'The whole thing is broken': Temp staffing costs strain WA hospitals

Amid a retention crisis, rural hospitals turned to pricey travel-nurse agencies with little oversight or transparency. Now they need a way forward.

Nurse Steven Higgs poses with his arms crossed in dark blue scrubs in front of evergreen trees.

Nurse Steven Higgs started a Sequim-based temporary staff agency, North Coast Nomad, in 2021 in response to the demand for travel nurses. He now employs 17 health care workers at hospitals around the Olympic Peninsula. (Courtesy of Steven Higgs)

Coming off a recent 12-hour night shift in Grays Harbor County, travel nurse Steven Higgs sleeps for about six hours. Then he tosses his backpack into his 2004 Nissan Sentra and starts the two-and-half-hour drive north along Highway 101 to his home and family in Sequim.

Higgs typically spends three nights a week in Aberdeen, where he tends patients in the Harbor Regional Health emergency room, filling shifts contracted through his own small health care staffing agency — North Coast Nomad

Amid the pandemic’s surging demand for health care workers, the longtime nurse said he saw a chance in 2021 to launch a regional, collaborative temporary staffing service that could better serve both workers and shorthanded local hospitals. 

“For the last couple of years we were at war, in essence, with something that was killing a lot of people,” he said. “And I just wanted to make sure that I was able to help as much as I could for that.”

Many small or rural hospitals have had to turn to national temporary staffing agencies to fill their urgent nursing needs, facing a tight market where they compete for workers against much larger facilities in metro areas. Aberdeen’s Harbor Regional has completely closed one of its medical/surgical floors over staffing shortages and the mounting costs of temporary workers. 

Chief Financial Officer Niall Foley said Harbor Regional has seen its temporary labor expenses balloon by more than 485% since 2019. Financial reports show the hospital’s primary staffing contractor — AMN Healthcare, the country’s largest such agency — has seen its profits more than triple in that time. 

Despite their outsized role in propping up the nation’s strained health care system, temporary staffing agencies operate with little direct oversight. Lawmakers and hospital officials nationwide have increasingly called for more transparency from those agencies, passing price caps in some states or requesting investigations into alleged price gouging. Washington officials say they continue to seek more accountability on these services. 

Many hospitals have also struggled to balance travel-nurse reinforcements with their regular full-time workers as wage disparities have contributed to low morale and retention challenges. Both hospitals and health care unions will propose staffing bills again this legislative session that they argue would ease staffing conflicts.

While Higgs and Foley work on different sides of the staffing dynamic, both agree the situation is unsustainable. And both hope a new model can emerge to ease local hospitals out of a constant state of crisis.

“The travel agencies aren't really causing [the shortage],” Foley said. “It's a necessary industry. Really, we need to focus on getting new nurses, new staff, new doctors into the industry.” 

A ‘bill-to-fill’ boom

Health care staffing agencies provide temporary staff, or “travelers,” to local hospitals or other medical facilities. They have long played an important role in the health care ecosystem: For example, the typical 13-week contracts cover things like an employee’s parental leave, while shorter contracts can cover when employees have unexpected illness or leave. 

Staffing agencies take a percentage of the price billed to hospitals. As the prices of and demand for travel staff increase, their financials look better and better. AMN Healthcare is a national, publicly traded company that has the largest market share – about 18% – in the very fragmented market for travel nurses. 

An AMN spokesperson declined to answer questions or be interviewed for this article. Crosscut gathered information from AMN’s annual and quarterly public reports, press releases and discussions with a Morningstar financial analyst.

This story is a part of Crosscut’s WA Recovery Watch, an investigative project tracking federal dollars in Washington state.

Reports show AMN typically earns a 27% gross profit on “nurse and allied solutions.” So if AMN bills the hospital $100 for a nurse, AMN pays wages and a range of possible benefits, and then keeps about $27 for its own overhead and profit. If the “bill-to-fill” rate doubles to $200, AMN now keeps $54. 

As COVID-19 surged in urban areas, demand for front-line staff outstripped supply, contributing to a surge in the bill-to-fill rate. Then as the pandemic wore on, a national reshuffling of health care staff continued. Some staff nurses left for lucrative travel contracts while front-line workers left the field, some temporarily and others perhaps permanently. 

AMN reports that the average number of temporary nursing and allied staff on assignment (excluding physicians and leadership) increased by 65% from September 2019 year-to-date to the same period in 2022

That translates to big money for AMN. It reported $362 million in profit for the first nine months of 2022, significantly higher than in all of 2019.

AMN also runs Medefis, an online staffing marketplace that is free for health care employers. Medefis allows a hospital to access many staffing agencies through a centralized process of recruiting and hiring. It is unclear how the staffing agencies pay to use the platform, also called a “vendor management system” or VMS. 

What is clear is that AMN makes approximately 70% gross profit on this line of business (“technology and workforce solutions”) and says that it takes a “4-5% fee” on the service.

With such growth, temporary staffing agencies have drawn increased scrutiny in recent years as regulators questioned whether agencies might be engaged in price gouging or anti-competitive behavior. 

Harbor Regional Health officials in Aberdeen say they had to close a floor of the facility after temporary staffing expenses soared to nearly five times what they had spent in 2019. (Courtesy of Harbor Regional Health)

Temp staffing costs

Meanwhile, Harbor Regional Health, or Grays Harbor Public Hospital District No. 2, simply cannot hire and retain enough nurses, certified nursing assistants, respiratory therapists or other staff. Foley said in October the hospital had seen an increase in non-COVID visits and behavioral health patients forced to wait for beds elsewhere.

HRH received a variety of federal and state pandemic relief grants and loans, including $13.6 million from the CARES Act. Those federal CARES Act provider relief funds allowed hospitals to pay for unusual expenses related to COVID-19. 

With numbers shared by the CFO, Crosscut calculated that in 2021-2022 HRH spent the equivalent of more than half of that $13.6 million on temporary labor alone. 

Harbor Regional fills most of its staffing needs through Medefis, the AMN platform, where Foley said they face a national bidding war.

“Obviously, we're a small community hospital – we don't have the same resources as the large health systems,” he said. “If we run out of money, there's no one to come and bail us out.”

Foley estimates that they will have spent over $11 million on temporary labor in 2022 — a combination of their need for staff and the agencies’ bill-to-fill rates. Temporary labor hours accounted for 10% of all Harbor Regional labor hours from January-August 2022, an increase from just 2.6% of labor hours in 2019. 

Prior to the pandemic, the bill-to-fill rate was roughly comparable to the rate of pay plus benefits for similar local staff, Foley said. A staff nurse might make about $42 per hour, plus benefits, for a total cost of $57 an hour. Before the pandemic, the hospital paid on average $56 an hour for a travel nurse. Staffing agencies typically cover any benefits for travel staff.

Since 2019, the average hourly bill-to-fill rate Harbor Regional paid for travel nurses nearly tripled, reaching $156.

Foley said the hospital temporarily closed the second floor because of the staffing shortage. They haven’t reopened it because the revenue from patient services would not cover the costs of hiring travel staff. 

With fewer beds available to admit emergency patients, the backups have caused staffing strains and longer wait times.  

Hospitals can match some volumes to staffing, for example by rescheduling procedures. But they must staff the ER. Harbor Regional does that partly with travel staff from North Coast Nomad. 

“There's been a lot of burnout, a lot of long hours,” Foley said. “We've tried to do things to help people out. We've done retention [bonuses], but not everybody just needs an extra few dollars in their pocket — they actually need breaks and time off. And that's been challenging.”

Policing ‘price gouging’

Retired Washington state Rep. Eileen Cody, D-West Seattle, was a practicing nurse herself until a few years ago. She served on the House Health Care and Wellness Committee for 28 years, 24 of those as chair. She said that while staffing agencies have their place, the pandemic highlighted the need to try to regulate them.

“It really was price gouging,” Cody said. “There was a discussion about whether we should try and do a bill. But the problem is, that especially when it's across state lines, you're interfering with interstate commerce. And it's just not easy to figure out how, as a state, to deal with an agency bill.”

A price-gouging bill that the Washington Attorney General sent to the legislature in 2021 failed.  It would have regulated “health care services,” along with other necessities during an emergency. 

Still, Brionna Aho, a spokesperson for the Washington Attorney General’s office, wrote that “excessive, unnecessary price increases, not based on increases in cost, can be an unfair or deceptive business practice.” (Someone would have to file a complaint against an agency.)

Chelene Whiteaker, senior vice president of government affairs for the Washington State Hospital Association, said she thinks more transparency is an important first step for this now-huge part of the health care delivery system. According to their survey of Washington’s acute-care hospitals, the number of travelers statewide had grown from fewer than 2,000 before the pandemic to about 8,000 as of June. 

No Washington state agency directly regulates the staffing agencies for issues such as basic financial transparency or billing rates. Hospitals, however, must provide a detailed accounting of service rates, patient volumes, staff certifications and other information to government entities.

“We think that it’s time for the traveling agencies to do the same,” Whiteaker said.

Find tools and resources in Crosscut’s Follow the Funds guide to track down federal recovery spending in your community.

Illinois just passed a law to require some transparency around the rates billed to hospitals and paid to travel staff. And a bill in the U.S. Congress urges investigation of “the effects of travel nurse agencies during the COVID-19 pandemic,” including business and payment practices, their effects on workforce shortages, and the role of private equity firms.

A few states have considered or passed caps on how much a staffing agency can bill for nurses and other critical health workers. Minnesota caps rates for travel staff in nursing homes at 150% the average wage.

Foley and Whiteaker worry that rate caps could backfire: If the state has a cap, travel staff may not want to come here and patient needs would go unmet.

A local approach

After six years working in the emergency department at Olympic Medical Center in Port Angeles, Higgs now employs a staff of 17 travel nurses at North Coast Nomad with contracts at three hospitals. He said he recruits local nurses to work at nearby facilities, keeping them rooted in their home communities. 

Nursing is already a tough job, he said, without dealing with the resource shortages and politics of a hospital. The culture of most hospitals is that nurses will do anything for their patients, based on their compassion and feelings of duty or service. 

“Do it all with nothing,” he said, “build mansions out of twigs and shrubbery.”

Higgs was reluctant to share his story publicly because travel nurses and agencies get negative press — unfairly he thinks. In his experience, North Coast Nomad allows health care workers to continue their passion on their terms. 

It isn’t just the money that entices people to do travel work, he said. Some want more control over their schedules or different experiences to build their skill set. Some are just tired of hospitals’ internal politics. Travel work allows a type of gig-worker autonomy and detachment. And, if the traveler keeps their housing back home, the pay covers double rent or mortgage. Ultimately, he thinks his business has “allowed us to take pride again in what we’re doing.” 

He said his business is different from the big national staffing agencies in transparency, flexibility and staff quality. North Coast Nomad strives for low overhead and pays out a larger share of its bill-to-fill rate to employees. About 75% goes directly to workers as wages, he said, a percentage he contends is meaningfully higher than that of other agencies working in the region. Several recent job postings for an RN in an Aberdeen emergency room advertise a pay and benefits package equivalent to 61% to 73% of a $130 bill rate.

“We try to give the best rate possible,” he said, “but also if [the hospitals] need staff, we have to attract nurses.” 

Higgs said he discloses those rates and profit margins with his staff, a policy he says is unique. Other travel staff he has worked alongside told him they had no idea what the bill-to-fill rate is. 

(According to Foley and a public records request, North Coast Nomad’s bill-to-fill rate for ER nurses was similar to that of another larger staffing agency, about $125-$135 an hour in 2021. Favorite Healthcare Staffing, a national agency based in Kansas, was billing $130 as a “crisis” rate — the market rate Harbor Regional has paid since late 2020.)

Higgs said he aims to have staff more readily available to fill shifts at these isolated hospitals. Because his team is local, North Coast Nomad can fill short-notice, single shifts for hospitals. And hospitals deal directly with him — not a recruiter — as the owner and a practicing nurse. 

He also knows the quality of his team first-hand, often working directly alongside them. 

“I’m not out just trying to fill a hole,” he said, “I’m trying to deliver a good product.”

Seeking solutions 

As it is, Higgs said some hospitals seem stuck in a cycle of understaffing, high volumes, burnout and more travel staff. And nurses are voting with their tired feet. 

Foley said he thinks the congressional bill calling for the GAO to investigate the health care staffing industry could help, particularly around crisis rates. But the shortage of nursing and health care staff is the most important problem in his opinion. 

Jayson Dick, director of labor advocacy for the Washington State Nurses Association (WSNA) and a nurse, said there are plenty of nurses licensed in Washington, but “they’re not willing to work under these conditions.”

He said hospitals throwing money at recruitment is like giving a blood transfusion to a patient whose bleeding hasn’t been stopped yet.

Rep. Cody said minimum nurse/patient staffing ratios could bring some nurses back to work because they wouldn’t be so burned out. She supported such a bill for the first time in 2022. The reason, she said, was that the hospitals weren’t “coming up with anything, and this is what the nurses are saying they need.” It didn’t pass, but nurses’ unions pushed for a similar bill this session. 

Higgs isn’t sure about his business in the long term. Hospitals might not need as much from North Coast Nomad if the health system can be fixed. 

“As a country, we've done a terrible job of taking care of the medical professionals as a whole, in addition to taking care of the medical system,” Higgs said. “So you know, I mean, the whole thing is broken. We're just nurses trying to keep the whole boat afloat.”

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