PINC: Hospitals Paying $24 Billion More for Labor During COVID-19
On Oct. 6, Premier Inc. (PINC), a healthcare improvement company headquartered in Charlotte, N.C., published a blog entitled, “PINC AI Data Shows Hospitals Paying $24B More for Labor Amid COVID-19 Pandemic.”
The blog post states that “As the Delta variant pushes COVID-19 caseloads to all-time highs, hospitals and health systems across the country are paying $24B more per year for qualified clinical labor than they did pre-pandemic, according to a new PINC AI analysis. The analysis found that clinical labor costs are up by an average of 8 percent per patient day when compared to a pre-pandemic baseline period in 2019. For the average 500 bed facility, this translates to $17M in additional annual labor expenses since the pandemic began.”
That said, “According to PINC AI data, 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.”
The blog explains that overtime and the use of agency staff typically add 50 percent or more to a typical employee’s hourly rate—making this the most expensive labor choice for hospitals.
Additionally, the blog states that “Hospital workers aren’t just putting in more hours, they are also working harder than ever before. The PINC AI analysis shows that productivity, measured in worked hours per unit of departmental volume, increased by an average of seven percent to 14 percent year-over-year across the intensive care, nursing, and emergency department units. Observing increased overall staffing cost during a period of improved staff productivity highlights just how significant the increases in cost-per-hour have become.”
Further, “The combined stressors of working more hours while under the constant threat of COVID exposure are pushing many hospital workers to the breaking point. In fact, PINC AI data shows that clinical staff turnover is reaching record highs in key departments like Emergency, ICU, and Nursing. Since the start of the pandemic, the annual rate of turnover across these departments has increased from 18 percent to 30 percent. This means nearly one-third of all employees in these departments are now turning over each year, which is almost double the rate from two years ago.”
The turnover rate could increase, according to the blog, as new vaccination mandates take effect. “Already, one midwestern system reported a loss of 125 employees who chose not to be vaccinated. A New York facility reported another 90 resignations, and overall, staffing agencies are predicting up to a 5 percent resignation rate once vaccine mandates kick in,” the blog says.
The American Hospital Association has estimated that hospitals in the U.S. will lose an estimated $54 billion in net income over the course of the year, even taking into account the $176B in federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year. “Added staffing costs were not addressed as part of CARES and are further eating into hospital finances,” the blog states. “As a result, some are now predicting that more than half of all hospitals will have negative margins by the end of 2021—a trend that could be dire for some community hospitals.”
The blog suggests some solutions to high cost and short supply of labor, including:
- Predictive models that use AI and machine learning to predict if a department will face a shortage of clinical staff
- Benchmarks for optimal staff performance
- Work redesign
- Managing agency costs
- Considering international labor
The blog concludes that “To conduct the analysis, PINC AI compared workforce trends from October 2019 through August of 2021 using workforce data. This database contains daily data for approximately 250 hospitals, bi-weekly data for 650 hospitals, and quarterly data for 500 hospitals, collectively representing most geographic and demographic segments. Workers included in the analysis were limited to clinical employees working in the emergency department, ICU, or nursing areas. Titles included in the analysis included nurses (RNs, LPNs, etc.), paramedics/EMTs, infection control practitioners, patient educators, and clinical coordinators. Non-clinical staff such as administrators or those in finance, food service, communications, marketing, etc., were not included.”
