COVID-19 Era Healthcare Labor Costs Continue To Surge

A new PINC AI data analysis from healthcare improvement company Premier has revealed that qualified clinical labor expenses have soared substantially, costing hospitals and health systems an additional $24 billion per year compared to pre-pandemic levels. The ongoing spread of the delta variant and its significant contribution to COVID-19 caseloads have exacerbated the issue. With no definitive end to the pandemic in sight, this healthcare labor spending trend is bound to continue into the future.

In comparison to pre-COVID times, clinical labor costs have risen by an average of 8% per patient each day. For the typical hospital managing around 500 beds, this makes for an increased annual labor expenditure of $17 million. Premier's evaluation also found that overtime scheduling is up by around 50%, and agency-provided or temporary labor assignments have surged approximately 130%. Contingency labor positions are being created at a rate 126% higher than normal, as healthcare systems desperately try to plug the COVID-created holes threatening to burst the population health dam. Agency-led staffing and overtime come with a hefty price tag; those labor choices are often 50% more expensive than average employee compensation.

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The American Hospital Association says that U.S. hospitals could lose $54 billion in net income this year, even despite the circulation of $176 billion in CARES act funding—which admittedly made no provisions for added staffing costs. Many other industry prognosticators are estimating that over half of nationwide inpatient health organizations will see red in their margins by the end of 2021, which could be a death knell for some smaller hospitals.