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Hospitals eye increases to treatment costs as nurses’ salaries rise

Written on May 27, 2022

Hospitals dealing with rising nurse salaries are seeking to raise prices by up to 15%, leading to contract fights with health insurers and businesses and possibly leading to higher premiums. 

It is estimated that hospitals are asking to increase their prices by 7.5% to 15%. 

The requests are more than the 4% to 6% price increases that hospitals typically seek, according to employers and insurers. The hospitals usually won an average 3% price increase in recent years, according to Altarum, a nonprofit that does health care research. 

If hospitals win the bigger price increases, that would likely result in higher premiums for employers and workers; however, insurer and employer groups, which push for lower-cost contracts or negotiate them on behalf of coalitions of businesses, are rejecting the requests. The groups say the priciest hospitals can absorb higher labor costs without raising their rates. 

Employer groups plan to bring to the negotiations emerging hospital-pricing data, including prices that federal law made public last year for the first time. 

Hospitals are one of the primary drivers of U.S. health spending, accounting for $1 trillion a year, according to federal actuaries. Compensating the roughly 1.9 million nurses who work at hospitals nationwide is a big part of their costs. Nurses’ salaries, overtime and bonuses have increased during the pandemic, as the strain pushed some into early retirement while others left for higher-paying temporary jobs traveling to hot spots. 

As of March, average yearly base pay for hospital nurses had reached $86,674, up 9% from $79,172 in June 2021, when the Delta variant took hold in the U.S., according to Premier Inc., a health care consulting, contracting and data-analytics company, which analyzed salaries of about 116,000 nurses. 

Hospitals typically set prices under long-term contracts with insurers and employers. Some negotiations on new contracts won’t open until 2024. The delay will buffer health-spending increases for some employers next year, said employers and analysts, though some insurers say certain hospitals are asking to reopen contracts ahead of schedule to raise rates.