Acute-care hospitals are increasing 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. In many cases hospitals may have no choice but to hire contract labor because of nursing and other shortages. For not-for-profit hospitals, personnel costs represented 51.6% of operating revenue in 2002, with contract labor 7.7% of personnel expenses. For-profit hospitals reported lower personnel costs-40.1% of operating revenue-but contract labor amounted to 12.7% of personnel spending.
Novation receives subpoena
VHA officials said Novation, the group purchasing organization it jointly owns with University HealthSystem Consortium, received an administrative subpoena from the U.S. attorney's office in Dallas requesting some documents. "The matter is in the very early stages, and Novation is cooperating fully to provide the requested documents," VHA spokesman Lynn Gentry said. He declined to specify the nature of the documents or the investigation. Officials at the U.S. attorney's office in Dallas did not return calls seeking comment.
L.A. County hospital closes
Catholic Healthcare West, San Francisco, said it would close 209-bed Northridge Hospital Medical Center's Sherman Way Campus in Van Nuys, Calif., by year-end, marking the second announced shutdown of a Southern California hospital this month. On Aug. 13, a federal bankruptcy court judge ordered the closure of ElaStar Community Hospital, Los Angeles, after determining that the 110-bed facility had amassed $10 million in debt (See story, p. 24). Northridge Hospital, which lost $1.1 million on revenue of $67.4 million last year, faces declining government reimbursement, nurse shortages and $16 million in mandatory seismic retrofitting, officials said. The facility will be the fourth Los Angeles County hospital to close this year.