Hospital staff wages may be on the rise again

Laura Dyrda (Twitter)

Hospital wage growth cooled mid-year after several months of high growth sparked by the pandemic, when talent was in short supply and demand was high, according to a report from Fitch.

While healthcare workers are no longer facing the same stress as they did during the initial months of the COVID-19 pandemic, new market dynamics could push wages up again. Nurses and healthcare workers across the country are striking, which pressures hospitals to boost wages and benefits.

Oakland, Calif.-based Kaiser Permanente faced a three-day strike beginning Oct. 4, noted as one of the largest in history with more than 75,000 workers at hospitals and medical offices across four states. There is a coalition of 11 labor unions working to negotiate a new deal with Kaiser Permanente, and the unions warned another strike could occur if bargaining sessions scheduled for mid-October aren’t fruitful.

Many of the workforce issues plaguing the hospitals are on the minds of the workers: labor shortages, burnout, safety, and outsourcing. Kaiser Permanente has allegedly rejected the union’s request to limit subcontracting and outsourcing.

“It’s simple: Kaiser executives need to be investing in healthcare workers right now amidst this short staffing crisis, not discarding them through a variety of expensive outsourcing schemes,” Tamara Chew, a healthcare plan representative at Kaiser in Roseville, Calif., said in the coalition release. “I can’t understand why anyone in the Kaiser boardroom thinks corporate outsourcing threats are the way to treat a workforce that just a short time ago were being hailed as heroes.”

Hospital worker wages were up around 3.8% in the last quarter, a far cry from the 9.3% growth at its zenith during the pandemic but strikes coupled with state and national policy decisions may lead to bigger growth, according to The Wall Street Journal. CMS also pitched a rule for minimum standards of nurses in long-term care facilities, and there are states with similar legislation focused on hospitals and other care facilities.

“The confluence of all these different pro-inflationary policies and labor actions in aggregate could ultimately catalyze a renewed upward trend in wage inflation,” wrote Scott Fidel, an analyst at Stephens, as reported in WSJ.

Labor shortages are also persistent and will likely continue over the next several years. McKinsey & Co. estimated there will be 831,212 open nursing care positions in 2031, and 62,604 open positions in specialty care. The competition is already steep for nurses to fill these roles, especially as hospitals and health systems try to reduce their need for contract labor and instead recruit and retain great teams. An Oct. 2 report from Fitch placed a premium on controlling staffing costs as a measure of financial stability for health systems.

“Given current and projected staffing shortages and the associated upward reset of labor rates, Fitch believes that providers’ success in attracting and retaining permanent staff is key to mitigating stress on margins. The sector will trifurcate, with highly successful labor recruiters generally gravitating to higher investment grade ratings,” according to an Oct. 2 Fitch report.

Nashville, Tenn.-based HCA Healthcare was able to avoid a strike at five California facilities by renegotiating labor contracts that included a 15% wage increase over three years. Overall, the health system reported its salaries and benefits spend was up 7.1% year over year for the second quarter to $7.3 billion.

Dallas-based Tenet Healthcare also reported a 7.5% increase in second quarter wages and benefits, and still faces a potential strike. The health system has been negotiating with a union that represents 4,000 employees but talks since June have not produced a new contract. Tenet told Becker’s it had offered a “competitive initial wage” that would be among the highest increases for SEIU-represented employees, but the union members remained dissatisfied.

The appetite to strike seems to be spreading. Newport, Mass.-based Beth Israel Lahey Anna Jaques Hospital registered nurses voted to authorize a three-day strike in October amid contract negotiations. Their contract doesn’t expire until Dec. 31, but the nurses felt an early strike was necessary due to the “gravity of the crisis the facility faces,” according to the union’s statement. The sticking point is increasing wages, according to a statement from the hospital’s CNO Christine Kipp. The hospital has engaged temporary staff and incentivized existing staff to cover patient care needs when necessary.

In September, Saint Louis University Hospital, part of St. Louis-based SSM Health, reported members of the National Nurses Organizing Committee held a 24-hour strike amid labor contract negotiations that had begun in May. The contract expired in June, and the nurses are looking for a market-competitive compensation and benefits package. The nurses also asked the hospital to address workplace violence and safe staffing concerns.

In his WSJ analysis, David Wainer wrote: “For now, most for-profit hospitals are insulated from widening worker strikes. Yet, with healthcare workers in short supply for the foreseeable future and politicians and the public increasingly siding with unions, wage inflation will continue to threaten their finances.”