The healthcare industry is at an inflection point. A nationwide staffing shortage, increased patient demand and record turnover have converged to threaten organizational and financial stability across the healthcare landscape.
While leaders across the country have invested in strategies to attract and retain top talent, too often these efforts are siloed within human resources—viewing “culture” as a secondary concern rather than a business imperative. The evidence is clear: A strong organizational culture built on compassion, trust and respect has a direct and measurable impact on operational and financial performance. An engaged workforce drives better outcomes and reduces the costs associated with turnover. In today’s environment, investing in culture is one of the smartest investments leaders can make.
Over the past decade, the healthcare industry has experienced financial strain, which has only been heightened as inflation has driven up the cost of delivering care. According to the American Medical Association, in 2023, U.S. health spending increased by 7.5% to $4.9 trillion. This was one of the highest growth rates in a single year since 2003, outpaced only by the rise in 2020 due to the COVID-19 pandemic. In many cases, reimbursement has not kept pace with rising costs associated with care delivery, making it crucial for leaders to place renewed focus on their bottom line.
One of the major drivers of costs for healthcare organizations is the challenging labor market—according to the American Hospital Association, there could be a projected shortage of 3.2 million healthcare workers by 2026, and there does not appear to be an end in sight. In fact, the National Center for Health Workforce Analysis (NCHWA) recently released projections estimating that shortages will continue through 2037 for many key health occupations, including 207,980 registered nurses. With an aging population that is driving higher demand across the healthcare continuum, vacancies of this level cannot be sustained.
To combat the workforce shortage, organizations are exploring unique recruitment opportunities such as pipelines, externships and academic partnerships. Equally important, and often overlooked, are strategies focused on reducing turnover by ensuring both new hires and long-time staff are provided a rewarding and fulfilling environment.
Turnover is a major expense for healthcare organizations. The estimated recruiting cost for a full-time employee is $61,000, a figure that does not include the cost associated with onboarding or the more intangible losses associated with turnover, such as loss in productivity and institutional knowledge. Beyond the cost of recruitment, organizations also face significant expenses to maintain operations when positions are vacant; physician vacancies, for example, cost hospitals an estimated $7,000 to $9,000 in lost revenue per physician, per day.
Employee engagement significantly strengthens organizations’ bottom line by reducing these turnover-associated costs. According to Press Ganey, one in four non-engaged employees are likely to leave within their first year. Beyond retention-related cost savings, engaged employees also deliver heightened productivity and customer loyalty.
In healthcare, this translates directly to improved patient safety, satisfaction, and trust. Highly engaged employees are more likely to be motivated, committed and enthusiastic about their work—characteristics that are crucial to being internal champions of positive change, ensuring organizations achieve their strategic goals. An engaged workforce not only drives improved patient experience but also fosters innovation through seamless adoption of new programs and technologies. These advantages boost revenue while reducing expenses, making employee engagement an indispensable business priority for healthcare leaders.
So how can organizations effectively drive employee engagement and, in turn, strengthen their bottom line? It starts at the top: leaders must instill a culture of collaboration and trust as the foundation of their organization. This requires every leader, from mid-level management to the C-suite, to be both visible and accessible to frontline staff and patients alike.
It also means investing in employees both financially and through workforce development opportunities. Most healthcare organizations understand the importance of comprehensive health and retirement benefits programs and support services through Employee Assistance Programs. These investments should be coupled with investments in employees’ professional growth and development through programs such as continuing education, clinical ladders and mentorship programs.
When appropriate, leaders must also engage staff in transparent, strategic dialogue. True motivation is driven by an individual’s understanding of both the long-term vision and the short-term goals of their organization, and how they connect to the organization’s guiding values and principles. Every employee should recognize the unique role they play in reaching organizational success and how this success will meaningfully benefit patients.
This transparency, combined with steadfast leadership and meaningful investment in employees, positions culture at the very foundation of an organization, inspiring team members to reciprocate the investment and drive the organization’s success. Leaders should also not shy away from recognizing staff members. According to a report by Gallup and Workhuman, a 10,000-person organization with an already engaged workforce can save up to $16.1 million annually by prioritizing recognition as a strategic factor of its culture. By cultivating a strong culture of development, collaboration, support, and appreciation, employees are provided with an environment designed for success.
Fostering an engaged workforce is crucial to an organization’s long-term strategic success, particularly as healthcare leaders continue to navigate a complex and challenging landscape. Devoting time and resources to culture translates not only to increased employee and patient satisfaction, it also offers a clear return-on-investment by reducing turnover and providing an edge in a competitive recruitment market. Ultimately, by prioritizing employee engagement as a foundational principle, healthcare leaders empower their teams to advance organizational goals, achieve operational excellence, and, most importantly, improve the health and well-being of the communities they serve.
Scott Edelman is the executive director of Burke Rehabilitation, a rehabilitation hospital within Montefiore Health System.