Saum Sutaria, MD, CEO of Tenet Healthcare, mentioned at the beginning of the year the system's strategy would focus on hiring and retention, and reduce reliance on contract labor. During an Oct. 30 third quarter earnings call, he discussed the early results.
Dr. Sutaria said the system has improved nurse retention and accelerated hiring over the last three quarters while reducing reliance on contract labor without cutting capacity. During the third quarter, Tenet's contract labor dropped to near pre-pandemic levels of 3.1% of consolidated salary, wages and benefits. The system cut contract nurse staffing costs 60% year over year in the quarter.
"Given our progress in hiring and retention, the reductions in contract labor did not come at the expense of further capacity reductions," said Dr. Sutaria during the third quarter earnings call Oct. 30, as transcribed by Seeking Alpha. "We reached these levels in advance of our own projections through disciplined data-driven processes. We will balance the utilization of contract labor for nurses with our targeted strategies to increase capacity to support patient demand for high acuity services."
Dr. Sutaria said Tenet may decide to invest in "additional resources" if demand for care increases but will be disciplined about using contract labor.
Beyond contract labor reduction, Dr. Sutaria is also optimistic about settling contract disputes with unions. Industrywide, nurse and healthcare worker unions have held multiple strikes this year to advocate for higher pay and workplace safety, among other conditions. In late September, members of SEIU United Healthcare Workers West, representing around 4,000 Tenet employees at 11 facilities in California authorized a strike after the workers' contracts expired June 30.
Tenet told Becker's it provided SEIU with a "competitive initial wage offer" which would have been among the highest increases of SEIU-represented employees, but the sides have been unable to agree on a new contract.
"Over the last two years, we have successfully settled over 30 labor union contract negotiations," said Dr. Sutaria during the earnings call. "These require a delicate balance between understanding our employees' needs and our ability to have a cost structure to deliver affordable care for our patients. We will continue with our strategy to balance those two aspects."
Daniel Cancelmi, CFO of Tenet Healthcare, said the system's strategy around labor management and containing temporary contract nurse staffing costs has been effective.
Salary, wages and benefits were 45.2% of revenue, down from 46.4% in the third quarter of 2022 and 47.6% in the third quarter of 2019. However, going forward there are challenges. California's recent legislation to increase minimum wage for healthcare workers to $25 per hour will impact the system, which has multiple locations in the state. Florida's new regulations around workers compensation and personal injury reimbursement, and the government dropping COVID-related funding programs will also have a negative impact on the system.
Mr. Cancelmi said these new policies represent $100 million in headwinds for Tenet, but he expects earnings growth to offset the headwinds.
Dr. Sutaria is taking a pragmatic approach to potential future challenges.
"There are things that complicate that environment in the middle of the wage bill in California being passed, but that's just something that we're going to work on with our employees and the union, and we'll move past that at some point," he said.