The healthcare industry faces immense difficulties in the year ahead.

With the remarkable spend and growth trajectory, the US healthcare industry has emerged as a colossal force in the employment landscape. Employment has trended up in the beginning of 2025, with healthcare adding 52,000 jobs in February 2025 alone according to the U.S. Bureau of Labor Statistics. Healthcare spending in the US is staggering and continues to grow rapidly. According to a June 2024 report from Health Affairs, US healthcare spending had been projected to reach a monumental $5.1 trillion in 2024, marking a 52.6% increase from 2022. 

While all this growth is promising, several factors are significantly impacting the scale of healthcare spending and the remarkable employment rates observed in the past year:

1. A persistent staff shortage created by burnout, turnover, and an aging population has led to a limited pipeline and shortage in the healthcare industry.
2. Financial pressures on healthcare providers, exacerbated by rising inflation and cost of labor increases, have further fueled expenditures.
3. The implementation of pay transparency regulations has also played a role, as it compels organizations to offer competitive salaries to attract and retain talent, thereby influencing both employment rates and spending patterns in the industry.
4. An increased need for data security as the threat of data breaches reamains high.

In this article, we will take a look at these challenges impacting the healthcare workforce and employers today. We'll also explore ways the industry could respond and what solutions might help mitigate these challenges. 

        Healthcare staffing shortages and an increased demand for healthcare services

The healthcare staffing shortage is a multifaceted issue that poses significant challenges, particularly in the delivery of quality care. One major contributing factor is the rising levels of mental health issues and burnout among healthcare workers. These challenges lead to higher turnover rates as professionals leave the field due to excessive workloads, emotional and mental fatigue, and exposure to violence and harassment.

The aging population represents a twofold challenge for the healthcare industry. First, the aging population is creating a higher demand for healthcare services, further straining an already stretched workforce. By the year 2030, as America's baby boomers enter their seventies and eighties, we will see a rise in healthcare spending — estimated to top $16 trillion, or 32% of GDP. Second, we will see a decrease in the supply of healthcare workers — as healthcare workers age, they may retire or reduce their hours. For example, the average age of nursing faculty is 53.5 years for doctorates and 59 years for professors, and the average age of retirement is 62.5 years. While demographic shifts are expected to play a major role, the shortage will span all positions and roles within the healthcare sector. This combination of factors not only intensifies the existing workforce shortage but also threatens the sustainability of healthcare services across the nation, highlighting the need for companies to reassess the competitiveness of their total rewards offerings. 

Rising cost of healthcare

The healthcare industry is experiencing increased financial pressure due to inflation, creating a challenging environment for providers. As the economy inflates, additional strain is placed on healthcare workers' pay. Any increase in wages to compensate is particularly impactful given that labor accounts for more than 80% of the healthcare industry's output. A surge in labor costs, coupled with escalating prices for supplies, equipment, and prescription, places significant strain on the budgets of healthcare providers. Consequently, many organizations will need to implement cutbacks in staff, services, or essential investments to stay profitable, thus jeopardizing the quality of care. Furthermore, inflation can lead to supply chain disruptions, complicating the delivery of necessary medical services. Adding to these challenges, hospitals often face increased administrative burdens stemming from commercial health insurance practices and inadequate reimbursement from government payers, further complicating their financial sustainability and ability to provide high-quality care.

Pay transparency is reshaping the dynamics of compensation

Pay transparency has become a critical part of compensation recently. As regulations and societal expectations continue to evolve, more healthcare workers will expect organizations to disclose salary ranges and compensation structures, fostering a culture of openness and accountability. This shift aims to address longstanding disparities in pay, particularly among underrepresented groups, and to promote equity within the workforce. Healthcare employers can attract and retain talent more effectively by having access to trustworthy pay data. This transparency places pressure on organizations to offer competitive salaries, especially in a labor-intensive industry like healthcare. Ultimately, while pay transparency can enhance trust and morale among employees, it also necessitates strategic adjustments, innovative engagement, and retention plans to ensure financial sustainability while meeting the demands of a competitive labor market.

Increased need in data security

Healthcare networks are entrusted with a vast amount of personal and medical data, ranging from patient health records to billing information. This makes the healthcare industry a prime target for cyberattacks. 

Healthcare organizations must have a robust data security network that ensures they comply with regulations like HIPAA and maintain the trust of patients and stakeholders.

A strong data security network will include things like firewalls, access controls, encryption technology, and routine security audits. Healthcare organizations should also educate their staff about data security best practices. While paying for advanced cybersecurity technology may feel expensive, it is no match to the cost of a data breach.  Being prepared and protected is critical in today's digital landscape.

A trusted advisor can help address the challenges in healthcare

The healthcare industry has numerous challenges to work through, and here at Mercer we’re ready to roll up our sleeves and help.

With the leading healthcare compensation survey in the market, Mercer can support your HR needs in offering competitive total rewards to your healthcare workers and can help you engage, retain, and attract top talent. Take advantage of our Healthcare Industry Compensation survey or work with a Mercer team to ensure that your employees feel heard, understood, and supported through Mercer’s suite of employee listening tools.

For more information on what solutions Mercer has for the healthcare industry, give us a call 855-286-5302 or email us at surveys@mercer.com.