Companies ignoring employee demands will falter

Dive Brief:

  • Companies that fail to adjust to labor shortages and satisfy the growing demands of workers will likely falter as they lose the battle for talent, BlackRock CEO Larry Fink said in a letter to CEOs.
  • “No relationship has been changed more by the pandemic than the one between employers and employees,” Fink said, noting that “employees across the globe are looking for more from their employer — including more flexibility and more meaningful work.” Fink, while leading the world’s largest asset manager, has sought for a decade to influence corporate behavior through an annual CEO letter.
  • “As companies rebuild themselves coming out of the pandemic, CEOs face a profoundly different paradigm than we used to,” Fink said. Companies can no longer overlook employee mental health, insist that staff work in the office five days per week and provide modest wage increases for low- and middle-income workers.

Dive Insight:

CFOs considering an increase in prices and employee wages need to balance the imperative to sustain profits with pressures from the worst inflation and labor shortages in decades.

The persistence of COVID-19 has slowed the labor market’s post-lockdown recovery and churned up company payrolls. Fink noted that in November the quits rate, or the number of workers who left their jobs as a percent of total employment, rose to 3%, a record high first breached in September.

CFOs aiming to attract and retain employees with wage increases must take into account a 7% jump in the consumer price index (CPI) during the 12 months through December — the biggest surge since 1982.

“Workers demanding more from their employers is an essential feature of effective capitalism,” Fink said. Describing “a new world of work,” he said, “companies not adjusting to this new reality and responding to workers do so at their own peril.

“Turnover drives up expenses, drives down productivity and erodes culture and corporate memory,” Fink said. BlackRock manages more than $10 trillion in assets for institutional and retail investors.

In order to satisfy workers, CEOs must look beyond pay and workplace flexibility, Fink said. The coronavirus “shone a light on issues like racial equality, childcare and mental health — and revealed the gap between generational expectations at work.”

Fink also reiterated his support for “stakeholder capitalism,” saying that “a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.”

“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke,’” he said. “It is capitalism driven by mutually beneficial relationships between you and the employees, customers, suppliers and communities your company relies on to prosper.”

Most stakeholders expect companies to help “decarbonize” the global economy, Fink said, predicting that so-called sustainable investment will surge well beyond the $4 trillion total.

BlackRock has asked companies to set short-, medium- and long-term targets for greenhouse gas reductions which “are critical to the long-term economic interests of your shareholders,” he said.

At the same time, “divesting from entire sectors — or simply passing carbon-intensive assets from public markets to private markets — will not get the world to net zero,” Fink said, adding that “BlackRock does not pursue divestment from oil and gas companies as a policy.”

Fink’s annual letter drew fire from environmentalists.

The letter “is just another rehashing of the same vague rhetoric, without any meaningful new commitment to actually help lead the necessary transition to a climate-safe future,” Ben Cushing, the Sierra Club’s fossil-free finance campaign manager, said in a statement.

UPMC workers to strike Nov. 18

Workers at Pittsburgh-based UPMC plan to strike over wages and benefits, the Post-Gazette reported Nov. 5. 

Service Employees International Union Healthcare Pennsylvania, which does not represent the workers but is supporting them, told Becker’s Hospital Review the strike would involve workers at UPMC hospitals in Pittsburgh, including transporters, dietary workers, housekeepers, nurses, patient care techs, medical assistants, pharmacy techs, surgical techs, valets, therapists, health unit coordinators and administrative assistants. Workers plan to strike for one day on Nov. 18.

The workers are demanding a $20 per hour minimum wage, affordable high-quality healthcare, elimination of all medical debt and respect for union rights, according to a union news release.

Their strike notice came after UPMC announced Nov. 2 that the health system is giving 92,000 staff members a bonus of $500 to thank them for their work during the pandemic. UPMC will issue the bonuses on Nov. 26. The health system also announced improvements to employee compensation and benefit programs, including raising the entry level wage to $15.75 in January, according to the Post-Gazette

“There was no ‘thank you pay’ until we started organizing to strike,” Juilia Centofanti, pharmacy tech at UPMC Children’s Hospital of Pittsburgh, said in a news release.

Ms. Centofanti added that employees are “owed this [$20 per hour wage] and so much more,” and said she “will continue organizing with my co-workers for the pay, safer staffing and union rights we deserve.”

In announcing the bonuses, Leslie Davis, president and CEO of UPMC, told workers, “Over the past 20 months, you have risen in truly exceptional ways to meet challenges we could have never anticipated. With your critical support, UPMC continues to care for so many.”

A UPMC spokesperson declined to comment to Becker’s on Nov. 5.

UPMC is a $23 billion healthcare provider and insurer. SEIU Healthcare Pennsylvania has been trying to organize about 3,500 hourly workers at UPMC Presbyterian and Shadyside hospitals for nearly a decade, but has not yet held a unionization vote, according to the Post-Gazette.

Read the full report here.

Lower volumes, higher wages, supply chain disruption all dragged down hospital

Hospitals’ performances declined “by almost every metric” during September as volumes dropped, average patient stays rose and expenses increased “dramatically” due to labor and supply chain issues, Kaufman Hall wrote in its latest monthly report.

Although revenue increased compared to this time last year, the industry analyst said that these pressures have led median change in hospital operating margin to decline 18.2% from August to September, not including CARES act funding.

These declines were greatest across regions heavily affected by the recent delta surge, with the west part of the country seeing the largest year-over-year drop in its median change in operating EBITDA margin (38%), Kaufman Hall wrote.

Hospital size also played a role in margin performance, they wrote, with hospitals containing more than 500 beds seeing year-over-year declines of 36% while those with 25 or fewer beds actually seeing their margins increase year over year.

Adjusted discharges dropped 5.1% month over month but remained up 11.4% year over year. Patient days similarly dropped 1.4% month over month, “reflecting a decrease in COVID-19-related hospitalizations,” but are still up 11.4% year over year, according to the report. Notably, the average length of stay saw increases across the board—0.7% month over month and 4.8% year over year.

Expenses and revenues continued their hand-in-hand climb during September.

For the former, total expenses grew 2.2% month over month and 11.2% year over year. Labor expenses increased 1.4% month over month at the same time as workers per patient bed declined, the group wrote. Other non-labor expenses, including drugs and medical supplies, also saw a 1.3% month-over-month increase.

“Multiple factors are contributing to alarming and sustained increases in hospital expenses,” Erik Swanson, a senior vice president of data and analytics with Kaufman Hall. “Growth in labor expenses are outpacing increases in hours worked, suggesting hospitals are paying more due to nationwide labor shortages. Rising supply and drug expenses also point to worldwide supply chain issues.”

Hospital revenues saw their seventh consecutive month of year-to-date increases when compared to 2020 and 2019 alike, “due in part to yearly rate changes and the continued rise in higher acuity cases,” Kaufman Hall wrote. Specifically, gross operating revenues minus CARES grew 12.3% year over year from 2020 and 12.3% year over year from 2019, with inpatient revenue rising faster than outpatient revenue.

Month over month was a different story, however, with gross operating revenue without CARES dropping 1.4%. While inpatient revenue was up 1.5% from August, a 3.3% decline in outpatient revenue “suggests that consumer worries about accessing care during the recent delta surge have led to another downswing,” Kaufman Hall wrote.  

Kaufman Hall’s reports incorporate data from more than 900 U.S. hospitals. The September numbers follow early warnings of delta-fueled recovery roadblocks from the group’s preceding monthly reports as well as recent hospital chain earnings calls highlighting high revenues, costs and COVID-19 patient counts.

Examining the economic pressures facing healthcare workers

https://mailchi.mp/94c7c9eca73b/the-weekly-gist-april-16-2021?e=d1e747d2d8

As health systems look to address the “social determinants of health”, one obvious but often overlooked place to start is with their own employees. The left side of the graphic below shows forecasted employment growth and salaries across a range of healthcare occupations. Many of the fastest-growing healthcare jobs—including home health and personal aides, medical assistants, and phlebotomists—are among the lowest-paid.

Case in point: home health and personal care aides are among the top 20 fastest-growing occupations in the US, and median wage for these jobs is only about $12 per hour, or around 200 percent of the federal poverty level—well below the living wage in many parts of the nation. (Note that this analysis does not include support staff who are not healthcare specific, like custodial or dietary workers, so the number of low-wage workers at health systems is likely higher.)
 
Among of the many struggles lower-income healthcare employees face is finding affordable housing. Using fair market rent data from the US Department of Housing and Urban Development, the right side of the graphic shows that healthcare support workers, even at the 90th percentile salary level, struggle to afford rent in the majority of the 50 largest US metros areas. In particular, home health aides in the top decile of earners can only afford rent in 14 percent of major cities.

These disparities have caught the attention of lawmakers. The $400B in President Biden’s proposed infrastructure plan devoted to home healthcare for seniors includes tactics to increase the wages and quality of life for these caregivers. But as we await policy solutions, health systems should pay careful attention to issues of housing insecurity and other structural challenges facing their workers and look to increase wages and provide targeted support to these critical team members.