How to Reduce Contract Labor

How to Reduce Contract Labor

A children’s hospital dramatically reduced its agency staffing hours and saw a 25% reduction in first-year turnover.

Children’s hospital workforce metrics are improving, with key data points like turnover and full-time equivalent (FTE) positions per adjusted occupied bed (AOB) trending closer to pre-pandemic levels. However, the return to normal staffing levels comes at a cost.

A limited pool of qualified caregivers has forced hospitals to pay a higher median wage rate to contract staffing firms. Contract labor costs increased by 88% between 2019 and 2023, according to CHA’s financial and operational data program PROSPECT. Specifically, the median hourly rate for a contract employee was $67 in 2019; in the first half of 2023, children’s hospitals paid contract labor $127 per hour, accounting for 8.6% of their total salary expenses in that period.

Children’s Memorial Hermann Hospital faced this challenged head on, and it led to a dramatic decrease in the use of agency staff, from 14,500 in May 2022 to 3,700 in May of 2023. It also reduced first-year turnover by 25%, hired 540 new employees in fiscal year 2023, saw significant decreases in voluntary turnover among respiratory therapists, and all but eliminated pediatric intensive care unit diversion hours.

 “We decided to take a really intentional, coordinated, and assertive approach,” says Chief Nursing Officer Emily Weber, DNP, RN. “We knew we had to buckle down and be prescriptive to make sure this work got done, and we saw the long game come to fruition.”

Consistent, constant work

The Houston hospital used multiple tactics to move the needle, starting with a multidisciplinary approach that combined resources from nursing leadership, talent acquisition, education, administration, marketing, and human resources.

“Everybody has a responsibility in this,” says Alison Krawacki, MSN, BS, RN, NEA-BC, associate vice president of children’s nursing. “Each week, all team members had a commitment to doing something specific to help accomplish the big goal. Instead of getting lost in the day-to-day work, we focused on where we needed to go to get to the next step.”

Specifically, the hospital expanded recruitment efforts to regional and national audiences using a marketing campaign and workforce-focused videos. Employment offers were made on the spot during virtual and in-person job fairs. Recruiters attended nursing conferences, and the Memorial Hermann Health System hired a talent acquisition recruiter dedicated to the children’s hospital.

A few agency employees converted to full-time hospital employees, and as part of a targeted campaign, managers actively solicited former employees who had left the hospital to become travel nurses.

“We wanted them to come home when they were ready,” Krawacki says. The system allowed some nurses to work PRN to stay rooted at the children’s hospital while they traveled for contract positions. Managers also called former employees who had left to travel and invited them back with immediate offers.

The talent acquisition and onboarding teams focused efforts to expedite the hiring process. “This decreased the time for job offers, where applicants previously experienced delays and could lose interest or receive an offer from other hospitals,” Krawacki says.

New nurse education models moved both new graduates and experienced nurses through orientation more efficiently. A campus-wide night educator rounded on all new employees and was available for questions. The Skills Teacher as a Resource (STAR) program made experienced nurses available to teach and validate skills at the bedside.

“All of this work is continuing. It has to become part of who you are so it stays consistent and constant. It’s forever work. It’s just who we are now,” Krawacki says.

Success strategy

To entice valuable staff who left for travel nursing positions to return, Children’s Memorial Hermann launched a systematic campaign that resulted in 50 re-hires. Here’s how they did it:

  • Leaders screened and prioritized the list of employees that had left the organization in the past two years.
  • Hiring leaders called the RNs and RTs to ask if they were interested in returning.
  • If a candidate showed interest, a recruiter performed a quick screen.
  • The recruiter generated an offer and sent to the hiring manager within 24 hours for approval.
  • Once the offer was approved, the recruiter made a verbal offer to candidate on the same day.
  • If the candidate verbally accepted the offer, the recruiter sent an official offer the same day.
  • When the candidate signed the offer, the recruiter notified the hiring manager on the same day.
  • Boomerang offers were shared with the pre-boarding team to expedite employee start dates and return caregivers to the floor faster.

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