The overtime and agency premium

Why the cost of a sitter is your floor, not your number.

This series began with an overview of a term we introduced: Patient Liability and Grievous Loss (PLGL). We then began to size the cost of risk within a behavioral health hospital, with its two pieces: the run rate and the tail. In the previous piece, we covered how to calculate the run rate.

By sizing it, we said we would give you a clear view of what “watching” costs in your facility. Now that you have done the initial math on the cost of a sitter, let’s recognize that the number is likely your floor. The reality is that it is a lot more than you’re budgeting for.

Before we dive in, let’s look at what is happening in the behavioral health labor market.

The behavioral health labor crisis: Turnover and workplace safety

Today’s environment would stretch any operator. Behavioral health carries the highest turnover of any nursing specialty, 22.5% in 2025, ahead of the ER at 20.7% (Becker’s Hospital Review). Why? One reason is that 76% of psychiatric nurses reported verbal threats or aggressive language at work in the past year (Nurse.org 2026 State of Nursing Survey).

The high cost of unplanned 1:1 observations and nurse burnout

And the people most exposed are the ones doing the watching. Psychiatric aides and techs, who cover most 1:1 observations, face workplace violence at many times the national rate. That matters because 1:1s are not a rounding error: an estimated 13 to 16% of psychiatric inpatients are placed on continuous observation at some point in their stay, and constant observation can consume up to a fifth of a psychiatric hospital’s nursing budget. Every unplanned 1:1 pulls a staff member off the floor mid-shift. In a market this tight, where each nurse who leaves costs over $60,000 to replace, that gap is almost always filled the expensive way, through overtime or agency.

We’ve seen that the real economics are tough to track because the business is unpredictable. A constant observation order can land at 3am with no warning, on a unit that cannot pull a staff member from a lower-acuity flow, and what you budgeted for the overnight shift is swamped.

Comparing overtime vs. staffing agency rates in psychiatric facilities

What we can do, though, is baseline the costs.

Start with the baseline. A staff RN costs roughly $50 an hour in wages (BLS, via Becker’s); add benefits at around 50% and a fully loaded hour runs about $75. Overtime is paid at 1.5x the regular rate past 40 hours in a workweek for non-exempt staff, so every overtime hour costs at least $75 in wages alone, before payroll taxes. Agency is starker still. Illinois public reporting for Cook County (June 2024 to May 2025) shows agencies charging facilities an average of $110.89 an hour for an RN, while paying the nurse $78.79. That is more than double the base wage, and roughly 50% above a fully loaded staff hour, for someone who does not know your unit, your patients, or your protocols.

Put simply, an hour covered by agency costs more than twice the base wage it replaces, and an overtime hour costs half as much again.

When you look at your budgeting, are you covering the full picture?

If not, are you trying to staff shifts to a level of safety you are held accountable for, with an agency team you don’t know, at a cost you are not capturing?

Why demand unpredictability drives continuous observation costs

Let’s come back to the fundamental reality: running a behavioral health hospital is hard work.

And the dollars add up quickly. One 591-bed general hospital in the New York City metro area spent $2.3M on sitters in 2014. That is one facility, a general hospital rather than a psychiatric one, and over a decade ago. I don’t think it is an isolated case, and the cost has almost certainly risen since.

This is the real impact that is hard to see during the budgeting process: unplanned overtime, over-budget agency spend, or your best nurse off the floor for three hours. Those all cost you something.

I would argue that the cost isn’t the sitter. You know that number. The cost is the business’s unpredictability. Observation demand fluctuates with census, season, and behavioral health volumes. You budget and size staffing pools for average demand, not peak periods.

Augmenting staff with technology: A predictable alternative to agency sitters

How do you adjust for the peak, then? What can you do to actively reduce observation hours? What if you could shift the dollars spent on unplanned, premium-priced hourly rates to fixed, budgetable expenses?

Not surprisingly, we see the answer not as adding more sitters through agency spend, but as augmenting your staff with innovation. Running a great hospital is about creating a managed environment with clear spend that enables an excellent patient and staff experience.

And there is a better way to do that, today.

Author: Todd Haedrich, CEO, LIO