Contingency planning is essential in any business, but it’s especially critical in healthcare.

The industry is fraught with plenty of built-in unpredictability — not to mention that the last few years have brought new challenges and obstacles unique to our times. 

As our industry transforms, it will become increasingly important for managers to plan for the issues that can strain budgets, disrupt workflows and worst of all, affect the quality of patient care. Below, we’ve outlined some of the biggest factors for healthcare providers to consider when crafting a contingency plan, along with tips for navigating all kinds of unexpected costs. 

It’s fair to say that few industries have experienced as much flux over the past few years as healthcare. From the fallout of the pandemic to the rise of generative AI to the continued changes in patient expectations, the landscape is getting increasingly difficult to predict. 

All the while, hospital margins have slimmed, with research from 2023 — the last year for which data is currently available — finding that hospitals had an average operating margin of just 5.2%. 

That figure was an increase from the previous year, but it was still a decline from pre-pandemic earnings. Perhaps even more alarmingly, nearly 40% of hospitals had negative margins in 2023. 

Plus, hospital expenses are growing rapidly, rising at a rate of 5.1% in 2024 and significantly outpacing inflation, which grew at a rate of 2.9% for the year. Those factors combine to create a tricky time for healthcare businesses, one where even a minor hiccup could turn much bigger without the right plan. 

And, while some level of contingency planning is required under HIPAA, those rules should be little more than a reminder of how critical these systems are. Organizations will ultimately need to adopt a set of plans that are specific to their strengths, weaknesses and needs. 

Supply costs are perhaps the most timely issue around which providers are currently crafting contingency plans, as new tariffs on America’s trading partners stand to affect just about every industry. 

Much remains unknown about negotiations and lowered tariff rates between the U.S. and other nations, which makes planning more difficult, but it is exactly for that reason that so many industries are now hustling to prepare for whatever may come. 

Healthcare has not been spared from the uncertainty. A recent survey from the American Hospital Association found that over 80% of healthcare experts expected tariffs to raise costs by at least 15% over the next six months. Meanwhile, 90% of supply chain professionals are expecting disruptions that will affect the procurement of equipment and supplies.  

The first step for any contingency plan around supplies — even in these chaotic times — should be evaluating your current suppliers, assessing whether you’re getting the best deal on the best products. Here, it’s worth remembering that some suppliers will be more affected by tariffs than others, and they will also be offering competitive prices in order to earn business. 

Point being, negotiation is on the table — either with your current suppliers or new ones you may be considering. 

Additionally, it’s important to think about ways you can obtain better deals regardless of your situation. This may include buying in bulk or consolidating multiple kinds of orders to save on shipping. 

It’s also worth evaluating your current supplies with an eye for waste. There’s a popular statistic that around 25% of hospital spending goes toward waste, so efforts to reduce it can result in major savings. 

Equipment failures fall into a similar category as supply costs, and the two are often connected, especially if, say, a piece of equipment breaks and has become prohibitively expensive or difficult to replace. 

Here, managers must be both predictive and responsive to mitigate risk. The former involves maintaining up-to-date equipment and supply databases that include information about how hard something may be to replace. 

It could involve tracking reported incidence of what’s failed in the past, as well as a broader-scale market understanding of how long it will take to replace or repair something, and what that will cost. 

The ultimate goal of this is to create a real-time, in-depth database of all your equipment, its current state and its biggest vulnerabilities. This tool can help you respond to issues quickly and before they reach a critical state — such as when a life-saving piece of equipment is unusable. 

Litigation is, unfortunately, a major source of tumult for most healthcare businesses, both because of how common it is and how difficult it is to prepare for. 

While total litigation has fallen slightly in recent years, it’s still true that around 31% — or nearly a third — of doctors have been sued in their career. 

The simplest way to plan for the risks and financial loss brought on by legal action? Avoid it in the first place. This is virtually inevitable in medicine, but proper management can lead to reduced litigation and ultimately, fewer legal risks. 

Preventative measures include keeping staff up to date on compliance with frequent trainings, as well as taking detailed measures to ensure the information is being communicated effectively. It’s also crucial to have an advanced, heavily detailed record-keeping system that has all the information you may need if and when a legal issue does arise. 

Of course, it’s also important to have a high-quality, trusted legal team that can defend you when the time comes. For smaller organizations and those with budget restraints, it may be helpful to consider a contingency fee agreement, which is where lawyers aren’t paid for their services unless they win the case, after which they receive a portion of the settlement. 

Staffing is one of the clearest representations of the need for contingency planning, since it’s often addressed by having enough people to fill in when employees get sick, feel overstrained or quit. 

Healthcare is, unfortunately, starting from a place of weakness here. In 2021, analysis from Mercer predicted that there would be a healthcare shortage of more than 3.2 million workers by 2026. With that date less than a year away, the issue has only become more apparent. 

Although often considered inevitable, turnover is a costly part of the healthcare business, with some estimates showing that doctor and nurse turnover costs hospitals over $15 billion a year. 

Therefore, combatting turnover is the first step to mitigating risk. This may involve creating flexible schedules, equitable training programs and clear growth opportunities, but ultimately, it means listening to your staff directly and working to give them what they need to remain satisfied. 

The second step is creating contingency plans for when employees do, inevitably, leave. There should be a stated, multi-layered backup plan for every kind of situation, which may include — but is not limited to — cross-training employees to cover for one another in different departments, drawing on per diem staff like travel nurses, creating good incentives for overtime work and offering resources that make work easier, like childcare.