My Path : Home > Our Company > Ownership

Growing Industry

A Growing Industry

As a healthcare recruiting and staffing company, Medical Connections Inc., is directly affected by the dynamics in the supply and demand for medical specialists. Government and private sector research indicates that a perfect combination of economic, political and educational conditions has created a soaring demand for more healthcare providers than the country has been able to generate.

A Brief Profile of the United States Healthcare Staffing Industry

In spite of the challenging outlook of the U.S. economy in the last year, a stable overall growth in the healthcare employment market induced positive development in the medical staffing industry.

The improvement of the U.S. economy experienced between 2003 and 2006, was not stable and did not bring satisfactory results to the job market. Lower budgets, cost-cutting, large mergers with layoffs, and price competition created by the globalization of the labor market causes HR departments to seek more flexible solutions to their HR needs. As a result, the medical staffing industry has shown a recession-proof development with an expected raise of 8% for 2008, a significant growth compared to other recruiting businesses.

The staffing industry is responding to the market dynamics. It provides the needed workforce without increasing hourly wages and without compromising long-term expenses. As per ASA (American Staffing Association), the temporary staffing industry grew due to the above-mentioned factors. In one year, the staffing industry revenues totaled $94.8 billion, a growth of 16% from 2005 to 2006.

After dropping for several years, permanent placement revenues increased by nearly 36% in 2006, to an estimated $8.4 billion.

The medical staffing and recruiting industry is affected by similar factors. There are budget cuts in hospitals along with mergers and acquisitions aiming to reduce overall management costs. These factors severely affect the ability to supply a quality workforce. However, this is where the similarity between other industries and the healthcare industry ends. The healthcare workforce is affected by huge shortages impacting all medical professions. The disparity between supply and demand is more severe in the healthcare industry, where lack of medical specialists reaches dramatic proportions.

Even in a tough economic environment, medical staffing and recruiting continued to thrive, despite the recent crisis in manufacturing, the global outsourcing and the slow growth of salaries and wages.

The medical staffing industry doubled revenues in 10 years: from $5.3 billion in 1996 to $10.6 billion in 2006. Stable growth is projected to reach $12.5 billion in 2008 and escalate to over $20.4 billion in 2014.

The growth data reflects the two major trends in the U.S. labor market: an increasing demand and a shortage in supply.

The Bureau of Labor Statistics projects that the growth rate of new jobs in the healthcare professions will be at 27% until 2016. This is twice the rate of job growth in non-healthcare professions. The Bureau of Labor statistics also predicts a need for 5.6 million healthcare workers to fill job openings by 2016 created by departures and new positions.

DEMAND FACTOR:

Increasing Need for Healthcare Professionals

AGING POPULATION

According to the U.S. Census Bureau, the United States population will increase 12% by 2020. Beginning 2012, a rapid increase in the elderly population will lead to dramatic demographic changes. Between 2012 and 2020, the population younger than age 65 will maintain an annual growth of 9 percent, while the population age 65 and older is projected to grow by about 50 percent. This will also lead to a significant increase in the number of people in need of healthcare. Estimates predict an increase upwards of 36 million individuals, of whom almost 24 % will be age 65 and older. The aging population of baby-boomers is entering into retirement age with ever-escalating demands for healthcare services. The baby-boomers are not only the largest part of the U.S. population, but also are the biggest spenders for healthcare services. In 2006, people over 50 represented only 12% of the population, but accounted for 21% of all U.S. spending. In 2006, the population over 50 accounted for 70% of healthcare spending. Baby-boomers alone, aged 47 to 62 now, account for almost 40% of the healthcare spending. Most of them are covering healthcare costs with private insurance. The rest of their expenses are paid out of pocket. Baby-boomers are also covering the medical needs of their parents and children. As more baby-boomers approach retirement, those expenses will increase dramatically, reaching a projected $4.2 trillion by 2016.

Aging population will place significantly more demands on the already compromised U.S. healthcare industry. The aging of the population by itself is one of the factors for the growing demand for healthcare professionals. Another factor, arising from the aging population combined with scientific advancements, is the increased life expectancy of baby-boomers. Consequently, the need for healthcare will continue growing in the years to come.

The third factor influencing the demand for healthcare services is that the baby-boomer generation, unlike their parents’ generation, prefers a much more dynamic lifestyle after retirement. Therefore, they need to be healthy to enjoy this way of life. Studies show that people between 65 and 70 decrease their stay in hospitals in favor of outpatient care. This trend will continue to push the age of hospitalized patients much further. This will open more possibilities for nurses, physical therapists, and occupational therapists to work in settings different from acute care facilities. At the same time, in hospitals, the need for those professionals will increase even more dramatically.

DEMAND FACTOR:

Increased Risk Factors for Health Problems

Aging, by itself, is not the only factor increasing the health risks for the 81-million-strong baby-boomers generation. The magnitude of the baby-boomers’ long-term care needs is increasing with estimates of disabled elderly ranging from two-to-four times the present level. Currently, cancer diagnoses for people over 55 represent 76% of all medical diagnoses. With over 1.4 million new cancer cases in 2006, the expense of treating this illness in the U.S. has increased dramatically to $209 billion in 2007.

Additional important factors identified as main sources of health problems:

HIGH STRESS

The economic uncertainty and low growth in several industries creates job insecurity and provokes higher levels of stress at the work place. Another factor increasing stress levels is the constant pressure for higher productivity with reduced personnel; as a result of the shortage of skilled workers. Studies by the American Medical Association (AMA) have shown the negative effects of stress on health. Stress is a factor in more than 75 percent of all illnesses and diseases today. Stress accounts for two-thirds of family doctor visits and half the deaths of Americans under 65, according to the U.S. Centers for Disease Control and Prevention (CDC). High levels of stress are listed as the main cause for acute heart conditions. It is also the principal contributor for the worsening of other conditions, such as high cholesterol, high blood sugar, and psychiatric pathologies.

OBESITY & SEDENTARY LIFESTYLE

Nearly two-thirds of adults in the United States are overweight and 30.5% are obese, according to the study of the NIH (National Institutes of Health). Less than one third (31.8%) of U.S. adults get regular leisure-time physical activity. The lack of physical activity and the increased consumption of saturated fat and processed sugar are the main risk factors for many diseases, such as diabetes, heart disease, stroke, hypertension, gallbladder disease, osteoarthritis (degeneration of cartilage and bone joints), breathing problems, and some forms of cancer (uterine, breast, colorectal, kidney, and gallbladder). Approximately 400,000 adult deaths in the United States each year are attributable to unhealthy dietary habits, physical inactivity or sedentary behavior. As the prevalence of obesity and other weight issues has increased in the United States, so have related healthcare costs – both direct and indirect: Direct healthcare costs are preventive, diagnostic, and treatment services (physician visits, medications, and both hospital and nursing home care). Indirect costs are the value of wages lost by people unable to work because of illness or disability, as well as the value of future earnings lost by premature death.

OTHER DEMAND FACTORS

TECHNOLOGY

The pace of technological advancement in U.S. healthcare is increasing faster than the education of the people who are using it. This creates additional pressure for hospitals to find skilled employees to operate new diagnostic or treatment machines. It also increases the demand for highly-educated, technology-savvy healthcare specialists.

What was more than sufficient 20 years ago to perform the duties of a nurse, physician, or a radiology technologist, is now only 20% of the daily routine for those professions. Tasks related to heavy computer usage, complex legislation, and complicated prescription drug issues are part of everyday life for those specialists. There is an ever increasing need to find technology-savvy professionals who are staying up to date with the scientific advancements in their field.

CULTURAL DIVERSITY

The United States has been a multicultural country since its inception. In recent decades, it has become more and more important to provide medical services in other languages (Spanish, Creole, etc...) This need drives the constantly increasing demand for multilingual healthcare specialists.

LEGAL & REGULATORY

Recent governmental mandates have further increased the demand for qualified healthcare professionals. One of the most affected sectors is the hospital industry, which has experienced unprecedented closures of entire units due to their inability to meet federal staffing guidelines.

Several legislative initiatives were introduced in many states, and 32 states already succeeded in mandating a staffing ratio for nurses. It is expected however, that staffing ratio laws will be ratified in all states during the next years.

In the proposed national staffing ratio law, an LPN cannot be hired as an RN to satisfy shortages. This will put additional pressure on the RN hiring process nationwide.

Professional associations for physical therapists and other allied health specialists are also lobbying for similar legislation, which will increase the demand for more professionals in those fields.

SUPPLY FACTOR:

Dramatic Shortage of Qualified Medical Personnel

With the aging population in America, there will be a major crisis in the U.S. workforce in general. The labor force is projected to grow at an annual rate of 0.8 percent, slower than the population growth rate of 0.9 percent annually. Between 2006 and 2016, as the baby boomers continue to age, the 55 to 64 age group will increase by 30.3 percent or 9.5 million persons, more than any other group. The 35 to 44 age group will decrease by 5.5 percent, reflecting a slowed birth rate following the baby boom generation, while the youth population, aged 16 to 24, will decline 1.1 percent over the 2006 to 2016 period. The demographics of the labor force will change dramatically in the projected period between 2006 and 2016: the youngest working population (16 to 24-year-olds) will decrease by almost 3%, individuals in their prime work years of ages 24 to 54 will increase by less than 11%, and the 55-and-older age group have the greatest increase in their participation rate: almost 5 percent. This growth rate is nearly 5 times the overall labor force annual growth rate of 0.8 percent.

Baby boomers, the fastest growing group in America’s workforce already represent 43% of the total workforce, and they are retiring at a head-spinning speed – 330 per hour.

Skill shortages are growing with similar velocity among healthcare professionals, scientists, and managers. Already 45% of the U.S. employers are considering the retiring workforce a major challenge to overcome in the next years. In addition to the aging population, trends shaping the workplace of the future will be heavily influenced by rapidly advancing technology. The healthcare industry is already experiencing the problems associated with the aging of its workforce.

In the period between 2006 and 2016 healthcare employment—will grow by 25.4 percent and add 4 million new jobs.

Between 2006 and 2016, healthcare employment will grow by 4 million new jobs; representing 25.4% growth in employment for healthcare professionals.

A recent study featured in the Health Forum Journal reported that in virtually every hospital, the vacancy rates for registered nurses, pharmacists, and radiology technologists are greater than 10%. It also stated that more than 15% of hospitals are reporting a severe shortage of nurses, with more than 20% of their nursing positions currently vacant.

The most significant shortages of medical professionals will be highly qualified registered and executive nurses:

As the largest health care occupation, registered nurses held about 2.5 million jobs in 2006. Registered nurses also make up the largest projected shortage area in healthcare. The U.S. Department of Health and Human Services predicts that more than one million new and replacement nurses will be needed by 2012. Registered nurses are projected to generate 587,000 new jobs, among the largest number of new jobs for any occupation. The shortage is projected to intensify over the next two decades with 44 states, plus the District of Columbia, expected to have RN shortages by the year 2020. Today, fully 75% of all hospital vacancies are for nurses. The shortage is costing long-term care facilities an estimated $4 billion a year in recruitment and training expenses. Employment of registered nurses is expected to grow 23 percent from 2006 to 2016. Accordingly, the current shortage of registered nurses is projected to worsen, as by 2020 there will be 800,000 open positions for nurses. That means that in 2020, the demand for nurses will be 29% higher than the supply. In the same time, turnover and cost-per-hire escalate. It costs $6,029 to hire or replace a registered nurse and almost 2 months to fill the position. Turnover rate remains high at 10.3%, as well as the vacancy rate at 9.6 %. The expenses related to hiring and retaining RNs in the U.S. represent $6.5 million for temporary staffing only – which is more than 50% of all staffing expenses in the healthcare staffing industry. The reasons for this shortage have been identified as follows:

Low enrollment in nursing schools,

The Health Resources and Services Administration (HRSA) projects that nursing schools must increase the number of graduates by 90 percent in order to adequately address the nursing shortage. With an 18.0 percent increase in graduations from baccalaureate nursing programs in 2006, schools are falling far short of meeting this target. In 2007, more than 40,000 nurses were turned down, despite their admission qualifications, due to the shortage in educational facilities and faculty. Because the number of recently graduated RNs has decreased so dramatically over the past two decades, enrollment in nursing programs would have to increase by at least 90% annually to replace those expected to leave the workforce. This will not be possible because of the following:

– The nursing program’s faculty for a Bachelor of Science degree is decreasing due to academic retirement and the impossibility to fill faculty positions with new nurses with a MS degree or who have obtained an advanced level of education

– The nursing programs physically lack facilities for the schools

The average age in the existing nursing pool is close to retirement. More than 40% of the current nursing workforce is over 50 years old.

Alternative career options have opened doors for those who traditionally pursued nursing as a career. Previously male-dominated professions (i.e., physicians, attorneys, computer science, etc.) are now attracting more female candidates, resulting in a much lower supply of applicants for nursing.

Job burnout and dissatisfaction are driving nurses to leave the profession. In a recent survey, the statistics show that an overwhelming majority of the hospital HR managers believe that work-related stress is a major factor in the overall nursing shortage, which has resulted in nurses leaving hospital duty, or even the entire profession. The survey showed that work stress and burnout accounts for 85% of the shortage, 76% of the nurses leaving hospital settings and 77% of the nurses leaving the profession.

Technological advancements will demand an extended curriculum in nursing schools and continuing education programs. This will create an additional gap between the active nursing workforce and the nurses who are attending qualification and improvement courses.

Fewer nursing professionals are remaining in patient care. The significant turnover is due to an oppressive nurse to patient ratio, stressful work environment, unsatisfactory wages, and better opportunities in other professions.

SUPPLY FACTOR:

The Allied Health Professional Shortage – An Attractive Sector For Emerging Companies.

Hospitals and healthcare facilities across America are experiencing a critical shortage of allied health professionals, including occupational and physical therapists, clinical laboratory technologists, imaging technicians, pharmacy technicians, and radiology technologists.

Based on private research from The Staffing Industry, Inc., and data from the BLS, the allied/other temporary staffing market is estimated to be a $3.5 billion industry and it is expected to grow at a 9% annual rate. An estimated daily average of 70,000 temporary workers are employed in this skill set, making up almost half of total temporary healthcare staffing.

The Center for Health Professions lists the following most wanted allied health professionals:

• Physical Therapists
• Occupational Therapists
• Speech Language Therapists
• Pharmacists
• Radiologic Technologists
• Respiratory Therapists
  
• Laboratory Professionals
• Health Information Managers

Hospitals reported vacancy rates ranging from 7 to 7.5 percent among imaging technicians, pharmacists, and many other allied healthcare positions. The current shortage is expected to worsen over the next 20 years. The Bureau of Labor Statistics (BLS) projects that in 2016 our country will need a total of 220,000 physical therapists – 27% more than the currently employed. According to the AHA workforce survey results, shortages are contributing to Emergency Department diversions, a reduced number of staffed beds, and increased patient wait times.

Allied staffing is perhaps the most attractive field for emerging companies in the healthcare staffing industry. It is one of the least concentrated of the four sectors of healthcare staffing with large firms generating just one-sixth of total revenue. Segmentation, with small companies comprising the largest part of allied health staffing, opens opportunities to newcomers in the field. It also includes many specialties with low penetration rates (the percentage of temporary staffing versus total positions in the company), indicating that there will be significant growth.

As projected by the BLS, of the 30 fastest growing professions in all industries, 12 are in the allied/other skill set.

There are several factors influencing shortages in the allied health professionals’ field. The overall aging workforce of allied health professionals is just one of them. The median age of physical therapists is 45 and young allied health professionals cannot join the labor force with the needed speed because of the high demand for a minimum of a BS degree, and higher certification standards. In the meantime, the computerization of hospitals drives the increasing demand for computer-savvy allied health specialists. This requirement is especially critical for radiology technicians, sonographers, and many other diagnostic specialties.

PHYSICAL THERAPISTS

Demand for physical therapists is expected to increase faster than the average, as growth in the number of individuals with disabilities or limited function spurs demand for therapy services. Future medical developments should also allow a higher percentage of trauma victims to survive, creating additional demand for rehabilitative care. In addition, growth may result from advances in medical technology that could permit the treatment of more disabling conditions.

Additional demand will be created by nonconventional use of allied health professionals’ services. A growing number of employers are using physical therapists to evaluate workspace, develop exercise programs, and teach safe work habits to employees in the hope of reducing injuries and decreasing long-term healthcare spending.

In the therapeutic category, demand at the moment is strongest for physical therapists, with occupational therapists a distant second and radiation therapists running third. Lab technician temporary placements are being driven by worker shortages caused by declining enrollment in medical schools, as well as higher technological expertise demanded by the hospitals.

SUPPLY FACTOR:

Increasing Shortages of Qualified Pharmacists

The market for pharmacists and pharmacy technicians is also on the rise, reflecting expansion of pharmacies into grocery and department stores, as well as Internet and mail-order sales. Thanks to a record number of new drugs, aging baby-boomers taking more medication, the proliferation of managed healthcare, colleges across the country cannot graduate students fast enough to fill the nationwide shortage of pharmacists.

Data published by the National Association of Chain Drug Stores reflects an alarming trend, predicting that over the next years, there will be a 26% increase in the number of prescriptions dispensed, and only a 4% increase in the number of pharmacists needed to meet this demand.

The annual growth rate for prescription drug spending will soar from 7.4% in 2007 to nearly 10% in 2016. That will require an estimated 672,000 pharmacists and pharmacy technicians by the year 2016 – a 21% and 32% projected growth from 2006 respectively.

In addition, college and university pharmacy programs are converting the degree requirements from a bachelor’s degree in pharmacy to the more recognized Pharm D. The change has extended the time for graduation of pharmacists. College officials say they are trying to meet the demand by offering accelerated courses and increasing class size, while pharmacies and hospitals are in a bidding war, offering bonuses and tuition reimbursement.

Other than the demand factors mentioned above, there are other factors for the increasing shortage of qualified pharmacists:

– Lack of qualified faculty in the pharmacist schools and universities

– Internet retail channel growth requires more qualified pharmacists to monitor the prescription filling online

– Conventional retail stores, increasing their pharmacy sections, demand more and more qualified professionals

SUPPLY FACTOR:

Trends in Physician Employment

For two decades, health planners have been forecasting impending physician surpluses, and policy decisions related to medical schools and residency programs have been based on these expectations. However, much-heralded surpluses never materialized and a growing body of data and opinions now point in the other direction. The question is whether the United States is headed towards a physician shortage. What is the evidence?

Current information indicates that physician shortages are emerging and they will probably worsen over the next two decades. By 2020 or by 2025, the deficit could be as great as 200,000 physicians – 20% of the needed workforce. The forecasted growth for physicians and surgeons between 2006 and 2016 is projected to surpass 14%.

Another important shift has been the decline in the proportion of physicians practicing independently. In studies published by the Kaiser Family Foundation and Harvard University, the percentage of physicians who were in solo practice declined from 41% in 1983 to 26% in 1999. An important driver for the trend away from solo practice was the physicians’ pursuit of market advantage in negotiating payments from managed care plans. The research also showed another trend affecting the payment and contracting of physicians: 63% of HMOs pay primary care physicians and 42% pay specialists using fee incentives. Still, fee-for-service is by far the most common payment method and its use is increasing.

By 2020 or by 2025, the deficit could be as great as 200,000 physicians – 20% of the needed workforce. The forecasted growth for physicians and surgeons between 2006 and 2016 is projected to surpass 14%.

The proportion of HMOs using fee-for-service payment for physicians almost doubled between 1997 and 2000, increasing from 33% to 74% for primary care physicians and from 49% to 84% for specialists. This trend is dramatically changing the staffing dynamics in hiring and contracting of highly qualified and specialized physicians. As these physicians seek employment with large, well-established companies, they are turning to physician recruiting companies to assist them in their endeavors at an ever-increasing rate.