The U.S. healthcare sector, particularly hospitals and health systems, appears to be emerging from a period of intense labor shortages and high turnover rates. A recent report by Aon, a leading human resources and consulting firm, indicates a significant shift in the healthcare employment landscape. After years of grappling with the repercussions of the COVID-19 pandemic and the subsequent “Great Resignation,” hospitals are finally experiencing stabilized and even decreased employee turnover. This positive trend is attributed to strategic investments in employee compensation and benefits packages, aiming to attract and retain talent in a highly competitive market.
The COVID-19 pandemic placed an unprecedented strain on healthcare workers, leading to widespread burnout and a mass exodus of professionals, especially nurses and physicians. The long hours, emotionally demanding work, and personal risks associated with treating COVID-19 patients contributed to a sense of exhaustion and disillusionment within the healthcare workforce. This, coupled with the broader trend of the “Great Resignation,” where employees across various sectors reevaluated their career paths and sought better work-life balance, exacerbated the staffing crisis in hospitals. The situation became so dire that many hospitals were forced to rely on expensive temporary staffing agencies to fill critical roles, further straining their already stretched budgets.
Aon’s findings, based on a survey of over 1,500 U.S. hospitals conducted between April and June 2024, reveal a dramatic improvement in staff retention. Only 7% of hospitals reported increased nurse turnover, a significant drop from the 62% reported in the previous year. Similarly, turnover rates for non-physician clinical staff and physicians also declined sharply to 5% and 9%, respectively, compared to 41% and 22% in 2023. This data suggests that the efforts made by hospitals to enhance their employee value propositions are starting to yield positive results.
The stabilizing workforce trend in the healthcare sector aligns with other industry analyses. Fitch Ratings, in a report released earlier this year, suggested that the worst of the labor downturn for not-for-profit hospitals, which constitute the majority of hospitals in the U.S., might be nearing its end. Fitch observed a decline in the year-over-year average hourly earnings growth for hospital employees, from 4.2% in 2023 to 3% in 2024. This deceleration in wage growth could indicate a cooling labor market and reduced pressure on hospitals to offer exorbitant salaries to attract and retain staff. This stabilization, coupled with the improved retention rates reported by Aon, points towards a more sustainable and predictable future for healthcare staffing.
However, the improved labor market doesn’t mean hospitals can afford to become complacent. Experts caution that maintaining a stable and qualified workforce will require ongoing efforts and strategic adjustments to recruitment and retention practices. Aon’s study highlights the crucial role of competitive compensation and benefits in attracting and retaining talent. A significant majority of hospitals, 70%, reported increasing pay for new hires, while 69% implemented or enhanced sign-on bonuses. These findings underscore the recognition that competitive compensation remains a primary driver in attracting qualified professionals in a tight labor market.
Beyond financial incentives, hospitals are also focusing on broader workforce well-being. The emphasis on addressing burnout and supporting the mental health of healthcare professionals is gaining traction. Sheena Singh, a senior vice president at Aon, emphasizes the need for hospitals to invest in total rewards and support workforce resiliency and mental health to address recruitment and retention challenges effectively. This suggests a shift towards a more holistic approach to employee well-being, recognizing that beyond salary and benefits, factors like workload management, work-life balance, and access to mental health resources are crucial for creating a sustainable and supportive work environment. The future of healthcare staffing relies on a multi-pronged strategy that encompasses competitive compensation, comprehensive benefits, and a genuine commitment to employee well-being.
