Home-based care agencies have bemoaned contract labor over the past couple of years, especially as COVID-related staffing shortages have forced them to tap into these talent pools.
New info commissioned by Boston-based health care staffing solutions platform IntelyCare paints contract labor in a different light, however.
According to research put together by Oliver Wyman and Mercer, contract labor may balance out costs in the long run when compared to full-time staff. The study found that a full-time nursing employee can cost a facility up to 33% more on an hourly basis than a contract worker.
“I will argue on behalf of home health care agencies saying, ‘It’s still more valuable for me to have my own staff that I’ve trained, that knows my policies and knows my standard of care.’ I agree with them 100%,” David Coppins, CEO and co-founder of IntelyCare, told Home Health Care News. “But every CEO of a home health company has told me the same thing: that their biggest impediment to growth is not enough staff. They could grow a lot faster if they really understood that a contingent staffer doesn’t cost a lot more — or any more in some cases — than their own employees.”
A surprising cost finding
Throughout the pandemic — and even before it — the staffing crisis in home-based care was seen as being worsened by the need for contract workers to fill the void.
It was such an issue that nearly every publicly traded home health company mentioned the drag that contract labor was bringing to their financials on their third quarter 2021 earnings calls.
Companies like LHC Group Inc. (Nasdaq: LHCG) and Amedisys Inc. (Nasdaq: AMED) saw the use of contract labor tick up from 1% to 4%, which doesn’t seem like a lot on the surface, but ended up costing millions of dollars.
“I’ve been doing this for five and a half years, and I keep hearing this notion [from providers and facilities] that, ‘Jeez, you charge us 28 bucks for a CNA and we only pay our CNAs 15 bucks. You’re a rip off.’” Coppins said. “As I kept hearing that, I knew that they were making an apples to oranges comparison.”
Through those kinds of conversations and others in the home-based care and senior living industry, Coppins decided to enlist Oliver Wyman and Mercer to look at the true cost of what a home-based care provider or facility would pay to employ a caregiver compared to hiring contract labor.
Before the data came in, Coppins thought that the comparisons being made across the industry were exaggerated. But he didn’t know how similar the costs would end up being.
According to the data, the national average for the contingent labor cost of a contracted registered nurse is $61 per hour. For a full-time RN, that same number is $38 per hour for just wages. However, when taking into account health and retirement benefits, PTO and taxes, that number rises to $59 per hour.
When considering the costs of recruitment, retention bonuses and continuing education — three areas that Coppins considers “soft costs” — the cost to employ a full time nurse could be as expensive as $81 per hour.
“When it comes right down to any kind of facility or home health company, you really need to kind of look at your own numbers,” Coppins said, noting that it depends on many factors.
Prices for contract labor spiked during the pandemic as demand skyrocketed. Providers who had to use contract labor also had to deal with third-party players such as staffing agencies. Many of those agencies took advantage of the staffing shortage and hiked prices.
Costs have grown substantially since the onset of COVID-19, especially in wages, recruitment and retention, according to the study. Increased turnover and diminished labor pools have forced employers to go after talent with pay raises and bonuses.
In today’s new normal, Oliver Wyman and Mercer largely expects these costs to hold through 2030 due to a long-term projected workforce shortage.
For home health providers, Coppins said he hopes they come away with this information and understand contract work isn’t as financially damning in the long term.
“If you can get comfortable with the idea that the contingent staff is roughly a few bucks more or a few bucks less, then you could start to partner with a contingent staffing company and make them part of your strategic workforce plan,” Coppins said. “Rather than thinking of [contract workers] as a necessary evil, think of them as a way to help you grow faster and reduce the burnout of your existing staff.”