Labor woes plaguing hospitals and health systems across the country could be subsiding for the first time since the COVID-19 pandemic triggered an exodus of healthcare workers.
A new report by Fitch Ratings says the “worst of the labor downturn” could be nearing an end for not-for-profit hospitals in the U.S. Not-for-profit, or tax-exempt hospitals, account for most hospitals and health systems in the U.S. and they have been hit hard by staffing issues due to the COVID-19 pandemic and the so-called “Great Resignation” took their toll on healthcare providers across the country.
As one example, the Fitch report said the year-over-year “average hourly earnings growth of hospital employees has (favorably) declined, averaging 3% in 2024 compared to 4.2% in 2023.”
”Hospital wage inflation is cooling to more sustainable levels, with (year-over-year) wage growth below that of the private and ambulatory healthcare services sectors for several months,” Fitch said in its report. “This development follows an extended period of above-average salary and wage increases for hospital employees, which were implemented to reverse persistently high turnover and external contract labor use.”
To be sure, Fitch said hospital payrolls have increased for the last 32 consecutive months as of August of this year, up 6.7% since February 2020, which was around the time COVID began its spread in the U.S. and triggered shutdowns the following month.
But Fitch says “job openings in the healthcare and social assistance sector” are continuing their steady decline” and are down to 6% as of July compared to 7.9% in January.
And though the openings rate in the healthcare and social assistance sector is down from pandemic highs, it’s still much higher than the 4.2% from 2010 to 2019, the year before COVID hit in early 2020. “Job openings, while heading down, are still high due largely to the ongoing shortage of clinical labor that will take time to address,” said Fitch Director Richard Park.
The nation’s largest healthcare staffing firm known for placing physicians at hospitals across the country said its clients are still dealing with labor shortages though the situation has improved.
“The COVID pandemic created a once-in-a-generation healthcare workforce crisis,” Meredith LaPointe, Chief Business Officer with AMN Healthcare said.
“While the crisis has passed and conditions are normalizing, many of the underlining factors driving workforce shortages and turnover in healthcare remain,” LaPointe said. “Geographic and specialty misalignment between demand and supply of physicians, nurses and allied health professionals continues to be the status quote. This is a long-term challenge that requires long-term solutions and creative thinking.”
In one area where medical care providers remain in particular demand is in the care of people age 65 and over who are eligible for Medicare, the health insurance program for seniors and the disabled.
Since late last year, health insurance companies that administer privatized Medicare Advantage plans, which contract with the federal government to provide benefits for seniors, have reported higher than expected medical costs, particularly from hospital admissions and inpatient surgeries put off during the pandemic.
Humana, for example, earlier this year said the industry was “navigating significant regulatory changes while also absorbing unprecedented increases in medical cost trends.” CVS Health’s Aetna health insurance has also had troubles including higher costs that contributed to the departure of a high-ranking executive.
“Hospitals are still dealing with post-pandemic pent-up service demand, especially from seniors, that has kept labor needs high,” Fitch’s Park said. “Sustained high volume levels are a modest positive for health systems, but often come with administrative challenges, slow payments and denial of prior authorizations for care, in particular when dealing with Medicare Advantage insurers.”
