Travel Nursing Agencies Profit from Stanford Strike and Pandemic

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The call for recruitment from an employment agency called HSG Strike Staffing was one of many that has attracted thousands of replacement nurses to fill positions left vacant this week by the first nurses’ strike at the Stanford Hospital in two decades. Crossing the picket lines comes with the promise of a salary of up to $13,000 a week, plus free food, housing and transportation. And the recruitment agencies that hire them, increasingly owned by private equity firms, are posting record profits.

The traveling nurse industry, fueled by labor unrest and the COVID-19 pandemic, has turned hospital staffing into a nationwide bidding war, with healthcare facilities paying exorbitant rates to outside agencies to obtain ugly.

This trend creates a costly vicious cycle, experts say, as nurses quit their long-serving jobs for temporary but more lucrative “travel nurse” positions – worsening labor shortages in hospitals, increasing salaries and creating rapid turnover, which worsens the morale of nurses.

The shortage means every hospital is competing for the same nurses, said health economist Joanne Spetz, a professor at UC San Francisco’s Institute for Health Policy Studies.

“Stanford can’t say, ‘Oh, well, I’ll just borrow nurses from, say, Valley Medical Center, because they probably have more,'” she said.

Hospitals such as Stanford have long relied on traveling nurses to fill staffing gaps. But the pandemic triggered a 20% increase in the volume of patients coming in for treatment, so more nurses were needed. Now, facing this week’s strike, Stanford has signed 2,700 temporary replacements to five-day contracts to help fill 5,000 vacancies.

They must fund not only the much higher salaries offered to replacement nurses, but also a hefty commission to the agencies that hire and house them.

Striking nurses remained on the picket line on Tuesday as leaders began the first day of negotiations early in the morning. Union leaders and hospital officials have been tight-lipped about the closed-door negotiation, but nurses say they are ready to strike indefinitely until a reasonable contract is reached.

Until then, Stanford will rely on replacement nurses and management to fill the void. Prior to a strike, agencies send replacement nurses to their destination and transport them to work each morning, where they cross picket lines.

The estimated average hourly rate for striking nurses can be as high as $216.67, or about 2.5 times the average hourly rate for comparable clinical nurses. They do not receive benefits, such as health insurance. In comparison, the average hourly rate for a clinical nurse at Stanford ranges from $87 to $89.50. Traveling nurses are also paid more than staff nurses, but less than strike nurses.

PALO ALTO, CA – APRIL 25: Nurses and their supporters take part in a strike outside Stanford Hospital on Monday, April 25, 2022 in Palo Alto, California. About 93 percent of eligible nurses have authorized the strike, which the Nursing Achievement Recognition Committee used to set up a picket line Monday morning. (Aric Crabb/Bay Area News Group)

Demand for travel nurses has skyrocketed during the pandemic, according to a report published in the journal Health Affairs by Professors Tony Yang and Diana Mason of the George Washington University School of Nursing.

Between January 2020 and January 2022, the advertised pay rate for traveling nurses jumped 67%, reported Prolucent Health, which provides software and services for healthcare workers. Agencies say they have to pay these fees to attract talent, but hospitals like Stanford also have to pay high fees to agencies.

Health officials and elected officials argue that nursing agencies are exploiting circumstances to line their pockets. Last November, a congressional group wrote a letter to the coordinator of the White House COVID-19 response team, urging him to investigate whether nurse recruitment agencies were price gouging. The American Hospital Association says the agencies are “exploiting our organizations’ desperate need for healthcare workers.”

About 75% of hospital costs are for the nurse; companies keep 25% for profit, according to Yang, a health economist at George Washington University who studies the industry.

One of the country’s leading agencies, AMN Healthcare Services, reported a 109% increase in gross profit in the fourth quarter of 2021, compared to 2020, Yang said. Cross Country Healthcare, another healthcare staffing agency, saw its revenue jump 93% between the third quarters of 2020 and 2021.

Meanwhile, private equity firms are cashing in on the traveling nursing industry. Since the start of 2021, at least eight private equity firms have purchased at least seven recruitment agencies.

According to Yang and Mason’s report, state laws have been ineffective in combating the rise of travel contract nursing. That may be because predatory pricing laws have historically applied to product sales and retailers, not the hiring of temporary employees and recruitment agencies, they said.

“Demand exceeds supply,” Yang said. “They can do it because they can get away with it.”

Although expensive, Stanford replacement nurses are highly experienced, said Stanford Office of Chief Nursing Officer Dale Beatty.

Agencies provide proof of licensure, experience, qualifications, drug testing and regulatory requirements, and COVID-19 vaccination. Stanford is reviewing all of these documents, he said.

“We must continue to provide and support our patients with the same high quality care and ensure they are safe,” Beatty said.

“Certainly, the fees do concern us,” he said. “But our top priority must be quality and patient safety. When you are on strike, we need to have the resources to care for our patients.

On the Strike Nurse Facebook page, replacement nurses praised Stanford. “The best place to work,” wrote one nurse. “Excellent resources and supplies. Very welcoming staff to travelers there.

The nurses checked into San Francisco International Airport late last week. Before starting, they had to complete a 16-hour online program on Stanford standards and a 12-hour training session, Beatty said.

Upon arrival, each nurse was individually screened by Stanford staff to ensure they were a good fit for their position, he said.

“Sometimes we may have people who can come in and provide critical care, but they may not have specific skills for that population,” he said. “So we are evaluating to see if they can make that adjustment. … We can certainly reassign them to another location.

Even if the Stanford strike ends quickly and the striking nurses go home, they are already paid.

“If you get on the plane,” one nurse wrote on the Facebook page, “they’ll pay you.”

Writer Aldo Toledo contributed to this report.

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