Dr Michael Suk, founder and CEO of MDEnvoy, outlines the issues and potential solutions to premium labour bidding practices in hospitals.
On 22 July, UNC Hospitals announced a change to premium nursing shift assignments. Beginning 2 August, nurses could request open shifts at their desired premium rate. While the shift remained open, other eligible staff could request it at lower rates. Shifts would typically be awarded to the lowest bidder, although staffing leaders could consider skills, competencies, and unit needs.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Nurses voiced strong public objections, leading to a reversal within three weeks. UNC Medical Center president Min Lee informed employees that the lowest-bid approach was a mistake, apologised for the confusion, and clarified that although the bidding function remains on the platform, it will not be used at UNC Hospitals.
While the outcome was appropriate, the process was flawed. There was no procurement review, total cost analysis, category strategy, or reserve price. The change resulted from employee backlash and media attention. The function remains in the software, disabled by executive decision, and could be reactivated at UNC or other systems using the same platform.
This mechanism has existed for years. In 2004, Nurse Leader featured Sharp HealthCare’s use of BidShift, which allowed nurses to increase shift rates and have more control over their schedules. The article disclosed that one author was a vendor vice president. The 2004 version enabled upward bidding, while the recent UNC version would have awarded shifts to the lowest bidder. The software is unchanged; only a configuration setting determines price direction.
Procurement teams recognise that reverse auctions add value in some categories but not others. Key screening questions include: can requirements be fully specified before bidding? Is quality verifiable at award? Is there a large, competitive supplier pool? Are switching costs low? Does the relationship have value beyond price?
Premium clinical labour fails four of those five.
Specification
A shift only defines time and location. It does not capture unit familiarity, charge capability, experience, or continuity of patient care. As a result, bids at different prices may reflect fundamentally different offerings, which the auction cannot distinguish.
Quality at award
Manager discretion in the UNC process highlights the specification issue. When buyers reserve the right to reject the lowest bid, it indicates incomplete specifications. Procurement typically interprets this as a need for weighted award criteria or exclusion from auction-based sourcing.
Supplier pool
Reverse auctions rely on independent, replaceable bidders and new entrants. Here, the bidders are employees, so the pool cannot expand. Each nurse who opts out reduces the pool, often starting with the most experienced staff. This results in a workforce that is both less costly and less experienced, though only the cost is immediately visible.
Switching costs
These are significant in hospitals. The “2026 NSI National Health Care Retention and RN Staffing Report” estimates the cost of replacing a bedside registered nurse at around $60,000. With national RN turnover at 17.6%, each percentage point costs the average hospital approximately $295,000 annually, resulting in about $5.2m in annual losses and 43 unfilled RN positions.
Compare these costs to potential savings. If bidding reduces rates by eight dollars an hour across two hundred premium shifts monthly, the annual savings total about $230,000. However, nineteen additional resignations would eliminate these savings and incur an extra $900,000 in costs. The savings are immediate and measurable, while the offset is delayed, less visible, and distributed across recruitment, orientation, agency premiums, and overtime.
Total cost of ownership is a fundamental procurement principle, often used to discourage unit-price focus. However, it is rarely applied to premium labor, as workforce management and human resources typically oversee these decisions rather than procurement professionals.
This division of responsibility creates a governance gap. Labour represents about 60% of hospital expenses, with workforce costs rising 5.6% in 2025. Despite its size, this category receives less structured oversight than much smaller capital purchases.
This approach is not unique to American hospitals. Many health systems globally use internal bank pools and tiered agency rates, administering prices rather than discovering them. Wherever a central office posts shifts to an internal pool, the mechanism operates as it did in North Carolina.
This trend is likely to extend beyond nursing. The factors enabling shift bidding in nursing also exist in medicine. Relative value unit compensation has quantified clinical work for decades. Locum platforms already match rates nationally, representing a $9.6bn market in the US last year. As of January, 82% of American physicians were employed by hospitals or corporate entities, up from 52% in 2018. United States antitrust law, as established in Arizona v. Maricopa County Medical Society (1982), prohibits independent physicians from collectively setting prices. All necessary conditions are present; implementing the software is straightforward.
The economics of physician staffing warrant caution. Recruiting a replacement physician costs at least $150,000 and can exceed $500,000 by speciality. A vacant position may result in $300,000 to $800,000 in lost monthly billings. In any other category, procurement would reject a price-only auction with such high potential losses.
These outcomes do not require bad faith. The original UNC communication suggests the team implemented default platform settings without considering long-term effects on the labor pool. This is a common oversight, which procurement is designed to prevent.
Five actions would improve outcomes: First, determine whether premium clinical labour should be competitively bid and document the rationale. If so, incorporate award criteria that account for skill and unit familiarity, rather than relying on manager discretion. Establish a reserve price to prevent a race to the bottom. Report premium savings alongside twelve-month turnover, vacancy, agency spend, and overtime for the same units, and agree on these metrics before starting the pilot. Finally, monitor pool depth by tracking unique bidders per shift and the experience mix, as declines in participation precede turnover increases.
Hospitals have spent decades professionalising the procurement of supplies and equipment. The largest expense category – labour – deserves the same rigour, yet currently receives the least. At UNC, nurses identified the issue first. Other systems may not have staff who scrutinise such announcements as closely.
