Relationship between Racial Diversity in Medical Staff and Hospital Operational Efficiency: An Empirical Study of 3870 US Hospitals

Demand for foreign nurses and medical staff is rapidly increasing due to the severe labor shortage in U.S. hospitals triggered by the COVID-19 pandemic. However, empirical studies on the effect of the racial diversity of medical staff on hospital operations are still lacking. This research gap is thus investigated based on the foreign medical staff working in 3870 U.S. hospitals. Results show that workforce racial diversity has a significantly positive relationship with hospital operational efficiency regarding occupancy rate, manpower productivity, capacity productivity, and case mix index. Notably, this study empirically supports that increasing the ratio of foreign nurses positively affects the overall operational efficiency of hospitals. In addition, the study results also indicate that the hospital location, size, ownership, and teaching status act as significant control variables for the relationship between racial diversity and hospital efficiency. These results imply that hospitals with these specific operating conditions need to pay more attention to racial diversity in the workplace, as they are structurally more sensitive to the relationship between racial diversity and operational efficiency. In short, the findings of this study suggest that hospital efficiency can be operationally improved by implementing workforce ethnic diversity. For this reason, hospital stakeholders and healthcare policymakers are expected to benefit from this study's findings. Above all, the results of this study imply that if an organization adapts to extreme external environmental changes (e.g., the COVID-19 pandemic) through appropriate organizational restructuring (i.e., expanding the workforce racial diversity by hiring foreign medical staff), the organization can gain a competitive advantage, a claim that is supported by contingency theory. Further, investors are increasingly interested in ESG, especially companies that embody ethical and socially conscious workplaces, including a diverse and inclusive workforce. Thereby, seeking racial diversity in the workforce is now seen as a fundamental benchmark for organizational behavior that predicts successful ESG business practices, a claim that is supported by stakeholder theory. Therefore, in conclusion, the findings of this study suggest that workforce racial diversity is no longer an optional consideration but should be considered as one of the essential determinants of competitive advantage in organizations, particularly in the healthcare sector.