Baptist Health’s loss is my neighbor’s gain.
That’s because my neighbor is a traveling radiology technician. He makes more money traveling from hospital to hospital and working for a few weeks at a time under contract than if he were working full-time at one.
A lot of hospital professionals are doing what he’s doing. Troy Wells, Baptist Health’s president and CEO, told me his 11-hospital system paid $89 million in contract premium labor costs outside of its normal cost of business in 2021. That wasn’t a problem because federal COVID dollars helped offset the costs.
This year, it had planned to spend $74 million for premium labor, but it looks like it will exceed that by $20 million. It’s also spending another $35 million in higher salaries, primarily for nursing.
Those extra staff costs represent roughly a 10 percent budget increase for a hospital system with about $1.8 billion in total revenues. But this year, it’s not getting all of those COVID dollars.
“[In] 2020 and 2021, we were in the black, and we are severely in the red in 2022. … I don’t see a way that we will be positive by year end,” Wells said.
Likewise, the University of Arkansas for Medical Sciences spent $44 million on contract labor in its recently ended fiscal year. The year before the COVID pandemic began, it paid $600,000.
Dr. Steppi Mette, CEO of UAMS Medical Center and vice chancellor for UAMS Health, told me UAMS is counting on its contract labor costs being cut in half, but it’s too early to predict if that will happen.
He said market forces have reduced contract labor costs 30-40 percent. The number of UAMS contract workers has fallen from the high-200s to about 190-220 in a total workforce of 11,000.
The bidding war for traveling nurses came as the profession was already facing a nursing shortage. Wells said nursing has become a national job market. Arkansas is competing for labor with other states while having the nation’s lowest commercial insurance reimbursement rates. Meanwhile, Mette noted that Arkansas also has the nation’s lowest Medicare reimbursements.
You can’t blame those nurses or my neighbor. Supply and demand works the same in the labor market as it does in the consumer goods market. They had the good sense to gain professional certifications in a high-demand, high-paying field. It’s been no secret to anyone paying attention that there aren’t enough nurses and other medical professionals. We’ve all known, or should have known, that you can go to school for a couple of years, often paid for by future employers, and then make a very good living in a field with a lot of opportunities. When COVID hit, they realized they could make even more money by selling their services to the highest bidder, even if it meant traveling.
And of course, their job has some risk, too. I talked to a clinic nurse today who’s getting over her second bout with COVID.
Contract labor isn’t the only challenge facing hospitals. Wells told me Baptist Health is facing ongoing double-digit inflation expenses for medical supplies. Like other industries, it’s also facing supply chain disruptions.
“On a given day, we’ve got 20 things that we can’t find,” Wells said.
But unlike other industries – like, obviously, gas stations – hospitals can’t simply pass higher costs to consumers. That’s because hospitals receive almost all of their income from government-sponsored Medicare and Medicaid programs and private insurers. They can’t just negotiate higher rates with the government, so they have to try to get more money from the insurance companies.
Wells and Mette both said the insurance companies seem to appreciate their financial challenges. But insurance companies, of course, can pass on their higher rates to their customers.
So if your insurance is more expensive next year, place a small part of the blame on my neighbor for making a good career choice, getting his education, and then responding to job market opportunities and doing what’s best for his family – all while helping sick people get well.
Steve Brawner is a syndicated columnist in Arkansas. Email him at firstname.lastname@example.org. Follow him on Twitter at @stevebrawner.