Are hospitals hiring too many people? Does continued growth of jobs in the US healthcare sector, including hospital gains, as shown in preliminary federal data released Nov. 7, reflect the industry's strength under the Affordable Care Act? Or is it a sign that healthcare is hurtling down a path toward more workers and lower salaries, but not necessarily more productivity?
It depends on whom you ask.
Robert Kocher, MD, a partner with the Cambridge-based investment firm Venrock, asserts that the growth of healthcare jobs actually reflects a lack of efficiency in the industry. He described it as a worrisome trend in a blog and Harvard Business Review article last year.
Kocher, who helped shape the ACA as special assistant to president Obama for healthcare and economic policy before joining Venrock, took the time to answer an email query from Healthcare Dive: "Is it fair to say that your underlying conclusions from a year ago—about the downside of US healthcare sector jobs—remain basically the same?"
Kocher's emailed reply: “TOTALLY TRUE!!!!”
Demand and supply didn't grow in tandem
Last year Kocher and his colleagues analyzed federal labor data and found the number of workers in the US health system grew by nearly 75% between 1990 and 2012; nearly 95% of the growth was from non-physicians. He said demand and supply weren't growing in tandem—since inpatient days per capita decreased by 12% while the workforce in hospitals grew by 11% from 2002 to 2012.
"This misalignment underlies some of the productivity decline we have observed in healthcare," Kocher said, explaining the healthcare industry was hiring far faster than demand was growing: adding 119,000 new workers in the first half of 2013 with little increase in patient volume.
However, Kocher said productivity gains would be possible if healthcare jobs weren't added in 2014.
So what happened? Most recently, the US healthcare sector added 25,000 jobs in October, slightly above the prior 12-month average gain of 21,000 jobs per month, according to preliminary data released Nov. 7 by the US Bureau of Labor Statistics. Of the total, 19,000 jobs were added in ambulatory services.
In August, a Forbes article noted that the healthcare industry had gained more than 1 million jobs since the Affordable Care Act was signed into law in March 2010. In fact, Forbes said the industry is working on "a 13-year streak of unprecedented jobs growth." Yet Forbes worried that not all healthcare sectors were growing equally, noting that hospitals lost about 7,000 jobs in July over the previous month; by contrast, physician offices and home health employers added nearly 13,000 jobs over the time period.
But that hospital job loss turned out to be a blip. Since July, federal data show hospitals have gained steadily, adding 19,500 jobs as of October. Overall, US hospitals now employ 4,822,000 workers, up about 33,000 jobs since January 2014.
'Getting the right people to the right place'
Lauren Eyster, senior research associate at the Urban Institute in Washington, DC, points out that the Bureau of Labor Statistics also projects that the greatest growth in the US healthcare sector between 2012 and 2022 will come from low-wage jobs. Personal care aides top the list, followed by registered nurses, home health aides and nursing aides. "It's certainly concerning," she says. She notes that personal care aides make about $20,000/year, "so these are poverty-level jobs."
Where does this leave hospitals? From an operational standpoint, hospitals may be seeing less reimbursement under reform, but they still have a commitment to take care of patients and produce positive outcomes, says Chris Fox, CEO of Avantas LLC, a staffing consulting firm based in Omaha, NE, that also offers a labor management software tool for the healthcare industry.
Hospitals "need to get the right people to the right place to take care of patients...without reducing their skill set and the hours of care needed by each patient for a good outcome," Fox says. He predicts a growing market for clinicians because the small decline in hospitals' inpatient volume likely will be exceeded by an increase in volume on the outpatient side from people newly insured under the ACA.
Last year Fox wrote a blog about continuing consolidation of health systems. Since consolidation focuses on creating efficiencies, he said, labor should be among the merged organization's key early initiatives. Labor typically represents 60% of an organization's operating expense, he explained, so improvements can save money and improve quality. By the same token, he said, inefficiencies in labor management can disrupt an organization's ability to offer quality care, control expenses and minimize turnover and its related costs.
With labor as a major cost center, healthcare administrators must focus on their work forces and "right-size" them across the continuum of care, Fox says. That means using analytics to look at full-time, part-time and contingency staffing requirements, and using predictive models to estimate volume. Administrators also must use analytics to examine the demographics of existing care staff, especially given the aging population of registered nurses (and 12% nurse turnover rate), he says, since they must hire continuously—typically in a competitive market—to make up for workers exiting and retiring.
Fox cites the inherent challenge in handling many moving parts, from shifts in volume to changing demographics, "which together make it a moving target for healthcare organizations to have the right amount of workforce available to them."