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Why health care systems are buying schools to offset labor shortages

Owning a piece of the talent pipeline

INSIGHT ARTICLE  | 

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 care system, nonprofit 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 care systems must boost their access to skilled labor by owning a piece of the talent pipeline or building programs that get them closer to it.

Health care 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 care 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.

Staying competitive

What can health care 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.

WHAT MAKES THE LATEST DEALS UNIQUE IS THAT THEY GIVE THE HEALTH CARE SYSTEMS DIRECT RELATIONSHIPS TO THE SCHOOLS THAT ARE TRAINING DOCTORS, NURSES, TECHNICIANS, ADMINISTRATORS AND OTHER SKILLED LABOR. 

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 as 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

On the technology front:

  • Continue to determine how to advance the organization’s 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 the health care system.
  • Evaluate the use of automation in workflow of all the organization’s 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 processes.

Related to talent pipeline:

  • If you’re a health care system smaller than Atrium and HCA, building a pipeline to a larger university may not be in the organization’s 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.

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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