Why California hospitals spend the most on contract labor

Eleven of the 20 hospitals with the highest contract labor expenditures are located in California, accounting for the top 30 percent. 

California has taken steps to stabilize its healthcare workforce, putting $1.3 billion toward retention bonuses for employees of eligible hospitals, clinics and skilled nursing facilities. But as staffing shortages wear on, contract labor is still a necessity.

Demand for temporary staff is about three times as high as  pre-pandemic levels and is projected to hover up to 20 percent above the 2019 average. This is particularly visible in the Golden State; Kaiser Permanente operates hospitals in eight states and Washington, D.C., but only its California hospitals made the list for highest contractor costs. 

Kenny Kadar, president of Coast Medical Service — a Hermosa Beach, Calif.-based staffing agency that operates in all 50 states and Guam — spoke with Becker's about why California hospitals spend so much on contract labor. 

"The primary drivers are population size, hospital census counts and the cost of living," Mr. Kadar said. "California has the highest population in the nation, yet ranks 40th in hospital beds per capita. This means that hospitals are generally very full."

"Between that and a high cost of living, it creates a huge demand, and thus expense, for both full time and contract skilled healthcare workers in California," Mr. Kadar continued. 

The demand for his staffing agency's services is continuing to increase, according to Mr. Kadar. 

"Contract labor can be deployed quickly at a price point that works within the hospital cost structure while allowing flexibility to staff up or down with quality providers based on need," he said. "That is valuable for hospitals navigating census fluctuations and a clinical talent shortage."

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