Author Archives: henrykotula

The cost of hospital contract labor in 22 numbers

Posted on by • Posted in Employee Staffing, Employee Staffing Shortage, Health System, Hospital, Hospital Industry, Labor Market, Labor Shortages, Labor Spend Management, Labor Temporary, Nurse Agency Staffing, Nurse Staffing, Nurses Shortage, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Retention, Talent Management • Leave a comment
https://www.beckershospitalreview.com/finance/the-cost-of-hospital-contract-labor-in-22-numbers.html?utm_medium=email&utm_content=newsletter

Many hospitals and health systems aim to recruit and retain permanent staff to replace contract labor positions, which have seen wages skyrocket because of staff shortages during the COVID-19 pandemic. 

Hospitals across the country have relied on contract labor and temporary staffing agencies to support their clinical teams when many burned-out providers are exiting healthcare. An October survey conducted by Bain & Company found that 25 percent of physicians, advanced practice providers and nurses are considering changing careers. Eight-nine percent of the providers thinking about leaving the profession cited burnout as the driving force. 

Staffing shortages are driving labor costs to an unsustainable level for hospitals operating on razor-thin margins and reducing temporary staffing costs is top of the agenda for many financial executives looking to reduce expenses in the coming quarters.

Here are 22 numbers that demonstrate the cost of contact labor for hospitals, according to reports from Kaufman Hall, Definitive Healthcare, Vaya Workforce and big hospital operators:

1. The demand for contract labor increased 500 percent in fall 2021 compared with 2019, according to healthcare staffing services company Vaya Workforce. While demand has since decreased, it is still nearly triple pre-pandemic levels and is projected to remain as high as 20 percent above the 2019 baseline.

2. In 2020, the average amount hospitals spent on contract labor was $4.6 million, more than double the average expense of $2.2 million in 2011, according to a report from Definitive Healthcare, a data and analytics company.

3. Rochester, Minn.-based Mayo Clinic Hospital, Saint Mary’s Campus spent $286.8 million on contract labor in 2020, the most of any hospital in the country that year, according to Definitive Healthcare’s analysis of about 3,100 U.S. hospitals

4. From 2019 to 2022, the hourly wage rate for contract nurses increased 106 percent, according to Kaufman Hall. Contract nurses are earning an average of $132 an hour in 2022 versus $64 an hour in 2019. At the height of the pandemic, some travel nurses earned up to $300 an hour, with rates as high as these placing immense pressure on hospital balance sheets.

5. The rise in contract labor from 2019 through March of 2022 led to a 37 percent increase in labor expenses per patient, equating to between $4,009 and $5,494 per adjusted discharge.

6. Hospitals with 25 beds or fewer spent about $460,000 on contract labor in 2020 compared to hospitals with more than 250 beds that spent almost $11 million on average, according to Definitive Healthcare.

7. Hospitals in the western U.S. have the highest contract labor expenses, with an average of $9.6 million reported in 2020. Large cities, high cost of living and high salary rates in the region contribute to this high average.

8. Labor costs were one of the core reasons Franklin, Tenn.-based Community Health Systems reported a net loss of $42 million in the third quarter, but CFO Kevin Hammons said he expects to see a 40 percent to 50 percent reduction in contract labor costs next year compared with 2022.

9. Nashville, Tenn.-based HCA Healthcare reported a 19 percent decrease in contract labor costs in the third quarter compared to the second quarter, allowing the system to absorb much of the market-based wage adjustment costs for its employee workforce, CFO Bill Rutherford said during an Oct. 21 earnings call.  

10. According to Kaufman Hall’s “2022 State of Healthcare Performance Improvement” report, published Oct. 18, 46 percent of hospital and health system leaders identify labor costs as the greatest opportunity for cost reductions. This was significantly up from the 17 percent of respondents who noted labor costs as their greatest opportunity to cut costs last year.

11. There are some hopeful signs that the use of contract labor has stabilized and is steadily falling, according to Kaufman Hall: 44 percent of hospitals in its survey reported that their utilization of contract labor is declining while 29 percent said that it is holding steady.

Kaiser Permanente reports $1.5B Q3 net loss

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Oakland, Calif.-based Kaiser Foundation Health Plan, Kaiser Foundation Hospitals and their subsidiaries reported a net loss of $1.5 billion for the quarter ending Sept. 30, according to a Nov. 4 financial report.

The company posted total operating revenues of $24.3 billion and total operating expenses of $24.3 billion for the quarter. Total operating revenues of $23.2 billion and total operating expenses of $23.1 billion for the same period in 2021. 

Additionally, there was an operating loss of $75 million in the third quarter compared to an operating income of $38 million in the third quarter of 2021, according to a Nov. 4 news release. 

“I am proud of our ability to navigate the challenges of the past few years, including a global economic crisis, the high cost of goods and services, supply chain issues, labor shortages, and the pandemic while serving our 12.6 million members,” said Greg Adams, chair and CEO of Kaiser Permanente. 

The net loss of $1.5 billion in the third quarter of 2022 compares to a $1.6 billion net income in the third quarter of 2021. Capital spending totaled $2.5 billion year-to-date.

“We are grateful to our extraordinary people whose commitment and compassion allow us to continue to fulfill our mission of providing high-quality and affordable care and improving the health of our communities,” said Tom Meier, corporate treasurer of Kaiser Permanente.

Walgreens-backed VillageMD rumored to be exploring Summit Health purchase

Posted on by • Posted in Market Consolidation, Market Trends, Mergers & Acquisitions, Primary Care, Primary Care Delivery Model, Private Equity, Urgent Care, Value-Based Healthcare • Leave a comment

https://mailchi.mp/46ca38d3d25e/the-weekly-gist-november-4-2022?e=d1e747d2d8

According to reporting from Bloomberg, primary care company VillageMD, which is majority-owned by Walgreens, is engaged in talks to merge with New Jersey-based Summit Health, a large medical group network and urgent care chain backed by private equity firm Warburg Pincus.

In 2019, Summit merged with CityMD, a New York City-based urgent care chain, and operates over 370 clinic locations based in and around New York City, as well as in central Oregon. The combined entity would be valued between $5B and $10B.

The Gist: Should this deal go through, it would epitomize recent trends in healthcare M&A: a well-established independent medical group using private equity funding to rapidly expand its operations before selling off to an industry giant. 

If that industry giant ends up being VillageMD, Walgreens would finally have a physician practice with deep experience in managing risk, on which they can anchor their larger ambitions in care provision. And if the deal with Walgreens falls through, Summit, with its combination of mostly suburban value-based care practices and largely urban urgent care chains, is sure to attract plenty of other suitors, including any of the major national insurers. 

Who is still dying of COVID?

Posted on by • Posted in Coronavirus, Coronavirus Mutation, Infection Rates, Infectious Virus, Mortality, Public Health, Public Opinion, Public Perception, Vaccination, Vaccine, Vaccine Booster, Vaccine Distribution, Vaccine Hesitancy Rate, Vaccine Safety, Vaccine Skepticism, Vaccine Supply • Leave a comment

https://mailchi.mp/46ca38d3d25e/the-weekly-gist-november-4-2022?e=d1e747d2d8

While we have mercifully moved beyond the crisis phase of the pandemic, COVID remains a leading cause of US deaths, taking the lives of hundreds of Americans each day.

In the graphic above, we analyzed COVID mortality data, finding the defining characteristic of Americans still dying of COVID is age. As death rates have dropped, the percentage of COVID deaths accounted for by individuals 65 years or older has risen to an all-time high of 88 percent. 

Notably, a majority of people dying of COVID today are vaccinated, due to the high rate of vaccination in the 65+ population. While the near-universal vaccination of seniors, including the fact that one in five have received the most recent bivalent booster, is not sufficient to save all of their lives, unvaccinated seniors are still dying at higher rates than vaccinated ones.

In August 2022, vaccinated individuals over age 80, who represent about four percent of the total US population, made up 31 percent of COVID deaths, while unvaccinated individuals in the same age group, who represent less than one percent of the total population, made up 19 percent of COVID deaths. 

We entered 2020 with about 55M Americans ages 65 and older, and have since lost 790K, or nearly 1.5 percent of the senior population, to COVID. Meanwhile, reports of the new, immune-evasive BQ variant sweeping New York and California remind us that COVID’s not done with us yet, even if we think we’re done with it. 

The ethics and legality of private equity (PE) once again in the spotlight

Posted on by • Posted in Ethical Pitfalls, Ethics, Health Insurance Industry, Healthcare Industry, Legal, Legal Challenges, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Private Equity, Profit Model, Profit Motive • Leave a comment

https://mailchi.mp/46ca38d3d25e/the-weekly-gist-november-4-2022?e=d1e747d2d8

 In a recent STAT News article, reporters Tara Bannow and Bob Herman took an in-depth look at private-equity firm Welsh, Carson, Anderson & Stowe, examining the performance of four of its healthcare portfolio companies. They show how the firm’s A-list partners, clients, and board members have promoted controversial business practices—often at the expense of publicly funded healthcare programs—that conflict with its well-curated public image.

The Gist: This article emphasizes how the complex and opaque regulatory structure of American healthcare allows motivated parties like PE firms to find technically legal, though ethically suspect, business models, which can easily tip over into outright illegality.

It highlights the “revolving door” flow of executives between industry and government, which allows investment firms to play a long game by actively shaping the regulatory landscape and lobbying to create business opportunities where none previously existed. Justified backlash at “gotcha” business models and profit-seeking at the expense of vulnerable patients may swamp any positive contribution that PE investment and rollups may make to the business of healthcare.

Tenth year of Affordable Care Act (ACA) marketplace enrollment begins

Posted on by • Posted in ACA, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, Out of Pocket Expenses, Uncompensated Care, Underinsured, Uninsured • Leave a comment

https://mailchi.mp/46ca38d3d25e/the-weekly-gist-november-4-2022?e=d1e747d2d8

Tuesday marked the start of the tenth season of open enrollment in the ACA’s health insurance exchanges. Last year, a record 14.5M Americans obtained coverage through the exchanges, and this year’s total is expected to surpass that. That’s thanks to the extended subsidies included in the Inflation Reduction Act, a fix to the “family glitch” that prevented up to 1M low-income families from accessing premium assistance, and expanded offerings by most major insurers, who have been enticed by the exchanges’ recent stability. The average unsubsidized premium for benchmark silver plans in 2023 is expected to rise by about four percent, but the enhanced financial assistance will lower net premiums for most enrollees. 

The Gist: ACA marketplace enrollment has grown nearly 80 percent since opening in 2014, and exchange plans now cover 4.5 percent of Americans. After enrollment lagged during the Trump administration, the combination of policy fixes and improved risk pools are attracting insurers back into the exchanges, where enrollees are finding more affordable plans than ever before. 

We consider this a commendable first decade, but the success of the exchanges over the next ten years remains subject to political winds. Congress must revisit the extended subsidies by 2025, and a different administration might deprioritize marketplace advertising and navigation support, policies have which proven crucial to the exchanges’ recent growth.