An old data series got new life, when the Brookings Institution issued a report that compared health care jobs growth versus all other industries.
It’s “a truly astonishing graph,” according to Derek Thompson at The Atlantic. “I knew health care had been the most important driver of national employment over the last few years, but I had never seen the case made so starkly.”
Thompson wasn’t alone in his surprise. (Hopefully, readers of The Health Care Blog would be less astonished.) But lost within the reaction—and even mostly overlooked within the industry—is that not all health care jobs are growing, or at least not growing at the same pace.
Take a look at the following chart. It resembles the Brookings data, with one major change: The hospital employment curve has been separated from all other health care jobs growth.
Notice how hospital employment essentially flatlined across 2009—a hard year for the sector, which was still insulated compared to the rest of the economy. But many organizations pared back on staff and sought to cut non-essential services to survive the Great Recession.
And while sector employment began to rebound in 2010, roughly in line with other industries, there’s been a surprising blip this year. Hospitals shed jobs in January, and according to the Bureau of Labor Statistics’ estimates, hospitals also lost nearly 6,000 jobs in May—on paper, the worst single month for the sector since February 2004.
It’s possible that when the new jobs report comes out on Friday, May’s number will be revised up. But the trend is unmistakable: Hospital job growth, which used to parallel the rest of the health care industry, is now following a slower curve.
Why the sector-wide slowdown? I spoke with several health economists and labor experts, and here are a few leading hypotheses.
Hypothesis: It’s because fewer people are seeking care in hospitals.
There’s increasing evidence that the long-anticipated care shift away from the inpatient setting and to less costly outpatient settings is finally underway.
For example, Martin Gaynor, an economist at Carnegie Mellon, cites the Health Care Cost Institute‘s recent study on how inpatient utilization is declining for the privately insured. And Fitch Ratings last week issued a report on the changing patterns in care delivery, ticking off the various reasons why hospital volumes are falling: patients paying for a greater share of their care, federal policies that reduce readmissions, and insurers incenting care in lower-cost settings, among other factors.
Hypothesis: Wary hospitals aren’t eager to hire.
Partly because of their weak volumes—and partly because of outstanding questions around the sequester, other potential reimbursement cuts, and broader economic concerns—the hospital labor market is basically in a “holding pattern,” according to John Workman, practice manager of the HR Investment Center and my colleague at the Advisory Board.
Workman points to his latest benchmarking data on hospital turnover and vacancy rates; while both indicators showed signs of a rebound through 2012, the rates have since been flat as hospital executives have held pat.
Hypothesis: It’s the effect of Obamacare.
The Affordable Care Act has added new financial pressures for hospitals, such as a push toward new payment models that don’t reward them for doing more procedures. But while this theory gets advanced when some hospitals announce major layoffs, the health law tends to be more convenient scapegoat than an actual culprit, economists agreed.
Hypothesis: It’s a result of the mega-mergers across the sector.
“There’s been a lot of consolidation in the health care industry,” says Amitabh Chandra, a health economist at Harvard University, with hospitals banding together to survive the Great Recession, or to maximize their power under the ACA. And that tends to lead to downsizing, as duplicate jobs get eliminated.
Dan Diamond is Managing Editor of the Daily Briefing, a CaliforniaHealthline columnist, and a Forbes contributor. This post originally appeared in The Daily Briefing Blog.
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The big idea during that bubble was to “keep people healthy” and out of hospitals to offset the budget cuts. Some hospitals created new jobs out of the new idea by implementing Wellness programs that were designed to keep current employees and families healthier which in time would reduce insurance claims. Fortunately, the new program created new jobs such as health coaches whom generally had a RN license.
Had so what do you do for a living Cynthia????
Wake up you fool, Obamacare kills charity and is only open for big business and is killing the health care industry that has so far helped 100% of the country:
http://www.forbes.com/sites/davidwhelan/2012/09/17/obamacare-could-cause-nonprofit-hospitals-to-lose-their-tax-exempt-status-heres-how/
http://www.forbes.com/sites/chrisconover/2012/07/31/healthcare-law-will-cost-1-million-or-more-jobs/
http://www.ncpa.org/sub/dpd/index.php?Article_ID=23732
Since I am being forced to buy healthcare I will use it! I am young, healthy and in the demo these morons think wont use the healthcare. Well guess what, I plan on seeing a doctor weekly for everything that bothers me. To spend over $300 a month with a $1000 a month salary is ridiculous! With this health care I can get a doctors note and not go to work and worry about getting fired and I can get free or cheap drugs! If I wasn’t a pussy I could sell the pills to help pay for the healthcare I cant afford. Let the insurance lobbyists pay for putting this law into place. Go see your doctor every chance you get, FOR EVERYTHING! They cant deny you for preexisting conditions including the one I have, the govt. tumor on my back sucking the life out of me. Go see your doctor, fill up the hospitals, get prescriptions for everything and most importantly thank yourself for paying up the butt for providing yourself with such amazing insurance.
The last time I looked at this, which was last summer, from May 2007 to May 2011, hospitals had added 200 thousand jobs, despite declining admissions and flatlining outpatient volumes. I think to an extent, management didn’t get the memo (including yours).
As long as there is black ink on the projected EBIT line, the pressure to add more staff doesn’t abate. Between the continuing IT “investment”, ACO’s and acquiring docs (perhaps 30k of the employment growth), there are always poorly examined “strategic” reasons to expand headcount.
Lots of folks, including me, have been hammering hospital managements and boards to learn to run their places on regular gas. But particularly if you’re a late boomer CEO not wanting to retire on a sour note, it’s a hard message that hospitals need to begin husbanding their human resources and getting real productivity gains from all that IT “investment”. They just don’t want to say “no”. . .
And it’s not that hospital execs are bad people. They’ve just had a thirty year run of franchise expansion. It’s almost a part of their DNA. Really hard to learn to economize.
I am tired when I read all of these comments bashing hospitals. Can we stop and talk about the good things that hospitals do? They pay billions in charity care and they provide solid employment to millions of people who only want to help others. I do not think that seeing hospitals get smaller, while pharmacies and doctors that are chasing more patients and dollars, is a good thing at all.
“If we’ve seen two down months for hospital headcount in 2013, that makes, I think, four or five in the more than four years of this alleged recovery. Too soon to call it a trend reversal.”
* Between 2004 and 2008, hospitals lost jobs in just two of 60 jobs reports.
* Since January 2009, hospitals have lost jobs in 13 of 54 jobs reports.
I don’t think there’s a full-fledged reversal underway, but there’s clear evidence that hospital jobs aren’t growing at the pace we saw in the early 2000s. The original Daily Briefing post contained a pair of graphics — in case THCB doesn’t work this one in, it shows a very visible slowdown in hospital job growth compared to the rest of health care:
http://www.advisory.com/sitecore%20modules/web/~/media/Advisory-com/Daily-Briefing/2013/07/27263_DB_Employment-Line_450px.jpg
It is very refreshing to hear Cynthia and others challenge the cost structure of hospitals.
For too many years we have heard complaints that insurance reimbursements were not “covering the hospital’s costs.”
We never hear anyone say that some costs do not deserve to be covered.
If we ever have a level playing field on outpatient care, in other words reference pricing, then hospitals will really have to get efficient.
I have myself proposed the creation of Health Courts — and not for malpracrice, but simply for reviewing bills to root out price gouging.
The courts would have the authority to reduce or even wipe out a bill that was padded for ‘facility fees’ and ‘overhead’. If a petient asked for full price disclosure before their treatment and was denied a price quote, then they would own nothing.
No disclosure, no liability.
(and not just for the uninsured………patients could demand to know what their co-pay will be, and how it was based.)
Bob Hertz, The Health Care Crusade
The question should not be whether jobs are being cut. It’s which jobs – are hospitals cutting administrative positions (probably a good thing) or clinical positions (not a good thing).
It’s similar to higher education, where the growth in administration has greatly outweighed any increase in actual fulltime teaching positions.
Lifted from this article entitled ” Medicare Panel Urges Cuts to Hospital Payments for Services Doctors'[Offices] Offer for Less” (see link below):
“Full-service hospitals need higher reimbursements than doctors’ offices because unlike them, they have emergency rooms and ‘standby capacity’ to care for victims of accidents, natural disasters, epidemics and terrorist actions. And hospitals are subject to more stringent regulation.”
[That’s a very misleading statement being peddled by the hospital industry. Hospitals, unlike doctors’ offices, are allowed to tack on a so-called “facility fee” to each and every bill that’s paid by Medicare. Hospitals use these fees to cover the cost of severe and costly traumas and preparing for mass casualty events such as the one in Boston several months back. Also, hospitals, unlike doctors’ offices, are given generous charity care payments, via Medicaid and Medicare disproportionate share hospital (DSH) payments, to cover most of the costs of caring for the uninsured. Don’t be fooled, hospitals receive generous handouts from Uncle Sam for all of the various services they provide to the public, many of which have absolutely nothing to do with providing medical and nursing care.]
http://www.nytimes.com/2013/06/15/health/medicare-panel-urges-cuts-to-hospital-payments-for-services-doctors-offer-for-less.html
Jeff, you forget to factor in hospitals engaging in the very costly practice of hiring RNs as “care coordinators” to do the rather mundane and mindless task of scheduling patients for inpatient and outpatient procedures. Needless to say, it’s very wasteful and cost ineffective to hire RNs to do this kind of low-skilled, low-stress work when a moderately-intelligent person with a GED, a little bit of clerical training, and a working knowledge of medical terminology can do the job with the same level of proficiency at half the price! It’s even worse than that. RNs who are employed as care coordinator generally fall in a higher pay grade than RNs who are hired as critical care nurses. I have yet to figure out why hospital do this especially given that care coordinators, unlike critical care nurses, never have to deal with life and death issues, and never have to put their license on the line to do what they do. Nor can they bill medicare or any other insurer for the work that they do.
What’s worse, hospitals are also filled with way too many overpaid and under-worked nurse managers and nurse educators and nurse coordinators who contribute absolutely nothing to improve patient care or reduce hospital stay. A large bulk of hospital nursing has become a welfare program for master’s and doctorate prepared nurses, who wouldn’t know how to diagnose and treat patients if their life depended on it!
It’s worth repeating again: any hospital nurse whose job doesn’t require putting their nursing licenses on the line and whose services aren’t billable to Medicare, Medicaid or any other form of health insurance, which is the case for ALL non-clinical nurses, doesn’t deserve an overly fat paycheck, especially when hospitals will soon be forced to either do or die if they don’t reduce their costs. This is the honest-to-god truth, and nothing disputable about it, but most people who work in healthcare turn a blind eye to it.
Hospitals are now among the biggest drains on American health care. They were once the only game in town. But today you can go to an urgent care center, or a surgi-center or even CVS . And hospitals instead of figuring out how to compete, buy technology they don’t need, they hike up bills for patients and fight to keep their protected tax status. Good riddance
Some hospitals have set ambitious cost reduction goals sufficient to enable to break even on Medicare. Many others are waiting for business to improve with the recovery. My argument has been that this isn’t cyclical, but that’s the mindset. . .
The UPMC situation includes a HUGE health plan (2 million members) and the largest hospital sponsored physician group in the United States (3200 MD’s). UPMC is a lot more than a hospital system, and it’s been using hospital profits to fund its growth in these other businesses. It may be problems with these related businesses that was responsible for the steep earnings decline.
Jeff, if hospitals are missing revenue targets by that much, how can two months of cutting staff cover the shortfall? I would conclude that there is a deeper course correction in store this year.
The shift away from inpatient care isn’t new. It’s been going on for over 30 years. US hospitals had 1.3 million fewer admissions in 2011 than in 1980, despite an 80 million person increase in population. Hospital census was 31% lower in 2011 than it was in 1980. I wrote a book about this called: Can Hospitals Survive: The New Competitive Healthcare Market (Dow Jones, 1981) predicting it, and explaining why it was likely to occur.
Even if you factor in outpatient growth, adjusted census is up only about 15% since 1980, but hospital FTE employment per adjusted census is up 62%.
And that doesn’t tell the whole cost story because hospitals have steadily shed low skill workers (orderlies, LPN’s, clerks, etc.) and added Masters level clinicians and technical staff, an entire IT bureaucracy and entire new functions like QI and marketing who are twice as expensive or more than the low skill folk they replaced. Not to mention tens of thousands of physicians seeking shelter from the economic risks of private medical practice.
If we’ve seen two down months for hospital headcount in 2013, that makes, I think, four or five in the more than four years of this alleged recovery. Too soon to call it a trend reversal.
Hospitals are cutting headcount because their top line revenues aren’t growing and CEO’s are missing their earnings numbers (in some cases by a lot).
One of the most aggressive health systems in the US, the University of Pittsburgh Medical Center (UPMC) had a more than 60% earnings decline in the last six months of 2012.
You will know that austerity has finally arrived in the hospital industry when there are year over year declines in headcount. That probably won’t happen in 2013.
The real job growth in this field in the past four years has been in consulting (thanks to ACA and the ACO circus), information technology (thanks to HITECH) and post-acute services (thanks to a completely fragmented and dysfunctional payment system).
See this posting on Health Affairs blog for a discussion of health care employment trends last summer: http://healthaffairs.org/blog/2012/08/23/health-care-an-alternate-economic-universe/