“Expense pressures—particularly with the cost of labor—outpaced revenues and drove poor performance [in hospitals]. While emergency department visits and operating room minutes increased slightly, hospitals struggled to discharge patients due to internal staffing shortages and shortages at post-acute facilities,” Swanson noted.
Like their parent organizations, hospital and health system-based medical laboratories are dealing with ongoing staffing shortages, which Dark Daily covered extensively in multiple ebriefings.
Non-profit healthcare systems are particularly hard hit, leading to merger/acquisition deals that continue the trend of hospital consolidation.
“Consolidation will continue. Here’s the scary part. The old solutions of jacking up treatment volumes and commercial payment rates aren’t working. Evidence of business model failure abounds. A fiscal storm is raging,” David Johnson, CEO, 4sight Health, wrote in an article for the Healthcare Financial Management Association. The results of these business failures have a direct impact on hospital-based medical laboratories as well as clinical laboratories in surrounding areas that service a health system’s physicians. (Photo copyright: 4sight Health.)
The numbers speak volumes. Looking at financial statements from 2022, Ascension, Cleveland Clinic, CommonSpirit Health, Providence, and Mass General Brigham all posted losses of more than $316 million dollars, the HFMA series noted. Two in that group (CommonSpirit and Providence) posted losses over $1.1 billion. Providence’s losses represented only nine months of data from 2022.
So, what’s the problem? In another HFMA article titled, “The End of Traditional Nonprofit Healthcare Business Models?” Johnson wrote, “Even in the best of times, the nonprofit hospital business model has never been robust. Hospitals are capital-intensive, labor-intensive, highly-regulated, low-margin businesses that require high-cost facilities and highly expert personnel to operate.
“Competing mission and business priorities make running nonprofit hospitals even more difficult,” he added. “The existential question is whether current operating losses at nonprofit health systems are aberrant or indicate a broader collapse of their models. I believe it’s the latter. Structural weaknesses, combined with pernicious macro forces, make this a period of unprecedented challenge for nonprofit providers.”
In his “Cracks in the Foundation” series, Johnson lists five “deeply embedded defects in current nonprofit business models.” They are:
Brittle business models
“Under pressure, health systems are struggling to right the ship, but they are defaulting to old habits,” Johnson wrote. “They’re chasing volume and rates under fee-for-service (FFS) medicine. While this has worked in the past, it is not a viable long-term strategy. Powerful macro forces are aligning against healthcare business practices. Ignoring them won’t make them go away.”
This chart, taken from 4sight Health CEO David Johnson’s HFMA article, shows the five large health systems that showed operating losses in 2022. The numbers displayed are drawn from each health system’s publicly released financial statements for the periods shown, HFMA noted. (Graphic copyright: Healthcare Financial Management Association.)
Deteriorating Outlook for Health Systems
Increased expenses for labor and supplies paired with inflation is what a 2022 Fitch Ratings report cited as contributing to a “‘deteriorating’ outlook for systems,” Healthcare Dive reported.
“Labor will remain the largest hurdle for hospitals this year even as they struggle with inflation and spiking COVID-19 admissions that can dent revenue. The labor story just dwarfs the inflation story,” financial analyst Kevin Holloran, Senior Director and Sector Leader USPF Healthcare at Fitch Ratings, told Healthcare Dive.
Holloran has worked for Fitch since 2017, joining after 14 years at S/P Global Ratings. He has 20-years experience in the healthcare sector.
Nonprofit hospitals that posted COVID-19-related operating losses are struggling with higher costs for labor and supplies while navigating declining and neutral admission volumes, Healthcare Dive noted, citing that healthcare systems have turned to staffing agencies and contracted labor to counter the loss of burned-out employees who go on strike or who leave healthcare entirely. On a positive note, Holloran sees contract labor use decreasing in the future.
There’s a steep road ahead for nonprofits but Holloran see positive changes. “We are beginning to come out of the worst of it,” he told Healthcare Dive. However, he added, “Hospitals should not expect to ‘grow [their] way out’ of soaring labor expenses by raising revenues or increasing hospital admissions.”
Like Johnson, Holloran stressed the importance of looking for long-term solutions. With rising expenses, declining revenues, and increased labor costs projected to continue for years, “hospitals are putting recruiting and retention efforts ‘on steroids’ amid challenges,” he noted.
One coming improvement is that hospitals “can look toward commercial payer contracts to ease high expenses,” Holloran predicted.
“Payer contracts fall in the approximately 25% to 30% of non-fixed revenue that hospitals have the ability to control. … The ratings agency [Fitch] now expects to see a shift from long-term contracts to single-year contracts as nonprofits attempt to ease expenses,” Healthcare Dive noted.
It appears that, for the foreseeable future, clinical laboratories will continue to feel the pressures brought on by mergers and acquisitions as the healthcare industry struggles to find solutions to the economic downturn and loss of qualified staff following the COVID-19 pandemic.
Post-merger, a first goal is often to achieve cost savings by consolidating hospital laboratory testing into fewer medical laboratory sites
Major integrated delivery network (IDN) healthcare systems continue to acquire other hospitals. These deals are getting larger in scope and confirm that the trend of hospital consolidation is robust and ongoing. They also present a challenge for clinical laboratories that service the IDN’s physicians from both inside and outside the networked systems.
And for good reason. According to Healthcare Dive, the partnership that will create a 28-hospital, $10 billion dollar health system with more than 100 specialty and primary care offices serving patients in Illinois, Kansas, and Missouri. Fiscally, BJC showed $6.3 billion in revenue last year and Saint Luke’s $2.4 billion.
Mega mergers are a big deal (pun intended). They can give the new healthcare organization unrivaled competitive authority in the marketplace potentially passing along lower healthcare prices to patients. But they come at cost to embedded clinical staff, including medical laboratories.
The health system merger gives BJC/St. Luke’s “huge leverage in terms of negotiating power with the insurers,” Ryan Barker, an independent healthcare policy consultant, told the St. Louis Post-Dispatch. Clinical laboratories are also impacted in these mergers when hospital systems consolidate their testing capabilities and locations. (Photo copyright: Missouri Foundation for Health.)
Impact of the BJC/St. Luke’s Merger
BJC and St. Luke’s signed a non-binding agreement to merge on May 31 and plan to reach a final agreement before the year’s end barring regulatory interference. The duo’s combined 28-hospital system will operate out of two headquarters: One in St. Louis managing southern Illinois and eastern Missouri, and another in Kansas City to serve parts of Kansas as well as western Missouri, Healthcare Dive reported.
The merger of BJC and St. Luke’s means the formation of a “clear market leader in Missouri,” St. Louis Post-Dispatch reported, adding that BJC has 40% of the market’s patient discharges and St. Luke’s holds 20% of the market share in the “state’s second largest metropolitan area.”
This will likely manifest itself in leverage during negotiations with healthcare payers that service that area.
“It continues to be the case that the hospitals are trying to gain the upper hand on the insurers,” John Romley, PhD, Associate Professor in the University of Southern California (USC) Price School of Public Policy and USC Mann School of Pharmacy and Pharmaceutical Sciences, told the St. Louis Post-Dispatch. Romley is also an economist at the USC Schaeffer Center for Health Policy and Economics, and adjunct economist at the Rand Corporation. “That was true 10 years ago. That’s true today,” he added.
“That’s what I always worry about with consolidation is the impact on [healthcare] pricing,” Ryan Barker, an independent healthcare policy consultant in St. Louis and former Vice President of Health Policy at Missouri Foundation for Health, told the Post-Dispatch.
Other Large Health System Mergers and Acquisitions
There have been a growing number of large-scale mergers and acquisitions of IDNs in the last few months. Dark Daily’s sister publication The Dark Report has covered these deals in multiple intelligence briefings.
Healthcare policy makers were surprised by the merger, as Kaiser and Geisinger were often cited as two of the best IDNs in the nation.
Now under single ownership there will be implications that take years to play out, especially for clinical laboratories that now must service a significantly larger physician base. Conversely, if the new combined healthcare system decides to combine multiple medical laboratories to save on costs it will have a huge impact on lab staff.
Another deal recently announced involves UPMC’s (University of Pittsburgh Medical Center) announcement to merge with multihospital Washington Health System (WHS) in Washington, Pennsylvania, a WHS news release noted. But the move has drawn pushback from elected officials and organized labor, the Pittsburgh Post-Gazette reported.
UPMC has recorded rapid growth over the year acquiring smaller hospitals, but hospital mergers are getting closer inspections from federal regulators, the Pittsburgh Post-Gazette noted.
Concentrated ownership of diagnostic services impacts clinical laboratories in many ways. The Dark Report noted that combined IDNs often review clinical laboratory services across the entire healthcare network. Opportunities for third-party commercial labs to step in and run the hospitals’ local laboratory services may also present themselves.
Impact IDN Mergers Have on Clinical Laboratories
Mergers occur for many reasons. Monetary stress has a wide-reaching impact, and some healthcare researchers suggest that financial pressures may cause hospitals formerly hopeful about their medical laboratory outreach businesses to consider selling their programs, as The Dark Report noted.
One significant impact that health system mergers and acquisitions can have on clinical laboratories is to reduce their number, particularly by consolidating testing from multiple sites into a core laboratory.
“There is a growing body of empirical research about the potential for competitive harm to labor markets from consolidation and concentration,” Federal Trade Commissioner Rebecca Kelly Slaughter, JD and FTC Chair Lina M. Khan, JD, wrote in a joint 2022 statement about the merger of the first and second biggest healthcare providers in Rhode Island. “The loss of competition from mergers may be especially pernicious in the healthcare sector where skilled medical professionals are uniquely limited in employer options within their local geographic area,” the Pittsburgh Post-Gazette reported.
In this case, the plans to merge were ended after the FTC sued to block the partnership.
More IDN Mergers on the Way
But increased FTC scrutiny does not seem to have slowed the trend toward larger merger and acquisition deals. Kaufman Hall’s 2023 National Hospital Flash Report states that both mergers and acquisitions are trending toward cross-regional partnerships and predicts a “new wave of transaction activity,” Healthcare Dive reported. The report looks at actual and budget data collected over the past three years that was sampled from more than 900 hospitals on a recurring monthly basis.
And so, moving into the future, clinical laboratories can expect to see more mergers and acquisitions of IDNs, with consolidation, regionalization, and standardization occurring in the combined IDN’s clinical laboratory once the merger is completed and leadership begins to look for ways to save costs. Labs are generally first to be consolidated because it is easier to move lab specimens than it is to move patients.
Funded by the CDC, the program hopes to alleviate personnel shortages in Baltimore area clinical labs while also producing a knowledge base for lab managers nationwide
Clinical laboratory managers struggling to fill vacant phlebotomy and accessioning positions will be interested to learn about a pilot program being conducted by the City of Baltimore and the University of Maryland School of Medicine to train people “for employment in hospital laboratories, phlebotomy draw sites, and reference laboratory processing centers,” according to The Elm, a publication of the University of Maryland, Baltimore.
The 14-week “Mayor’s Workforce Development Program” began on April 19 and will continue through the end of July. Participants meet twice a week for lectures and experience working with specimens in actual medical laboratories or in a “hybrid learning environment,” The Elm reported.
“I came up with the idea of doing cross-training for laboratory people and public health people in case there is another pandemic,” explained Lorraine Doucette in an exclusive interview with Dark Daily. Doucette, who is managing the pilot program, is an Assistant Professor and Medical Laboratory Science Program Director, Department of Medical and Research Technology, University of Maryland School of Medicine.
“There is already a huge shortage of laboratory people, but an enormous amount left in droves during the pandemic because they got physically burned out. Some just could not do the work anymore because of things like carpal tunnel syndrome and repetitive stress injuries,” she added.
“I’m confident that all 15 or 16 students who complete this workforce program will be employed within weeks of finishing as accessioners,” said Lorraine Doucette (above), Assistant Professor and Medical Laboratory Science Program Director, Department of Medical and Research Technology, University of Maryland School of Medicine, in an exclusive interview with Dark Daily. “This has been so successful. This is making a difference in people’s lives. This is changing them from being unemployed to actually having a career in a clinical laboratory. They love it. They are so proud of themselves.” (Photo copyright: LinkedIn.)
CDC Funding Part of National Program to ‘Enhance’ Clinical Lab Workforce
The collaboration is part of a CDC project titled, “Enhancing US Clinical Workforce Capacity.’ Doucette will receive a total of one million dollars over the course of three years to facilitate the program in stages.
“It is not necessarily an old-fashioned grant where they just gave me a pile of money,” Doucette told Dark Daily. “The CDC works with me constantly via reports and Zoom meetings.”
“They are going to be qualified to work as an accessioner in any local hospital,” Doucette noted. “The people who pick up the lab samples out of the tube system are the accessioners and there is a huge shortage of them also. We’re teaching them the basics so the more advanced lab personnel can perform the higher-level work.”
Students in the program learn all about lab safety and the proper handling of lab samples as well as proper data entry, professionalism, and how to communicate with medical and laboratory personnel. They work with urine and blood samples and fabricated spinal fluid samples.
“They are taught about the different tubes, what the anticoagulants are, what makes each tube unique, why you can’t mix samples, balancing a centrifuge, and how to properly put on and remove safety gear like lab coats, gloves, and goggles,” Doucette explained.
The Mayor’s Workforce Development Program is free for Baltimore residents looking for employment via the workforce office. The only requirements for enrolling are having a high school education and being fully vaccinated.
Phlebotomy and Additional Cross-training to Be Added
Doucette would eventually like to add a phlebotomy segment to future training sessions. “We would like to develop an additional partnership with BCCC (Baltimore City Community College) for the phlebotomy piece. That would definitely increase the people and the program’s marketability,” she said. “They could not only draw the blood, but they could also process the sample.”
After assessing the success of the current program and determining what did and did not work, there will be an additional training session held in the fall. Next year, there will be more sessions held for individuals in the workforce program and cross-training classes for current clinical laboratory professionals.
The strategy for the third year of the grant includes sharing the specifics of the program with medical laboratory professionals via the CDC’s free OneLab REACH platform. This portion includes the online delivery of documentation such as training sheets, lab exercises, Microsoft PowerPoint presentations, and videos used in both the accessioning and cross-training coursework.
“We’re going to do the OneLab REACH,” Doucette said. “I’m going to be putting it all online and marketing it all around the country in stages and increments. I will be going to a lot of professional society meetings and talking to lab managers to help them understand the concept of how this all benefits them.”
This unique collaboration between the City of Baltimore and University of Maryland School of Medicine, funded by the CDC, should help alleviate some of the clinical laboratory worker shortages that exist in the Baltimore area. Hopefully, the effort will result in additional knowledge, resources, and tools to assist medical lab managers across the country to recruit and retain talented, highly-skilled workers.
Family medicine academic departments in Canada are dealing with a shortage of applicants qualified for their residency programs, mirroring the shortage of pathologists
For the past decade, the number of medical residencies in Alberta Canada that went unfilled have increased each year. Now, just like in many parts of America, the province is experiencing severe medical staffing shortages that includes clinical laboratories and pathology groups.
Though the trend seems to be worse in Alberta, the resident shortage is affecting the entire Canadian healthcare system. According to the Angus Reid Institute, approximately half of all Canadians cannot find a doctor or get a timely appointment with their current doctor.
That is fueling predictions of an increased physician shortage in coming years, particularly in Alberta.
What’s standing in the way of Canadian doctors becoming licensed to practice? Some claim the system of residency matching is discriminatory towards Canadian doctors who received their training outside of Canada. Rosemary Pawliuk, President of the Society for Canadians Studying Medicine Abroad, is one of those who believe the system of matching is broken.
“They have cute slogans like, ‘You’re wanted and welcome in Canada,’ but when you look at the barriers, it’s very clear that you should not come home. Their message is essentially, ‘Go away’ and so [doctors] do,” Pawliuk told the CBC.
According the Pawliuk, “the current residency selection system puts internationally trained Canadian doctors at a serious disadvantage,” the CBC reported. “The Canadian public should be entitled to the best qualified Canadian applicant. Whether they’ve graduated from a Canadian school or an international school, whether they’re a Canadian by birth or if they’re an immigrant, they should be competing on individual merit,” she added.
Canada’s Medical School Matching Bias
In Canada’s current matching system, medical schools decide who gets a residency. Critics say the schools are biased towards Canadian-educated doctors and overlook foreign-trained doctors. About 90% of all residencies in Canada are set aside for Canadian-trained doctors and the remaining spots are left for the physicians trained abroad, CBC noted.
It is important to note that these doctors who are trained abroad are either Canadian citizens or permanent residents. Thus, it’s not a question of citizens from other countries competing with Canadian citizens.
So, if a surplus of doctors are being shut out of residency training opportunities, why are there open slots in Alberta? Some believe this indicates individuals are not interested in practicing medicine in Alberta.
But Rinaldi still has concerns, “We may fill them with 42 disinterested people who have no interest in family medicine,” she says.
Anderson admits that “Across the country, over the last five or more years, family medicine has become less popular with medical students graduating from medical schools than it was in the years before.”
Therefore, both Anderson’s and Hemmelgarn’s schools have changed curriculum to put more of an emphasis on family medicine. Perhaps with these changes, and possibly an opening for internationally-trained Canadian doctors to achieve residency positions, Alberta’s—indeed all of Canada’s—residency match days will be better attended.
In the United States, there is little news coverage about serious problems with the health systems in other nations. The experience of residency programs in Canada, as explained above, demonstrates how a different national health system has unique issues that are not identical to issues in the US healthcare system. What is true is that Canada is dealing with a similar shortage of skilled medical technologists (MTs) and clinical laboratory scientists (CLSs), just like here in the United States.
It was a special and unusual moment for this mother and son duo as they applied for acceptance into residency programs and were both matched on the same day
Pathologists and other clinical laboratory scientists who underwent the matching process will be interested to learn how a mother and son were matched on the same day as part of the National Resident Matching Program (NRMP) 2023 Match Day.
Match Day is the next step for medical and medical technology students to be placed into desired training programs in chosen specialties. According to the NRMP website, pairings are determined by a mathematical algorithm to match applicants with residency positions.
Cao, 54, is currently a research scientist/professor at the University of Kansas. She graduated from medical school in China and spent 10 years practicing internal medicine there before immigrating with her family to the US in 2006. Liu, 26, is finishing his oncology studies at the Medical College of Wisconsin where he expects to graduate in May.
Hefei Liu, MD (left), a radiation oncology student at Medical College of Wisconsin, and his mom hematologist Wenjing Cao, MD, PhD (right), a research scientist and professor at the University of Kansas, matched residencies on the same day during the annual National Resident Matching Program 2023 Match Day. Pathologists and clinical laboratory scientists know how exciting this day can be for residency applicants. (Photo copyright: Good Morning America.)
Pair Express Their Excitement, Awe
The matching program will take the pair to different locations for their training. Cao will be headed to the clinical pathology residency program at the University of Wisconsin-Madison and Liu to the University of Pennsylvania for the radiation oncology residency program, Good Morning America noted.
“When she told me she was going to reapply this year and it was the same year I was applying, I thought, this could actually happen. Somehow it did and it’s still incredible to me,” Liu said.
Cao is also thrilled. “This is incredible and amazing, something I feel very excited about. I never thought I would go through this process with my son together,” she told Good Morning America.
National Resident Matching Program
Though this is a special and rare moment, it’s not the first time the NRMP matched a parent/child in the Main Residency Match. However, Stephanie Bartek, Senior Communications Analyst for the NRMP, told Dark Daily that the NRMP does not track whether applicants are related, so there is no way to provide odds of it occurring.
The NRMP has matched physicians to residency training programs since 1952, but in 1984 it formalized the Medical Specialties Matching Program (MSMP) which matches physicians into fellowships and subspecialty training programs.
The first fellowship match was for Colon and Rectal Surgery. Since then, the NRMP has grown the MSMP to 73 subspecialties in 20 separate fellowship Matches, according to an NRMP press release.
The report shows 13,919 active applicants competed for 13,365 fellowship positions offered by 5,734 programs, according to the press release.
“For the past 70 years, the NRMP has been proud to play a part in helping physicians transition into residency training and begin careers serving their patients and community,” she added.
Age is Only a Number
Cao hopes her match will impact individuals who are holding back from following their desires.
“I hope my story can inspire so many others like me, at my age, [in their] 50s, and as a mother, as a woman, as an immigrant, [anyone] can pursue their dream, as long as you want it,” she said. “It’s your dream, put hard work on it. Keep positive. Stay motivated. You can get it.”
Her son Liu mirrored her sentiment. “If you see your parents or any of your family members who are interested in pursuing medicine and they have an interest, but they clearly have some sort of obstacles in their life, you should … be supportive of them and encourage them to pursue that dream because I think with dedication, hard work, and sometimes just even luck, that you can truly achieve your success.”
With the demand for pathologists in the United States outstripping the supply, Wenjing Cao, MD, PhD, may have her pick of positions when she finishes her pathology residency program and any pathology fellowship programs she may undertake.
As with clinical laboratories, worker shortage is affecting large retail pharmacy chains and independent pharmacies alike
Staffing shortages in clinical laboratories and anatomic pathology groups caused by the Great Resignation is having a similar impact on retail pharmacy chains. Consequently, pharmacy chains are reducing store hours and even closing sites, according to USA Today.
Pharmacies now report similar shortages in qualified workers, partly due to the sharp decrease in revenue from COVID-19 vaccinations, but also due to worker burnout. Both developments have counterparts in clinical laboratories as well.
“I’m concerned that without the help from the COVID-19 vaccinations that everyone needed, these pharmacies that were able to tough it out for another year or two might not be able to continue,” B. Douglas Hoey, PharmD, CEO of the National Community Pharmacists Association (NCPA), told USA Today. Clinical laboratories that processed large numbers of SARS-CoV-2 diagnostics have experienced the same sudden drop in revenue causing similar difficulties maintaining staffing levels. (Photo copyright: Cardinal Health.)
Staffing Shortages Leading to Safety Concerns
According to the Washington Post’s coverage of a study conducted in 2021 of 6,400 pharmacists in various retail and hospital environments, a majority did not feel they could conduct their jobs efficiently or safely.
“75% of the pharmacists in [the] survey disagreed with the statement ‘Sufficient time is allocated for me to safely perform patient care/clinical duties.’”
“71% said there were not enough pharmacists working to ‘meet patient care/clinical duties.’”
“65% said ‘payment for pharmacy services’ did not support their ‘ability to meet clinical and non-clinical duties.’”
“Workplace conditions have pushed many pharmacists and pharmacy teams to the brink of despair,” said the board of trustees of the American Pharmacists Association (APhA) in a press release, the Washington Post reported. “Pharmacy burnout is a significant patient safety issue. It is impacting patients today with delayed prescription fulfillment, unacceptable waits for vaccines and testing, and potential errors due to high volume, long hours, and pressure to meet performance metrics.”
This is a sentiment that has been repeated across every facet of healthcare—including in clinical laboratories—where staff shortages are being felt.
“The pressure never let up. No matter how mind-numbing and repetitive the work could get, we had to work with constant vigilance, as there was absolutely no room for error,” Bator wrote.
“We techs were left unsupported and unmentored throughout the pandemic,” she continued. “No one cared if we were learning or growing in our job, and there was little encouragement for us to enter training or residency programs. We were just expendable foot soldiers: this is not a policy that leads to long-term job retention.”
Healthcare workers feeling burnt out and under-appreciated during the pandemic led to mass resignations that produced staffing shortages throughout the industry. It appears this trend has caught up to pharmacies as well.
Workforce Wasn’t Ready
Local and chain pharmacies played an important role in the COVID-19 pandemic. Pharmacists distributed COVID-19 tests and treatment to their communities. But for many it was a struggle to keep up.
Much like Bator recounted in her essay, pharmacy workers suddenly had new responsibilities, longer working hours, and little room for error.
“There are multiple stories about pharmacists just getting overwhelmed. The stress level and burnout is high,” Dima M. Qato, PharmD, PhD, told USA Today. Qato is Hygeia Centennial Chair and Associate Professor (with tenure) in the Titus Family Department of Clinical Pharmacy at the University of Southern California. “So, pharmacists leave, and stores have to shorten” their hours, she added.
Scheduling and Patience Can Help
What can be done to soften some of the issues staff shortages are causing? Ferreri suggests that pharmacies set appointment times for regular customers so that a pharmacist’s workload can be more predictable. An appointment system can ease stress for both the pharmacist and patient. Ferreri advises customers to be patient when it comes to their prescriptions. She suggests patients give pharmacies more than a day’s notice for refills.
“I think on both sides of the counter, we need to all have grace and realize this is a very challenging and stressful time for everyone,” said Brigid Groves, PharmD, Vice President, Pharmacy Practice at the American Pharmacists Association.
With burnout, staff shortages, and stress affecting nearly every aspect of the healthcare industry, having patience with each other will go a long way to helping clinical laboratories, pharmacies, and patients navigate the road ahead.