The growing labor shortage in the hospital and healthcare sector is having a seriously adverse effect on hospital finances, as wages and travel nurse agency costs soar at the same time that other healthcare expenses are increasing.
Premier, the healthcare improvement company best known for its group purchasing, released a study last week
showing that U.S. hospitals and health systems are paying $24 billion more per year for qualified clinical labor than they did pre-pandemic. Approximately two-thirds of hospitals' costs are from wages and salary.
Premier found that “overtime hours are up 52 percent as of September of 2021 when compared to a pre-pandemic baseline. At the same time, use of agency and temporary labor is up 132 percent for full-time and 131 percent for part-time workers. Use of contingency labor (or positions created to complete a temporary project or work function) is up nearly 126 percent.” Overtime and use of agency staff typically add 50 percent or more to a typical employee’s hourly rate, according to Premier.
The Premier study follows a September study from Kaufman Hall
projecting that hospitals nationwide will lose an estimated $54 billion in net income over the course of the year, even taking into account the funding they received from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. High-acuity patients and other expense costs, including labor costs, are leading to the shortfall.
Moody’s Investor Services also last week joined the chorus of analysts predicting bad news for hospitals. Moody’s predicted hospital margins would continue to fall, driven mainly by the rise in COVID-19 cases and the decline in workforce.
“Over the next year, we expect margins to decline given wage inflation, use of expensive nursing agencies, increased recruitment and retention efforts, and expanded benefit packages that include more behavioral health services and offerings such as child care,” Moody’s wrote. “Even after the pandemic, competition for labor is likely to continue as the population ages — a key social risk — and demand for services increases.”
Employment in the healthcare sector fell by an estimated 17,500 jobs last month, according to preliminary data from the U.S. Bureau of Labor Statistics. The decline was the second-biggest in 2021, behind January’s drop of 80,500 jobs.