Dive Brief:
- The labor outlook is stabilizing for U.S. nonprofit hospitals as employment increases and healthcare job openings decline, according to a new report from Fitch Ratings.
- Hospital and ambulatory healthcare services payrolls have risen for 22 and 34 consecutive months respectively, according to the credit ratings agency. Wage growth has remained “relatively flat” at 4%.
- Though the statistics indicate the hot labor market is cooling, Fitch said recruitment is still “hyper-competitive.” Health systems may need to offer higher salaries and better benefits to attract talent and dissuade skilled labor from seeking early retirement, the report said.
Dive Insight:
This year, nonprofit health systems honed in on recruitment and retention strategies to cut pricey contract labor costs and remedy staffing shortages after burned out healthcare workers exited the field between 2020 and 2021.
Some operators, including Mayo Clinic, CommonSpirit and Providence, reported progress on the labor agenda in recent quarters relative to the same period in 2022, citing slowing contract labor cost growth or reduced spend on the heels of successful recruitment initiatives.
But the outlook for the sector is still “deteriorating,” Fitch said in a separate report released earlier this month — a rating that’s been in place since August 2022. At the time, the agency said individual operators’ financial performance would hinge on their ability to attract and retain talent.
The recent Fitch report called hospitals’ ability to manage salary, wages and benefits “the single most meaningful differentiator between operational success and failure in the current environment.”
“Hospital workers remain in a favorable position in a hyper-competitive landscape for personnel against a backdrop of higher cost of living and the exit/early retirement of some skilled labor from the workforce,” said Richard Park, a director at Fitch, in the report.
Though quit rates have fallen from a May peak of 2.9%, they remain above pre-pandemic levels of 2.3% as of October, Fitch said.
Wage growth for hospital employees increased 4% between June and October but remained relatively flat, according to the report. The growth is above the 2.3% increase in average hourly earnings between 2010 and 2019.
Increasing union activity may also pressure health systems to offer higher wages, according to Fitch.
“Labor tensions may put more pressure on wages and subsequently make managing costs more difficult for health systems over time as union contract negotiations are occurring during a period of increased bargaining power for workers,” Park said.
Labor tensions have caused strikes at health facilities, with some prompting wage increases.
More than 1,700 nurses at Robert Wood Johnson University Hospital in New Brunswick, New Jersey announced this month they had reached a tentative deal with management that would raise wages after walking the picket line for nearly four months.
The deal followed the Coalition of Kaiser Permanente Unions’ three-day October strike, which resulted in a new four-year contract, covering more than 85,000 healthcare workers. The contract includes a 21% wage increase over four years, a minimum wage of $25 an hour in California and $23 an hour in other states.
