Is this how most health care corporations run things?
I do not know about "Most" but a great many of them do in my experience. Both of my sisters are nurses in hospitals as well as a few cousins and my wife worked as an ER Admin at a different hospital still. All of their hospitals (4 different)work that way. For that reason I feel comfortable saying it is a very common policy.
Wouldn't this affect their ability to recruit experienced workers?
Yes of course, In general experienced workers are more expensive. But 3 times a year nursing schools spit out a new batch of inexperienced but licensed nurses. These nurses have difficulty getting into more cushy positions at doctors offices or higher paying positions at specialist centers.
Home grown experienced nurses generally command a lower salary than those that are brought in for their experience. One of the offsets of that lower income is the seniority perks. These include priority consideration for new openings, vacation priority, shift preference, and many others. These "perks" cost the hospital nothing, but being as they need to staff hundreds or maybe even thousands of nurses(depending on the size of the hospital) the perks start to matter about 5 years in where suddenly that nurse with 5 years seniority is in the top half of the whole staff due to retirements, new jobs, and other causes attrition. One of my sisters is realitively low paid but she has been at the hospital for 12 years and is one of the senior staff in her department... she does not want to give that up for more pay.
Why would someone with 10 years experience want to join your hospital
if someone less experienced (say 2 years) has more seniority?
Because they enjoy that work environment. A good nurse can command a much higher salary at a surgery center, Specialist center, private doctors office, or many other places. These places also generally offer consistent daytime hours, little or no weekend work, and greater flexibility with vacation time.
But a hospital offers a unique environment where the nurses can have a greater responsibility and interaction with patients. There often is the potential for lots of overtime which can more than make up for the lower base pay-rate. In short most experienced nurses work at a hospital because they enjoy it.