The average person likely does not know about the economic underpinnings of a hospital, nor should they. But a hospital’s economic viability has an impact on how that hospital can deliver patient experience. Some might think that, with COVID filling 90+% of all hospital beds, that this must have meant that hospitals were rolling in cash during the pandemic, but that was not the case. Most hospitals—all hospitals that relied on private insurance and governmental Medicaid and Medicare for payment—were underwater for at least a year or two. Operating at a loss, as you can imagine, caused hospitals to focus on things other than “mints on pillows.”1 Even now, a few years later, those deficits linger on a lot of ledgers and still impact decisions hospitals make, especially as it relates to the patient experience.
Before I continue, I want to make two key points here. First of all, this is not an essay on economics of healthcare. I will include some numbers just to provide some context, but I am not best-practice when talking about accounting and I am not interested in talking about hospital balance sheets so much as I am interested in talking about how those balance sheets impact patient experience. Second, the post-COVID picture of hospital financials is not pretty, but this is not an essay about how anyone should feel sorry about them. This is NOT a “poor hospital/poor me” essay. Again, if anyone wants to grab a beer and dissect the good, the bad, and the very ugly of hospital operations, let me know. In this essay, I am simply interested in how these numbers affect a hospital’s ability to direct attention to patient-centered experiences.
I have mentioned this before, but here is a quick peek into the broad strokes of hospital economics. If you don’t care, you can skip this paragraph. If you think I am being deceitful or incomplete, you can call me out in the comments. While there are exceptions on both sides of the curve, generally hospitals operate with a 2% to 3% operating margin. This means that they are bringing in just a bit more money than they spend keeping the doors open. While getting hard numbers for other industries can be difficult, this is conservatively about a third of the margins of other industries and can be as little as a tenth or even less of the margins of some industries.2 As of writing this, the current inflation rate in the US is 3.4%, so a hospital’s margin is currently not generally keeping up with inflation. The fed recently raised the interest rate by 0.25% with perhaps another TWO coming this year. This increases the interest rate on bonds, which in turn raises the cost of managing any debt that the hospitals acquired during the pandemic. So, while the pandemic may be over, its impacts linger in healthcare.
When it came to staffing, COVID acerated a trend that was already in place. The clinical staff is aging, and doctors and nurses were already starting to retire. The stress of managing the increased volume and acuity of patients as well as all the policies and procedures instituted to manage a new virulent infectious disease encouraged others near retirement or with other options to pack it in. This loss of staff exacerbated a staffing challenge.
To understand this, one needs to understand the universe of clinical staffing agencies. I will try to keep this brief since I assume many of you are already familiar with. Setting aside private practice doctors and independent nurses, clinicians are usually either employed by a health system or a staffing agency. Those employed by an agency will be assigned on short-term contracts to various healthcare systems who need staff, either to cover a short-term gap or a chronic gap. A friend of mine is a respiratory therapist who works for an agency, and she has taken contracts in Hawaii, California and Arizona, as well as more magical places, like Wisconsin. If you hear someone called a locum, a traveler, or an agency staff, they are not employed by the hospital but contracted by the hospital to work for them. They get paid and ultimately answer to a 3rd party. The rates hospitals paid to agencies were generally higher than they paid to employed staff, but since this did not require the additional expense of a traditional benefits package and included the ability to cancel or not renew contracts, it did give them some flexibility.
During COVID, this reality created a vicious cycle.
- Hospitals needed nurses to cover retirements and increased acuity, so they contacted agencies.
- Agencies, responding to supply and demand, raised their rates to manage increased demand.
- To satisfy the supply, agencies offered attractive packages to recruit nurses.
- Employed nurses, lured with these attractive pay scales, quit their hospitals and joined the ranks of the agency staff.
- Hospitals needed to replace the staff that just quit.
While the agency market has cooled down a bit since the pandemic subsided, this pattern created an overheated market for staff. Like with most overheated markets this led to sacrifices or allowances in other spaces to balance the ability to support these costs.
I will never say that a clinician will not provide care to the best of their ability, and I would never say that a hospital would allow for substandard care delivery. But I will say that both the staff and the hospital saw these folks as ghosts in the machine, here today and gone tomorrow, so everyone’s focus was on their clinical skills and not their ability to demonstrate compassion and caring. Everyone’s attention was on making sure they knew how the IV pumps or food service process works; everyone gave themselves permission to not stress the education in the organization’s focus on PX initiatives. In other words, if the 5% of their working brain that should be focused on the basics of PX is actually taken up with trying to remember how to document things in the unfamiliar electronic health record, or considering whether to set out for Portland, Poughkeepsie, or Panama City at the end of this contract, it won’t cause negative care outcomes, but it may be enough to cause the patient experience scores to drop from a ‘9’ to an ‘8.’
One must also consider the personality of these folks. I will never begrudge someone for chasing the best economic options for themselves. Those who join the ranks of staffing agencies because of signing bonuses and better hourly rates also accept that there will be times when there are no available assignments or the only assignment is in a town so small that they only have one traffic light and it only blinks red. They often become agency staff because they prefer the larger paycheck instead of 401K contributions, tuition assistance, or other benefits which means that they are younger with fewer roots.
They are likely also less interested in climbing the organizational ladder, so they don’t volunteer to serve on committees where they can make a difference (and a name for themselves) in the organization. Further—and I don’t mean to impugn all agency staff—they may not fit in with the staff longterm, either because they are not interested in establishing friendships or collegial relationships or they struggle with that. There is a reason that this joke will get laughs in a meeting.
Do you know why they are called travelers? Because they all come with baggage.
Now, again, I mean no disrespect when I say that.3 But if they are seen as short-timers and have a reputation for not fitting into the traditional employment routine, it is not surprising that organizations often do not do much to fold them into the standard educational process for things like patient experience. Some hospitals will use agency staff as a soft recruitment for employment, but many hospitals see them simply as a necessary evil and not a long-term staffing solution.
While the doctors and nurses are expected to operate within a hospital’s clinical procedures, there is less effort to get them to diligently use the hospital’s mnemonic device, rounding logs, or tracking software for patient complaints and grievances and this shows in the data. I have identified an statistically significant inverse correlation between the patient experience scores and the percentage of agency staff on an inpatient floor. I also found a statistically significant difference in emergency department PX scores between employed physicians as opposed to locum physicians. Even before COVID, I encouraged organizations to include PX performance as a metric in the contracts they signed with staffing agencies and to this day, most contracts I see do not include any requirement for maintaining PX standards.
Part of this is the organization itself. At the onset of COVID, I worked with organizational education departments about what needed to be in the starter-pack for on-boarding new agency nurses and locum doctors. Every time I would suggest some training on the PX processes, like AIDET, hourly rounding, or bedside shift responsibilities, it was shot down, because the system was not interested in paying the exorbitant agency rates for staff only to have them sit in a room taking education and not practicing medicine.
As the post-COVID market has settled down and as organizations have been reducing agency staff to help balance their unbalanced balance sheets, this tension in on-boarding has eased. It has, though, also created a loophole. Agency staff that were recruited to stay at a hospital after their contract expired often did not get the traditional on-boarding process. This meant that they didn’t get PX training as agency staff and still didn’t get it as they transitioned. Moreover, COVID itself changed how hospitals on-boarded staff. Not only was there a desire to get people up and running as quickly as possible, but social distancing requirements also meant that bringing them all together in an auditorium was replaced with self-learning modules done alone on a computer. So, in many cases, there are far fewer staff members trained on an organization’s PX must-haves than most organizations realize.
This is indicative of a broader lingering problem in healthcare brought on by the pandemic. During the height of COVID, organizations had standing emergency response committees that were fast-tracking policies and procedures to keep up with the quickly changing landscape. Now, five years later, some of those rules that were created in the heat of battle are still on the books and are not being revisited. While some changes may reflect a new universe—we may never go back to big auditorium-style meetings and training sessions—it would still be valuable to evaluate some of these changes and, if not revert back to the old way, at least consider ways to address the gaps that are caused by the new way of doing things.
COVID has changed staffing and on-boarding for both clinical and non-clinical staff and that is not likely to change quickly, if at all. The issue is that patients have largely been in the dark about these economic pressures, so they are not likely to understand the reasons for the changes that they see. Frankly, patients have never understood the business model of a hospital. They don’t understand why they got five different bills from an emergency department visit that morphed into an inpatient visit, or how a ten-minute conversation with a doctor counts as a “consultation.” They assume that everyone they meet is a nurse, including all the lab techs, imaging specialists, and even half of the doctors, so they certainly won’t be able to tell the difference between employed and agency staff. If hospitals don’t take care to make sure all of these people wearing the hospital’s logo on their name-badge are delivering the same excellent experience, they shouldn’t be surprised if the patient holds the system accountable for the actions from a 3rd party vendor.
1Attentive readers know that this description of PX is meant as sarcasm.
2Again, I am not interested in wading into the swamp of gross margin and net margin and all the ways to massaging balance sheets. I am simply making the point that for a host of reasons, hospitals operate with less room for economic error than any other industry.
3Really, Joe, it seems like you are. I really am not trying to be disrespectful. I am, though, considering my mother’s admonition that if you pick up one end of the stick, you pick up the other. There are costs in perception that you must accept along with the benefits of working for an agency.
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