Emergency Department Labor Costs Up 50% From Pre-Pandemic Levels

March 17, 2023 - Hospital expenses remain high in 2023, with emergency department labor costs in particular increasing 50 percent from pre-pandemic levels, according to a report from Syntellis Performance Solutions.

The Syntellis Performance Trends Healthcare report reflects data from more than 135,000 physicians from over 10,000 practices and over 1,300 hospitals.

Hospitals and health systems started 2023 with a 2 percent year-over-year increase in total expenses and a 4.8 percent year-over-year increase in total non-labor expenses. Total labor expenses grew just 0.6 percent from January 2022, when labor expenses peaked due to staffing shortages and a jump in contract labor costs.

Between December 2022 and January 2023, total expenses and non-labor expenses were down by 0.1 percent and 1.3 percent, respectively, while total labor expenses increased by 1.4 percent.

“Our data from the first month of 2023 indicates this will be another challenging year for the healthcare industry,” Steve Wasson, executive vice president and general manager for Data and Intelligence Solutions at Syntellis, said in the press release.

“High labor costs are the new normal for the nation’s hospitals, as illustrated by escalating labor expenses in emergency departments nationwide. Ongoing labor shortages have only exacerbated long-running staffing issues in EDs, driving up hourly rates for nurses and other ED labor costs.”

Emergency department (ED) labor expenses have increased significantly over the last three years, despite overall volume declines. As of January 2023, the median national ED labor expense per visit was up 49.9 percent compared to January 2020, while ED visits fell by 9.5 percent.

Between January 2019 and January 2023, labor expenses per ED visit ranged from $117 in May 2019 to $230 in February 2022, when the Omicron surge occurred. In January 2023, labor expense per ED visit was $186 nationwide. Hospitals in the West had the highest ED labor expenses at $260 per visit, while labor expenses were $153 per visit in the South.

Hourly wages for registered nurses (RNs) represented a large share of overall ED labor costs, the report noted. The median hourly rate for employed and contract RNs was $42.24 in January 2023, up 4 percent from 2022 and 19 percent from 2020.

The RN hourly rate was the highest for EDs in the West at $45.84, up 3 percent from 2022 and 15 percent from 2020. EDs in the South had the lowest RN hourly rate at $39.46, but this figure was up 23 percent from 2020.

Physician expenses also grew, with the total direct expense per physician full-time equivalent (FTE) at $922,417 for November 2022 to January 2023, compared to $816,219 in 2021. Physician productivity increased by 7.3 percent from 2021 but decreased only slightly from 2022.

Investment per physician FTE was $252,358 between November 2022 and January 2023, rising 7.7 percent from 2021 and 2.9 percent from 2022.

Despite rising expenses, hospital operating margins increased year-over-year in January for the first time since December 2021. Compared to January 2022, operating margins were up 3.7 percentage points. However, the median change in operating margin was down 2.2 percentage points compared to December 2022.

Gross operating revenue increased 10.1 percent year-over-year, primarily due to an 18.7 percent year-over-year increase in outpatient revenue. Between December 2022 and January 2023, gross operating revenue rose 2 percent and outpatient revenue grew 2.7 percent.

After three years of financial challenges stemming from the COVID-19 pandemic, hospitals and health systems will likely face another difficult year in 2023 due to inflation and ongoing staffing shortages, experts projected.