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Fitch: Pandemic Stresses Staff, Raises Costs at Not-for-Profit Hospitals

Analysis  |  By John Commins  
   January 19, 2021

The situation will only get worse as the epidemic drags on, and especially if multiple areas of the nation encounter simultaneous surges of infection.

The coronavirus pandemic is wearing down healthcare workers and could lead to longer-term staffing and cost pressures for the nation's not-for-profit hospitals, Fitch Ratings says.

"Hospitals and healthcare systems' ability to maintain adequate staffing and provide for employee safety and well-being during the pandemic has become more critical than ever," the bond rating agency wrote this week in an issues brief.

"Fitch believes the importance of these labor issues to a hospital's Environmental, Social and Governance (ESG) Relevance Score and credit has been heightened over the past year, indicating the potential for these considerations to have a greater bearing on a hospital's rating over time."

The brief notes widely reported morale problems at hospitals across the nation, with short-staffed clinicians overwhelmed by the coronavirus caseload, compounded by the potential for personal health risks because of an inadequate supply of personal protective equipment.

"Fitch believes these issues could negatively affect labor relations and present longer-term challenges in attracting, hiring and retaining staff at hospitals," Fitch says.

Nurses were already in short supply before the pandemic, and the surge in new cases has only made matters worse, "resulting in staff shortages and higher costs, which is expected to continue in the near term against a backdrop of lower revenues due to reduced elective surgery volumes," Fitch says.

Labor is the largest expense at most hospitals, accounting for more than 50% of total expenses. Although the pandemic has led to layoffs in hospitals, it has also forced many hospitals to ramp up staffing, pay more overtime, intensify nurse recruiting efforts, including signing bonuses, hire travel nurses, and vie with competitors to acquire expensive PPE.

"These pressures are heightened for smaller rural hospitals that must staff up for increased caseloads, as rural areas typically do not have a significant supply of nurses from which to draw," Fitch says.  

The situation will only get worse as the epidemic drags on, and especially if multiple areas of the nation encounter simultaneous surges of infection.

"Under this scenario, fatigue will inevitably escalate among existing staff who could decide to retire early or leave the workforce due to fears of contracting the virus, or if they feel their health, well-being and safety have not been prioritized or are at risk," Fitch says.

The widespread availability of vaccines – expected to gain momentum in the coming months --should ease the pandemic caseload and relieve some of the pressure clinicians are experiencing, Fitch says.

"However, hospitals will have to face the longer-term challenge of attracting talent to an industry that already faces a labor shortfall and consider investing in programs that positively impact employees and reduce turnover to mitigate expense increases and improve clinical outcomes," Fitch says.

The bond rating agency said President-elect Joseph Biden's proposal to provide $30 billion for supplies and PPE and investing $10 billion in domestic manufacturing of medical supplies will also help the hospital sector's recovery from the pandemic.

“Hospitals and healthcare systems' ability to maintain adequate staffing and provide for employee safety and well-being during the pandemic has become more critical than ever.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Nurses were already in short supply before the pandemic, and the surge in new cases has only made matters worse.

The widespread availability of vaccines should ease the pandemic caseload and relieve some of the pressure clinicians are experiencing.

President-elect Joseph Biden's has proposed $30 billion for supplies and PPE and investing $10 billion in domestic manufacturing of medical supplies.


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