Experiencing long wait times for your doctor? You’re not alone, and according to most hospital leaders, it’s only going to get worse. That’s why we believe the next healthcare giant will focus on solving the healthcare labor shortage.
- 25% of today’s healthcare labor supply is at high risk of leaving the industry unless burnout is seriously addressed
- Workforce retention and optimization are the most pressing areas to implement technology
- Companies building end-to-end platforms with an emphasis on labor cost reduction, actionable insights, and product experience tailored to the specific needs of frontline workers and managers will be best positioned to win
The U.S. healthcare system is in crisis: 1 in 4 clinicians want to leave healthcare. The biggest reason for quitting? Burnout and stress—there is a shortage of labor, causing major overwork across the system.
There’s likely going to be a shortage of 124,000 physicians by 2034, with a particular lack of specialists, according to The Association of American Colleges projects. In the short term, The American Hospital Association projects a shortage of 1.1 million nurses by the end of the year. There are 1.1% fewer healthcare workers than there were pre-pandemic.
This shortage has pushed costs up as hospitals rely on temporary, higher cost labor (roughly 3–4 times more expensive than full-time workers). Many hospitals are struggling to survive since labor accounts for about 60% of their net patient revenues, and labor costs increased from 18% to 28% between 2019 and 2022. Around 30% of rural hospitals are projected to close, and while rural America only represents about 17% of the U.S. population, nearly 70% of these Americans already face healthcare worker shortages in their area.
There are also several structural trends that continue to widen the demand and supply gap. Two of those factors: limited medical and nursing schools, and an aging population with greater healthcare demands. Unfortunately, the absolute number of healthcare workers is unlikely to significantly increase in the next few years to meet exploding demand.
“We just can’t hire nurses fast enough,” says Bassett’s Chief Digital Health Officer Paul Uhrig. Bassett Health, located in central New York and one of the nation’s most innovative rural health systems in upstate New York, currently has 4,500 total employees but is trying to fill 800 job openings. “But there’s also an opportunity to ease burdens on our existing workforce, and allow them to focus on patients and higher level activities,” Uhrig explains. “For instance, AI can play a role in freeing up clinicians’ time to do less reductant work. These AI tools are meant to support or augment clinicians, not replace them. For example, a physician receives many electronic messages from patients every day and needs to go back to review the notes before responding appropriately. And patients rightly expect a timely response. An AI tool can prioritize those messages and auto generate replies that then can be edited and approved by the physician.”
At SignalFire, we strongly believe that technology has the power to augment limited supply and be a force multiplier. That’s why we’re currently on the lookout for companies building in the space.
Healthcare labor tech market map
Solving talent problems is central to SignalFire’s DNA—we have a proprietary-AI recruiting platform called Beacon that tracks and ranks 495 million people on skill and hireability, as well as a full-time talent team internally led by Tawni Cranz (former chief talent officer at Netflix), Heather Doshay (former head of talent at Webflow) and Mario Espindola (former head of talent at Wheel) to support our portfolio companies in their talent needs. SignalFire has also made several investments in the future of work across sectors such as Praisidio, XOR, and Modal.
Based on that experience and our healthcare investment team’s expertise, we mapped out workforce management solutions in healthcare specifically. We spoke with a wide range of healthcare providers and startups focused on the labor shortage to determine the biggest opportunities for improvement. Here’s our framework:
- Identifying and recruiting talent: Healthcare recruiters are struggling to find talent and are increasingly partnering with local colleges to offer students a way to work part-time with the hopes that they will join as a full-time nurse upon graduation. There isn’t a ubiquitous LinkedIn or job posting site for doctors and nurses. How can we leverage data to identify quality candidates?
- Staffing and labor marketplaces: Given the sourcing challenge, healthcare recruiters are increasingly relying on the convenience of marketplaces with “ready to go,” identified, temporary labor. The healthcare gig economy is exploding, especially post-pandemic, as many workers are choosing higher pay and flexibility vs. full-time jobs.
- Credentialing and licensing: Healthcare professionals have several credentials they need to keep in compliance to practice. Many health systems see delays in onboarding professionals (sometimes 6+ months) due to the fragmented nature of this data. Furthermore, many health systems lack visibility into this data, requiring large teams to manually keep track.
- Training and upskilling: Many states are getting creative with healthcare delivery to deal with the labor shortage. For example, 32 states now allow nurse practitioners to serve as primary care providers. We will likely see similar trends continue. The bigger question is: how do you upskill all healthcare providers to practice at the top of their licenses or beyond? How do you do more with less?
- Scheduling and workforce optimization: The average nurse gets called in last minute via text. Nurses hardly have a say in their schedules, worsening their burnout. For many health systems, scheduling challenges are a major contributor to workforce churn. Lack of insights into scheduling also creates inefficiencies in labor use.
- Remote work and telehealth: There should be more remote opportunities for health system workers, especially as telehealth continues to grow. Many providers and physicians have opted for virtual “supervision” by lower-credentialed workers as an alternative to providing in-person care. Telehealth companies offering virtual care can optimize for both a patient’s desire to stay at home and flexibility for practitioners.
- Retention: Every industry has HR and benefits to drive worker satisfaction, but given healthcare’s lack of sophistication around data and insights, many leaders have no idea how to keep their clinicians happy. While surveys for the healthcare workforce are common, actionable insights are lacking. The common retention tactic of “pizza parties for nurses” is insufficient. Can clinicians be paid more for performance? Are there certain benefits that could improve their satisfaction? How can data play a role here?
- Task automation and support: The nature of a healthcare worker’s job is also extremely tedious—e.g., only 25% of a nurse’s time is spent caring for patients. A whopping 75% of their time is spent on documentation and administrative tasks. How do you unlock care time by automating certain tasks? How can AI play a role in augmenting our clinicians’ productivity?
Where SignalFire is investing
Of the various subsectors identified above, SignalFire is most excited about investing in platform solutions in this space that have multiple components of the labor tech stack. HR leaders in healthcare organizations are tired of disparate point solutions and having to manage the integration amongst all these different technologies.
Healthcare is a unique industry requiring particular founder and product characteristics. We’re specifically looking for teams and solutions with the following traits:
- Clear, measurable ROI: Either reducing labor costs or increasing the productivity of existing labor.
- Actionable insights with built-in automation: True value-add platforms should be “smart,” aiding and empowering hiring managers, nurse managers, and frontline workers with actionable insights—e.g., recommendations, suggested next steps, or early warning signals—and provide users the ability to automate the appropriate follow-up tasks.
- Built by teams who deeply understand healthcare go-to-market: A 10x better product does not always lead to adoption. Sales cycles and implementation timelines are long, making it critical for startups to equip themselves with this particular skill set.
With the right application of technology, there’s a path to greater healthcare access, affordability and quality. It’s time to bring joy back to the healthcare profession. If you are building a health tech startup solving some of these labor challenges with the characteristics described above, we would love to hear from you! Contact [email protected].