs. All told, the healthcare sector laid off over 40,000 people (inclusive of both healthcare workers and support

staff) nationally in the first half of the year. And yet, patient and health system demand still point to a substantial number of care providers needed over the coming years. Indeed, despite the layoffs, the healthcare sector added 63,000 healthcare workers and supporting jobs in July , pointing to a continuing overall shortage in labor. Health systems are now recognizing that paying high premiums for contract labor is financially imprudent in the new landscape. The demand for nursing professionals continues to outpace the supply, and this is compounded with challenges of an aging population, nurse retirements and burnout, and increased specialty needs. This shortage not only strains existing healthcare facilities but also limits potential growth of new healthcare facilities, as adding facilities often requires adding staff.

Despite healthcare systems reducing contract labor to control costs, the sector still added 63,000 jobs in July.

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