The Hidden Cost of Understaffing in Healthcare

When the phrase “the new normal” gained popularity at the start of the coronavirus pandemic, healthcare organizations clung to the hope it didn’t apply to the accelerating staffing shortage. 

Unfortunately, staffing headaches have persisted with a troublesome addition – inflation. This one-two punch impacts healthcare organizations on every level, from operating costs to quality of care.

Cost of unfilled healthcare roles 

According to McKinsey, “US national health expenditure is likely to be $370B higher by 2027 due to inflation…the worsening clinical labor shortage is a significant contributor to our projected increase in healthcare costs over the next five years. By 2025, we expect a gap of 200,000 to 450,000 registered nurses and 50,000 to 80,000 doctors.”

The cost of leaving healthcare positions unfilled can add up quickly. One unfilled healthcare job can cost a healthcare facility an average of $7,700, according to a report by Randstad US. Additionally, facilities can expect to lose more than $14,000 if a position stays vacant for three months or longer.

Nationally, healthcare jobs stay vacant for around 50 days, but that number can vary significantly by role. For example, hospitals in the United States currently need an average of 86 days to recruit a registered nurse (RN), according to the 2024 NSI National Health Care Retention and RN Staffing Report. That number climbs to 126 when recruiting physicians, according to a 2021 benchmarking survey from the Association for Advancing Physician & Provider Recruitment.

Healthcare facilities are grappling with these costly vacancies on a regular basis. As of 2024, the national hospital turnover rate remains above 20%. It is crucial for facilities to find ways to fill empty roles faster in order to reduce the negative impacts of an understaffed workforce.

Cost of physician vacancies

When roles remain unfilled, there are many costs associated with finding and attracting talent – including running ads, conducting interviews, and screening candidates.

These direct costs, while impactful, aren’t even the biggest costs healthcare organizations must worry about. Indirect understaffing costs related to billing, reimbursement, and patient satisfaction pack an even bigger punch.

An unstaffed position is an unbillable position. If it’s unbillable, that means it’s non-reimbursable. That’s a problem that matters more for some healthcare facilities than others.

Community hospitals, for example, tend to carry less commercial plan coverage than private hospitals. While Medicare and Medicaid typically round out the rest, for both.

Coverage type matters because hospitals have the best chance of breaking even with Medicare-related billing, while billing towards Medicaid will likely result in a loss. This leaves commercial plans to do the heavy reimbursement lifting. And, in many cases, they do.

Reimbursement rates at these levels can have a serious positive impact on balance sheets. This only happens, however, if hospitals are able to bill for procedures within these specialties in the first place

Understaffing across many of the most billable specialties is already a top concern. In coming years, physician aging and retirement will exacerbate the issue. This can leave healthcare organizations losing out on potential revenue. 

“The projected supply of physicians across seven internal medicine subspecialties is expected to be inadequate to meet 2025 demand. Specifically, projections show deficits for cardiologists (7,080 FTEs), gastroenterologists (1,630 FTEs) and hematologists/oncologists (1,400 FTEs),” according to the Bureau of Health Workforce.

Cost of nurse vacancies

When people think about the consequences of not having enough RNs on staff, the first things that come to mind are decreased quality of patient care, increased risk of errors and higher burnout among the nursing staff that remains. While these are indeed critical issues, there are also several hidden costs to nurse understaffing that healthcare organizations must consider.

Hospital leaders can no longer overlook the negative financial and operational impacts of the ongoing nursing shortage. Financial impacts of the nursing shortage come from several different sources, including overtime pay, agency staffing costs, turnover and medical errors.

When there aren’t enough RNs, the existing staff often has to work longer hours. This leads to a surge in overtime pay. Once existing staff can no longer keep up with demand – despite overtime – bringing in domestic agency nurses to fill gaps can also prove costly. 

When existing nurses are stretched too thin, turnover also becomes a more serious issue. The burnout from chronic understaffing leads to nurses leaving their jobs.The average cost of turnover for a staff RN is currently $56,300, a 7.5% year-over-year increase. 

While more difficult to quantify, the financial burden of medical errors that occur due to understaffing – in terms of extended patient stays, additional treatments, and potential lawsuits – is also substantial. Just because there is not a specific number related to this loss does not mean hospitals can afford to overlook it.

Understaffing and HCAHPS scores

Patients are consumers, and they hold more power than ever before.

Service and experience dictate where they are willing to spend their dollars. They can choose where to receive care  – and their opinion directly impacts each hospital’s bottom line. 

Regardless of what is happening with internal staffing issues, hospitals must still provide quality care and an exceptional patient experience. First and foremost, to support the best interests of each patient. But, also, because HCAHPS scores depend on it.

“HCAHPS is a survey instrument and data collection methodology for measuring patients’ perceptions of their hospital experience,” according to the Centers for Medicare and Medicaid Services.

Perceptions is the key word here. It’s these perceptions that influence whether HCAHPS scores will contribute to a lack of Medicare reimbursement.

Understaffing at all levels – assistants, nurses, physicians and surgeons – negatively impacts a hospital’s ability to care for their patients. Vital surgeries may get postponed or canceled. ER wait times may skyrocket. In-patient bedside care may suffer. Overworked physicians and nurses may become short-tempered.

HCAHPS scores will reflect it all. 

Low HCAHPS affect more than just Medicare reimbursement. The public nature of these scores means that a hospital’s reputation can be damaged by poor scores, making it harder to attract nursing talent and creating a vicious cycle.

Multiple paths to understaffing relief

While the initial reaction to a staffing shortage may be to “make do with what we have,” the hidden costs of understaffing are too great to ignore. Investing in adequate staffing levels is essential for the financial health, operational  success, and long-term viability of any healthcare organization.

Healthcare facilities can utilize a mixture of international nurses, long-term care nurses and locum tenens staffing to fill harmful staffing gaps. Each organization has unique needs, and their staffing choices should reflect that.

International nurses offer a plethora of benefits for hospitals. The National Institutes of Health (NIH) has found that these nurses tend to be highly educated, experienced in patient care and motivated to become full-time employees. These characteristics make international nurses great candidates for hospitals looking to fill nursing gaps with quality professionals while simultaneously creating a pathway to long-term employment. 

Facilities with skilled nursing and assisted living staffing shortages should consider bringing in long-term care specialists to cover gaps. These nurses can be contracted for various timeframes, meaning they can provide coverage on either a short-term or long-term basis.

Locums tenens is another option to sustain quality care and strategically fill talent gaps until permanent placements are found. 

While most healthcare organizations prefer to staff open roles with full-time employees in order to save money and build more cohesive teams, high-quality locum tenens providers are still a great option for hospitals that need to fill roles fast. Compared to the cost of understaffing, using locums providers is a financially sound option that provides immediate relief for short-staffed roles, teams, and divisions. 

When used thoughtfully, each of these options can become a strategic workforce component and sustainable revenue driver for healthcare facilities facing a tough staffing environment.

Continue the conversation with Elite365

We’ve worked in the industry for decades. Our depth of experience means we understand the challenges healthcare facilities face. 

We offer a wide range of staffing solutions to meet your organization’s unique needs. We can help maximize billing, find the right provider for each role, and ensure quality care remains the priority number one.

Understaffing challenges – and their related costs – show no signs of slowing down. Why wait to get them under control? Connect with us to get started on a more profitable workforce road.