How hospitals are gaining operational control by utilizing local talent and technology | Viewpoint

Hospitals are rethinking their approach to workforce strategy.

For years, travel nursing was the go-to solution for filling staffing gaps, but its high costs and reactive nature have proven unsustainable. The market peaked at $43.7 billion in 2022, dropped to $28 billion in 2023, and is expected to level off at $19.5 billion this year. While spending is declining, travel nurse rates remain historically high, with the national average still exceeding $90 per hour—well above pre-pandemic levels.

At the same time, the nursing shortage is growing, with projections showing a shortage of between 200,000 to 450,000 nurses available for direct patient care. This shortfall will continue to push hospitals to lean heavily on expensive travel nursing agencies, creating a dependency that strains budgets and undermines long-term workforce stability.

Because healthcare shortages vary by state, the most effective solutions are those implemented locally. Arizona is projected to have the largest deficit, with Washington, Georgia, and California also facing significant shortages.

To address these challenges, hospitals are adopting smarter strategies that leverage local talent, operational data, and workforce optimization. By using technology to manage internal float pools and local per diem staff, healthcare systems are improving retention, reducing costs, and achieving better outcomes.

The high costs of travel nursing

Travel nursing operates in cycles. When rates rise, recruiters convince local nurses to take short-term contracts elsewhere, leaving gaps that hospitals must backfill at premium rates. Even now, some hospitals are paying 300% more for travel nurses than pre-pandemic, a financial burden that is unsustainable for systems operating on razor-thin margins.

Meanwhile, staffing agencies remain bullish on travel nursing. Medical Solutions recently reported a 13% increase in demand, and AMN anticipates rising rates in 2025. While this benefits travel companies, it’s a warning sign for hospitals: without changes, labor costs will continue to climb.

Every travel nurse starts as a local nurse. By offering flexible per diem opportunities, hospitals can retain local talent and avoid paying premium travel rates.

The case for per diem nursing

To regain control, hospitals are looking to their local workforce and per diem nursing. Unlike travel nursing, per diem pools use local talent to fill short-term needs. This approach provides flexibility without the high costs of long-term commitments.

Why per diem works:

• Lower costs: Per diem nurses cost 15–20% less than travel nurses.

• Community retention: Cultivates the local workforce, strengthens care teams and reduces turnover.

• Flexibility: Hospitals can scale staffing in real-time to meet demand.

By investing in per diem nursing, hospitals can reduce costs while improving workforce stability. Per diem costs also remain aligned with local full-time salaries, avoiding the volatility of travel rates.

Workforce optimization through technology

Hospitals are leveraging advanced analytics and AI to gain greater control over workforce management. Predictive and prescriptive tools align staffing with patient demand, improving care quality, employee satisfaction, and reducing turnover.

According to Kauffman-Hall’s 2025 Trends Report, healthcare leaders are prioritizing these technologies to close operational gaps, streamline staffing, and optimize resources—strategies that enhance patient outcomes, lower turnover, and reduce labor costs.

With these technologies, hospitals are able to accurately forecast patient volumes, streamline scheduling, and cut back on costly overtime or reliance on contingent labor when appropriate. Organizations that adopt these tools have seen improvements in nurse-to-patient ratios, reduced burnout, and labor cost savings.

Hospitals seeking to move away from travel-heavy models can focus on three steps:

1. Adopt scheduling apps: Enable local nurses to pick up shifts directly, filling gaps before relying on external staffing.
2. Build per diem pools: Invest in flexible, local labor to scale with your facility’s needs.
3. Leverage analytics: Use predictive tools to align staffing with demand and reduce inefficiencies.

A smarter path forward

The future of healthcare staffing depends on finding sustainable, flexible solutions that help hospitals manage their workforce more effectively.

By adopting tools that optimize staffing and investing in adaptable models, hospitals can reduce costs, enhance patient care, and create a better work environment for their teams.

Todd Walrath is the CEO of ShiftMed.