On December 7, Haitham Ahmed, MD, MPH, a Harvard-educated cardiologist who has taught at Johns Hopkins and who currently serves as chair of cardiology at Advantage Care Physicians in New York City, sized up the healthcare staffing crisis in this tweet:
In my view, the threat from our continued health staffing crisis is far greater than additional threats from Omicron.
But somehow the media’s focus has been the opposite.
If you don’t have ICU beds, nurses, doctors, it doesn’t matter how much more dangerous Omicron *might* be.
(https://twitter.com/haithamahmedmd/status/1468412171398832135?s=11)
Physicians Megan Ranney and Joseph Sakran expound on this point in an op ed published on December 7 in Time. Ranney is a professor of emergency medicine and the associate dean of the School of Public Health at Brown University. Sakran is associate professor of surgery and nursing and director of emergency general surgery at Johns Hopkins Hospital. They write,
“But for those of us engaged in clinical care and public health—we’re an emergency physician and trauma surgeon—there’s a different fear: with almost every part of our system already overtaxed, we are on the verge of a collapse that will leave us unable to provide even a basic standard of care. Even if Omicron ends up being mild, it could well be the straw that breaks our back.”
(What Actually Worries U.S. Doctors About Omicron, https://time.com/6126293/doctors-omicron-worries/)
We encourage readers to read and digest the entire op ed.
We thank clients and consultants and all readers, including new readers who learned of our efforts on behalf of nurses. Many responses have been thoughtful and have added precious and provocative personal perspectives. We plan to continue our efforts, so here’s number three in what is now a series.
Please remember that the broadly defined category of healthcare constitutes about 12%–14% of the American employment cohort. The Census Bureau’s 2019 American Community Survey (ACS) found that “There were 22 million workers in the health care industry, one of the largest and fastest-growing sectors in the United States that accounts for 14% of all U.S. workers.” (“Who Are Our Health Care Workers?” https://www.census.gov/library/stories/2021/04/who-are-our-health-care-workers.html). The Kaiser Family Foundation (KFF) found in May of 2020 that healthcare accounted for 12% of employment in the US and broke down that percentage state by state: “Health Care Employment as a Percent of Total Employment,” https://www.kff.org/other/state-indicator/health-care-employment-as-total/.
Today’s missive is about healthcare employment and, specifically again, about nurses. But first let’s set the stage by looking at the bigger employment picture.
The Big Picture
In his Weekly Economic Update for December 3, 2021, my friend Michael Drury of McVean Trading (https://www.mcvean.com) noted that
“The key indicators from this week’s employment report were the 4.2% unemployment rate in the household report and the 1.4% insured unemployment rate in the initial claims report. In February 2020, the unemployment rate was 3.5% and the insured unemployment rate was 1.2%. As the data from the claims report is a hard count (as compared to the household’s roughly 50,000-member survey), we believe it offers stronger confirmation of just how tight the labor market has already become. The work-age population of the US (15-64) shrank in 2020 and is falling in 2021 due to the combined effects of the aging of the baby boom, low birth rates early in the millennium, stricter immigration rules and roughly 200,000 COVID deaths among those 15–64 years old.”
My good friend Philippa Dunne of TLR Analytics (https://www.tlranalytics.com) sent me the dissection of the employment report in the December 3 edition of TLRWire: “Comments on October Employment,” which I will quote here:
“Employers added 210,000 jobs in October, 235,000 of them in the private sector. The headline number was 259,000, or 55%, below the average of the previous three months, and many sectors seriously underperformed. Construction was up 31,000 (slightly above the average of the previous three months); manufacturing, 31,000 (a quarter below the previous three-month average); wholesale trade, 8,000 (a third above the trailing average); transportation and warehousing, 50,000 (a quarter below); finance, 13,000 (also about a quarter below); professional and business services, 90,000 (ditto on the quarter); education and health, 4,000 (less than a tenth its average); leisure and hospitality, 23,000 (a fifth its average); other services, 10,000 (just under half its average). Several sectors were in the red: mining and logging, down 2,000 (vs. a +3,000 average); retail, -20,000 (compared to a +33,000 average, with general merchandise responsible for more than half the loss); and information, -2,000 (compared to an average gain of 16,000). Government shed 25,000, with every subsector but the postal service in the red. Still, that -25,000 is about half the average loss of the previous three months.”
Education and health, 4000 (less than a tenth of its average)!
Philippa noted in her details how the employment recovery in healthcare hasn’t reached the average of 2.6% below what it was in February 2020. That’s right: Healthcare is not recovering robustly; it’s lagging.
We thank both Mike and Philippa for permission to share these excerpts. Let’s dig deeper.
The Healthcare Employment Sector
Please remember that you can usually choose whether you will fly on a plane or stay in a hotel or take a cruise. But when you need the doctor or the hospital or the rehab center or, especially, a nurse, you are motivated by circumstances that leave you little choice.
Here’s where we are today:
“There were 22 million workers in the health care industry, one of the largest and fastest-growing sectors in the United States that accounts for 14% of all U.S. workers, according to the Census Bureau’s 2019 American Community Survey (ACS).” After nearly two years of a pandemic, the United States has fewer workers in the healthcare sector than it did before the pandemic started. Here’s a link to the full data set and report.
https://www.census.gov/library/stories/2021/04/who-are-our-health-care-workers.html.
It takes about ten minutes to review this data. When you do, you can see where we were and why some of us are really worried now about where we are!
There are currently about 1 million nursing and nursing assistant and related job openings in the United States. Some estimates are higher. The entire healthcare sector (22 million people employed in pre-pandemic times) is now even more shorthanded than it was before.
Let’s get to the pay levels for reference and then draw some inferences for economics and markets. We will use the Becker’s 50-state list so readers can see the vast disparity by state and region when it comes to compensation of physician assistants (PA), nurse practitioners (NP) and registered nurses (RN):
“Physician assistant salary by state — Alaska is No. 1 at $150,430,”
https://www.beckershospitalreview.com/compensation-issues/physician-assistant-salary-by-state-alaska-is-no-1-at-150-430.html
“Nurse practitioner salary by state: California is No. 1 at $145,970,”
https://www.beckershospitalreview.com/compensation-issues/nurse-practitioner-salary-by-state-california-is-no-1-at-145-970.html
“RN salary by state — California is No. 1 at $120,560,”
https://www.beckershospitalreview.com/compensation-issues/rn-salary-by-state-california-is-no-1-at-120-560.html
Other subsectors in the healthcare cohort show similar disparities.
Let’s draw some inferences.
1. There are not enough trained people available to fill the job openings. Therefore, compensation levels will have to rise. This is not “wage inflation” because of the Federal Reserve’s monetary policy; this is how labor shortages find a new price equilibrium.
2. There is no present policy that is opening up the immigration channel, which has been closed for several years. Trump started a policy that has reduced immigrants by 2 million people; and that policy continues under the divided, stymied government we have in Washington and in many states. Politics in the United States is a cause of deficient healthcare services.
3. Because healthcare jobs require several years of training and special skills and licensing, this situation is likely to continue for some years.
Our Conclusions
A pandemic is a major shock and not a normal business cycle. The 22-million-person healthcare employment sector is on the front line whether we like it or not.
For two years the federal government has used debt to subsidize the cost of the pandemic shock. Politics and budget fights are bringing that intervention to a halt. Hence, the cost we pay for healthcare is going to go up, and it may go up a lot. We expect to see that confront our country in 2022. Watch what happens to healthcare insurance premiums and to copays and to uncovered costs.
Healthcare is a high-tech industry that includes biotech and methods of treatment (telemedicine) and medical devices (the pronation bed wasn’t used much two years ago). An entire new generation of treatment and prevention (vaccination and prophylaxis) has accelerated because of the pandemic. This is where productivity gains must occur, since they will not be able to come from an influx of additional healthcare workers for a while. The healthcare industry is changing.
Cumberland’s US Equity ETF portfolio continues to be fully invested at about double the market weight in the healthcare sector. We expect that sector to have a long, strategic upward path.
Let’s conclude with some readings that may be worthwhile in understanding why the healthcare employment cohort of people is likely to shrink or remain static until much higher pay levels have become pervasive enough to attract newer entrants into this employment sector.
Reading List
This CIDRAP report details the results of two surveys, one from Duke University and one conducted in Italy, assessing the impacts of COVID-19 on healthcare workers over time. These studies measure the impacts that nurses are reporting: “Emotional toll of COVID-19 on health workers is vast, varied,”
https://www.cidrap.umn.edu/news-perspective/2021/11/emotional-toll-covid-19-health-workers-vast-varied
This FOX 5 Atlanta report assesses the nursing shortage and points to rising interest in nursing programs, though there’s a delay of years to bring those new nurses into the system: “US faces a critical nursing shortage in spite of growing interest in the profession,”
https://www.fox5atlanta.com/news/us-faces-a-critical-nursing-shortage-but-growing-interest-in-the-profession
Urbi Khan, a reporter for the Toronto Star, recently interviewed eight Ontario nurses to capture their perspectives on the COVID-driven nursing crisis in her article, “‘We’re on the brink of collapse.’ What eight Ontario nurses have to say on the state of a profession in crisis,” https://www.thestar.com/news/gta/2021/11/28/were-on-the-brink-of-collapse-what-eight-ontario-nurses-have-to-say-on-the-state-of-a-profession-in-crisis.html. The piece is a valuable read with a focus on Canada’s healthcare system, but Toronto-based nurse Birgit Umaigba, who was interviewed for the article, points out a reality that stretches across borders: “We cannot afford to keep losing experienced nurses….” Leah Waxman, an emergency department nurse, concurs: “If you’re an emerge nurse, your spectrum of what you can do and what you know, takes years to learn. And, you know, you can’t just replace that with a new nurse.” (When we revisited this article, we found that it had, at least for us, to have been moved behind a paywall.)
Rising healthcare-associated infections (HAIs) are one indicator that the quality of patient care decreases when exhausted healthcare workers have too many patients to care for and not enough hands on deck: “The less-discussed consequence of healthcare’s labor shortage,”
https://www.beckershospitalreview.com/patient-safety-outcomes/the-less-discussed-consequence-of-healthcare-s-labor-shortage.html
Like the rest of the US population, healthcare workers are divided on the question of vaccination. Medical News Today looks at where the data stood at the end of September 2021: “COVID-19: 30% of healthcare workers in US hospitals not vaccinated,”
https://www.medicalnewstoday.com/articles/covid-19-30-of-healthcare-personnel-in-us-hospitals-remain-unvaccinated
Employers with wellness programs are looking at differentiating health insurance premiums according to employees’ vaccination status: “20% of large businesses considering premium hikes for unvaccinated workers,”
https://www.beckershospitalreview.com/payer-issues/20-of-large-businesses-considering-premium-hikes-for-unvaccinated-workers.html
This must-read from the Federal Reserve Bank of San Francisco “uses daily county-level data to assess the statistical relationship between economic activity and local COVID-19 conditions”: FRBSF Economic Letter, “How Strongly Are Local Economies Tied to COVID-19?”
https://www.frbsf.org/economic-research/publications/economic-letter/2021/november/how-strongly-are-local-economies-tied-to-covid-19/
Women around the world, not just those who make up 88% of nurses working today in the US (BLS), have been most impacted by loss of income and additional caregiving responsibilities: “Women bore brunt of social and economic impacts of Covid – Red Cross,”
https://www.theguardian.com/global-development/2021/nov/22/women-bore-brunt-of-social-and-economic-impacts-of-covid-red-cross
Healthcare’s direct service workers — nurse assistants, home care aides, and others — who number 4 million in the US, are also in crisis, and that fact complicates care not just in institutions but for families who have a loved one who must depend on assistance.
“To save our healthcare system, we must think beyond doctors and nurses,”
https://thehill.com/opinion/healthcare/584076-to-save-our-healthcare-system-we-must-think-beyond-doctors-and-nurses
Though levels of vaccine resistance among healthcare workers varies by state and region, burnout and ongoing trauma remain a primary driver of resignations: “N.H. health care employers say burnout, not mandates, driving worker shortage,”
https://www.nhpr.org/nh-news/2021-12-08/nh-health-care-burnout-not-covid-mandates-worker-shortage
A broader employment piece from the Federal Reserve Bank of San Francisco, published back in 2018, tracked the then-expected “trend in the aggregate labor force participation rate and its projections over the next 10 years.” It’s a valuable read for context as we consider factors, such as demographic ones, that remain relevant and assess the disruption that COVID-19 continues to be: FRBSF Economic Letter, “The Labor Force Participation Rate Trend and Its Projections,”
https://www.frbsf.org/economic-research/publications/economic-letter/2018/november/us-labor-force-participation-rate-trend-projection/?amp
David R. Kotok
Chairman of the Board &Chief Investment Officer
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