Recent Federal and State Legislative Action Targeting Health Care Staffing Agencies

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October 5, 2022

Nurse and health care professional staffing shortages during the COVID-19 pandemic resulted in a significant increase in the use of temporary health care professional staffing. Lawmakers and health care providers have urged the Federal Trade Commission (FTC) and the White House COVID-19 Response Team to open investigations into allegations of price gouging and potential anti-competitive activity by nurse staffing agencies.

Additionally, the House and Senate introduced companion bills titled the “Travel Nursing Agency Transparency Study Act,” which would require the Government Accountability Office (GAO) to conduct a study and issue a report to Congress on the business and payment practices of nurse staffing agencies and the impact of hiring travel nurses across the health care field during the COVID-19 pandemic. The study would investigate the following:

  • the difference between how much nurse staffing agencies charged health care institutions and how much they paid their contracted nurses,

  • the extent to which agencies could provide more transparency regarding these payments,

  • how federal funds were used to pay such agencies during COVID-19 related workforce shortages, and

  • the effect of market reaction in states that imposed caps to travel nurse pay.

The increase in the use of travel nurses has also caused state lawmakers to prioritize regulation of health care staffing agencies. States generally define health care staffing agencies to include any entity who contracts with health care facilities to provide temporary health care personnel. Below is an overview of recently enacted and proposed state legislation requiring licensure or registration of health care staffing companies and/or nursing pools.

Enacted Legislation

  • ConnecticutConnecticut passed a law requiring “temporary nursing services agencies” to register and pay an annual registration fee, effective January 1, 2023. Furthermore, effective July 1, 2023, temporary nursing service agencies will be required to submit annual cost reports, including revenues and costs, average number of nursing personnel, average fees charged by type of nursing personnel and health care facility, and the states in which the agency’s nursing personnel reside. The law also requires the Department of Social Services to evaluate the rates agencies charge nursing homes and establish maximum rates for such services.

  • IowaIowa passed a new law requiring “health care employment agencies” to register with the Department of Inspections and Appeals (DIA) and pay an annual registration fee of $500, effective July 1, 2022. Among other things, the law prohibits health care employment agencies from:

    • restricting the employment opportunities of health care workers, including the use of non-compete clauses in any contract with a health care worker or health care entity, or

    • contractually requiring liquidated damages or other compensation if a health care worker becomes a permanent employee of their assigned health care entity.

Subsequent legislation that was passed effective June 21, 2022 makes the provisions restricting agencies from including or enforcing non-compete clauses and requiring liquidated damages only effective for contracts entered into on or after January 1, 2019. Additionally, the law requires health care employment agencies that place health care staff at Medicare or Medicaid participating health care entities to submit quarterly reports to DIA outlining the average amount charged to the entity and the average amount paid to the health care staff.

  • Illinois. Illinois recently amended its Nurse Agency Licensing Act, effective July 1, 2022, to prohibit the following nurse staffing agencies from engaging in the following activities:

    • Entering into “covenants not to compete” with nurses and certified nurse aides (CNAs), which includes any restrictions on the employee’s ability to work for another employer or in a specified geographic area.

    • Requiring payment of liquidated damages or other compensation if a health care facility hires an agency employee as a permanent employee.

    • “Recruiting potential employees on the premises of a health care facility."

The law as amended requires nurse-staffing agencies to submit new health care facility contracts, including a full disclosure of the charges to the health care facility and compensation to agency employees, to the Illinois Department of Labor (IDOL) within five business days of their effective date. Agencies must as well as quarterly reports listing average amounts charged to health care facilities, average amounts paid to agency employees, and average amount of labor-related costs. The amended law further requires the agency to pay wages to nurses and CNAs that match the wages listed in the agency contract submitted to IDOL, or face penalties.

  • LouisianaLouisiana passed a new law effective August 1, 2022 that newly requires “nurse staffing agencies” to obtain a license and pay a biennial fee of $1200.  The law prohibits nurse staffing agencies and health care facilities from requiring agency employees to engage in recruitment efforts as a condition of employment in their contracts. Further, the law prohibits nurse staffing agencies from offering financial incentives to agency employees for recruiting permanent employees of health care facilities to be employees of the nurse staffing agency. Additionally, nurse staffing agencies may only charge a fee for conversion of nurse staffing agency employees into permanent employees of the health care facility under certain conditions (i.e. payable by the facility, reduced pro-rata based on the length of time the agency employee provided services on behalf of the nurse staffing agency, etc.).

  • OregonOregon’s new law requires “temporary staffing agencies” to apply for an authorization and pay the applicable fee. The new law requires that temporary staffing agencies may only charge fees to health care entities for hiring agency employees as permanent staff, and pay health care entities fees when the agency hires the health care entity’s staff members, if: 1) the temporary staffing agency or health care entity directly solicit employment, and 2) the contract between the temporary staffing agency and health care entity allow each party to charge or receive the fees described above. The law’s provisions are operative as of July 1, 2023.

Notably, the law also requires that the Oregon Health Authority put together a report that describes the process by which the Health Authority will establish maximum rates that a temporary staffing agency may charge an entity for services provided by its employees.

Proposed Legislation

  • OhioOhio has introduced a bill that would require “health care staffing agencies” to submit annual registrations and applicable fees. The proposed law would require that health care staffing agencies provide health care providers with a schedule of fees and charges that cannot change without 30 days’ prior written notice, and prohibit health care staffing agency employees from recruiting the health care provider’s permanent employees. Health care staffing agencies would be prohibited from restricting their employees’ employment opportunities, including through the use of non-compete clauses, the payment of liquidated damages or compensation for staffing agency employees being hired as permanent employees of the health care provider, or requiring a staffing agency employee to pay money to terminate employment or accept an employment buyout. The proposed law would also prohibit health care staffing agencies from billing or receiving payments from health care providers for applicable health care licensed professionals. The proposed law prohibits the billing or receiving of payments at a rate that is higher than 150% of the statewide median hourly wage for that category of professional, as determined by the Department of Medicaid from cost reports for the most recent calendar year with an established a median wage.

  • PennsylvaniaPennsylvania has introduced a bill that would require “temporary health care services agencies” to annually register with the state, pay the applicable fee, and provide a list of each separate agency location.  Among other requirements, the proposed legislation would prohibit temporary health care staffing agencies and health care facilities from restricting the employment opportunities of their personnel.

We will continue to monitor and report on state legislative efforts to regulate health care staffing agencies.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
National Law Review, Volume XII, Number 278
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