Host 1:
Welcome to Insight Exchange, presented by LEK Consulting, a global strategy consultancy that helps business leaders seize competitive advantage and amplify growth. Insight Exchange is our forum dedicated to the free, open, and unbiased exchange of the insights and ideas that are driving business into the future. We exchange insights with the brightest minds of the day, the most daring innovators, and the doers who are right now rebuilding the world around us.
Host 2:
Chronic workforce shortages are leaving healthcare providers facing unprecedented challenges. Operating models are being undermined as is the ability to deliver growth and value creation.
Historically, providers may have been able to rely on recruiting their way out of such problems. However, the structural and global nature of current workforce shortages means this is no longer an option for most operators. Tackling the workforce shortage is now therefore a major strategic issue and should be a primary focus for both operators and investors in the sector.
In this episode, we'll discuss the factors affecting workforce shortage and in the near, medium, and long term, what actions providers could take to mitigate these challenges. To provide insights on these topics, let's welcome Louisa Chaves and Eilert Hinrichs. Could I ask both of you, Louisa and Eilert, take a moment to introduce yourselves?
Louisa Chaves:
Hi, my name's Louisa Chaves. I am a Principal in LEK's European Healthcare Practice based in our London office. I spend a lot of my time working with operators and investors in the healthcare sector thinking about how to tackle workforce-related challenges.
Eilert Hinrichs:
Hi, my name is Eilert Hinrichs, and very welcome to talk about this topic today. I'm a Partner in LEK European Health Practice based in the London office, and a lot of my clients are providing service to the elderly population where having access to staff is a critical success factor.
Host 2:
Thanks so much. So to start out, could you outline some factors that are contributing to the global workforce shortage?
Louisa Chaves:
Sure, I can answer this one. Perhaps we should start by saying that workforce shortages in healthcare have become a truly global issue that has reached an unprecedented scale. The issue reaches far beyond nonclinical care workers and now includes many vital disciplines and professions such as nurses, GPs, dentists, and radiologists to name a few.
To answer your specific question, some of the key factors contributing to workforce shortages include, well, firstly, unprecedented demand for healthcare services, particularly to support the management of long-term chronic conditions. Secondly, workers exiting the sector, particularly post COVID, in part reflecting increased pressure on healthcare staff due to high workloads, which is clearly taking its toll. In fact, absenteeism and high staff turnover only serve to exacerbate this problem. Finally, the aging workforce suggests that shortages are set to compound in a perfect storm where more people are expected to retire than those entering the healthcare workforce.
Eilert, is there anything you'd like to add?
Eilert Hinrichs:
Not really. I think they're all very, very good points that you're making, Louisa. I guess the only comment I'd like to add is that the industry cannot really treat itself out of this issue. It's much better off facing it and starting to think strategically about these issues.
Host 2:
Great. So what's the impact of these factors on healthcare providers?
Eilert Hinrichs:
Yes, let me take this question, Louisa. There are really four factors that we have in mind and let me go through them in more detail. The first one is staff shortages are increasingly inhibiting organic growth, and without adequate supply of the adequately trained staff, providers are limited to their operating facilities and are unable to take on additional patients or services.
Secondly, it also starts to erode margins. Scarcity of labor can quickly drive wage growth and significantly inflate the cost base without being able to pass this through to payors. Thirdly, it undermines the value creation strategy. The success of any greenfield expansion relies increasingly heavily on the ability to recruit new and well-trained employees. And fourthly, M&A is increasingly dependent on the success to retain the workforce when they've actually been brought into line.
Host 2:
Okay, thank you. Please tell us, what are some ways that the healthcare sector can take action to maintain value in their business?
Louisa Chaves:
This is a really key question we spend a lot of time talking to our clients about. Ultimately, the actions you take to maintain value in your business very much depends on the time horizons you are working with. Thinking about near-term actions first of all, these may include taking time to develop a market-leading employee value proposition, by which we mean being the most attractive employer, not only to maintain existing staff, but to also attract new recruits within highly competitive labor markets.
Secondly, think about modifying existing processes to maximize capacity, by which we mean delegating diagnostic or treatment work to the wider healthcare team. Finally, think about reducing the administrative burden on clinicians. By this we mean focusing staff on those activities they should be doing, such as providing care that is a human-to-human interaction, as opposed to doing endless paperwork.
Eilert, do you want to share your perspectives on the medium-term actions healthcare providers can take?
Eilert Hinrichs:
Yeah. Thank you very much. I'd like to do so. Medium-term actions is when we think about healthcare operators should think strategically how and when to invest technology and how can technology used to improve productivity, can it help to evolve the business models, and how to support new business models that can help to mitigate against the impact of challenging in the workforce.
For example, Taylor Radiology is a great business model that had evolved, that is able to bring back radiologists that the network had lost by using remote reading and therefore increasing the workforce. Also, the governments should rethink about how they can incentivize operators to invest more in technology. For example, the German government is providing 4.3 billion euros of grants to the healthcare sector to encourage more usage of technology.
How about some more long-term issues, Louisa?
Louisa Chaves:
Great. Thanks, Eilert. Totally agree with your comments. In the long term, ultimately the healthcare industry should be lobbying governments to ensure that workforce planning is a key policy agenda item. That means making sure that there are a sufficient number of people trained to do the vital jobs that society needs. This needs to be backed by adequate financial investment and support.
Host 2:
Super. Thanks. And finally, how do workforce shortages potentially impact investors?
Eilert Hinrichs:
Louisa, let me take that one. So there are a number of aspects that investors should really consider when they're assessing investment opportunities in this space. One of the most important ones include, they should really ensure that their due diligence does include workforce as a key diligent item, they use benchmarking to assess the strengths of the employee-facing brand and value proposition versus leading competitors and identify ways to improve it under their stewardship, and they should plan to deploy capital into digital solutions early in the investment cycle, as it will take some little time for them to really feed through and show the returns, and therefore enable to accelerate the growth.
Host 2:
All right, thank you both. So to close the conversation, we'd like to thank our expert guests, Louisa and Eilert, for their discussion regarding healthcare staffing shortages. And it's clear how important a well-trained and tech-enabled workforce has become a key success factor in healthcare.
We are happy to provide more detailed discussions on request, and we invite you to connect with us to learn more how LEK Consulting has extensive experience in providing strategic support to healthcare operators and investors tackling the issues of workforce shortages, such as how to use technology to improve productivity and support new business models.
Host 1:
Thank you, our listeners, for joining us today at the Insight Exchange, presented by LEK Consulting. Links to resources mentioned in this podcast can be found in the show notes. Please subscribe or follow for future episodes wherever you listen to your podcasts. Also, we encourage you to submit your suggestions for future insights online at lek.com.
