As hospitals face high costs from travel nurses amid a growing labor shortage, some industry groups and lawmakers are calling for investigations into staffing agencies over potential price gouging.

Hospitals struggle with the high cost of travel nurses

Currently, many hospitals are struggling to fill open positions and having to pay high prices for travel nurses, heavily straining their labor expenses. For example, the Henry Ford Health System said it plans to spend $50 million on travel nurses in the first quarter of this year.

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"It's a downward spiral," said Robert Vande Merwe, executive director of the Idaho Health Care Association. "You kind of have to use agency [staff] because there's no other choice. ... One hospital told me the nurse is being paid $75 an hour, but the rate charged to the hospital is $250 an hour. "

However, Tom Malara, VP of government relations at the American Staffing Association (ASA), said the extra costs staffing agencies charge are used to pay for expenses, like recruiters and nurse training, and not just going towards profits.

"The cost of nurse staffing services has risen not only because of the unprecedented demand but because the supply of nurses has suffered due to the unusually harsh working conditions caused by Covid," a paper from ASA released last month said. "This supply-demand imbalance required nurse staffing agencies to offer significantly higher wages to attract and retain nurses—which necessarily drove up the cost of agencies' services."

Corporate claims of financial stress are also straining hospitals' staff relations, particularly with travel nurses, Marketplace reports.

"The ones who make the decisions, they don't walk into a Covid patient's room," said Pamela McNairy, a travel nurse from Mississippi who currently works at a Covid-19 unit in Southern California. "They're not risking their lives. They're not away from home."

Health care organizations, lawmakers push for investigations, pay caps for staffing agencies

In response to the situation, health care organizations and lawmakers have called for investigations into potential price gouging by staffing agencies amid high demand for nurses.

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For example, almost 200 House lawmakers, led by Reps. Peter Welch (D-Vt.) and Morgan Griffith (R-Va.), in January asked the White House to investigate wages charged by nurse staffing agencies. In a letter addressed to Jeffrey Zients, the White House Covid-19 response coordinator, the lawmakers said they have "received reports that nurse staffing agencies are vastly inflating price, by two, three, or more times pre-pandemic rates, and then taking 40% or more of the amount being charged to the hospitals for themselves in profits."

Similarly, the American Hospital Association, the American Health Care Association, and the National Center for Assisted Living earlier this month asked Zients and the White House to investigate staffing agencies, noting that staffing agency prices are not directly correlated with the income individual travel nurses earn.

The American Nurses Association (ANA) has applauded these efforts to end price gouging by staffing agencies, but said it wants lawmakers to guarantee individual travel nurses will not be negatively affected during the process.

"While overhead costs associated with staffing agencies have recently been targeted as a driver of staffing shortages, it is only one symptom of a much larger systemic problem," ANA said. "More needs to be done to effectively investigate and mitigate the root causes of nursing shortages."

Aside from these investigations, some states have also proposed legislation that would implement pay caps or prevent staffing agencies from participating in price gouging. For example, an Idaho bill introduced to the state's Senate Commerce and Human Resources Committee would add temporary health care staffing as a category under the state's consumer protection law.

"We just want a check and a balance of what is abusive practices and what is reasonable," Vande Merwe said of Idaho's law. "But it has to be abusive [for the law to be broken]."

For their part, staffing agencies say the higher costs for travel nurses is merely an issue of supply and demand. "It's kind of like saying real-estate agents set the price," said Alan Braynin, president and CEO at Aya Healthcare, the largest health care staffing agency in the United States "The buyers and sellers participating in the market do." (Dutton, Idaho Capital Sun, 2/21; Farmer, Marketplace, 2/15; Muoio, Fierce Healthcare, 1/26)