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Labor constraints in the hospital space are improving after pandemic-era challenges, Fitch Ratings said in a recent research report, indicating a prolonged bargaining process for 75,000 Kaiser Permanente employees who chose to strike over working conditions and salaries last week.
Kaiser, one of the largest nonprofit health providers in the U.S., is expected to resume negotiations this week, as protesting workers agreed to return to work on Saturday.
The 72-hour union action by nurses, lab technicians and support staff paralyzed routine health care for nearly 13 million patients across the country, from California to Virginia, in what turned out to be the largest health care strike. in American history.
As unions seek negotiations and threaten new strikes if demands are not met, Kaiser executives are expected to have the upper hand amid weakening working conditions in hospitals and outpatient health care services.
Even before the pandemic, labor was a critical component in healthcare, with costs associated with recruiting and retaining employees, benefits and incentives accounting for more than half of total costs in the sector. hospitable.
“Labor is the number one expense and most critical piece of the healthcare sector,” said Fitch Ratings Senior Director Kevin Holloran. Bloomberg.
COVID-19 changed the equation as the sector faced a nursing shortage compounded by pandemic-driven demand for healthcare services.
HCA Medical Care (New York Stock Exchange: HCA), the country’s largest for-profit hospital operator, saw its expenses on salaries and benefits as a proportion of total expenses reach ~54% and ~55% in 2022 and 2021, respectively, up from just over 51% before the pandemic.
However, recent jobs data indicate signs of moderation. According to Fitch, average hourly earnings growth has consecutively slowed in hospitals and outpatient clinics health services, respectively, for three and four months, while payrolls continued to grow.
That means higher staffing levels and lower job openings as recruitment and retention efforts increase and the burden of seasonal COVID, flu and RSV infections on the U.S. healthcare system decreases.
The firm further states that if workforce improvements continue and COVID-related hospitalizations do not reach a level that could reignite demand for nurses or hurt surgery volumes, health systems can overcome spending challenges and improve profitability in the future. next years.
“Any disruption, whether in the actual supply of labor or workforce cost” has a significant impact on hospital margins, Fitch’s Holloran warned, adding that “we should expect to continue to see difficult labor negotiations in the sector for years to come.”
Healthcare service providers listed: HCA Healthcare (HCA), Community Health Systems (New York Stock Exchange:CYH), Surgery Partners (SGRY), Tenet Healthcare (New York Stock Exchange: THC), SunLink Health Systems (NASDAQ: SHY), Universal Health Services (UHS), Select Medical Holdings (SEM), Acadia Healthcare (ACHC), LifeStance Health Group (LFST)
