Hospitals feel relief as wage inflation falls, job openings rise

Key performance indicators are heading in the right direction and give hospitals reason for optimism.

Hospitals and health systems will finally see some relief from their staffing difficulties, even if things are not yet back to pre-pandemic levels.

Hospitals in particular are experiencing stabilization in wage inflation and fewer job vacancies, according to report by the Fitch Ratings rating agency, which gives organizations a moment of respite after the rapid growth in recent years.

After average hourly wages were up about 8% year-over-year in 2021-22, wage growth fell from 4.2% in 2023 to 3% in 2024.

Hospital wages continue to rise, now 6.7% above February 2020, but part of that growth is due to a welcome decline in job openings. Hospitals saw an average of 18,650 monthly job additions from September 2023 to August 2024, compared with 14,510 jobs averaged in the previous 12 months.

Healthcare workers are also staying with their organizations longer, with the attrition rate falling from a peak of 2.9% in May 2023 to 2.3% in July.

Fitch noted that wage inflation in recent years, while costly, has helped hospitals reduce employee turnover and reduce their reliance on contract workers.

“Healthcare management is pleased with this work exchange, which has translated into more predictable monthly expenses, quality benefits and improved organizational culture,” the report reads.

Despite promising employment trends, the situation in hospitals is still nothing like it was before the pandemic.

The number of job vacancies in the health and social care sector fell from 7.9% in January to 6% in July, but is still far from the average of 4.2% between 2010 and 2019.

“Hospitals continue to cope with surging post-pandemic demand for services, particularly from seniors, which is keeping labor requirements high,” Fitch Ratings Director Richard Park said in a statement. “The continued high volume is a modest positive for health systems, but it often comes with administrative challenges, delayed payments and denials of prior authorizations for care, particularly for Medicare Advantage insurers.”

The increase in demand for services could significantly deepen the labour shortage problem in the coming years.

According to current forecasts, by 2028 the US will have a shortage of over 100,000 workers in key positions, while estimates suggest that around 18.7 million workers are needed tests by consulting firm Mercer.

Even with a respite from the staffing constraints hospitals are currently experiencing, CEOs must ensure they take a long-term view of their workforce and continue to prioritize recruitment and retention strategies.