Despite the hiring bump, one investor advisory firm expected hospital employment to resume slowing in response to declining admissions trends.

July 7—Hospitals added 12,000 positions in June, or twice their monthly average for the year, according to new federal data.

The one-month bump in hiring came as hospitals were expected to enter a prolonged slowdown in new jobs with insurance coverage expansions leveling off and federal healthcare policy being reassessed.

“I find it surprising; I can’t quite see a reason for it because there is so much uncertainty as to what is happening with healthcare coverage and many of the provisions of the Affordable Care Act [ACA] and whether they change,” said Ani Turner, co-director of the Center for Sustainable Health Spending at Altarum. “I would have thought that hiring would be conservative.”

Recent projectionsby the Commonwealth Fund concluded that the Senate’s recently introduced Better Care Reconciliation Act (BCRA), which would repeal and replace some of the ACA, would eliminate 919,000 healthcare jobs by 2026—primarily through reductions in direct federal spending.

The hospital hiring jump was part of an industry-wide surge. Overall, health care added 36,500 positions in June, far more than the monthly average of 24,000 so far in 2017. Ambulatory services added 26,000 jobs, led by 8,000 in physician offices. 

The hiring totals harkened back to the healthcare jobs booms in 2015 and 2016, when total new hiring averaged 32,000 per month and hospital hiring averaged 10,000 per month in ’15 and 11,000 in ’16, according to Altarum figures. 

Turner said the monthly total specifically for hospitals could be an anomaly, so watching the next few months will be important.

Hospital Trends

Hedgeye, a market research company, noted hospital employment growth was up 1.81 percent year-over-year but remained below its peak year-over-year increase of 2.88 percent in November 2015.

“We believe hospital employment will continue to slow in response to deteriorating admissions trends,” a Hedgeye investors’ note stated following the latest jobs report.

The number of healthcare job openings has risen in the past six months after “slowing materially,” said Thomas Tobin, head of healthcare research for Hedgeye.

“And that’s usually a pretty good indication of what demand is at the facility level, so this could be a signal that things are turning,” Tobin said in interview. “But I would be very skeptical of that because generally healthcare employment lags inpatient admission growth and lags insured population growth, both of which appear to be continuing to slow in our models.” 

Preliminary fiscal 2016 medians as calculated by Moody’s found that despite rising absolute demand across all clinical service categories, the rate of growth slowed for hospital-based measures, such as inpatient admissions and observation stays.

The “not-for-profit and public hospital sector is experiencing an overall softening in operating performance and liquidity measures” relative to last year's medians, according to the May report from Moody’s. The report specifically cited rising labor costs as continuing to pressure expense-growth rates at those organizations.

The growing pressure on margins, fueled in part by the hiring spree, has left hospitals looking for cost controls.

“What organizations are looking very, very hard at is where are the savings—above and beyond stripping more money out of labor,” said Carol Fleischhauer, JD, chief nursing officer at Advisory Board.

Advisory Board data indicated that hospital executives increasingly are looking for that savings in initiatives to reduce variations in care delivery.

“Beyond supplies, beyond labor, beyond capital, it’s, ‘Holy smokes, there’s a lot of opportunity here to save on services,’” Fleischhauer said in an interview.

Other savings efforts involve a push to retain newly hired professionals. In doing so, hospitals seek to avoid the expense of replacing high-turnover healthcare workers, which can cost 150 percent as much as retaining the worker, according to Advisory Board data.

An emerging retention challenge has arisen among Millennial workers, who have “less patience” for workplace frustrations, Fleischhauer said.

“You can create jobs and you can recruit people into these positions, but if you are not prepared to invest in the infrastructure, engage them, and make sure that they are skilled and they are satisfied, they’ll leave you and jump around,” Fleischhauer said. “The downside of increased turnover is extraordinary cost to the organization.”

Workforce Focus

The latest federal data on positions that are driving the healthcare hiring boom point to registered nurses, nurse practitioners, physician assistants, and “some” physicians, Turner said.  Smaller growth has occurred among support staff, such as care coordinators. The latest position-related data are from mid-2016.

At hospitals, the scramble to hire independent physicians may have peaked. The latest edition of a regular report by the American Medical Association found stabilization in the trend toward hospital employment of physicians. Specifically, the share of physicians who work in a practice with at least some hospital ownership or who are direct hospital employees was 32.8 percent in both 2014 and 2016.

However, a June report from Fitch concluded that the ongoing implementation of the Medicare Access and CHIP Reauthorization Act (MACRA) is continuing to encourage hospital employment of physicians.

“MACRA will further tighten hospital-physician relationships and lead more independent physicians to seek hospital employment,” the report stated.

That sentiment differed from a 2016 report, also from Fitch, that projected the pace of physician alignment and employment to slow from very strong levels over the past few years, given that most physicians have consolidated.

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

Publication Date: Friday, July 07, 2017