State Lawmakers Target Travel Nurse Agencies

During the worst of the coronavirus pandemic, travel nurses made national headlines for earning double or triple what nurses employed by health systems were making. Now some states are considering legislation to regulate travel nurse and other healthcare staffing agencies, including how much they can charge for their personnel.

Travel Nurses Draw Unfavorable Attention

In early September 2021, when the nation was averaging over 160,000 coronavirus cases a day, Newsweek reported that travel nurses were making an average of $3,000 to $5,000 per week, up sharply from the $1,000 to $2,000 a week they were averaging before the pandemic began.

Travel nurse agencies were charging hospitals in Kansas City, Missouri $165 to $170 an hour per nurse, according to Charlie Shields, CEO of Truman Medical Centers. Shields said a big chunk of that money was going to the agencies, with the nurses likely clearing $70 to $90 an hour, still two to three times what hospital staff nurses were earning.

“I think clearly people are taking advantage of the demand that is out there,” he said. “I hate to use ‘gouged’ as a description, but we are clearly paying a premium and allowing people to have fairly high profit margins.”

The huge demand for travel nurses not only drove up hospitals’ labor costs but also worsened chronic nursing workforce challenges. The Newsweek report referenced a hospital in Georgia where some weeks 20 to 30 nurses would quit to take jobs with traveling nurse agencies.

“Small to medium-sized hospitals generally have dozens of full-time openings, and the large health systems have hundreds of full-time openings,” James Quick, President of healthcare staffing firm SimpliFi, told the publication.

Crisis Has Eased but Staffing Issues Remain

The number of COVID-19 cases and hospitalizations are well down from where they’ve been but staffing shortages and labor costs remain major issues for hospitals and nursing homes nationwide.

An analysis released last month by the American Hospital Association projected that hospital and health system margins this year would be down at least 37 percent - and as much as 133 percent - from pre-pandemic levels, largely because of higher labor costs. The analysis projected labor costs would be $57 billion higher than last year, with $29 billion of that sum coming from contract labor expenses. The analysis also noted that contract labor costs were already 500 percent higher than before the pandemic.

States Putting Reins on Staffing Agencies

Lawmakers in at least 14 states have introduced legislation in the 2021-2022 biennium aimed at regulating travel nurse or healthcare staffing agencies, six of which have been enacted. A few of the measures, including enactments in Iowa (HB 2521) and Louisiana (HB 958), impose licensing, registration or other requirements on such agencies.

Most of the bills go further by addressing travel nurse pay specifically. For instance, Connecticut HB 5313, enacted in May, directs the state Commissioner of Social Services to evaluate the rates temporary nursing services agencies charge nursing homes to determine whether changes are needed to ensure nursing homes have enough nurses. Oregon SB 1549, enacted in March, similarly directs the Oregon Health Authority to establish a process for determining annual rates temporary staffing agencies can charge.

Several other measures go further still, actually placing restrictions on how much staffing agencies can charge, generally tied to fair market rates. The majority of these bills have failed. But one that’s still pending is Ohio HB 466, which would prohibit staffing agencies from billing healthcare providers at rates higher than 150 percent of the statewide median hourly wage for the particular category of personnel they provide.

At least a couple of bills alternatively target staffing agency profit margins. Illinois HB 4666, enacted in May, requires nurse staffing agencies that fail to pay their nurses 100 percent of the hourly rate they charge health care facilities to reimburse those nurses and pay a penalty of 5 percent of the amount the nurses were underpaid.

A bill pending in Michigan (HB 6364) would prohibit travel nurse agencies from charging healthcare facilities over 25 percent more than the agencies pay their nurses.

Mark Kopson, a partner at Plunkett Cooney’s who represents healthcare systems, medical practices and other industry organizations, described the measure as a potential “tempest in a tea cup,” according to a report by Crain’s Detroit Business. Because the bill doesn’t closely tie travel nurse pay to prevailing market rates and provides no guarantee that agencies will actually reduce how much they charge, it could end up encouraging agencies to raise their rates even higher to maximize their margins.

Melissa Samuel, president and CEO of the Health Care Association of Michigan, which helped draft HB 6364, said the bill was “nuanced because we didn’t want to cap what the employees can make.”

“We’re really just dipping our toes in on this to get a dialogue started,” she said. “We need framework around a regulatory structure for these companies. It is clear we need to do something here and getting what is happening exposure is part of it.”

Along with the bills regulating nurse and healthcare staffing agencies, Tennessee enacted a bill (SB 2463) providing for a study of such agencies. Travel nurse agency study legislation is also pending in Congress (H 8576/S 4352). And New York is considering legislation (AB 1461, SB 4565) that would prohibit price gouging in general during a state of emergency.

It remains to be seen which of the various approaches states are taking on the issue will gain the most traction. But with nurse contract labor costs and workforce shortages threatening the financial viability of health systems, efforts to regulate nurse and healthcare staffing agencies are sure to continue.

-- By KOREY CLARK

States Regulating Nurse, Healthcare Staffing Agencies

Lawmakers in at least 14 states have introduced legislation in the 2021-2022 biennium dealing with the regulation of travel nurse or healthcare staffing agencies, six of which have been enacted. Several of the measures go beyond imposing licensing or other requirements on such agencies by restricting staffing agency pay. Tennessee also enacted a bill (SB 2463) providing for a study of such agencies, and New York introduced legislation (AB 1461, SB 4565) prohibiting price gouging in general during a state of emergency.