Non-compete ban adds staffing woes for hospitals
TEXAS, NEW YORK, ILLINOIS — The Federal Trade Commission’s (FTC) recently announced rule banning non-compete clauses could exacerbate staffing challenges for not-for-profit (NFP) hospitals, according to Fitch Ratings.
Ruling could increase employee turnover
The credit rating agency warns that the rule, if upheld, may lead to higher labor costs and increased employee turnover for these healthcare providers.
NFP hospitals have been struggling with labor shortages and rising wages, straining their finances.
The FTC’s rule, which forbids new noncompetes and has organizations stop enforcing existing non-competes for all but senior executives, could further complicate matters and negatively affect healthcare delivery.
“One potential benefit is the improvement in labor supply and enhancement of the labor and physician recruiting pool,” Fitch notes.
“On the other hand, the rule could place further upward pressure on wages and potentially introduce operating volatility if there were increased healthcare staff turnover.”
Legal challenges to the FTC’s rule are expected, with the U.S. Chamber of Commerce already filing a lawsuit seeking to block its implementation.
America’s healthcare staffing shortage
The American Medical Association estimates that between 35% and 45% of physicians are bound by non-compete clauses. Additionally, most hospitals in the U.S. continue to fill in the gaps, particularly nurses and patient care technicians.
Job openings remain high at 7.8% as of February 2024 compared with the 4.2% average rate from 2010 to 2019.
NFP hospitals have managed to control wage growth while increasing payrolls. As of March 2024, hospital payrolls had risen for 27 consecutive months.
This has resulted in payrolls that are 5.3% above the levels immediately prior to the pandemic, compared with 4.2% for the broader private sector. The resignation rate of 2.1% is also higher than the 1.6% average from 2010 to 2019.
