Politics. Pandemics, wars, depressions and other like dislocations of human society have consequences, from the minute to the massive. Something as innocuous as closing schools for seven months seems like a sincere effort to protect children and the frail and vulnerable they might encounter. Yet, like so many of the cruel ironies of the COVID-19 outbreak, these decisions have boomeranged back onto the very people they were meant to protect.
As you would expect, the burden of child care during school shut downs has fallen mostly to mothers and grandmothers. That responsibility has extended through the fall as most major school systems have returned to the classroom only via virtual attendance. Closed schools present the health care industry with a very significant workforce challenge: over 90% of nurses are women.
As we mentioned last week, a McKinsey & Company report on a recent survey, identified workforce shortages as a top issue limiting hospital throughput. That same survey anticipated completed surgical operations in 3Q will remain 15% or more below the same period last year. In 4Q, things should improve but with volumes still 10-13% below normal. HCA in their 3Q 2020 pre-announcement offered a similar prognosis. Same facility adjusted admissions are expected to decline 9%.
There are a number of political forces keeping classrooms empty. We have called attention to the COVID-19 outbreak as presenting an important opportunity for labor to assert its claim as the primary advocate for safe working conditions. About 13 of the top 20 MSAs are located in the heavily unionized jurisdictions of California, Illinois, Pennsylvania, Metro DC, Massachusetts, Michigan and Washington.
The California Teacher's Association has flexed substantial muscle to keep schools closed until a uniform statewide safety standard could be applied, ensuring schools in less affluent areas are treated the same as their wealthier counterparts.The CTA has also demanded extensive cleaning and testing; adequate supply of PPE; and limits on student, staff and teacher contact. Since working conditions are a feature of union contracts, the terms under which California's teachers will return to the classroom involves negotiating an agreement between the school districts and the unions.
Meeting demands focused on safe working conditions are coming up against another municipal reality: significant reductions in hotel occupancy, alcohol consumption, sales and eventually, income taxes, make meeting the unions' requirements difficult, perhaps impossible. Additionally, most urban public school districts have seen significant declines in student enrollment as parents have migrated to more promising job markets and/or family support or enrolled in private schools when possible. In most states, funding is tied directly to enrollment.
CARES Act money has provided some support but many school districts spent substantially on technology to support remote learning thus limiting, at least in theory, the urgency for returning to the classroom. Under the dreaded and common restriction on federal funding known as "maintenance of effort" school districts must maintain their budgeted funding levels and not replace their cuts with federal funds.
When it comes to getting kids back in the classroom and meeting labor's demands, many U.S. public school systems are between a rock and a hard place. Teachers won't return to school unless safety demands are met and there are insufficient resources to meet their requirements. The result is fewer women at work, including Registered and Licensed Practical Nurses.
The shallow labor pool's impact is and will continue to be persistant. The McKinsey study estimates the backlog of surgical procedures will take a couple years to clear. On Friday, CMS released a Summer 2020 Supplement to their regular Medicare Beneficiary Survey that suggests that McKinsey isn't exaggerating. The survey reported that 21% of beneficiaries did not seek medical care due to the pandemic. Of that percentage, 27% reported that they were unable to access care due to closed offices or reduced hours.
The best guess for fully functioning classrooms is January in America's more urbanized states; sooner if scientific evidence continues to argue emphatically for a return to classroom learning and parents reach the end of their already frayed ropes. In the meantime, nurse demand will outstrip supply in many states in the US, especially those with highly unionized education workforces.
Meanwhile the backlog grows. Unlike the pent-up demand created before implementation of the ACA, this one affects individuals across all payer types and most especially Medicare, which covers those most at risk for severe complications from COVID-19. The next several years should be more interesting than usual for health care.
Policy. If the health care workforce wasn't stressed enough, CMS announced on Thursday that beginning January 1, it would pay $100 per SARS-CoV-2 test if results were returned in two days. If not, the reimbursement would be $75. Further, CMS indicated that it would reimburse $75 for each test performed on a high throughput machine and pay an extra $25 for each test if a majority were returned in two days, regardless of payer. The policy is, of course, designed to get lab test results turned around more quickly.
As is the case with hospitals, clinical laboratories are encountering similar labor challenges. According to the ACLA, in August 58% of its members were reporting workforce availability as their number one challenge up from 35% in May. While for hospitals workforce woes are connected to labor force availability, labs have experienced a shift of testing from ERs and physicians offices to SARS-CoV-2 detection.
While demand for COVID-19 tests are high from universities, employers, sports teams and governments, the demand from ER visits and physicians offices is down. The CDC reported a decline of 42% of ER visits in the spring during the height of the COVID-19 pandemic. HCA's pre-announcement indicates that only about half of the normal volume returned in 3Q. ER visits, of course, can drive a lot of testing.
The preponderance of $100 tests may not be sufficient to offset $250-$500 diagnostic tests typically ordered in an ER. Now, CMS at least is saying that to be paid $100 there needs to be sufficient labor or technology to achieve a fast turnaround.
Another rock and a hard place.
Power. In health care, the battle between labor and capital rages on. Silicon Valley can develop all the apps and smart watches it wants, when it comes to delivering health care, only human hands work. Although we are seeing signs that deregulation and technological advances may finally bring some needed improvements to clinical practice, productivity advances have been difficult to attain.
The immutable reality of labor's role in health care makes it one of its biggest and most difficult costs to control. There are a number of confounding factors. Nurses frequently work on a discretionary basis and in prosperous economic times may forego a paycheck in favor of other priorities. Physicians, burdened with hundreds of thousands of dollars in education debt are often drawn into practice areas with adequate and often over-supply, like orthopedics, leaving hospitals depending on foreign labor or offering incentives to attract physicians in other specialties.
Leave it to HCA, a company founded on the premise that vigorous costs controls would pay off for investors, to find another way. In January, HCA acquired a minority interest in the multi-state nursing school, Galen School of Nursing with locations in Texas, Ohio, Kentucky and Florida. Last week, the company announced that it would be establishing Nashville's third Medical School (preceded by Meharry Medical College and Vanderbilt University) in partnership with Belmont University.
In a press release, Belmont President Bob Fisher said, "HCA Healthcare will bring world-class expertise to Belmont's College of Medicine offering our students extraordinary faculty instructors and a pathway to residency and clinical placements."
In addition to high visibility on nurse supply, HCA has now promised to develop a pipeline for physicians with latitude to provide incentives and cost controls not available to most hospital systems. The affiliation is no accident. In addition to both Belmont and HCA being based in Nashville, they have something else in common. Do you know what it is?