As COVID hospitalizations surge to new highs, healthcare workers have become the rate-limiting factor for most hospitals’ ability to deliver care. Using self-reported data collected by the Department of Health and Human Services, the graphic above shows that hospital staffing concerns reached an all-time high this month, with nearly one in three hospitals reporting a critical shortage. (Anecdotal evidence from our conversations with hospital leaders suggests that the actual number in crisis may be even higher, with every system we’ve spoken to in the past month reporting severe staffing challenges.)
During previous surges, COVID hospitalizations and reported staffing shortages have ebbed and flowed together. However, staffing challenges and case numbers became decoupled during the Delta surge, as the percentage of hospitals reporting staffing shortages did not go down as the Delta wave subsided.
With a growing number of nurses and other staff choosing early retirement or looking for jobs in other sectors, health systems are navigating the Omicron spike with a smaller pool of workers. And now the high transmissibility of the Omicron variant is forcinghealthcare workers to quarantine in droves.
As shown on the map, this is playing out both in highly vaccinated states like Vermont and California, and less-vaccinated places like West Virginia and Wyoming. That’s leading some state health officials and health systems to allow COVID-positive staff who are asymptomatic or experiencing mild symptoms to continue working—a policy which is being sharply criticized by nurses.
While the end of the Omicron surge should bring some relief, longer-term staffing challenges will surely remain for most health systems.
Some pundits claim that current reporting on COVID hospital admissions is overly pessimistic, failing to account for a distinction between patients admitted explicitly “for COVID”, and those admitted for other reasons who also, incidentally, have COVID. The latter now comprise up to half of some health systems’ COVID patients.
In an article in The Atlantic this week, reporter Ed Yong rejects this dichotomy, on the grounds that it ignores both the significant number of people for whom COVID exacerbates underlying chronic conditions, as well as the challenges any patient with COVID poses to hospitals. As he points out, those patients still require isolation and special safety measures, further worsening the burden on an already-strained staff.
The Gist: For hospitals, dealing with endemic COVID will mean establishing strategies to manage COVID-positive patients without postponing much needed non-emergency care, and without overly taxing a stretched workforce. Downplaying the burden of “incidental COVID” is not helpful, but sustaining operations while on perpetual crisis footing will prove untenable.
Every hospital in America has been affected by the growing shortage of nursing talent as the pandemic persists. This week a health system chief operating officer shared her greatest concern about the future of the nursing workforce: “We’re under immense pressure to find any nurses we can to keep units and operating rooms open. But if I think about the long-term impact, what I am most worried about is losing our most experienced nurses en masse.”
The average age of a nurse is 52, and 19 percent of nurses are over 65. Health systems have been facing a wave of retirements of Baby Boomer nurses, and the stresses of the pandemic, both in the workplace and at home, have dramatically accelerated the rate of tenured nurses leaving the profession, taking their well-honed clinical acumen with them.
“We’re looking at ways to increase the nursing pipeline, but you can’t replace a nurse with decades of experience one-to-one with someone just out of school, and expect the same level of clinical management, particularly for complex patients,” our COO colleague shared.
In the near term, her system is looking at two sets of strategies to maintain the nursing “brain trust”.
First, they hope to retain tenured nurses with job flexibility: “We’re not just losing nurses to retirement, we’re losing them to Siemens and Aetna—not because they are excited about that work, but because they don’t want to work a 12-hour shift. We have to be better about creating part-time, flexible schedules.”
Second, they are piloting telenursing and decision-support solutions to provide guidance and a second set of eyes for new nurses. These tools have also helped in new nurse recruitment. We’d predict the workforce crisis will persist far beyond the pandemic, and require rethinking of training, process automation, and the boundaries of practice license. But in the near-term, retaining and upskilling the talent we have is essential to maintaining access and quality.
Hospitals across the U.S. are feeling the wrath of the omicron variant and getting thrown into disarray that is different from earlier COVID-19 surges.
This time, they are dealing with serious staff shortages because so many health care workers are getting sick with the fast-spreading variant. People are showing up at emergency rooms in large numbers in hopes of getting tested for COVID-19, putting more strain on the system. And a surprising share of patients — two-thirds in some places — are testing positive while in the hospital for other reasons.
At the same time, hospitals say the patients aren’t as sick as those who came in during the last surge. Intensive care units aren’t as full, and ventilators aren’t needed as much as they were before.
The pressures are nevertheless prompting hospitals to scale back non-emergency surgeries and close wards, while National Guard troops have been sent in in several states to help at medical centers and testing sites.
Nearly two years into the pandemic, frustration and exhaustion are running high among health care workers.
“This is getting very tiring, and I’m being very polite in saying that,” said Dr. Robert Glasgow of University of Utah Health, which has hundreds of workers out sick or in isolation.
About 85,000 Americans are in the hospital with COVID-19, just short of the delta-surge peak of about 94,000 in early September, according to the Centers for Disease Control and Prevention. The all-time high during the pandemic was about 125,000 in January of last year.
But the hospitalization numbers do not tell the whole story. Some cases in the official count involve COVID-19 infections that weren’t what put the patients in the hospital in the first place.
Dr. Fritz François, chief of hospital operations at NYU Langone Health in New York City, said about 65% of patients admitted to that system with COVID-19 recently were primarily hospitalized for something else and were incidentally found to have the virus.
At two large Seattle hospitals over the past two weeks, three-quarters of the 64 patients testing positive for the coronavirus were admitted with a primary diagnosis other than COVID-19.
Joanne Spetz, associate director of research at the Healthforce Center at the University of California, San Francisco, said the rising number of cases like that is both good and bad.
The lack of symptoms shows vaccines, boosters and natural immunity from prior infections are working, she said. The bad news is that the numbers mean the coronavirus is spreading rapidly, and some percentage of those people will wind up needing hospitalization.
This week, 36% of California hospitals reported critical staffing shortages. And 40% are expecting such shortages.
Some hospitals are reporting as much as one quarter of their staff out for virus-related reasons, said Kiyomi Burchill, the California Hospital Association’s vice president for policy and leader on pandemic matters.
In response, hospitals are turning to temporary staffing agencies or transferring patients out.
University of Utah Health plans to keep more than 50 beds open because it doesn’t have enough nurses. It is also rescheduling surgeries that aren’t urgent. In Florida, a hospital temporarily closed its maternity ward because of staff shortages.
In Alabama, where most of the population is unvaccinated, UAB Health in Birmingham put out an urgent request for people to go elsewhere for COVID-19 tests or minor symptoms and stay home for all but true emergencies. Treatment rooms were so crowded that some patients had to be evaluated in hallways and closets.
As of Monday, New York state had just over 10,000 people in the hospital with COVID-19, including 5,500 in New York City. That’s the most in either the city or state since the disastrous spring of 2020.
New York City hospital officials, though, reported that things haven’t become dire. Generally, the patients aren’t as sick as they were back then. Of the patients hospitalized in New York City, around 600 were in ICU beds.
“We’re not even halfway to what we were in April 2020,” said Dr. David Battinelli, the physician-in-chief for Northwell Health, New York state’s largest hospital system.
Similarly, in Washington state, the number of COVID-19-infected people on ventilators increased over the past two weeks, but the share of patients needing such equipment dropped.
In South Carolina, which is seeing unprecedented numbers of new cases and a sharp rise in hospitalizations, Gov. Henry McMaster took note of the seemingly less-serious variant and said: “There’s no need to panic. Be calm. Be happy.”
Amid the omicron-triggered surge in demand for COVID-19 testing across the U.S., New York City’s Fire Department is asking people not to call for ambulance just because they are having trouble finding a test.
In Ohio, Gov. Mike DeWine announced new or expanded testing sites in nine cities to steer test-seekers away from ERs. About 300 National Guard members are being sent to help out at those centers.
In Connecticut, many ER patients are in beds in hallways, and nurses are often working double shifts because of staffing shortages, said Sherri Dayton, a nurse at the Backus Plainfield Emergency Care Center. Many emergency rooms have hours-long waiting times, she said.
“We are drowning. We are exhausted,” Dayton said.
Doctors and nurses are complaining about burnout and a sense their neighbors are no longer treating the pandemic as a crisis, despite day after day of record COVID-19 cases.
“In the past, we didn’t have the vaccine, so it was us all hands together, all the support. But that support has kind of dwindled from the community, and people seem to be moving on without us,” said Rachel Chamberlin, a nurse at New Hampshire’s Dartmouth-Hitchcock Medical Center.
Edward Merrens, chief clinical officer at Dartmouth-Hitchcock Health, said more than 85% of the hospitalized COVID-19 patients were unvaccinated.
Several patients in the hospital’s COVID-19 ICU unit were on ventilators, a breathing tube down their throats. In one room, staff members made preparations for what they feared would be the final family visit for a dying patient.
One of the unvaccinated was Fred Rutherford, a 55-year-old from Claremont, New Hampshire. His son carried him out of the house when he became sick and took him to the hospital, where he needed a breathing tube for a while and feared he might die.
If he returns home, he said, he promises to get vaccinated and tell others to do so too.
“I probably thought I was immortal, that I was tough,” Rutherford said, speaking from his hospital bed behind a window, his voice weak and shaky.
But he added: “I will do anything I can to be the voice of people that don’t understand you’ve got to get vaccinated. You’ve got to get it done to protect each other.”
At the 390-bed Terrace View nursing home on the east side of Buffalo, 22 beds are shut down. There isn’t enough staff to care for a full house, safely or legally.
That means some fully recovered patients in the adjacent Erie County Medical Center must stay in their hospital rooms, waiting for a bed in the nursing home. Which means some patients in the emergency department, who should be admitted to the hospital, must stay there until a hospital bed opens up. The emergency department becomes stretched so thin that 10 to 20 percent of arrivals leave without seeing a caregiver — after an average wait of six to eight hours, according to the hospital’s data.
“We used to get upset when our ‘left without being seen’ went above 3 percent,” said Thomas Quatroche, president and chief executive of the Erie County Medical Center Corp., which runs the 590-bed public safety net hospital.
Nursing home bed and staff shortages were problems in the United States before the coronavirus pandemic. But the departure of 425,000 employees over the past two years has narrowed the bottleneck at nursing homes and other long-term care facilities at the same time that acute care hospitals are facing unending demand for services due to a persistent pandemic and staff shortages of their own.
With the omicron variant raising fears of even more hospitalizations, the problems faced by nursing homes are taking on even more importance. Several states have sent National Guard members to help with caregiving and other chores.
Hospitalizations, which peaked at higher than 142,000 in January, are rising again as well, reaching more than 71,000 nationally on Thursday, according to data tracked by The Washington Post. In some places, there is little room left in hospitals or ICUs.
About 58 percent of the nation’s 14,000 nursing homes are limiting admissions, according to a voluntary survey conducted by the American Health Care Association, which represents them. According to the U.S. Bureau of Labor Statistics, 425,000 employees, many of them low-paid certified nursing assistants who are the backbone of the nursing home workforce, have left since February 2020.
“What we’re seeing on the hospital side is a reflection of that,” said Rob Shipp, vice president for population health and clinical affairs at the Hospital Association of Pennsylvania, which represents medical providers in that state. The backups are not just for traditional medical inpatients ready for follow-up care, he said, but psychiatric and other patients as well.
A handful of developmentally disabled patients at Erie County Medical Center waited as long as a year for placement in a group setting, Quatroche said. Medical patients recovered from illness and surgery who cannot go home safely may wait days or weeks for a bed, he said.
“I don’t know if everyone understands how serious the situation is,” Quatroche said. “You really don’t know until you need care. And then you know immediately.”
Nearly 237,000 workers left during the recovery, data through November show. No other industry suffered anything close to those losses over the same period, according to the Bureau of Labor Statistics.
Workers in the broader health-care industry have been quitting in record numbers for most of the pandemic, plagued by burnout, vulnerability to the coronavirus and poaching by competitors. Low-wage workers tend to quit at the highest rates, Labor Department data show, and nursing home workers are the lowest paid in the health sector, with nonmanagerial earnings averaging between $17.45 an hour for assisted living to $21.19 an hour for skilled nursing facilities, according to the BLS.
Nursing home occupancy fell sharply at the start of the pandemic, but inched back upward in 2021, according to the nonprofit National Investment Center for Seniors Housing and Care. One major force that held it back was worker shortages.
“Operators in the business have said we could admit more patients, but we cannot find the staff to allow that to happen,” said Bill Kauffman, senior principal at the organization.
Shortages have spawned fierce talent wars in the industry, Brookdale Senior Living Chief Executive Officer Cindy Baier said in a recent earnings call. When they don’t have enough workers, restaurants can reduce service hours and hospitals can cut elective surgeries, but nursing homes don’t have the option of eliminating critical services, she said. They must close beds.
“We are in the ‘people taking care of people’ business around-the-clock, 365 days a year,” she said.
Nursing homes tend to gain workers during a recession but can struggle to hire during expansions, according to an analysis of county-level data from the Great Recession recently published in the health care provision and financing journal Inquiry.
Steady income from their resident population and government programs such as Medicaid makes them recession-proof, and their low pay and challenging work conditions mean they’re chronically understaffed, said one of the study’s authors, Indiana University health-care economist Kosali Simon.
When recessions occur, nursing homes go on a hiring spree, filling holes in their staff with qualified workers laid off elsewhere.
“People during a recession may lose their construction jobs or jobs in retail sectors, and then look for entry-level positions at places like nursing homes where there is always demand,” Simon said.
Now, amid the “Great Resignation” and the hot job market, the opposite is happening. In sparsely populated areas and regions where pay is lower, the problem is even worse.
The Diakonos Group, which operates 26 nursing homes, assisted-living facilities and group homes in Oklahoma, closed an 84-bed location for seniors with mental health needs in May “simply because we couldn’t staff it any longer,” said Chief Executive Officer Scott Pilgrim. Patients were transferred elsewhere, including Tulsa and Oklahoma City, he said.
The home in rural Medford, which depended entirely on Medicaid payments, “was never easy to staff, but once we started through covid and everything, our staff was just burned out.”
Diakonos boosted certified nursing assistants’ pay from $12 an hour and licensed practical nurses’ pay from $20 an hour, used federal and state assistance to offer bonuses and employed overtime, but workers kept leaving for better health-care jobs and positions in other industries, he said.
“I’ve never been able to pay what we ought to pay,” Pilgrim said. Eventually he began to limit admissions and eventually was forced to close.
“The hospitals are backed up,” he said. “They’re trying to find anywhere to send people. We get referrals from states all around us. The hospitals are desperate to find places to send people.”
In south central Pennsylvania, SpiriTrust Lutheran is not filling 61 of its 344 beds in six facilities because of the worker shortage, said Carol Hess, the company’s senior vice president.
“I have nurses who went to become real estate agents,” she said. “They were just burned out.”
Pay raises of $1 to $1.50 an hour and bonuses brought the lowest-paid workers to about $15 an hour, Hess said, and the company is planning a recruiting drive after Jan. 1. But the prognosis is still grim.
“We’re competing with restaurants for our dining team members,” Hess said. “We’re competing with other folks for cleaning and laundry and others.” In the area around Harrisburg where SpiriTrust employees live, some schools that turned out certified nurse assistants closed during the pandemic and haven’t reopened.
The nursing homes have begun borrowing licensed practical nurses from WellSpan Health, the nearby hospital system that discharges many of its patients to SpriTrust after they recover. About 15 have began their orientations this month, she said, and the two systems are collaborating to pay them.
The bed shortage is causing backups that can average several days in the hospital, said Michael Seim, the hospital system’s chief quality officer. That gives the hospitals an interest in helping any way they can, he said.
“We have between 80 and 100 patients waiting for some type of skilled care,” Seim said this month. The hospital has begun caring for more people at home, enrolling 400 people so far in a program that sends clinicians to check on them there. More than 90 percent have said they are happy with the program.
“I think the future of hospital-based care is partnerships,” Seim said. “It’s going to be health systems partnering across their service areas … to disrupt the model we have.”
Another challenging year defined by the continued COVID-19 fight and vaccination drives has created a unique healthcare landscape. Pandemic-induced telehealth booms, continued strain due to understaffing and pressure from big tech disruptors are just some of the issues that have presented themselves this year.
Here are five major trends that hospitals and health systems may see in 2022. While some present challenges, others present significant opportunities for healthcare facilities.
Record numbers of workers have quit their jobs in 2021, with some 4.4 million people quitting in September. That means that 1 in 4 people quit their jobs this year across all industries. Around 1 in 5 healthcare workers have left their positions, creating issues with understaffing and lack of resources in hospitals and health systems. Stress, burnout and lack of balance have all been cited as reasons for staff leaving their roles. An increase in violence toward medical professionals, continued COVID-19 surges and low pay and benefits have contributed to the exodus of healthcare workers. None of those problems seems poised to disappear come 2022, so the new year could bring continued workforce and staffing challenges.
Pressure from disruptors
Big tech and retail giants have continued their push into healthcare this year. Companies like Apple, Amazon and Google stepped up their game in the wearables market. Pharmacy and retail chains Walmart and CVS Health both detailed their intended expansions into primary care. The pandemic also encouraged big corporations outside the healthcare sector, like Pepsi and Delta Airlines, to consider hiring CMOs to make sense of public health regulations guide them on their policy. These moves all mean there is a tightening of competition for the top physicians and hospital executives. Going into 2022, health systems may be under pressure to hang onto top talent and keep patients from using other convenient health services offered by retail giants.
The unequal toll of the pandemic on people of color both medically and economically helped shed a light on the rampant inequities in American healthcare and society at large. Indigineous, Black and Hispanic people were much more likely than white or Asian people to suffer severe illness or require hospitalization as a result of COVID-19. Increasing numbers of hospitals, health systems and organizations are starting initiatives to advance health equity and focus on the socioeconomic drivers of health. The American Medical Association launched a language guide to encourage greater awareness about the power of language. Z-code usage has also been encouraged by CMS to increase knowledge and data about the social determinants of health. Next year, the perspective of health as holistic instead of just a part of an individual’s life will continue, with special attention being paid to social drivers.
The pandemic helped the telemedicine industry take off in a big way. Telehealth was often the only healthcare option for many patients during the height of the lockdown measures introduced during the pandemic. Despite a return to in-person visits, telehealth has retained its popularity with patients. Some advocates argue that telehealth can help increase access to healthcare and improve health equity. About 40 percent of patients said that telehealth makes them more engaged and interact more frequently with their providers. However, while Americans see telehealth as the future of healthcare, a majority still prefer in-person visits. Regardless of patient opinion, telehealth will remain a key part of health strategy. In late December, the FCC approved $42.7 million in funding for telehealth for 68 healthcare providers. This suggests that there are investments and subsidies available in the future for health systems to bolster their telehealth services.
At the 2021 UN Climate Conference, Cop26, in Glasgow, Scotland, hospitals and health systems acknowledged the role they have to play in mitigating the effects of climate change. Hospitals and health systems shed light on the health-related effects of climate change, such as illness and disease from events like wildfires and extreme weather. Health systems are also becoming more aware of their own contributions to climate change, with the U.S. healthcare system emitting 27 percent of healthcare emissions worldwide. To that end, HHS created an office of climate change and health equity that will work alongside regulators to reduce carbon emissions from hospitals. More health systems too are taking charge and pledging net neutrality and zero carbon emissions goals, including Kaiser Permanente and UnitedHealth group. It’s expected that more systems will follow suit in the coming year and make more concrete plans to address emissions reduction.
Attending a recent executive retreat with one of our member health systems, we heard the CEO make a statement that really resonated with us. Referring to the current workforce crisis—pervasive shortages, pressure to increase compensation, outsized reliance on contract labor to fill critical gaps—the CEO made the assertion that this situation isn’t temporary. Rather, it’s the “new normal”, at least for the next several years.
The Great Resignation that’s swept across the American economy in the wake of COVID has not spared healthcare; every system we talk to is facing alarmingly high vacancy rates as nurses, technicians, and other staff head for the exits. The CEO made a compelling case that the labor cost structure of the system has reset at a level between 20 and 30 percent more expensive than before the pandemic, and executives should begin to turn attention away from stop-gap measures (retention bonuses and the like) to more permanent solutions (rethinking care models, adjusting staffing ratios upward, implementing process automation).
That seemed like an important insight to us. It’s increasingly clear as we approach a third year of the pandemic: there is no “post-COVID world” in which things will go back to normal. Rather, we’ll have to learn to live in the “new normal,” revisiting basic assumptions about how, where, and by whom care is delivered.
If hospital labor costs have indeed permanently reset at a higher level, that implies the need for a radical restructuring of the fundamental economic model of the health system—razor-thin margins won’t allow for business to continue as usual. Long overdue, perhaps, and a painful evolution for sure—but one that could bring the industry closer to the vision of “right care, right place, right time” promised by population health advocates for over a decade.
Amid a nationwide staffing shortage, rising demand for nurses has led hospitals to increase salaries and other benefits to attract and retain workers, Melanie Evans reports for the Wall Street Journal.
Hospitals increase salaries, benefits to keep up with nursing demand
Hospitals across the country have been struggling amid staffing shortages, particularly of nurses, Evans reports. According to health care consultancy Premier, nurse turnover rates have increased to around 22% this year, up from the annual rate of about 18% in 2019.
“We are employing more nurses now than we ever have, and we also have more vacancies than we ever had,” said Greg Till, chief people officer at Providence Health & Services.
To retain their current nurses and attract new staff, many hospitals have increased their nurses’ salaries to remain competitive in the job market, Evans reports.
For example, HCA Healthcare, one of the largest hospital chains in the country, said it increased nurse pay this year to keep up with Covid-19 surges and compete with rivals also trying to fill vacant positions.
Similarly, Jefferson Health in May raised salaries for its nearly 10,000 nurses by 10% after the system discovered that rivals had increased their compensation. “The circumstances required it,” said Kate Fitzpatrick, Jefferson’s chief nurse executive.
In addition, Citizens Memorial Hospital in Bolivar, Mo., this month raised its nurses’ salaries by up to 5% after rivals in other nearby cities increased their workers’ wages. Sarah Hanak, Citizen Memorial’s CNO, said the hospital also increased the hourly wages of nurses working overnight shifts by around 15% to ensure sufficient staffing for those shifts.
“We were forced to,” Hanak said. “We absolutely have to stay competitive.”
Overall, the average annual salary for RNs, not including bonus pay, grew to $81,376, according to Premier—a 4% increase across the first nine months of the year. This is larger than the 3.3% increase in the average annual nurse salary for 2020 and the 2.6% increase in 2019, Evanswrites.
In addition to salary increases, some organizations, such as Providence, are also offering other benefits to attract and retain nurses, such as more time off, greater schedule flexibility, and new career development opportunities. Many hospitals are also hiring new graduates to work in specialized roles in ORs and other areas, allowing them to advance their careers more quickly than they would have before.
Overall, this rising demand for nurses has allowed those entering the workforce to negotiate higher salaries, more flexible working hours, and other benefits, Evans writes.
“I think you get to write your ticket,” said Tessa Johnson, president of the North Dakota Nurses Association.
Nurse compensation increases were inevitable—here’s why
It was inevitable that we would get to this point: baseline nurse compensation on a clear upward trajectory. Inevitable because this boils down to laws of supply and demand. Amid a clear nursing shortage, organizations are being forced to raise baseline compensation to compete for increasingly scarce qualified nurses. This is true in nearly every market, even for those considered to be ‘destination employers.’
If anything, what’s most surprising in the data from Premier is the moderated increase of around 4%. From a worker’s perspective, that’s not even covering cost of living increases due to inflation. However, amid this new data, it’s important to keep two things in mind:
Two considerations for health care leaders
New data only captures baseline compensation.Differentials—which organizations must standardize and expand across shifts, specialties, and even settings—plus overtime put baseline compensation much higher. Not to mention lucrative sign-on bonuses, that members tell us are increasingly table stakes in their markets. In general, we don’t recommend this type of incentive that does nothing for retention. You’re better off investing those resources in baseline compensation as well as beefing up your RN bonus plan to incentivize retention.
There is a new floor for wages (and it’s only going up from here).
Open questions (and important indicators) we are assessing
What happens to wages for entry-level clinical roles? As the shortage of RNs persists, organizations will need to make a shift to team-based models of care, and those are only possible with a stable workforce of entry-level personnel. Right now, that part of the health care workforce is anything but stable. When you consider their work and their wages in comparison to out-of-industry players that pay the same or better, that’s a clear area where investment is required.
Will the share of nurses working permanently with travel agencies return to pre-pandemic levels? That’s to say, what will those RNs who experienced the traveler lifestyle and pay value more moving forward: the flexibility and premium pay or stability of permanent employment? Even if this number stabilizes a couple percentage points above pre-pandemic levels, that will aggravate provider’s sense of shortage.
Operating cash flow margins for nonprofit hospitals fell to a median 7% in 2020.
A shortage of nurses and other workers will continue to erode hospital financial performance into 2022, according to a new Healthcare Quarterly report from Moody’s.
A rise in COVID-19 cases in various regions of the United States has contributed to a wave of nurses, often burned out, resigning to take care of family, to work in less acute healthcare settings such as ambulatory care or to pursue higher-paying contract opportunities, such as becoming a travel nurse.
Hospitals are also having difficulty finding other types of healthcare workers, such as respiratory therapists and imaging technicians, as well as nonclinical workers in areas such as dietary, housekeeping and environmental services.
WHY THIS MATTERS
The report holds no surprises for hospital executives, who already know the financial affect labor shortages are having on revenue. But Moody’s confirms projections that rising costs will make it difficult for hospitals to rebuild margins to pre-COVID-19 levels.
Labor shortages are driving up costs and also may be limiting the number of lucrative elective procedures, resulting in lost revenue. Not-for-profit hospitals saw operating cash flow margins fall to a median 7% in 2020, from 8.3% in the three prior years, according to Moody’s median data.
Hospitals using contract nurses report that hourly wages are very high, in some cases higher now with the Delta variant than during earlier COVID-19 surges. Many hospitals and health systems have also increased minimum wages for nonclinical workers and are finding they must compete with other service sectors, such as the food industry, to attract nonclinical staff.
Given their substantial reliance on government reimbursement from Medicare and Medicaid, most healthcare providers maintain limited pricing flexibility to offset the costs of higher wages. While there are opportunities for more lucrative commercial insurance contracts, rates are the subject of intense negotiations, limiting providers’ pricing power, Moody’s said.
Providers with strong liquidity and diversified cash flow will remain better positioned to manage stress from cost constraints. Hospitals are taking steps to retain nurses, including developing “float pools” of nurses who can work in multiple departments, increasing retention and merit pay, and expanding healthcare benefits such as mental health and child care services.
LifeBridge Health, a not-for-profit health system operating in Baltimore and Carroll County, Maryland, paid its nursing staff retention bonuses in December 2020 as the labor market tightened. To recruit nurses, many systems are offering signing bonuses in exchange for multi-year work commitments as well as scholarship and loan forgiveness programs with local nursing schools.
While these strategies will ease the effect of labor shortages over the long term, they will cause hospitals’ costs to increase in 2022 as salaries and benefits typically represent at least half of a hospital’s expenses. Labor shortages will also likely spark an increase in unionization efforts or lead to more difficult negotiations between unions and providers, potentially increasing costs via new contracts.
THE LARGER TREND
The quarterly report focused on the impact of labor shortages and cost pressures for various sectors, including hospitals, insurers, pharmaceuticals, healthcare services such as staffing firms and health insurers.
Health insurers are less affected by labor shortages, wage pressure and potentially burgeoning inflation than many other healthcare sectors, Moody’s said. Insurers reset premiums each year, which helps them to offset inflation. But if the government does not keep up with payment, providers will look to insurers to make up the shortfall.
Large physician staffing companies, such as Envision Healthcare Corporation and Team Health Holdings, will experience pressure on their profitability as it becomes harder and more expensive to fill open positions as burnout and retirements decrease the number of doctors available to work.
Travel nurse staffing has higher profit margin resilience compared to physician staffing, the report said.
For real estate investment trusts, worker shortages are slowing net operating income growth for REITs to invest in senior housing and skilled nursing facilities.
Growth in salaries and benefits has exceeded hospitals’ expense growth, a trend likely to continue for the remainder of 2021 andinto 2022, Moody’s said in an earlier October report.
In one bright spot in the earlier report, Moody’s noted recent rises in nursing school enrollment indicating a more robust long-term staffing pipeline. However, the aging population, combined with a healthcare workforce that may be retiring from their jobs or quitting due to burnout, represent long-term healthcare staffing challenges nationwide.
Labor shortages from the COVID-19 pandemic will continue to worsen the financial performance of nonprofit and for-profit hospitals into 2022, an October Moody’s quarterly report found.
As nurses and other workers deal with burnout and resign from positions, some hospitals are limiting elective procedures, which is reducing revenue. They’re also increasing minimum wage and using contract nurses with much higher hourly wages.
Physician staffing companies like Envision Healthcare Corp. and TeamHealth will also struggle with profitability as it becomes more difficult to fill open positions because of fewer available physicians, the report said.
An Association of American Medical Colleges study in 2020 found that more than 2 out of 5 physicians will be 65 or older by 2030; COVID-19 is accelerating retirement.
Meanwhile, health insurers are not as affected by labor shortages, wage pressure and inflation, according to the report. Because their product is more short-term and premiums reset every year, they have more flexibility when it comes to inflation.