Accountable Healthcare - Hospitals raising nurse pay: Why now?
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January 27, 2023

Hospitals raising nurse pay: Why now?

Inflation, nurse contracts opening up and a decrease in contract worker utilization are among the factors behind a spate of recent pay raises across hospitals and health systems. But such raises are hardly enough to remain competitive and improve retention in today's market, experts say.

Becker's has reported on various raises in recent months. In November, Baltimore-based LifeBridge Health said it would raise the hourly minimum wage for many employees to $16. The move affected about 270 employees and will eventually cover about 2,500 positions at the health system. Members of the Oregon Nurses Association also approved a contract with Providence Hood River (Ore.) Memorial Hospital last fall that includes wage increases between 14 percent and 21 percent over the next two years (not counting increases to differentials/premium pay). The contract covers about 150 nurses.

Beyond inflation: What's behind the raises?

Across all industries, decades-high inflation is a primary driver of pay increases. 

"[Wages] have been increasing drastically faster than they typically do based on inflation," Greg Till, chief people officer of Renton, Wash.-based Providence, told Becker's. "It's worse in healthcare than in most other industries," based on the supply and demand gap for workers, particularly nurses. 

Delays in annual wage increases for unionized nurses help explain some of the recent raises that seem significant on the surface.

"If we negotiate a contract for four years and there's three percent raises every year and that feels pretty good in 2019, that certainly doesn't feel great in 2022," Mr. Till said. So as contracts open up in 2023, "you'll see pretty significant raises [in] year one to make up for the gap that's accumulated, and then more reasonable raises in the out years."

Meanwhile, many hospitals are decreasing contract labor utilization. In October, hospitals in Washington state indicated they would consider cutting travel nurses in the wake of financial losses. Providence's reliance on contract labor has also decreased. 

"We've decreased that by about 40 percent," Mr. Till said. "We're still not back at 2019 levels, but we're aiming to get there in the next couple of months. We've also seen contract rates come down pretty significantly; in some of our ministries by almost half." 

Monthly reports shared with Becker's from Vivian Health, a national healthcare hiring marketplace, show a year-over-year decrease in travel nurse pay overall. The average weekly travel nurse pay in December was $3,177, down 16 percent from $3,782 during the same month in 2021. As of Jan. 5, there were 645,243 active RN travel jobs on the Vivian Health platform nationwide in the last 90 days. 

Ultimately, a combination of inflation, workforce shortages and the COVID-19 pandemic have made raises inevitable. Local market pressures may also play a role, Therese Fitzpatrick, PhD, RN, senior vice president of Kaufman Hall and a member of the firm's strategic and financial planning practice who specializes in performance improvement, told Becker's

"I would suggest that all boats have risen, that COVID-19 really took a toll on the healthcare workforce, across all spectrums of the healthcare workforce," she said. "So, I think this is in response to sort of general employee engagement and getting a foot up in a market in terms of recruitment and retention."

At the same time, Dr. Fitzpatrick has observed hospitals and health systems watching their total benefits closely as well. 

Both things are occurring amid different desires of individual employees, and as organizations work to ensure a seamless healthcare journey for patients seeking services.

Flexibility and the gig economy

Raises have a place in retention strategies at most healthcare organizations. But that is the bare minimum, health system leaders say. 

"Raises play a big role because if we don’t stay current to the salaries in the market, we lose our staff who go to another hospital making several more dollars an hour, and this leads us to using costly agency nurses," Leslie Simmons, RN, executive vice president and chief operating officer for LifeBridge Health, said in an email to Becker's

Hospitals must start advancing efforts to support workplace flexibility and growth to realize needle-moving improvements in recruitment and retention, leaders told Becker's

"Our perspective is let's pay people at market competitive rates, but that really is only table stakes from a retention perspective," Providence's Mr. Till said. Beyond pay, employees' sense of connection to an organization's mission and values, the ability to grow and develop, and flexibility "all have a much more significant impact on retention than wages, within a certain range," he said. 

To stand out when it comes to recruitment, Mercy, a multistate health system based in Chesterfield, Mo., has harnessed an employment model usually associated with ride-share services and food delivery. 

The system saw the effects of the COVID-19 pandemic on nurses. Some workers left their local hospital jobs for travel nursing opportunities. Nurses were also struggling with effects on their physical and mental well-being, leading some to retire early or relinquish bedside positions. That is why Mercy rolled out Mercy Works on Demand, an app and online platform that allows the health system's full- and part-time nurses — and other experienced nurses in the area — to pick up gig shifts.

Mercy launched a pilot program at Mercy Hospital Springfield (Mo.) and, last spring, rolled out the on-demand platform across the health system. Providence is also testing ways to enable employees to choose the shifts — ranging from four to 12 hours — that they want to work. It is all part of embracing the gig mindset model, Mr. Till said. 

"What if we thought of all of our positions as gig economy positions where workers can work when they want to, where they want to and potentially [in the future] even choose the pay rates they want?" he said. 

A number of hospitals and health systems have taken staffing into their own hands via internal programs and agencies. Mr. Till argued against this approach as the best long-term solution.

"I personally for the organization see that as a strategy to kind of fix yesterday's problem versus as a strategy to move us into solutions for tomorrow," he said. "I really think we need to be, from a structural perspective, looking at new models of care. We're never going to have more nurses employed than we do today, relative to need, so we need to figure out how to build capacity with new models of care or we're not going to be able to continue to provide care."

Dr. Fitzpatrick said she has also seen other hospitals and health systems focus on redefining jobs. 

"Some of our more innovative clients are moving away from very static job descriptions, more of what's referred to as job architecture. So a much less prescriptive, if you will, job description that sort of builds upon competencies, so that as an employee comes into the organization, they recognize that by meeting the performance objectives, 'Here's where I go next [within the organization],'" she said.  

One example of this is New Orleans-based Ochsner Health, which has a mentoring program focused on developing diverse leaders at the manager and director levels and helping them prepare for higher-level leadership roles, including vice president.

"We do that by pairing them with executive leaders as a mentor and having a very programmatic approach to mentoring over a 12-month period of time," Tracey Schiro, executive vice president, chief human resources officer and chief administrative officer for Ochsner Health, told Becker's in August. "Those leaders are … getting feedback and then working with their mentor on the development plan and getting advice on how they can develop their own skills and talent." 

Moving forward in 2023, hospital and health system human resources leaders told Becker's they are focused on efforts such as modernizing the hiring process, training and partnering with nonprofit and academic undergraduate and technical schools.