Market indicators support predictions of tougher financial times ahead for hospital-based clinical laboratories and pathology groups
New statistics for 2013 on employment in the healthcare and hospital sectors show the lowest rates of growth since 1990. This is a signal to pathologists and clinical laboratory executives that much belt-tightening is taking place by all types of providers.
Number of Healthcare Jobs Declined in December 2013
Currently, 14.57 million U.S. jobs are in the healthcare industry, according to the U.S. Bureau of Labor Statistics (BLS). In fact, December 2013 ended with a significant drop of 6,000 jobs in healthcare employment. Declines in payroll numbers were recorded primarily in hospitals and ambulatory care.
During 2013, hospitals in the United States added 40,000 jobs overall. This was down 30% from the annual average since 1990. Hiring of nurses and staff for resident care facilities totaled 24,600, down roughly 40% from the annual average.
Hospitals currently account for one-third of all healthcare jobs, with 4.81 million on the payroll. Residential care facilities employ another 3.22 million healthcare workers. Meanwhile, ambulatory-care hiring was up 30% by the end of 2013. This was an increase of 270,200 jobs, compared to the annual average of 160,100 since 1990. The year ended with 6.52 million jobs in this sector.
Hospitals are Trimming Budgets by Eliminating Jobs
The weakest job growth was among hospitals, nursing homes, and residential healthcare facilities. By contrast, ambulatory-care services experienced a surge in hiring over the course of 2013. David Auerbach, a health economist at Rand Corp., said this data adds to growing evidence that hospitals are scaling back spending as one response to reductions in Medicare reimbursement. “It’s all telling the same story,” he stated. “There’s a shift of care out of the hospital” as providers seek to treat patients in lower-cost settings.
In a Modern Healthcare report last August, hospital executives admitted that they needed to trim budgets. One way to do that is to cut jobs, beginning with personnel considered to be least essential.
Changes brought by the Affordable Care Act are partly responsible for hospital employee layoffs. Other factors include declining inpatient volumes and cuts to Medicare reimbursement for inpatient services.
In fact, Milliman, an actuarial firm with claims data for about half of the nation’s commercial insurers, predicts that inpatient admissions per 1,000 patients will drop 15%—from 103 in 2012 to 88—by 2021. (See Dark Daily, “Falling Inpatient Revenues at Many Hospitals Is Sign of Healthcare’s Transition to New Models of Integrated Clinical Care and Changes in Medical Laboratory Test Utilization,” January 24, 2014.)
Cutbacks in Medicaid Funding Adding to Healthcare Hiring Woes
Recently, Lawrence+Memorial Hospital of New London, Connecticut, laid off 33 employees. Its President and CEO, Bruce D. Cummings, told the Washington Free Beacon that state cutbacks in Medicaid funding are taking a financial toll on hospitals. “We are also experiencing unexpected—and previously unbudgeted—cuts in federal (Medicare) and state (Medicaid) funding,” he said.
“The magnitude of the Medicare and Medicaid cuts impel us to look at all of our services and costs, including the largest component of our budget—personnel,” Cummings explained. He cited the example of a 20% cut in state Medicaid funding that has reduced reimbursement to hospitals by $550 million.
Impact of New Federal Budget Deal on Hospitals
Things are likely to get worse, because the bulk of deficit savings in the new federal budget deal will come from fresh cuts to Medicare providers, noted a news report published by The Huffington Post. The budget compromise, which was passed by both Houses of Congress in mid-December, extended a 2% cut to Medicare reimbursement originally imposed by the 2012 sequester.
In a story published by the San Diego Union Tribune, Chris Van Gorder, President/CEO at Scripps Health, responded to news of how Congress plans to balance the federal budget on the backs of Medicare providers. He said that Medicare cuts will cost his organization about $13 million per year, and comes alongside other reductions specified by the Affordable Care Act.
Van Gorder suggested that patients eventually will feel the effects of the federal budget’s Medicare cuts, as fewer physicians may agree to accept Medicare insurance. “I think, over time, patients are going to experience more difficulty getting an appointment, and they may have to travel further to be seen,” he said.
How Cutbacks May Affect Medical Laboratories
As hospitals continue to trim their workforces, it can be expected that their medical laboratories will be asked to reduce staff. In turn, reduced operating budgets for hospital laboratories will require them to increase their productivity while maintaining the quality of their lab testing services.
—by Patricia Kirk