The Impact of California’s Minimum Wage Hike on Healthcare Practice

California's Minimum Wage Hike

California Senate Bill 525 signed by Governor Gavin Newsom on the minimum wage hike by $25/hour in the coming years for healthcare workers. The new legislation started to take effect on June 1, 2024. Healthcare providers are required to pay between $18 to $23 per hour. The scheduled increase depends on the healthcare category, employer size, and other parameters until it reaches the $25 per hour threshold by 2028.  


What does California’s minimum wage hike mean in your medical practice? This blog post will cover healthcare providers’ financial implications and challenges due to the minimum wage hike.

Financial Implications for Healthcare Providers

Increased Labor Costs

California’s minimum wage hike will affect the payroll of medical providers. May it be a small or large-scale healthcare facility. 


Compare how much you are currently paying to your medical staff to what you will be paying after the minimum wage hike. 


Let us say, for instance, currently, you are paying $15 per hour. Then, it increases to $18 per hour. Calculate the total increase for all healthcare staff. Calculating the cost in advance will help you see the bigger picture. It will help you plan accordingly.  


Larger practices might have more financial cushioning to absorb these costs. However, smaller practices will need to be more strategic. It might involve reallocating funds from other areas or finding ways to increase efficiency to offset the added expenses. 

Potential Decreased in Profit Margin

California’s minimum wage hike might result in a tighter profit margin.  Medical practice in California with a slim profit margin will be particularly affected. 


Analyze your current profit margin to understand how it might be affected by California’s minimum wage hike. How would a wage increase affect your profit margin if you are currently making 5% on an operating basis? Will it drop to 3% or lower?  

Challenges in Staffing & Workforce Management

  1. Recruitment Challenges. With the higher minimum wage, be prepared for a competitive job market. Consider what makes your healthcare practice unique as other providers will likely offer higher compensation to attract top talents.   
  1. Employee Retention. Keep your current medical staff happy. It is crucial rather than attracting new ones. When they are not happy and satisfied, they will leave for a higher-paying job elsewhere.  
  1. Training and Development Costs. Invest in your medical team. It can improve productivity and job satisfaction. The initial investment in training might be high, but the long-term gains can offset these expenses.  

Operational Adjustments

1. Streamline Operations.

Consider hiring a medical virtual assistant to streamline administrative tasks. Virtual medical assistants are knowledgeable in using software like electronic health record systems, scheduling tools, etc.   


They can help you save time and reduce the need for additional staff. They can also optimize your medical practice’s workflow so your on-site staff can focus on providing quality patient care.   

2. Changes in Service Delivery

Consider offering online consultations. It is cost-effective and provides convenience to patients. It will also help you save on in-office resources.   


Ensure that changes do not compromise the quality of care. Even as you look to cut costs, maintaining high standards of patient care should remain a top priority.  

3. Adjust Patient Pricing

You may need to adjust your pricing to cover increased labor costs. Consider how and when to increase your service fees. Gradual increases might be more acceptable to patients than a sudden large hike.  

Financial Strategies to Mitigate Impact

Cost Management Tactics

Cost-cutting is crucial in managing the financial aspect of your healthcare practice. 

  • Reducing Expenses: Cut costs without affecting patient care. It might include reducing unnecessary supplies or finding more cost-effective suppliers.  
  • Supplier Contracts: Negotiate better deals with suppliers. Bulk purchasing or long-term contracts can often secure discounts.  
  • Hire a Medical Virtual Assistant: Consider hiring a medical virtual assistant. Compare the cost of hiring a virtual assistant in California vs. hiring an on-site medical staff.  
Medical Virtual Assistant Vs. On-Site Healthcare Site

California’s minimum wage hike will bring significant changes to healthcare practices. You should proactively adapt and manage these changes effectively.  


Analyze your financial standing. Come up with a strategy for staffing problems and operation adjustments without compromising on providing quality patient care. Adapt to the continuous changes in the industry and turn this challenge into an opportunity to grow your medical practice in California.