Not since the Affordable Care Act have ASA and its members faced a regulatory challenge more complex, widespread, and daunting as this year’s legislative assault on nurse staffing agencies. Squeezed by the rising cost of nursing services and the limits on their government reimbursement, hospitals, nursing homes, and assisted living facilities have unfairly lashed out at nurse staffing agencies complaining of abusive pricing and urging federal and state regulators to act.
Since the start of the year, bills aimed at reining in the cost of nurse staffing services and regulating how agencies providing those services can operate have been introduced in 11 states—California, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Ohio, Oregon, and Pennsylvania. At the federal level, national hospital and long-term care associations have urged Congress, the White House, and the U.S. Federal Trade Commission to investigate whether nurse staffing agencies should be regulated, despite their nurses making up less than 2% of the U.S. nurse population and thus having a nominal effect on the nationwide cost of nursing services.
To defend against the onslaught, ASA staff and its outside lobbyists, along with a broad coalition of nurse staffing agencies, have engaged with federal and state policymakers—and with groups arguing for regulation—in a multifront effort to address their concerns. Although some of the proposals are relatively benign, ASA has strongly opposed more draconian proposals, such as price caps, that would arbitrarily and unjustifiably limit what agencies can charge for their services. The battle is not over but, to date, no state has adopted rate caps, nor has any federal regulatory action been taken.
Unique Factors Affecting Nursing Staffing Costs
Nurse staffing costs rose due to the Covid-driven demand for nurses and the shortage of nurses—which Covid conditions made worse. Stress and overwork, physical danger, and travel nurses’ extended periods away from home led to burnout, long leaves of absence, and retirements. This supply–demand imbalance required nurse staffing agencies to offer much higher wages to attract and retain nurses—driving up the price of their services.
The state proposals to cap agency prices have focused solely on price, largely ignoring all the costs that agencies incur in providing their services that must be reflected in the price for the firm to operate profitably. In addition to wages, agencies provide benefits and pay other labor-related costs like payroll taxes; employee screening; professional liability, workers’ compensation, and unemployment insurance; travel, meal, and housing costs; plus overhead expenses like marketing, rent, equipment, and administration—not to mention interest, depreciation, taxes, and amortization costs. A few proposals consider some of those costs, but still would impose arbitrary percentage limits on agency profit margins and burden agencies and regulators with unnecessary compliance costs. In some cases, the caps are so onerous that agencies simply could not continue to operate profitably.
Price controls are bad public policy. History shows that they always distort markets, and most of the proposed rate caps would preclude agencies from paying market wage rates—forcing nurses to seek higher wages in other states or leave the profession entirely, to the detriment of patients. Instead of across-the-board caps, ASA and its members are exploring approaches that would allow state regulators to address specific complaints of pricing abuses on a case-by-case basis.
While Revenue Grew, Nurse Staffing Agency Earnings Have Been Stable During the Pandemic
Industry-wide rate caps are demonstrably unneeded because even though the increase in demand for nurses drove up staffing agency revenues, firms’ earnings have been relatively stable. In fact, according to a survey of travel nurse agencies by Staffing Industry Analysts and 2021 public company data, agency gross profit margins (revenue minus the direct cost of services) actually declined because increases in bill rates were offset by higher nurse wages. Another factor moderating earnings was that more than 70% of travel nurse revenue, according to the survey, was generated through third-party buying arrangements (managed service providers, or MSPs), which health care facilities use to lower their staffing costs and to help them focus on their core mission—patient care.
Fortunately, policymakers are listening to the industry’s arguments against rate caps. Some long-term care leaders ASA has met with also have acknowledged that rate caps are not the answer. Nurse groups have weighed in strongly against such caps, arguing persuasively that they would effectively act as a cap on nurses’ wages, which no one supports—and that, by discouraging agencies from doing business in a state, rate caps would deprive nurses of the flexible work arrangements they prefer and that agencies provide. As a result of these efforts, no state rate cap proposal has thus far been enacted.
Other Proposals
Although price caps are the main concern, the bills include other proposals that would impose new regulatory requirements on nurse staffing agencies similar to laws that have been on the books for years in several states (see existing laws on the ASA website). The proposals include licensing and registration provisions requiring the payment of fees, provisions to ensure that health care personnel are properly screened and credentialed, prohibitions on charging health care facilities “conversion fees” when the facility hires agency employees, and periodic reporting of wage and bill rate data to the state.
Members of the nurse agency coalition working with ASA on these proposals have had little concern with the licensing and registration proposals because agencies already comply with those requirements. But several of the bills had to be amended to allow agencies to charge conversion fees, payable on a sliding scale based on the hours employees work on the agency’s payroll. ASA also successfully lobbied to ensure that agencies are protected against public disclosure of any proprietary wage and bill rate information they may be required to report to a state. To help defeat rate cap proposals and to show good faith, ASA has supported anti-poaching provisions barring agencies from directly soliciting the on-site employees of a health care facility—a common complaint.
Solutions
While rate caps are the wrong solution and would aggravate the nursing shortage, several steps can be taken to constructively address the cost of nurse staffing without imposing costly, complex, and burdensome regulations. ASA will be working with policymakers and health care facilities on ways to address that issue.
- Increase the supply of nurses. Increase investment in nursing schools and teachers so more students can achieve their dreams of becoming nurses; remove state licensing barriers so nurses can work across state lines to meet demand; reform immigration rules to allow more foreign nurses to work in the U.S.
- Increase facility reimbursement rates. Medicare and Medicaid reimbursement rates should be increased to relieve financial pressure on health care facilities.
- Foster agency competition. Thousands of nurse staffing agencies compete vigorously across the country for clients and nurses. Hospitals and nursing homes should be urged to aggressively shop for the best price among the agencies in the market.
For detailed information on the specific nurse staffing proposals in a state, contact Toby Malara, ASA vice president, government relations, at tmalara@americanstaffing.net. Media inquiries should be directed to Megan Sweeney, ASA director, public relations, at msweeney@americanstaffing.net.
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