The labor crisis in many industries has stabilized, but impending retirements and high demand for healthcare services will likely reignite labor shortages in the sector, according to a March 5 report from Moody's Investor Services.
"The healthcare and social assistance sector's outsized labor demand and highly labor-intensive operations represent an extraordinary test of labor market dynamics going forward," the report states. "The sector's demand for labor will grow much larger as the elderly US population, which tends to have greater and more complex healthcare needs, fuels demand for its services."
Healthcare is expected to comprise 45% of all jobs added from 2022 to 2032, according to the Bureau of Labor Statistics, and the demand for labor is projected to outpace supply. The growth rate for nurse practitioners is estimated to rocket 44.5%, and physician assistants growth rate will jump 26.5%. The report also notes workers in the healthcare industry skew older and closer to retirement as compared to other sectors
Moody's reported healthcare is "broadly vulnerable" to labor shortages, particularly in home health and health practitioner services. Health practitioner offices are projected to need to hire 37% to 42% of staffing levels in 2022 to meet rising demand and replace retiring teammates, according to the report.
Labor costs are expected to increase as the competition for trained workers heats up, and providers are purchasing technology to support the existing workforce.
"Healthcare providers facing a rising labor bill will look to do more with less by optimizing existing practices and investing in productivity-enhanced technologies," the report states. "Some health systems are using new staffing patterns that pair older, more experienced but less mobile nurses with predictive analytics technology that enables them to better detect illness, predict patient outcomes and utilize younger staff."
Hospitals and physician practices are also partnering with early-stage, artificial intelligence-driven startups to reduce readmissions and automate administrative tasks.
Hospitals and practices that don't increase productivity or cut costs will pass the higher labor costs on to patients, insurers and healthcare consumers, according to the report.
"A growing labor bill will compound other growing expenses for healthcare providers, the larger ones of which we expect will be able to use their growing market power to partially offset rising costs by securing higher reimbursements from commercial insurers during contract negotiations," the report states. "In turn, private insurers, especially those in highly concentrated markets, are likely to aggressively challenge claims, tighten service coverage and boost premiums and copays to maintain margins."