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Why health systems are buying into schools to offset their labor shortage

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Some health care systems are using acquisitions to install their own talent pipelines in response to a shortage of skilled labor.

In March, HCA Healthcare Inc., the large, publicly traded national hospital system, acquired a majority stake in Galen College of Nursing, a for-profit nursing school. In April, another large health system, non-profit Atrium Health, announced it was merging with Wake Forest Baptist Health and Wake Forest University, which includes a well-respected medical school. These recent tie-ups may signal the beginning of a trend within the health-care ecosystem: to remain competitive, health systems must to boost their access to skilled labor by owning a piece of the talent pipeline or building programs that get them closer to it.

Health systems have completed acquisitions of academic medical centers in the past, with varying degrees of success. Banner Health acquired University of Arizona Health Network in 2015. Atrium tried unsuccessfully to merge with UNC Health Care in a transaction that was expected to close in 2017. What makes the latest deals unique is that they give the health systems direct relationships to the schools that are training doctors, nurses, technicians, administrators and other skilled labor.

Undeniably, skilled labor remains an important component in the current health care system business model. And it is getting scarcer to find. Consistently we see data from the federal jobs report that suggests the supply of skilled medical workers is being outpaced by demand; doctors and nurses, particularly, are highly sought.

 

health care jobs chart

Staying competitive

What can health systems do in response? One option is to deploy technology to augment the existing labor force, providing platforms for employees to become more efficient. Technology solutions to promote efficiency range from the automation of routine administrative functions to more futuristic concepts such as virtual health care in the form of telemedicine. Existing regulations, however, make some technology slow to gain traction; telemedicine, for one, has challenges related to reimbursement.

Given that medical practitioners are not going to be replaced by technology any time soon, a second, and complementary option, is to build stronger relationships to the talent pipeline through alliances such those underscored by the recent mergers. Together, these strategies can enhance the health care systems business model.

Here are some tips for how midsize health care systems can strengthen their flanks on technology and skilled labor.:

Technology:

  • Continue to determine how to advance your reach in virtual health care delivery by developing relationships with technology companies that provide the infrastructure for this type of care. This should go beyond just simply providing a digital front door to your health system.
  • Evaluate the use of automation in work flow of all of your skilled labor. We continue to see excitement around robotic process automation, especially in back office functions. RPA can also be used in other areas, especially if paired with a digital platform for patient experience to continue to increase the efficiency of your processes.

Talent Pipeline:

  • If you’re a health care system smaller then Atrium and HCA, building a pipeline to a large university may not be in your wheelhouse. Look instead to community colleges and state universities in your service area. Instead of acquisitions, consider developing paid learning programs such as internships, externships and scholarship programs with work requirements.

At the end of the day, the health care provider business model is being challenged. While the future of health care delivery could eventually curb the demand for skilled labor, it is uncertain when, or if, that will happen.  In the meantime, maintaining access to qualified labor will be critical to remain competitive.

 

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About Rick Kes

@HealthCare_CPA

Rick has over a decade of experience providing audit and consultative services predominately to organizations in the health care industry. He has served a wide variety services for organizations ranging from large organizations with more than $12 billion in annual revenue to small, standalone entities with less than $1 million in annual revenue. Rick has served clients across the health care continuum including integrated health systems, physician groups, safety-net hospitals, health insurance clients, and other various health care related entities. Rick has experience in governmental, not for profit, and statutory accounting standards.

Rick has played a role on several due diligence engagements as a dedicated health care professional resource. In 2018, he was selected as a senior analyst in RSM’s cutting edge Industry Eminence Program, which positions its senior analysts to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. These senior analysts advise clients on conditions impacting middle market leaders.

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