Slideshow: Percent Change in Employment
Healthcare reform, federal funding cuts, a sluggish economy, and new technologies and treatments are accelerating a longstanding trend that has seen healthcare job creation shift away from hospitals and toward outpatient ambulatory care.
Nicole Smith and Artem Gulish, analysts from the Georgetown University Center on Education and the Workforce, said in an email exchange with HealthLeaders Media that ambulatory care employment first outgrew hospital employment in 1995 with the gap widening ever since. For the past 13 years hospital employment has been growing at a slower pace than the overall healthcare sector while ambulatory services has grown at a faster pace than the sector.
"The slow growth in hospital employment and fast growth in ambulatory care services has been the trend in healthcare since the 1990s," say Smith and Gulish, citing Bureau of Labor Statistics data. "This trend has been driven by the move away from high-cost, high-risk hospital care and towards more convenient, lower-cost ambulatory care… In recent years this trend has been driven by development of new technologies that have allowed patients who previously required hospital care to be treated in ambulatory setting, such as the use of stents for many people who previously required bypass surgery."
Bureau of Labor Statistics preliminary data for August shows that the healthcare sector, which includes hospitals, nursing homes, ambulatory surgery centers, clinics, and physicians' offices, created 32,700 new jobs in August, which represents 20% of the 169,000 new jobs created in the entire economy for the month.
Ambulatory services accounted for 26,600 of those new jobs, and hospitals accounted for 900 new jobs. Hospitals shed 9,000 jobs in May, and 1,300 jobs in July, BLS data and preliminary data show. BLS data for August and July is considered preliminary and can be subject to considerable revision.
For the past five years the general consensus has been that the recession and sputtering recovery have played a role in reducing inpatient admissions.
"The pace of growth in hospital employment has significantly slowed down since 2008 following the beginning of the recession, even before 'Obamacare' was enacted," the Georgetown analysts say. "This is most likely due to impact of macroeconomic conditions and is indicative of the downward cyclical decline in employment. The pace of growth improved since the recovery started to take hold; though it is still much slower than before the recession."
"Ambulatory care employment has been largely protected from the recession, likely due to its cost advantage over hospital care. So, as cost became a greater consideration for insurers and providers, they were more like to use ambulatory care in place of hospital care."
In 2013 the pace of hospital job growth slowed to a crawl.
"We are seeing significantly lower job growth for hospitals this year than we did year-to-date in August 2012 and year-to-date August 2011," says Caroline Steinberg, vice president, health trends analysis at the American Hospital Association.
"Last year at this time job growth was about 44,500 by August and this year it is only 7,000, but that is not surprising given the mounting payment cuts to hospitals, particularly the 2% cuts to Medicare mandated by the sequester."
While ambulatory services created most of the jobs in healthcare, Steinberg says hospitals had been holding their own until this year. "The trend in terms of employment is really due to the cuts," she says.
"We had been seeing steady increases in hospital employment even as we saw a shift away from inpatient care because a lot of that inpatient volume is being replaced by outpatient volume. Overall demand for hospital care is not really dropping off. It's that the funding for the same amount of care is getting to be less."
Steinberg says hospitals are reluctant to hire because they're bracing for massive reductions in federal funding over the next 10 years. "It's not just healthcare reform. We've seen about $100 billion of other cuts coming that are not healthcare reform since 2010."
"You've got the sequestration, which is about $45 billion over 10 years, then you have the coding offsets and they've tacked on more cuts to Medicaid (disproportionate share payments) and cut the reimbursements for bad debt. There are a lot of other cuts that hospitals are facing that are causing them to really cut back on staff."
Adam Powell, a Boston-based healthcare economist, says the move away from fee-for-service reimbursements is changing the way healthcare is delivered. "We are seeing a movement toward accountable care organizations and contracting and this means that healthcare providers will have fixed revenues and can only increase their profitability by decreasing their costs. Now, seeing as providers tend to have the largest cost being their staffs the only way to decrease costs is to reduce staffing," says Powell, president of Payer+Provider consultants.
"There is naturally a certain rate of staff attrition which helps solve the problem. The way to reduce staffing costs without laying off people is simply not hiring as many. This is all part of a trend toward running leaner operations."
Hospital consolidation is also a factor. "Two merged hospitals don't need two CEOs and two CMOs. They can potentially eliminate positions that help reduce costs. The staff gets right sized. The community doesn't need two complete departments for a particular specialty," Powell says.
While it is indisputable that hospital hiring is down, Steinberg says the BLS data may not reflect the big picture because it does not account for hospitals' buying physician groups and other ambulatory services.
"If a hospital bought a physician practice and that practice continues to operate in an off-campus facility that would still be counted as a physician office for BLS data. So you have to be a little careful in terms how you are looking at the data. The data is collected at the establishment level and the establishment is a particular location," she says.