While payroll increases and labor shortages continue to challenge hospitals, there is some good news. Wage inflation is leveling off, according to Fitch Ratings.
Year-over-year average hourly earnings growth for hospital employees dropped 3% while ambulatory healthcare services employees saw year-over-year wage growth of 3.4% in 2024.
"This development follows an extended period of above-average salary and wage increases for hospital employees, which were implemented to reverse persistently high turnover and external contract labor use," according to the Fitch report. "Healthcare leadership has been satisfied with this labor exchange, and it has resulted in more predictable monthly expenses, qualitative benefits and improved organizational culture."
Hospital payrolls have increased for the last 32 consecutive months, and have now jumped 6.7% from February 2020. The hospital sector also continues to add jobs, averaging 18,650 per month from September 2023 to August 2024, according to the report. Fewer healthcare workers are quitting as compared to a high point in May 2023, dropping from 2.9% to 2.3% in July.
"Hospitals are still dealing with post-pandemic pent-up service demand, especially from seniors, that has kept labor needs high," said Richard Park, director at Fitch Ratings. "Sustained high volume levels are a modest positive for health systems, but often come with administrative challenges, slow payments and denial of prior authorizations for care, in particular when dealing with Medicare Advantage insurers."