BJC HealthCare of St. Louis and Saint Luke’s Health System of Kansas City are exploring a merger that would yield a 28-hospital, $10 billion, integrated, academic health system, the nonprofits announced Wednesday.
The two have signed a nonbinding letter of intent and “are working toward reaching a definitive agreement in the coming months” with a targeted close before the end of the year, they said. The cross-market deal would be subject to regulatory review and other customary closing conditions.
“Together with Saint Luke’s, we have an exciting opportunity to reinforce our commitment to providing extraordinary care to Missourians and our neighboring communities,” BJC HealthCare President and CEO Richard Liekweg said in the announcement. “Amid the rapidly changing health care landscape, this is the right time to build on our established relationship with Saint Luke’s. With an even stronger financial foundation, we will further invest in our teams, advance the use of technologies and data to support our providers and caregivers and improve the health of our communities.”
Both systems are based in Missouri but “serve distinct geographic markets,” they said.
St. Louis-based BJC Healthcare’s footprint is spread across the greater St. Louis, southern Illinois and southeast Missouri regions. It comprises 14 hospitals including two (Barnes-Jewish and St. Louis Children’s) affiliated with Washington University School of Medicine. It also operates multiple health service organizations providing home health, long-term care, workplace health and other offerings.
Kansas City, Missouri-based Saint Luke’s is a faith-based system with 14 hospitals and more than 100 offices throughout western Missouri and parts of Kansas. It also provides home care and hospice, adult and children’s behavioral care and a senior living community.
Should the deal close, both systems would continue to serve their existing markets and maintain their branding. The joined organization would be run from dual headquarters with BJC’s Liekweg as CEO but an initial board chair hailing from Saint Luke’s.
The organizations said their combination will expand the services available to patients and provide an estimated $1 billion in annual community benefits. The arrangement would also fuel clinical and academic research while supporting greater workforce investment.
“Our integrated health system, with complementary expertise and team of world-class physicians and caregivers, will set a new national standard for medical education and research,” Saint Luke’s President and CEO Melinda Estes, M.D., said in the announcement. “Through our decade-long relationship as a member of the BJC Collaborative, we’ve established mutual trust and respect, so the opportunity to come together as a single integrated system that can accelerate innovation to better serve patients is a logical next step.”
Years of health system consolidation have led to increased scrutiny from regulators and lawmakers, who have worried that mergers can harm competition. To date, however, efforts to block announced deals have been limited to situations where the parties are operating in the same geographic markets.
Larger, cross-market deals like BJC and Saint Luke’s have become more common in the past year, potentially due to the opportunity to distribute operational risks with limited regulatory scrutiny, analysts have noted.
Healthcare’s most recent billion-dollar deal took the industry by surprise, leaving medical experts and hospital leaders grappling to comprehend its implications.
In case you missed it, California-based Kaiser Foundation Health Plan and Hospitals, which make up the insurance and facilities half of Kaiser Permanente, announced the acquisition of Geisinger, a Pennsylvania-based health system once acknowledged by President Obama for delivering “high-quality care.”
Upon regulatory approval, Geisinger will become the first organization to join Risant Health, Kaiser Foundation’s newly created $5 billion subsidiary. According to Kaiser, the aim is to build “a portfolio of likeminded, nonprofit, value-oriented, community-based health systems anchored in their respective communities.”
Having spent 18 years as CEO of The Permanente Medical Group, the half of Kaiser Permanente responsible for the delivery of medical care, I took great interest in the announcement. And I wasn’t alone. My phone rang off the hook for weeks with calls from reporters, policy experts and healthcare executives.
After hundreds of conversations, here are the three most common questions I received about the acquisition—and the implications for doctors, insurers, health-system competitors and patients all over the country.
Question 1: Why did Kaiser acquire Geisinger?
Most callers wanted to know about Kaiser’s motivation, figuring there must’ve been more to the acquisition than the press release indicated. Although I don’t have inside information, I believe they were right. Here’s why:
Kaiser Permanente has a long and ongoing reputation for delivering nation-leading care. The organization has consistently earned the highest quality and patient-satisfaction rankings from the National Committee for Quality Assurance (NCQA), Leapfrog Group, JD Power and Medicare.
And yet, despite a 78-year history, dozens of hospitals and 13 million members across eight states, Kaiser Permanente is still considered a coastal—not national—health system. It maintains a huge market share in California and a strong presence in the Mid-Atlantic states, yet the organization has failed repeatedly to replicate that success in other geographies.
With that context, I see two compelling reasons why the Kaiser Foundation Health Plan and Hospitals wish to become a national brand:
Influence. Elected officials and regulatory bodies often turn to healthcare’s biggest players to set legislative agendas and carve out national policy. At that table, there are a limited number of seats. By shedding its reputation as a “local” health system, Kaiser could earn one.
Survival. In recent years, companies like Amazon, CVS and Walmart have been scooping up organizations that provide primary care, telehealth, home health and specialty care services. These “retail giants” are spending up to $13 billion per acquisition. And they’re consuming already-successful healthcare companies like One Medical, Oak Street Health, Signify, Pill Pack and many others. Like an army preparing for war, these corporate behemoths are amassing the components needed to battle the traditional healthcare incumbents and ultimately oust them entirely.
The Geisinger deal expands Kaiser’s footprint, adding 600,000 patients, 10 hospitals and 100 specialty and primary care clinics. These assets lend gravitas, even though Geisinger also comes with a 2022 operating loss of $239 million.
The lesson to draw from this first question is clear: size matters. The days of solo physicians and stand-alone hospitals are over. Nostalgia for medicine’s folksy, home-spun past is understandable but futile. To survive, healthcare players must get bigger quickly or team up with someone who can. That insight leads to the next question and lesson.
Question 2: How much value will Kaiser give Geisinger?
Almost everyone I’ve spoken with understands Kaiser’s desire for greater national influence, but they’re less sure how this deal will affect Geisinger Health.
Geisinger’s Pennsylvania-based hospitals and clinics have been locked in territorial battles for years with surrounding health systems. More recently, the pandemic, combined with staffing shortages and national inflation, have challenged Geisinger’s clinical performance and eroded its bottom line.
Assuming Kaiser plans to invest roughly $1 billion in each of the four to five health systems it’s planning to acquire, that surge in cash inflow will provide Geisinger with temporary financial safety. But the bigger question is how will Kaiser improve Geisinger’s value-proposition enough to grow its market share?
In public comments, Kaiser leaders spoke of the acquisition as an opportunity for Risant to “improve the health of millions of people by increasing access to value-based care and coverage, and raising the bar for value-based approaches that prioritize patient quality outcomes.”
Many of the experts I spoke with understand Kaiser’s value intent. But they question how Kaiser can could deliver on that promise since The Permanente Medical Group (TPMG) wasn’t involved in the deal.
If, hypothetically, Kaiser and Permanente leaders were to strike a deal to collaborate in the future, TPMG’s physician leaders could bring tremendous knowledge, experience and expertise to the table. Otherwise, I agree with those who’ve expressed doubt that Kaiser, alone, will be able to significantly improve Geisinger’s clinical performance.
Health plans and insurance companies play an important role in financing medical care. They possess rich data on performance and can offer incentives that boost access to higher-quality care. But insurers don’t work directly with individual doctors to coordinate medical care or advance clinical solutions on behalf of patients. And without strong physician leadership, the pace of positive change slows to a crawl. As a example, research conducted within The Permanente Medical Group found that it takes only three years to turn a proven clinical advance into standard practice—that’s nearly six times faster than the national average.
For decades, the secret sauce for Kaiser Permanente has been the cohesive success of its three parts: Kaiser Health Plan, Kaiser Foundation Hospitals and The Permanente Medical Group.
And KP’s results speak for themselves:
90% control of hypertension for members (compared to 60% for the rest of the country)
30% fewer deaths from heart attack and stroke (compared to the rest of the country)
20% fewer deaths from colon cancer
The big lesson: insurance, by itself, doesn’t drive major improvements in medicine. It must be a combined effort between forward-looking insurers and innovative, high-performing clinicians.
But there’s another takeaway here for doctors everywhere: now is the time to join forces with other clinicians in your community. Together, you can collaborate to improve clinical quality. You can augment access and make care more affordable for patients. Simultaneously, this is the time for the insurers and the retail giants to figure out which medical groups can deliver the best care and make the best partners. Neither side will flourish alone. And this leads to a third question and lesson.
Question 3: Will the deal work?
Almost all of my conversations ended with this query. I say it’s too early to tell. But as I look years down the road, one part of the deal, in particular, gives me doubt.
Today, Geisinger uses a hybrid reimbursement model—blending both “value-based” care payments with traditional “fee-for-service” insurance plans. In addition to offering its own coverage, it contracts with a variety of other insurance companies. Rarely have I seen this scattered approach succeed.
Most healthcare observers understand the inherent flaw in the “fee for service” (FFS) model is also its greatest appeal to providers: the more you do the more you earn. FFS is how nearly all financial transactions take place in America (i.e., provide a service, earn a fee). In medicine, however, this financial model results in frequent over-testing and over-treatment with minimal if any improvement in clinical outcomes, according to researchers.
The “value-based” alternative to FFS involves prepaying for care—a model often referred to as “capitation.” In short, capitation involves a single fee, paid upfront for all the medical care provided to a defined population of patients for one year based on their age and health status. The better an organization at preventing disease and avoiding complications from chronic illness, the greater its success in both clinical quality and affordability.
Within the small world of capitated healthcare payments, there’s an important element that often gets overlooked. It makes a big difference who receives that lump-sum payment.
In the case of Kaiser Permanente, capitated payments are made directly to the medical group and the physicians who are responsible for providing care. In almost every other health system, an insurance company collects capitated payments but then pays the medical providers on a fee-for-service basis. Even though the arrangement is referred to as capitated, the incentives are overwhelmingly tied to the volume of care (not the value of that care).
In a mixed-payment model, doctors and hospitals invariably prioritize the higher paying FFS patients over the capitated ones. When I think about these conflicting incentives, I’m reminded of a prominent medical group in California. It had a main entrance for its fee-for-service patients and a second, smaller one off to the side for capitated patients.
I doubt the time spent with the patient—or the overall care provided—was equal for both groups. When income is based on quantity of care, not quality, clinicians focus more on treating the complications of chronic disease and medical errors rather than preventing them in the first place. Geisinger has walked this tightrope in the past, but as economic pressures mount, I fear doctors will find the two sets of incentives conflicting and difficult to navigate.
The big lesson: as financial pressures mount, the most effective approaches of the past will likely fail in the future. All healthcare organizations will need to make a decision: keep trying to drive volume and prices up through FFS or shift to capitation. Getting caught in the middle is a prescription for failure.
Examining the healthcare acquisitions made by Amazon and CVS, it’s clear these giants have decided to move aggressively toward a model more like Kaiser Permanente’s—one that brings insurance, pharmacy, physicians and sophisticated IT systems under one roof. These companies, along with Walmart, are aggressively marching down a path toward capitation, focusing on Medicare Advantage (the value-based option for Americans 65+) as an entry point.
So far, Geisinger has hedged its bets by maintaining a hybrid revenue stream. I doubt they can do so successfully in the future. That brings us to a final question.
The biggest question remaining
Over the next decade, hospital systems, insurers and retailers will battle for healthcare supremacy. The most recent Kaiser-Geisinger deal reflects an industry that’s undergoing massive change as health systems face intensifying pressure to remain relevant.
The most important issue to resolve is whether these shifts will ultimately help or harm patients. I’m optimistic for a positive outcome.
Whether or not the retail giants displace the incumbents, they will redefine what it takes to win. For all their faults, companies like Amazon and Walmart care a lot about meeting the needs of customers—a mindset rarely found in today’s healthcare world. As these companies grow ever larger, they’ll place consumer-oriented demands on doctors and hospitals. This will require care providers to deliver higher quality care at more affordable prices.
The retailers will only do deals with the best of the best. And they’ll kick the underachievers to the curb. They’ll use their sophisticated IT systems to better coordinate and innovate medical care. Insurers, hospitals and doctors who fail to keep up will be left behind.
Over time, patients will find themselves with far more choices and control than they have today. And I’m optimistic that will be good for the health of our nation.
Fitch Ratings Senior Director Kevin Holloran dubbed 2022 the worst operating year ever and most nonprofit health systems reported large losses. However, the losses are shrinking and some systems have even reported gains during 2023 so far.
Cleveland Clinic reported $335.5 million net income for the first quarter of the year, compared with a $282.5 million loss over the same period in 2022. The health system reported revenue of $3.5 billion for the quarter. Cleveland Clinic has 321 days cash on hand, which puts it in a strong position for the future.
Boston-based Mass General Brighamreported $361 million gain for the second quarter ending March 31, which is up from a $867 million loss in the same period last year. The health system reported quarterly revenue jumped 11 percent year over year to $4.5 billion. The system’s quarterly loss on operations was down significantly this year, hitting $8 million, compared to $183 million last year.
Renton, Wash.-based Providence reported first quarter revenues were up 5.1 percent in 2023 to $7.1 billion, and operating loss is also moving in the right direction. The system reported $345 million operating loss in the first quarter of 2023, down from $510 million last year.
All three systems cited ongoing labor shortages and labor costs as a challenge, but are working on initiatives to reduce expenses. Cleveland Clinic and Mass General Brigham reported operating margin improvement to nearly positive numbers.
Kaiser Permanente, based in Oakland, Calif., also reported operating income at $233 million for the first quarter of the year, an increase from $72 million operating loss over the same period last year. The system is focused on advancing value-based care for the remainder of the year and its health plan grew more than 120,000 members year over year.
Even more regional systems are stemming their losses. SSM Health, based in St. Louis, went from a $57.4 million loss for the first quarter of 2022 to $16.5 million quarterly loss this year. Revenue increased 13.3 percent to $2.5 billion for the quarter, with increased labor expenses and inflation on supply costs continuing to weigh on the system.
UCHealth in Aurora, Colo., also reported a first quarter income of $61.8 million and revenue of more than $5 billion.
Not every system is seeing losses decline. Chicago-based CommonSpirit Health, which reported larger operating losses in the first quarter year over year, hitting $658 million and $1.1 billion for the nine-month’s end March 31. The system was able to reduce contract labor costs, but still finds hiring a challenge and spent time last year recovering from a cybersecurity incident.
Hospitals face a long road to financial recovery from the pandemic as inflation persists and labor shortages become the norm, but movement in the right direction is welcome.
Kaiser Permanente on Wednesday announced it is acquiring Geisinger Health, and Geisinger will operate independently under a new subsidiary of Kaiser called Risant Health.
The combination of the two companies will need to be reviewed by federal and state agencies, but if approved, the two companies will have more than $100 billion in combined annual revenue.
Geisinger will operate independently as part of Risant Health, which will be headquartered in Washington, D.C. and will be led by Geisinger president and CEO Jaewon Ryu. The health systems said they intend to acquire four or five more hospital systems to fold into Risant in an effort to reach $30 billion to $35 billion in total revenue over the next five years.
In an interview, Ryu and Kaiser chair and CEO Greg Adams said Risant will specifically target hospital systems already working to move into value-based care.
According to Adams, Risant Health “is a way to really ensure that not-for-profit, value-based community health is not only alive but is thriving in this country.”
“If we can take much of what is in our value-based care platform and extend that to these leading community health systems, then we extend our mission,” Adams said. “We reach more people, we drive greater affordability for health care in this country.”
Why we’re ‘cautiously optimistic’ about this acquisition
Just when you thought healthcare couldn’t get more interesting, Kaiser and Geisinger announce their union through newly established Risant Health. At first pass, it is hard to see a downside with this deal — and that’s something that raises my “spidey-senses.”
Kaiser and Geisinger are coming together through a vehicle that could allow them to clear an increasingly skeptical Federal Trade Commission. It affords two health systems — both in comparatively weaker financial positions than before the pandemic — the ability to get bigger through the merger. Its pitch is decidedly hospital- (and in the future provider) led, with Geisinger retaining its brand and elevating its CEO to the head of Risant. It also gives Geisinger and future partners the latitude to pursue their own payer relationships.
In addition, it is ostensibly a play to increase providers’ control over the nature and pace of value-based care (VBC) adoption. In its press release, Kaiser acknowledges that its closed network model of care management hasn’t scaled well to other markets. And Geisinger, with its own health plan and a track-record of developing its own VBC incentives, is no neophyte and brings a clear wealth of expertise.
Without a doubt, the offer to future partners is compelling: “Come for the size and stay for the value-based care.” But like all things in life, it’s all in the details. And that’s where my “spidey-sense” kicks in.
Partnership and affiliation models alone do not make the hard work of VBC easier. While this emerging group could become a valuable, provider-led clearing house for VBC concepts, applying them in communities remains a stubborn challenge that requires individual work and leadership.
The true test of the concept will come when the first new partner joins. How they decide to participate and whether the model has the right mix of scale and flexibility is what I’ll be watching closely. The overall objective and success measure of this endeavor remains somewhat opaque, but I would say that the concept has real legs here. Right now, I’m leaning toward “cautiously optimistic.”
As care continues to shift to lower cost ambulatory surgery centers (ASCs), the graphic above looks at recent growth and consolidation in the ASC market.
From 2012 to 2022, the five largest operators increased their collective ownership of ASC facilities from 17 to 21 percent, and were responsible for over 50 percent of total facility growth in that period.
While physicians still fully own over half of the nation’s ASCs, the national chains tend to run larger, multispecialty facilities responsible for an outsized proportion of procedures and revenue.
The likes of Tenet, Optum, and HCA are betting big on ASCs, banking on projections that the market will grow by over 60 percent in the next seven years.
(Though AmSurg’s parent company, Envision Healthcare, filed for bankruptcy, AmSurg is buying Envision’s remaining ASCs to retain its significant foothold in the market.)
While many high-revenue specialties, notably orthopedics and gastroenterology, have already seen a significant shift to ASCs, cardiology is one of the most promising service lines for ASC growth, with some predicting that a third of cardiology procedures will be performed in ambulatory settings in the next few years.
The shift of surgeries from hospitals to ASCs is daunting for health systems, who stand to lose half or more of the revenue from each case—if they’re able keep the procedure within the system.
In the meantime, low-cost ASC operators will continue to add new facilities that deliver high margins to fuel their growth.
Given the somewhat frantic pace at which transactions are happening in healthcare these days, with insurers buying up primary care assets, private equity firms rolling up specialty practices, hospital systems looking to consolidate, and everyone circling around digital players, it’s little surprise that we’ve begun to hear some angst among health system executives about their ability to keep pace.
“Some of these disruptors are focused entirely on M&A strategies,” one CEO told us recently. “My team still has to run a complex health system at the same time. It takes us forever to get deals done.”
The concern is legitimate: for many health systems, M&A has been a one-at-a-time proposition. Evaluating and completing an acquisition takes many months, if not a year or more—and the integration of even a relatively small entity into a larger health system often takes longer.
There is a growing sentiment that the pace of single, sequential mergers and acquisitions will not allow health systems to keep pace.
One CFO shared, “We did a large merger a decade ago, and we’re just at the point of feeling like we act as a single system. We’re looking at one or two others, and we can’t delay the next opportunity because we’re still working to integrate the last.”
His strategy: systems aiming to build a super-regional organization should “rapidly build the network and integrate it once you have all the pieces”. It’s a strategy, he said, that is serving vertically integrated payers like CVS and UHG well. To keep pace in a consolidating market, health systems must maintain a pipeline of potential partners that fit with their vision. But we’re also wary of “saving” all the integration until the deals are done.
Rather, health systems looking to rapidly expand must be able to “parallel process” multiple acquisitions and integration. With smaller financial reserves compared to payer behemoths, health systems need mergers to generate value more quickly. And moreover, as providers are held to a higher standard by regulators, new partnerships will benefit from demonstrating value to consumers and communities.
Kaiser Permanente is acquiring Geisinger Health and forming a new nonprofit to buy and operate other value-oriented nonprofit systems, the organizations announced Wednesday.
The new nonprofit, Risant Health, will operate separately from Kaiser Permanente. Geisinger will become part of Risant but maintain its own name and mission, according to a press release.
Geisinger president and CEO Jaewon Ryu will be CEO of Risant as the transaction closes, subject to regulatory review. Risant will have its headquarters in Washington, D.C..
Risant represents an opportunity for Kaiser, which currently operates in eight states and Washington, D.C., to expand its reach nationwide through targeted acquisitions of nonprofit community health systems, as smaller hospitals continue to struggle in a difficult operating environment.
About half of all U.S. hospitals finished last year with negative margins, according to consultancy Kaufman Hall.
Kaiser, which reported $95 billion in revenue in 2022, plans to spend $5 billion on Risant over the next five years, and add five or six health systems to Risant over that period, according to reports.
Kaufman Hall said recently it expects a “new wave of transaction activity” and a growing number of cross-regional partnerships.
Pennsylvania-based Geisinger has 10 hospital campuses and a health plan that covers more than 500,000 members. It has more than 25,000 employees. Both Geisinger and Kaiser reported operating losses last year, as supply and labor expenses rose.
Federal and state regulators still need to approve the deal, the financial terms of which were not disclosed. It’s likely to face a high bar for approval as regulators more aggressively scrutinize hospital mergers.
On today’s episode of Gist Healthcare Daily, Kaufman Hall co-founder and Chair Ken Kaufman joins the podcast to discuss his recent blog that examines Ford Motor Company’s decision to stop producing internal-combustion sedans, and talk about whether there are parallels for health system leaders to ponder about whether their traditional strategies are beginning to age out.
Inflation moderated notably in March as a decline in gas prices helped to pave the way for the slowest pickup in prices in nearly two years, providing relief for many American consumers and a positive talking point for President Biden.
The Consumer Price Index climbed 5 percent in the year through March, down from 6 percent in February. That marked the slowest pace since May 2021.
Still, the details of the report underlined that inflation retains concerning staying power under the surface: A so-called core index that aims to get a clearer sense of price trends by stripping out food and fuel costs, both of which can be volatile, picked up by 5.6 percent from a year earlier. That was up slightly from February’s 5.5 percent increase, and it marked the first acceleration in the yearly number since September.
The mixed signals in the fresh inflation data — which, taken as a whole, suggested that price increases are meaningfully moderating but the progress remains gradual — come at a challenging economic moment for the Federal Reserve. The central bank is the government’s main inflation fighter, and it has been trying to wrestle price increases back under control for slightly more than a year, raising interest rates to nearly 5 percent from near zero as recently as March 2022 to slow the economy and weigh down costs.
Officials are now assessing how their policy changes are working, and they are trying to gauge how much more they need to do to ensure that price increases come fully under control. Inflation has been slowing after peaking at about 9 percent last summer, but the process has been a slow one. It remains a long way back to the 2 percent inflation that was normal before the onset of the pandemic in 2020.
Uncertainty over how quickly and completely price increases will cool is being compounded by recent developments. A series of high-profile bank blowups last month could slow the economy, but it is unclear by how much. Some Fed officials are urging caution in light of the turmoil, even as others warn that the central bank should keep its foot on the economic brake and remain focused on its fight against rising prices.
The new data “solidifies the case for the Fed to do another hike in May, and to proceed cautiously from here,” said Blerina Uruci, chief U.S. economist at T. Rowe Price, later adding that “it will take time to bring inflation down.”
Fed officials target 2 percent inflation, which they define using a different index: the Personal Consumption Expenditures measure, which uses some data from the consumer price measure but is calculated differently and released a few weeks later. That measure has also been sharply elevated.
While Wednesday’s report showed an uptick in core inflation on an annual basis — one that economists had largely expected — Ms. Uruci said that it also offered some encouraging signs. The core inflation measure slowed slightly on a monthly basis, when the March figures were compared to those in February.
And a few important services prices, which the Fed is watching closely for a sense of whether price increases are poised to fade, cooled notably. Rent of primary residences picked up 0.5 percent compared to the prior month, down from 0.8 percent in the previous reading, for instance. Housing inflation broadly is expected to slow in 2023, and that appears to be starting to take hold.
“There are signs in the details to suggest we’re making some progress toward slowing inflation,” Ms. Uruci said. “It’s not where it needs to be, but it’s progress.”
But those hopeful signs do not mean that inflation will fade smoothly and rapidly. The slowdown in the overall index, for instance, may not last: A big chunk of the decline is owed to a drop in gas prices that may not be sustained.
And a few other indexes continued to show quick price increases, including new vehicles and hotel rooms.
As they try to bring inflation to heel, some central bankers have suggested that they may need to further raise interest rates.
The Fed’s latest estimates, released shortly after the collapse of Silicon Valley Bank and Signature Bank in March, suggested that officials could lift rates another quarter-point this year, to just above 5 percent. The central bank will announce its next policy decision on May 3.
On Tuesday, John C. Williams, the president of the Federal Reserve Bank of New York, said that the Fed had more work to do in bringing down price increases and suggested that the central bank’s March forecast for one more quarter-point rate move was still a “reasonable starting place.”
But Austan D. Goolsbee, the president of the Federal Reserve Bank of Chicago, suggested that recent bank failures could make it tougher for businesses and consumers to access credit, slowing the economy, stoking uncertainty and creating a “need to be cautious.”
“We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation,” Mr. Goolsbee said.
Higher interest rates have made it much more expensive to borrow money to buy a house or expand a business. That is slowing economic activity. As demand cools and the labor market softens, wage growth is also moderating.
That could help to pave the way for cooler inflation. When wages are climbing quickly, companies might charge more to try to cover their labor bills, and their customers are likely to be able to afford the steeper prices. But as households become more strapped for cash, it could become harder for businesses to raise prices without scaring away shoppers.
Healthcare job growth continued to climb in March with the industry adding 34,000 jobs last month, according to a report released from the Bureau of Labor Statistics on April 7.
The job growth is lower than the six-month average monthly job gain of 54,000 in healthcare. Home health services and hospitals recorded the most gains, adding 15,000 and 11,000 jobs, respectively.
The BLS report comes as demand for temporary nurses declines with median rates of temp staff billing down, according to a report out last week from Jefferies.
Labor shortages have been a continuing obstacle for hospitals and health systems, after the coronavirus pandemic spurred industry job reductions and clinicians left the field due to burnout. Temporary nurse staffing agencies swooped in to ease labor shortages, with hospital systems paying higher rates to temp agencies to staff their floors.
But hospitals may be catching a break from labor and temporary staffing pressures. Data from private healthcare staffers, including Aya Healthcare and Fastaff, show that demand for temporary nurses declined by 2.2%, with median bill rates dropping 2.9% week over week, according to the Jefferies report.
The accelerated decline in demand and bill rates could be a sign of labor woes easing, especially for nurse-dependent hospital operators like HCA Healthcare, according to the report.
“As we see order and bill rate data for temp nurses decline, we are gaining optimism that nurse-dependent healthcare providers such as hospitals [HCA Healthcare, Community Health Systems, Tenent Healthcare] and post-acute players [Amedisys, Encompass Health, Enhabit] will begin to see labor headwinds ease, which should help these companies achieve or exceed earnings goals this year,” the report said.
While labor shortages have battered HCA Healthcare and CHS, both operators suggested in recent earnings reports that labor pains could be easing. HCA reported in January that it was decreasing its nursing turnover and CHS reported in October that it had made progress in reducing its contract labor expenses.
Hospitals continue gaining jobs
Reports have showed that labor shortages appear to be easing this year, with a December report from Fitch Ratings noting that staffing shortages at nonprofit hospitals appeared to be incrementally waning.