Challenges Persist in Staffing for U.S. Life Plan Communities and Skilled Nursing Facilities

Monday, Fitch Ratings dropped a Non-Rating Commentary about staffing challenges in Life Plan and SNF organizations. Per the release, “Though growing for some time, payrolls for U.S. life plan communities (LPCs) and skilled nursing facilities (SNFs) are still well off the pace needed to reach a full post-pandemic recovery.”

Bureau of Labor Statistics (BLS) data indicates that Life Plan and SNF employment is declining toward a point where private sector jobs and employment have recovered, post-pandemic. While the payrolls for Life Plan and SNF have risen for the past 24 months, they still remain 6% to 8% (Life Plan, SNF) below pre-pandemic levels. Healthcare and Social Assistance job opening have declined since March of 2022 (from 9.6% to 7.8%) to the same period in 2024.  The elevated rate however, of 7.8% is higher than the average openings rate between 2010 and 2019 of 4.2%. The corollary concern is that ongoing occupancy recovery in both sectors could be slowed by lack of staff.  The Fitch Release is here: Fitch Release on Payroll Recovery 4 15 24

Top among concerns for CEOs and to a lesser extent, investors in healthcare, has been labor or staffing. The reality remains that there simply are not enough qualified workers to meet the growing demand. As I’ve watched Federal jobs reports and job data, the economic disconnects are becoming more plain almost by the day. https://rhislop3.com/2024/02/07/wednesday-feature-healthcare-job-growth-and-the-economic-disconnect/

• An aging population, one that presents (per person) with advancing chronic diseases (diabetes, heart disease, etc.), demands and consumes more healthcare.
• Within this aging population are healthcare workers, now retiring and adding to the demand.
• U.S. population trends evidence a lower birthrate, today approximating the rate of retirement (as one person turns 65, one person is born). This birthrate does not generate sufficient population growth to accommodate job demands. In the last jobs report from March, U.S. born employment decreased and foreign born increased. Our overall labor pool (domestic, U.S. born) is shrinking. March 2024 Jobs Report
• While immigration numbers add to the potential labor pool, the skill match is not indicative today, of immigrant labor arriving with healthcare skills and qualifications need to fill the jobs created.

A recent report from Kaiser on the trends in healthcare employment provides a solid analysis on what has happened and what is happening (with respect to labor).  The report is available here: KFF Trends in Health Sector Employment

The pandemic caused a seismic shift in employment in the U.S. Lockdowns and closures/forced volume reductions disaggregated labor in all industries.  Healthcare was do different as elective procedures were fallowed. and consumer fear or hesitation pushed folks away from even necessary services and screenings, fearful of contracting COVID. Staff that were on the cusp of retirement hastened their separations, now permanently removed from the workforce as full-time labor. 

As is typical, healthcare jobs have recovered quicker than many industries.  Additionally, healthcare remains more recession proof than other industries, leading to a more lasting recovery. Even during COVID, healthcare job losses were less pronounced than other industries. In April of 2020, health employment fell to 14.9 million from 16.2 million the year prior (-8.2%), while non-health employment fell by -14.0%. Total health employment in February, pre-pandemic, was 16.5 million.

In 2023, 10.8% of people employed in the U.S. worked in healthcare. This proportion has grown across prior decades, from 7.5% in 1990 to 10.6% in 2010, remaining fairly stable since. Healthcare and government as sectors, are today, the two largest employers.  One could easily assume however, that healthcare generates more employment via related industry elements such as pharmaceutical companies, computer companies (think EPIC, and CERNER), insurers (Humana, United, Aetna), etc. All of these industry sub-sets consume healthcare labor such as nurses, pharmacists, and therapists.

As the Fitch release noted, where labor weakness persists in terms of employed staff is in senior living and post-acute care.  SNF employment is down from pre-pandemic levels and job growth the same.  Some of this is due to flatter demand, some due to lower utilization (patient days via length of stay are down), and the rest is due to lower bed counts and facility closures.

From an economic perspective, the share of healthcare provider budgets committed to labor has increased.  Not surprising, wages for employees have as well. Average weekly wages for employees of in other industries increased by 20.6% from $979  (February 2020) to $1,181 by January 2024. Healthcare employee average wages, generally slightly higher, have increased 20.8%, from $1,038 (February 2020) to $1,254 in January 2024. This is a function of scarcity and demand.

The increases in average healthcare wages have not been equally distributed among provider settings. SNF employees have seen the slowest recovery in employment post- pandemic but have seen some of the highest average wage increases. Among skilled nursing care employees, average earnings rose by 26.5% between February 2020 and January 2024, from $671 to $849 per week. NOTE: SNF employees tend to be somewhat lower paid than their peers in other settings.

Physician offices which saw the largest increase in employment post the pandemic have seen the lowest average wage increases. Average earnings rose by 12.3% between February 2020 and January 2024, from $1,443 to $1,620 per week. Hospital staff experienced a 20.3% increase between February 2020 to January 2024, from $1,269 to $1,527 per week.