As the nation's labor market improves, hospitals that saw demand for nurses erode their margins last fall are now aggressively hiring and targeting turnover in a bid to stem further financial strain.
Executives gathered in San Francisco this week for an annual healthcare conference had a mixed view of the labor market for nurses and other healthcare professionals. Some perceive greater demand and others said the market remains unchanged. Those conflicting opinions might reflect how labor markets vary across the U.S., and depend on the strength of local economies and the number of competitors vying for talent, executives said.
Those hospital executives who saw labor costs strain their expenses in late 2015 blamed continued patient demand.
“It's always a challenge as the economy gets stronger,” said HCA Chief Financial Officer Sam Hazen. The Nashville-based company has seen more patients visit its clinics, urgent-care centers, freestanding emergency rooms and 167 hospitals. HCA is in 42 U.S. markets, including Colorado, Georgia and Tennessee. Last year, it reported lower third-quarter margins from rising labor costs.
Healthcare hiring slowed in 2013 but rebounded the next year after the Affordable Care Act expanded health insurance subsidies and millions gained coverage. The industry's hiring accelerated in 2015, adding roughly 470,00 workers to its payrolls. Nursing, the industry's largest occupation, is projected to grow rapidly in coming years.
Hazen said in some markets, new competitors "are chasing this labor pool." While HCA saw labor costs creep up slightly from the prior year, it does not expect significant spikes in labor costs in the short term.
Trevor Fetter, the CEO of Dallas-based Tenet Healthcare, said he wasn't seeing much pressure in his markets. The company owns 84 hospitals across 13 states including California, Florida, Michigan and Texas. “That may have to do with where we are,” he said. “But we're just not seeing it.”
Universal Health Services, the King of Prussia, Pa.-based hospital and behavioral health company, did see higher labor costs last year in the third quarter. The company rushed to recruit nurses after unexpectedly steady demand in the third quarter caught the company by surprise and forced UHS to rely on temporary staffing, said Steve Filton, the company's chief financial officer.
“We simply are hiring more nurses,” he said. Hiring and training take time, but the industry is not facing the structural nursing shortage apparent 10 years ago when “no matter how much we tried to hire nurses, no matter what we were willing to pay them and no matter what benefits we were willing to give, we couldn't hire nurses.”
UHS has not seen wages go up in its market, but Filton said they're not ruling it out in the future. Their recent hires were the result of continued strong volume, “which is a good problem to have,” he added.
Executives said they would continue to monitor labor markets for signs that demand could spike wages.
“I'd like to give it another quarter or two,” said Ben Breier, CEO of Kindred Healthcare, Louisville, Ky., which operates across 47 states and employs roughly 102,000 workers.
“There clearly seems to be some pressure materializing in the labor market,” he said. “We're seeing that through more need in higher merit increases, to make sure that we're neutralizing wage growth. I think it is out there. It is real.”
Economic growth has increased demand for temporary nurses at AMN Healthcare. A strong economy has historically had that impact, said Susan Salka, CEO of the San Diego-based company.
When general unemployment declines, “nurse attrition always goes up,” she said. Other factors include hospital occupancy, nursing shortages and demographics and the Affordable Care Act.
The company's large operations “represent the national average,” and hospitals across the country are reporting challenges hiring nurses, she said.