Healthcare labor costs have reached an all-time high. A 2024 analysis by the American Hospital Association found that hospitals’ labor costs increased by more than $42.5 billion between 2021 and 2023. Total labor expenses reached $839 billion and now account for nearly 60% of average hospital operating costs. That number climbs even higher for hospitals that rely heavily on contingent staff without centralized workforce planning. Meanwhile, rural and community hospitals continue to struggle with inconsistent reimbursement, leaving leadership teams under pressure to find new ways to control spending while protecting care quality.
A Managed Service Provider (MSP) staffing model offers a practical and proven approach. By consolidating all contingent labor into a single managed program, hospitals gain visibility, reduce administrative complexity, and improve cost predictability across their entire staffing supply chain. For hospitals seeking greater workforce efficiency, an MSP model delivers both savings and structure
Why Staffing Costs Keep Rising
Traditional hiring models no longer meet the financial and operational needs of most hospitals. The staffing marketplace has become more fragmented, with dozens of vendors competing for contracts and limited internal resources to oversee the process. That leads to inconsistent rates, duplicated efforts, and delayed placements.
In many cases, hospitals pay more to fill shifts quickly without having a clear view of total labor spend. Over time, this reactive approach adds financial strain and reduces workforce stability. An MSP model helps resolve these challenges through centralization and strategic oversight.
How an MSP Model Improves Cost Control
An MSP partner takes on responsibility for managing the hospital’s entire contingent workforce. That includes sourcing, vetting, credentialing, scheduling, and rate negotiations. By consolidating these activities under one program, hospitals can align staffing costs with actual demand, eliminate inflated markups, and reduce agency overuse.
MSP partners also leverage data to uncover hidden costs. They track fill rates, bill rates, time to fill, and usage trends to identify areas where the hospital may be overspending or underutilizing internal staff. These insights allow hospital leaders to make informed decisions and redirect resources where they are needed most.
Instead of chasing open shifts with a dozen separate vendors, administrators work with one dedicated team that brings transparency, accountability, and proven results.
Boosting Operational Efficiency Without Sacrificing Care
One of the biggest concerns in any cost-cutting effort is the potential impact on patient care. An effective MSP model ensures that quality remains at the center of workforce planning. The provider screens all candidates thoroughly and tailors placements to each hospital’s clinical needs and culture.
This approach reduces onboarding time, lowers staff turnover, and ensures coverage continuity. When hospitals can rely on consistent staffing support, their internal teams experience less burnout and patients benefit from better outcomes.
In facilities where reimbursement lags rising costs, even small improvements in staffing efficiency can make a meaningful financial difference.
A Smarter Way Forward
Workforce expenses will always be one of the largest parts of a hospital’s budget. What matters is how well those dollars are managed. With MSP staffing, hospitals gain more control, access to better data, and a stronger return on investment. Supplemental Health Care offers MSP solutions tailored to meet the specific needs of hospitals. If your organization is ready to enhance efficiency and reduce labor costs, connect with our team to explore how MSP staffing can deliver measurable impact.
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