Healthcare leaders are operating in one of the most complex workforce environments the industry has ever faced. Persistent staffing shortages, rising labor costs, clinician burnout, and unpredictable patient demand have made workforce strategy a defining operational and financial challenge.
Executives are being asked to do more with less, while maintaining care quality, controlling spend, and ensuring staffing resiliency. As a result, labor decisions are increasingly evaluated not just by headcount, but by total cost, speed, and long-term sustainability.
Recent findings from the U.S. Nursing, Allied Health, and Therapy Labor Costs Study conducted by KPMG suggest it may be time to reconsider how contingent labor fits into a stable workforce strategy.
Today’s Staffing Reality: Pressure From All Sides
In Medical Solutions’ 2025 Client Feedback Survey, representing responses from 1,308 healthcare leaders:
- 35% reported managing contingent labor cost pressure as their top staffing challenge
- 60% cited filling open positions quickly as a major obstacle in a tight labor market
These pressures are deeply interconnected. Difficulty filling roles quickly often drives higher overtime usage, clinician burnout, and increased reliance on flexible staffing models to maintain coverage and continuity of care.
To understand how these realities translate into actual labor economics, it’s helpful to look beyond internal perceptions and examine independent, industry-wide data.
An Industry-Wide View of Labor Cost
In November 2025, KPMG LLP conducted a comprehensive U.S. labor cost study examining nursing, allied health, and therapy staffing across healthcare organizations nationwide. Commissioned by the National Association of Travel Healthcare Organizations (NATHO), the study was designed to bring more transparency into healthcare labor cost structures.
The research surveyed 100 senior healthcare executives, including CEOs, COOs, CFOs, HR leaders, and nursing leadership. Importantly, the study evaluated fully loaded labor costs, accounting for the full range of expenses required to support both permanent and travel clinicians. This broader view goes well beyond hourly wages or bill rates and captures the true cost of workforce delivery.
Challenging a Common Assumption
A widely held belief in healthcare is that travel clinicians are inherently more expensive than permanent staff. That assumption is understandable when comparisons focus only on visible line items such as hourly wages or bill rates.
However, when labor costs are evaluated alongside productivity, overhead, and time-to-fill, the picture changes.
What the Data Shows: All-In Cost Comparison
KPMG’s analysis found that travel clinicians are often less expensive than permanent staff when all cost components are included.
Average all-in hourly cost:
| Role | Permanent | Travel | Difference |
| Nursing | $94/hr | $89/hr | –5% |
| Allied Health | $65/hr | $59/hr | –9% |
| Therapy | $69/hr | $61/hr | –12% |
While travel roles typically carry higher visible bill rates, the underlying cost structure of permanent labor often outweighs that difference.
What Drives Total Labor Cost
One of the study’s most important insights is that payroll represents only about 60% of the total cost of permanent labor. The remaining 40% is driven by overhead, inefficiency, and time-to-productivity. Several factors contribute to this dynamic.
Non-Productive Paid Time
KPMG found that approximately 10% of permanent nursing labor hours are non-productive, driven by continuing education, annual training, onboarding, and administrative requirements. These costs are necessary but reduce overall labor efficiency.
Attrition & Vacancy Friction
Executives reported an average annual permanent nurse attrition rate of 12%. Attrition creates recurring vacancies that introduce downstream costs, including overtime, burnout among remaining staff, delayed throughput, and prolonged understaffing risk.
Recruitment, Onboarding, & Training Investment
Permanent hiring requires significant upfront and recurring investment. Survey respondents indicated that newly hired permanent nurses complete an average of 150 hours (approximately 19 days) of orientation and training before becoming fully productive. Notably, 41% of facilities reported onboarding programs exceeding 150 hours.
Benefits, Insurance, & Risk Exposure
Permanent roles also carry ongoing expenses related to benefits and insurance, workers’ compensation, malpractice coverage, internal float pools, and compliance risk. These costs are embedded and largely fixed, limiting flexibility during periods of fluctuating demand.
Why Speed & Flexibility Matter
Cost alone does not define workforce performance. Speed-to-fill and operational agility increasingly determine how effectively organizations respond to patient surges, seasonal variability, and unexpected vacancies.
KPMG found that 78% of healthcare organizations filled travel roles within 21 days, with most filled in 8–21 days. By contrast, recruiting, hiring, and fully onboarding permanent staff often takes several months.
Travel clinicians are most frequently deployed in areas with the highest volatility and acuity:
- Nursing: Medical-Surgical, Emergency Department, ICU, Float Pools
- Allied Health: Radiology and laboratory services
- Therapy: Physical and Occupational Therapy
This reflects a strategic use of flexible labor to reduce exposure to inefficiency and care disruption.
What an Effective Workforce Strategy Looks Like
The study also found that healthcare organizations are becoming more intentional about how they manage contingent labor. Out of all respondents, 78% of hospital leaders reported using an MSP-led workforce model rather than a VMS-only approach.
Among Medical Solutions clients, these trends translate into measurable outcomes:
- Only 1 in 4 clients cite managing contingent labor cost pressure as a top concern (compared to 35% market-wide)
- Approximately 90% say cost-effective staffing solutions meet or exceed expectations
- 90%+ report consistently high-quality clinicians
- 95% report roles are filled quickly with minimal cancellations
These outcomes reinforce a key insight from the KPMG study: contingent labor effectiveness is driven by intentional strategy and disciplined management.
A More Complete Way to Think About Labor Cost
Labor cost is influenced by far more than hourly wages. Time to productivity, nonproductive overhead, attrition, and risk exposure all shape total workforce spend.
Managing those factors requires more than staffing coverage alone. Through disciplined contingent labor management and data-driven workforce strategy, Medical Solutions partners with healthcare organizations to help control labor costs while maintaining reliable access to care.
For a closer look at where organizations are seeing measurable improvements in labor efficiency and workforce performance, complete the below form to receive a copy of our Real-World Results: Client Workforce Insights in your email inbox.
