The labor market added 253,000 payrolls in April, while the unemployment rate dipped to 3.4% — a historically low level.
Why it matters:
Job growth continued to boom last month, the latest sign that economy has strong momentum despite recent bank failures.
Economists expected a gain of 185,000 jobs last month.
Details:
The April job figures are a pickup from the 165,000 jobs added the previous month, which were revised down by 71,000, the Labor Department said on Friday.
The Labor Department said that jobs growth in the previous two months was lower than first estimated: jobs growth was revised down by a combined 149,000 for February and March.
The big picture:
In recent months, more Americans have joined the workforce, helping to ease labor force shortages.
The labor force participation rate — or the share of workers employed or looking for work — held at 62.6% in April.
Average hourly earnings, a measure of wage growth, rose to 0.5% in March. Wages rose 4.4% from the same time last year.
But Fed Chair Jerome Powell said this week that there were signs that the workforce was “coming back into better balance,” though it remained “very tight.”
One of the most persistent economic narratives of 2021 and 2022 was that of missing workers. Many Americans seemed to have simply vanished from the labor force during the pandemic, leaving employers in a lurch.
That’s no longer the case, White House economists argue in a new post presenting evidence that labor supply has returned to its pre-pandemic trend.
Why it matters:
It would be way less painful if the U.S. labor market were to come into a better, non-inflationary balance because labor supply increased, rather than labor demand decreased.
And contrary to a widespread economic narrative of the last couple of years, that seems to be happening — as the Biden team seeks to emphasize.
State of play:
There has been ample speculation about why labor supply was depressed in the aftermath of the pandemic, the White House Council of Economic Advisers notes.
Maybe fear of COVID, or long COVID symptoms, kept people out of work. Maybe it was excess savings from the pandemic, or reassessment of life priorities, or a “collective loss of work ethic.”
Nah. It increasingly looks as if it just took some time for potential workers to match up with jobs and return to the labor force.
By the numbers:
The share of prime-age workers — those between 25 and 54 — who are part of the workforce is now a tick higher than it was before the pandemic: 83.1%, compared with 83.0% in February 2020.
The overall participation rate is down (62.6%, from 63.3% in February 2020), but that is due to the Baby Boom generation retiring. It’s on track with what forecasters at the Congressional Budget Office anticipated before the pandemic.
Moreover, immigration rates surged in 2022 after a pandemic collapse, also adding to the supply of labor.
What they’re saying:
“The swift but lagged response of labor supply to surging demand suggests that with time workers do respond to favorable economic conditions,” the White House economists write.
“There are many plausible reasons that explain why this response is lagged. Most obviously, the job search process itself is not frictionless; it may take workers some time to find a good job,” they wrote.
“Also, if households adapted to the pandemic in ways that can take a while to unwind (such as giving up formal child care), this would delay the labor supply response to growing demand.”
The bottom line:
“There’s still an inaccurate view that prime-age labor supply is depressed,
that immigration is way down, and that labor force participation rates aren’t back on trend following the pandemic shock to our economy,” Ernie Tedeschi, the chief economist at the CEA, tells Axios.
In fact, he said, tight labor markets “pull folks back into the workforce and, while we have more to do to break down barriers to entry, the ‘missing worker’ story doesn’t quite apply anymore.”
Workforce problems in U.S. hospitals are troublesome enough for the American College of Healthcare Executives to devote a new category to them in its annual survey on hospital CEOs’ concerns. In the latest survey, executives identified “workforce challenges” as the No. 1 concern for the second year in a row.
Financial challenges, which consistently held the top spot for 16 years in a row until 2021, were listed the second-most pressing concern in the American College of Healthcare Executives’ annual survey.
Although workforce challenges were not seen as the most pressing concern for 16 years, they rocketed to the top quickly and rather universally for healthcare organizations in the past two years. Most CEOs (90 percent) ranked shortages of registered nurses as the most pressing within the category of workforce challenges, followed by shortages of technicians (83 percent) and burnout among non-physician staff (80 percent).
Here are the most concerning issues hospital CEOs ranked in 2022, along with the score of how pressing CEOs find each issue.
1. Workforce challenges (includes personnel shortages and staff burnout, among other issues) — 1.8
2. Financial challenges — 2.8
3. Behavioral health and addiction issues — 5.2
4. Patient safety and quality — 5.9
5. Governmental mandates — 5.9
6. Access to care — 6.0
7. Patient satisfaction — 6.6
8. Physician-hospital relations — 7.6
9. Technology — 7.7
10. Population health management — 8.6
11. Reorganization (mergers and acquisitions, partnerships and restructuring) — 8.7
Within financial challenges, most CEOs (89 percent) ranked increasing costs for staff and supplies as the most pressing, followed by operating costs (66 percent) and Medicaid reimbursement (63 percent). CEOs are less concerned about price transparency and moving away from fee-for-service.
Seventy-eight percent of CEOs ranked lack of appropriate facilities/programs as most pressing within the category of behavioral health and addiction issues. That was followed by lack of funding for addressing behavioral health and addiction issues (77 percent).
The results are based on a survey administered to CEOs of community hospitals (non-federal, short-term, non-specialty hospitals). ACHE asked respondents to rank 11 issues affecting their hospitals in order of how pressing they are. Results are based on responses from 281 executives.
Healthcare added almost 45,000 jobs in November, but many hospitals and health systems will continue to struggle to meet staffing needs, retain top executives and providers, and foster long-term pipelines for talent, Ted Chien, president and CEO of independent consulting firm SullivanCotter, wrote in a Dec. 15 article for Nasdaq.
Hospitals and health systems are living “paycheck to paycheck” and unable to make long-term investments at the height of the current workforce crisis, Mr. Chien said.
The challenge boils down to a healthcare delivery problem, not a demand problem.
Baby Boomers are the greatest source of care demand on the healthcare system, but are unable to contribute to the provider workforce in the numbers needed to achieve balance, according to Mr. Chien. To compound that issue, burnout is a major factor why “too many” frontline workers have left or plan to exit healthcare, he said.
Last year, an estimated 333,942 healthcare providers dropped out of the workforce, including about 53,000 nurse practitioners, which has led hospitals to spend more on contract labor and feeling more pressure to consolidate, according to an October report published by Definitive Healthcare.
Long term, a continued lack of healthcare workers would force hospitals to operate in a heightened crisis mode, according to Mr. Chien, depriving non-critical patients of sufficient health prevention and demanding too much of providers who are already overly taxed.
Mr. Chien highlighted three key areas to tackle the workforce crisis: smarter technology, resilient teams and excellent leadership.
Technologies that alleviate providers’ administrative burdens will be critical to reduce burnout and keep caregivers focused on patient care, while smarter tech can also forge pipelines for future providers by streamlining clinical experience operations and aligning student placements with existing opportunities.
Building resilient teams begins with competitive pay and robust benefit packages, which fosters trust and demonstrates that a hospital values its staff, according to Mr. Chen. Supporting career growth, including upskilling and redeploying staff when appropriate, empowers employees.
Lastly, capable executive leadership teams, under intense scrutiny from industry stakeholders, must clearly outline their hospital or health system’s strategy and provide the change needed to support their staff. Lack of trust in leaders drives staff out of healthcare, so it is crucial to recruit and retain “modern, strategic thinkers with depth of experience who are prepared to lead,” Mr. Chien wrote.
The majority of hospitals are predicted to have negative margins in 2022, marking the worst year financially for hospitals since the beginning of the Covid-19 pandemic.
In Part 1 of Radio Advisory’s Hospital of the Future series, host Rachel (Rae) Woods invites Advisory Board experts Monica Westhead, Colin Gelbaugh, and Aaron Mauck to discuss why factors like workforce shortages, post-acute financial instability, and growing competition are contributing to this troubling financial landscape and how hospitals are tackling these problems.
As we emerge from the global pandemic, health care is restructuring. What decisions should you be making, and what do you need to know to make them? Explore the state of the health care industry and its outlook for next year by visiting advisory.com/HealthCare2023.
As the nation continues to grapple with the fallout from COVID, one of the greatest unknowns is “long COVID”, the broad range of health problems experienced by a significant number of individuals after contracting the virus. The Centers for Disease Control and Prevention defines long COVID as any post-COVID condition lasting three months or longer.
In the graphic above, we aim to quantify the prevalence of long COVID and its ongoing impact on the US workforce. While estimates for thesenumbers vary, data compiled by Brookings show that COVID infections in roughly one in four working age adults have resulted in long COVID, and up to one in four individuals with long COVID are unable to work due to their lingering health problems. Long COVID is also more prevalent in middle-aged adults, who are often at the peak of their working years. Dealing with symptoms like chronic fatigue and brain fog, long COVID patients are more likely to be unemployed or working reduced hours, compared to a pre-COVID baseline of the general adult population.
While it’s difficult to assess the precise impact on the nation’s current labor shortage, the estimate that 4M working age adults are no longer working because of long COVID equals about 40 percent of the 10M total job openings in August of this year, undoubtedly exacerbating ongoing economic challenges.
Citi, The American Hospital Association (AHA) and the Healthcare Financial Management Association (HFMA) recently hosted the 22nd annual Not-for-Profit Healthcare Investor Conference. The event was in person, after being virtual in 2021 and canceled in 2020 due to the pandemic. Leaders from over 25 diverse health systems, as well as private equity and fund managers, presented in panel discussions and traditional formats. The following summary attempts to synthesize key themes and particularly interesting work by leading health systems. The conference title was “Refining the Now, Reshaping What’s Next.”
Is Healthcare Headed for Best of Times or Worst of Times?
Clearly the pandemic showed how essential and adaptive the US healthcare industry is, and especially how incredible healthcare workers continue to be. It also exposed and accelerated many underlying dynamics, such as impact of disparities, clinical labor shortages and supply chain challenges. On balance, at this year’s conference presenters remained quite optimistic about the future, and felt that despite enormous pain, the pandemic has helped to accelerate positive transformation across healthcare.
At the same time, almost all presenters referenced future headwinds from labor and supply inflation, concerns about increasing payment pressures, and the continued need to address disparities and social justice. That being said, there was not much disclosure at the conference about just how bad things could get in the future given accelerated operational and financial risks.
As usual at such a conference, there was much passion, creativity, sharing and celebration. While each organization and market differ somewhat, the following are common themes discussed.
Key Themes
Enormous Workforce Challenges – Every speaker referenced workforce as being THE key issue they are facing, specifically retirement, recruitment, retention, well-being and cost. We have talked for years about a future caregiver shortage, but this reality was accelerated by the pandemic. The majority of health systems saw single-digit turnover rates grow to 20-30%, and the cost of temporary labor such as traveling nurses, decimate operating margins. The many strategies discussed at the conference went beyond simply paying more to attract and retain staff. A key question is whether organization-specific strategies will be enough, or whether we need a broader societal and industry-wide collaborative effort to dramatically increase training slots for nurses and other allied health professionals.
Pandemic Stressed Organizations and Accelerated Transformation – At the 2021 virtual Citi/AHA/HFMA conference, many posited that the country was past the worst of the pandemic. (In fact this author’s summary of last year’s conference was titled “Sunrise After the Storm”). That was before the Omicron wave hit hard in Q1 2022. First-quarter 2022 operating margins were negative for most but not all healthcare systems due to cumulative impact of Omicron, temporary labor and supply costs, especially since the governmental support that partially offset those costs in 2020 ended. Organizations and their teams remain resilient, but highly stressed. Risks and challenges associated with future waves continue, as well as high reliance on foreign drug and supply manufacturing. While highly distracting and painful, many organizations discussed how the pandemic actually accelerated the pace of transformation. Necessity drives required action, and at least temporarily overcomes political and cultural barriers to change.
Growing Pursuit of Scale, Including through M&A and Partnerships – All health systems continue to be highly complex with multiple competing “big-dot” priorities. Multiple systems described their current M&A and growth strategies, pursuit of scale, as well as how these strategies were impacted by the pandemic. While the provider community remains highly unconsolidated on a national basis, mergers are more frequent, including between non-contiguous markets. Systems said that larger size, coupled with disciplined management, can reduce cost structure and improve quality and patient experience. While some pursue scale through organic growth initiatives or M&A, others described success in creating scale by leveraging partnerships with “best-in-class” niche organizations and other outside expertise.
Health Equity, Diversity and ESG as Core to Mission – Consistent with last year, most speakers discussed their efforts to address health equity, social justice, diversity, and Social Determinants of Health. Many health systems have developed robust strategies quickly as the pandemic spotlighted the impact of existing disparities. There is increasing interest in Environment, Social and Governance (ESG) initiatives, including environmental stewardship to improve the health of their communities and the world by reducing their carbon footprint and medical waste.
Patient-Centric Care Transformation Continues as a Priority – The pandemic significantly accelerated the shift to telehealth and virtual care. Many health systems are increasing their efforts to design care around the patient instead of the traditional provider centric focus. While the need for inpatient care will always continue, more care is taking place in settings closer to or at home, with digital enablement. Expansion of personalized medicine, genetic testing and therapies, and drug discovery are transforming how healthcare is provided.
Affordability and Value-Based Care – US healthcare costs as a percentage of GDP increased from 18% in 2019 to almost 20% in 2020, mainly driven by the pandemic. There remains a dichotomy between reliance on fee-for-service payment and commitment to value-based care. Although only 11% of commercial payment is currently through two-sided risk arrangements, almost all presenting health systems discussed their strategies to continue moving to value-based care and to improve affordability. Some systems are leveraging their integrated health plans and/or expanding risk-based contracts. Many are trying to reduce unnecessary care through adoption of evidence-based models and to shift care to less costly settings.
Inflation and Accelerating Financial Pressures – Health systems are facing unprecedented increases in labor and supply costs, that are likely to continue into the foreseeable future. At the same time, commercial payment rate adjustments are “sticky low” as insurers and employers push back on rate increases. Governmental payment rate increases are less than cost inflation. In addition to current cuts like the re-implementation of sequestration, longer-term cuts to provider assessment programs, provider-based billing, disproportionate share and Medicaid expansion may severely impact many organizations over time. Benefits like 340b discounts are also experiencing pressure. Post-pandemic clinical-volume trends remain unclear, and additional governmental support associated with future pandemic waves is unlikely. Adding to these challenges, declines in stock and bond prices are negatively impacting currently strong balance sheets.
Conclusion: Best or Worst of Times in Healthcare?
Time will tell, in retrospect, if the next five years will be the best of times, worst of times, or both in healthcare. Optimists point to the resiliency of healthcare organizations; enormous opportunity to reduce unnecessary cost through adoption of evidence-based care and scale; pipeline of new cures and technology; and opportunities to address social and health equity. Pessimists point to likely unprecedented financial pressures and operational challenges due to endemic labor and supply shortages; high-cost inflation vs. constrained payment rates; and future uncertainty about the pandemic, the economy and investment markets.
The situation will undoubtedly vary by market and organization as reflected in conference presentations, but all systems will likely face substantial pressure. As one speaker noted “humans have a great ability to respond to pain,” so this may be the inflection point where more healthcare systems radically accelerate necessary change to improve health, make healthcare more equitable and affordable, with higher quality and better outcomes. Some health systems are clearly doing that, with pace, nimbleness and passion. Can the industry as a whole accomplish it successfully?
HENRY KOTULA 