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Source: Wall Street Journal
Author: Melanie Evans
Date: July 25, 2024
Hospitals are finally emerging from the pandemic’s lasting disruption to labor markets, adding nurses and other critical workers who left the market or job hopped for higher pay.
HCA Healthcare and Tenet Healthcare, two of the nation’s largest hospital and surgery-center companies, reported this week their hospitals are busy and are expected to stay that way through the year. Hiring has opened up services they had closed because of the pandemic and a tight labor market, company executives say.
“In totality, the strength in the hospital segment has been significant,” said Dr. Saum Sutaria, Tenet’s chief executive, on a call with analysts after the company posted its earnings this week. “We feel optimism about the demand that we see.”
Hospitals in recent years have struggled to recruit and keep staff, forcing some to scale back services or close units. Now, employment gains are opening up much needed capacity to meet demand where aging and growing populations have created long waits for treatment and backlogs in emergency rooms.
These changes have resulted in positive returns for the hospital chains. HCA and Tenet both beat Wall Street’s expectations and raised their earnings outlooks for the year, sending shares higher. HCA shares jumped more than 5% Tuesday, while Tenet shares rose nearly 5% after reporting earnings on Wednesday.
Universal Health Services, which operates general and behavioral-health hospitals, on Thursday also raised its outlook. The company’s acute-care hospital growth was close to expectations, after accounting for outpatient business, said Steve Filton, chief financial officer, on a call Thursday with analysts.
Hospital chain Community Health Systems, which also released earnings Thursday, reported hospital admissions increased 3% in the latest quarter from the same period the prior year. The system added nearly 3,000 nurses to its payrolls through June, Tim Hingtgen, CHS’s chief executive, told analysts, and hiring was up 14% across imaging, pharmacy, laboratories and surgical services this year.
Higher prices also helped deliver hospital companies’ strong earnings. Hospitals have won price increases from private insurance companies to offset higher spending on labor and supplies during the economy’s recent high-inflation period.
Employment gains have allowed hospitals to reopen operating rooms and hospital units they couldn’t or wouldn’t operate in a tight labor market that made hiring difficult and expensive.
It is more affordable to expand capacity now that it is easier to hire and avoid heavy use of expensive temporary staff, said Brian Tanquilut, a healthcare equity analyst for Jefferies.
Hospitals reported spending less for temporary labor, an expense that soared during the pandemic with repeated waves of Covid-19 surges creating intense demand for nurses, respiratory therapists and other medical workers.
The healthcare labor market remains tight even as demand for hospital workers has eased. Hiring remains strong across clinics, hospitals, and surgery and imaging centers in a cooling labor market. Hospitals added 89,700 jobs this year through May, with an average monthly hospital employment growth of 3.6% in the first five months of the year, the fastest pace since 1990.
Still, by one measure, the number of full-time employees per hospital patient, including outpatient medical care, remains down nearly 10% from before the pandemic, according to an analysis of data from about 1,300 hospitals, conducted by advisory firm Kaufman Hall.
The decline can’t be fully explained by outsourcing that would remove employees from hospital payrolls, said Erik Swanson, senior vice president of data and analytics at Kaufman Hall. Hospital demand has stabilized, he said.
At HCA there has been an increase in the numbers of patients who can be transferred to its hospitals from other facilities that lack services patients need, its executives have said in recent months during investor conferences.
Tenet has opened more beds for patients in medical and surgical units, beginning earlier this year, Sutaria said, doing so in markets where recovery from the pandemic has so far lagged behind somewhat.
Admissions to hospitals in Tenet’s portfolio for at least a year were up 5.2% in the second quarter from the same period a year ago. Its revenue from admissions, after accounting for business that includes outpatient services, increased 5.7%.
Tenet’s CEO said he expects continued demand into the next decade from an aging, chronically ill population. “That trend hasn’t stopped,” he said.