Beyond the Byline: Providers accuse staffing agencies of price gouging

Modern Healthcare Senior Hospital Operations Reporter Alex Kacik and Politics Reporter Jessie Hellmann talk about staffing policies and regulation.

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Alex Kacik: Short staffed hospitals, nursing homes and other providers across the country are turning to staffing agencies to mitigate labor shortages. Meanwhile, wages for travel nurses have spiked as demand surges and the supply of nurses drops. Should there be a limit to what staffing agencies can charge? Welcome to Modern Healthcare's Beyond the Byline, where we offer behind the scenes look into our reporting. I'm Alex Kacik, senior operations reporter. Our Politics Reporter Jessie Hellmann is joining me today to talk about staffing policies and regulation. Thanks for joining me, Jessie.

Jessie Hellmann: Thanks for having me.

Alex Kacik: All right, Jessie. We've heard from providers that they are paying staffing agencies rates that are two, three, four times higher than pre-pandemic levels. You reported earlier this month that the nursing home industry is pushing to cap the rates that healthcare staffing agencies can charge. What types of legislation are being introduced?

Jessie Hellmann: So lawmakers in states like Ohio and Pennsylvania have introduced legislation that would cap the rates that these agencies can charge. They say that these agencies are taking advantage of a pandemic to raise their rates and nursing homes have been leading this legislation. There are also bills in states like Maryland and Indiana, that would take a different approach by including health staffing agencies in existing anti-price gouging laws that aim to protect consumers during emergencies. So both types of bills are just an attempt to kind of rein in these staff agencies.

Alex Kacik: And it sounds like, you know, states are becoming more proactive when it comes to this type of intervention. You know, I've been talking to some antitrust lawyers and whatnot. And, you know, on the regulatory front there, you know, states are increasingly introducing different types of bills, and trying to get out in front of some of this federal regulation or fill the gaps in that in these federal laws to cater to their state. So it sounds like that maybe applying in this case too.

Jessie Hellmann: Yeah, Congress has an interest in this area, like there have been members of Congress, you've written to that Federal Trade Commission asking for an investigation. But it looks like there isn't a lot that Congress thinks that it can do. And so that's why you've seen like trade associations turning to state legislatures instead. So labor shortages have been an issue well, before the pandemic. Can you talk about how we got to this point?

Alex Kacik: Yeah, so staffing expenses typically make up around half of hospitals operating costs. And hospitals have been trying to operate "leaner for years" in part by limiting how much inventory they store. Let's say for PPE, like masks and gloves, or by increasing nurses case loads and their productivity. So there has been this simmering tension between nurses and their managers as they plead for lower nurse to patient staffing ratios and better working conditions. And that friction, coupled with all the stresses of the pandemic, have caused many healthcare staff to leave the industry. And also, you know, leading up to the pandemic, many senior nurses with expertise in let's say emergency medicine or respiratory therapy have been nearing retirement age. So this has left the entire system more vulnerable. And I was reading our cohort's Kara Hartnett's recent story, and she pulled out data from the Bureau of Labor Statistics showing that the number of registered nurses declined 2% between 2020 and 2021, and nursing assistants fell 9% over that span. But I'm curious, why is this focus coming from nursing homes in particular who are looking to implement some of these staffing agency rate calves?

Read more: Staff shortages, deferred treatment driving changes in care models

Jessie Hellmann: So groups like the American Health Care Association, which represents nursing homes, have really been on the front end of the state legislation and nursing home leaders that I've talked to say that it's because they really just have a different payer mix than hospitals do. When staffing prices go up there's not a lot that nursing homes can do to kind of offset those costs because they really rely a lot on Medicaid. I think most of the, on average, most of the patients that nursing homes serve are Medicaid patients and those rates tend to be lower than Medicare and commercial insurance. So they argue that these staffing prices just hit them harder than at hospitals where they have a they typically have a more diversified payer mix. Can you talk about how the labor shortage has impacted the finances of hospitals?

Alex Kacik: Yeah, sure. Providence, a 52-hospital system spread out across the West Coast reported their 2021 earnings last week, which mirrored you know, a lot of other bigger health systems. They saw their salary and benefit costs increase almost 11% from 2020 to 2021. The national average was closer to about 13%. According to Kaufman Hall data, they had, they broke that down into full-time equivalent employees per adjusted bed. And that decreased 4.5% year over year, while labor expenses per adjusted discharge increased 16.3%.

Read more:
Providence's operating losses doubled in 2021

So that implies that, you know, there aren't necessarily more nurses at the bedside. But these fewer number of nurses are demanding higher salaries. And, you know, the folks I talked with are expecting some of those pay boosts and benefit increases to be permanent, and not just a short term blip. So, you know, there other than upping pay and signing bonuses or partnering with nursing schools or recruiting healthcare workers from overseas, they're trying to leverage telehealth where they can and expand workers roles in a team based care delivery model and their deficiencies of certain types of staff. So in the near term, some hospitals, particularly rural ones, have had to suspend services now the effects of which could play out in worse outcomes for years to come. But, you know, in this talk about changing policy, and some of this legislation that's proposed, how have you seen this dynamic between hospitals and other types of providers trying to remain viable with the kind of corresponding argument that nurses should be paid adequately, and you know that, you know, the working conditions need to change in order for their safety and to merit their work?

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Jessie Hellmann: So it's really interesting. It seems like the position of hospitals when it comes to these rate capping bills isn't as unified is it is when it comes to nursing homes. I've seen some hospital association's say they support rate capping legislation. I've also seen some say that they don't. Just for example, in Oregon, there's a rate capping bill that the state's hospital association came out against because they worried that it would actually dissuade staffing agencies from coming to their state. And they say we rely on these traveling nurses all the time, not just during pandemics, and we can't risk having a situation where we need them. And they won't come here because they're these rate caps.

Alex Kacik: Yeah, into Oregon too. I mean, they're just starting this cost growth benchmark similar to other states, like Massachusetts. So it's interesting to see these competing games play out where the you know, they're very focused on healthcare costs. And, you know, these staffing agency rates contribute a lot to that, but at the same time, you know, they're worried about being able to recruit enough people to maintain, you know, their levels of care. So, yeah, I'm glad you pointed out Oregon. And when you talked with other lawyers and legal experts about these bills, you know, what were their thoughts on, you know, them winning the approval from the lawmakers, and what are the chances they move forward?

Jessie Hellmann: So even the people and the nursing home associations that are pushing these bills acknowledged that it's an uphill battle. They're hearing concerns from Republican lawmakers and Democrats as well that this is kind of a form of rate setting. And that's kind of a dirty word in healthcare. So they're facing opposition on that front. Like I said, they're also facing some opposition from hospitals. There are definitely facing opposition from nurses who argue that being a traveling nurse is giving them more opportunities to control their schedules, more opportunities to make more money. So it's definitely an uphill battle. We've already seen a bill die in Kansas, meaning it's not going to be considered this year. There are other bills in states like Missouri and Oregon that have been watered down and would now only require staffing agencies register with the state and wouldn't touch the rate setting issue at all. So I think this is definitely something that's not going to be solved this year in the state legislatures. And we're probably going to see that issue come back again in the future.

Alex Kacik: This makes me think too of this broader price transparency effort, where, you know, these hospitals have had to disclose you know, their payer negotiated rates. I imagine some of this, theoretically, has cost shifted. So if there's more, they're experiencing higher expenses on the labor front, you know, that could reflect in higher prices. So maybe some of this pushback is stemming from, you know, these mandates and that they have to be more open and disclose their prices, and then, you know, there and then I imagine they would kind of justify some of these higher prices through some of these increases in staffing costs if they had to experience. But do you see any corollary between some of this, you know, the price transparency mandates and these allegations of, you know, price gouging from, you know, amongst these staffing agencies?

Jessie Hellmann: Definitely, I think there's more interest from both state and federal lawmakers wanting to know why certain healthcare service or procedure costs as much as it does. So I think this is another example of that. An interesting difference. I would point out, though, and something I've heard from people who don't support rate capping is that hospitals, in general, have been really opposed to the price transparency measures that have come out of the previous administration and are being continued under the Biden administration. But some of these hospitals are the first to call for more transparency around what these staffing agencies are charging. So it's kind of an interesting dynamic.

Alex Kacik: Well, we'll keep an eye on you know, these bills moving through these state legislatures and see what the what the outcome is. But either way, I think there's more focus on on some of these on pricing, and some of you know these expense costs as well. So I imagine this is there'll be a theme going forward.

And in the meantime, Jessie, thank you so much for your reporting and for sharing your time with us. Appreciate your insight.

Jessie Hellmann: Thank you.

Alex Kacik: Thank you all for listening. If you'd like to subscribe and support our work, there's a link in the show notes. You can subscribe to Beyond the Byline on Spotify, Apple podcasts or wherever you listen to your pods. You can stay connected with our work by following Jessie and I at Modern Healthcare and Twitter and LinkedIn. We appreciate your support