Severe Increase in Nursing Labor Cost and Effect on Surgical Department Financial Margins at an Academic, Tertiary Medical Center

BACKGROUND

A pre-existing nationwide nursing shortage drastically worsened during the pandemic, causing a significant increase in nursing labor costs. We examined the financial impact of these changes on department of surgery financial margins.

STUDY DESIGN

Operating room, inpatient, and outpatient financial metrics were analyzed. Monthly averages from a 14-month control cohort, January 2019 to February 2020 (pre-COVID-19), were compared with a 21-month cohort, March 2020 to November 2021 (COVID-19). True revenue and cost data from hospital accounting records, not estimates or administrative projections, were analyzed. Statistics were performed with standard Student's t -test and the Anderson-Darling normality test.

RESULTS

Monthly surgical nursing costs increased significantly, with concomitant significant decreases in departmental contribution to margin. No significant change was observed in case volume per month, length of stay per case, or surgical acuity, as standardized by the US Centers for Medicare & Medicaid Services Case Mix Index. To obviate insurance payor mix as a variable and standardize cost data, surgical nursing expense per relative value unit was analyzed, demonstrating a significant increase. Hospital-wide agency nursing costs increased from $5.1 to $13.5 million per month (+165%) in 2021.

CONCLUSIONS

Our results demonstrate a significant increase in surgical nursing labor costs with a resultant erosion of department of surgery financial margins. Use of real-time accounting data instead of commonly touted administrative approximations or Medicare projections increases both the accuracy and generalizability of the data. The long-term impact of both direct costs from supply chain interruption and indirect costs, such as limited operating room and ICU access, will require further study. Clearly this ominous trend is not viable, and fiscal recovery will require sustained, strategic workforce allocation.

Drastic Increase in Hospital Labor Costs Leads to Sustained Financial Loss for an Academic Vascular Surgery Division During the COVID-19 Pandemic

Objective

The financial effects of the coronavirus disease 2019 (COVID-19) pandemic have fundamentally changed the healthcare environment, with hospitals expected to have lost billions in 2021. A preexisting nationwide nursing shortage became drastically worse during the pandemic amid dramatically increasing labor costs. We examined the evolution and financial effects of these changes during repeated pandemic surges within a vascular surgery division at a tertiary medical center.

Methods

Operating room, inpatient unit, and outpatient clinic financial data were examined retrospectively. The monthly averages for a 14-month control cohort before COVID-19 (January 2019 to February 2020) were compared to the averages for seven interval groups of sequential, 3-month cohorts from March 2020 through November 2021 (groups 1-7).

Results

The monthly relative value unit (RVU) generation had returned to the mean before the COVID-19 pandemic (2520 RVUs) after an isolated decrease early in the pandemic (group 1; 1734 RVUs). The RVUs ranged from 2540 to 2863 per month for groups 2 to 5, with a slight decline in groups 6 and 7. The average monthly RVUs in the COVID-19 period (2437 RVUs) were nearly equivalent (P = .93) to those for the pre–COVID-19 cohort. An analysis of payor mix demonstrated an increase in commercial and Medicaid payors, with a respective decrease in Medicare payors, during COVID-19. The contribution to indirect, or profit, from inpatient hospital and outpatient clinical revenue showed a drastic decrease in group 1, followed by a swift rebound when the government restrictions were eased (group 2). The total monthly vascular nursing unit expense demonstrated a marked increase with each sequential group during COVID-19, with an average monthly upsurge of +$82,171 (+47%; P < .001). An increase in the nursing labor expenses of +$884 per vascular case (from $1630 to $2514; +54%; P < .001) was observed in the COVID-19 era. The nursing labor costs per patient day had increased from $580 to $852 (+$272; +53%; P < .001). The nursing labor cost per RVU had increased from $69.5 to $107.7 (+$38.2; +55%; P < .001). On a system-wide level, the agency-related nursing costs had increased from $4.9 million to $13.6 million per month (+178%; P < .001) in 2021 compared with 2020.

Conclusions

The COVID-19 pandemic has had severe, nationwide effects on healthcare delivery, exacerbating the deleterious effects of an existing, critical nursing shortage. To the best of our knowledge, the present study is the first detailed analysis of this phenomenon and its effects on a surgical division. Our results have demonstrated a progressive, drastic increase in nursing labor costs during the pandemic, with a resultant sustained erosion of financial margins despite a level of clinical productivity, as measured in RVUs, equal to the prepandemic standards. This precarious trend is not sustainable and will require increased, targeted government funding.