In the second quarter, Nashville, Tenn.-based HCA Healthcare saw its net income increase 25% year over year to $1.5 billion, partly due to the health system's success in reducing its contract labor costs.
HCA trimmed its contract labor costs for the period by 25.7%, compared to the second quarter of 2023. Total labor costs for the period were $7.7 billion, up from $7.3 billion in the same quarter last year.
"We continue to see good results in contract labor, which declined 25.7% from the prior year and represented 4.8% of total labor costs," CFO Mike Marks said during HCA's second-quarter earnings call. "We're continuing to see the improvements from all the work we're doing around recruiting and retention, and that's paying the dividends in contract labor."
The health system continues to march down contract labor costs, which skyrocketed for hospitals across the country during the pandemic, and noted that wage inflation has remained relatively stable.
"We expect salary wages and benefits supplies and other operating expenses as a percent of revenue to run mostly where we did June year-to-date," Mr. Marks said. "Contract labor as a percentage of salary wage and benefits is projected to be roughly in the mid-4% range in the back half of 2024. And we do expect professional fee expense growth to the prior year to moderate a bit more in the back half of 2024 as well."
CEO Sam Hazen also noted that contract labor costs tend to drop during this period because some payroll taxes it absorbs in the first quarter are consumed by the end of the first quarter or the early part of the second quarter.
"That tends to improve a little bit of our metrics simply because of the timing of those tax payments," Mr. Hazen said.
HCA's academic affiliation initiatives and its expansion of the Galen School of Nursing — which has 10 campuses across 10 states — have also improved the supply of nurses into its markets. Last spring, the health system invested more than $200 million to open new campuses through the college.
"Our focus now is finding ways to help our employees succeed even more at what they do," Mr. Hazen said. "We are investing in [the] education of our existing workforce just as much as we're investing in education with new nurses and so forth. We are improving our processes around supporting our caregivers so they can deliver better care."
Mr. Hazen also said HCA is investing heavily in its leadership "because good leaders produce good outcomes for our patients and good outcomes for the organization."