Why US Healthcare has been slower to embrace HR transformation

Businesses across the globe are looking to modernize in an effort to keep pace with the rapidly evolving business landscape. But not all industries move at the same pace, share the same priorities or face the same challenges. And when it comes to HR transformation, the US healthcare industry offers a particularly unique case.

According to the US healthcare edition of our latest report, The Cost of Standing Still: Why Ignoring Cloud ERP Could Harm Your Business, the industry’s complex landscape and singular goals have had a direct impact on its transformation efforts, often resulting in a slower and more considered approach to HR transformation.

The pace of change for Healthcare vs general US businesses

The pressure on global businesses to be future-ready is palpable, so it’s perhaps unsurprising that over a third of US businesses have undergone HCM transformation in the past three years. Fourteen percent have transformed their operations just within the past year.

Yet in the US healthcare industry, change is noticeably slower and less frequent, with many going more than four years between upgrades. Perhaps most surprisingly, the majority (38%) of healthcare organizations we surveyed were unsure when their last transformation took place.

In contrast to other industries, this suggests a surprising lack of urgency and awareness.

What are the major blockers affecting US Healthcare's adoption of HR transformation?

Different business priorities for the US Healthcare sector

To understand this disparity, it’s helpful to consider how the healthcare industry’s business priorities differ from those of other businesses.

As technology continues to develop at an astonishing pace, a clear majority (45%) of companies cite technology and value realization as their top priority. This contrasts sharply with US healthcare, where less than a fourth (24%) consider it a top priority, giving it an overall ranking of fifth, alongside digital transformation.

While the healthcare industry can, no doubt, benefit from innovative technology and digital transformation, it’s important to remember that the sector’s primary focus is providing patient care. This explains why the majority of US healthcare organizations (38%) name efficiency and productivity as their number one priority.

Businesses in any industry often worry about the potentially disruptive nature of HR transformation, especially when it involves major technology upgrades. In healthcare, these concerns are even more pronounced. Whatever benefits digital progress may offer, delivering safe and effective care will always come first.

Magnified security concerns for US Healthcare affecting ability to change

The US healthcare industry must also contend with very specific security concerns that undoubtedly impact attitudes towards transformation. In contrast to business priorities, healthcare’s security concerns generally align with those of other businesses. The difference is in their level of emphasis.

Data breaches, for example, are the top security concern across all industries, healthcare included. But while 64% of other businesses name it as their primary concern, that number jumps to nearly three quarters (74%) among healthcare organizations.

Healthcare organizations deal in sensitive patient data on a daily basis, so it’s understandable why they would have an emphasized focus on data security.

It’s perhaps also unsurprising that compliance would take the number two spot, with nearly half (48%) of healthcare organizations naming it as a top priority. US healthcare contends with strict regulatory demands and compliance is vital.

The pressures of these risks may make healthcare organizations more risk-averse and wary of taking any action that may potentially compromise data security or result in a loss of patient trust. This could lead to slower and more considered decisions regarding transformation as they highest possible security standards must be maintained at all times.

Additional operational complexities

Beyond general priorities and risk aversion, there are several specific operational challenges in healthcare that slow transformation but must be addressed for any successful modernization.

Managing complex union rules and pay differentials

• Many health systems are governed by collective bargaining agreements (CBAs) that define numerous differentials, such as shift differentials and skill/qualification differentials. Accurate payroll must calculate not only regular pay plus overtime, but ensure that these differentials are correctly included. 

Handling multi-state compliance for large health systems

• Large healthcare providers often operate across multiple states, each with its own tax, labor, licensing, and benefit regulations.
• Provider credentialing and licensing requirements also vary widely: boards in each state may have different renewal intervals, continuing education requirements, verification standards, and background check rules. 

Tracking these various regulations and requirements is a full-time compliance challenge. 

Integrating contingent workforce and credentialing processes

• Many health systems depend on contingent labor: travel nurses, agency-based clinicians, clinical business workers etc. Ensuring these workers are credentialed properly, compliant with state licensing, malpractice coverage, and employer liability is a complex process, which can take up to 120 days.

Managing cost pressures while maintaining patient care quality

• Healthcare budgets are under pressure: declining reimbursement, rising costs of supplies, labor shortages, inflation in benefits and liability insurance. Yet patient care quality, safety, regulatory compliance, and staffing ratios must be preserved. Balancing cost control with these demands often means health systems are wary of investing in large transformations, even when inefficiencies are clearly costing more in the long run.

How Strada can help US Healthcare organisations transform

Strada brings specific capabilities and differentiators that can address many of these challenges:

• Industry-specific assets, templates, and best practices - Integrated technology solutions specific to healthcare workflows to help modernize systems more quickly.
• Accelerated adoption – Established best practices and change management strategies tailored for clinical and non-clinical staff to ensure adoption without disruption.
• Measurable outcomes - Reduced administrative burden, increased payroll accuracy and timeliness, improved cost-allocation transparency, and accelerated time to hire and onboard.
• Invoice automation - Automated supplier invoices, reimbursement claims, etc., improving insurance reimbursement timeliness and reducing manual errors.
• Nurse shift bidding - Workforce scheduling tools, aligning labor supply with needs while respecting union or differential rules.
• Service line and item cost allocations - Systems designed to improve financial oversight and automate cost allocation, ensuring that costs are correctly assigned at the service line or item level, and enabling health systems to understand profitability by service or procedure.
• Tying EMR data to financial performance - Integrated platforms across HR, finance, supply chain, clinical data sources, enabling more precise insight into cost, resource utilization, and margins.
• Collective bargaining agreement scenario planning - CBA scenario modeling to support negotiation and budgeting.
• Change management strategies tailored for clinical and non-clinical staff - Training, phased rollouts, and transition strategies to help maintain clinical operations without interruption.

A clear path forward for HR transformation

While the difference between healthcare’s approach to HR transformation and that of other industries can be clearly understood, there is a danger of becoming too reluctant or risk averse in a rapidly changing climate. Outdated systems are being phased out, new technologies are sweeping the landscape and customer expectations are evolving accordingly.

US healthcare organizations need to be wary of falling behind

The good news is that healthcare organizations seem to face fewer barriers to transformation than other industries. While all sectors named budget constraints as the number one obstacle, only 34% of healthcare organizations cited it as a barrier, compared with 47% of organizations in other industries. Most surprisingly, nearly a third of healthcare organizations reported that they faced no major barriers at all.

Taking the first step

Transformation is a significant undertaking. Given their unique priorities and concerns, US healthcare organizations are right to be cautious. At the same time, being too cautious can result in missed opportunities for improvement and growth.

Part of ensuring a successful transformation is long-term strategic vision, and healthcare organizations need to consider the ways in which digital transformation and modernization can better help them meet their goals and address their concerns.

With fewer barriers in their way, the future is at their fingertips

Download The Cost of Standing Still: Why Ignoring Cloud ERP Could Harm Your Business today to discover more industry-specific data, case studies, and ROI benchmarks you can use to make the case for transformation.