Nurses are one of the healthcare systems greatest resources and one of it’s biggest expenses. In the midst of a nursing shortage, administrators are looking for new and cost effective solutions. Because of the hourly bill rate, many assume contract nurses are more costly. A closer look at the numbers will show how contract nurses are a cost saving option.
Comparing the Numbers
Recent healthcare market studies compare the cost of contract and permanent nurses. Two surveys frequently cited are the SIA Healthcare Staffing Report from 2019 and the KPMG US Hospital Nursing Labor Costs Study from 2017. The SIA survey provides good insight but uses an aggregate, not average, bill rate. SIA lists $72.97 per hour as the aggregate bill rate for contract staff. The KPMG survey referenced here provides an average bill rate of $83 per hour for contract nurses and $89 per hour for permanent nurses. The results of these surveys show contract nurses have a lower total cost per hour.
When healthcare systems have gaps in staffing, they rely on existing staff to work additional hours. The result is costly overtime and bonus pay driving wages up by an additional $20-$50 per hour. When staff work extra hours, they are at increased risk for burnout and turnover which creates additional expense. The NSI 2020 National Healthcare Retention & RN Staffing Report states the average cost of replacing a nurse is $44,400. Furthermore, attrition can have a negative impact on workplace culture which can result in a cycle of turnover.
NSI also looked at the length of time to replace an experienced nurse. Their results show an average of 90 days to find and hire a replacement. Using a 36 hour work week, this means existing staff have to cover approximately 468 additional hours until a replacement is found. This could cost an organization between $9,400 and $23,400 in overtime and bonus pay on top of hourly wages.
Contract Nurses Create Cost Savings
Contract nurses are a great option at any time, but there are several scenarios in which they are the best fit for meeting demand and reducing cost. Instead of leaving a vacant position open while a permanent placement is hired and trained, place an experienced contractor in as little as 1-2 weeks which will save costly premium pay and protect staff from burnout. Temporary gaps like medical leaves, seasonal increases in demand, and other labor shortages are also great opportunities for contract staff. Contract nurses provide experienced coverage while the demand is high and allow for staffing to flex down without layoffs or furloughs when needs normalize.
Staffing and recruiting firms in the healthcare industry, or looking to expand into this growing market, should understand that contract nurses are a cost savings option for their clients. Contact FoxHire to see how our dedicated team with healthcare expertise can help with your next placement.