What hospitals can expect from labor costs in 2023

Health systems will continue to see increased rising permanent labor costs for the next 12 months while contract labor trends down, according to a report from Moody's Investment Service Healthcare Quarterly report.

"Even as agency costs moderate, the ability to offset permanent wage and retention costs will be challenging," states the report.

Eight takeaways:

1. Hourly rates and the use of temporary labor is trending down after peaking in 2022.

2. Union activity in some markets will lead to higher labor costs for hospitals.

3. Labor costs will continue to comprise a large percentage of hospital expenses.

4. Rural healthcare facilities likely will be more reliant on temporary staff and contract agency personnel because it will be harder for them to recruit permanent staff.

5. Academic medical centers and hospitals with high-end services will have higher labor expenses because staff are highly specialized and it's difficult for academic medical centers to close beds.

6. Hospitals are restructuring work units and focusing on internal labor pools to boost productivity and cost efficiencies.

7. Some systems are bringing international nurses on with multiyear contracts to fill labor gaps.

8. More hospitals and health systems are partnering with local nursing schools to start a pipeline of talent.

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