Average 2021 contract labor expenses by state

The ongoing healthcare staffing crisis is pushing providers to adopt new strategies to keep facilities running and maximize patients’ quality of care. Hospitals are working increasingly with contracted labor to fill the gaps in care teams, administration, and other critical roles.

Throughout the COVID-19 pandemic, high demand for travel nurses and other contracted care professionals drove their hourly rates as high as $300 an hour in some areas. While demand seems to have dipped along with COVID-19 hospitalization rates, many hospitals still spend big on contracted labor, and overall hospital labor costs have jumped 40% between 2019 and 2022.

Using data from more than 7,300 hospitals across the U.S., we’ve determined the average contract labor expenditure for each state. Mouse over the map to get a closer look at each state’s average.

Average contract labor expenses in the U.S.

Fig. 1 – Data is from Definitive Healthcare’s HospitalView product. Data is accurate as of November 2022.

Which states had the highest average contracted labor expenses?

North Dakota hospitals lead the U.S. in contracted labor expenses, with an average of $24.3 million spent on contracted labor in 2021. As the nation’s third least populous and fourth most sparsely populated state, North Dakota’s hospitals cover broad swaths of patients with fewer concentrated pools of local healthcare talent to draw from, and thus may rely increasingly on contracted staff and locum tenens professionals.

California has the second-highest average contracted labor expenses in the U.S. at $19.5 million in 2021. While California is home to some rural regions that face the same talent pool issues as North Dakota, it also encounters a unique problem: As the country’s most populous state—with about 38 million more residents than North Dakota—California’s densely populated cities produce massive patient bases within concentrated areas. Contracted labor helps local staff meet the demands of these rapidly growing populations.

Third on the list is Washington D.C., with $17.8 million in average contracted labor expenses. While D.C. spends the least on healthcare as a portion of its gross state product of any state in the nation (about 6.3%), it spends more of that money on hospital care than the national average (about 47.8% vs. 36.3%).

What are the advantages of contracted labor?

For hospitals, contracted labor provides a number of advantages over staffed employees, especially in the face of short-term or immediate need.

While contracted healthcare professionals generally cost more on an hourly basis than their fully employed peers, they can reduce long-term labor costs when employed for shorter periods when demand is highest. They also won’t require the training and development expenditures of full-time staff, and their benefits may be limited—or covered by a staffing agency.

Contracted labor is also quicker to hire, as talent can be selected for expertise or technical skill alone, rather than long-term cohesion with the team or company culture. As a contracted professional will likely have worked in a variety of diverse settings, they may bring unique perspectives and skill sets to the facility.

Ultimately, contracted labor enables hospitals to operate more flexibly and scale up or down to meet demands as they arise.

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