Home Health care provider Hospitals are spending more money to hire and retain healthcare workers during the pandemic. It’s bad for their margins.

Hospitals are spending more money to hire and retain healthcare workers during the pandemic. It’s bad for their margins.



Hospitals face staffing shortages made worse by the COVID-19 pandemic, and Wall Street analysts are increasingly concerned that not having enough workers to staff these facilities will squeeze margins.

“The increase in COVID-19 cases due to the delta variant continues to exacerbate the hospital staff shortage, hampering recruitment and retention, driving up salaries and dragging down hospital profitability,” Moody’s Investors said on Tuesday. Service. “Over the next year, we expect margins to decline given wage inflation, the use of expensive nursing agencies, increased recruitment and retention efforts, and expanded benefits that include more behavioral health services and offers such as childcare. ”

There are several issues involved.

Nurses and doctors have been scarce in some parts of the country for years. Many are exhausted and after 20 months of the pandemic some are choosing to retire or resign. (A recent survey of 6,000 critical care nurses found that 66% have considered stopping nursing due to the pandemic.)

“There is no doubt that the job market has been under pressure for some time, given COVID activity,” William Rutherford, CFO of HCA Healthcare Inc. HCA,
+ 0.03%,
one of the largest hospital chains in the United States, said at the Morgan Stanley Healthcare Conference last month, according to a FactSet transcript of the presentation.

Then came the delta variant and an increase in hospitalizations which increased the demand for nurses, in particular, to treat COVID-19 patients.

Many hospitals have had to limit or stop elective procedures considered essential to their financial success in order to focus their resources on these patients.

That includes Intermountain Healthcare, Utah’s largest hospital system, which in mid-September began postponing all elective procedures at 13 nonprofit hospitals, citing a lack of beds. That same week, Idaho began allowing hospitals to ration care, citing “the massive increase in COVID-19 patients requiring hospitalization in all parts of the state.”

“In parts of the United States, hospitals have suspended elective night surgeries due not only to an increase in the number of cases, but also to insufficient staff, resulting in loss of revenue,” the analysts wrote. from Moody’s in the report.

And, finally, some workers have decided to resign or be fired rather than comply with the COVID-19 vaccination mandates implemented by some health organizations.

Add all of these factors together, then consider that salaries and benefits are typically up to half of a hospital’s total expenses.

Hospitals must now pay workers more, including by hiring more expensive temporary or itinerant nurses; spend more on employee benefits and other retention “perks”; and increase the amount of money they invest in recruiting clinical talent. (This is a good thing for healthcare staffing companies like AMN Healthcare Services Inc. AMN,
+ 0.47%
and Cross Country Healthcare Inc. CCRN,
+ 2.47%,
analysts say.)

“When COVID outbreaks occur, hospital beds are primarily allocated to COVID patients and non-COVID admissions are postponed,” Jefferies analysts wrote this week in a note to investors on nonprofit hospitals . “As we come out of the delta’s rise, we believe the demand for temporary nurses will decline from current levels but remain high (placement rates lower than current averages) as admissions and procedures deferred. are reprogrammed. “

The delta’s surge is decreasing and the number of new cases, hospitalizations and deaths is decreasing. The current seven-day average for COVID-19-related hospitalizations is 7,271 as of Friday, according to the Centers for Disease Control and Prevention. That’s already lower than last week’s 8,378-day average, but that doesn’t mean all hospitals are out of the woods yet.

“Even as average daily COVID hospitalizations decline, we continue to see many hospitals and intensive care units across the country at full capacity,” CDC director Rochelle Walensky said in a Home briefing on Wednesday. White.

Learn more about related MarketWatch coverage:

New York healthcare workers who are fired for refusing to get vaccinated are not eligible for unemployment benefits, in most cases

‘You have to do the right thing’: 50 healthcare groups ask employers to demand COVID vaccines for workers – but big hurdle remains

Court Confirms Houston Hospital’s Compulsory COVID-19 Vaccination Policy: “Every Job Has Limits To Worker Behavior”