As career seeking high school students the virtues of a career in healthcare were always preached. Aside from the good pay and honorable cause, healthcare was considered to be a safe field during times of economic strife. Yet the economic turmoil of 2009 has lead to record high layoffs in the healthcare industry leaving people wondering why?

Although layoffs are lower in the healthcare sector compared to other areas such as construction and manufacturing, any layoffs came as a shock to those who believed in healthcare. As early as January 2009, The Bureau of Labor and Statistics reported that healthcare layoffs were mounting, increasing from 3.4% to 3.7% with projected rates of up to 4.4% as of March. As the recession spread to the furthest reaches of the nation, healthcare layoffs continued as well. But many question why, when so many are sick, do healthcare organizations need to layoff?

The key reason for lackluster finances in healthcare organizations is the decrease in patient visits due to a declining economy. This has been widely reported by the American Medical Association and other news outlets like Fierce Healthcare.com As patients lose health coverage or have to tighten budgets, healthcare is often one avenue they seek to trim expenses. Families limit visits to doctors to only serious conditions, whereas in a looser economy they may have considered visits for lesser maladies like cold and flu symptoms. Patients have also conserved by putting off elective procedures like cosmetic procedures. So although people are still getting sick in this lifeless economy, they are not seeking care as actively as they once were. Insurance organizations are also feeling the crunch and have begun reducing reimbursements to hospitals. Conversely, when care is needed, these patients without insurance tend to be considered charity cases by local hospitals. Charity cases require that the patient be treated but often the healthcare provider be reimbursed. This twofold issue of decreasing elective cases, reduced reimbursements and increasing charity cases has left hospitals money strapped.

A lesser known reason for healthcare organizations to initiate cost savings measures like layoffs is the internal financial management. Poor stock market performance can affect company pension plans, thus causing the organization to have to bolster the plans with operating capital.

Research from the American Medical Association also concludes that capital itself is hard to secure. Much like other businesses, hospitals rely on loans to finance new projects like buildings and services additions. When credit is tight, hospitals cannot get funding to grow which also limits the revenue that can be brought in. Where donors could be relied upon for expansion projects, hospitals are suddenly seeing a lack of businesses and individuals comfortable in making sizable donations in a rocky economy.

When all these factors combine, hospitals find themselves in a position where they must adopt a survivalistic mentality in order to be able to continue to provide care for the communities they service. Typically hospitals look to cut non-clinical positions first, but as the American Medical Association reports, many hospitals have taken to slicing doctor positions as well. Therefore many healthcare employees across the nation have either been laid off, or have been working in fear of layoffs.

There are a number of lessons to be learned from this situation. First of all, nursing positions remain relatively untouched during layoffs. Other clinical areas such as laboratory and radiology are relatively safe as well, compared with non-essential personnel such as housekeeping, finance and marketing. Secondly, hospitals, although safe in most economies, are not immune. Therefore if you are an employee of a healthcare organization be as prepared for a layoff as you would be if you worked in any other field.

As the economy moves towards the beginning of stabilization the only answer for these problems is time. The healthcare layoffs of 2009 are sure to affect organizations both fiscally and anecdotally for years to come, but like in any other recession, stabilization will occur and growth with come back for the healthcare organizations that are pillars of community economies.

Sources:

http://www.fiercehealthcare.com/story/hospital-layoffs-mounting/2009-01-26

http://www.bls.gov/iag/tgs/iag62.htm

http://www.ama-assn.org/amednews/2009/01/26/bisb0126.htm

http://www.healthleadersmedia.com/content/232066/topic/WS_HLM2_FIN/AHA-Hospitals-in-Critical-Condition.html