It’s no secret that temporary staffing agencies have been both a boon and bane for the nursing home industry, providing necessary but very costly labor during the pandemic. Staffing problems have persisted long enough in the post-Covid era to warrant their use, but pricing practices have led to an outcry and push for state regulation.
Use of travel nurses has become associated with declining quality of care, training headaches and high turnover. In order to reduce the use of such nurses hired through temp agencies, many states have been engaged in legislative efforts.
Over the last two years, a growing number of states have begun to request or implement regulations that will curb price gouging on employee salaries, ban conversion fees when hiring a temp employee and restrict non-compete clauses that geographically limit an employee’s ability to get hired permanently. Some states also have plans underway to create a registry for filing complaints related to temp agencies, while others are pushing to provide operators with visibility into staffing agency payment rates.
Some of the legislation aims to facilitate an easier hire of permanent staff from the pool of temporary staffers. Usually there are buyout fees – or in industry parlance “conversion fees” – on a sliding scale depending on the number of days an employee has worked. The latter can be as high as an employee’s six-month salary or more in some states if a nursing home wants to make a temp worker permanent. Also, non-compete clauses prevent an employee hired by a facility in a certain geographical radius from being re-hired permanently.
In the past, these measures made it a difficult task for nursing homes to hire employees from the travel nurse pool. It also reduced the number of employees available for permanent hire by facilities. Moreover, these agreements vary from region to region and staffing agency to staffing agency, and there is no transparency on rates or fees.
And so, at least 10 or more states – 30 by some counts – are in the midst of legislation that improves this situation for employers, legal experts and advocacy groups involved with such efforts in various states told Skilled Nursing News.
All said, the matter isn’t a simple contrast of villains and heroes – even if it seemingly appears as one at first glance.
And temp agencies and their advocates argue that these fees cover their expenses and offer protection from being treated like a “free job placement” agency, as Toby Malara, VP of government relations at the American Staffing Association (ASA), likes to put it. Moreover, temp agencies need to keep their pay rates private, he argues, in order to protect their own business interests.
“They don’t want their information out in the public place where everybody can see it, where their competitors can see it, where other clients can see it. It’s confidential information and every business has confidential information that they don’t want to share,” Malara told SNN. “I’m sure there’s some (staffing agencies) that would be more than happy to share the bill rate and some that wouldn’t, (but) I think all of them would be happy to have a conversation about what goes into that bill rate to make sure that the client understands that this is not 100% profit for the staffing firm on every billable hour.”
After all, there are a lot of expenses associated with getting employees to qualify as temporary staff, including credentialing costs and placement fees that justify the billing rates, Malara said.
Indiana’s case
Paul Peaper, president of the Indiana Health Care Association, told SNN that his nursing advocacy group worked closely with temporary agency providers and advocates to make sure Indiana’s legislation achieved the right balance in terms of shared burdens.
“(Indiana’s legislation) was not sought out as anti-temp agencies. We know we’ve got a lot of good partners out there. They were helpful to us throughout the pandemic and remain so,” said Peaper. “That being said, there are some bad actors out there, to put it lightly.”
Peaper said that the associations were “amenable” to make changes to the language of the legislation upon the request of temporary agencies over concerns that it could impact their business operations and add to the large paperwork burden.
In the end, Indiana successfully passed legislation in the spring that put boundaries on staffing agencies that were engaged in questionable practices.
“This was a member-driven charge to try and put some of those guardrails or safeguards in place,” Peaper said. “There are a lot of good actors out there, but these additional guardrails will hopefully root out the bad actors.”
During the pandemic, temp agencies grew at a fast pace, and it was often the newcomers to the scene that seemed to cause trouble. Without a complaint process in place, there was little accountability.
“The recent entrants … were trying to capitalize on the crisis that we were having and maybe didn’t enter into it with some of the good intentions that some of the longer actors have,” Peaper said.
Indiana’s legislation “prohibits” conversion fee clauses effective July 1, 2023, and establishes a complaint registry, said Peaper.
Buyout clauses weren’t an issue in the bigger cities of Indiana, notably Indianapolis, he said. However, in small- to medium-sized cities, certain temp agencies were exploiting the labor shortage to shuffle the same employees through many facilities in a large geographical area just to make every single facility in that city then become bound by a buyout clause, and this prevented temp workers from ever being hired as permanent staff, he said.
Moreover, the payment for temp staff was getting to be too much.
“The cost borne by the state’s Medicaid program grew at an astronomical rate,” explained Peaper. “So we shared our concerns about temporary staffing with legislators, with the administration.”
The total cost paid by Medicaid to temporary staffing agencies was over $108 million in Indiana in 2021, a jump of 121% from 2019, according to Peaper. “That number alone was enough to get a lot of our state policymakers to pay attention to the growth [of staffing agencies] here,” he said.
The complaint registry was essential too, he said.
“There was no state agency that we could really report [complaints] to that had any sort of teeth to investigate any complaint. So we’ve now established that complaint process,” Peaper said. “It will be a really good tool for our members, but also quite frankly, for any of the temp employees as well. They can avail themselves of this process equally if they feel that they are being mistreated or going against their contract in some manner.”
According to Peaper, it’s not just Indiana, but over the past two years 30 different states have filed legislation attempting to reel in some of these temporary staffing agencies.
“We’re seeing it nationwide. And as I’ve worked with a lot of my state executives … a lot of their members are sharing similar stories and asking for similar systems,” Peaper said.
Massachusetts’ case
Massachusetts was early on the scene in banning conversion fees. But policy makers have determined that more needs to be done because the issue has resulted in fiscal problems across the health care sector, a report put out by the state’s Health Policy Commission (HPC) stated. In long-term care, the share of hours worked by contracted registered nurses has risen from 4% in 2019 to 19% in 2022. And across Massachusetts, health care facilities paid $1.5 billion to contracted workers in fiscal 2022 — a 154% increase over the previous year, according to HPC’s report.
The state’s Health and Human Services Secretary Kate Walsh called the temporary agency contracts “usurious,” while the state attorney general issued an advisory warning temporary nursing agencies of violating rate payment rules, according to news outlets.
Colorado’s case
Colorado is the most recent state to successfully pass legislation putting limitations on conversion fees. The governor signed a bill on May 1 that approved the hiring of temporary employees into the permanent workforce without incurring fees as long as the employee worked for a month or more at a facility, Doug Farmer, president and CEO of Colorado Health Care Association, told SNN.
In Colorado, nursing home advocacy groups are also working on improving the transparency of payment rates by temp agencies because the lack of visibility is often the reason for taking advantage of operators, Farmer said.
“The contracts that our providers sign with staffing agencies are very opaque,” Farmer told SNN. He said that some operators complained about paying as much $75 for a CNA when in actuality the CNA was being paid $17 by the temp agency.
“I call it price gouging,” he said.
Such stories of exploitation of the staffing agencies spurred on by Covid has led to a push by nursing home advocacy groups in Colorado to seek legislation for next year to regulate temporary staffing agencies’ payment rates. Their efforts have been fruitful in allowing the Colorado Department of Labor to seek this information for a policy report by to influence legislation, which Farmer is hopeful is going to get passed.
Illinois’ case
Illinois eliminated its buyout clauses last year in the summer after such pricing practices during the pandemic got the Illinois General Assembly’s notice, according to experts.
“The long-term care provider community was really getting gouged by staffing agencies during the COVID pandemic … the labor staffing agencies were cutting them deep,” Jason Lundy, partner at Ice Miller’s Health Care Group, told SNN. “[Legislators] really decided to take some action to level the playing fields and kind of stop what I think was pretty rightfully viewed as a niche industry really taking advantage.”
Illinois made some amendments to the Illinois Nurse Staffing Licensing Act so as to effectively ban conversion fees as of last summer.
“From a nursing home, long-term care provider standpoint, this is a really major change … even from the nurses’ or a CNA’s perspective,” said Lundy. “Those buyout fees and liquidated damages cannot be used anymore.”
However, in order for operators planning to hire a nurse recruited from a temp agency without incurring fees, Lundy has one piece of advice: “If [Illinois] providers want to have the benefits of this new law, they need to cancel a contract that is outdated and demand that the nurse staffing agency enter into an update of the contract with them.”
A wider push
According to a recent survey from the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), 75% of nursing homes reported that they have had to hire expensive temporary agency staff. Staffing agencies have been charging two to three times the pre-pandemic rates, according to a spokesperson for AHCA/NCAL, who said the advocacy group is concerned that traveling nurses are not even receiving 40% of what the agency is charging the facility.
Along with many other health care organizations, AHCA/NCAL has urged the White House and the Federal Trade Commission (FTC) to investigate the matter. Last year, ACHA/NCAL also pushed for legislation on the national level that would require the Government Accountability Office (GAO) to conduct a study on these staffing agencies’ practices during the pandemic.
“Many of these agencies have taken advantage of the crisis and depleted precious resources from long-term care facilities,” AHCA/NCAL said in an emailed statement. “We encourage federal and state policymakers to hold these staffing agencies accountable and to support policies that allow nursing homes to invest in full-time, dedicated caregivers.”
Companies featured in this article:
AHCA/NCAL, Colorado Health Care Association, Ice Miller, Indiana Health Care Association
