Feb. 7 (Bloomberg) — Hospital jobs in the U.S. declined in back-to-back months for the first time in three years as medical care increasingly moves to outpatient facilities and hospitals anticipate reimbursement cuts under Obamacare.
Hospitals lost 4,500 jobs in January, after dropping 4,700 jobs in December, the first consecutive two-month decline since February 2011, according to Labor Department figures released today. The health-care industry as a whole also reported a slowdown in employment, with 400 jobs lost in January compared with an average of about 17,000 jobs gained a month in 2013.
The job losses reflect an industry in flux as the 2010 Patient Protection and Affordable Care Act, also known as Obamacare, takes full effect. Reimbursements for Medicare, the U.S. health plan for the elderly, are being reduced to help pay for the coverage expansion under Obamacare, and hospitals are contending with lower payment rates from insurers on the public exchanges. In addition, care once provided at hospitals is shifting to outpatient settings, lowering patient volumes.
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"The next phase of health-care reform is likely to make the hospital operating and financial environment more difficult to navigate," George Huang, an analyst at Wells Fargo Securities LLC, wrote in a Dec. 17 memo. "Going forward, management teams will have increasingly difficult business decisions, in our view, that may include reorganizing staff."
Job Cuts
Hospitals in the U.S. eliminated thousands of jobs in 2013. The Cleveland Clinic closed "several hundred open positions" and released 700 workers through early retirement last year, spokeswoman Heather Phillips said in an e-mail.
The Ohio facility, one of the world's foremost medical and research centers, said last September that the early retirements and restructuring were needed to "prepare for health-care reform." Other hospitals that fired workers last year included Vanderbilt University Medical Center in Nashville, Tennessee, and Baton Rouge-based Louisiana State University Health Care Services.
Hospitals are "putting on the brakes" while they wait to see the impacts of the Affordable Care Act, Mitch Morris, a Austin-based analyst for Deloitte Consulting LLP, said in a telephone interview. "Everyone knows reimbursements are going down, so you'd better get your house in order."
Morris noted that job cuts and hiring freezes are among the many methods hospitals use to cut costs.
"It's a much more complex answer than just cutting people," he said. "It's about carefully looking around your business model and asking how you can deliver higher quality care faster and cheaper. You're not going to build that new hospital wing yet."
Publicly Traded
Publically-traded hospital companies may be more resilient to cost pressures because of their size, said Jennifer Lynch, an analyst at BMO Capital Markets Corp. "There's an inherent benefit in scale," she said. "You have more efficiency when you have 100 facilities."
Calls to HCA Holdings Inc., the largest U.S. hospital operator by market capitalization, weren't immediately returned.
Hospital jobs as a percentage of job creation in the health-care industry have also fallen. In 2011, 23 percent of jobs created in health care were in hospitals, according to Labor Department data. Last year, hospitals lost 400 jobs while the health-care industry gained 204,000.
Services moving to outpatient facilities have contributed to this decline in hospital jobs, Lynch said.
"We're getting better at doing higher acuity services in lower acuity settings," Lynch said in a phone interview today. "For the payers, it's cheaper and for the providers, the work environment is more attractive with better scheduling."
Outpatient Growth
Outpatient care centers have seen steady job growth, according to Labor Department data. The sector hasn't reported a monthly decline in jobs since July 2011.
While hospitals have slowed down hiring for now, in the long term they will be facing increased demand from the newly insured and more baby boomers reaching retirement age.
"It's important to keep an eye on the big picture," Morris said. "We're getting older and living longer, so we'll need more health care."
There will be "a tsunami" of patients seeking care in the coming years, Peter McMenamin, senior policy fellow at the American Nurses Association, said today in a phone interview. "This is a period of mixed signals," but ultimately, "growth is almost guaranteed."
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