Monthly Labor Review June 2006 3

Hospital Employment

Employment in hospitals:

unconventional patterns over time

Numbers of jobs in hospitals are affected

by a variety of special influences;

the industry does not conform to the business cycle

William C.

Goodman Employment in hospitals is subject to

influences that are not related to the business cycle and responds to the business

cycle in an unusual way. The trends of employment

in hospitals therefore contrast with those of total

employment, especially during cyclical downturns.

Apart from the effect of the business cycle, demographic and technological changes influence hospital

job growth in both upward and downward directions.

In relation to the business cycle, job growth in hospitals is greater when gross domestic product (GDP)

is weak, when unemployment is high, and when

overall hiring declines. This article first takes up

influences other than the business cycle and then

explains the countercyclical pattern of growth in

employment. One cyclical influence in particular—

variations in the labor shortage in the industry—is

examined in detail.

In this article, the Current Employment Statistics

survey1 is the primary source of statistics representing employment. Two particular time series

from the survey are emphasized. One represents

employment in all hospitals, including private and

Federal, State, and local government establishments.2

 The other represents employment just in

privately owned general medical and surgical

hospitals (NAICS 6221). The latter series offers a

longer history, since 1958; the former starts in 1990.

The more restricted series, then, can be used for

longer term analyses. Whenever possible, however, the broader hospital series is used to generate

conclusions about the entirety of the hospital

industry, both public and private.

Persistent trends

Although this article primarily concerns cyclical

patterns in hospital employment, a few important

influences that have persisted for long periods also

are examined. Changes in the size and nature of the

U.S. population, advances in medical technology,

and changes in the extent and characteristics of

private and public health insurance are among the

long-term factors.

Demographic changes. The population over age

65 increased more than tenfold during the 20th

century, and the elderly as a proportion of the

population increased about threefold in the last

hundred years, to 12 percent in 2000. The proportion

of Americans over 65 increased in every 20th-century

decade except the nineties, when it declined by just

0.1 percentage point. Even in the nineties, those over

65 increased in number; and during the nineties, the

oldest age group (people over 75) increased as a

proportion of the total population.3

 A glance at statistics representing inpatient hospital care by age

group confirms that, after infancy, the need for hospital services increases greatly with age:4

All ages ............................ 578

Under 1 ............................ 1,218

1 to 4 ................................ 149

5 to 14 ............................. 108

15 to 24 ........................... 268

25 to 34 ........................... 353

35 to 44 ........................... 359

45 to 64 ........................... 582

65 to 74 ........................... 1,429

75 and older ..................... 2,776

Greater demand for hospital services, then, is a function

of, among other things, the increasing numbers of

elderly individuals.

Willliam C.

Goodman is a

social science

research analyst

in the Office of

Employment and

Unemployment

Statistics, Bureau

of Labor

Statistics. E-mail:

Goodman.

William@bls.gov

 Age, years

Days of hospital

care per 1,000

persons, 2003
4 Monthly Labor Review June 2006

Hospital Employment

Even disregarding the aging of the population, the overall

growth in the number of U.S. residents drives some of the

increase in demand for healthcare. From 1990 to 2004, the

resident population increased by 44 million, or 18 percent.5

Technological change. Both information technology and

medical technology have changed the nature of work at

hospitals. Advances in information technology, such as the

electronic processing of billing documents, clearly tend to

increase efficiency,6 but the overall effect of new medical

technology on hospital staffing requirements is ambiguous.

One publication cites the discovery and implementation of

treatments “that cure or eliminate diseases” and “shifts to

other sites of care . . . as technology allows” as “factors that

may decrease health services utilization.” 7 At the same time,

“factors that may increase health services utilization” include

“new procedures and technologies” (for example, hip

replacement).8

 The net effect of medical advances on hospital

employment is not definitely known to be either positive or

negative. Statistical analysis using numbers of Food and

Drug Administration (FDA) approvals of medical devices9

characterized by that agency as “significant,” “breakthrough,” or “important” 10 exhibited no definitive relationship between the numbers of major device approvals and

annual percent changes in hospital employment.11

Certain pharmaceutical developments have reduced the

need for hospitalization substantially. The mental health field

is especially noted for new pharmaceutical products that

shorten hospital stays or allow shifts from the hospital

setting to a residential setting.12 Indeed, unlike hospitals in

general, private mental and drug abuse hospitals and State

hospitals show long-term declines in employment.13

Furthermore, new drugs for the treatment of HIV infections

have been relatively successful in postponing or preventing

the development of AIDS. From 1987 to 2004, the FDA approved

some 24 medications for HIV infection.14 Treatment with drugs

“has improved steadily since the advent of combination

therapy in 1996. More recently, new drugs have been approved, offering added dosing convenience and improved

safety profiles, while some previously-popular drugs are

being used less often as their drawbacks become better

defined.”15 Because of pharmaceuticals and through changes

in behavior,16 the AIDS epidemic, once feared as likely to

become overwhelming to the healthcare industry, in fact

declined after the middle nineties.17 On broad fronts, then,

new pharmaceutical products have reduced the need for hospitalization.

Changes in health coverage. Private health insurance and

public funding of healthcare have undergone numerous

important changes in recent decades. To begin with, the

percentage of the population with no health insurance has

risen from 13.9 percent in 1990 to 15.7 percent, or 45.8 million

individuals, in 2004. At the same time, the percentage covered

by private insurance has fallen by 5.1 percentage points,

while the percentage covered by government insurance,

particularly Medicaid, has risen. Those with no insurance

utilize health services to a lesser extent than those who have

health insurance, and the per capita hospital expenditures of

Medicaid enrollees are considerably less than those of the

overall population.18 These developments have restrained

the growth of healthcare.

Along with the decline in the percentage of the population

covered by private insurance, the percentage of total hospital

expenditures paid through private insurance fell slightly from

1990 to 2003.19 Multiple changes in the nature of private

insurance have affected the demand for hospital care. Health

maintenance organizations (HMO’s), defined as health plans

that provide more or less comprehensive healthcare by the

plan’s own providers, primarily in exchange for a fixed regular

payment, often regulate access to specialists and, in some

cases, hospitalization, through their primary care physicians.

Certain mechanisms in the operation of HMO’s—especially

authorizations required for particular treatments—in effect

limit the consumption of healthcare services.20 HMO’s, however, “led the way in expanding benefit coverage to maternity,

mental health, preventive, and pharmaceutical services.”21

Although enrollment in HMO’s declined between 2000 and

2003, the rise was so great in the preceding decade that the

net change from 1990 to 2003 was an approximate doubling of

the proportion of the population enrolled. In 2003, 24.7 percent

of the population was covered by HMO plans.22 In recent

years, a shift toward health insurance plans with greater outof-pocket costs to the consumer, accompanied by coverage

of more types of care, is likely to have made the health consumer somewhat more cost conscious. James C. Robinson

refers to “the all-too-human tendency to spend other people’s

money with less care than one’s own.”23 Thus, the complex

set of changes in private health insurance has exerted both

upward and downward influences on the demand for healthcare.

Government health insurance programs also have undergone numerous changes intended to control costs; those

programs and their changes will be described in more detail

with respect to the business cycle in a later section.

From 1990 to 2003, the proportion of total hospital expenditures paid by private insurance and government funds

crept up from 91.5 percent to 92.7 percent. This measure,

however, cannot be used as the sole basis for determining the

overall influence of changes in insurance on hospital job growth.

More subtle factors, such as the availability of new treatments

unknown in 1990, also are involved in the picture of health

insurance benefits and costs.
Monthly Labor Review June 2006 5

Downward influences

The forces restraining the growth of hospital employment

are clearly substantial, opposing the overall growth of the

population and the increasing number of elderly people, as

well as the upward influences of some new procedures being

performed at hospitals. Consequently, hospitals have cut

jobs, merged with other hospitals, and outsourced a variety

of functions, including food preparation, transcription, and

information technology.24 The rest of this section describes

some major downward influences.

Competition from other venues. A shift toward treatment

in outpatient settings has increased employment in offices of

physicians and other ambulatory venues such as outpatient

surgery centers. Chart 1 shows that jobs in healthcare have

grown more in purely outpatient settings than in hospitals.

Even within hospitals, a shift from inpatient treatment to

outpatient treatment has been noted.25 While relative costs

are one reason for this shift, consumer preferences are

another,26 and, as noted earlier, technological advances are

partly responsible. Ambulatory surgery is perhaps the greatest

shift that has been made possible by improved technology.27

Length of stay. Both the average length of inpatient hospital

stays and the number of days of care per thousand persons

fell considerably from 1990 to 2003. 28 As the length of stay is

reduced, staffing needs per case also are reduced. Hospitals

are motivated to decrease lengths of stays because of the

structure of reimbursements from Medicare and managed

care programs.29 In addition, advancing technology shortens

the time required for certain treatments in the hospital.

Overall long-term effects. Both the persistent upward

influences and the downward long-term influences are

multiple and strong. The restraining influences have held the

rate of growth in hospital jobs below that of the overall

population and below the rate of growth of payroll jobs in

general. (See table 1 and chart 2.)

History of employment in private hospitals

Although estimates of total hospital employment are available

only from 1990 to 2005, data on the history of employment in

private general and surgical hospitals are available starting in

1958. Accordingly, it is possible to investigate briefly the

economic behavior of that major part of the hospital industry

over several decades. (Private general and surgical hospitals

represent about three-quarters of the employment of the

entire public and private hospital industry.) Just looking at a

line graph of employment in private general and surgical

hospitals (chart 3) reveals that recessions do not particularly

Chart 1. Indexed employment in private outpatient healthcare venues and in private hospitals,

 1990–2005

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

1.00

1.20

1.40

1.60

1.80

2.00

1.00

1.20

1.40

1.60

1.80

2.00

Proportion of 

January 

1990 value

Outpatient

Hospital

Proportion of 

January 

1990 value
6 Monthly Labor Review June 2006

Hospital Employment

Table 1. Numbers of jobs in all hospitals, in ambulatory healthcare, and in all nonfarm establishments, 1990–2005

1990 ............. 4,817 ... 2,842 ... 109,487 ... 249,623 ...

1991 ............. 4,920 2.2 3,028 6.6 108,374 –1.0 252,981 1.3

1992 ............. 5,029 2.2 3,200 5.7 108,726 .3 256,514 1.4

1993 ............. 5,061 .6 3,386 5.8 110,844 1.9 259,919 1.3

1994 ............. 5,038 –.4 3,579 5.7 114,291 3.1 263,126 1.2

1995 ............. 5,031 –.1 3,768 5.3 117,298 2.6 266,278 1.2

1996 ............. 5,028 –.1 3,940 4.6 119,708 2.1 269,394 1.2

1997 ............. 5,038 .2 4,093 3.9 122,776 2.6 272,647 1.2

1998 ............. 5,092 1.1 4,161 1.7 125,930 2.6 275,854 1.2

1999 ............. 5,126 .7 4,227 1.6 128,993 2.4 279,040 1.2

2000 ............. 5,141 .3 4,320 2.2 131,785 2.2 282,192 1.1

2001 ............. 5,253 2.2 4,462 3.3 131,826 .0 285,102 1.0

2002 ............. 5,377 2.4 4,633 3.8 130,341 –1.1 287,941 1.0

2003 ............. 5,477 1.9 4,786 3.3 129,999 –.3 290,789 1.0

2004 ............. 5,534 1.0 4,952 3.5 131,435 1.1 293,655 1.0

2005 ............. 5,609 1.4 5,110 3.2 133,463 1.5 (1

) (1) 

Average ....... (2

) 1.0 (2) 4.0 (2) 1.3 (2) 1.2

Year

Annual

percent

change

Jobs in

thousands

Jobs in

thousands

1 Data not available.

2

 The average number of jobs in thousands, though calculable, is not economically meaningful.

Annual

percent

change

Thousands

Annual

percent

change

Jobs in

thousands

Hospitals Ambulatory

healthcare

Nonfarm

 establishments

U.S. resident

population

Annual

percent

change

Chart 2. Indexes of employment in hospitals, U.S. resident population, and total payroll

 employment, 1990–2005

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

0.98

1.03

1.08

1.13

1.18

1.23

0.98

1.03

1.08

1.13

1.18

1.23

Population

Hospital employment

Total payroll employment

Proportion of 

January 

1990 value

Proportion of 

January 

1990 value
Monthly Labor Review June 2006 7

slow growth. Even before the existence of Medicare (which

started in 1966), the private general and surgical hospital

industry grew through periods of recession in 1958, 1960, and

1961, as well as later, when Medicare was in place.

Nevertheless, one sees three definite plateaus or declines

in employment: one from 1982 to 1986, one from 1992 to 1995,

and one from 1998 to 2000. The first and last coincide with

restrictions in Medicare spending. In 1982, the Tax Equity

and Fiscal Responsibility Act started a shift from retrospective

payment, which covered costs of the actual treatment, to

prospective payment, which led to generally smaller reimbursement amounts standardized on the basis of diagnosis.

The prospective payment system was fully enacted in 1983.30

In 1997, Operation Restore Trust—a crackdown on fraudulent

billing31—and the Balanced Budget Act restrained spending.

The remaining plateau—in fact, including a small decline—

in employment in private general and surgical hospitals, from

1992 to 1995, does not correspond to any major change in

government funding rules, but did occur at a time when the

possibility of reform in healthcare policy was a major issue. It

seems that uncertainty was an important restraining factor in

hiring.

Countercyclicality

Now consider again the entire hospital industry. As mentioned

previously, hospital employment as a whole varies in response

to the business cycle, but not as one might expect. Although

employment in the hospital industry has increased almost

constantly since 1990, changes in its rate of increase are

opposite to those of GDP and of total payroll employment.

Furthermore, when unemployment rises, so does the rate of job

growth in hospitals. While the trend of employment in all

hospitals combined is consistently upward, the rate of

growth may be described as countercyclical: when general

business conditions are weak, hospital employment exhibits

greater growth.

Health of the population. In order to see how the growth

or decline in total U.S. employment correlates with the demand

for hospital services, the movements of total payroll employment

were compared with the movements of certain indicators of

hospital workload in the years 1993 to 2002. (See chart 4.) Yearto-year changes in the number of hospital discharges, which

represent the number of inpatient cases, tend to move opposite to the changes in total payroll employment. Days of inpatient care and the average length of stay also exhibit a

pattern in opposition to that of total payroll employment.32

One possible reason for the countercyclical pattern might

be an improvement in the general health of the population as

business conditions improve. If health does improve as

economic growth increases, demand for hospital services

would tend to decelerate as the economy expands. Evidence,

however, indicates that health actually is better when busiJanuary

1958

January

1963

January

1968

January

1973

January

1978

January

1983

January

1988

January

1993

January

2003

January

2005

January

1998

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Thousands Thousands

NOTE: Shaded areas designate recessions.

Chart 3. Employment in private general and surgical hospitals, seasonally adjusted, 1958–2005
8 Monthly Labor Review June 2006

Hospital Employment

ness is slow. Christopher J. Ruhm, in the Quarterly Journal

of Economics, finds that physical health is better during

recessions. He shows that eight major causes of death occur

more frequently during economic expansions, finds that

tobacco use increases along with economic activity, and

provides evidence that “physical activity rises and diet

improves when the economy weakens.”33 The general state

of health therefore quite possibly exerts a procyclical influence on demand for hospital services. Certainly, job stress,

as well as joblessness, causes health problems in many individuals, and some evidence suggests that increased workloads in recent years have contributed to illness.34 The countercyclical forces, then, would have to be all the more powerful

to overcome the procyclical fluctuations in illness.

If health does not deteriorate during business slowdowns,

how is it that the amount of hospital inpatient work tends to

be greater during those same periods? There are several

possible explanations. Ruhm mentions “the opportunity cost

of time”: the possibility that some people are more reluctant

to undergo medical care when it would interfere with their

income or career. While the opportunity cost of time probably

has little effect on vital inpatient procedures, elective procedures may be affected. Slack business or unemployment may

reduce time conflicts, tending to boost hospital business

when economic activity is low.35

Other explanations for more inpatient business during

economic slowdowns also are possible. Unemployment and

the consequent loss of employer-provided coverage may

make some people unable or unwilling to get medical attention

until hospitalization becomes necessary. The Medicare and

Medicaid programs make hospitalization more affordable than it

would otherwise be for some groups during periods of

unemployment or reduced business; those who have only

Medicare part A are covered just for hospitalization, as opposed

to office visits. Furthermore, at times of peak U.S. hiring, when

the labor shortage in hospitals may be particularly intense,

hospitals with staffing shortages may face restrictions on the

volume of business that can be performed at a particular time.

Year-to-year changes in the number of hospital outpatient visits,

however, tend to move in the same direction as the changes in total

payroll employment.36 Outpatient business, then, serves to reduce

the countercyclical pattern of hospital employment and helps

hospitals compete with ambulatory venues.

Labor supply. One countercyclical force affecting the

hospital industry is the labor shortage in some healthcare

Inpatient days of care

Chart 4. Percent change in total payroll employment and in selected indicators of hospital

 workload, 1993–2002

Percent change in

workload indicators

Percent change

in employment

Employment

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Inpatient days of care 

Outpatient department visits

–10

– 5

10

0

– 5

20

15

–2.0

– 1.0

2.0

0.0

–1.0

4.0

3.0
Monthly Labor Review June 2006 9

occupations, a reflection of which might be the rate of job

vacancies in hospitals.37 A continuous national time series of

hospital vacancies, however, appears not to exist.38 Nevertheless, evidence of a shortage is abundant. Most often

mentioned as in short supply are nurses, but personnel in

other hospital occupations—laboratory scientists, pharmacists, radiologic technologists, and radiation therapists—

also are cited as scarce.39 Among the major reasons for the

shortage of nurses are the following:

• “Operating rooms and post-surgical units, both of which

tend to be staffed by older, experienced nurses, lose

workers to retirements. Intensive-care units go wanting

because the young women who once gravitated to the

physical and mental demands of those jobs are being

attracted to non-nursing careers. . . .

• “Women, who make up the overwhelming majority of

health-care workers, no longer are guided to pink-collar

career tracks, and they are choosing more lucrative

fields, including technology and business. . . .

• “ . . . experienced nurses are leaving the profession or

are shifting to nursing jobs out of the hospital because

they are dissatisfied. Hospital nursing is stressful, and

that is made worse by inadequate staffing and excessive workloads.”40

Julie Pinkham, executive director of the Massachusetts

Nurses Association, provides an additional perspective:

“What’s driving nurses out of the field is going to work

knowing you can’t do an adequate job.”41 Because lower

staffing levels result in greater dissatisfaction, the nursing

shortage is exacerbated and perpetuates itself.

The permanently low unemployment rate in the hospital

industry is additional evidence that hospital labor is harder

to find than most other labor. From 1976 to 2002,42 the

unemployment rate of experienced hospital wage and salary

workers43 was always well below the unemployment rate of

all workers. The mean difference between the two rates was

3.8 percentage points, and the minimum difference was 2.7

percentage points.

Hospital labor shortages can be expected to increase when

alternative job opportunities are abundant and to decrease

when opportunities are scarce. Chart 5 shows annual percent

changes in hospital employment and in total payroll employment,

the latter shown on an inverted scale. The inverse relationship

is clear and is also apparent from a correlation coefficient of –0.90.44

Thus, a very strong inverse relationship between the two variables

has been established. That relationship is considerably stronger

than those between any of the aforementioned indicators of

hospital workload and change in hospital employment. The

rates of change of employment in hospitals also exhibit movements opposite to the overall rate of gross job gains,45 opposite

to changes in GDP, and in the same direction as changes in the

unemployment rate. The relationship between hospital employment and general unemployment—hospital jobs tend to grow

slowly when unemployment is low and faster when unemployment is high—suggests that some workers take hospital jobs only when other jobs are scarce. Changes in hospital

employment exhibit a much closer relationship to gross job gains

than to gross job losses, a fact which suggests that alternative

job opportunities may have a greater cyclical influence on

hospital staffing than does fluctuating demand for hospital

services.

The longer history of employment in private general and

surgical hospitals reveals an increasingly inverse relationship

between employment in the industry and total U.S. payroll

employment over the decades. One explanation for the increasing

strength of the relationship may be a hospital labor shortage

that became more sensitive to the business cycle as more job

opportunities became available to women. In 1958, women

constituted 33 percent of the employed; by 2005, they had

expanded their share to 46 percent.46 Private general and

surgical hospitals continue to depend primarily on women to

fill jobs and face much more competition in recruitment and

retention. According to Dolores Hopper, vice president of

patient care at Goodall Hospital, women now have more career

opportunities than ever before, and nurses can now work for

medical software or pharmaceutical companies, which offer

better benefits and conditions than hospitals do.47 During

the sixties, a small negative correlation (correlation coefficient

of –0.15) existed between employment in private hospitals

and total payroll employment. By 2005, the two employment

series had become much more negatively correlated.

Earnings, hours, and the labor shortage

One might expect that, as hospitals attempt to attract more

workers, hospital pay would increase in response to the

industry’s labor shortage and hours would increase when

hiring is difficult. Although data on hours and earnings in

government hospitals are not available from the Current

Employment Statistics program, earnings in private hospitals

can be examined. On its surface, the overall trend of hourly

earnings in private hospitals from 1990 to 2005 would appear

to support the claim that a labor shortage exists. Indeed, over

the 15-year period, earnings increased by an average 3.9

percent per year, far more than the 3.1-percent average increase

in earnings in total private industry. Because total private

earnings undoubtedly have been influenced by intraindustry

shifts, the change in hospital earnings also was compared with

those of 13 large private-industry sectors.48 The average percent

increase in private hospital earnings far exceeded those of all

sectors except financial activities.
10 Monthly Labor Review June 2006

Hospital Employment

A year-by-year analysis of changes in earnings in private hospitals, however, does not obviously support the

case for a fluctuating labor shortage. Private hospital earnings, deflated by the Consumer Price Index, tend to rise

more rapidly in years of low or even negative growth in

total payroll jobs. One might expect hospitals to raise pay

most when competition for workers is most intense.

Instead, hospital pay increases most when broad hiring is

low. Certain factors, such as Medicare, Medicaid, and

private insurance restrictions, may prevent hospitals from

changing pay scales quickly. Indeed, large Medicare and

Medicaid cutbacks have occurred during times of economic expansion.

One also would expect the average workweek to expand

when labor is short. Average weekly hours in private hospitals

grew by an average 0.2 hour per year since 1990, while hours

for all private workers declined by an average 0.03 hour during

the same time span. Hospital hours show little or no cyclical

pattern.

Government dollars

A separate influence on the number of hospital jobs consists

of changes in government funding for healthcare. Total real

government expenditures on hospitals exhibit year-to-year

percent changes that fluctuate mostly in the opposite direction from those of real GDP. As shown in chart 6, hospital

employment and real government expenditures on hospital

services have some tendency to accelerate and decelerate

together. Because Federal, State, and local government now

contribute well over half of hospital funding, the influence of

government funding on hospital employment is almost

inevitable.49

In 1997 and 1998, years of relatively high increases in GDP,

substantial tightening of government funds for healthcare

had an impact. In 1996, welfare reform had come, and those

receiving cash assistance were no longer automatically

eligible for Medicaid.50 Additional changes in 1997 included

the establishment of optional managed care within the

Medicare program and prospective payment for outpatient

hospital services.

In 1998, total real government funding of hospital services

hardly increased, in stark contrast to preceding years; and in

1999, government funding increased only modestly. The

Balanced Budget Refinement Act of 1999 “increased payments for some Medicare providers and increased the

amount of Medicaid DSH51 funds available to hospitals in

certain States and the District of Columbia,”52 thus permitting

total real government funding of hospitals to accelerate rapidly in 2001; funding continued to increase at a rapid pace in

2002. Clearly, then, government hospital expenditures have

fluctuated in a pattern largely opposite to that of real GDP

All hospitals

All nonfarm establishments

Hospital

jobs

Nonfarm

jobs

Chart 5. Percent change of employment in all hospitals and in all nonfarm establishments, 1991–2005

1991 1992 1994 1993 1995 1996 1998 1997 1999 2000 2002 2001 2003 2004 2005

 4

 1

 3

 2

 –5

 –4

 –1

 –3

 –2

0

 5

 5

 –5

 –4

 –1

 –3

 –2

 4

 1

 3

 2

 0

NOTE: Correlation coefficient = –0.90.
Monthly Labor Review June 2006 11

and have contributed to the countercyclical pattern of hospital employment.

Uncertainty

In the middle nineties, the trend of hospital employment was

somewhat below what one might expect. We may ask, then,

what influences might have reduced hiring at that time. One

factor appears to have been an uncertain outlook in the area

of future government policy toward healthcare. In the early

nineties, the Clinton Administration established a task force

to reform the U.S. healthcare system.53 Uncertainty about the

future of healthcare was unusually high. In the absence of a

way to quantify uncertainty among healthcare executives,

however, the effect on hiring cannot be estimated.

Specific types of hospitals

So far, the emphasis in this article has been chiefly on the hospital

industry as a whole, including both privately owned and publicly

owned institutions. This section examines various types of

hospitals separately. The detailed hospital time series available

from the Current Employment Statistics program consist of data

on private general and surgical hospitals, private mental and

drug abuse hospitals, other private specialty hospitals, Federal

hospitals, State hospitals, and local government hospitals. All

six show some countercyclical tendency, with accelerations and

decelerations in employment opposite to those of total U.S.

payroll employment, and all except Federal hospitals exhibit

statistical significance in their correlation with total payroll

employment. The degree of correlation with total employment

varies a great deal, however. The absolute value of the correlation

coefficient indicates the strength of the association, as shown

in the following tabulation of correlation coefficients between

percent changes in employment of specific types of hospitals

and percent changes in total payroll employment over the 1990-

to-2004 period:

 Correlation coefficient

Private-sector hospitals:

General and surgical ............ –0.80

Mental and drug abuse .......... –.82

Other specialty ................... –.92

Public-sector hospitals:

Federal ............................ –.40

State ............................... –.54

Local .............................. –.67

Clearly, the private-sector categories of hospitals uniformly

exhibit stronger relationships with the movements of total

employment than do the public-sector categories of hospitals.

Aside from exhibiting countercyclical patterns, the various

categories of hospitals show substantial contrast in their

Chart 6. Year-to-year percent changes in all hospital employment and in total government

 hospital expenditures, deflated by the Producer Price Index for hospitals, 1991–2003

Percent 

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Government hospital expenditures

All hospital employment

NOTE: Correlation coefficient = 24.

Percent 

6.0

5.0

4.0

3.0

2.0

1.0

0.0

–1.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

–1.0

NOTE: Correlation coefficient = 24.
12 Monthly Labor Review June 2006

Hospital Employment

overall, long-term direction and degree of change in jobs.

Private specialty hospitals other than behavioral (cancer

hospitals, for example) grew proportionately the most, by 64

percent, from 1990 to 2005. Private general and surgical

hospitals exhibited the second-greatest percent in employment growth, 24 percent. Private behavioral hospitals and

State hospitals, which also are mental facilities to a large

extent, declined quite similarly to each other, by about 20

percent, while other venues for psychological treatment

(offices of psychiatrists, offices of other mental health practitioners, outpatient mental health centers, and residential

mental and substance abuse care facilities) increased substantially in employment. Numbers of jobs in Federal and

local government hospitals remained relatively stable,

increasing by no more than 8 percent. The growth of employment in hospitals, then, was concentrated in private facilities

for the treatment of physical illnesses and injuries.

THE TRENDS OF EMPLOYMENT IN HOSPITALS are atypical in comparison

to those in other industries. Hospital jobs are more than resistant to

recessions; the changes in hospital employment are countercyclical.

The clearest statistical relationship found with employment in all

hospitals is the inverse relation between the growth rate of hospital

employment and that of total payroll employment. The waning and

waxing of the available labor supply appears to be an important

cyclical influence on hospital staffing levels. Government policy

also affects employment in hospitals, because changes in funding

are substantial and government funding makes up a large percentage

of hospital income. Progress in medical technology both increases

and decreases demand for hospital services. Trends in population

by age increase the need for hospital services, while competition

from outpatient venues reduces demand. Growth in hospital

outpatient business increases demand for hospital personnel. In

sum, a wealth of unusual influences contributes to an unusual pattern

of employment inhospitals.

1

 Employment data presented in this article are from the Current

Employment Statistics (CES) program, which conducts monthly surveys

of about 160,000 businesses and government agencies representing

400,000 establishments. For more information on the CES program’s

concepts and methodology, see BLS Handbook of Methods, chapter 2, on

the Internet at www.bls.gov/opub/hom/homch2_a.htm. CES data are

available on the Internet at www.bls.gov/ces/.

2

 The industry code for hospitals in the North American Industry

Classification System (NAICS) is 622. For industry definitions, see

www.census.gov/epcd/www/naics.html. In the CES program, statistics

for private, Federal, State, and local government hospitals are estimated

separately. These four series were added together to form one time series

for purposes of this article.

3

 Frank Hobbs and Nicole Stoops, Demographic Trends in the 20th

Century, Census 2000 Special Reports, Series CENSR-4 (U.S. Census

Bureau, 2002), pp. 57–59.

4 Statistical Abstract of the United States: 2004–2005 (U.S. Census

Bureau, 2005), table 162, p. 113. Most of the data in the tabulation

are from Vital and Health Statistics, Series 13 (U.S. National Center

for Health Statistics, various years); and unpublished data.

5

 Calculated from resident population estimates from the U.S.

Census Bureau.

6

 See Anthony Birritteri, “New Jersey—The Innovative State,

Part XIV: Technology Triumphs: Hospitals Investing in IT See Healthy

Rewards,” New Jersey Business, June 1, 2004, pp. 42 ff.; and Vince

Galloro, “The Edge Centers of attention: Don’t look for back-office

personnel at HCA hospitals,” Modern Healthcare, July 22, 2002, pp.

26 ff.

7

 See Amy B. Bernstein, Esther Hing, Abigail J. Moss, Karen F.

Allen, A. B. Siller, and R. B. Tiggle, Health care in America: Trends in

utilization (Hyattsville, MD, National Center for Health Statistics,

2003), p. 7.

8 Ibid.

9

 According to the U.S. Food and Drug Administration, “A medical

device is: ‘an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar article that is

intended for use in the diagnosis of disease or other conditions, or in

the care, mitigation, treatment or prevention of disease.’ Medical

devices can be anything from thermometers to artificial hearts to athome pregnancy test kits. Federal Food, Drug and Cosmetic Act,

Section 201”; on the Internet at www.fda.gov/cdrh/consumer/

product.html (visited Dec. 16, 2004).

10 Information on numbers of approvals of such medical devices is found

in the FDA’s ODE/OIVD Annual Reports for fiscal years 1990 through 2003.

11 “Significant,” “breakthrough,” and “important” device approvals were

tried separately as sole independent variables and in a model using percent

change in total payroll employment as an additional independent variable. In

both cases, results for approvals were far from statistically significant.

12 Telephone interview with Dee Roth, chief, Program Evaluation

and Research, Ohio Department of Mental Health, Jan. 26, 2004.

13 According to the American Hospital Association’s Diana Cobertson,

reached by phone on May 5, 2005, 221 of the 336 State-controlled hospitals

treat behavioral problems only. These 221 hospitals include 192 psychiatric

hospitals, 12 child psychiatric hospitals, 12 institutions for the retarded, and

5 facilities for the treatment of alcohol and drug problems.

14 “AIDSinfo: Approved Medications to Treat HIV Infection” (U.S.

Department of Health and Human Services, reviewed May 2005), on the

Internet at aidsinfo.nih.gov/other/cbrochure/english/05_en.html

(visited Feb. 3, 2005).

15 “Guidelines for the Use of Antiretroviral Agents in HIV-1-

Infected Adults and Adolescents” (Department of Health and Human

Services, Panel on Clinical Practices for Treatment of HIV Infection,

Oct. 29, 2004), p. 2.

16 Tom W. Smith, American Sexual Behavior: Trends, SocioDemographic Differences, and Risk Behavior (University of Chicago,

National Opinion Research Center, April 2003, updated in December

Notes
Monthly Labor Review June 2006 13

1988); on the Internet at cloud9.norc.uchicago.edu/dlib/t-25.htm

(visited Feb. 3, 2005).

17 Summary of Notifiable Diseases, United States, 2002, Morbidity

and Mortality Weekly Report (Atlanta, Centers for Disease Control

and Prevention, Apr. 30, 2004).

18 See David W. Baker, Martin F. Shapiro, and Claudia L. Schur,

“Health insurance and access to care for symptomatic conditions,”

Archives of Internal Medicine, May 8, 2000, pp. 1269–74. See also

Carmen DeNavas-Walt, Bernadette D. Proctor, and Cheryl Hill Lee,

Income, Poverty, and Health Insurance Coverage in the United

States: 2004, Current Population Reports P60-229 (U.S. Census

Bureau, 2005), pp. 17–19; on the Internet at http://www.census.gov/

prod/2005pubs/p60-229.pdf (visited July 6, 2006). Regarding Medicaid,

sources are Census Bureau Historical Health Insurance table HI-1, on the

Internet at pubdb3.census.gov/macro/032005/health/h01_000.htm

(visited Feb. 3, 2004); and hospital expenditure figures provided by M.

Kent Clemens, actuary, Center for Medicare and Medicaid Services, U.S.

Department of Health and Human Services.

19 Hospital expenditure figures are provided by M. Kent Clemens,

actuary, Center for Medicare and Medicaid Services, U.S. Department

of Health and Human Services.

20 James C. Robinson, “Renewed Emphasis On Consumer Cost

Sharing In Health Insurance Benefit Design,” HEALTH AFFAIRS—Web

Exclusive, Mar. 20, 2002, p. W143.

21 Ibid.

22 Calculated from HMO enrollment figures in Statistical Abstract of

the United States: 2004–2005 (U.S. Census Bureau, 2004), table 137,

and population figures in Census Bureau Historical Health Insurance

Table HI-1; on the Internet at www.census.govprod/2004pubs/

04statab/health.pdf (visited Feb. 3, 2004).

23 Robinson, “Renewed Emphasis On Consumer Cost Sharing,” p. W143.

24 See, for example, Judith Messina, “Hospitals won’t take scalpel

to clinical units: Fearful of competition; can mergers still pay off?”

Crains New York Business, Apr. 24, 2000; and Scott Hensley, “Survey

Shows More Hospitals Turning to Outside Firms for a Broad Range of

Services,” Modern Healthcare, Jan. 13, 1997, pp. 45 ff.

25 See, for example, PricewaterhouseCoopers, “Cost of Caring: Key

Drivers of Growth of Spending on Hospital Care,” Feb. 19, 2003, p. 6, on the

Internet at www.healthcare.pwc.com/cgi-local/hcregister.cgi?link=pdf/

caring.pdf (visited May 24, 2006).

26 Bernstein and others, Health Care in America, p. 6.

27 Ibid.

28 Vital and Health Statistics, Series 13.

29 See Harriet S. Gill, “Acute Care Length-of-Stay Creep,” Strategies

in Post-Acute Care, May/June 2003, pp. 1–3.

30 David R. H. Hiles, “Health services: the real jobs machine,”

Monthly Labor Review, November 1992, pp. 3–16.

31 Cynthia Engel, “Health services industry: still a job machine?”

Monthly Labor Review, March 1999, pp. 3–14.

32 Data on discharges, days of care, and the average length of stay are from

Vital and Health Statistics, Series 13. Annual data from 1989 to 2002 were

used.

33 Christopher J. Ruhm, “Are Recessions Good for your Health?”

Quarterly Journal of Economics, May 2000, pp. 617–50.

34 John Schwartz, “Always on the Job, Employees Pay with Health,” The

New York Times, Sept. 5, 2004, pp. A1 ff., also on the Internet at

www.nytimes.com/2004/09/05/health/05stress.html?page

wanted=2&ei=5090&en=4f3737967aa1ae66&ex=1252123200&

partner=rssuserland.

35 Ruhm, “Are Recessions Good for your Health?”

36 Data on ambulatory visits are from the National Center for

Health Statistics’ National Hospital Ambulatory Medical Care Survey.

Annual data for the years 1994 to 2002 were used.

37 The BLS Job Openings and Labor Turnover program supplies

statistics on job openings only at much higher levels of industry detail

than hospitals.

38 According to Janet Heinrich, “National data are not adequate to describe

the full nature and extent of nurse workforce shortages” (“NURSING WORKFORCE

Multiple Factors Create Nurse Recruitment and Retention Problems,” GAO

Testimony GAO-01-912T, June 27, 2001, p. 3).

39 Judith VandeWater, “Hospital Care Could Suffer from Labor Shortage,”

St. Louis Post-Dispatch, August 18, 2002, pp. E1 ff.; and Tammie Smith,

“Hospitals Turn to Agencies; Nurses Not Only Jobs They’re Hurting to Fill,”

Richmond Times-Dispatch, Jan. 1, 2002, pp. B1 ff.

40 VandeWater, “Hospital Care Could Suffer.”

41 Lisa Richardson, “The State Intense Debate at Hearing Tackles

Issue of Nurses Staffing at Hospitals,” Los Angeles Times, Nov. 16,

2002, pp. B10 ff.

42 After 2002, estimates are not consistent with earlier ones,

because the Standard Industry Classification System was replaced with

the North American Industry Classification System.

43 This specific unemployment rate is that of people whose latest

job was in the hospital industry.

44 A t-score of –7.4 indicates that the correlation is statistically

significant at a 0.2-percent level of probability.

45 Data on gross job gains are from the BLS Business Employment

Dynamics program, which produces and maintains a quarterly series of

statistics on gross job gains and gross job losses in the private sector. Gross

job gains and gross job losses reveal some aspects of business dynamics,

including establishment openings and closings and establishment

expansions and contractions. The microdata used to construct the

statistics on gross job gains and gross job losses are from the Quarterly

Census of Employment and Wages (QCEW), or ES-202, program.

46 The stated shares are calculated from Current Population Survey

data. The Current Population Survey is conducted by the Bureau of

the Census and disseminated by the Bureau of Labor Statistics.

47 “Troubling Labor Shortage Health-Care Vacancies Stress Industry

in Maine,” Portland Press Herald, Sept. 5, 2001, pp. 1B ff. 48 These 13 industry aggregations are natural resources and mining,

construction, manufacturing, wholesale trade, retail trade,

transportation and warehousing, utilities, information, financial

activities, professional and business services, education and health

services, leisure and hospitality, and other services.

49 Statistics representing government expenditures on hospital

services were provided by Matthew Clemens, Center for Medicare and

Medicaid Services, U.S. Department of Health and Human Services.
14 Monthly Labor Review June 2006

Hospital Employment

50 “Key Milestones in CMS Programs” (Centers for Medicare &

Medicaid Services), on the Internet at www.cms.hhs.gov/about/

history/milestones.asp (visited Nov. 4, 2004).

51 “DSH [Disproportionate Share Hospital] payments are additional

payments in the Medicaid and Medicare programs that . . . help

hospitals finance care to low-income and uninsured patients,”

according to the National Association of Public Hospitals and Health

Systems, “NAPH Issue Brief,” February 2001, located on the Internet at

www.naph.org/content/Navigationmenu/About_Our_Members/

Frequently_Asked_Ques-tions1/FAQpdf2.pdf (visited May 12, 2005).

52 “Key Milestones in CMS Programs.”

53 See Hilary Stout, “Medical Maze: Health-Care Experts Devising

Clinton Plan Face Sticky Questions,” The Wall Street Journal, Mar.

11, 1993; Tim W. Ferguson, “Business World: Hospitals’ Charts Take

a Turn for the Worse,” The Wall Street Journal, Aug. 10, 1993; and

Tom Redburn, “New York Hospitals Foresee Loss Of Billions Under

Clinton’s Plan,” New York Times, Oct. 9, 1993.