Despite a generally robust economic environment and improving employment picture in the U.S., 2013 was not exactly a banner year for the healthcare staffing industry. We estimate the market grew 4 percent year-over-year last year, slowing from a rate of 11 percent in 2011 and 8 percent in 2012. A multitude of factors combined to constrain demand, including federal budget sequestration, lower hospital census and reductions in Medicare reimbursement for therapy. So, what should we expect for the industry in 2014?
In short, we anticipate a rebound for the healthcare staffing market, projecting year-over-year growth of 7 percent in 2014. At the macro level, this sanguine outlook extends from the fact that the long-term drivers of supply and demand continue to present a favorable environment for healthcare employment.
On the demand front, the U.S. population demographics continue to shift toward the older and more obese. According to the U.S. Census Bureau, the percentage of Americans over 65 years of age (who have higher utilization and are all eligible for Medicare) will increase from 15 percent of the population in 2015 to 21 percent in 2035. All 50 states had an obesity rate of 20 percent or higher in 2012, based on a report from the Center for Disease Control and Prevention. Centers for Medicare and Medicaid Services projects growth in national health expenditures to accelerate from 3.8 percent in 2013 to 6.1 percent in 2014. This will be driven largely by the impact of additional insured—a projected 9 million through the expansion of Medicaid and 7 million through the exchanges this year alone—under the Affordable Care Act.
Meanwhile, the data indicates that we are not producing enough new doctors and nurses to accommodate this demand outlook. The latest projection from the Association of American Medical Colleges forecasts an 8 percent physician shortage in 2015, rising to 14 percent by 2025. Despite a sharp increase in nursing school enrollment in the early 2000s, the unemployment rate for RNs was below 2 percent based on a one-year moving average through the third quarter of 2013, indicating that they remain in tight supply. We anticipate an increased reliance on the advanced practice disciplines (nurse practitioners, physician assistants and certified registered nurse anesthetists — often referred to as physician extenders) along with allied health professionals in response to this unmet need.
A tight labor market is typically characterized by high turnover, particularly in terms of voluntary separations. Data from the U.S. Bureau of Labor Statistics shows that the number of quits in the healthcare and social assistance industry group (the most narrowly defined category inclusive of healthcare) increased by 11 percent in 2012. Moreover, that number was up an additional 10 percent through the first three quarters of 2013 versus the same period in 2012. This trend is bullish for healthcare staffing both in that quits create vacancies, and in that healthcare workers who feel less dependent upon the security offered by “permanent” jobs will be more willing to accept a temporary position.
It is clear is that we are in the midst of a transformational period for the U.S. healthcare system. Nimble and astute healthcare staffing firms will position themselves to capitalize on these structural shifts and will prosper; those that do not will face the unpleasant duty of managing an inevitable decline. Our job at Staffing Industry Analysts is to provide you the data and insight that will enable your firm to remain in the former category and avoid slipping into the latter.