Nursing homes lead push in state legislatures to regulate staffing agencies

The nursing home industry is launching a lobbying offensive in several states to limit what healthcare staffing agencies can charge providers, but the efforts are facing fierce headwinds from agencies, lawmakers, nurses and, in some cases, hospitals.

The wave of legislation in states like Ohio and Pennsylvania comes amid a pandemic that saw rates for traveling nurses soar, due to increased demand for their services. That means higher staffing costs for hospitals and nursing homes, who accused agencies of "price gouging" and taking advantage of a pandemic.

Providers argue something needs to be done to rein in staffing agencies, and with action unlikely at the federal level, nursing homes are turning to state legislatures.

"The conduct by some staffing agencies across the country, it's just been despicable," said Mark Parkinson, CEO and president of the American Health Care Association, which represents 14,000 skilled nursing facilities and assisted living centers. "We've encouraged the federal government to look at it, but we really think our best chance is getting some regulation in some of the states."

Staffing agencies argue their rates are fair and competitive and driven by rising demand. The American Staffing Association, which represents staffing companies like AMN Healthcare, has been lobbying against rate caps in several states.

"Any state that enacts a nurse rate cap system will actually be harming their own healthcare system because nurses will leave the state and want to work elsewhere," said Toby Malara, vice president of government relations for ASA.

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Legislation introduced in Ohio and Pennsylvania would permanently cap what healthcare staffing agencies can charge providers. The bill in Ohio would cap charges to all healthcare facilities, while the legislation in Pennsylvania would only apply to nursing homes and assisted living facilities. Both bills would require staffing agencies register with the state, something that is currently not required in many other states.

The nursing home industry, including AHCA's and LeadingAge's state affiliates, appear to be the primary force behind the legislation. While nursing homes and hospitals both rely on traveling nurses, nursing homes typically have a payer mix that heavily relies on Medicaid rates and are less able to offset higher staffing costs. In 2020, 62% of nursing home residents used Medicaid to pay for services; 12% used Medicare and 26% paid privately, according to the Kaiser Family Foundation.

The bills face an uphill battle, though, with lawmakers raising concerns about "rate setting," and staffing agencies warning that rate caps could lead them not to send staff to Pennsylvania or Ohio.

"When you're in a red state, controlling prices is kind of against the free-market mentality, but the point is, it's not a free market for skilled nursing facilities," said Peter Van Runkle, executive director of the Ohio Health Care Association. "We can't go and say, okay, because the staffing agencies are charging us this much money, we have to raise our prices. We can't do that. The prices are set by the government. So it's not a free market to begin with."

Similar bills in Missouri and Oregon initially would have capped rates but were watered down due to those same concerns, and would now only require staffing agencies to register with the state. Rate capping also carries the bad optics of lowering pay for nurses and other health professionals, who often go to work for staffing agencies to achieve higher pay and more flexible scheduling.

"That language is gone, that had the perceived risk of lowering nurse wages," Missouri state Rep. Kurtis Gregory, a Republican, told his colleagues during a hearing this week on the bill. "That was never my intent."

A bill in Kansas that would have capped prices staffing agencies can charge providers at 150% of the average wage rate died in committee after similar concerns were raised.

In some cases, the bills have sparked hospital opposition, even though they're also facing higher staffing costs. In Oregon, the state hospital association opposed the initial legislation, worrying that it would discourage agencies from sending needed staff to the state.

"The demand for temporary staff is so high that agencies don't have to work in Oregon," Becky Hultberg, president and CEO of the Oregon Association of Hospitals and Health Systems, wrote in a letter last month to state legislators. "We can't get enough contract staff as it is. The unintended consequence of this bill would be that agencies stop sending staff to Oregon, which would have devastating consequences for Oregon patients and place a greater strain on our workforce."

They noted that Massachusetts and Minnesota have capped agency rates for several years now; both had to waive those rules or raise maximum rates during the pandemic.

Another reason for the rift: hospitals are legally required to treat every patient who comes through their doors. Nursing homes are allowed to turn patients away when they reach capacity.

The Kansas Hospital Association raised similar concerns but ultimately supported the bill after being approached by the nursing home industry. While the bill died in committee, lawmakers are continuing to discuss the problem and hospitals may need to find other solutions.

"We have members that have varying opinions. So we're going to really have to continue to develop where want to be moving forward," said Cindy Samuelson, senior vice president of member and public relations for KHA. "We have some members that say it's unfortunate to have to pay these exorbitant prices like this, but also, they need nurses."

In a letter KHA sent to state lawmakers last month, it suggested better transparency around rates might be helpful.

The American Staffing Association said rate information is proprietary and would put agencies at a disadvantage when competing with providers for workers.

Lawmakers in states like Maryland and Indiana have taken a different route, introducing bills that would include healthcare staffing agencies in existing anti-price gouging laws that aim to protect consumers during emergencies, an approach that is supported by the ASA. Both bills include language that allow for higher prices if agencies can prove costs are rising.

"We don't advocate for capping rates. We want healthcare workers to make more," said Nick Goodwin, director of government affairs for the Indiana Health Care Association.