https://mailchi.mp/d0e838f6648b/the-weekly-gist-september-8-2023?e=d1e747d2d8

Across the hospital industry, heavy reliance on contract labor in 2021 and 2022 caused a significant challenge for profitability.

However, a chief financial officer recently posited that his system’s large contract labor load has had unexpected benefits.

“Other hospitals [in our market] thought we were crazy to keep staffing with high contract rates until recently,” he shared. “But by keeping the agency nurses around a little longer, we were able to avert raising base salaries quite as much, and are in a better place today now that the labor market has softened.” It’s a story we’ve heard several times now.

While market rates for nursing and other clinical labor have undoubtedly been rebased, salary increases are sticky—it’s hard to adjust wages downward when the labor market loosens. 

Systems who were able to avert large wage increases by increasing bonuses and other non-salary benefits, or forestalled permanent hiring at higher salaries by extending contract labor, now find themselves with more flexibility and potentially lower staffing costs in the long-term.