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What's Behind the Sudden Health Care Job Growth Slowdown?

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Congratulations are in order for 2,500 or so individuals in the U.S. These people claimed one of the net new jobs added in the health-care industry during July, according to data from the Bureau of Labor Statistics. While getting a job was good for them, the news isn't so great overall. July's figure represented the lowest monthly seasonally adjusted number of net new jobs added in health care in 10 years.

On one hand, a decade of continuous job gains is an impressive streak. On the other hand, the latest jobs numbers raises a question: What's behind this health care job growth slowdown?

Digging into the numbers
The one area of health care that seems to be doing relatively well is ambulatory care services, which includes outpatient settings such as physician offices, outpatient clinics, and home health. Around 6,600 net ambulatory care jobs were added in July. Even that positive gain is a bit deceiving, though. That's the lowest job growth reported by the Bureau of Labor Statistics in over two years.

Also, the biggest driver of new jobs in ambulatory care came from home health care services, which added 3,900 jobs in July. This ties in with the overall national trend of more new jobs coming from lower-pay and part-time employment. According to Moody's Analytics, low-paying industries have accounted for 61% of U.S. job growth in 2013 even though these industries only comprise 39% of overall jobs. Around 77% of new jobs this year were part-time.

Looking beyond the "good" news, nursing care facilities cut 2,400 jobs during July. As a group, these facilities have only seen a net growth of jobs during one month so far this year.

Hospitals lost even more jobs. Around 4,400 workers were let go by the 5,700-plus hospitals across the country. July was only the third month in the past year and a half where hospitals recorded negative job growth.

What's going on?
While some of the nation's overall job weakness can be attributed to sluggish economies in other parts of the world, that reason doesn't explain why health care job growth has slowed down. Some clues might be found by looking at publicly traded health care companies' latest financial results.

Kindred Healthcare (NYSE: KND  ) reported its second-quarter results this week. The company's operations include 116 transitional care hospitals, six inpatient rehabilitation hospitals, 169 nursing centers, and 105 hospice, home health and non-medical home care locations. Kindred employs around 72,000 workers.

Richard Lechleiter, Kindred's CFO, blames sequestration in large part for his company's woes. He noted that the 2% across-the-board cut to Medicare resulting from sequestration contributed to a $13 million decline in revenue last quarter.

Some hospitals, including Community Health Systems (NYSE: CYH  ) and Tenet Healthcare (NYSE: THC  ) , didn't mention any negative effects of sequestration. Instead, their results focused on weak admissions volumes. It only makes sense that fewer patients require fewer caregivers and support staff. However, the nation's largest hospital chain, HCA Holdings (NYSE: HCA  ) , reported modest increases in admissions.

I suspect that the best answers, though, could be found from smaller employers. Baptist Health of Arkansas recently announced plans to cut nearly 2.5% of its 7,300 employees. Spokesman Mark Lowman specifically mentioned "a difficult and challenging environment of substantially less government reimbursement, burdensome government regulations, rapidly rising costs of supplies, increasing charity care and bad debt, and the need for technology and medical innovations" as reasons for the layoffs.

Impact of Obamacare
Several big hospital chains are consolidating in part due to the Affordable Care Act, commonly referred to as Obamacare. Mark Smith, president of health-care consulting firm Merritt Hawkins, said that health-care reform has already had a negative impact on jobs thus far as hospitals streamline to get ready for full implementation of Obamacare. Consolidations could lead to even more job cuts.

Community Health Systems plans to buy HMA, forming a combined operation with 206 hospitals in 29 states. Community Health CEO Wayne Smith said the merger would help the company be "well positioned to realize the benefits of health care reform."

Likewise, Tenet is buying Vanguard Health Systems (UNKNOWN: VHS.DL  ) . One key reason given for this acquisition: to increase benefits expected to be realized under health-care reform. The combined organization will include 79 hospitals and 157 outpatient facilities.

Many investors are banking on these moves to sustain the rapid rise in hospital stocks over the last year. The hope is that Obamacare will drive uninsured Americans to purchase health insurance via online exchanges. This would then potentially lead to higher health-care utilization and lower bad-debt write-offs for hospitals.

From a jobs standpoint, that would indeed be good news. Higher health-care utilization means more health-care workers are needed. Higher profits from lower bad-debt write-offs means that hospitals could better afford to hire those workers.

If this scenario materializes, the disappointing July health-care jobs numbers could be a temporary phenomenon. However, if things don't go as well as hoped, the industry won't see another 10-years of job growth like it has over the last decade.

Read/Post Comments (7) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2013, at 3:28 PM, comosichiam wrote:


  • Report this Comment On August 10, 2013, at 4:04 PM, ataredlight wrote:

    yes, don't go to nursing school because you won't find a job.

    HCA cutting costs (staff) to increase profits and claims to be afraid of medicare cuts as the rationale..

    short staffing - injuries

    firing more expensive workers for new grads with less pay and fewer benefits.

  • Report this Comment On August 10, 2013, at 4:05 PM, ataredlight wrote:

    btw, more injuries - workers comp. they pay the same, the worker loses.

  • Report this Comment On August 10, 2013, at 4:57 PM, Freddbe wrote:

    It should be named the Republican sequestration. The Republicans haven't be right about anything important in 30 years. Follow the Republican into the pass is the only road they travel. These people are bats that think they are birds.

  • Report this Comment On August 10, 2013, at 7:11 PM, Dadw5boys wrote:

    Home Health Care needs to be reworked here big time. The Doctor orders Home Care then someone shows up to do the paperwork, then someone shows up to diagonisis the needs, then they commit to 4 visits to help !

    They show up 3 times and do maybe 30 mins of work. The 4th visit is phones calls promising to be there shortly running late and they NEVER SHOW UP but Medicare gets billed !!!!!

  • Report this Comment On August 11, 2013, at 9:27 AM, outman2 wrote:

    Freddbe: thats why all the democrat strong holds are doing so well. Remember the health care "fix" is 100% democrat.

  • Report this Comment On August 11, 2013, at 11:26 AM, sogole wrote:

    ACA will cause a deeper reccesion.

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