Labor picture improving for hospitals, nursing homes, according to Fitch

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More rays of light are emerging for U.S. nonprofit hospitals on the labor front, according to the latest from Fitch Ratings, with hospital and ambulatory healthcare services payrolls having risen for 14 and 26 consecutive months, respectively, as of March.

Monthly job additions are also up 15,150 and 24,300 per month, respectively, between March 2022 to February 2023. This, said Fitch Ratings Director Richard Park, points to the potential of alleviating labor market pressure.

WHAT'S THE IMPACT

The improving picture also extends to nursing facilities, which have been plagued by severe staff shortages the last several months.

While still high, nursing facilities reported shortages of 17.3% and 17.7% of nurses and aides, respectively, through the end of February. These figures are well below the peak in January 2022, when 28.3% and 29.8% of nursing facilities reported shortages of nurses and aides.

"Sustained staffing improvements at nursing homes should help improve length of stay/discharge challenges at hospitals,"said Park.

That said, quit rates are still high. The number of quits in the healthcare and social assistance sector were at 2.7% as of February 2023, compared with the 1.6% average from 2010 to 2019.

Hospitals will have to invest in cost effective care solutions and develop enhanced business models that incorporate flexible staffing to adapt to labor costs that have been reset to a permanently higher level, according to Fitch.

THE LARGER TREND

Though the labor situation is improving, the cost of that labor is still quite high. Recent data published by Syntellis and the American Hospital Association show that contract labor expenses for hospitals shot up 258% from 2019 to 2022, which is linked to long-standing labor shortages in the industry.

Contract labor has helped to fill some of the gaps caused by those persistent staffing shortages, which were only made worse over the past couple of years by an increase in patient demand due to the COVID-19 pandemic. Compared to before the pandemic, hospital total expense per patient, as measured by median total expense per adjusted discharge, rose 22.5% – due largely to a 24.8% increase in labor expense per adjusted discharge from 2019 to 2022. Total expense rose 17.5%, and total labor expense jumped 20.8% over the same period.

Relying on labor from contract staffing firms contributed to higher overall labor expenses. Total contract labor expense skyrocketed 257.9% from 2019 to 2022 as a result. Contract labor full-time equivalents (FTEs) jumped 138.5% over the three-year period, and the median wage rate paid to contract staffing firms rose 56.8% as organizations competed for a limited pool of qualified healthcare professionals.

Hospitals were not the only facilities to endure staffing issues. Labor shortages at skilled nursing facilities contributed to challenges for hospital clinicians trying to transition patients to the appropriate post-acute care setting.
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com