HOSPITALS AND HEALTHCARE FACILITIES

As in any industry, there are specific areas that increase labor costs, and the health care industry is currently seeing a rise in labor costs. In the hospital setting there are specific key drivers that contribute to the issue, such as chronic diseases, the aging population, and shortage of staff members.

Evaluating the key drivers on how and why they raise labor cost, will help create solutions to the problem areas and the rising costs. Creating a future plan of action to help minimize the costs, can be beneficial to the hospital and the health care industry (Bryant, 2018).

Key Drivers of Labor Costs

Three key drivers that raise labor costs within a hospital are, chronic diseases or conditions, the aging population, and the shortage of staff members. Chronic diseases or conditions are a contributing factor in the increase of labor costs, this is due to the increase in patients that require more frequent hospital visits or stays, chronic diseases include, cancer, heart disease, obesity, and diabetes. Patients that have these conditions require more medical attention, which hospitals needs more staff members to care for the patients. The aging population is also increasing labor costs, there are thousands of people that are considered “baby-boomers”. This means that this population is getting to the age where they require more health care than normal (Norbeck, 2013). And shortage of staff members is a key driver that increases labor costs for hospitals. Many doctors and nurses are getting to the retirement age, and those that are not are forced to work long hours or overtime. Paying employees overtime, increases the amount of labor and daily, weekly, or yearly pay. And the patients with chronic diseases or conditions and the aging population are also causing a shortage in staff members, as there are sometimes not enough employees to cover the extra patients a hospital may see (Simmons, 2010).

Current Industry Solutions

Many hospitals are now outsourcing overseas to reduce labor costs within the health care industry. This means using an international company for their call centers, or to handle their billing concerns and issues. By outsourcing, the facility is saving many on labor, due to the decrease in the hourly wages an international company charges, versus one within the United States. Another way to reduce labor costs in a hospital is to layoff unneeded staff members, such as janitors, answering phone services, valet services, or cafeteria employees (LaPointe, 2018).

Future changes. Technology is part of the future of reducing labor costs within a hospital and will increase more revenue. With the current and yet to still come, advancements in technology, the fewer employees the hospital will need to staff. Technology can be both negative and positive for hospitals, negatively, it means the demand for doctors or nurses will decrease. But, positively, it will help bring in more money for the hospital and the owners. Robots are now being used to perform surgeries, and technology can diagnose patients with their medical issues (Bannow, 2018).

Conclusion

There are specific key drivers in a hospital that contribute to the rise of labor costs, such as chronic diseases, the aging population, and shortage of staff members. Knowing and understanding the key drivers of labor cost increases, can help the owners find solutions to decrease the amount. One way to help rectify the increase is to use technology to reduce the number of employees needed per shift (LaPointe, 2018).