Healthcare Faces 'Interesting Times'

There's an old saying: "May you live in interesting times." It's allegedly from China, and there is debate about whether it's meant as a blessing or a curse.

If you're an HR executive in the healthcare industry, there is no denying that we are living in interesting times right now, and it's hard to say if that's a blessing or a curse. So, let's take a little time to review the world we're working in, and what is likely in store for at least the near future.

On the one hand, we've got critical shortages of doctors, nurses, and other healthcare workers in almost every area of the nation, and that has led to steady job growth in the healthcare sector.

The Bureau of Labor Statistics reports that 372,000 healthcare jobs were created in 2008, despite the gray economic climate. This happened, BLS reports, at the same time that 3.6 million people joined the ranks of the unemployed. In the last 10 years, the healthcare sector has created about 300,000 new jobs every year. A further BLS breakdown shows that the hospital sector created 138,000 new jobs in 2008 for a total of more than 4.7 million. In the last 10 years, the hospital sector has created 788,000 new jobs. Although the shortage of healthcare workers creates hardship for people needing medical care, particularly in rural areas, it also provides an employment opportunity for the tens of thousands of newly jobless people, albeit with some assembly required.

On the other hand, we've got daily reports from across the nation of hospital layoffs. It's not immediately clear how many jobs have been lost, but there is also nothing to indicate that this trend won't follow the moribund economy well into this year, and beyond. How can there be layoffs at a time when healthcare workers are at a premium? How can one industry have two trends heading in diametrically different directions? How do you as an HR professional simultaneously plan for a labor shortage, a recruiting drive, benefits enticements, benefits cuts, and layoffs, all of which could occur with no reduction in the demand for medical services?

Marick Masters, a professor of business at Wayne State University in Detroit, says it's not unusual for a particular industry to face conflicting internal trends, particularly an industry as large, vital, complex, and all-encompassing as healthcare. For example, the automobile industry saw foreign automobile manufacturers like Toyota, Nissan, and Mercedes-Benz building strong operations in the United States in the last 25 years at the same time that domestic manufacturers suffered declining markets.

"The healthcare industry really is a microcosm of the whole U.S. economy, which is in a massive state of flux right now," Masters says. "All you have to do is look at the gyrations of the daily stock market reports to get an idea of the degree of instability that's out there."

The press releases and media accounts of hospital layoffs usually stress that patient care won't be adversely affected, that the laid-off workers usually are in less-critical administrative and environmental positions, rather than front-line medical care providers like nurses or physician-employees. Frankly, that's just public relations fodder.

It's hard to believe that too many hospitals carried excessive staffs before the economy tanked. In this age of hospital-acquired infections, intensive documentation of quality initiatives, Medicare/Medicaid paperwork mazes, and RAC audits, please don't suggest that cleaning and administrative staffs are non-essential or luxuries. Their diminishing numbers are a clear signal that hospitals are looking at leaner operations in the foreseeable future and we'd better get used to it. In all likelihood there will be more layoffs.

"These are very tough economic times, particularly for organizations that tend to operate at the margins," Masters says. "It's going to be very difficult for them to shield themselves from layoffs. It might not be as bad for them as in on other industries like manufacturing, but there is no perfect indemnity for avoiding the economic problems we face today."

Of course, while the healthcare industry is resilient, it isn't immune to the realities of a sputtering economy. But it's not like the widget industry, where workers get axed when nobody buys the widgets. Tough times mean private-paying patients will delay elective care. But people will still get sick and they'll still need care, and some will need hospitalization. Someone will have to provide that care. It will cost money. The only thing that isn't a guarantee is payment.

Rising unemployment means more workers will lose their employer-sponsored healthcare. It means an increase in lower-paying Medicare and Medicaid patients, and in charity care and bad debt. Credit markets are locked down, which makes the cost of borrowing money for capital projects and other obligations prohibitively expensive. Nonprofit hospitals face reduced support from cash-strapped governments. For-profit hospitals could see property tax hikes.

And any economic woes a hospital feels will likely reverberate in the community it serves, because hospitals are often the largest employers in their communities, exacerbating the problems for the community, the local government, and the hospital. A hospital that lays off 30 workers in a small community might someday provide charity care for those workers and their families.

Is there any other industry where the overall demand for services remains more or less constant, where the demand for workers remains acute, yet there are layoffs and buckets of red ink?

Interesting times, indeed!