Labor

Heightened labor costs are still hitting health systems’ bottom lines, even as their finances have held relatively stable over the past year, according to two reports by consultancy Kaufman Hall. 

Pricey contract labor costs have decreased, but the rest of the labor market is still tight, the consultancy said.

Medical groups’ median investment per employed physician reached $304,312 in Q3 2024, the first time the metric has risen above $300,000. The increase suggests current models of physician employment aren’t sustainable, Matthew Bates, managing director and physician enterprise service line leader at Kaufman Hall, said in a statement.

High labor costs aren’t a new problem for hospitals and medical groups. Labor expenses rose due to temporary hires and staffing shortages during the pandemic, hitting health systems particularly hard in 2022 and dragging down margins.

But the industry’s financial outlook began to improve in 2023, and hospital performance has recovered even more in 2024, according to Kaufman Hall’s Hospital Flash Report. 

Still, the sector is lagging behind financial targets from before the pandemic. Meanwhile, hospitals are now reporting increased inpatient revenue and average lengths of stay, suggesting they’re treating sicker patients.

“If this continues, organizations will need to contain expenses,” Erik Swanson, senior vice president and data and analytics group leader at Kaufman Hall, said in a statement.

Overall, hospitals’ operating margin index was 4.3% for the calendar year to date, a slight decline from previous months this year, which have hovered closer to 5%. 

Among medical groups, labor expenses have remained elevated, according to Kaufman Hall’s Physician Flash Report. The total direct expense per full-time provider increased 5% compared with the third quarter in 2023. Physician productivity also rose 6% year over year. 

As expenses rise, healthcare organizations should consider changing their physician employment models — like rewarding efficiency or using more advanced practice providers. according to the consultancy.

“Revenue is increasing but physicians and providers are working more while generating less revenue,” Bates said in a statement. “Health systems need to rethink operations to align the costs of provider employment with the current health care environment.” 

An aging population with heightened care needs and lagging labor trends will create a shortage of over 100,000 critical healthcare workers around the close of the decade, according to a recent study from consultancy Mercer.

Certain states and specialties will weather most of the burden, according to the report. Mercer projects a deficit of 73,000 nursing assistants by 2028 as the field grows by just 0.1% per year.

New York, New Jersey and Tennessee are likely to experience the largest labor shortages across all roles by the same year. Meanwhile California, Pennsylvania and Texas are projected to have a surplus of healthcare workers.

Mercer projects a total supply of 18.6 million healthcare workers in 2028 — and a shortage of over 100,000 to address national health needs. Still, some specialties and geographies are expected to have a surplus of workers.

The nation’s physician and registered nurse populations, for example, are expected to grow modestly over the next four years. Both fields are projected to have a surplus of workers nationwide by 2028, with registered nurses anticipated to have a surplus of about 30,000 by 2028.

However, even in growing fields, workers may be scarce in certain geographies. Mercer predicts California, Texas and New York will face deficits of physicians. Pennsylvania, Indiana and Minnesota will have a surplus. Registered nurses will be most scarce in New York, Tennessee and Massachusetts, according to the report.

Some shortages — such as the shortage of nursing assistants — are in part due to some professions growing at more sluggish rates than others.

Nurse practitioners are expected to grow at the fastest annual rate among the occupations reviewed by Mercer, while nursing assistants will grow the slowest. 

While the projected shortage is an area for employers to watch — and consider when developing compensation strategy and technology to support smaller teams — the shortage does not compare to the spike in attrition seen during the COVID-19 pandemic, according to the report.

Healthcare workers reported high rates of burnout following the onset of the COVID-19 pandemic due to increased uncertainty, a rise in workplace violence and increased staffing pressures. Burnout contributed to elevated rates of attrition industry-wide. 

Mercer notes that the field lost 100,000 workers between 2020 and 2022 alone.

To prevent a similar exodus now, employers should manage employee burnout early on to prevent an “endless spiral of attrition” related to burnout, the authors concluded.

“Given that attrition is often driven by burnout, healthcare systems need to ensure the well-being of existing employees. This can be done by fine-tuning the employee value proposition with respect to pay and benefits, schedule flexibility, career growth opportunities and job satisfaction,” according to the report.

Mercer said employers in hot markets might adjust their compensation strategies to help them recruit talent from less constrained regions — an option that wasn’t available during the pandemic, when shortages were far-reaching.

“Healthcare organizations may need to pivot recruitment beyond typical boundaries to meet talent where it is,” the report notes. “Whereas some states and metropolitan areas will have significant labor shortages, others will have surpluses, and it will be critical to know where those surpluses are.”

Mercer predicts that employee pressure on compensation will continue if talent shortages intensify.

Healthcare workers have already campaigned for increased wages and benefits through union organization and strikes. In 2023, the industry witnessed its largest strike in decades when over 85,000 Kaiser Permanente workers walked off the job in order to achieve a 21% raise over four years.

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By Vituity

By: Thomas Sugarman, MD and Hartwell Lin, MD

As COVID-19 surged through New York City this spring, local hospitals increased their ICU capacity by 500%. But despite this feat, they still hit a wall.

They didn’t have enough critical care physicians to staff those beds.

The takeaway: when it comes to pandemic preparedness, your clinical staffing plan is every bit as important as your facilities plan. You not only need more beds and providers; you also need the right expertise — plus systems to support and manage it.

As emergency physicians, we learned this firsthand while providing critical care relief in New York.

In April, California Gov. Gavin Newsom’s office asked our physician group, Vituity, to provide clinical support to New York City Health and Hospitals. In addition, we were charged with helping develop policy recommendations to prepare California for future COVID-19 surges.

When we arrived at our assigned hospitals, we were moved by the resilience of the New York City providers, who had been working tirelessly for weeks. At the same time, the process of integrating relief physicians with diverse backgrounds into clinical care proved complicated – especially as knowledge of COVID-19 changed daily.

Many local physicians assigned to the COVID-19 unit had minimal experience managing ICU patients. (Imagine a psychiatrist or pediatrician who hasn’t changed a central line since medical school.) As emergency physicians, we were comfortable with critical care procedures and resuscitation but were less experienced with ongoing management. We therefore depended on local physicians for both clinical direction and practical help navigating our new hospitals.

Fortunately, the strong climate of teamwork meant no provider was left behind. In addition, we were supported by Vituity critical care partners, who were available to advise and consult with front-line volunteers.

So how can health systems plan now to staff a potential surge? Here are our recommendations.

1. Adapt Your Clinical Command Structure

Because the New York City hospitals had far too many ventilated patients for the available pulmonology/critical care physicians to manage, they implemented an effective pyramid model.

• Native intensivists and pulmonologists (1-2 per hospital) served as both clinical experts and incident commanders who coordinated needed resources with hospital administration.
• Each COVID-19 unit was managed by intensivist fellows or physicians with critical care experience. Emergency physicians sometimes filled this role when needed.
• Finally, teams of clinicians consisting of an attending, resident, and intern from various specialties managed direct patient care. Physician assistants provided additional bandwidth, sometimes replacing interns and performing many procedures.  
• Additionally, dedicated clinical teams covered night shifts, and specialist teams were available for renal, infectious disease, cardiology and related consults.   

Relief clinicians were plugged into the pyramid based on expertise. Each team included local physicians familiar with the hospital.

2. Build Your Team in Advance

While the exact composition of your clinical pyramid will be situation-dependent, it’s never too early to start identifying key leaders. Imagine your hospital sees a three-to-ten-fold increase in critical patients. What roles you can fill from within your health system? If you notice gaps, start reaching out now to potential clinical partners.

Consider how you will integrate visiting doctors, including those working outside of their specialties. It’s vitally important that your local clinical leaders connect with incoming relief physicians to ensure they understand their responsibilities and points of contact.

Also consider logistics. When possible, centralize or outsource credentialing, travel, scheduling, training, orientation and related tasks to free up bandwidth for your front-line clinicians. It’s usually easiest to work with one or two organizations that can supply the specialists you need. Some physician groups also have the infrastructure to assist with the logistics.

3. Connect Daily with the Front Line

Finally, as a healthcare leader, stay engaged with your clinical teams. While centralized support is essential, rapidly shifting knowledge of COVID-19 requires agile decision-making that is best left to front-line providers.

Perhaps the best way to harmonize executive and clinical agendas is through daily outreach. Identify pain points and help to create solutions. Giving your teams just 10 to 15 minutes of undivided attention sends a message of support and solidarity.

In Summary

Adding beds may be the easiest part of preparing for a COVID-19 surge. Don’t forget to give equal attention to clinical capacity, including onboarding, scheduling, and providing practical and moral support to your expanded teams. Ensure that leadership stays visible and keeps communication lines open. Having a well-prepared surge plan along with leadership support will go a long way toward improving patient outcomes and boosting provider morale.

Read more insights from the New York City delegation.

Thomas Sugarman, MD, helped coordinate and deployed to New York City with the Vituity delegation. He is a practicing emergency physician and assistant medical director.

Hartwell Lin, MD, led the Vituity delegation of more than 50 clinicians to New York City. He is a practicing emergency physician, regional director, and elected member of the Vituity Board of Directors.

James Phillips was working as an emergency physician at Beth Israel Deaconess Medical Center in Boston in 2015 when a man walked into Brigham and Women’s Hospital across the street and shot and killed cardiovascular surgeon Michael Davidson.

Though Phillips was physically unharmed, the shooting served as a reminder of the several times he had been assaulted on the job.

There was one time when a patient spat blood, contaminated with hepatitis C, on him. And another when a patient threw an iPhone at his face.

“It started me on this pathway of looking back on my own early career and realizing that I’ve been the victim of violence several times,” recalled Phillips, now the chief of disaster medicine for the American College of Emergency Physicians, or ACEP, and chief of disaster and operational medicine at George Washington University.

Since the Boston shooting, attacks against healthcare workers have continued to rise.

Healthcare workers were five times more likely than those in other industries to be physically attacked while at work in 2018, according to the Bureau of Labor Statistics.

Some providers say the COVID-19 pandemic made violence worse.

In early 2023, the Massachusetts Health and Hospital Association issued a report and “call to action” on workplace violence at healthcare facilities in the state, based on an ongoing monthly survey of member hospitals. The organization saw an uptick in violence as the pandemic waned and hospital patient volume surged – a violent incident was reported every 38 minutes in 2022, up from every 57 minutes in 2020.

The American Hospital Association said healthcare workers experienced a “sharp increase” in violence after the pandemic, making it “more difficult for clinical staff to provide quality patient care.”

Phillips and ACEP now study violence against physicians. In ACEP’s annual membership poll this year, 91% of respondents said they or a colleague had been threatened or attacked in the previous year.

The data makes healthcare the “most violent non-law enforcement industry in America,” Phillips said.

Hospital groups, providers focus on guidelines

Healthcare workers are in a unique position because, particularly in emergency medicine, they have an obligation to treat people who might potentially put them in danger.

“I think it would be helpful to have some medical-legal guidelines that that allow us to know what our rights are once we’ve been attacked in the emergency department in terms of actions that can be taken against that person,” Phillips said. For example, would clinicians be held liable for abandoning the patient if they refuse to treat someone who is belligerent?

Seeking answers, physician and hospital organizations have created guidelines for preventing and managing violent interactions.

Other groups, like the MHA, have adopted codes of conduct for violence prevention.

MHA’s document calls for specialized training when appropriate — particularly for psychiatric and dementia patients — and post-incident debriefings by management, according to Patricia Noga, MHA’s vice president of clinical affairs.

“It was a template for, and guidelines for hospitals then to take and develop their own,” Noga explained.

In addition to the guidelines, hospitals should consider architectural redesigns, like rethinking the proximity of providers to room exits, and having at-risk staff wear duress alarms, Noga said.

Other strategies hospitals should consider include beefing up security, hardening entrances, providing escorts through the building or parking areas and adopting surveillance technology. However, there’s no good data on which strategies work better than others, she said.

A few states, notably California, have enacted policies requiring healthcare organizations to take concrete steps toward improving worker safety.

Provider groups have lobbied for federal legislation. One bill, introduced in April 2023, would have given healthcare workers the similar legal protections as commercial pilots and flight attendants. However, the legislation appears to have stalled after being referred to the House Judiciary Committee and again in the Senate Committee on the Judiciary.

Providers pivot to high-tech surveillance

Among the increasing violence, artificial intelligence companies have billed themselves as a new avenue for detecting violent actors.

One company called ZeroEyes, a Pennsylvania-based developer of “computer vision” software to detect brandished guns from images captured by security cameras, is seeing growth in the healthcare industry, according to Jonathan Norton, the firm’s vice president of commercial sales.

ZeroEyes taps into existing camera installations and, backed by an operations center staffed around the clock, determines if images flagged by the AI system are real threats. If appropriate, the company said it alerts clients and local police of potential danger in three to five seconds, then provides near-real-time updates on the potential assailant’s location and travel path.

Lane Dermatology, a four-physician group in Columbus, Georgia, signed on as a ZeroEyes customer this year. Though the independent practice has not experienced violence, founder Joshua Lane has been adjacent to it over the years, and said he would rather be prepared if it does ever happen.

Three people, including a nurse, were killed in 2008 at a hospital where Lane performs surgeries. In 2019, a gunman entered the clinic of a dermatology colleague of Lane’s in Gainesville, Georgia. Police shot and killed the suspect after a nurse was able to escape to a safe spot to call 911.

Lane, an Air Force flight surgeon with degrees in counterterrorism and homeland security who served in law enforcement for 15 years, presented at a national medical meeting this year on active shooters in healthcare settings.

Although his practice already had protocols for active shooters, he started looking into early-warning technology after the conference.

“Decrease the [response] time,” Lane advised. “The more that shooter is in your office, the more things can happen.”

In his lecture, Lane recommended keeping plans basic.

“The main thing is just to have a system and be aware of it. You don’t have to have an exact plan, but just know what to do if it happens,” he advised. “Have a panic button, have doors you can lock. Know your local sheriff and police department, talk to them.”

Nearly one-third of nurses experiencing symptoms of burnout in 2023 said their electronic health records were a contributor, according to a report by healthcare IT research firm Klas.

Of those nurses, 40% said they were likely to leave their organization within the next two years. 

Many nurses don’t think they have a say in governance over the EHR at their organizations. Sixty-five percent of survey respondents didn’t agree that they have a voice in EHR changes, while 39% said they don’t feel they can ask for fixes.

One long-term frustration for clinicians is the amount of time and effort it takes to document care or perform other administrative work in EHRs, which can contribute to burnout.

Thirty-three percent of nurses reported symptoms of burnout in the Klas survey, which included feedback from roughly 75,000 respondents. 

For example, nurses argue they face technological challenges, like slow loading times or unplanned system downtime. Forty percent of nurses reported their EHR doesn’t have the expected response time, while nearly a quarter said the record isn’t reliable. 

Stress and burnout among nurses is a significant challenge for the healthcare workforce. Some research has found a large chunk of nurses are considering changing jobs or leaving the profession entirely due to burnout — a major problem for health systems who are still recovering from the workforce shortages and heightened labor costs they faced during the COVID-19 pandemic. 

Even though nurse satisfaction with their health records has increased over the past three years, they still report insufficient training and system reliability problems that could contribute to burnout, according to the Klas report.

Training is also key to nurse satisfaction with their EHRs, but many nurses say their education was lacking —  nearly 40% reported their ongoing EHR education wasn’t sufficient, according to Klas. Forty-two percent of respondents reported their initial training wasn’t up to snuff, while 32% said it wasn’t specific to their workflow.

Improvements and upgrades aren’t always helpful to nurses either, according to the survey. Sixty-seven percent of respondents didn’t agree that upgrades improved the EHR. More than 70% said EHR optimizations weren’t delivered quickly enough, and 60% felt fixes weren’t timely. Half said changes to the EHR weren’t well communicated to them.

Fewer physicians are considering leaving the profession in 2025 than in 2024, according to a survey from the Harris Poll and electronic health record provider Athenahealth.

Part of physicians’ improved job satisfaction was driven by increased adoption of artificial intelligence, the researchers said. Fewer physicians reported the technology was over-hyped in 2025, and they saw the most promise in transcription services and capabilities.

Still, physicians shared concerns about the fate of the industry long-term and only 3 in 10 physicians were optimistic about the direction of U.S. healthcare generally. Respondents were most concerned about interoperability challenges, their organization’s financial health and meeting regulatory requirements.

Athenahealth, an electronic health record vendor that sells patient engagement tools and healthcare AI products, and the Harris Poll surveyed more than 1,000 primary care and specialist physicians nationwide in January to understand physician attitudes about the state of their profession and the adoption of emergent technologies.

The team reported a decrease in physician burnout rates and intentions to quit in 2025 relative to 2024 — a welcome finding after multiple years of high physician turnover following the COVID-19 pandemic.

In a blog post accompanying the survey, the team said technology improvements, especially the use of AI to address administrative burdens, was a “main driver” of physicians’ changing sentiments.

“For years EHRs were cited as one of the major contributors to physician burnout, so it stands to reason that as the technology improves, we’ll hopefully start to see sentiments improve as well,” the team said in the blog.

While previous independent research has linked frustrations with EHRs to turnover, those studies have cautioned against attributing discontent to a single factor. Researchers note burnout is complex and can stem from frustrations with pay, difficult patients, volume and intensity of work, and advancement opportunities.

In Athenahealth’s survey, 3 in 10 physicians said AI has the potential to reduce burnout. The same number reported they are currently using AI in their practice, while the majority have yet to adopt the technology. This year was the first time researchers queried physicians about their AI use, so a spokesperson couldn’t comment on whether AI adoption had ramped up among physicians.

The survey did find an increase in “resources and tools” available to physicians in 2025 relative to 2023. Physicians also reported spending more time with patients relative to 2023, which could partially explain the shift in burnout and quit intentions, according to the survey.

Fifty-one percent of physicians report having adequate time with patients, up from 43% in 2023. While 35% of respondents said patient volumes and costs negatively impact their ability to provide quality care at least once a week, that’s down from the 50% of respondents who said volumes and costs impacted care at least once a week in 2023.

Still, physicians report more optimism about potential use cases of AI. They said the greatest possible benefits to using AI in healthcare will be improved clinical documentation and transcription services, identifying patterns in patient data and reduced administrative burdens. 

However, there is a gender gap forming between male and female physicians in how comfortable they feel using the technology to treat patients. 

While 66% of male physicians would use AI for diagnosis support and 54% would use the technology for treatment planning, only 46% of female physicians would leverage the technology for diagnostics and just 36% would use it for treatment planning.

Across genders, physicians said their top concerns with using AI include the loss of a human touch in healthcare, an overreliance on the tools to diagnose patients and improper diagnoses.

Mass General Brigham will lay off hundreds of non-clinical employees, a spokesperson confirmed to Healthcare Dive in February 2025. The health system said it is making the cuts — which are the largest in the health system’s history — to stem a projected financial shortfall of $250 million over the next two years.

The academic medical system has improved its operating margin in recent years and reported a $2 billion net margin in the year ended Sept. 30, 2024. However, investments drove most of the system’s gains in profitability in 2024, and a spokesperson said the health system is battling sector-wide headwinds. “We are acting now to allow us to continue with planned and future investments,” they said.

Anticipated cuts to federal research funding and threats to the Medicaid program could have motivated MGB to act now, said Paul Hattis, senior fellow at the Lown Institute. “The rich ... tend to stay rich by managing carefully,” he said.

Mass General Brigham is the largest private employer in Massachusetts, with a workforce of more than 82,000. The health system, which is generally considered one of the most financially stable in the state by credit ratings agencies and state regulators, is mostly known for its two flagship hospitals: Massachusetts General and Brigham and Women’s.

The hospitals have operated almost entirely independently from one another for much of the system’s 30-year history. However, MGB laid out plans in March 2024 to integrate the hospitals’ clinical and academic teams over several years, citing an opportunity to create efficiencies.

That restructuring could have shed light on role redundancies organization-wide, Hattis said.

The health system has previously been accused of having a bloated management team, he said. MGB executives nodded to this theory in interviews with the Boston Globe, which first reported the layoffs. MGB said studies have shown the health system has more managers per front-line worker than its peers, multiple layers of management and some redundant roles.

The system has also repeatedly warned about the impact of rising expenses and an “unrelenting capacity crisis” on the system’s bottom line. MGB said overcrowded emergency departments and resulting backlogs processing patients through the system were hurting the system’s ability to accept patient transfers and grow its revenue.

“Our response has included an intense focus on cost management while pursuing new sources of revenue, but ongoing headwinds continue to temper the pace of our progress,” Niyum Gandhi, CFO and treasurer of Mass General Brigham, said in December 2024.

Mass General Brigham declined to provide specifics about which roles will be impacted in this round of layoffs. However, the health system said the cuts were unrelated to its former performance improvement plan with Massachusetts regulators. The Health Policy Commission said in December 2024 that the performance plan was successful in helping MGB reach its target of $176.7 million in savings.

Still, the decision to cut jobs now may be motivated by more immediate cost pressures, according to Hattis, who has previously served on the Massachusetts Health Policy Commission and has worked with numerous Massachusetts health systems, including MGB.

Last week, the Trump administration announced plans to cap federal research funding from the National Institutes of Health as part of an ongoing push to reduce federal spending. The policy would slash the rate for reimbursing hospitals for indirect research costs from about 27% to 15%.

Although a federal court temporarily blocked the policy from taking effect, members of Massachusetts’ congressional delegation have sounded the alarm about the possible impact on state academic medical centers.

“Scientific overhead is well more than 15% of the cost of the experiments themselves: facilities, IT, and support personnel are essential elements of cutting-edge research,” said Rep. Jake Auchincloss, D-Mass., in a LinkedIn post. The congressman warned the funding cuts could cost Massachusetts universities and hospitals approximately $2 billion.

In 2024, Mass General Brigham recorded $2.9 billion in research and academic revenue, a 7% increase compared to the year prior. Should the proposed NIH rate cuts ultimately hold up in court, Hattis said the system could lose access to a “significantly huge chunk of dollars.”

There are also worries that Congress could take aim at Medicaid, the public insurance program for low-income Americans, in a bid to cut costs. Regulators could attempt to cap the rate states are reimbursed for services or place restrictions on who qualifies for the program, such as work requirements. 

Taken together, Hattis said the flurry of activity likely contributed to the timing of MGB’s layoff announcement. However, he stressed that reducing headcount was likely an idea in the works for a while.

“This wasn’t something that that was cooked up over the weekend,” he said.

Meanwhile, healthcare layoffs are on the rise industry wide. Outplacement services firm Challenger, Gray & Christmas tracks layoffs and found healthcare cuts peaked in 2023 but remained elevated in 2024. For example, Massachusetts-based Tufts Medicine cut approximately 170 roles in May 2024, Kaiser Permanente slashed more than 450 roles over 2024 and Jefferson Health cut 270 positions in January 2025.

The high rate of layoffs is a bit unusual, according to Andy Challenger, senior vice president of Challenger, Gray & Christmas. The consultant said workforce reductions are usually a lagging indicator of economic pressures; however, in this case, they’re coming even as nation continues to add jobs. In January 2025, the U.S. Bureau of Labor Statistics found the healthcare sector added 44,000 jobs, 14,000 of which were in hospitals.

“It’s not a recession,” Challenger said. “You often see layoffs when the economy goes down, but the economy’s floating along pretty fine right now.”

Challenger said healthcare layoffs could signal systems are looking for synergies in-house to remove operating redundancies or are preparing to weather headwinds on the horizon.

“The days of easy money are over,” Hattis said, reflecting on what the MGB cuts signal about the broader healthcare ecosystem. “Here’s the largest and wealthiest by net worth healthcare organization in our state, and they’re looking at what’s down the road... and saying we need to act accordingly.”

In April 2025 a Texas federal judge struck down a controversial Biden-era policy that sought to require nursing homes to increase their staffing and have a registered nurse on premise around the clock.

Judge Matthew Kacsmaryk said the policy was “laudable” in its goal of improving nursing home quality, but that the HHS had ultimately overstepped its authority in issuing the rule.

The plaintiffs, nursing home trade organizations including the American Health Care Association and LeadingAge, cheered the decision. The groups have argued the staffing requirements were too onerous and could have led to nursing home closures.

From its inception in 2023, the landmark staffing mandate has been unpopular among both industry groups and some politicans, who have argued the industry can’t hire enough to meet the proposed staffing quotas. 

The CMS estimated 79% of nursing homes would have to increase hiring to meet the requirement of providing 3.48 hours of patient care per resident, per day, while KFF predicted 81% of facilities would have to hire additional staff.

The mandate was also likely to be expensive. The CMS predicted it could cost the industry anywhere from $1.5 billion to $6.8 billion to meet the hiring targets.

Before the Biden administration finalized the rule in April 2024, some lawmakers urged the the CMS to consider negative impacts on veteran care should nursing homes shutter and introduced bills attempting to block the rule from being finalized.

Still, the policy moved forward.

The rule was intended to address quality concerns brought to light during the COVID-19 pandemic, according to the Biden administration, which cited research that found higher staffing levels were associated with better care outcomes for patients.

The administration intended ease the implementation burden on providers by phasing in the rule over a period of three years for non-rural providers and five years for rural providers. However, industry groups and some politicians still pushed back on the policy.

Both the state of Texas and nursing home organizations sued the HHS and the CMS in the Northern District Court of Texas last year to block the rule.

Kacsmaryk, who presides over the court, was appointed by Trump and has ruled frequently in favor of a de-regulatory agenda. Independent watchdog organizations and media outlets have accused plaintiffs of judge shopping to appear before the conservative judge.

In this case, Kacsmaryk said he was sympathetic to the Biden administration’s desire to improve care quality at nursing homes, but that the rule overstepped Congress in creating a 24-7 registered nurse requirement. The judge noted Congress had specifically considered whether to implement such a requirement previously, and opted not to do so, both when a committee reviewed a similar suggestion and when Congress allowed a bill advancing a 24-7 nursing policy to die in session.

“The court decision not only upholds the rule of law and balance of powers, but it protects access to care for our aging population,” Clif Porter, President and CEO of AHCA and the National Center for Assisted Living, said in a news release.

Katie Smith Sloan, president and CEO of LeadingAge agreed, adding, “The mandate ignored the critical interdependence of funding, care, staffing, and quality, and would have severely impacted our ability to provide the care and services that our nursing home members, along with providers in other care settings such as home health and hospice, deliver every day.”

The HHS did not immediately respond to a request for comment.

Compensation for critical healthcare roles rose in 2023 amid heightened demand for workers, according to a survey from the Medical Group Management Association.

Median total compensation for medical assistant positions and healthcare management positions grew 3.3% and 7%, respectively, between 2022 and 2023, the survey found.

However, increasing compensation cannot fully address labor shortages, according to the MGMA. The most successful medical groups are employing a broad range of strategies to optimize their workforce, including building new graduate programs and leveraging artificial intelligence.

Healthcare labor shortages have been top of mind for healthcare providers since the pandemic, when workers left the industry in droves due to burnout and what some said were unsafe working conditions.

In response, employers have increased compensation in an attempt to lure workers back, according to the MGMA. Over the past five years, registered nurse median compensation has increased by 19.6%, medical assistant compensation surged by 20.6% and licensed practical nurse compensation rose by over 22%.

Some employers also offered enhanced benefits in 2023 relative to 2022, such as reimbursement and paid time off for education, new wellness benefits, better mental health resources and paid leave.

However, despite the increased investment in compensation and benefits, nearly 8 in 10 employers said they spent more time trying to hire in 2023 than in previous years, according to a MGMA survey.

Meanwhile, some employers may have reached the maximum of what they’re willing to offer in a benefits package. In a June 2024 survey, 70% of respondents told the MGMA that their benefits packages stayed largely the same compared to 2023, while 9% said their benefits offerings had declined compared to 2023.

Some healthcare providers told MGMA that further benefit increases would be contingent on improved financial performance, while others said they already offered competitive packages.

Employers’ reluctance to increase benefits and perks could also be due to a lack of return on investment. The MGMA found that some of the lingering staffing shortage in 2024 is due to structural “bottlenecks” across the healthcare labor market that are unlikely to be solved through increased compensation alone.

For example, since the pandemic, new nurses have been hard to come by as budget cuts and a lack of faculty have forced baccalaureate nursing programs to turn away record levels of qualified candidates, according to the American Association of Colleges of Nursing, which tracks enrollment trends over time.  

In the face of such bottlenecks and macroeconomic pressures, Halee Fischer-Wright, president and CEO at MGMA, said in a press release that compensation increases cannot be the only tool in a recruiter’s toolbox.

“Amid heightened patient demand and increased financial pressures, medical group practices continue to face a tight labor market where competition for clinical and administrative roles remains especially difficult,” said Fischer-Wright.

Medical groups that have effectively recruited and retained talent have built new graduate programs to funnel in early talent and invested in upskilling current staff into new roles.

Other providers have begun to leverage AI to do more with less staff. As of February 2024, the MGMA found almost half of medical groups it surveyed had begun to automate their revenue cycle operations, and 17% had automated more than 60% of revenue cycle operations.