Becker's Hospital Review

9 CFO / FINANCE The cost of hospital contract labor in 22 numbers By Alan Condon M any hospitals and health systems aim to recruit and retain permanent staff to replace contract labor positions, which have seen wages skyrocket because of staff shortages during the COVID-19 pandemic. Hospitals across the country have relied on contract labor and tem- porary staffing agencies to support their clinical teams when many burned-out providers are exiting healthcare. An October survey conducted by Bain & Company found that 25 percent of physicians, advanced practice providers and nurses are considering changing ca- reers. Eight-nine percent of the providers thinking about leaving the profession cited burnout as the driving force. Staffing shortages are driving labor costs to an unsustainable level for hospitals operating on razor-thin margins and reducing temporary staffing costs is top of the agenda for many financial executives look- ing to reduce expenses in the coming quarters. Here are 22 numbers that demonstrate the cost of contact labor for hospitals, according to reports from Kaufman Hall, Definitive Health- care, Vaya Workforce and big hospital operators: 1. e demand for contract labor increased 500 percent in fall 2021 compared with 2019, according to healthcare staffing services company Vaya Workforce. While demand has since decreased, it is still nearly triple pre-pandemic levels and is projected to re- main as high as 20 percent above the 2019 baseline. 2. In 2020, the average amount hospitals spent on contract labor was $4.6 million, more than double the average expense of $2.2 million in 2011, according to a report from Definitive Health- care, a data and analytics company. 3. Rochester, Minn.-based Mayo Clinic Hospital, Saint Mary's Campus spent $286.8 million on contract labor in 2020, the most of any hospital in the country that year, according to Defin- itive Healthcare's analysis of about 3,100 U.S. hospitals 4. From 2019 to 2022, the hourly wage rate for contract nurses in- creased 106 percent, according to Kaufman Hall. Contract nurs- es are earning an average of $132 an hour in 2022 versus $64 an hour in 2019. At the height of the pandemic, some travel nurses earned up to $300 an hour, with rates as high as these placing immense pressure on hospital balance sheets. 5. e rise in contract labor from 2019 through March of 2022 led to a 37 percent increase in labor expenses per patient, equating to between $4,009 and $5,494 per adjusted discharge. 6. Hospitals with 25 beds or fewer spent about $460,000 on con- tract labor in 2020 compared to hospitals with more than 250 beds that spent almost $11 million on average, according to De- finitive Healthcare. 7. Hospitals in the western U.S. have the highest contract labor ex- penses, with an average of $9.6 million reported in 2020. Large cities, high cost of living and high salary rates in the region con- tribute to this high average. 8. Labor costs were one of the core reasons Franklin, Tenn.-based Community Health Systems reported a net loss of $42 million in the third quarter, but CFO Kevin Hammons said he expects to see a 40 percent to 50 percent reduction in contract labor costs next year compared with 2022. 9. Nashville, Tenn.-based HCA Healthcare reported a 19 percent decrease in contract labor costs in the third quarter compared to the second quarter, allowing the system to absorb much of the market-based wage adjustment costs for its employee workforce, CFO Bill Rutherford said during an Oct. 21 earnings call. 10. According to Kaufman Hall's "2022 State of Healthcare Perfor- mance Improvement" report, published Oct. 18, 46 percent of hospital and health system leaders identify labor costs as the greatest opportunity for cost reductions. is was significantly up from the 17 percent of respondents who noted labor costs as their greatest opportunity to cut costs last year. 11. ere are some hopeful signs that the use of contract labor has stabilized and is steadily falling, according to Kaufman Hall: 44 percent of hospitals in its survey reported that their utilization of contract labor is declining while 29 percent said that it is holding steady. n Providence closes all 27 retail clinics in Southern California By Alan Condon R enton, Wash.-based Providence closed all 27 of its ExpressCare retail clinics in Southern California on Nov. 17, three days after it reported a $1.1 billion operating loss for the first nine months of 2022. The healthcare labor shortage, inflation, supply chain disruptions, declining volumes and a highly competitive retail health industry led to "unprecedented operating losses" for the retail clinics, a spokesperson for the 51-hospital system told Becker's Hospital Review. The closure of the retail clinics affects a mix of medical assistant, advanced practice clinician and leadership roles. "We are collaborating with these individuals to transition them to open positions within the Providence family of organizations," a spokesperson for the health system told Becker's. "We are confident there are positions for our medical assistants and [advanced practice clinicians] should they choose to remain with Providence." ExpressCare virtual services will remain available in California, and patients will be able to receive same-day care services at urgent care, walk-in and primary care clinics, according to Providence. n

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