Becker's Hospital Review

14 CMO / CARE DELIVERY Will rising nurse pay mean higher healthcare costs? It's complicated By Erica Carbajal and Jakob Emerson T he year 2023 was full of labor union wins — in healthcare and beyond. Now hospitals nationwide must grapple with higher nurse salaries, teeing up further tensions with insurers, employers and the potential for increased premiums. From Hollywood writers to healthcare workers, nearly 900,000 unionized U.S. employees secured double-digit pay increases throughout the year, according to data analyzed by CNN. "I would say this is the best run of wage increases won by labor since the period right aer the end of World War II," Art Wheaton, director of labor studies at Ithaca, N.Y.-based Cornell University, told the news outlet. As of Dec. 13, 967 strikes and labor protests happened this year across 1,347 locations nationwide, according to a labor action tracker managed by Cornell's School of Industrial and Labor Relations. Zooming in, 183 of those actions occurred in the healthcare and social assistance assistance sector and 46 were strikes. e labor movement across healthcare has garnered widespread support from Americans. According to an AFL-CIO poll of 1,200 registered voters from both major parties in August, 75% of respondents said they are in favor of "workers going on strike to negotiate for better wages, benefits and working conditions." Nurses and other clinicians secured historic pay raises this year, such as a 37% increase to the average base wage at Oregon Health & Science University in Portland and an average raise of 40% over four years for employees at Providence Cedars-Sinai Tarzana (Calif.) Medical Center. Several health systems also moved to raise their minimum wages for employees. "While it is very difficult to predict what will happen next, I think that the recent uptick in healthcare strikes will continue for at least the near future," Johnnie Kallas, a PhD candidate and director of the Cornell labor action tracker, previously told Becker's. "Many of these recent strikes have emerged from the first set of contract negotiations for unionized workers since the beginning of the pandemic, which obviously exacerbated many of the issues, like understaffing, already confronting healthcare workers." Of the nation's 16 most populated industries, registered nurses are projected to see the greatest increase in hourly pay by 2033 when accounting for inflation, according to October research from telecommunications company TollFreeForwarding, which sourced data from the Bureau of Labor Statistics. RNs are projected to earn an adjusted $58.31 per hour by 2033, an increase of nearly $13 per hour. Physicians are estimated to earn $118.62 per hour in 2033, the highest of all the professions researched, though nearly $3 less per hour than what they currently earn. Such raises are playing out against the backdrop of a financial atmosphere for hospitals and health systems that is still recovering from COVID-19. On average, hospital finances appear to be stabilizing following 2022, which by some estimates was the worst operating year on record. Now, 2024 has been categorized as another "make or break" year for healthcare finances, with high labor costs and widespread staff shortages expected to drive the persistence of weak margins. Meanwhile, the healthcare workforce's demands around improved staffing and compensation are unlikely to waver anytime soon, especially as the nation faces an estimated shortfall of 800,000 nurses by 2027. So what will all of this mean for the cost of healthcare going forward? A complex question Labor costs typically make up more than 50% of an average health system's total expenses, so there is no equation in which a double-digit increase of those costs would not lead to higher prices for consumers and patients down the line, former health system leaders say. "e ultimate impact here is it will drive up the overall cost of care," Marvin O'Quinn, former president and COO of Chicago- based CommonSpirit, told Becker's during a July podcast. "ere's no avoiding that. As the unit cost goes up, that cost at some point is going to have to be passed on." Stephen Klasko, an adviser at General Catalyst and the former CEO of Philadelphia- based Jefferson Health, and Robert Pearl, MD, former CEO of Kaiser's Permanente Medical Group, echoed that sentiment. "It's ridiculous to say in an algebraic way that if [labor costs] go up 20 to 25% that it's not going to have an effect on either my ability to survive or coming up with some way that healthcare is going to get more expensive. at's a fact," Mr. Klasko told Becker's. "Nursing costs are no different than any other cost," Dr. Pearl, MD, a professor at Stanford (Calif.) University School of Medicine, told Becker's. "With everything we do that adds cost, it either gets passed on to the insurer or to the patient." Hospitals' contracts with payers typically arise every two to four years, meaning higher worker pay secured this year would not appear in reimbursement negotiations just yet. In the short term, self-insured employers will likely accept higher healthcare costs, according to Dr. Pearl. For 2023, annual family premiums for employer-sponsored health coverage reached an average of nearly $24,000, up 7% from 2022, according to KFF's 25th annual Employer Health Benefits Survey published in October. "e real question is, what are we going to see in the long term?" Dr. Pearl asked. "Because if insurers negotiate harder or refuse to agree to the coverage in contracts, which we're already seeing happen, hospitals are going to have to respond. e unknown is, will that pressure happen or not?" During third-quarter earnings calls with investors, executives at some of the nation's largest health systems were not shy about discussing "increasingly aggressive behavior" they say is coming from insurers. In the third quarter, at least 21 contract disputes became public and were covered in the media compared to 11 during the same period in 2022, a 91% increase, according to data published in October by FTI Consulting. "Hospitals will find a way to shi the costs; they will not eat into profits," Ge Bai, PhD, professor of accounting and health policy at Baltimore-based Johns Hopkins University, told Becker's. "I would be surprised if higher labor costs don't translate to higher costs for consumers." According to Dr. Bai, the financial impact on patients once a hospital's labor costs go up depends on the labor competition and cost variations among facilities in an individual market. If all hospitals in a market face increases in worker salaries,

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