So Where Did the Smokin-Hot Healthcare Market Go?

That’s a great question. Unfortunately, the answer is both simple and complicated.

Whether you’re new to the industry or have been around for years, I’ll bet you came to healthcare with grandiose ideas of how recession-proof this industry was. Maybe you came to feel this way because of the articles you read about the large number of candidate shortages. Or maybe you came to this industry in an attempt to try and make a difference. Well, regardless of what brought us to the healthcare market, we probably all need reminding from time to time of how cyclical this market can be.

We need to know that, regardless of how things are going in other industries, healthcare is a world unto itself. But this time it isn’t just a cyclical shift. Rather, it is a historical convergence of four factors: declining revenues from reimbursement cuts (federal, state, and third-party payers), shortages of skilled professionals, inadequate services, and misconduct by recruiters. And it’s all wrapped up in the uncertainty of the geo-political environment leading up to the 2008 presidential election. See, simple but complicated.

Many of these factors have been affecting healthcare for years, so why have they all converged at this time? This article will attempt to break down each area, give its importance, and suggest how to counteract the negative effects from the convergence of these factors.

First of all, recruiters have created the situation in which we find ourselves. Although that may seem an overstatement considering the players in the market today, the resistance we find to our presence is a reaction by the market to recruiters in general. Now, not all recruiters have created this problem, but the 10% of recruiters who did create the problem have left the remaining 90% of us with a challenge to provide a solution. Most of the more experienced recruiters and trainers I know are suggesting that we should all just make more phone calls. I would suggest this is the last thing we should be doing.

Let me paint you a real-world example of why I say this. I can remember a TV commercial where a sports celebrity was running through an airport. Hurdling seats and zigzagging through passengers. The TV commercial was conveying the message of a late-arriving passenger racing to secure his rental car. In this day and age, if a person were running through an airport, the airport would be shut down for fear of a terrorist attack. I could name many other examples of how our world has changed so that we now fear either the actions or words of a person that we wouldn’t have given a second thought in the past. As recruiters, the things we used to say and do had little to no immediate effect on the market, but in light of this present set of issues, we find the market taking a very different response to our methods. So the very methods we are using are intensifying the negative reaction the market in general is having toward recruiters.

We are experiencing a negative paradigm shift – an overused phrase with an unfavorable connotation. What recruiters need to understand is that this could be a time of “positive paradigm shift,” but our actions have pushed the market away from us. As we all know, “for every action, there is an equal and opposite reaction.” Well, we (or at least some of us) have taken action in a way that has caused a reaction opposite to what we wanted, and consequently, many employers have chosen not to work with any recruiters.

More hospitals than ever before are implementing “no recruiter” policies. Why do you think this is so? Well, it’s certainly not because we’ve done remarkable and/or high-quality work in filling their job orders. Well, I plan to name names and describe the crimes I have witnessed over my last 12 months of healthcare recruiting. But before I do that, let me explain the importance of the other issues that the healthcare market is struggling with.

Money! It makes the world go around, right? Or at least that’s what they say. Well, these days there isn’t as much money to go around as there used to be, at least for the hospitals. Declining revenues over the last 10 years have created a situation where hospitals, clinics, and medical centers are forced to give away a lot of their services to the poor or uninsured. Additionally, it has forced them to operate with skeleton crews or reduce the quality of the services they offer.

Now don’t get me wrong. There is plenty of money “in” the healthcare market; it’s just not getting to the people who provide the services. There are so many different subgroups tapping into the revenue stream these days that, by the time the money passes through, there’s very little for the person at the end of the line – the one actually providing the service. But that’s not the half of it. Even when a hospital finds itself at the end of the line, receiving a smaller portion of the revenue for the services they provide, they can even be asked to pay for being a part of the healthcare community (call it a membership charge).

Let me give you an example. When the Balanced Budget Act of 1997 was passed, it was described as a stroke of genius and hard negotiating by the Clinton administration to force government to live within its means. The truth is that the Balanced Budget Act required every hospital in this country to pay an average of $2 million per facility back to the government just for being a part of the healthcare community. The government extracted these fees from hospitals by substantially reducing reimbursement rates. As a justification, the legislation tied it to a hospital’s participation in the Medicare program. No other industry in the United States paid as much as the healthcare industry did during this time. So after all this smooth talk and wrangling, our wonderful government stuck it to our healthcare system. This caused a number of community hospitals to go out of business; and, additionally, placed a larger number of hospitals on the brink of disaster by draining their reserves.

The contributors to this problem aren’t just our federal government (Medicare, federal laws, etc.) but also our state governments (Medicaid, state laws, etc.); insurance companies (through reduced reimbursements, or cutting reimbursement altogether for some tests, treatments, or drugs); other third-party payers; the uninsured; and other service providers. This is not a good time to be a hospital, clinic, or medical center.

Most hospitals consider it a good year when they have an end-of-the-year reserve of 3 to 5%, but a large number are barely breaking even.

In light of this information, about three years ago a small group of hospitals started developing policies and procedures that were designed to increase year-end reserves to the 15 to 20% range. This is where our paradigm shift comes in. The programs that these hospitals implemented have become very successful. So much so that other hospitals started to follow their lead by implementing the very same programs. So what were these programs? The senior management of these progressive hospitals started putting into place measures that reduced the prices of some vendors and eliminated other vendors. And the way senior management has structured who gets cut versus who gets eliminated is based largely on how much clout the vendor has. For example, with pressures being placed on doctor practices by Medicare, Medicaid, and insurance companies, many doctors are now more than happy to make the shift to becoming employees of hospitals instead of independent practitioners, which would have been unheard of five years ago. Other examples are the product vendors (implants, surgical supplies, office supplies, drugs, etc.), who have all been given ultimatums on pricing structures. Contracts have been established for approved vendors, and the other vendors (unable to capitulate) have been cut from the herd.

On top of this are the record shortages of skilled professionals. If you go to any hospital website and check out the “Current Openings” link, you will see a long list of the hardest-to-find professionals these facilities are trying to recruit. But at the same time, a recruiter who calls this facility will be told that they don’t have any openings. What’s the truth? I suggest that you read more into people’s actions than their words. If they take the time to post a position on their website, then there is most likely an opening. The real truth is that for every opening they post, there are five other openings for lesser-skilled titles they don’t have time to post.

We all have been reading for years that 7 out of 10 jobs by 2010 will be healthcare-related, and there’s a reason for that – it’s called baby boomers (78 million strong). But in light of an increase in patient traffic, with fewer skilled professionals (caregivers) to meet the new demand, why have hospitals decided to misrepresent their employee needs to inquiring recruiters? Why do hospitals feel justified in misrepresenting their openings to the one group that could help relieve the pressure of these issues? Rodney Dangerfield put it best when he said, “I get no respect!” Client hospitals have lost so much professional respect for recruiters that they feel it’s not unethical at all to misrepresent their situations to recruiters. Quite frankly, they feel it’s absolutely none of the recruiter’s business as to what openings they have or don’t have. Besides, the hospitals I work with feel that recruiters are the cause for all these openings in the first place. They (management) share no responsibility for employee falloffs, or employee separations.

And finally, let’s wrap all of this up in a geo-political football and kick it around a little. As far as the healthcare market is concerned, history is about to repeat itself. This 2008 presidential election is being reported far sooner than any other election in history, and in these reports, our industry (healthcare) is being reminded that the person they defeated in 1994 (Hillary Clinton) as the First Lady, assigned to the task of overhauling healthcare, may, as president, take a second shot at the healthcare industry.

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To remind you of the climate in 1994, healthcare was a bundle of nerves because of two years of secret sessions (by Hillary Clinton) to create a type of “Universal Healthcare for all.” It was compared to the system in Canada. They wouldn’t admit it, but they wanted the U.S. healthcare system to become “socialized medicine.” This is bad news (big time) for more reasons than can possibly be explained in this article.

During this 1993-1994 cycle, healthcare went through many of the same symptoms that it’s experiencing today. It tightened up, and overreacted to a situation that never came to pass. But from this overreaction came managed care, and set in motion many of the healthcare issues and problems we all face today.

So let’s review. We are working in a market that is forced to accept reduced revenues from a big brother (the state and federal government) while at the same time is required to provide more services with less-skilled professionals for a customer base that is the largest in modern history. Now, when surviving seems almost impossible, our market is being reminded that “Big Brother” might become the worst nightmare ever, due to a power-wielding president hell-bent on saving face from a defeat she suffered as first lady. If the market were a turtle, it would be so far back in its shell it would be hard to tell if it were dead or alive. The market is scared stiff, convinced that the world as they know it may be doomed.

Regardless of your political beliefs or affiliations, this is how this market reacts when confronted by changes within the federal government. If we want the healthcare industry to function, then leave it alone. I suggest that the same people we count on to save our lives or treat our family members can also be trusted to police the very industry they call their own.

So, I bet you’re thinking how did we, as recruiters, cause any of this? And on the surface, you would have a point because the picture I have painted in the past paragraphs would have happened regardless of our existence. But let’s go deeper. Let me ask you a question. What do some people do when they are forced to operate in a way that they do not like? Do they become bitter and resentful toward others? Do they become disgruntled toward their family and coworkers? Would some of them even seek out others to vent their frustrations? Yes, Yes, and Yes. What I mean by this is that healthcare has no choice but to operate in a dysfunctional system of checks and balances forced upon them by the administrators of the system. But where they do have a choice is the question of with whom they will work during their time of misery.

For years, recruiters have been tolerated as a necessary evil of doing business in an industry of candidate shortages. But in the last four years, we have seen an explosion of wannabe recruiters thrashing their way through healthcare in a way that would embarrass even the worst of recruiters.

These wannabe recruiters, unbeknownst to them, entered a difficult and complicated market where placements (even if they knew what they were doing) could take four to six months to complete. As months turned into a year, these recruiters became more desperate, so in an attempt to survive financially they took aggressively to the phones. They told any employer who would listen that they would work for any fee: 20% fees, then 15% fees, then 10%, to finally flat fees of $2,500 to $5,000 per placement. This gave employers the idea that we were all for sale. At first the market tolerated these calls, but then it became apparent that something had to be done. So in a time when hospitals saw a need to cut vendors from the herd, we have seen a huge shift toward “No Recruiter” polices.

During this time of historical convergence of three legitimate issues, recruiters stuck their heads up and became the whipping boy for the whole situation. Unfortunately, it seems that recruiters have become the mental scapegoat for all that’s wrong in the healthcare industry today (at least for management). Hospitals have found someone else farther down the food chain and are rejoicing because they feel powerless to control the outcome of their present situation – misery loves company.

But for all of these symptoms, there is an antidote – and I will reveal them in my next article.

Clay Abbott is the president and founder of the Academy of HealthCare Recruiters, Inc. Clay is one of the healthcare recruiting industry’s leading recruiters, trainers, public speakers, and consultants. He has 21 years of healthcare experience and has successfully developed the only guaranteed Home Study HealthCare Recruiter Training programs in the industry. Many solo recruiters and recruiting managers are finding the crossover into healthcare possible with Clay’s leadership and knowledge. To learn more about his training products and services, visit his website at www.academyofhealthcarerecruiters.com. Clay can be reached at (812) 522-2992 or e-mail him at clay@academyofhealthcarerecruiters.com.

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