Fitch Ratings: Workforce pressures easing for hospitals, ambulatory care, nursing homes

Recent months’ payroll and staffing data have largely brought good news for provider employers thanks to consistent monthly job additions, fewer open roles and, most recently, a slowdown in hourly earnings growth, according to a recent sector update from Fitch Ratings.

“Hospital and ambulatory healthcare services payrolls have risen for 14 and 26 consecutive months, respectively, as of last month,” Fitch Ratings Director Richard Park said in a release. “Hospital and ambulatory healthcare services monthly job additions are also up an average of 15,150 and 24,300 per month, respectively, between March 2022 to February 2023. These statistics point to the potential of alleviating labor market pressure.”

The past year’s average job gains are a turnaround from the -2,010 and 20,350 average monthly job change for hospitals and ambulatory care reported from April 2021 to March 2022, the group wrote in its Tuesday report.

Compared to June’s 8.4% high, hospital employees’ year-over-year average hourly earnings growth has dipped to 4.7% as of February, Fitch wrote. Ambulatory care services employees’ average wages have dropped from their 6.3% year-over-year increase in January 2022 to a 3.8% year-over-year increase in February 2023, per the report.

Job opening rates within the healthcare and social assistance sector have also somewhat improved for employers. Fitch highlighted a decline from 9.3% in March 2022 to 7.4% in February 2023, though the group acknowledged that “the latest job openings rate remains very high compared to the 4.2% average job openings rate from 2010 to 2019.”

The flip side of the numbers is that many healthcare and social assistance workers are still leaving their roles for greener pastures. Quit rates within the sector have inched up to 2.7% as of February, well above the 1.6% average of the 2010s, Fitch wrote. The sector is coming off 6.4 million total quits across 2022, which was also above 5 million in 2021 and 4.9 million in both 2020 and 2019.

“Given the persistence of high quits and significant wage inflation over the past year, Fitch believes the sector will need to invest in cost-effective care solutions and develop enhanced business models that incorporate flexible staffing to adapt to labor costs that have been reset to a permanently higher level,” the ratings agency wrote.

Labor shortages across the industry have led provider organizations to rely on pricey contract labor or limit their capacity. Both approaches have made a divot on organizations’ bottom lines, as per health system earnings numbers and industry reports alike.

Workforce departures and early retirements due to issues such as burnout have also been a longitudinal concern for the industry.

Beyond hospitals and ambulatory care, Fitch’s update outlined much-needed improvement across nursing facilities’ staffing numbers. Reported shortages of nurses and aides as of March were 17.3% and 17.7%, respectively, down from January 2022’s peaks of 28.3% and 29.8%.

“Sustained staffing improvements at nursing homes should help improve length of stay/discharge challenges at hospitals,” Park said in a release.