Health system labor expenses still climbing

When the pandemic began, many hospitals and health systems were forced to pay top dollar for traveling nurses to treat patients. Now, many are cutting back on contracted labor in favor of full-time employed staff. But labor costs are still on the rise.

 

Inflation, staff shortages and bonus programs are pushing staff salaries and benefits ever higher. Renton, Wash.-based Providence reported a 9 percent increase in salaries and benefits for the first nine months of 2022 because of staff agency costs, overtime and wage increases.

CommonSprit Health, a Chicago-based health system with 138 hospitals nationwide, said salary and benefits expenses increased 5.1 percent to $4.5 billion for the third quarter due to inflation, overtime, premium pay and retention programs.

"As the industry grapples with escalating salary costs for travelers and staff alike due to staffing issues brought on by COVID-19 and exacerbated by increasing inflationary pressures, CommonSpirit has developed programs to encourage retention and has created internal float pools and an internal registry," the health system said in its third-quarter earnings report.

Phoenix-based Banner Health reported a 7 percent increase in contract labor for the first nine months of 2022, pushing expenses up. The system reported contracted labor pay rates dropped steadily for the first half of the year but then were up for the third quarter, and contracted pay is still more than double the rates Banner paid before the pandemic. The health system reported one contracted laborer costs about three times as much as an employed staff member, and overall labor costs are four times higher than in 2019.

Salt Lake City-based Intermountain Healthcare reported compensation and benefits jumped from $3 billion for the first nine months of 2021 to $4.3 billion this year. The health system combined with Broomfield, Colo.-based SCL Health earlier this year and reported income hit $2.2 billion for 2022 so far.

Mayo Clinic in Rochester, Minn., reported operating expenses hit nearly $4 billion for the third quarter, a 7.1 percent increase year over year. Salaries and benefits for the system were up 3.5 percent year over year to $2.3 billion for the quarter, partially because of inflation and continued use of contracted labor. The contract labor expenditures were up 47 percent in the third quarter and 75 percent for the nine months' end.

Advocate Aurora Health, with dual headquarters in Downers Grove, Ill., and Milwaukee, reported salary, wages and benefits expenses were up 12.6 percent for the nine months ended Sept. 30, primarily due to increased agency costs and higher merit and premium pay for caregivers due to inflation and labor shortages. The health system increased full-time equivalent employees 2.2 percent in the first three quarters of the year.

Nurse associations in Maine and Massachusetts have been helping nurses negotiate raises at hospitals, including an 8.5 percent raise from Milford (Mass.) Regional Medical Center over two years and a 10 to 11 percent wage increase over three years at Millinocket (Maine) Regional Hospital. Westchester Medical Center in Valhalla, N.Y., also agreed to raise nurse pay by 27 percent over five years at the end of October as part of a contract with members of the New York State Nurses Association.

Across the country, members of the California Nurses Association reached a tentative agreement with Kaiser Permanente for a 22.5 percent wage bump over four years, averting a two-day strike.

With the high inflation environment and staff shortages, many health systems are preparing for additional wage increases, bonuses and other labor expenses in the next year as well.

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