Contract Nurse Agencies Are Making Big Money in the Age of COVID-19. Are They ‘Exploiting’ the Pandemic?

Jennie has spent 40 years as a Registered Nurse. The last two were the most difficult.

A lot of that is due to COVID-19, which transformed health care facilities, including Thomas Health’s hospital system in Charleston, West Virginia, where Kahn works, into triage centers and forced nurses to take on an extraordinary amount of personal risk and heartache. It’s no mystery why some 18.5% of healthcare workers have left the profession.A Morning Consult poll found that they were most likely to lose their job between Sept 2021 and Feb 2020.
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Kahn also says that these two years have been very punishing for hospital staffs because thousands have left their jobs to be contracted travel nurses. Their pay is usually two to fourfold higher. The result has been a vicious circle of costly turnover: hospital administrators, facing shortages in staff nurses, spend a mint hiring contract nurses, which makes them less able or willing to increase their staff nurses’ pay. Staff nurses are leaving to work as contract nurses. This further lowers the nurse supply, and drives up demand for contract nurses. “It is a vicious cycle,” says Kahn, the hospital system’s chief nursing officer.

The prices of contract nurses agencies has risen in the meantime. Prolucent Health reports that travel nurse pay rates have increased 67% in January 2020-2022. AMN Healthcare and other staffing agencies told TIME that travel nurse pay rates at their facilities rose 164% between the fourth quarters of 2019-2021. Some of these agencies’ profit margins top 20%.

Some hospital administrators, many of which saw their facilities’ profits shrivel during COVID, say they’ve reached a crisis point and are calling on Congress and the Biden Administration to step in. Contract nursing agencies, they claim, are profiting off COVID-19. They claim that their rates reflect growing demand. Nurses, meanwhile, argue that hospital administrators, who are somehow finding a way to pay premium rates for contract nurses, could have avoided the mass nurse exodus by paying their staff nurses better and improving working conditions from the start, and that a fragmented nursing force with quick turnover is bad for patients’ health.

This is not an easy solution. Health care facilities, desperate to keep nurses on staff, may have to improve salaries and working conditions, but at many facilities, that’s easier said than done. Long-term care facilities’ bottom line is dictated by Medicare reimbursement and Medicaid reimbursement. At many small- and medium-sized hospitals the costs of personal protective equipment have fluctuated significantly since March 2020.

“This is not anything that any health system can sustain for a long period of time,” says Kahn. “If the rates do not decrease or if travel nursing is not reduced somewhat, hospital systems are going to have to find alternative ways to provide patient care.”

A boom in temporary staffing

Travel nurses have been around for decades and became more widespread in the 1980s, as nursing shortages grew, but it’s really the pandemic that changed the landscape of the profession. Some healthcare facilities have contract nurses almost as widespread as staff nurses.

Jeffrey Tieman, president and CEO of Vermont Association of Hospitals and Health Systems (VAHHS), says that prior to COVID-19, his system used travel nurses “as a stop gap”; now he says they’re “in every department of the hospital every day of the week.” The same is true of Thomas Health, Kahn says. When she first became the hospital system’s chief nursing officer in 2019, the acute care team didn’t rely on traveling nurses at all; these days, about 40% of her acute care nurses are on temporary contracts.

The financial fallout of this trend for hospitals’ and nursing homes is staggering. According to Thomas Health, Thomas Health has a nearly 100% increase in its staffing budget due to contract nurses. Between Fiscal Years 2020 and 2021, VAHHS’s outlay for contract nurses increased $29 million, or 35%, the group says. “As the pandemic picked up and dragged on, the need for nurses intensified when the supply of nurses diminished,” Tieman says.

Depending on contract nurses also creates logistical problems, says Deb Snell, a registered nurse and the president of the Vermont Federation of Nurses & Health Professionals. “It is difficult when you have new people coming in every 12-13 weeks, and orienting them to your floor, making sure they know where equipment is, where meds are, who to call for a problem,” she says. “It’s constant turnover.”

SVAHHS found it difficult to fill vacant positions and was way behind budget in staffing. They reached out to Peter Welch from Vermont to find a solution. On January 24, Morgan Griffith, Virginia and Welch wrote to the White House. The letter was signed by almost 200 members of Congress. In the letter, the Biden Administration is urged to examine the extent that contract nursing agencies exploit the pandemic in order to increase their profits through anticompetitive activities. “We are writing because of our concerns that certain nurse-staffing agencies are taking advantage of these difficult circumstances to increase their profits at the expense of patients and the hospitals that treat them,” the letter says.

Days later, the American Hospital Association and the American Health Care Association/National Center for Assisted Living, the major nursing home trade group, threw their support behind Welch and Griffith, calling on the Administration to help prevent the travel agencies “from exploiting our organizations’ desperate need for health care personnel.”

Travel nurses, meanwhile, were incensed. They appealed to their supporters via social media to contact their congressmen to protect them and their schedules. “Wait, what? They want to cap travel nurse pay but they won’t cap CEO and executive pay? Well… I guess they know who their true masters are, and it sure as hell ain’t the voters,” wrote one Reddit user.

“It’s just because they can get away with it”

Welch says capping contract nurses’ take-home pay was never the intention of his letter. “I never have and never would propose a cap on nursing pay,” he says. “Nurses are the frontline, and they’re overworked, they’re underpaid, and they legitimately point out how the executives get fat salaries while they have to do all this work.”

He says that the main reason hospitals are facing financial difficulties is because of the high fees paid by nurse staffing agencies to send nurses abroad. Proculent Health, a healthcare company’s workforce management tool, estimated that hospitals and other healthcare facilities will be charged an additional 28% to 32% over the wage paid by the agency for contract nurses.

Welch argues these agencies may be exploiting the pandemic’s circumstances at the expense of hospitals, health centers, and the patients who seek care at them. “The fee that the agency charges is not related to any additional work they do, or any value added,” Welch tells TIME. “It’s just because they can get away with it.”

AMN Healthcare Services announced that its fourth-quarter gross profits totaled $434 millions, an increase of 109% over the previous year, in accordance with the annual earnings reports. The net income of the company, which includes all taxes and business expenses, reached $116 million. This is a 1100% increase. Cross Country Healthcare also saw its revenue rise 93% in the three quarters between 2020-2021. It also reached $1 billion in annual revenue for the first time in the company’s history in 2021.

In recent months, private equity firms have begun acquiring contract healthcare staff agencies at a rapid clip, signaling to Welch that investors believe there is even more money to be made off the travel nurse industry in years to come—which would put hospitals under even greater strain. Two private investment companies purchased Medical Solutions in August, one of the biggest healthcare staffing agencies. In January, a private equity-owned staffing company bought Favorite Healthcare.

“Three of the 10 largest staffing agencies—and probably more—were purchased by private equity right around the time that the pandemic began,” Welch says.

According to staffing agencies, the reason why hospitals are charging higher rates for health care is because of the increased wages that agencies pay their nurses to fill the need. In 2020, 75% of revenue nurse staffing agencies made went to wages and the costs of employing nurses, including payroll taxes, worker’s compensation and unemployment insurance payments, and other benefits, says Toby Malara, vice president of government relations for the American Staffing Association (ASA), a trade group for the staffing industry. He adds that most of the association’s nurse staffing agencies have seen their profits remain “relatively stable” during the pandemic.

Nurses worry about pay cuts — for good reason

Many nurses are worried that heightened government scrutiny will result in lower take-home pay for them — and that anxiety is not It is not necessarily unfounded. Some states have already set caps on nurse salaries in certain circumstances, and others are looking at legislative options. Minnesota has a cap on contract nurses working in nursing homes. An RN’s hourly wage during normal hours is $62.36, according the To. Documentation provided by the state’s Department of Health. Massachusetts pays RNs around $120 an hour. At nursing home facilities, the state caps an RN’s pay around $79 per hour, the state’s Executive Office of Health and Human Services Says.

Kansas, Ohio and Oregon are also considering legislation that would cap nursing pay in certain cases. PTimothy Bonner, ennsylvania’s state representative has proposed a bill that will establish travel nursing agency employees maximum rates. These would not exceed 150% of the average state pay for comparable jobs. “[Staffing] agencies have seized on the pandemic and the critical need for workers,” he wrote in a letter to his statehouse colleagues, The following is an extract from the Lewistown Sentinel, “and have raised their hourly rates to 100 percent, 200 percent or even 400 percent above the current median wage rate.”

The White House referred TIME’s questions about how regulatory action against the contract nursing industry would work to the Federal Trade Commission, which did not return a request for comment.

Many nurses believe that arbitrary pay caps for nurses are unjust. The problem is not high pay, they say; it is that there aren’t enough nurses to do an increasingly challenging job for relatively low wages. And while the pandemic exacerbated nurse shortages nationwide, the problem long preceded COVID-19’s added pressures. “Things were already getting tight even prior to the pandemic,” says Snell in Vermont. “Nurses have known and seen this coming for a while. We just couldn’t get people to listen.”

The demographic issue is part of the problem. According to the National Council of State Boards of Nursing survey, the median age of registered nurses in 2020 was 52. With baby boomers now retiring, there will be more need for nurses to replace them. But there’s no lack of interest. According to the American Association of Colleges of Nursing (AAC), enrollment in higher-degree and baccalaureate nursing programs rose in 2020. Nurse practitioner graduate numbers have also increased over recent years. Experts believe that nursing schools may be training more nurses, however, the high cost of school for nursing can pose a problem. Schools are also facing a shortage in nursing teachers.

The biggest factor according to nursing unions and professional organizations is the relative low salary to the difficult work environment. “There is no nursing shortage in the United States. There is a shortage of nurses who are willing to work in these conditions,” says Michelle Mahon, a registered nurse who is assistant director of nursing practice at National Nurses United (NNU), the largest nurses union in the country. “This is something that’s been created by health care employers over a very long period of time.”

NNU frequently criticizes hospitals that it claims have adopted policies of understaffing to increase their profits. Mahon claims that nurses who had high nurse-to-patient ratios suffered from poorer patient care. When the pandemic struck, hospitals who had prioritised cost cutting were left unprepared.

Health care doesn’t operate like a free market

Some nurse unions were able to get raises from big hospital systems in the wake of the pandemic. However, facilities that treat primarily government-insured patients are typically less able to pay. The majority of nursing home staff is paid through Medicare and Medicaid. They say that the rates at which they pay their nurses are determined by the amount the government reimburses each patient. Low-income hospitals can find themselves in similar situations.

Clif Porter (senior vice president for government relations at AHCA/NCAL) estimates that about 70% of nursing home operating costs are related to labor. Despite the fact that facilities were required to pay up to three times their normal wage to employ temporary nurses in response to the pandemics, reimbursement rates for these services haven’t kept up. “I can’t pass on inflation to my customer,” he says. “This creates a situation where our expenses exceed our revenue. It’s just that simple. And that’s just not sustainable.”

Porter says that he doesn’t want maximums for what nurses can make, but floats the idea of a cap on agency profits or regulations that stipulate how much of what a staffing agency charges it must pass on to its workers.

“If the legislation were to directly impact the [agency] overhead, we don’t believe that nurses salaries would be impacted,” says Ernest Grant, president of the American Nurses Association. But the ANA does not support any effort to lower nurse wages, and Grant added that the concern over price gouging has “become quite a distraction.”

Mahon is in agreement, stating that investigating staffing agencies would not resolve the staff shortage. Although the staffing agencies’ rates are not what the hospitals want, Mahon notes that they are able to find the funding. “If there was serious reflection and introspection and desire to solve [the nursing shortage], it would be focused inward by this industry,” Mahon says.

More nurses, better treatment

Nurses groups’ say there are other solutions that could retain and attract a larger workforce. NNU wants to see lower staffing levels, improved workplace safety, and more funding for nursing education. The ANA supports other ideas, such as improving nursing hours and mental support, adjusting Centers for Medicare & Medicaid Services’ payment methods and removing obstacles that hinder nurses practicing. “We really need to address it once and for all, and not just cap it off at this particular time,” Grant says.

Thomas Health, Jennie Kahn’s employer, has increased staff retention by increasing bonus pay, instituting recruitment bonuses and expanding its tuition repayment program. They also started giving their staff meals free at the hospital cafeterias.

The University of Vermont Medical Center, meanwhile, just agreed to raise its nurse’s wages by 20% over two years, with 10% being implemented now and an additional 5% coming in October 2022 and an additional 5% coming in October 2023.

Though Snell says the raises are a positive step toward retaining staff, she’s not certain it is sufficient to stop the bleeding. According to an American Nurses Foundation study, October’s report contained some disturbing findings. Nationally, 21% of nurses are employed According to 29%, they plan on resigning from their job within six months. Another 29% stated that they considered leaving. The University of Vermont Medical Center does not seem to be immune.

“We have a lot of nurses leaving our hospital to go travel,” she says. “I’m hoping the 10% right now will be enough to maybe keep some of them in place.”