Hospitals bracing for four-year nursing shortage by partnering with colleges

The nursing shortage currently challenging healthcare systems across the country will continue to impact hospital margins for the next three to four years, thanks largely to the labor-related solutions necessary to bridge the gaps in staffing. That's according to a new report from Moody's Investor Service.  

To grow the prospective hiring pool, hospitals are implementing partnerships with local colleges to provide hands-on training to nursing students and creating internal pools to fill temporary vacancies without using contract labor, which can be very expensive.

[Also: Coping with a nursing shortage that will only get worse]

Those partnerships boost the stream of nurses to that hospital because the hospital provides a setting for their clinical training and then students develop attachments to the hospital and its personnel. This enhances the likelihood that the student will choose to work at the hospital after graduation. Not surprisingly, hospitals systems that include a nursing school will fare better than those that don't in terms of the shortage.

Labor takes up the largest share of operating expenses at about 51 percent and strategies to address the shortage will compound current financial pressures, impacting margins negatively, the report said.

[Also: Short-term, contract nurses could ease impending nursing shortage]

The aging population, increased demand for services thanks to expanded insurance coverage as well as rising rates of chronic disease are fueling the growing need for nursing staff. Other causes for the shortage include an aging nursing workforce, competition from staffing and traveler agencies, and lack of training programs and nursing instructors. These issues strain the supply of nurses, and efforts to increase their ranks will take time as nursing schools try to hire more educators to expand nursing school enrollment, Moody's said.

Moody's cited data from the Health Resources and Services Administration that showed enrollment for undergraduate nursing degrees spiked 34 percent between 2012 and 2016 and is projected to increase by another 9 percent by 2019. 

Moody's annual medians showed the average annual revenue growth of 5.7 percent between 2012 and 2016 exceeded the growth rate of salaries and benefits at 5.5 percent. However, salaries and benefits exclude recruitment expenses, which tend to be higher during a favorable economic climate because nurses tend to change employers looking for better pay.

"Until the increase in nurse supply materializes, hospitals will continue to face margin pressure because of rising wages, expensive recruitment and retention efforts that exceed revenue growth," the report said. 

Nursing shortages seem to be specific to regions, as the report showed the South and West will be more negatively affected than the North and East. The pipeline for nurses in the south and west is weakest, whereas chronic health issues like obesity and diabetes are more prevalent in the southern states.

"In particular, the need for nurses in Florida, Texas and California will be greatest. These states will not only see some of the highest population growth and an increasing average age in the US but also show the lowest number of nurses entering the workforce by 2030, per a report from American Journal of Medical Quality," Moody's said.

Finally, rural hospitals will feel the effects of the shortage more acutely because they will likely not be able to offer the same compensation as larger or urban systems, or offer employment for spouses and other "lifestyle perks." Their general lack of proximity to a nursing school also puts them at a disadvantage, as nurses tend to work near where they got their education and professional training.

"As a result, rural hospitals may need to increase their financial incentives, typically in the form of sign-on bonuses and higher wages, to attract nurses," the report said. However, since many rurals struggle financially, this may prove challenging.

Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com