News | Labor Cost Management

Hospitals need federal support to handle the ongoing staffing and financial crunch, industry leaders say

News | Labor Cost Management

Hospitals need federal support to handle the ongoing staffing and financial crunch, industry leaders say

  • Hospitals say clinical labor shortages and the resulting spike in costs are untenable.
  • The federal government should investigate whether staffing agencies are engaging in unfair business practices, the American Hospital Association said.
  • Other requests include bolstering the assistance available through the Provider Relief Fund (PRF) and postponing deadlines for repaying Medicare loans.
  • A $2 billion distribution from the PRF was announced Tuesday.

The hospital industry on Jan. 25 issued its latest plea for additional federal support to mitigate surging staffing costs and other financial and operational ramifications of COVID-19.

The American Hospital Association (AHA) hosted a media call that included several hospital and health system leaders. While the wave of cases sparked by the omicron variant appears to be slowing in some areas of the country, they said, hospitals are still dealing with a crush of cases. On Jan. 23, for example, 150,000 patients were hospitalized with COVID-19, and 26,000 were in ICUs.

Many challenges will remain regardless of what course the pandemic takes from here. One of the biggest concerns involves the consequences of a depleted workforce, said Rick Pollack, president and CEO of the AHA.

“The stress, the trauma, the burnout and behavioral health disorders among our caregivers are at historic levels, and their health and well-being is on an unstainable path,” Pollack said.

Nurse staffing costs remain a problem

As explored in the December cover story of hfm, there are no obvious solutions to the clinical staffing costs that are hampering hospital operations. The AHA on Tuesday cited data from the software solutions company Prolucent Health, which reported a 67% increase in the advertised pay rate for travel nurses during a two-year period ending in January. Hospitals then are being billed an additional 28% to 32% by staffing agencies.

Congress and the Federal Trade Commission should investigate whether agencies have engaged in anticompetitive practices, the AHA said.

Mindy Hatton, JD, general counsel with the AHA, said the FTC has authority to “look for collusive behavior, which we’ve seen some evidence of because not only are the absolute costs that some of the nurse staffing agencies are charging similar throughout the nation, but they seem to move in lockstep.”

In addition, she said, “When you see price increases that are two or three or more times what they were before the pandemic, it’s fair to at least investigate whether or not these companies are price gouging.”

In a statement provided to HFMA, AMN Healthcare, a leading staffing agency, attributed the costs of hiring travel nurses to market dynamics.

“As demand for nurses has increased during the pandemic, the market has required increased compensation to attract nurses to fill staffing requests from hospitals,” Landry Seedig, group president and COO for nursing and allied solutions with AMN Healthcare, said in the written statement. “Price increases are passed through to compensate travel nurses to help hospitals compete for this limited talent. Hospitals set bill rates for all travel nurses and, in fact, AMN Healthcare’s nurse staffing gross margins are lower now than they were before the pandemic.”

Clinical staffs are being stretched thin

Hospitals say the prices and fees charged by agencies essentially are non-negotiable because ensuring adequate staff are on hand to support patient safety is vital.

Wright Lassiter, president and CEO of Henry Ford Health System (HFHS) in Detroit and chair of the AHA Board of Trustees, said his organization has about 1,000 nursing vacancies out of 9,000 positions. The system had to close 150 beds due to staffing limitations a month ago. As of Tuesday, 75 beds remained unavailable.

HFHS anticipates a $50 million impact from November 2021 through March 2022 stemming from what it refers to as “crisis labor spend,” namely costs related to travel and contract nursing.

Ruby Kirby, CEO of Bolivar Hospital and Camden Hospital, both part of West Tennessee Healthcare, said nurses aren’t the only ones leaving their jobs to sign on with travel agencies for higher pay. “They are also recruiting respiratory therapists because [they’re] a valuable resource to all of us.” She added that her hospitals have lost over 50% of their respiratory therapist coverage.

“We cannot compete with the salaries that they’re offering,” she said.

The challenges won’t end whenever the pandemic ends. Robyn Begley, senior vice president and chief nursing officer with the AHA, said data indicates that 500,000 nurses will leave the workforce in 2022, bringing the overall shortage to 1.1 million.

Hospitals’ wish list focuses on the Provider Relief Fund and more

The AHA recently sent a letter to congressional leaders seeking assistance on several fronts, including more efficiently making distributions from the Provider Relief Fund.

The Health Resources and Services Administration on Tuesday did announce an additional $2 billion allocation as part of the ongoing Phase 4 distribution. The funding follows the December release of $9 billion in Phase 4 general disbursements and $7.5 billion for rural hospitals.

However, the AHA noted that no distribution to date has been targeted to cover expenses and revenue losses stemming from the delta or omicron variants of the coronavirus; the Phase 4 distribution is directed to expenses and losses incurred between July 1, 2020, and March 31, 2021. The AHA hopes another $25 billion can be provided for the more recent surges, in addition to whatever is left in the fund.

Other requests include suspending repayment of Medicare advance payments and postponing the restoration of the Medicare sequester, which is scheduled to reduce payments by 1% starting in April and 2% starting in July. The advance payments were made to hospitals at the start of the pandemic, and Medicare recoups 25% of a provider's payment during the first 11 months of the repayment period and 50% for six months after that. If the loan is still not repaid, CMS will demand the outstanding amount at an interest rate of 4%.

“It’s really a cash-flow issue, a cash-flow crunch,” Pollack said. “We’re simply saying, ‘Give us a little more grace period here in terms of the payback period.’”

“We’re not asking [CMS] to just forgive it, but we’re asking for more time so that our cash flow isn’t impacted at a time when our profitability is not what it might have been pre-COVID,” Lassiter said.

The hope is that some of these accommodations can be included in an upcoming appropriations bill to fund the federal government for the remainder of FY22. The government is scheduled to run out of money in mid-February.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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