iProtean—Hospitals Cut Back on Hiring in Response to Revenue Reductions

One of the few predictable employment sectors during and since the great recession has been the healthcare industry. Job reductions have been unlikely and for most organizations job growth has been stable or increased. In some subsectors of the healthcare industry, job growth has been significant. The industry has served as the bastion of stability.


But this changed at the beginning of 2013. Although healthcare continues to add jobs, the slowdown in growth has garnered attention both in the industry and in the cities and towns that have a significant number of their populace employed in hospitals and other provider organizations.


The Bureau of Labor Statistics recently released data showing that the healthcare sector has added an average of 19,000 per month during the first nine months of the year, a 30% drop from last year (the 2012 average was 27,000 per month).  The September drop in job growth was even more significant: 7,000 jobs added—an 84% drop from 44,000 jobs added in September 2012 and 2011.


This slowdown indicates hospitals continue to take cost-cutting steps to bring expenses in line with decreases in volume and cuts in reimbursement. Moody’s Investors Service sees the slowdown in job growth as a credit positive, noting that hospitals are being managed more efficiently.


“We maintain a negative outlook for the not-for-profit hospital sector, but the slowing employment growth is a credit positive as management seeks to lower labor costs in the face of declining revenue growth. In fiscal 2012, expense growth outpaced revenue growth for the first time since fiscal 2008.”(“Sector Comment: Slowdown in Healthcare Job Growth Helps Hospitals, Hurts Municipalities,” Moody’s Investors Service, October 2013)


As reported here in previous posts, hospitals/health systems face the challenges of reductions in payments from government and commercial payers, shrinking inpatient volume, hospital inflation and Affordable Care Act provisions as they strive to maintain their operating margins. To cut costs, hospitals/health systems have begun to reduce their workforces through layoffs and eliminating positions. Reductions also have been achieved through merger/consolidation activity.


A key example of a health system that has reduced its workforce is Cleveland Clinic. It is offering buyouts to 3,000 employees as part of an effort to cut expenses by $330 million.


Healthcare workforce reductions negatively effect employment in the cities the hospitals/systems serve. Many local governments count on the local hospital(s) to help anchor economic growth. The authors of the Moody’s comment on job growth noted that throughout the great recession and its long aftermath, “healthcare employment has been a stabilizing force that buffered many local governments from even more severe employment declines than they actually experienced.” (“Sector Comment: Slowdown in Healthcare Job Growth Helps Hospitals, Hurts Municipalities,” Moody’s Investors Service, October 2013)



iProtean subscribers, Part Two of Making Difficult Decisions About Services and Programs: A Portfolio Approach features Lisa Goldstein, Marian Jennings and Nate Kaufman. The Sector Comment on the decline of job growth in health care is one of the resources you can access through viewing this course. Look for it later this month!



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