Hospitals are facing staff shortages made worse by the COVID-19 pandemic, and Wall Street analysts are increasingly concerned that there are insufficient staff for these facilities, which is hurting margins.

“The surge in COVID-19 cases from the Delta variant continues to exacerbate hospital staff shortages, hinder recruitment and retention, drive up wages and hurt hospital profitability,” Moody’s Investors Service said Tuesday. “Over the course of the next year, we expect margins to decline in light of wage inflation, the use of expensive care agencies, increased recruitment and retention efforts, and expanded service packages that include more behavioral health services and offers such as childcare.”

There are several problems involved.

Nursing staff and doctors have been in short supply in some parts of the country for years. Many have burned out – and after 20 months of the pandemic, some are choosing to retire or quit. (A recent survey of 6,000 critical care workers found that 66% considered quitting nursing because of the pandemic.)

“There is no question that the labor market has been under pressure for some time with COVID activity,” said William Rutherford, CFO of HCA Healthcare Inc.
HCA, -0.77%,
one of the largest hospital chains in the US said at the Morgan Stanley Health Care Conference last month, according to a FactSet transcript of the presentation.

Then came the Delta variant and an increase in hospital admissions, which in particular increased the need for nurses to care for COVID-19 patients.

Many hospitals have had to limit or discontinue elective procedures, which are considered critical to their financial success, in order to focus their resources on these patients.

This includes Intermountain Healthcare, Utah’s largest hospital system, which began postponing all non-urgent procedures in 13 nonprofit hospitals due to lack of beds in mid-September. That same week, Idaho began rationing care to hospitals there, citing the “massive increase in COVID-19 patients requiring hospitalization in all areas of the state.”

“In some US regions, hospitals have suspended elective overnight operations, not only because of an increase in cases, but also because of insufficient staffing, which led to a decline in sales,” the analysts from Moody’s write in the report.

And finally some workers made up their minds quit or get fired instead of following the COVID-19 vaccination regulations introduced by some health organizations.

Add all these factors together and consider that salaries and benefits typically make up half the total cost of a hospital.

Hospitals now have to pay their workers more, including hiring more expensive temporary or travel nurses; spend more on social benefits and other “perks” to keep; and increase the amount of money they invest in recruiting clinical talent. (This is a good thing for healthcare recruitment agencies like AMN Healthcare Services Inc.
AMN, -0.33%
and Cross Country Healthcare Inc.
CCRN, + 1.69%,
Analysts say.)

“When COVID spikes occur, hospital beds will primarily be assigned to COVID patients and non-COVID admissions will be postponed,” Jefferies analysts wrote this week in a notice to investors on nonprofit hospitals. “If we leave the delta rise, we believe that demand for temporary nurses will weaken from current levels, but will remain elevated (lower placement rates compared to current average) as postponed admissions and procedures are rescheduled.”

The delta rise subsides, and the number of new cases, hospital admissions and deaths are falling. The current 7-day average for COVID-19 hospital admissions is 7,271 (as of Friday), according to the Centers for Disease Control and Prevention. That’s already lower than last week’s 7-day average of 8,378, but that doesn’t mean all hospitals aren’t ready.

“Even if the average daily COVID hospital stays are decreasing, we continue to see many hospitals and intensive care units across the country operating at full capacity,” said CDC director Rochelle Walensky on Wednesday during a briefing at the White House.

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