Though we have presented on a historical basis that healthcare has been recession proof, it does not mean that there are not issues in healthcare that create major problems in good times and in bad times. I have told many students and investment bankers that with healthcare comprising over 20% of the U.S. economy, there is always a part of the industry that is on fire and one that is melting down. Today, insurance companies are on fire as companies continue expanding into healthcare.<\/p>\n
As we mentioned previously, we are now seeing the challenges of burnout and high labor cost in the U.S. beginning to impact healthcare companies. Particularly hard hit are hospitals whose biggest cost is people both by the nature of their business, as well as the heavy regulations.<\/p>\n
The reality is, both union and non-union facilities are experiencing personnel shortage and growing labor cost as the cost of replacement workers, whether permanent or traveler, grows. We also suspect to see a drop in productivity however, that will take longer to document.<\/p>\n
As further proof, note the following article in\u00a0Modern Healthcare<\/em><\/strong>[1]<\/a>. Below are two key points made in this report:<\/p>\n \u201cA New York based hospital \u201cannounced it would pause admissions to its adolescent inpatient mental health unit over staffing in May. \u201cIt\u2019s been frustrating. The challenging situation we are in\u2014as a healthcare provider and together as a community\u2014is related to the national healthcare staffing crisis. This crisis wasn\u2019t caused by COVID, but the ripple effects of the pandemic certainly complicate it\u2026.\u201d<\/em><\/p>\n The article continues with the following:<\/p>\n \u201cThis year has been the worst financially for hospitals since the pandemic, according to research by healthcare consultancy Kaufman Hall. Nationally, operating margins were -0.98% in July, the seventh negative month in a row, the firm found. The median change in operating margins was -63.9% compared with the year before.\u201d<\/em><\/p>\n Operating margins for many urban hospitals were already diminishing due to increasing cost to maintain aging infrastructure, supply chain challenges, and the aforementioned labor cost. When coupled with an inability to simply reprice services, as many other industries can do and \u2018pass some or all costs to the consumer,\u2019 hospitals do not have this option \u2013 they are caught between government (Medicare\/Medicaid) and private insurance contracts. Also recently, we have read many other articles noting 100s of hospitals closing or cutting cost, one stood out as it stated that \u201c17 hospitals scaling back care\u201d mostly due to \u201cfinancial challenges and staffing issues.\u201d[2]<\/a><\/p>\n This problem is not just a rural, smaller hospital, or even for-profit versus non-profit issues. World famous Cleveland Clinic just announced that it had incurred a US$1 billion loss for the first six months of 2022[3]<\/a>.<\/p>\n Though Cleveland Clinic had revenues of over US$6 billion, it was not enough to make up for the rapidly escalating cost of operation. This is what they reported:<\/p>\n \u00a0<\/em>\u201cNationwide labor shortages have created staffing challenges that have resulted in increased overtime costs and premium pay for employed caregivers as well as an increase in the utilization of agency nurses and other temporary personnel to meet the demand of patient activity,\u201d Cleveland Clinic said in an earnings release. \u201cSupplies, pharmaceuticals and other nonlabor expenses have also increased due to recent inflationary trends and supply chain challenges.\u201d<\/em><\/p>\n How are some hospitals adapting?<\/p>\n Many hospitals are finding efficiencies, in part leveraging technology to integrate physical care with remote or telemedicine \u2013 in particular, with hospital employed specialists. The COVID pandemic brought telemedicine to the forefront so now the radiologist or the neurologist does not have to come to see the patient; they can just \u201cZoom-In.\u201d That makes their time way more efficient. We are also seeing better and more dynamic scheduling of staff and more use of \u201ctelemetry\u201d of connected technologies. We expect hospitals to use more technology and more hybrid-care to cope with the financial challenges, while price adjustments from active contracts remain in force and government program catch up with cost.<\/p>\n More on that in a future blog.<\/p>\n -Noel J. Guillama, Chairman<\/p>\n [1]<\/a>\u00a0https:\/\/www.modernhealthcare.com\/operations\/hospitals-reduce-services-over-staffing-concerns<\/a><\/p>\n [2]<\/a>\u00a0https:\/\/www.beckershospitalreview.com\/care-coordination\/17-hospitals-scaling-back-care.html<\/a><\/p>\n [3]<\/a>\u00a0https:\/\/www.beckershospitalreview.com\/finance\/cleveland-clinic-reports-1b-loss-in-first-half-of-this-year.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Though we have presented on a historical basis that healthcare has been recession proof, it does not mean that there are not issues in healthcare that create major problems in good times and in bad times. I have told many students and investment bankers that with healthcare comprising over 20% of the U.S. economy, there is always a part of the industry that is on fire and one that is melting down. Today, insurance companies are on fire as companies continue expanding into healthcare. As we mentioned previously, we are […]<\/p>\n","protected":false},"author":3,"featured_media":4470,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4469","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/pwer.com\/wp-content\/uploads\/2022\/09\/AdobeStock_279379136.jpeg","_links":{"self":[{"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts\/4469","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4469"}],"version-history":[{"count":1,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts\/4469\/revisions"}],"predecessor-version":[{"id":4471,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts\/4469\/revisions\/4471"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/media\/4470"}],"wp:attachment":[{"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4469"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4469"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4469"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}