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The Lag at the End of the Tunnel

John Commins, for HealthLeaders Media, August 17, 2009

We are reading reports that the great recession–which started in December 2007–might be over sometime in the third quarter of 2009. Some economists say it's already over.

But, before your C-suite pops the champagne corks and unrolls those dusty blueprints for the atrium expansion, remember that these recovery claims should be read only within the narrow economic measurement of the gross domestic product, which is expected to grow 2.4% in the third quarter. Skepticism and caution are justifiable when some economists suggest that a good indicator for the recovery is a slowdown in job losses.

The healthcare sector is one of the few areas in the economy that has seen job growth through the recession, but that growth has essentially been halved this year.

And, while the healthcare sector was one of the last areas of the economy to be adversely affected by the recession, some analysts warn it may also be one of the last sectors to enjoy the recovery.

"Economic cycles have different impacts on different sectors of the economy," says Steve Jenkins, vice president of Chicago-based Sg2. "Healthcare tends to be a lagging sector because it takes time for the downturn to result in lost jobs and the lost jobs to result to lost health benefits, and the COBRA option extends that further. So, it softens the blow early on but it tends to prolong the impact of the recession on healthcare providers for a longer time."

Last week, Kaiser Permanente, the massive integrated health system and one of California's largest employers, announced that it will eliminate 1,800 positions over the next few months. The positions, which represent about 2% of KP's 56,000-strong workforce, will affect mostly temporary and on-call positions.

Also last week, Arlington-based Texas Health Resources announced that it had laid-off 33 employees from its 19,000 workforce.

In California and Texas, like everywhere else, the reductions were blamed on the usual suspects, including: uncertainty over healthcare reform; dwindling Medicare reimbursements; growth in unreimbursed and charity care; tanking investment portfolios; and reduced inpatient volume.

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