The U.S. economy continues to add new jobs. The main reason is that it's a local hospital.
Healthcare contributed 70,000 jobs in January and accounted for nearly 20% of the U.S. workforce growth. New hires included people working in hospitals, outpatient centers, nursing homes and residential care facilities.
Experts say investors can expect strong hiring to continue this year as structural changes are underway as the pandemic subsides. Hospitals are relying more on full-time staff rather than the temporary support needed during the peak of coronavirus infections. Return to your normal routine.
This workforce restructuring is a boon for health care providers who had to shell out large sums of money for traveling nurses during the pandemic, but for publicly traded staffing companies that were providing many contract workers. , perhaps there is a possibility of retribution.
“The health care industry is recovering and is better able to meet peak demand when needed,” Courtney Shupert, an economist at MacroPolicy Perspectives, told Yahoo Finance. “That means companies can hire more permanent full-time employees, maybe not rely on some of the more expensive contract nurses, and just rely on contract workers in general. .”
return to normal
To understand why healthcare worker employment is changing, it helps to understand how COVID-19 has impacted staffing across the industry. As turnover rates accelerated and demand soared in various regions of the United States, hospitals turned to contract nurses for assistance.
Overall, the total number of medical staff more than tripled during this period, and the travel nurse subsegment grew even faster, said Trevor Romeo, a research analyst at William Blair & Co., according to Yahoo Finance. told.
That nurse's salary was not low. For example, in 2019, AMN Healthcare Services (AMN) billed hospitals $75.49 per hour for temporary staff, primarily nurses, according to Romeo data. Then, in March 2022, he rose to $145.34 per hour. That's nearly double the pre-pandemic rate.
These contract jobs are starting to be eliminated as hospitals hire more permanent employees. Some of the job gains in health care were offset by losses in staffing, Schupert said.
“Although the share of temporary services in total employment is smaller than that of healthcare, from 2020 onwards, especially in 2023, temporary services continue to decline while employment in healthcare continues to increase. “You'll see the two industries move more in opposite directions,” she said.
The need for more medical staff remains. Patient numbers are steady as more people undergo surgeries that were postponed during the pandemic. In addition, the aging baby boomer generation requires more healthcare services, a long-term trend that will continue to increase.
For example, HCA Healthcare (HCA) was able to admit 90% of patients coming to its medical facilities at the end of the year.
“In other words, we were unable to accept approximately 10% of the patients that were referred to us,” HCA CEO Sam Hazen said on a fourth-quarter earnings call in late January. “What we're seeing is more patients are coming through transfer centers and other patient navigation programs than they did in 2019.”
At the same time, many nurses and other medical staff who traveled during the pandemic did not return to their home bases, leaving former hospitals understaffed, especially in rural states.
“It's almost an emergency situation in places like Mississippi,” said Brian Tunkilt, an equity analyst at Jefferies. “Everyone's traveling, there's a shortage of nurses, and even if things get back to normal, that's how we're going to keep the state going.” “Not all the nurses who left came back.” Yahoo Finance. “So geographic and immigration factors play a role, especially in the recruitment and hiring of nurses.”
And now, overall interest in nursing careers seems to be declining. Enrollment in nursing degree programs decreased by 1.4% from 2021 to 2022, the first decline since 2000, according to the American Association of Colleges of Nursing.
“So this is another indicator that the severe nursing shortage that we're seeing isn't going to go away anytime soon,” Romeo said.
“Comprehensive personnel plan”
To address current and anticipated increases in demand, hospitals are increasing their full-time workforce while reducing their reliance on contract workers.
For example, HCA's contract workforce will decline by 20% in 2023, and its costs accounted for 5.3% of the company's salaries, payroll and benefits costs in the fourth quarter, down from 7.1% in the first quarter of last year. said the company's CFO.
Tenet Healthcare Corp. (THC) saw even larger reductions. By the fourth quarter of 2023, contract workers accounted for just 2.8% of consolidated salaries, wages and benefits, down 62% from 7.3% in the fourth quarter of 2022.
“We strengthened our workforce and effectively reduced contract labor spending throughout the year, resulting in a significant increase in nurse recruitment and retention,” Saumya Sutaria, CEO of the company, said in the company's latest earnings call on Thursday. Our investment has paid off.”
Significant savings can be made by reducing contract labor. Tanquilut said that although rates have come down slightly, temporary nurses' rates are still about 20% higher than pre-COVID-19 levels and more expensive than full-time staff.
AMN Healthcare charged hospitals $96.43 an hour for temporary workers at the end of 2023, according to Romeo data. This was a 51% decrease compared to March 2022 levels, but still a 28% increase compared to 2019 rates.
“That means they're still charging a premium,” Tankilt said. “So ultimately it's better to just have those full-time personnel.” [and] From a quality of care perspective, most hospitals prefer to have resident nurses who are familiar with the facility. ”
To prepare for future needs, some hospitals have established their own internal staffing companies, or float pools. This will allow the nurse, who typically works her three 12-hour shifts a week, to volunteer for additional shifts if desired and needed.
“Hospitals are certainly trying to reduce labor costs and eliminate or reduce their dependence on these contracting agencies,” Tankilt said.
“Market Reset”
Changes in staffing are reflected in the stock performance of two major healthcare staffing companies: AMN Healthcare Services and Cross Country Healthcare (CCRN). Both stocks reached their highest prices in late October 2022. Since then, AMN stock has fallen 41% and the value of Cross Country stock has fallen 48%.
AMN CEO Cary Grace acknowledged in November during the company's third-quarter earnings conference that the company “anticipated a market reset.” “But it's deeper and more persistent than we or others in the industry expected.”
AMN won't report fourth-quarter and full-year 2023 financial results until February 15, with Cross Country to follow on February 21, but Romeo provided a preview. He said temporary nursing business will likely decline 30-35% year-over-year in 2023, and to make matters worse for these companies, that decline is likely to continue unabated.
“Our current prediction is that the market will decline by another 20% in 2024,” Romeo said. “The question is when will we see that plateau…and my best guess at this point is late 2024.”
Meanwhile, AMN and Cross Country are taking advantage of one area where contract medical staff is on the rise: temporary physicians, which hasn't boomed as much as nursing did during the pandemic, Romeo said. The physician staffing market grew 10 to 15 percent last year and is expected to expand another 7 to 10 percent in 2024, Romeo said.
“It's a small part of their business, but both companies have actually been making acquisitions in that area recently,” Romeo said. “So I think that's going to be a bigger part of their business going forward.”
Janna Herron is a senior columnist at Yahoo Finance. Follow her on Twitter @JannaHerron.
For the latest stock market news and in-depth analysis of price-moving events, click here.
Read the latest financial and business news from Yahoo Finance
