Stronger economy drives more nursing turnover, higher wages

A stronger economy is increasing employee turnover rates at hospitals, particularly among nurses, and putting additional pressure on wages that are already straining hospital balance sheets.

Hospital operators around the country have been reporting increases in staffing costs, including contract labor, in the third quarter. Nursing positions have been most in demand, and the need is compounded by the increased patient volume that many health systems are seeing under the Affordable Care Act.

HCA, the largest hospital operator by revenue, last month attributed a year-over-year drop in third-quarter net income in part to increased labor costs.

“We do have an improving economy across most of HCA's markets and we think that is having some effect on our overall labor equation,” Samuel Hazen, president of operations for the Nashville-based chain, said on an earnings call.

The company said its nursing turnover has increased to 19%, up from 17.5% in 2014. Contract labor has been used to fill the gaps.

Providence Health & Services, a Renton, Wash.-based system, similarly reported last week that it spent $85 million more than it expected on labor costs and purchased services. Contract labor was used to fill open positions at its hospitals.

Labor costs in the third quarter pressured not only acute-care hospital groups but also post-acute care operators like Kindred Healthcare, which blamed “a tightening labor market in certain regions” for driving up its third-quarter expenses.

The rising costs have come amid a hiring boom in the healthcare industry, which has added 407,000 jobs during the first 10 months of 2015. Healthcare companies shed jobs during the uncertainty in the lead-up to the ACA, but as patient volume has returned, they're now rushing to meet the demand.

The latest figures from the Bureau of Labor Statistics show that average weekly earnings across all industries have increased to $869.40, up 2.2% from $850.81 during October 2014.

But nursing turnover is increasing not only because of a more robust job market. Nurses nearing retirement age also are feeling better about their portfolios and thinking about an exit strategy.

A survey from healthcare staffing firm AMN Healthcare found that 62% of nurses older than age 54 are considering retirement now that the economy has improved. “That's a significant number,” said Marcia Faller, the company's chief clinical officer. “We've been asking about the recession since at least 2013. It was a real change for us.”

Nurses who work in operating rooms have the highest average age, but the impact is likely to be felt across the board, she noted.

In addition, salaries and bonuses for nurses have been “unprecedented,” she said, as hospitals vie to fill open positions.

Nearly 70% of hospitals reported increased nursing turnover because of the stronger economy in a January survey from staffing firm NSI Nursing Solutions. Sixty-seven percent of respondents reported an increased use of contract labor, while 58% indicated that nursing costs have increased.

“The improved economy … is leading clinicians that postponed retirement following the credit crisis to retire and reduce shifts,” A.J. Rice, an analyst at UBS, wrote in a research note. “This is leading to gradually increasing open positions at hospitals and the willingness for more nurses to take temporary staffing assignments.”