The Wall Street Journal
Sunday, APRIL 12, 2009
By AVERY JOHNSON and KELLY EVANS

Employment in health care, the only major industry outside the federal government still adding jobs, is succumbing to the recession.

In the latest sign, the president of New York City Health & Hospitals Corp. wrote Friday to community organizations as well as employees and unions at its 11 hospitals and four nursing homes, saying the agency will lay off more workers even after slashing 400 jobs last month.

“We now project that HHC’s deficits will worsen, even if we are spared further state cuts,” Alan Aviles wrote to the staff of 39,000. “The challenges will deepen.” He blamed the job losses on state cuts in Medicaid payments to the public-health system.

Across the country, hospitals are taking financial hits. They are seeing losses in the portfolios that they rely on for investment income. The number of uninsured patients is rising. Elective procedures — which reap big profits — are down at a third of hospitals nationwide. Nursing homes are trimming payrolls. And with state governments continuing to cut budgets and talk of health-care reform from Washington, industry executives are preparing for even leaner times.

More than 16 million people — one in eight workers on U.S. payrolls — work in health care today, up from just 1% of the work force 50 years ago. Employment in health care and social assistance — which includes hospitals, doctors offices, nursing homes and social services such as day care — has grown by half a million jobs since the recession began in December 2007, while the rest of the economy has shed 5.1 million jobs.

But the pace of job growth in health services has slowed sharply this year. The sector added an average of 17,000 jobs per month in the first three months of the year, less than half last year’s pace. Health care usually weathers downturns better than many other industries because consumers tend to cut spending on cars or clothes before they forgo trips to the emergency room or pharmacy. But this recession is the deepest in a generation.

“To the extent that health care might have been recession-proof, it is no longer,” said Paul Levy, chief executive of Beth Israel Deaconess Medical Center in Boston, a teaching hospital for Harvard University. The hospital last month announced 140 job cuts, salary freezes, and reductions in vacation allowances and retirement-fund contributions to make up a $20 million budget shortfall.

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