Health care job growth slows

After years as a bright spot in an otherwise dismal national economy, the U.S. health care sector has fallen on harder times in recent months, reflected in hospital job-cutting and a slowdown in hiring growth within the sector overall.

In July, monthly employment reports and surveys indicated that some health care-related jobs, particularly at hospitals, could be in shorter supply.

A survey conducted by outplacement consulting firm Challenger, Gray & Christmas indicated that in July, the U.S. economy recorded the fewest number of announced job cuts in a month since 1997. However, the health care sector was not as fortunate as much of the rest of the economy, the firm said in August. Its survey indicated that the sector had announced 6,843 job cuts in July, the most job losses announced in a month since November 2009.

“It’s a pretty big turnaround,” said John Challenger, CEO of Challenger, Gray & Christmas. “Health care has been a bulwark of job creation for years, even in the deepest points of the recession.”

Federal employment reports tell a similar tale.

The July employment statistics report from the Bureau of Labor Statistics indicated that the health care sector added about 3,000 jobs during that month. But the increase came despite about 4,000 job cuts at hospitals nationwide in the same month, the BLS said.

The job losses at hospitals abruptly ended a six-month period in which hospitals added about 1,000 jobs per month, the bureau said. Those first six months had followed a year of strong job growth in 2012, in which hospitals had added an average of 6,000 positions per month nationwide.

At the same time, hiring at physician practices and other ambulatory health care settings increased in July by 7,000. However, the increase also marked a slowdown, as ambulatory health care settings had been adding an average of 16,000 jobs per month through the first six months of 2013, according to the BLS.

Overall, health care job creation slowed to its worst pace since 2003, the bureau said.

What’s to blame

Caroline Steinberg, vice president for trends analysis at the American Hospital Assn. and the affiliated American Society for Healthcare Human Resources Administration, said the job cuts in some facilities and slow job growth overall in health care can be pinned on the federal budget sequester and the resulting cuts to some Medicare payments.

Steinberg said the sequester cuts were affecting medical facilities, both large and small. But she said the job reductions have tended to come at hospitals because they have large enough staffs of nonclinical employees to absorb the cuts without directly affecting care.

Although smaller medical practices may not be eliminating jobs, they have curtailed hiring, she said. “In small practices, you might have only two employees,” Steinberg said. “A hospital is much larger, so you’re going to be able to respond more quickly.”

Challenger said hospitals also are cutting jobs because of merger and acquisition activities, increasing efficiencies by reducing overlap at different campuses or facilities, when possible.

Neither Challenger nor Steinberg said they knew specifically what jobs were being eliminated among those being cut. However, Steinberg said she suspected that the reductions were coming among nonclinical employees.

The July BLS report appeared to confirm that belief, as the bureau reported that employment among health care practitioners and health care support services occupations went up 3.9% compared with July 2012.

“The last place a hospital would cut would be clinical,” Steinberg said.

Hospitals acquiring more doctor groups

In recent years, hospitals have pushed to bolster their clinical staff, particularly through efforts to purchase physician practices and bring doctors on staff. Steinberg said she did not expect to see those efforts diminish in any way, even amid periods of tighter revenue and job cuts in other areas.

She noted that physician hiring would not necessarily be reflected in reports examining employment at hospitals, as physicians typically would be based off campus in ambulatory and outpatient settings. So such physician integration strategies could be reflected in the ambulatory care occupation reports.

In July, the BLS reported that ambulatory care services occupations logged the fifth-highest job growth of any U.S. industry. However, even with a job growth rate of 6.6%, the ambulatory care services sector lagged behind its three-month average growth rate of 15%, the BLS said.

“I would think you will see physician integration strategies continue,” Steinberg said.

What happens to job growth in the rest of the health care sector, however, remains much less clear, said Steinberg and Challenger.

A report issued in April by Moody’s Investor Services had indicated that the bond rating agency believes that hospitals’ physician practice acquisition programs could work to further dilute revenue at hospitals, placing even more strain on already thin margins.

As federal health system reform continues to unfold, and federal budget negotiations remain fluid, Challenger said it could be anyone’s guess as to what happens next. In the short term, he suspected that hiring in health care would remain constrained, as hospitals and other medical practices exercise caution amid uncertainty.

Beyond that, however, he said hiring could grow, should the Affordable Care Act deliver on its supporters’ assertion that it will increase access to health care and deliver tens of millions more covered patients into the country’s health care system. Or, continued efforts to rein in health care cost hikes could suppress revenues, leaving hospitals and other health care employers little choice but to keep hiring in check.

“I get a strong feeling that we are at a major watershed moment in the business of health care right now,” Challenger said.