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Column | Operations Management

Gail Wilensky: Labor issues dominate hospitals’ concerns for early 2022

Column | Operations Management

Gail Wilensky: Labor issues dominate hospitals’ concerns for early 2022


The first quarter of 2022 saw a confluence of trends emerging from the pandemic, some good and some bad for hospitals. We can only hope these trends represent a wind-down of COVID-19's effects on the industry. The important thing for hospitals now is to take stock of where they are and what should come next.

Unfortunately for hospitals, Moody’s industry outlook for 2022 indicates that staffing shortages and increased labor costs are likely to continue driving expenses higher through increased labor costs. And hospitals themselves, not surprisingly, are corroborating this prediction with reports of higher expenses and decreases in their operating cash flows. Voluntary turnover was increasing by 2 million annually going into the pandemic. And midway through the first quarter of 2022, healthcare saw its payrolls increase by 63,500 new employees, indicating a strong labor market. That’s good for labor, but it’s challenging for hospitals and other healthcare institutions employing that labor.a

Trends shaping the landscape

The solution for hospitals starts with recognizing the COVID-19-related trends that continued to unfold in this year’s first quarter.

Ongoing deferrals of elective procedures. At the start of 2022, the nation continued to see a large number of COVID-19 cases. As a result, many hospitals had to continue postponing elective procedures, leaving them with fewer opportunities to improve their bottom lines.

A drop in COVID-19 cases. As a countervailing trend, COVID-19 cases began showing significant declines in many areas in mid-January. As of March 14, new COVID-19 cases had dropped precipitously, with a reported daily average of 33,854 new cases nationwide, down from 806,795 as of Jan.14.b These declines have not occurred uniformly, however. During this same period, Texas and California continued to report new COVID-19 cases averaging 4,405 and 4,652  per week, respectively, as of March 13.c

Declining hospital margins. A continued downward trend in hospital margins has been observed since the pandemic began, as a result of an almost 25% increase in total expense per adjusted discharge since late 2019 driven by the influx of patients with COVID-19.

Ongoing workforce challenges. COVID-19 clearly contributed to employment and staffing issues reported in 2020 and 2021. However, it would be a mistake to attribute all these challenges to COVID-19, because even before the pandemic, hospitals were contending with these issues. Finding effective solutions therefore will require thinking about contributing circumstances unrelated to COVID-19.

3 takeaways for hospitals

As hospitals work to address these challenges, they should keep three considerations in mind.

1  Workforce shortfalls derive largely from preexisting demographic and economic trends. It is important to recognize that shortfalls hospitals are reporting are primarily a result of two trends that transcend COVID-19:

  1. Demographic shifts associated with the aging of the population
  2. Economic trends that have led many workers to reconsider how and where they want to spend their working hours

The pandemic gave many workers an opportunity to set aside pandemic-related funding and save more money than normal, allowing them time to take a break before rejoining the labor market. It also forced other workers into early retirement because their jobs were eliminated or they found the working conditions unacceptable. People who have retired, whether planned or unplanned, are unlikely to rejoin the workforce.

2  The pipeline of new healthcare workers needs to be strengthened. Even before the pandemic, shortages of various physician specialties had been widely predicted. An increased number of physicians and nurses will need to be either trained or recruited from other countries.

Addressing this challenge will require overcoming existing obstacles. For example, many more students have indicated an interest in nursing than can be currently accommodated, either because of a shortage of clinical sites or a shortage in clinical faculty. Whether this interest will continue after the pandemic is unclear, but increasing the training programs for various levels of nursing professionals  could have a marked effect on the future availability of nursing care.

The Consolidated Appropriations Act of 2021 included funding for 1,000 new graduate medical education (GME) positions, 200 to be allotted each of the subsequent fiscal years. CMS will engage in a separate round of applications to allocate these slots but has yet to establish parameters for the allocation. This marks the first such increase in funded GME positions in several decades, but it will likely only have a modest effect on the number of trained physicians available for future populations.

3  Care models will be needed that involve greater use of technology and less one-on-one in-person contact with clinicians. Telemedicine is the most obvious example of such care and was used extensively during the pandemic. As many patients and physicians discovered, many types of visits can be completed electronically, which can be especially effective if the electronic visits can be interspersed with in-person visits. Also, personal visits can be supplemented with technological assists that provide ongoing monitoring of patients at risk. These types of assists can alert clinicians when a visit or other type of contact is warranted while reducing reliance on in-person visits.

Hospitals financial stability at stake

The pandemic only muddied the waters for hospitals already challenged to find ways to achieve financial sustainability. In some cases, hospitals’ efforts in addressing the three considerations described here will only improve healthcare delivery, with no measurable improvement in hospitals’ financial stability. The fundamental question may be whether the current number and distribution of hospitals is correct for our future needs. But that will take time to assess.

We need only recall that the financial stability of many hospitals was already challenged before the pandemic. Many were consolidating operations to reflect changing delivery of care patterns. We may well see this trend resume as the nation moves to a post-pandemic period.

Only time will tell. 

Footnotes

a. Muoio, D., “Healthcare sector adds a hefty 63,500 jobs in February but still lags pre-pandemic employment,” Fierce Healthcare, March 7, 2022.

b. “Coronavirus in the U.S.: Latest map and case count,” The New York Times, Page accessed March 15, 2022.

c. CDC, “Trends in number of COVID-19 cases and deaths in the US reported to CDC, by state/territory,” Page accessed March 15, 2022.

About the Author

Gail R Wilensky, PhD,

is a senior fellow at Project HOPE; a former administrator of the Health Care Financing Administration, now CMS; and a former chair of the Medicare Payment Advisory Commission. 

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