Hospital hiring could slow further after any coverage reductions or payment rate cuts stemming from legislation to change much of the ACA.


March 10—Hospital hiring in February remained well below 2016 levels as facilities adjusted to the end of rapid coverage expansions.

Hospitals added 6,300 positions in February, according to the latest employment report from the Bureau of Labor Statistics (BLS). That was well below the 12-month average of 11,600 for 2016, according to a previous Altarum Institute analysis.

The latest employment figures also included downward revisions to January hospital hiring from 4,200 to 1,700 new positions.

The slower growth in hiring had been expected for some time by healthcare industry observers after hospitals and other healthcare entities launched hiring sprees over the last two years. That hiring was expected to slow down after the 2014 and 2015 coverage expansions under the Affordable Care Act (ACA) tapered off.

“We’ll have to see whether we’re going to move back up again or stay lower than average, in which case it really does look like there’s starting to be some moderation in the growth in health spending that we saw in 2015 and 2016,” said Ani Turner, co-director of the Center for Sustainable Health Spending at the Altarum Institute. “It does look like there is a slowdown coming in the rate of hospital-hiring growth.”

The hospital hiring drop-off in 2017 has been sharper than a similar slowdown across the healthcare industry, in which 26,800 jobs were added in February, compared with a 2016 average of 35,000.

Other healthcare areas also saw slowdowns. Ambulatory healthcare services added 18,300 jobs in February, down from a 22,000 monthly average in 2016. However, nursing and residential care facilities added 2,200 positions, compared with a monthly average of 1,800 last year.

ACA Benefit

The hospital trend likely reflects the fact that hospitals were the primary financial beneficiaries of the ACA’s coverage expansions through Medicaid and the individual-insurance market, according to industry analysts.

Emergency department “volumes were up a lot, admissions were up a lot, outpatient was up a lot,” said Thomas Tobin, head of healthcare research for Hedgeye, a market research company.

Turner said hospitals saw a double benefit because the coverage expansions also reduced their uncompensated-care costs.

Altarum’s analyses have found a direct correlation on a state-by state basis between coverage expansions and hiring increases that started in 2014 and accelerated in 2015 and 2016.

The hiring likely continued for some time after the bulk of the expansion population was added because there usually is a six-month lag between surges in demand for health care and hiring to meet that demand, according to industry analysts.

Hiring rates started to accelerate for many hospital companies in the second half of 2014 but have been slowing since the end of 2015. And it is becoming increasingly clear that the slowdown stems from the ACA’s waning coverage increases.

“We going into a period where growth is going to be really hard to come by in terms of patient volume and then all of the care that’s delivered to those patients,” Tobin said in an interview.

The slowdown also was anticipated because BLS reports have indicated reduced healthcare job openings since about mid-2016.

Reform Impact

Advancing legislation to repeal and replace some of the ACA was seen as an “incremental negative” for hospitals, Tobin said. Specifically expected to hurt hospital finances are provisions shifting Medicaid to per capita block grants, state flexibility to spend Medicaid funding elsewhere, and changes to essential health benefits.

“There’s a lot of deflating components to the amount of money that each person has to spend on health care, and then incremental pressure on the number of people who will have insurance,” Tobin said.

He expected the nonpartisan Congressional Budget Office (CBO) to soon produce a projection that the legislation, the American Health Care Act (AHCA), will reduce the number covered through Medicaid and the individual-insurance marketplace.

“Essentially the government used subsidies, which helped buy insurance, and those dollars by and large found their way into the hospital system,” Tobin said.

Although the ultimate hospital employment impact of the AHCA will likely depend on its final details, Turner said hiring will be impacted by any provisions that affect the number of people with insurance coverage or rates from public and private payers.

“Depending on the order of magnitude, it doesn’t necessarily mean that hospitals are suddenly going to start to firing people; it may just mean that the rate at which they were hiring is going to start to significantly slow down,” Turner said.

Hospitals with large shares of Medicaid patients could be most impacted under newly capped federal funding as states weigh whether to change eligibility, reduce payment rates, or cut services.

“If the Medicaid budget is squeezed moving forward, then that’s going to have an impact on providers and their hiring patterns,” Turner said.

Among the details that could matter a lot to hospitals is whether there will be any new funding to cover an increase in uncompensated care.

The hiring slowdown also comes amid the continuation of a decades-long shift from hospital to outpatient care, along with reduced admissions. It is believed that much of the recent hospital hiring has been on the outpatient side, Turner said.

“It’s more of a longer-term arch that’s still playing out,” Turner said.

A 2016 market outlook for for-profit hospitals by Moody’s Investors Service projected that over the next 18 months their EBITDA growth will continue to be constrained by weak inpatient volume trends, relatively modest increases in payment rates, and rising costs. It also noted that outpatient services will bolster volume growth.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

 

Publication Date: Friday, March 10, 2017