Nursing Homes See Movement on Staffing Agency Reform

There has been a flurry of proposed legislation to better regulate staffing agencies, as those in the sector continue to charge soaring prices for much-needed staff in nursing homes.

Operators and the state associations that represent them have pressed lawmakers to pass legislation on the largely unregulated staffing agency industry, with the exception of a few states that have had such measures in place for decades — Minnesota among them.

Still, existing legislation hasn’t completely curbed soaring prices and agency-related clinical issues, with some agencies flouting the rules, according to Patti Cullen, president and CEO of Care Providers of Minnesota.

State surveyors that would usually check to make sure state staffing agencies are toeing the line have been busy with Covid-related issues, added Cullen.

That hasn’t dissuaded states with no such regulatory oversight, however.

Six states have recently introduced bills to discourage price gouging amid a historic workforce shortage exacerbated by the pandemic, including Maryland, Idaho, Indiana, Kansas, New York, Pennsylvania, none making it past committees.

Oregon appears to be the furthest along with its legislation that went into effect in March. The state law requires temporary staffing agencies to apply for a license to operate in the state, as well as annually evaluate and implement maximum rates agencies may charge.

Iowa was the latest to pass legislation; its House File 2521 became law earlier this month.

The Iowa law has five aspects that will help the nursing home industry, stopping just short of placing a cap on rates. Crucially it will prohibit the use of noncompete agreements or other sorts of finder’s fees in existing or future contracts for staffing agencies.

Brent Willett, president and CEO of the Iowa Health Care Association, said this piece of the legislation due to roll out in July is “definitely the most important and of most consequence to our members.”

Everything short of a rate cap

The state association and its members didn’t go as far as pushing for cap rates on staffing agencies, but the legislature appeared open to that conversation, according to Kris Hansen, CEO of Iowa operator Western Home Communities.

Western Home Communities offers long-term care nursing services across three campuses, one of which also has skilled nursing care.

Potential future legislation surrounding staffing agencies in the state depends on data gleaned from what was just passed, Hansen said. If “heavy margins” continue to be made on the agency side, cap rates are an option.

HF 2521 requires agencies to provide wage data to the state on a per position basis; the state will also create a registry process, where agencies will have to go through Iowa’s state survey agency by paying a small fee.

When the bill was still in the pipeline, Hansen explained a need for financial transparency to lawmakers, with operators unable to separate what the agency keeps with what is actually paid to the agency worker.

“It would be nice to understand what they’re actually paying agency versus what we’re being billed,” Hansen said he told lawmakers.

The law makes noncompete agreements illegal, further relaxing the financial stranglehold agencies have on worker-starved operators.

If a direct care staff member wants to leave an agency and work directly with a provider, the provider was previously forced to pay a finder’s fee, or a fine that can cost operators thousands of dollars, Willett said.

Making noncompete agreements illegal improves mobility for workers, Willett added. As a result, he believes staffing levels in the state will improve on a more permanent basis.

The 435 nursing homes in Iowa have paid more than $150 million in staffing agency wages for 2021 alone, according to Willett, and while the association hasn’t crunched the numbers for this year yet, he expected to to see that number climb in the first quarter.

Hansen said his facilities went from using between zero to 5% at the most pre-pandemic to about 40% agency staff at the height of the omicron surge.

The good news is, agency use has declined “ever so slightly” during the second financial quarter as full-time, permanent employment levels slowly start to climb, Willett said.

He has seen a lot of agency workers once again take on permanent positions with operators.

“It’s too early to detect a real trend, but it’s certainly something we started to see in the last month or two,” added Willett.

Western Home has seen their agency use decline, but compared to pre-pandemic data they are still using “quite a bit” of agency staff between their three nursing homes. Usage has reduced to about 20-30% at the facilities, he added.

The law also requires agencies maintain and provide documentation to ensure their workers are fully certified, they meet all requirements and documentation is in line. More fines, all the way up to revoking licenses, are possible repercussions for sending an unqualified, uncertified worker to a facility.

Agencies must also retain professional general liability insurance of $1 million under the new law as well.

“I just felt that [agencies] needed to be ready to stand in behind their employees,” Hansen said. “If something went wrong in one of our buildings due to an agency contractor not doing what they were supposed to do, instead of it all rolling just on our liability insurance they ought to be standing behind it as well.”

Existing state legislation

Willett said the association, which sponsored the bill, looked at other states that already have agency legislation in place, but ultimately the law was a product of member engagement.

“This was our top legislative priority,” added Willett. “We had a level of support from a handful of hospital systems but this was primarily led by our association.”

Minnesota, Connecticut and Delaware are three states that have had legislation in place to better regulate agencies.

Minnesota’s agency law has been in place for roughly 20 years, according to Cullen.

The state’s legislation deters a lot of the national staffing agencies from coming in, Cullen said, using barriers like a cap rate based on position.

The caps change every year and are based on current wage thresholds. According to the Minnesota Department of Health, maximum charges for 2022 are: $62.36 for registered nurses (RNs), $50.75 for licensed practical nurses (LPNs), and $34.10 for certified nursing assistants (CNAs).

Minnesota requires background checks for agency staff prior to them entering a facility as well, further discouraging agencies, especially those that want to classify their pool of workers as independent contractors.

“It’s not the panacea. It’s not going to solve all problems. But it does have an impact on deterring some of the activities that we’re seeing – overtly stealing staff – from facilities,” Cullen said.

Even with legislation in place, Cullen said nursing homes in Minnesota have had to deal with compliance issues tied to agency staff.

“When Covid was at its height, the survey teams that would be responsible for making sure the supplemental nursing service agencies in Minnesota complied with the registration requirements, those surveyors were redeployed elsewhere,” she said. “They’re going back in and they’re telling [agencies] to behave, essentially.”

For two-and-a-half years, there has been minimal enforcement oversight on staffing agencies, she added.

The Iowa nursing home association has grappled with the possibility that the agency legislation will make the staffing crisis worse, but at the end of the day Willett doesn’t believe agencies will simply exit the market.

“If they do, their workers will still be here and we’ll have jobs for them. It’s not a primary concern of ours,” he said.

Looking ahead, Willett hopes Iowa will be a model for other states looking to pass similar legislation.

“We’re happy to be a little early,” Willett said. “We’re going to be monitoring exactly how this new regulatory framework rolls itself out and make adjustments as necessary … if there’s parts and pieces that work in other states, we certainly would be supportive of that.”