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Hospitals with the Largest Contract Labor Spend

February 5, 2019 BY Alanna Moriarty

Hospitals with the Largest Contract Labor Spend

It's no secret that the U.S. is facing a shortage of full-time healthcare providers and facility staff. The high demand for clinicians across the country is driving higher salaries and high turnover. At the same time, pressure from CMS and facility leaders to improve clinical quality without increasing care costs is leading to physician burnout in a variety of specialties.

Staffing shortages are leading to increased rates of physician burnout, largely fueled by increased reporting demands and widespread adoption of electronic health record (EHR) systems. New technology implementations also require user training, pulling staff away from patients and requiring facilities to hire locum tenens staff.

Locum tenens providers are placed at facilities that are short-staffed or are in need of specialists, usually for 1-3 months at a time. Locums providers are considered "contract labor," and are usually hired through a third party agency. Below, we've listed the hospitals that spent the most on contract labor in 2017.

Top 10 Hospitals by Contract Labor Spend

Rank Hospital Name Total Contract Labor Spend Bed Utilization Rate Staffed Beds
1.   Saint Mary's Hospital (MN) $196,632,765     70.9%   1,186 
2.   Fontana Medical Center (CA)  $131,782,553     55.7%   626 
3.   Los Angeles Medical Center (CA) $131,430,479     67.7%   460 
4.   San Leandro Medical Center (CA) $123,021,408    50.6%   206 
5.   Oakland Medical Center (CA) $122,596,188    66.1%   365 
6.   Zion Medical Center (CA) $120,674,466    40.5%   556 
7.   Santa Clara Medical Center (CA) $99,327,714    62.2%   327 
8.   Roseville Medical Center (CA) $98,929,695    67.3%   336 
9.   South Sacramento Medical Center (CA) $96,226,976    64.3%   217 
10.   Sacramento Medical Center (CA) $90,213,568    43.6%   287 

Fig 1 Data from Definitive Healthcare based on the 2018 Medicare Cost Report. Financial data collection period for the cost report ended 12/31/17.

All but one of the hospitals above are members of the Kaiser Permanente health system. The high spending on contract labor at these facilities could have been influenced by the series of wildfires that impacted California in late 2017, which may have created demand for more clinicians to care for burn patients and others affected by the fires. According to our news & intelligence data, Kaiser also invested in telemedicine software in July of 2017, creating demand for locum tenens providers while full-time staff were trained on the new systems.

Contract Labor Challenges

Contract labor offers flexibility for facilities in need of independent contractors — especially nurses. However, contracting with a third party has its own challenges. Facilities have to be sure contracted staff members are appropriately qualified, including being up-to-date with immunizations and having the proper certifications. The difficulty here lies in working with the right staffing firm. Not all firms provide comprehensive checks to ensure that credentialing needs are met, particularly those that do not specialize in healthcare.

Another common stumbling block for facilities is that they cannot get qualified candidates in fast enough. The top-tier candidates get scooped up quickly, and research shows that nurses are most likely to accept a position if interviewed and offered a position within 48 hours of applying. Quick turnaround in the hiring process also ensures a care facility can get new staff acclimated and working at full capacity in less time, reducing the impacts of being understaffed.

Essential Staffing Data

Struggling healthcare facilities and staffing firms can leverage quality and procedure data to better understand staffing needs. Hospital quality performance, particularly HCAHPS scores, is a key indicator of whether a hospital is short-staffed. One popular metric is is the percentage of patients who received assistance when they wanted; the lower the score, the more likely it is that a hospital didn't have the staff necessary to attend to patients quickly.

Clinical metrics are also valuable in assessing staffing needs. If a hospital's bed utilization rate is much lower than the regional or national average, the facility would likely benefit from hiring additional staff in order to receive and treat more patients in less time, thereby increasing revenue. Additionally, hospitals with very high bed utilization rates are likely very busy, and run the risk of increasing the rates of physician burnout and turnover.

Looking to solve some healthcare staffing woes? Visit us at the NALTO Conference in La Jolla, CA from February 19-21 to see how our comprehensive database can help you find and place candidates faster and more accurately than ever.

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