Acute-care hospitals are jacking up their labor costs by using expensive contract labor instead of hiring permanent staff, according to the American Hospital Directory, Louisville, Ky. Contract labor grew to 8.1%, or about $16 billion, of hospitals' total personnel expenses in 2002, up from 4.7% in 1997, the company said in a study based on Medicare cost report data. Preliminary 2003 figures indicate the trend is escalating, the study said; however, 2003 data are not yet available for most hospitals. In many cases hospitals may have no choice but to hire contract labor because of a shortage of nurses and many allied health professionals. For not-for-profit hospitals, personnel costs represented 51.6% of operating revenue in 2002, with contract labor equaling 7.7% of personnel expenses. For-profit hospitals reported lower personnel costs in 2002 -- 40.1% of operating revenue -- but contract labor amounted to 12.7% of personnel spending, the study said. "Since contract labor is more expensive, reversing the trend may be a significant opportunity to reduce personnel expense," the authors concluded. Read the study. -- by Jeff Tieman
Contract workers raising hospital labor costs
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.