Wall Street analysts are taking note of the impending labor strike of more than 12,000 hospital nurses in Minnesota, and they don't like what they see.
A report from Moody's Investors Service says such a strike, which is being billed as the largest in U.S. history if it takes place as scheduled on July 6, would create significant pressure on bond ratings at the systems. The report describes a multiplier effect on hospitals' profitability, as labor costs rise quickly through expensive temporary labor, while utilization drops, particularly among patients who would receive nonemergency procedures.
Three of the four systems in the Twin Cities rated by Moody's have a stable outlook as of today, but their balance sheets are fragile. The four systems together earned just $284 million in operating income on $7.2 billion in operating revenue in 2009, for an operating margin of 3.9%. “If the strike raises costs even slightly, it will have a significant effect on margins,” Moody's analyst Sarah Vennekotter wrote.
The 14 hospitals in the Minneapolis-St. Paul area affected by the threatened strike estimate the union's demands for increased staffing would cost about $250 million per year in additional personnel costs, which hospitals spokeswoman Maureen Schriner called “a conservative estimate.”
Union officials say mandated staffing levels would also save money by improving care quality and decreasing nurse turnover costs. “Our intent is not to inflict financial harm upon the Twin Cities hospitals, but to reach a contract agreement that puts patient care and safety at the forefront,” said Joni Ketter, the Minnesota Nurses Association's director of organizing and field operations, in an e-mail.
