The Hidden Costs of Premium Labor

Hidden Costs


Controlling costs without sacrificing patient care is the goal of top hospital management across the country. Total labor expense can exceed 50 % of a hospital’s operating costs and 90 % of its variable costs. Given this situation, many hospitals are choosing to let vacant positions remain unfilled or rely on overtime or contract employees to fill these gaps.

Your Premium Labor Costs are Higher Then You Realize.

Premium labor may seem a logical choice to manage costs and staffing needs but reality is very different. Overtime can cost your hospital hundreds of thousands of dollars in terms of direct expenditures as well as recruitment outlays. Scheduling was identified as one of the top five reasons nursing staff voluntarily resigns. With each resignation there are recruitment costs and additional scheduling challenges, most often filled with premium labor. When these employment gaps are filled with overtime hours, the process becomes a vicious, expensive cycle. In addition, overtime above 5% of total worked hours per pay period is associated with increased medical errors and patient falls, which can leave your hospital vulnerable to malpractice claims.

The Hidden Costs of Premium Labor

When your hospital relies on premium labor on a consistent basis there are several costs that are not obvious on a balance sheet, including:

  • Lower moral which can result in staff turnover.
  • Increased patient falls and other care-related mistakes.
  • Increased need for education and training of contract employees to assure compliance with hospital policies and regulatory requirements.
  • Shifted responsibilities from unfilled positions to employed staff, adding to the employee workload and taking time from their primary activities.
  • Confusion from scheduling changes and float responsibilities that result in lost work hours.
  • Reduced employee loyalty and engagement in the goals of your hospital.
  • Diluted corporate culture.

The consistent use of premium labor is more expensive than many administrator realize. The negative impact of premium labor usage on your hospital’s culture can directly affect patient satisfaction and the perception of your facility within the marketplace.

The Cost of Unfilled Positions

When a clinical staffing position remains unfilled for a significant amount of time, the increased care loads on other staff can lead to all of the issues discussed above. Moreover, the longer the position remains unfilled, the more extensive the negative impact of premium labor has on the staff.

Even unfilled non-clinical staff positions can have a negative effect on patient care and satisfaction. The loss of non-clinical staff can have a ripple effect, ultimately over-burdening those directly responsible for providing care and treatment, as well as undermining the delivery of other patient services.

For many hospitals, the challenge is filling these positions as efficiently and inexpensively as possible. But hospitals are in the business of providing health care, not staff recruitment. Using an expert in this field who has the resources and experience to fill your positions with quality staff and better culture matches is a smart choice. PPR Talent Solutions is a leader in workforce recruitment and can help you reduce your premium labor costs while improving patient care and satisfaction.


The Evidence is Clear: Analytics Key to Controlling Labor Costs, (2014) Health Care Insights

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