Hospitals lead October job gains in healthcare sector
- Hospitals added 28% of the healthcare jobs that were gained in October.
- Hospitals’ margins have improved overall, but patient volumes continue to lag.
- The pandemic has fueled a shift to outpatient settings, which in turn is straining hospital finances, according to a report.
Hospital job creation led the overall healthcare sector in October with 16,200 new positions, according to preliminary federal reporting.
Healthcare employment increased by 58,000 for the month, according the Nov. 6 report by the U.S. Bureau of Labor Statistics (BLS).
Other October job gains included:
- 14,000 in physician offices
- 11,000 in dentist offices
- 10,000 in outpatient care centers
However, those gains were somewhat offset by 9,000 job losses in nursing and residential care facilities. Other ambulatory healthcare services also lost 1,900 positions.
The hospital job gains were a big turnaround from September, when hospitals shed 3,900 positions. Despite gains since the steep job losses in the spring, hospitals still had 70,900 fewer positions in October than they did in October 2019, according to BLS.
Hospitals’ total labor expenses increased by 1.2% in September compared with September 2019, according to the latest Kaufman Hall report on the finances of more than 900 hospitals. Additionally, FTEs per adjusted occupied bed increased by 0.9% year over year (YOY). The report’s authors attributed the increase to the return of workers furloughed amid steep revenue cuts earlier in the year.
Hospital finances are rebounding
Hospitals’ margins continue to fluctuate from month to month, Kaufman Hall found. However, September margins were higher than in September 2019. Year-to-date (YTD) margins were 2.7% higher compared with 2019 when CARES Act provider funding was included. Kaufman Hall’s EBITDA Margin Index was 7.5% YTD.
For a seventh consecutive month, hospitals in September had lower patient volumes than in 2019.
Kaufman Hall attributed the increasing margins amid suppressed volumes to several factors, including an increase in average length of stay (LOS) by about 2.3% YTD and YOY. That led to an increase in payment per case, with a 5.8% increase in net patient service revenue and a 10.7% increase per adjusted discharge compared with September 2019.
Other helpful factors include:
- The 20% Medicare COVID-19 add-on payment
- Suspension of the 2% payment cut from sequestration
- Reduced bad debt
Headwinds loom for hospitals
Moody’s continues to have a negative outlook for the hospital sector and recently noted a range of short- and longer-term obstacles to improved finances. Those challenges include:
- Continuation of pre-pandemic trends shifts in care toward nonhospital settings
- Acceleration of the decrease in volumes due to patients’ fear of exposure to the coronavirus
- Acceleration of health plan initiatives to move care previously delivered in hospitals to other settings
“This is credit negative for hospitals because the loss of volumes will create earnings headwinds,” the report states.
The effects could be mitigated for health systems that offer numerous outpatient services “because of their ability to capture more surgical volumes.”
The trends likely will fuel more acquisition and development of outpatient facilities by acute care hospitals, according to the report.
Similarly, Moody’s expects hospital emergency departments will continue to lose volumes to less-expensive urgent care centers.
Earlier in 2020, Medicare allowed ambulatory surgical centers to begin performing total knee arthroplasties (replacements) on healthy Medicare enrollees. Moody’s noted that many commercial health plans since have since modified their policies to drive more highly profitable orthopedic procedures out of hospitals and into outpatient settings.
“After the pandemic, many patients will also want to keep their hospital stays to a minimum and bypass long-term care facilities and skilled nursing facilities, which will remain higher-risk settings for contracting coronavirus or other infections,” the report states.
That trend likely will fuel an increased interest in home-based care among patients and health plans, the report states.