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Healthcare's Next Trick: Economic Stabilizer

 |  By Chelsea Rice  
   December 10, 2012

Concern that the November federal jobs report would show weak numbers due to Hurricane Sandy's impact in the Northeast and Atlantic regions proved to be unfounded Friday.  

Despite the storm, unemployment dropped from 7.8 to 7.7 percent, the Bureau of Labor Statistics reported.  And, BLS said, the storm "did not substantively impact the national employment and unemployment estimates."

Total employment rose by 146,000 in November, showing "relatively strong growth" said Karl Smith, a professor of economics at the University of North Carolina at Chapel Hill.

Although November's job growth is slightly under the monthly average for 2012 (151,000), Smith estimates this is probably due to a statistical variation and does not represent a slowdown in job creation. This preliminary number will probably be updated to show a number closer to the monthly average, he says.

Because of a "smoothing" practice that takes place when collecting this data, the BLS report does not paint the most detailed picture of where the economy stands in terms of labor, says Smith. He estimates unemployment to be closer to the recently reported Gallup figure of 7.4%. The BLS report is often "behind the curve" by 18 months, he says, and employment figures are one of the slowest indicators of the economy's recovery.

Healthcare, representing almost 14% of the nation's total job growth, continues to produce jobs, but at a slower rate than the last few months. The healthcare sector created 20,000 jobs in November versus 31,000 in October and 43,500 in September, also falling below its monthly average of 28,000 for 2012.

Hospitals created a much larger portion of total job growth this month over last, BLS reports. There were 8,300 more hospital jobs in November compared to 6,200 last month. That represents at least 41% of the job growth in healthcare, compared to 19.35% of the total healthcare jobs created last month. What's not broken down in the numbers is where those jobs were created.

In a dramatic drop, ambulatory care saw 20,300 fewer jobs created in November (4,700) than October (24,900). Physicians' offices represented the largest portion of this dip, which created 1,700 more jobs in November versus 11,200 in October.

Job growth at outpatient care centers also plummeted, showing only 100 jobs in November, compared with 1,700 last month. Home healthcare services created 300 jobs versus 7,900 in October.

These are not the early signs of a slowdown, says UNC's Smith.

Since the 1990s, healthcare has been the economy's "stabilizer," he explains—rarely fluctuating even during the worse points of the recession. Economic swings will become less and less severe as healthcare takes up a larger and larger place in the economy, and ultimately the industry will help to stabilize the nation's economy with its continued growth, he says.

While national job growth has displayed a winter boom after a summer bust, healthcare's fluctuations haven't been as dramatic. A divergence from the fairly straight line of job growth that the healthcare sector has been experiencing for decades would require a shift in the way consumers think about healthcare in the United States, he says.

"At the end of the day, no one wants to see people sick, and as long as we're in the mindset that it doesn't matter the cost to cure someone, healthcare will continue to be consumed and experience revenue growth," says Smith. "If anything, we will be seeing more revenue, [and] more hiring with the growth of the insured populations."

Last month, I spoke with an economist at Dartmouth with a different view.   Jonathan Skinner, PhD, economist and senior author at The Dartmouth Atlas Project, suggested that with the focus on cost reduction and improved efficiencies in healthcare reform, job creation should eventually slow down. If it doesn't, he said, healthcare is not truly cutting expenditures and the culture of the industry isn't really changing.

One consultant for physician integration and healthcare executive recruiting speculates that not only will job creation continue, but that there will also be a shift in the nature of those jobs.

"Jobs will continue to increase in healthcare—it's where those jobs are in healthcare is what's changing," says Christine Mackey-Ross, senior vice president and board secretary of Witt/Kieffer, an executive search firm.

"Especially since the two biggest expenses are the things you use to treat people and the people you use to deliver that care. On the inpatient side of healthcare we're going to see jobs continue to diminish. Until delivery systems learn how to be profitable or functional on whatever Medicare reimbursement rates are, we're going to see them adjust around things that are the most immediate ways to control costs, and the biggest one of that is obviously labor."

Trends in hiring on the executive level underscore the changing emphasis on productivity and efficiency, Mackey-Ross says. "In the past couple of years, we haven't had a client that at every level of the organization, when they're hiring an executive, [who] has not said 'Get me somebody who is familiar with improving systems and productivity.'"

Staffing and productivity is being monitored on an every four-hour, every six-hour basis, she says, which is unusual for hospitals who used to take census at midnight every day and staff accordingly.

"But IT, particularly physicians and CMIOs, that's going to continue to be a very key position moving forward for a lot of different reasons, but particularly around these productivity improvement reasons," says Mackey-Ross. "That's why having a CMIO is so important in this transition, because they can balance the data that's coming out with the clinical knowledge and the understanding of what an enterprise means, to provide high-quality care and yet still manage costs."

"I think you're going to see more creativity around the kinds of jobs that are created in hospitals. I'm going to be surprised if more full-time jobs are created on the acute care side," says Mackey-Ross. With flu season and hospitals' typical uptick in revenue and patient volumes, Mackey-Ross anticipates that hiring will pick up again at the beginning of the year. The beginning of the financial quarter and New Year budgets also provide the revenue for job creation.

Smith predicts the coming year will bring national job growth that averages 180,000 monthly. If the winter/summer booms and busts continue, he expects winter booms could spike as high as 280,000 or 300,000 a month. "Underneath all that though, there are strengthening signs for the economy, and that's what really matters," he says.

Chelsea Rice is an associate editor for HealthLeaders Media.
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