Hospitals Pay $24 Billion More a Year for Staff During Pandemic


October 6, 2021 4:01 pm

Hospitals are paying $24 billion more for labor annually due to pandemic-driven staffing shortages and increased patient demand, draining resources when they’re already feeling the physical and emotional toll of the virus.

The $24 billion, according to data released Wednesday from health-care improvement company Premier Inc., represents an 8% increase in clinical labor costs per patient day compared with 2019.

Hospitals have had to pay nurses and other staff members inflated wages to keep their doors open amid nationwide staffing shortages, driven by burnout from an unrelenting virus, firings and resignations over vaccine mandates, and sickness and quarantine. Some states have even called in the National Guard to help meet patient demand during the delta variant’s surge.

Health-care providers are “just really at their wits end in terms of dealing with the pandemic,” said Doug Miller, vice president of workforce management operations at Premier.

The government issued funding to hospitals coping with lost revenues and pandemic-related expenses, but the health-care industry has said the more than $120 billion distributed isn’t enough to meet its needs. 

Beyond increased staffing prices, hospitals are facing higher costs for drugs, supplies, preparation for more Covid-19 patients and their treatment, and the lost revenue from elective surgeries, American Hospital Association Executive Vice President Stacey Hughes wrote in a Wednesday letter to congressional leadership asking for legislative provisions that would provide financial relief.

The industry is also facing various regulatory burdens, from the reporting required of those that received pandemic assistance funds to demands that they list their prices for common services online.

“The COVID-19 pandemic has resulted in historic challenges for hospitals and health systems and the communities they serve, placing unprecedented stress on the entire health care system and its financing,” the letter said. The AHA is advocating against reducing Medicare payments so that providers can stay afloat.

The financial stress has led to a breaking point for some hospitals less able to weather the storm, with more than 40% of rural hospitals in the U.S. at immediate or high risk of closing in July 2021, according to a Center for Healthcare Quality and Payment Reform report.

High Demand

The nursing industry was already facing labor shortages before the pandemic, said Beth Cloyd, principal consultant at Premier. The pandemic has tested nurses, who have worked longer hours in harder conditions, “but that resiliency and effort over time takes a toll on the workforce,” Cloyd said.

Hospitals may not be able to fill their vacancies any time soon, and the recent vaccine mandates could keep costs for labor high. So hospitals should look at bringing in international workers or consider how technology can help providers meet patient demand, Cloyd said. The Biden administration will speed up the visa process for health-care workers coming to the U.S. to aid in pandemic response.

Most of the evidence about how vaccine mandates will affect the workforce is anecdotal, Miller said, since many hospitals have not completed their vaccine mandate timelines. “I don’t know that anybody has a crystal ball to fully know how the data plays out,” Miller said, but Premier is working on another study to capture some of that evidence.

Other Findings

Premier used artificial intelligence to examine a workforce database and compare trends from October 2019 to August 2021. The study examines clinical employees who work in the emergency department, intensive care units, or nursing.

Among the survey’s other findings:

  • Larger hospitals with 500 or more beds have been paying $17 million extra for labor each year since the beginning of the pandemic.
  • Overtime hours as of September 2021 have risen 52% compared with before the pandemic.
  • Almost a third of emergency, ICU, and nursing employees turn over each year, up from 18 percent pre-pandemic.