Average salary expense at U.S. hospitals

Staffing during the Great Recession affected numerous industries, including the healthcare industry. Rising salary expenses and costs for contracted labor especially made an impact on hospitals and their financial spreadsheets.

In this Healthcare Insight, we review average salary and labor expenses at U.S. hospitals and compare metrics by hospital bed size and location.

What is the average hospital salary expense?

Based on data from more than 3,600 hospitals in the Definitive Healthcare HospitalView product, the average salary expense in 2021 for U.S. hospitals was $101.3 million. Data used in this analysis is from the October 2022 Medicare Cost Report release.

Fig. 1 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the October 2022 Medicare Cost Report release. Results based on 3,675 U.S. hospitals with a reported salary expense. Accessed November 2022.

How much do hospital salary expenses increase each year?

Hospital salary expenses have increased by about 4% on average annually from 2017 to 2021. In comparison, hospital expenses have risen about 5% each year in the same timeframe. Salary and labor expenses make up about half of a hospital’s total operating expenses.

Salary expenses by hospital bed size

Fig. 2 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the October 2022 Medicare Cost Report release. Results based on 3,675 U.S. hospitals with a reported salary expense. Accessed November 2022.

Hospitals with 25 beds or fewer spent on average about $14 million on salary expenses in 2021 compared to hospitals with more than 250 beds that spent more than $281 million on average.

Hospitals with more than 250 beds had the highest average annual increase in salary expense since 2017 at more than 4%.

Interestingly, salary expenses made up a smaller portion of total operating expenses for these large hospitals – 35% for hospitals with more than 250 beds compared to 42% for hospitals with 25 beds or fewer. The large physical size of these hospitals with a high bed count, as well as their higher operating expenses, likely contribute to this trend.

Salary expenses by region

Fig. 3 Data is from the Definitive Healthcare HospitalView product. Data is sourced from the October 2022 Medicare Cost Report release. Results based on 3,675 U.S. hospitals with a reported salary expense. Accessed November 2022.

Hospitals in the northeastern United States have the highest salary expenses, with an average of $149.8 million reported in 2021. Factors such as large cities and states with high costs of living in the region affect this high average.

Between 2017 and 2021, hospitals in the west had the highest average annual increase in salary expenses at 4.9%.

Salary expense is more than half of the hospital’s overall operating expense in the midwestern and western U.S. Hospitals in these regions have salary expenses of 57.6% of operating expense and 52.6%, respectively.

Which hospital departments have the highest salaries?

In addition to the total salary expenses, HospitalView tracks a number of cost center and departmental level salaries.

The top five cost centers based on average hospital salaries are:

• Adult and Pediatric Salary Costs: $13.1 million
• Clinic Salary Costs: $9.4 million
• ICU Salary Costs: $6.3 million
• Coronary Salary Costs: $5.4 million
• Operating Room Salary Costs: $5.1 million

Some of these departmental salaries are similar to the specialties of the highest paid physicians in U.S. including cardiologists and surgeons.

What is included in hospital salary expenses?

Hospital salary expenses are sourced from the Medicare Cost Report and include direct salaries and wages, amounts for related paid vacation, holiday, sick leave, other paid time off, severance pay, and bonus pay paid to hospital employees.

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Healthcare Insights are developed with healthcare commercial intelligence from the Definitive Healthcare platform. Want even more insights? Start a free trial now and get access to the latest healthcare commercial intelligence on hospitals, physicians and other healthcare providers.