The Rise of Agency Nursing

Many workers’ jobs become somewhat more pleasant during the pandemic. Those who could work from home enjoyed instantaneous commutes, less supervision from their managers, and more flexibility in when and how they worked. While these changes certainly did not fully compensate workers for the hardship of the pandemic, they did partially offset it.

Nursing, of course, is a glaring exception. Working conditions for bedside nurses became markedly less pleasant, and nurses have adjusted along several margins. Older nurses are retiring at elevated rates: one study found that employment rates for nurses older than 60 dropped by six percentage points. In addition, many prime-aged nurses are switching to outpatient or industry roles. At the same time, surges in COVID-19 have resulted in elevated demand for hospital beds and vaccine mandates have chipped away at hopital staff.

In short, the market-clearing wage for nurses has increased substantially.

It’s common to see this situation described in the media as a “shortage” (e.g., “Rural Hospitals Stretched Thin by Nurse Shortage”). This framing should be familiar to anyone who has seen stories about a so-called crises in the number of STEM majors graduating in the U.S.

It is worth pointing out that this is an employer-centric way of describing the world. The novel coronavirus has fundamentally altered the roles and responsibilities of nurses. The average nurse in 2021 spends more time on COVID precautions and almost certainly cares for more patients than they did in 2019. There is no reason to think that hospitals should be able to hire the same number of workers at the same wage for what is, in effect, a more onerous job. There is no shortage of nurses, but there is a shortage of hospitals willing to compensate them adequately.

(Of course, a “nursing shortage” sounds very much like a public health problem that urgently requires government intervention, and it is much catchier than a story about hospital administrators grudgingly adjusting to new market realities.)

In the meantime, hospitals have turned to nurse agencies for temporary, non-contract staffing. Wages for agency nurses, also called travel nurses, have increased dramatically relative to those nurses employed directly by a hospital, with some travel nurses making several times more than a staff nurse on the same unit. Nurses have quit their staff positions to follow the money at a nurse agency, and in turn hospitals have seen their labor costs explode. For instance, Ballad Health, an integrated healthcare system in Tennessee and Virginia, increased its spending on contract labor by 60% for the fiscal year ending in June 2021, paying $85 million for contract nurses.

Staff nurses have always had lower hourly wages than travel nurses, but in exchange they enjoy superior benefits and stability. The gap between the two has recently ballooned for two reasons.

First, pay raises are difficult to take back. Hospitals are wagering that the market for nurses will eventually look more like it did in 2019 than it does now. COVID-19 may have caused older nurses to accelerate their timelines for retirement, but many would have quit their jobs in the next few years anyway. And enrollments at nursing schools at the BSN level grew in 2020, despite the complexities of training nurses during a pandemic.

Second, using travel nurses allows hospitals to price discriminate. Suppose – in a gross simplification – that there are two types of nurses. The first type doesn’t care where they live, which shifts they work, or what kind of health insurance they have; perhaps they are young, childless, and unmarried. The second type is strongly attached to one place, prefers to work at particular times, and values having a 401k and comprehensive health insurance. By now, many of the first type have already quit to become travel nurses, while the second type has no intention of ever leaving. A hospital would be foolish to shower incentives to stay on precisely those nurses who have revealed that they are hesitant to leave.

References

American Association of Colleges of Nursing. (2021, April 1). Student Enrollment Surged in U.S. Schools of Nursing in 2020 Despite Challenges Presented by the Pandemic. https://www.aacnnursing.org/News-Information/Press-Releases/View/ArticleId/24802/2020-survey-data-student-enrollment

Keeling, Jeff. (2021, October 26). Ballad CEO, Congressional panel agree: Travel nurse industry huge part of health care labor challenge. News Channel 11 & ABC Tri-Cities. Retrieved from https://www.wjhl.com/news/local/ballad-ceo-congressional-panel-agree-travel-nurse-industry-huge-part-of-health-care-labor-challenge/

Spetz, J. (2021), Changes in Registered Nurse Employment and Education Capacity during the COVID-19 Pandemic and the Risk of Future Shortages. Health Serv Res, 56: 47-47. https://doi.org/10.1111/1475-6773.13814