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Staff shortages and supply chain woes threaten profit margins

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Labor shortages and supply chain challenges are a rising threat to profit margins for U.S. healthcare and pharmaceutical companies, according to a new report from Fitch Ratings.

The scarcity of workers is likely to increase pressure on some issuers’ margins in the near term but is unlikely to trigger any credit downgrades, the report added.

Multiple factors are contributing to labor pressures, including staff burnouts caused by the enduring COVID-19 pandemic and an overall shortage of qualified help, which has resulted in higher costs to hire temporary staff, as well as wage inflation.

Furthermore, the report noted that lack of staff is forcing some in-patient behavioral health and senior housing operators to lower admission rates.

“Healthcare providers should be able to recapture some of the lost margin, but rate increases tend to lag, given the cadence of contract renewals,” the report said. “Thus, cost mitigation efforts will initially focus on identifying cost savings elsewhere, more efficient utilization of existing staff and renewed efforts on recruitment.”

Supply chain issues are also adding pressure to profit margins, mainly due to higher transportation costs incurred by distributors. The medical device subsector is also being impacted by the global shortage of semiconductors needed for their manufacturing processes.”The risk […]

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