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Harvard Business Review Reveals Inefficiency in Healthcare Labor is Killing Independent Practices

In the past decade, healthcare costs have skyrocketed. According to a study in Health Affairs, national health spending is currently projected to grow at an average annual rate of 5.4% from 2019 to 2028, reaching $6.2 trillion.1 These rising healthcare costs are due to a staggering increase in healthcare labor. Here is the problem—most of the increase in healthcare workers are non-doctor employees. There is a ballooning ratio of clinical to administrative staff in healthcare today, and it is causing independent practices to bleed revenue. The only solution to this problem is to improve productivity of administrative healthcare workers.
The 10:1 Ratio Problem
Harvard Business Review shared an article explaining the imbalance in healthcare systems.2
"The number of workers in the U.S. health system grew by nearly 75%. Nearly 95% of this growth was in non-doctor workers, and the ratio of doctors to non-doctor workers shifted from 1:14 to 1:16. On the basis of BLS median wages, this equates to $823,000 of labor cost per doctor."
Harvard Business Review
The article explains that 10 of the 16 non-doctor workers are purely administrative. There are many factors that led us to this environment in healthcare today. Some examples are:
  • Government regulations
  • HIPAA requirements
  • Meaningful Use regulation
  • Increase in technology
  • Complex payor requirements
The list could go on and on. The bottom line is that the business of healthcare has grown in complexity over the years. Most practices have thrown people at this problem. That works for a time, but you can only throw people at a problem for so long before you run out of resources. Independent practices are the most at risk. If they want to remain independent, they need to find new strategies to combat the problem.
Rising Costs With Less Resources
"It is concerning that the conversion factor has remained relatively flat for more than two decades, despite general inflation of more than 50 percent during the same period."
American College of Surgeons
Independent practices are stuck between rising healthcare costs and low reimbursement rates. An article by the American College of Surgeons reveals the deeper problem with flat reimbursement rates.3 The problem is worse than it seems at first glance. Between rising costs and low reimbursement rates, practices are being asked to do more with less.
"83% of practice leaders are being pressured to do more work with less resources in their revenue cycle."
White Plume Technologies, Webinar Survey Data
A Productivity Problem
People who are busy working in the problem are unable to lift their head long enough to work on the problem. There is a productivity problem in the administrative side of healthcare, particularly in the revenue cycle. Instead of hiring more people, independent practices (and larger health systems for that matter) need to leverage their existing staff. If administrative staff members become more efficient, practices will not need to hire more staff to handle the administrative work that continues to pile up.
The problem of rising administrative staff will continue until practices stop long enough to improve the efficiencies and productivity of their existing staff.
"Labor productivity has historically worsened at a rate of 0.6% per year."
Harvard Business Review
"85% of healthcare leaders plan to hire new revenue cycle employees in the next 12 months."
White Plume Technologies, Webinar Survey Data
A Long-Term Solution
For practices who are ready to fight back against the current of rising healthcare costs, we have a solution. We call it our White Glove solution. We can help improve the productivity of your revenue cycle staff by 5x or more. This type of productivity gain leads to over $100k annually in net revenue savings. If you want to learn more, contact us today for a free consultation.
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1 Keehan, Sean P., Gigi Cuckler, John Poisal, Andrea Sisko, Sheila Smith, Andrew Madison, Kathryn Rennie, Jacqueline Fiore, and James Hardesty. “National Health Expenditure Projections, 2019–28: Expected Rebound In Prices Drives Rising Spending Growth: Health Affairs Journal.” Health Affairs, March 24, 2020. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.00094?journalCode=hlthaff.
2 Kocher, Robert. “The Downside of Health Care Job Growth.” Harvard Business Review, September 23, 2013. https://hbr.org/2013/09/the-downside-of-health-care-job-growth.
3 Coffron, Matthew, and Carrie Zlatos. “Medicare Physician Payment on the Decline: It's Not Your Imagination.” Bulliten of The American College of Surgeons, September 1, 2019. https://bulletin.facs.org/2019/09/medicare-physician-payment-on-the-decline-its-not-your-imagination/.