ShiftMed CEO Weighs in on Rate Hikes, Nursing Home Staffing Supply and Demand

Established staffing agencies have had to rethink – and defend – their relationship with skilled nursing operators at this point in the pandemic, with opportunistic players entering the space and rates doubling during a historic staffing crisis.

ShiftMed CEO Todd Walrath said the agency’s relationship has gotten a lot more “strategic”, in terms of keeping a constant stream of communication to see what providers need from them.

The McLean, Virginia-based staffing agency has been working “the other side of the ledger” too, lowering rates to guarantee shifts for agency staff and conceivably strengthen client relationships.

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Walrath shared his thoughts on this shifting relationship, price gouging claims, new players in the space and where ShiftMed fits in with it all. Founded in 2019, ShiftMed employs over 60,000 health care workers nationwide.

This conversation has been edited for length and clarity.

Any initial thoughts on how the pandemic has affected the relationship between agencies and operators?

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With the influx of patients, right, people getting sicker, census goes up, census goes down – the swings are wider. It’s much harder for an operator to plan for the needed labor if they’ve been swinging 15% for the last two quarters in a given month, and now they’re swinging at 30%. It just means that their contingent labor needs to have increased in that window.

So what has been driving that swing in needed labor?

There’s really three things driving that swing. One is more patients in some cases, or less. Even if they have a burst of a lot of patients for a week or two, and then it dies down due to a variant or a number of different things that affect census.

The second variable is their own workers, or the workers of their partners. The difference we saw between Q4 and Q3 of last year was that in Q3, everybody had delta and the patients were sick. In Q4, we saw the workers much more likely to get sick. That adds a second layer of more patients, less of your own workers.

And the third variable?

At the beginning of January we saw the mandates kick back in – that took the last 8% or 9% of the unvaccinated workers out of the equation as well. So you kind of have all three of those things hitting an operator at the same time.

I think that’s part of what’s causing an increase in agency usage, there’s no way for them to forecast, there’s no way for them to have a bench of people, and they’re regulated. They have to have people on the floor to cover those hours.

So how have these variables changed ShiftMed’s relationship with operators?

Our relationship got a lot more strategic in the last year as we went through this together. We had to sit down with them and say ‘hey, we know this is going to be harder on you. The budgets are going up. The number of new workers coming into your facilities is higher, creating a lot of operating challenges. What can we do to help? How can we just make sure you get the labor needed to care for patients, to get the outcomes that you want? At the lowest cost?’

What do you have to say about price hikes in your industry?

The overall rates that frontline workers are being paid is clearly higher now than it was before the pandemic but I would say that makes up about 80% to 90% of the variability in any rate changes that we’ve seen, versus firms that are boosting and might only have 50 workers that they’re sending out every week and they can sell them to the highest bidder. Our rates have been pretty consistent.

What about new companies, new business models entering the staffing agency space?

We’ve seen an influx of what I would call 1099 platforms and agencies which aren’t paying overtime, they don’t pay unemployment, they don’t have workers’ comp for those workers if they get injured. They aren’t paying health benefits. These are all costs that providers and the W2 platforms like us are incurring so [the 1099 platforms] have a slightly unfair cost advantage. It’s not really even a legal model. You can’t have 1099 workers going in and working for a nurse on the floor that’s telling them how to do the job, when to do it, when to be there. That oversight would basically invalidate them from being an independent contractor, especially for hourly workers like that.

What have you seen at the legislative level to curb 1099 platforms?

Some states like Texas are going to pass a law that says you’re not allowed to go into a skilled nursing facility in Texas if you aren’t a W2 employee of someone. Hopefully we’ll see some more regulation and definition around that.

Would you consider price gouging claims from operators to be valid?

From our perspective, at least the way we price, our clients are ultimately setting the price. They agree to a price and we put that price in the app. So it isn’t a price that we’re setting, it’s a price that people pick up shifts at. Is it higher than it used to be? Yeah but everything is, right? Wages have gone up, minimum wage has gone up, inflation has gone up. Gas prices have gone up to get these workers to work, the milk they drink in the morning has gone up.

There has to be an opportunity for those wages to reflect the market that exists. Right now, the supply basically stayed the same. Maybe it went down a little bit and the demand went up by 50%. I mean, any economist is going to tell you that the wage has to increase for that worker. There’s also the alternatives right? We have Amazon and Target and Walmart paying $15 – $17, paying for your college. It’s competitive out there and that may account for as much as the wage increase as anything because you have alternatives that are also compelling.

Any other thoughts on agency price hikes, new players in the space?

I have a slightly more philosophical view of pricing that’s more oriented toward the law of supply and demand than a conspiracy theory against the staffing industry. I think there are a couple bad actors out there who have taken advantage of that – you have to manage your vendors. The first time that happens, where you’re looking across your set of vendors that are providing you contingent labor and you see one that’s an outlier, you probably need to either be restructuring that relationship or discontinuing the use of that relationship if it’s not sustainable.

What has ShiftMed done to help break through agency stigma?

We’re kind of working on the opposite side of the ledger. Last year, we rolled out guaranteed shifts. One behavior in staffing that we think is hurting our relationship with caregivers is the fact that we may assign a caregiver to a building for a shift and when they get there, [the caregiver] sends them home; one of [the caregiver’s] workers has picked up that shift; that creates ill will towards that building. It makes it harder to fill the shift the next time. So we said if you guarantee the shift, you don’t have to put a bonus on it. You could pay a lower rate and the worker will trade the lower rate for more certainty.

Were guaranteed shifts widely implemented?

We did a case study in Pennsylvania with the Pennsylvania Senior Living Association, where we showed we lowered rates by 12% during the test period. The feedback I got on that was, that was the first time a staffing agency has ever lowered the cost of staffing in the time that they’ve worked with staffing agencies.

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