The case for contract labor in house care

Homecare services have bemoaned contract work in recent years, especially as COVID-related staffing shortages have forced them to tap into these talent pools.

However, new information commissioned by IntelyCare, a Boston-based healthcare workforce solutions platform, puts contract labor in a different light.

According to a study compiled by Oliver Wyman and Mercer, contract labor can offset costs over the long term compared to full-time employees. The study found that a full-time employee can cost a facility up to 33% more than a contract worker on an hourly basis.

“I will argue on behalf of home care services and say, ‘It is even more valuable to me to have my own staff who I have trained, who know my policies and 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 number one obstacle to growth is not enough staff. They could grow much faster if they really understood that an external employee doesn’t cost much more – or in some cases no more – than their own employees.”

A surprising statement of costs

Throughout the pandemic – and even before – the home care workforce crisis was seen as worsening as contract workers were needed to fill the gap.

It’s been such a problem that nearly every publicly traded company in the homecare sector mentioned the strain that contract workers were putting on their finances in their third-quarter 2021 earnings calls.

Companies like LHC Group Inc. (Nasdaq: LHCG) and Amedisys Inc. (Nasdaq: AMED) saw the use of contract workers increase from 1% to 4%, which on the surface doesn’t seem like much, but it ultimately did cost millions of dollars Dollar.

“I’ve been doing this for five and a half years and I keep hearing this thought [from providers and facilities] that, ‘Gosh, they charge us $28 for a CNA and we only pay our CNAs $15. You’re a rip off.’” Coppins said. “When I heard that over and over again, I knew they were comparing apples to oranges.”

Through these types of conversations and others in the home care and senior living industry, Coppins decided to hire Oliver Wyman and Mercer to research the actual cost a home care provider or facility would pay to hire a caregiver versus employ contract workers.

Before the data arrived, Coppins thought the cross-industry comparisons were overstated. But he didn’t know how similar the costs would end up being.

According to the data, the national average for a contract nurse’s contingent labor cost is $61 per hour. For a full-time RN, the same figure is $38 an hour for fair wages. However, when you factor in health and retirement benefits, PTO and taxes, that number jumps to $59 an hour.

When you look at the cost of recruitment, retention bonuses, and continuing education — three areas Coppins considers “soft costs” — the cost of hiring a full-time nurse could be as high as $81 an hour.

“When it comes to any type of home health care facility or business, you really have to look at your own numbers,” Coppins said, noting that it depends on a lot of factors.

Ultimate takeaways

Contract labor prices rose during the pandemic as demand soared. Providers that had to use temporary workers also had to deal with third-party providers such as staffing agencies. Many of these agencies took advantage of the staff shortage and increased prices.

According to the study, costs have increased significantly since the outbreak of COVID-19, particularly in wages, recruitment and retention. Higher turnover and lower labor reserves have forced employers to pursue talent with raises and bonuses.

In today’s new normal, Oliver Wyman and Mercer largely expect these costs to continue into 2030 due to long-term projected labor shortages.

Coppins said he hopes home nurses can get away with this information and understand that contract work isn’t that financially devastating in the long run.

“If you can get used to the idea that temp workers cost like a few dollars more or a few dollars less, then you could partner with a temp agency and make them a part of your strategic workforce plan,” Coppins said. “Instead of thinking about it [contract workers] Think of them as a necessary evil so you can grow faster and reduce burnout in your existing workforce.”

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