During the Covid-19 pandemic, hospitals across the United States had to dig deep to treat patients because some of the most profitable parts of their business, elective surgeries, were constantly postponed. The companies that assisted them in maintaining adequate staffing levels, as well as the brave and flexible people who filled those positions, have reaped the benefits.
Nurses willing to pack up and travel to a new hot spot every few months earned up to $10,000 per week during the peak of the pandemic to fill a medical staff shortage. Federal subsidies further distorted the economics of nursing by allowing hospitals to pay distorted wages, briefly creating a new class of highly paid nurses. On TikTok, some have flaunted their expensive Louis Vuitton bags, while others have simply expressed relief at finally being able to pay off their student loans.
The shortage of nurses, which had been a persistent issue in the United States prior to the pandemic, has harmed hospital profitability, as hospitals have had to raise pay not only for traveling nurses but also for their regular staff, sending average nurse salaries soaring nationwide. HCA Healthcare, HCA +0.62 percent a large hospital operator, had to sharply lower its full-year guidance earlier this year due to rising wages. Meanwhile, shares of temporary medical staff providers Cross Country Healthcare CCRN +0.67 percent and AMN Healthcare Services, AMN 0.05 percent have more than doubled in the last five years. Travel nursing revenue has increased.
However, the traveling-nurse market may be returning to earth. HCA reported second-quarter profit figures that exceeded Wall Street estimates last Friday and, more importantly for investors, reaffirmed its full-year outlook, sending its stock up more than 11%. Tenet Healthcare, THC +0.57 percent, rose 6% after reporting positive results after the market closed on Thursday.
During a conference call with analysts, HCA Chief Executive Officer Sam Hazen stated that temporary staff expenses were down about 22% in June compared to April. Bill Rutherford, Chief Financial Officer, predicted that "over the course of the year, we'll hopefully see a reduction in the utilization of that contract labor." Cross Country's stock dropped 17% after HCA and Tenet announced their results, while AMN fell 11%.
According to Brian Tanquilut, an analyst at Jefferies, weekly pay for temporary nurses will drop another 15% to the low $3,000s, helping hospital groups improve their bottom lines. While it is far from its peak, it will not return to its former glory due to what Tanquilut and other industry observers see as a structural shift in the market.
Some travel nurses have discovered that they enjoy the flexibility and higher pay that comes with traveling. Cross Country CEO John Martins stated at a recent conference that the work-from-home culture allows nurses to bring their remote-working spouses with them more easily. He predicted that the market would grow from 40,000 travel nurses in 2018 to 80,000 in 2023.
As a result, while hospitals may be relieved of the extreme costs of the pandemic, they may have to permanently reset their pay expectations. The boom times for nurses and companies that saw a silver lining in a health emergency may be over, but demand for their services will continue as long as America fails to address its broader nursing shortage.