Regional Bank opines on the real reckoning

Daily Data: MTB's CEO flags some major risks, and it's not what you think

In today’s dispatch:

• a regional bank ceo sees some storm signals, and it’s not the ones you think

• gross domestic healthcare

• healthcare is still (nearly) all the jobs

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A bank CEO opines on the real reckoning

Every now and again, it’s refreshing to let someone else do the talking.

It’s especially refreshing when there’s this apparently obvious and important thing, which for whatever reason, doesn’t seem to get the attention it deserves. Sometimes people act like it’s not there at all—they may even question its existence entirely—and it makes you think “am I stupid? have I gone mad?”

Depending on your disposition, Random Walk will admit that that line of inquiry can, in fact, be exhilarating, at least in the right doses, but other times, it’s possible that it’s on to something.

But then, someone else says what you say, and it’s safe to conclude that you’re both obviously correct.

CEO of a regional bank offers some real talk

Anyways, in this case, the CEO of M&T Bank, Rene Jones, in his annual letter to shareholders describes the Rotation to the National Nursing Home, about as well as anyone could.¹

Let’s dig in.

Storm signals in the healthcare system

First, take care to look for storm signals:

we must take care to not exclusively focus on what gets the most current attention and try to listen to the signals that could alert us to potential storms emerging on the horizon

And what might those storm signals be?

chief among such signals, in both our regions and virtually any sizable community in the country, is healthcare. One should think here not only of hospitals—so often major economic engines of communities—but also the assisted living and long-term care centers . . . In places like Buffalo, Baltimore, and Burlington, the healthcare industry is either the leader or runner-up in overall employment. It is a sector that will only grow in importance as the baby boomers continue to age, and our familiarity with these enterprises in our regions suggests they face significant challenges.

Oh gosh. Healthcare does sound pretty important. It’s the largest employer, too?

No way.

And “significant challenges” sounds bad.

What sort of “significant challenges”?

The healthcare sector has found it increasingly difficult to attract and maintain staff . . . As labor costs rise, the sector must offer higher wages to attract and retain staff . . . from 2020 to 2023, labor expense had risen by 20 percent . . . The National Center for Assisted Living reports that 77 percent of nursing homes face a workforce shortage—such that 55 percent of nursing homes are limiting new admissions . . . While not unique to the healthcare industry, these increased labor costs and staffing challenges will continue to weigh heavily on the financial sustainability of healthcare providers, and therefore their capacity to care for communities, across the country . . . one of many factors leading to increased consolidation.

A labor shortage, leading to rising costs that is threatening the sustainability of the business model, and seems likely to get worse?

Checks out.

Uncle Sam’s immigrant nursing brigade

And what has healthcare done thus far to address this challenge?