Healthcare Jobs Report Creates Clashing Narratives

Tighter margins, industry consolidation, and uncertainty surrounding healthcare reform, are tamping down healthcare hiring. "Everyone is afraid of what will happen and is too scared to hire," says one healthcare economist.

We're getting conflicting narratives about healthcare job growth.

The story line we've heard for the last decade or so tells us that healthcare is an excellent job growth market, particularly for people with advanced degrees and specialties.

That narrative has been backed up by consistent data from the Bureau of Labor Statistics, which has shown that the healthcare sector is one of the more robust job growth engines for the overall economy. In the last decade, for example, BLS data shows that the now-$2.8 trillion healthcare sector created more than 2.7 million jobs, with most of those new jobs in ambulatory services.

Until recently, there's been some sort of unsubstantiated belief that healthcare was immune from the growing pains and economic downturns of other industries. There was also a consensus belief was that healthcare reform and the expansion of health insurance coverage through commercial exchanges and Medicaid would only increase the demand for skilled healthcare workers, particularly clinicians and information technology experts.

While the immunity theory has pretty much been debunked, in some respects it still holds true that skilled clinicians will continue to be in demand.

However, in the last few months of 2014 a new narrative has emerged. In December, the healthcare sector shed 6,000 jobs, led by 4,100 job reductions in ambulatory services and 2,400 reductions at hospitals. That was not just a one-month blip. BLS data shows that in the fourth quarter of 2013, hospitals shed 500 jobs. Unfortunately the data is not granular enough to show us specifically what kinds of jobs are being lost.

The healthcare sector created 207,600 new jobs in 2013, considerably down from the 320,600 healthcare jobs created in 2012, but more in line with historical trends from the past five years.

A breakdown of BLS preliminary data for 2013 shows that hospitals created only 9,800 new jobs in 2013, well below the 73,300 jobs created in 2012 and the lowest total since 2009, when only 2,700 hospital jobs were created in the midst of a deep recession. Ambulatory services continue to be the primary job creator for the healthcare sector, posting 180,100 new jobs in 2013. That's down from 208,400 jobs created in 2012. Nursing and residential homes created 17,700 in 2013, less than half of the 38,900 jobs created in 2012.

What's going on here?

'Too Scared to Hire'
Medicare reimbursement cuts, an avalanche of sweeping and complex new federal mandates from meaningful use to ICD-10, the looming shift toward value-based payment models, the sector-wide shift toward out-patient services and population health, and the general uncertainty about how the Patient Protection and Affordable Care Act will play out has led many providers to re-evaluate their hiring practices.

"Everyone is afraid of what will happen and is too scared to hire," says Richard "Buz" Cooper, MD, a healthcare economist at the University of Pennsylvania. "Most are feeling the pressures of reimbursement cuts and are getting rid of employees. In the contest that is unfolding between government, insurers and providers, both government and insurers are mega-sized, while providers are too small to fend them off. No surprise that providers are consolidating."

Add to that, healthcare spending growth is at 53-year low. Actuaries at the Centers for Medicare & Medicaid Services earlier this month said that the 3.7% increase in healthcare spending in 2012 tracked the fourth straight year of relatively slow growth and actually declined slightly as a percentage of the gross domestic product.

And as much as Obama Administration officials would love to take credit for this spending downturn, the real driver here is the consumer. Healthcare spending slowed dramatically during the recession, because people either lost their insurance coverage through layoffs, or they delayed elective procedures and other medical care because of the general economic uncertainty.

As we emerge from the recession, we find that the healthcare landscape has changed, thanks largely to the advent of the high-deductible health plan. As consumers shoulder most of the cost of their care through higher co-pays and deductibles it seems only logical that they will cut back on personal spending on healthcare goods and services, which CMS says account for about 85% of total national healthcare spending.

Facing these daunting external challenges, it makes perfect sense that providers are reluctant to hire more staff. Labor costs are the largest slice of providers' budgets so naturally that'd be the first place they'd look for reductions when margins tighten.

Two Job Healthcare Markets Emerging
Mergers and consolidations undoubtedly are playing a huge role in layoffs. Merge two hospitals or a physicians' group and suddenly a lot of administrators and support staff become redundant. And there is no indication that M&A activity will slow anytime soon as providers struggle for leverage with payers.

What will 2014 bring? Based on what I'm reading and hearing, we will see the continued trend of two divergent job markets within the healthcare sector.

For support and administrative staff there will continue to be tepid, marginal growth, not because there is growing demand, but because healthcare is simply a massive, labor-intensive industry. The healthcare sector accounts for more than 14.6 million jobs so attrition is inevitable. People retire. People get fired. People quit. People move. People are replaced. We will see job growth but likely not the pace that we've seen over the past 10 years.

The Conference Board regularly tracks online ads for healthcare support jobs—the "have nots" of the healthcare universe—and finds that there are more than two people looking for every job advertised. The jobs also pay about $13.36 an hour.

That factoid is inverted for skilled clinicians, executives and technology folks; aka the healthcare "haves." The Conference Board shows that there are more than two jobs advertised for every skilled healthcare jobseeker, with an average salary of $35 an hour.

Anecdotally, recruiters across the country routinely tell me they're finding a robust market for skilled clinicians in every part of the country.

The bottom line: Healthcare providers are consolidating in an era of tighter margins and decreased utilization. Of course hiring is going to take a hit. Because of its vital nature, the healthcare sector may be more resistant to the economic forces that affect every other industry. It's not immune.