Temp nurses cost hospitals big during pandemic. Lawmakers seek limits.

To crack down on price gouging, proposed legislation in Missouri calls for allowing felony charges against health care staffing agencies that substantially raise their prices during a declared emergency.

A New York bill includes a cap on the amount staffing agencies can charge health care facilities. And a Texas measure would allow civil penalties against such agencies.

These proposed regulations — and others in at least 11 more states, according to the American Staffing Association industry trade group — come after demand for travel nurses, who work temporary assignments at different facilities, surged to unprecedented levels during the worst of the COVID-19 pandemic.

Hospitals have long used temporary workers, who are often employed by third-party agencies, to help fill their staffing needs. But by December 2021, the average weekly travel nurse pay in the country had soared to $3,782, up from $1,896 in January 2020, according to a Becker’s Hospital Review analysis of data from hiring platform Vivian Health. That platform alone listed over 645,000 active travel nurse jobs in the final three months of 2022.

Some traveling intensive care unit nurses commanded $10,000 a week during the worst of the pandemic, prompting burned-out nurses across the country to leave their hospital staff jobs for more lucrative temporary assignments. Desperate hospitals that could afford it offered signing bonuses as high as $40,000 for nurses willing to make multiyear commitments to join their staff instead.

The escalating costs led hospitals and their allies around the country to rally against what they saw as price gouging by staffing agencies. In February 2021, the American Hospital Association urged the Federal Trade Commission to investigate “anticompetitive pricing” by agencies, and, a year later, hundreds of lawmakers urged the White House to do the same.

No substantial federal action has occurred, so states are trying to take the next step. But the resulting regulatory patchwork could pose a different challenge to hospitals in states with rate caps or other restrictive measures, according to Hannah Neprash, a University of Minnesota health care economics professor. Such facilities could find it difficult to hire travel nurses or could face a lower-quality hiring pool during a national crisis than those in neighboring states without such measures, she said.

For example, Massachusetts and Minnesota already had rate caps for temporary nurses before the pandemic but raised and even waived their caps for some staffing agencies during the crisis.

And any new restrictions may meet stiff resistance, as proposed rate caps did in Missouri last year.

As the COVID omicron variant wave began to subside, Missouri legislators considered a proposal that would have set the maximum rate staffing agencies could charge at 150% of the average wage rate of the prior three years plus necessary taxes.

The Missouri Hospital Association, a trade group that represents 140 hospitals across the state, supported the bill as a crackdown on underhanded staffing firms, not on nurses being able to command higher wages, spokesperson Dave Dillon said.

“During the pandemic there were staffing companies who were making a lot of promises and not necessarily delivering,” Dillon said. “It created an opportunity for both profiteering and for bad actors to be able to play in that space.”

Nurses, though, decried what they called government overreach and argued the bill could worsen Missouri’s existing nursing shortages.

Theresa Newbanks, a nurse practitioner, asked legislators to imagine the government attempting to dictate how much a lawyer, electrician, or plumber could make in Missouri. “This would never be allowed,” she testified to the committee considering the bill. “Yet, this is exactly what is happening, right now, to nurses.”

Another of the nearly 30 people who testified against the bill was Michelle Hall, a longtime nurse and hospital nursing leader who started her own staffing agency in 2021, in part, she said, because she was tired of seeing her peers leave the industry over concerns about unsafe staffing ratios and low pay.

“I felt like I had to defend my nurses,” Hall later told KHN. Her nurses usually receive about 80% of the amount she charges, she said.

Typically about 75% of the price charged by a staffing agency to a health care facility goes to costs such as salary, payroll taxes, workers’ compensation programs, unemployment insurance, recruiting, training, certification, and credential verification, said Toby Malara, a vice president at the American Staffing Association trade group.

He said hospital executives have, “without understanding how a staffing firm works,” wrongly assumed price gouging has been occurring. In fact, he said many of his trade group’s members reported decreased profits during the pandemic because of the high compensation nurses were able to command.

While Missouri lawmakers did not pass the rate cap, they did make changes to the regulations governing staffing agencies, including requiring them to report the average amounts charged per health care worker for each personnel category and the average amount paid to those workers. Those reports will not be public, although the state will use them to prepare its own aggregate reports that don’t identify individual agencies.

Hall was not concerned about the reporting requirements but said another of the changes might prompt her to close shop or move her business out of state: Agencies will be barred from collecting compensation when their employees get recruited to work for the facility where they temp.

“It doesn’t matter all the money that I have put out prior, to onboard and train that person,” Hall said.

Dillon called that complaint “pretty rich,” noting that agencies routinely recruit hospital staff members by offering higher pay. “Considering the premium agencies charge for staff, I find it hard to believe that this risk isn’t built into their business model,” he said.

Of course, as the pandemic has waned, the demand for travel nursing has subsided. But pay has yet to drop back to pre-pandemic levels. Average weekly travel nurse pay was $3,077 in January, down 20% year over year but still 62% higher in January 2020, according to reporting on Vivian Health data by Becker’s.

With the acute challenges of the pandemic behind hospitals, Dillon said, health system leaders are eyeing proactive solutions to meet their ongoing workforce challenges, such as raising pay and investing in the nursing workforce pipeline.

A hospital in South Carolina, for example, is offering day care for staffers’ children to help retain them. California lawmakers are considering a $25-per-hour minimum wage for health care workers. And some hospitals have even created their own staffing agencies to reduce their reliance on third-party agencies.

But the momentum to directly address high travel nurse rates hasn’t gone away, as evidenced by the legislative push in Missouri this year.

The latest proposal would apply to certain agencies if a “gross disparity” exists between the prices they charge during an emergency and what they charged before it or what other agencies are currently charging for similar services and if their earnings are at least 15% higher than before the emergency.

Malara said he doesn’t have much of a problem with this year’s bill because it gives agencies the ability to defend their practices and pricing.

Kentucky last year applied its existing price gouging rules to health care staffing agencies. The rules, which set criteria for acceptable prices, allow increases driven by higher labor costs. Malara said if the Missouri bill gains momentum he will point its sponsor to that language and ask her to clarify what constitutes a “gross disparity” in prices.

The sponsor of the bill, Missouri state Sen. Karla Eslinger, a Republican, did not respond to requests for comment on the legislation.

Hall said she is opposed to any rate caps but is ambivalent about Missouri’s new proposal. She said she saw agencies raising their prices from $70 an hour to over $300 while she worked as a hospital nursing leader at the height of the pandemic.

“All these agencies that were price gouging,” Hall said, “all they were doing was putting that money in their own pockets. They weren’t doing anything different or special for their nurses.”