Healthcare Business Trends

Various data highlight the ongoing labor challenges facing hospitals and other healthcare providers

Wage growth appears to be slowing, but labor costs remain a drag on hospital finances.

February 6, 2023 12:31 pm

The healthcare labor picture may be stabilizing in some respects, but hospitals and other providers continue to feel the squeeze.

The industry added 58,200 jobs in January, including 10,900 at hospitals and health systems, according to preliminary seasonally adjusted data from the U.S. Bureau of Labor Statistics. That jump follows an average monthly increase of 49,000 in 2022, up from 9,000 in 2021, according to data compiled by Altarum.

By the end of 2022 healthcare employment was 1.2% higher compared with pre-pandemic levels. That’s greater than the increase, 0.8%, for other sectors. Hospital employment was 0.8% higher, a paltry jump compared with ambulatory settings, where the increase was 5.8%. Nursing and residential care employment was 9.1% lower.

Healthcare employment is 3.9% lower than it would have been based on pre-pandemic trends, while hospital employment is 2.4% lower, according to a data analysis from the Peterson-KFF Health System Tracker. Physician offices represent the only healthcare sub-sector that is not below trend.

Other data from the tracker show that job openings in the healthcare and social assistance combined sector hit a record high in September 2022 and remain higher than before the pandemic. Using February 2020 as a baseline, vacancies in the combined sector are 69.9% higher, compared with 49.3% in the overall economy.

Burnout continues to drive vacancies

Openings have arisen in part because of higher quit rates as staff grapple with issues such as burnout. Quit rates since early 2021 have been higher compared with pre-pandemic times, including 32.5% higher this past November. For context, the economywide difference that month was 21.1%.

The C-suite is not immune to the factors promoting increased turnover. A WittKieffer report on a survey of 233 healthcare executives found that 74% had felt burned out within the previous six months. That share was up from 60% in a comparable survey four years earlier. And 93% said burnout is negatively affecting their organization, up from 79%.

Of executives in the survey who reported feeling burned out, 43% said they often or always think about leaving their position, compared with 2% of those not experiencing burnout.

Among various recommendations in the report, boards and CEOs should encourage or require executives to take burnout seriously by availing themselves of organizational wellness resources. Leadership also should consider implementing a broader range of executive roles, such as those with a focus on community partnerships, working conditions for clinicians and staff, and digital health.

“Within existing roles, functional expertise is no longer sufficient,” the report states. “Your executives also require emotional awareness and the willingness to act inclusively to recognize the value of a much more diverse range of experiences on the executive team.”

Wage growth slows but remains substantial

Year-over-year healthcare wage growth has been curbed to a degree, Altarum reported, dropping from 7.4% in June to 5.2% in November — close to the 4.8% mark for the overall private sector. For hospitals, the year-over-year increase peaked at 8.5% in June before declining to 5.5%.

Kaufman Hall’s latest monthly National Hospital Flash Report, drawing on data from Syntellis Performance Solutions, found that year-over-year labor expenses actually declined by 1% in December. Labor expenses still ticked up by 2% compared with November and were 9% higher for the year compared with 2021 (and 24% higher than in 2019). Yet the moderation was enough for the median hospital margin to end December at 0.2% — the year’s first monthly finish in positive territory.

Relative to early 2020, however, labor expense growth remains considerable. The Peterson-KFF tracker reported an increase of 17% for the healthcare sector as of November 2022, compared with 14.6% for the economy. The increase for hospitals was 16.9% and had steadily risen in each successive month, except for slight dips in March and September 2022. Hospitals workers were making $1,482 per week in November, up from $1,268 in February 2020.

Wage increases for hospitals trailed nursing care facilities (21.8%), community care facilities for the elderly (20.5%), outpatient care centers (17.8%) and home healthcare services (17.7%). The average healthcare employee made $1,216 in November, compared with $1,039 pre-pandemic.

“While inflation has not yet seriously impacted prices of health services, rising prices of other consumer goods has put upward pressure on wages for all workers, including those in the health sector,” according to the Peterson-KFF analysis.


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