M&A activity is helping health systems grow their footprints or reduce debt, but workers’ wages often take a hit when there’s industry consolidation, according to the Center for Economic and Policy Research’s “Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality.”
Savings realized by healthcare systems have not gone back into staff training or improved healthcare workers’ wages, but instead improved healthcare organizations' finances, the report states.
- While hospitals remain one of the largest employers in healthcare, outpatient care jobs grew six times the rate of hospitals between 2005 and 2015. That trend is expected to continue, especially if coverage through Medicaid and private insurance decreases.
The industry has seen a lot of disruption this year, and staffing levels are affected like most everything else. Hospitals are reeling as they try to respond to lower reimbursements, decreasing patient volumes and the question of whether the Affordable Care Act will remain standing.
One result is an uptick in M&A activity, which has led to greater consolidation as systems look to gain market share, cut costs and achieve scale. A recent report by Kaufman, Hall & Associates, LLC found hospital and health system mergers and acquisitions increased 15% in Q2. That increase includes six transactions of health systems with nearly $1 billion or more in revenues announced in the first half of 2017. There were only four such deals in all of 2016.
This latest report found hospital worker wages are stagnant, and outpatient center worker wages have dropped 6% over the past decade. Healthcare makes up one-sixth of the U.S. economy, which means stagnant or declining wages in the sector can lead to a drag on the nation's overall wages. One factor in the wage issue is that health systems with more market share can create lower wage structures.
“While vertical integration of hospitals and other health providers can improve coordination and the quality of patient care, horizontal consolidation of hospitals into a relatively few healthcare systems in a local or regional market may decrease competition and increase anti-competitive practices that raise prices and revenues,” according to the report.
In addition to stagnant and declining wages, the most recent Bureau of Labor Statistics data showed healthcare may be starting a job growth slowdown. The healthcare industry added about 20,000 jobs in August, which was nearly half of the 39,000 jobs added in July. The number of added hospital jobs dropped from 7,000 in July to 6,000 in August. That might be a brief summertime blip, or part of a trend. We'll know more when September's numbers are released early next month.
Another healthcare employment issue this year is layoffs. There have been dozens of hospital layoffs this year, including Memorial Hermann, Brigham and Women’s Hospital, NYC Health + Hospitals, Summa Health and Hallmark Health. One reason for staffing cuts is the general uncertainty surrounding healthcare.
"When you add uncertainty to what's already been going on in the reimbursement environment around how many more uninsured there may be going forward, that's not the cause of [layoffs] but it's certainly going to accelerate the thinking of executive teams to make sure [their organizations] are efficient and ready for anything," Ben Isgur, director of PricewaterhouseCoopers' Health Research Institute, recently told Healthcare Dive.
Despite the hiring growth slowdown and layoffs, the healthcare industry is still expected to be among the fastest growing jobs through 2024.