As governmental funding for pandemic staffing has wound down, the bottom line for hospitals has taken a serious hit. Organizations with the highest labor costs during 2022 spent an average of $465M1. Large organizations such as Kaiser Permanente and Banner Health1 took a serious hit during that period of explosive staffing costs.
During the most recent calendar year, Kaiser spent $3.14B for contracted labor and Banner incurred $726M for temporary labor costs, respectively.
Despite these historic figures, they pale in comparison to the costs that were about to explode post pandemic. Although the percentage of contract labor as a percentage of total human resource spend remained relatively small, (2.23% on average) this small percentage would drive the entire cost of clinical labor upward across the country.
Although it is projected that contract labor will grow somewhere between 6-10% between now and the end of 2024, the dollar figures for full time staff will dwarf those numbers. Oddly, the national media is largely responsible for this surge.
During a two-year period of the pandemic, the pay for travel nursing was a hot topic in the media. As shortages became commonplace, the pay or “Crisis Rates” for nurses surged. Although rates have begun to settle, there was never a better advertising campaign for temp workers than what the media were espousing with extreme rates of pay.
As hospital employed nurses began to learn more about their counterparts working in the same units for significantly more pay, the reasonable question became, “if they can be paid that, aren’t I worth as much”? This logic began to put healthcare systems between the proverbial rock and a hard place. That’s a very difficult question to answer without significant investment in increasing the wages of full-time staff beyond what the case had traditionally been.
Considering the spend for human resources is the single largest budget item, the overriding question is “can the increased percentage in overall spend be met with similar increases from all sources of reimbursement?” This metric must be part of legislative discussions. Some legislators, including Bernie Sanders and Susan Murkowski, are already in discussion for possible legislative action. Unfortunately, these discussions will occur under the cloud of current negotiations for an increase in the U.S. debt ceiling. It seems the only answers in the future will be a combination of more funding and more efficient utilization of existing resources.
Both solutions will take time. The only question is, how much time do we have?
Additional References:
Fleron, A., Krishna, A., Singhal, S., The gathering storm: The transformative impact of inflation on the healthcare sector, McKinsey & Co., Sept. 19, 2022
U.S. Bureau of Labor Statistics, “Projections overview and highlights, 2019-29, September 2020
ABOUT THE AUTHOR
Tim Teague
President, BlueSky Synergy
Tim is a thought leader in the contingent labor market place. His latest technology approach takes advantage of hospitals developing their own "gig" workforce. This technology is similar to what staffing agencies have enjoyed for years.
