Hospitals Face Nursing Exodus as Contract Labor Band-Aid Fails

It is 2020. The world feels to be falling apart. Hospital leaders across the country face a daunting crisis. COVID-19 has put a strain on their care teams right at the moment when caregivers are needed most. The care team that is the most hands-on with care, which carries the brunt of direct care in hospitals, is the nursing staff. Many hospitals started the pandemic down 5-10% of their nurses. Then, during the pandemic, some nurses retired early. Some left care. Some died. 

Nursing labor, usually the single largest cost for most hospitals, caused a new dilemma for hospital leaders. They have already suffered financial challenges as their ORs, the economic engines of the hospital, were shut down temporarily. Few were thinking about how to retain staff and most hospital leaders were likely counting on the ‘heart’ of nursing to keep nurses in place during the pandemic. Any hospitals that made the decision to raise nursing wages chose to run in the red (for many a darker color of red). 

March of 2020 for hospitals was a triage situation, with many challenges, from PPE to spreading illness. While employers in other sectors usually turn to higher pay or improved working conditions to retain and attract their most critical labor needs, many hospitals turned to the quick fix of contract labor. These travel nurses can cost ~3x more to employ than full-time staff nurses. Most base rates for nursing contract labor at the peak of the pandemic (December 2020) were in the $125-165 range for staffing agency nurses and often came with a per diem bonus to help the travelers pay for housing/expenses.  Contract nurses could come in quickly, and while the costs might be temporarily more than giving all nurses a raise, this was meant to be a temporary measure and immediate fix—so it was felt to be the right option for many hospitals. 

What happened next was similar to a wound that needs stitches, but only gets a Band-Aid. The wound tore open, got worse, and then became infected. Contract nurses became advertisements for other nurses to leave their jobs. Contract pay is . . . well a dramatic increase, and almost before they knew what happened, the 5-15% of contract nurses a hospital was paying for spread to greater than 50% of nurses (at some hospitals). Today costs have spiraled out of control, care has suffered as nurses are constantly turning over, and staff nurses who say are now leaving in record numbers as they buckle under the strain of being the only constants in their department.

We know this because we interviewed over 800 nurses in the past 3 months, in 20-minute conversations to understand perceptions about care quality (a whole different topic) and the nurse working experience, including plans for future turnover and referability. 

Our data points to hospitals increasingly being divided into the haves and the have-nots. The hospitals that have done a better job holding onto their nursing staff are places where nurses want to go, and they are going there. Hospitals that have high turnover are just seeing more nurses leave.

Here is a view of 29 hospitals where we have measured the plans their nurses have to leave in the next 12 months. Another industry analysis of nursing turnover has placed those estimates of ~21% last year, compared to 27.9% of nurses we spoke to who plan to leave their jobs. While we can’t say turnover is going up (these are two very different measurements) it does not appear to be slowing. What is especially shocking is that some hospitals are seeing 5-7x the turnover of other hospitals!

Now compare this to hospital referability. Many of the hospitals with the highest turnover, for instance hospitals #13, #6, #3, and #18, also have some of the lowest RN recommendation rates. 

So what are these hospitals doing? They use more contract labor, further demolishing their bottom line, and they bring in new nurses who often get ‘chewed up’ with few experienced nurses to train them and heavy, acutely ill patient loads for these nurses to feel they are successful. How do we know this? We are speaking to these new nurses who, “Often cry leaving the hospital” and “Just can’t give the care they want to give and feel guilty about it.”

What should these hospitals do? These are exigent circumstances. Hospitals everywhere need to use every option to rebuild a core nursing team. This requires some critical questions:

• Is our hospital differentiated from other healthcare employers in our region? If not, do we have a strategy to differentiate beyond just pay?
• Are we compensating at a level, and in a way, that we take pay off the table as a concern? Have we removed little points of friction, like paid parking, that frustrate nurses and make them feel unappreciated. 
• Do we know the signals, specific to our hospital, that a nurse is looking to leave?

It may feel too late to make such steady, far-sighted moves when everything is urgently challenged. But success builds on success. Getting out of the spiral will take courageous, concerted action. 

Beyond courage, taking such action also requires knowledge and data. One of our favorite data views to help hospitals is this RN perception map. This map is actually for the Kaiser Permanente Hospital in Manteca—a small hospital that is struggling with teamwork but pays above average for the region. Similar to most hospitals, nurses here focus on the themes toward the right, which include teamwork, patient outcomes, and safe care. Compensation is far to the left, indicating it is not a focus for Kaiser nurses 

One nurse told us about this hospital: “Kaiser is a great place to work, however, I feel like the teamwork in my other hospital is a bit better than Kaiser. The attitudes in the other hospitals are really good. It is like you are working in a family in the other hospital.”

Nurse Retention Perception for Kaiser Permanente Manteca Hospital

This example is especially helpful because Kaiser had the lowest RN turnover rate in this region, pays the highest of any hospital (by far), but still had nurses leaving their hospital, in part pointing to teamwork as a significant challenge.

Most of us have worked jobs that were excellent, where we wanted to stay as long as we could. Those jobs had far more than good pay—they were at companies and with managers who took pride in giving us a great place to work. Creating the same for nurses will take the same—listening, change, and hard work. 

A recent Fitch report stated what all hospital leaders know: “Given current and projected staffing shortages and the associated upward reset of labor rates, Fitch believes that providers’ success in attracting and retaining permanent staff is key to mitigating stress on margins. The sector will trifurcate, with highly successful labor recruiters generally gravitating to higher investment-grade ratings.”

Today hospitals in crisis are back to a choice, and one that will determine their organization’s future. They can continue to rely only on quick fixes, or they can build lasting, healing change in their organization, becoming the employer of choice for nurses in their community. Real healing will take patience communication, commitment and dedication, but it will result in lasting cures and stronger organizations when done right.  

About Taylor Davis MS Stat, MBA

Taylor Davis is the Cofounder and CEO at CareLuminate, a firm seeking to improve hospital care quality through the collective voice of caregivers. He is a respected industry leader and the former president of KLAS Research. In his time at KLAS Research, Taylor founded the KLAS Arch Collaborative, a worldwide effort to collect the voices of over 300,000 clinicians worldwide in order to improve EHR usability.

About Linda Komisak RN

Linda co-founded CareLuminate with Taylor Davis in late Spring 2023, bringing with her an impressive portfolio of delighted healthcare clients.  She has an impeccable reputation for creating great experiences for healthcare systems, partners, and ultimately, patients.

As an RN herself, she knows that every nurse has an important story to tell.  Linda leads CareLuminate operations to creatively drive meaningful new insights into the way both hospitals and healthcare workers perceive quality in their work environments.