Hospital labor spending up 37% from pre-pandemic levels in March


Diving brief:

  • Hospital labor costs rose by more than a third from pre-pandemic levels in March 2022, according to a report released Wednesday by Kaufman Hall.
  • Rising temporary and traveling labor costs were a major contributor, with contract labor accounting for 11% of total hospital labor spend in 2022, up from 2% in 2019, according to the report.
  • The median hourly wage for contract nurses increased by 106% over the period, from $64 per hour to $132 per hour, while the wage for salaried nurses increased by 11%, from $35 $ per hour to $39 per hour, according to the report.

Overview of the dive:

New data from Kaufman Hall supports concerns expressed by hospital executives when reporting first-quarter results, as higher-than-expected labor costs prompted some operators, like HCA, to lower their financial forecast for the full year.

The continued use of contract labor amid shortages due to increased turnover was a key factor cited by executives to explain higher costs, and follows the findings of Kaufman Hall’s latest report.

More than a third of nurses surveyed by recruitment firm Incredible Health said they planned to leave their current jobs by the end of this year, according to a March report. While burnout pushes them to leave, higher salaries are the main motivator for taking other positions, according to this report.

The Kaufman Hall report, which analyzes data from more than 900 hospitals across the country, found that hospitals spent $5,494 in labor expenses per adjusted discharge in March, up from $4,009 a year ago. about three years old.

Costs rose for hospitals in all regions, although the South and West saw the largest increases from pre-pandemic levels, with such spending increasing by 43% and 42%, respectively.

According to the report, the Western and Northeast/Mid-Atlantic regions had the highest spending consistently from 2019 to 2022.

“The pandemic has exacerbated long-standing workforce issues in healthcare, making inpatient care much more expensive over the past two years,” said Erik Swanson, senior vice president of data and analysis at Kaufman Hall.

“Hospitals now face a number of pressures to attract and retain affordable clinical staff, maintain patient safety, provide quality services and increase efficiency,” Swanson said.

The report also notes that hospitals are competing with non-hospital employers who are also looking for hourly staff, although these companies may pass wage increases on to consumers through higher prices “in a way that organizations health care cannot,” the report said.

Some hospitals, like HCA Healthcare and Universal Health Services, are looking to raise health plan prices amid rising nurse salaries, according to reports from The Wall Street Journal.

Another recent report from group-buying organization Premier found that the CMS underestimated hospital labor expenditure during payment adjustments for fiscal year 2022, resulting in hospitals only receiving a 2.4% increase in rates compared to a 6.5% increase in hospital labor rates.

To match the rates that hospitals are currently paying staff, an adequate update of inpatient payments for fiscal year 2023 is needed, according to this report.

On April 18, CMS proposed its FY2023 IPPS rule, which includes a 3.2% increase in inpatient payments, which provider groups like the American Hospital Association called “simply unacceptable.” given inflation and rising hospital labor costs.


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