What the NYC nurses strikes reveals about US health care

More than 7,000 nurses in New York City are on strike after disagreeing over a new contract with the hospital where they work, leading two of the city’s hospital systems to cancel elective surgeries, calling for ambulances to transfer patients to other hospitals, and bringing in travel nurses to maintain operations.

The strike almost turned into a bigger crisis: Nurses at eight other city hospitals reached a last-minute deal with management. This is perhaps the highest-profile example of the tensions between hospital executives and medical staff that have been exacerbated by the pandemic.

The past few years have made it clear the degree to which American hospitals depend on nurses to handle an increase in patients in a public health crisis and the same health system struggles to value the work of these nurses. While the strike in NYC only involved four facilities, it is symptomatic of a structural failure in US health care: Hospitals lack strong financial incentives to invest in nursing staff.

Strikes by nurses and medical staff have occurred frequently in recent years. Eight of the 25 major layoffs involving 1,000 or more workers that the U.S. Department of Labor tracks in 2022 were initiated by healthcare workers, the highest of any single profession. In the past few years, there have been dozens of small walkouts by nurses.

The labor shortage has left nurses overworked and asking for more help in contract negotiations. There are more than 700 positions currently open at the three Montefiore hospitals in the Bronx where nurses are striking, the New York Times reported. The nurses say that management’s current offer of compensation and, in particular, hiring more staff to relieve overburdened nurses is not enough.

Montefiore said it has offered to raise salaries for existing workers and to hire about 150 new nursing positions. Mount Sinai, another hospital where nurses are on strike, has 500 open positions, according to the Times. According to Hell Gate NYC, nurses at Montefiore say they are responsible for 35 different patients on any given day.

Experts I’ve spoken to over the past few years generally agree that nurses are greatly undervalued because of the importance of their work in providing quality health care. Research has repeatedly found that more nurse staffing results in patients reporting better hospital experiences and better health outcomes.

But the problem is, given the way health care in the US is usually paid for, hiring more nurses and creating a better work environment doesn’t always make good economic sense for the hospital.

“There’s a lot of talk about the health care system being ‘greedy,'” said Betty Rambur, a professor of nursing at the University of Rhode Island. “But they’re only responding to financial incentives in the current compensation model.”

Structural flaws in US health care behind NYC nurse strike

Nurses pointed to exorbitant executive compensation (which has risen nationwide during the pandemic) and multimillion-dollar real estate deals to explain their decision to strike. He had a point: Hospitals practicing pure altruism would spend more on clinical staff without nurses having to go on strike to force their hand.

Andres Kudacki/AP

But the hospital is also responding to financial incentives established by the way the United States pays for health care. Eliminating executive pay (Montefiore’s CEO makes $6 million a year) can only pay for so many new nursing positions. Canceling a $38 million land deal in White Plains would make more money, but if revenue depends on the amount of services provided by the hospital system, buying land and building new facilities creates a fiscal drain. These new outposts should become a permanent source of new revenue once they are built, staffed, and operational.

Therein lies the problem. In the fee-for-service model that still dominates American health care, where each doctor’s service can be billed by the hospital where they work, the hospital has an incentive to expand services but no incentive to hire more nurses to support the work. From a hospital accounting perspective, nursing is an expense. They do not generate direct revenue, although they are necessary to provide quality medical care.

Doctors can perform exams and surgeries, order tests, and prescribe medications — all services that can be billed individually. The work of nurses is essential to the service, as I reported last summer, but their workforce is not directly accounted for. However, the cost of employing a nurse is rolled up in the same “room fee” that contains Jell-O patient can receive in the room. No matter how many services nurses perform and how important it is to ensure patients have a good experience, they do not generate additional revenue for hospitals under the current fee-for-service system.

That means American hospitals have a strong financial motivation to keep nursing staff that could be cut, which has led to nurse fatigue and burnout that has been reported over the past few years.

The New York state government is trying to solve the staffing problem with a 2021 law that creates new committees in all hospitals, populated by nurses and management, which will set acceptable staffing levels for patient care units.

However, when New York Focus and City & State reported together earlier this year, the committee’s process was often interrupted by disagreements between the two sides. Management at various facilities ignored nurse input and enforced their own nurse-to-patient ratios. Nurses have complained to state regulators but enforcement action has not been taken by the state’s low-income health department, and it’s unclear if they will, the news outlet reported.

Even that plan doesn’t change the basic economics of the hospital’s business model.

“What we forget is that when the hospital makes a profit for the patients, they work well in the economic carrot and stick system created for them, and in the created system, the hospital acts as rationally as any other economic agent,” Olga Yakusheva , a health care economist at the University of Michigan, said. “There is no economic incentive, currently, for hospitals to invest in adequate nursing staff, pay nurses well, or provide a good work environment for nurses.”

Until the US gives hospitals a good financial reason to invest in nursing staff, these labor disputes will recur. As much as we want our health care system to focus on quality health care, in America, health care is a business.

Good health care and profitable health care are not necessarily the same thing. The failure to honor nurses by paying for medical services, which laid the foundation for the NYC nurses’ strike, is a vivid example.