Hospitals Labor in Dealing With Growing Costs

Hospitals across the country are struggling to handle rising costs for staff, drugs, and supplies, the American Hospital Association reports.

During the Covid pandemic, labor costs per patient rose 19% from 2019 to 2021. Meanwhile, the prices for supplies jumped over 20% per patient, according to the report.

“The dramatic rise in costs of labor, drugs, supplies and equipment continue to put enormous pressure on our ability to provide care to our patients and communities,” AHA Chief Executive Officer Rick Pollack said in the statement.

During the past two years, nursing expenses shifted heavily toward traveling nurses. According to the AHA, the travelers’ share of nursing budgets rose from 5% in 2019 to 39% in 2022.

A recent nursing strike at Stanford Hospital shines a light on how hospital staffing can turn into a bidding war. According to The Mercury News, crossing the picket lines comes with the promise of up to $13,000 a week in salary plus free food, housing, and transportation.

Among the data, other highlights from the AHA report include:

• According to Bureau of Labor Statistics (BLS) data, hospital employment is down approximately 100,000 from pre-pandemic levels. Labor costs, which include recruiting and retaining employed staff, benefits, and incentives, account for more than 50% of hospitals’ total expenses. Therefore, even a slight increase in these costs can significantly impact a hospital’s total expenses and operating margins.
• Median hospital drug expenses by the end of 2021 were 28.2% higher than pre-pandemic levels and 36.9% higher per patient.
• Overall, supply expenses for hospitals were 15.9% higher by the end of 2021 than at the end of 2019. Looking specifically at ICUs, medical supplies in 2021 were 31.5% higher compared to 2019, and 31.8% higher per patient.
• Macroeconomic costs have implications for hospitals and health systems. In March 2022, the BLS reported that overall consumer prices rose by a historic 8.5% on an annualized basis.

To read the full AHA report, CLICK HERE.