Healthcare job growth reflects industry inefficiencies

While many consider recent healthcare job growth a reflection of the industry's strength, a new article in Harvard Business Review suggests otherwise, arguing it actually reflects a lack of efficiency in the industry.

"The early signs are worrisome," Robert Kocher, M.D., a partner with the Cambridge-based investment firm Venrock, wrote in the blog post. "With healthcare viewed as a jobs source and jobs being added faster than demand is growing, we appear to be on a path toward more workers and lower salaries, not necessarily more productivity, unless something changes dramatically."

Kocher and his colleagues analyzed Bureau of Labor Statistics data and found:

  • The number of workers in the U.S. health system grew by nearly 75 percent between 1990-2012;
  • Nearly 95 percent of this growth was in non-doctor workers, and the ratio of doctors to non-doctor workers shifted from 1:14 to 1:16; and
  • On the basis of BLS median wages, these figures equate to $823,000 of labor cost per doctor.

"Demand and supply are not growing in tandem: from 2002 to 2012, inpatient days per capita decreased by 12% while the workforce in hospitals grew by 11%. This misalignment underlies some of the productivity decline we have observed in healthcare," he wrote.

The good news is industry experts expect healthcare to grow in 2014 so Kocher said productivity gains are possible if jobs aren't added. And there are signs of a slowdown in job growth. In July, FierceHealthcare reported the healthcare sector led all other industries in workforce reductions, cutting 6,483 jobs, the largest industry reduction since the 9,558 jobs shed in November 2009. And in August, although the healthcare industry saw a gain of 32,700 jobs over the past month, the Bureau of Labor Statistics' monthly jobs report indicates only 900 of these were in the hospital sector, FierceHealthcare previously reported.

Even still the long-time trend isn't encouraging, according to Kocher. "Unfortunately," he said, "healthcare as an industry continues hiring far faster than demand is growing, adding 119,000 new workers in the first half of 2013, for example, with little increase in patient volume."

To reverse the decline in healthcare labor productivity, Kocher calls for a transformation of the system--both on the supply and demand sides. This means relying on innovative reimbursement models that reward providers for lowering healthcare costs and becoming more transparent in price and quality data so patients choose more productive settings.

Finally, he suggests healthcare leaders rethink their labor force and eliminate jobs that don't directly contribute to better outcomes or deliver a concrete return on investment.

For more:
- read the Harvard Business Review article

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