Healthcare is in a productivity crisis that more hiring and more technology alone will not solve. The next era of care depends on making automation work through human–AI workflows.
US healthcare faces a paradox. Over the past two decades, labor productivity in clinical-care organizations has declined roughly 1 percent, while productivity across the broader US services economy has increased more than 55 percent (Exhibit 1).1 In other industries, technology advances over the years have driven meaningful productivity gains by transforming entire operating models and workflows, not just digitizing isolated tasks. By contrast, healthcare organizations have long pursued incremental improvements without achieving comparable productivity gains from technology and automation.
One of the clearest examples of this transformation can be seen in warehouses, where robots deliver products directly to workers rather than workers being forced to walk miles each shift, and each task is automated in real time. The improvement is dramatic: twofold to fourfold productivity gains,2 with some warehouse operators reporting 20-fold-plus increases in output per worker over the past decade.
Healthcare tells a different tale. The industry is automating inefficiency faster than it is eliminating it: more technology, more people, yet less output per unit of labor. US clinical-care organizations now invest more than $150 billion annually in IT,4 yet face compounding costs and margin compression. These outcomes reflect not only execution challenges but also the realities of delivering high-stakes care within a fragmented, highly regulated system. Healthcare has also long accepted that productivity improvements are fundamentally limited by the labor-intensive nature of care delivery.5 For the first time, however, AI creates an opportunity to redesign how care is delivered and how shared services function, overcoming the historical barrier linking labor inputs and output.
The future of work in healthcare, therefore, should not be a technology story alone. It must be a story of operating-model transformation enabled by technology. Improving margins, as well as enhancing patient access, experience, and outcomes, will require substantial labor productivity gains across clinical-care organizations, far beyond what incremental improvements from point solutions or isolated pilots can deliver. Instead, interventions that provide 40 to 50 percent end-to-end improvements in processes and functions are needed, based on our experience.
What does it take to rewire an operating model?
To achieve meaningful productivity gains, clinical-care organizations need to rethink both care delivery functions and shared services.
Commit to a bold redesign of care delivery
Over the past two decades, US clinical-care organizations have expanded their workforce steadily at approximately 2 to 3 percent annually, adding more than five million clinical roles.6 Yet increased hiring has not translated into commensurate improvements in access.7 The system’s primary constraint is not workforce capacity; rather, it is the absence of a model for how care delivery work should be done.
Organizations need to take a different approach to lead in process redesign and AI enablement. For example, in a medical surgical unit, a substantial share of routine tasks (such as documentation, care coordination, and nonessential administrative steps) can be eliminated, automated, or reassigned. In the traditional care delivery model, a 25-bed medical surgical unit would have roughly one registered nurse (RN) for every five patients, along with one patient care technician (PCT) for every ten to 15 patients.
A redesigned model could allow for fewer RNs needed per patient and more lower-licensed clinical staff like PCTs. And instead of relying solely on in-person roles, the future state could incorporate virtual RNs shared across units and tools like ambient documentation. This would allow teams to redistribute work, operate more efficiently, expand care, ensure care quality, and adapt to hourly patient volume fluctuations. Caregiver satisfaction and sense of purpose also deepens, with some systems seeing first-year RN turnover fall by more than 60 percent.8
Organizations that transform their care models can see labor cost improvements that exceed 20 percent, in our experience. These gains, however, only emerge from the coordinated redesign of workflows, technology, and staffing. Implementing isolated changes, such as adding point solutions without redesigning care processes or adjusting staffing models, can instead reduce productivity, increase caregiver burden, and create new workforce challenges, limiting or even reversing the intended benefits. READ MORE
By Li Han, Michael Elliott, Pooja Kumar and Yenli Wong
Source: mckinsey.com
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