U.S. Healthcare Services: Payroll Growth Normalization a Modest Tailwind for MCOs

Bernstein observes that payroll growth across US hospitals and outpatient facilities has significantly declined, dropping from a peak of 4.3% in May 2024 to 2.2% in December 2025. Hospital wage growth cooled to 2.9%, while outpatient services slowed to 1.8%. This ongoing downward normalization in salary trends suggests that capacity expansion will decelerate, ultimately pulling healthcare utilization growth back to normalized levels. This trajectory serves as a modest tailwind for Managed Care Organizations (MCOs) by tempering medical cost inputs, though it implies lower volume growth for hospitals. Currently, hospital employment remains approximately 3.8% (around 210,000 workers) above its pre-pandemic trend line. Bernstein warns this overhang poses a risk to hospitals, potentially manifesting as rising labor expense ratios or a more abrupt slowdown in capacity additions. Wage inflation remains sticky at roughly 3.0%, which is above pre-pandemic levels. The firm favors MCOs such as Centene (CNC), Elevance (ELV), Humana (HUM), Molina (MOH), and UnitedHealth (UNH), all rated Outperform, as they stand to benefit disproportionately from moderating medical cost trends. Conversely, hospital operators like HCA face sustained headwinds from slowing volume growth.