As staffing shortages continue, hospitals see labor costs soar

This is the second of a two-part series. Read part one: Hospitals face ‘broad and serious threats’ as pandemic-related losses mount.

When the pandemic hit in early 2020, Ballad Health stopped all non-emergency surgeries and furloughed about 1,200 people.

None of them were nurses.

There was little need for nursing staff in departments like surgical or post-op, and the loss of surgeries was a big blow to Ballad’s bottom line. The normal practice would have been to send those employees home, but the health system instead did the opposite: It kept them on and guaranteed their hours.

Ballad, which operates hospitals and other health care facilities across Southwest Virginia and Northeast Tennessee, couldn’t risk losing any of its nurses, said president and CEO Alan Levine – not at the beginning of a global health crisis, and not in the middle of what was already a nursing shortage. 

“We knew we were taking a big financial hit, but we were trying to dodge what we knew would become a bullet later,” Levine said.

The strategy got them through the first big COVID surge. But the bullet eventually found its target, and not just at Ballad.

A May report by Kaufman Hall, a health care consulting firm, found that almost 1 in 5 health care workers quit their jobs during the pandemic. The pain has been felt across hospital workforces, but it has been particularly dire among nursing staffs.

The impacts to hospitals’ bottom lines are continuing to mount. The shortfall prompted health systems to raise nurses’ wages and offer signing bonuses. When that didn’t work, they turned to staffing agencies to fill shifts, paying hourly rates double and even triple what they paid their own staff nurses.

The staffing shortage has been one of the primary reasons hospital systems have struggled financially during the pandemic. Hospital labor expenses have increased by more than a third from pre-pandemic levels, Kaufman Hall found.

Contract Labor as a Percentage of Total Hours and Total Labor Expenses

Contract Labor as a Percentage of Total Labor Expense

But even the increased spending hasn’t guaranteed that hospital operations would return to normal. More than 30% of respondents to a survey of rural hospital leaders this summer by the Chartis Group said nurse staffing shortages have led them to suspend or consider suspending services. More than a third told the health care consultant that a lack of nurses had limited how many patients they’d been able to admit within the last 60 days. 

In September, Ballad had 2,500 staffing vacancies, representing more than 18% of its workforce. A thousand of those open jobs were in nursing. Roanoke-based Carilion Clinic was looking to hire 685 nurses. Centra Health in Lynchburg, 200.

“The nursing crisis is not going to go away. It’s there,” said J.B. Silvers, interim co-dean and a professor of health care finance at the Weatherhead School of Management at Case Western Reserve University.

Nurses are opting out of the traditional employment market because they want more money and more control over their schedules, he said.

“They’ve opted out by going to the agencies, by going to the traveling nurse market, which then lets them get twice as much money as they would otherwise,” he said. “What’s wrong with this picture? It’s not sustainable.”

* * *

Experts had been warning for years that a nursing shortage was coming. 

Members of the massive baby boom generation were aging and would soon need more medical care. At the same time, a wave of nursing retirements was looming, and nursing schools were struggling to meet the demand because of hiring pressures of their own.

[Read Cardinal News’ previous coverage of the nursing shortage here.]

COVID-19 exacerbated the crash. After months of dealing with the strain of the pandemic, many experienced nurses took early retirement. Some younger nurses, fresh out of school, decided this wasn’t what they’d signed up for and left the profession. 

And many others decided to give up their staff jobs for lucrative travel gigs, creating further shortages.

Contract nurses were generally paid more than staff nurses even before the pandemic; the job, which can require being away from home for months on end, needed to pay well to attract strong candidates.

But those wage disparities have ballooned, according to Kaufman Hall. In 2019, the median hourly wage for contract nurses was $64. By the beginning of this year, it had reached $132.

Over the same period, the median hourly wage for staff nurses rose from $35 to $39.

Median Hourly Wage Rates for Employed and Contract Nurses

Hospitals’ overall labor expenses are projected to increase this year by $86 billion over 2021, Kaufman Hall reported.

Just as the staffing shortage wasn’t caused by COVID-19, it isn’t likely to abate even as COVID shifts to its endemic phase, a May report by McKinsey & Co. found. In fact, the lingering effects of the pandemic – such as cases of long COVID or COVID-related kidney damage – are likely to drive increased hospitalizations for some years; the consulting firm predicted that by 2025, inpatient hospitalization days will have increased by up to 12% over 2019.

And highly contagious coronavirus variants continue to sweep across the U.S., leading to more patients – and more illness among staff. Earlier this fall, when the BA.4 and BA.5 subvariants were prevalent in Southwest Virginia, up to 250 employees were calling out sick every day in Carilion Clinic’s system, CEO Nancy Agee said.

* * *

There are two ways to ease the health care staffing shortage: create (or keep) more employees, or figure out how to get the job done with fewer people.

Ideas for how to do the former are being debated and tested, and have been since before the pandemic brought the nursing problem into such stark relief: expand the size of nursing schools, change how clinical rotations are done, offer scholarships, proselytize about the benefits of the job to ever-younger kids, raise pay, offer signing bonuses, increase schedule flexibility.

“No profession has been more negatively affected by COVID than the nursing profession,” Ballad’s Levine said. “They’ve been abused for two and a half years. They’ve been overworked, they’ve been short-staffed. They go to work every day wearing a mask for 12 hours, and dealing with PPE [personal protective equipment] and dealing with people who for a long time didn’t even believe it when we told them they had COVID.”

The shortage is as bad as he’s seen in 30 years, he said.

“We’ve got work to do as an industry to recapture the imagination of young people … to inspire them about what a noble profession nursing is and get them interested in the profession,” he said. “I’m very concerned about this.”

Ballad last year worked with East Tennessee State University to create the Appalachian Highlands Center for Nursing Advancement. HCA, the for-profit health system that operates LewisGale hospitals in Southwest Virginia, is offering scholarships to nursing students who commit to working in the region for a year. 

At the same time, hospital systems are increasingly trying to figure out how to make do with the staff they have, instead of the staff they used to have, or the staff that they want.

Agee, at Carilion, wants to explore using paramedics in emergency departments and home health settings, something that’s not currently allowed in Virginia but that she thinks could alleviate some staffing shortages. Carilion also is looking at ways to use technology – anything from robots to artificial intelligence – to free up clinical staff to focus on the patients who need them the most.

Health systems might be able to learn a few things from other industries, the McKinsey report suggested. Airlines, for instance, have embraced a model that has customers now doing much of the work that employees used to do, like booking flights. Health care may never be as do-it-yourself as budget travel, but some providers are testing the waters: In Sweden, health care providers have launched self-dialysis, where patients perform their own dialysis and nurses follow up remotely.

The report also suggested that providers turn to technologies like predictive analytics and artificial intelligence to better match staffing with clinical needs.

Levine’s understanding of the staffing shortages goes well beyond what he sees in his job. His wife, an intensive care unit nurse, went back to work during the pandemic to help. As of Friday, Ballad had 18 COVID patients in ICUs, and a total of 77 patients hospitalized with COVID.

When Levine’s mother fell this summer in Atlanta, it took an hour for an ambulance to arrive. Once she got to the hospital, she lay on a gurney for 10 hours with a broken hip and wrist before a doctor saw her, he said.

He was upset for her, he said, but not angry with the hospital because he understands the pressure that it must have been under. (The hospital, Atlanta Medical Center, announced recently that it’s closing Nov. 1 after losing more than $100 million in the last year. It’s also the hospital where Levine was born.)

“This is happening to patients every day,” Levine said. “There are people here who believe that Ballad Health created this. It breaks my heart to hear it because I know how hard our team is working to mitigate the problem.”