Rising Bill Rates in Staffing Agencies
VMS programs help standardize, centralize, and streamline all aspects of the business relationship between staffing agencies and healthcare organizations that utilize their services. There are a number of costs associated with facilitating these relationships which are all included in the bill rate. Bill rates are hourly rates that healthcare organizations pay for every hour of work performed by the contingent workforce. These rates are negotiated between the VMS with the client and are determined according to the specific costs involved for a staffing agency to recruit and employ the contingent labor they provide.
Bill rates are paid only for hours worked by contingent workers and can fluctuate according to supply and demand. In times of great need when healthcare organizations urgently need contingent staff, bill rates will increase. Conversely, when demand for staff is lower, bill rates will decrease. Given the current shortage of healthcare workers and economic climate, bill rates are on the rise.
Types of Bill Rates
Simply stated, a bill rate is an hourly rate paid to staffing agencies for their employee’s work time. Bill rates are the foundation of contingent workforce packages which determine how much money agencies have to work with on any given assignment.
Bill rates must account for costs that include:
- Agency Internal Operational Costs
- Advertising / Recruitment
- Continued Administrative Support for Duration of Contract
- Onboarding and Compliance Costs
- Paid Sick Time
- Professional/General Liability Insurance
- Workers Compensation Insurance
- Costs Related to Malpractice/Employment Litigation
- Employment Taxes
- Travel and lodging
- Advance payroll funding
A bill rate is not the same as a pay rate as many factors influence bill rates. The pay rate is what the healthcare worker will earn per hour worked. While it is often the largest cost, the pay rate is only one variable in determining the bill rate. There are three main types of bill rates: standardized, negotiated, and bid bill rates.
Currently, the most common type of bill rate is the standardized bill rate. A standardized bill rate is a rate agreed upon by the staffing agency and the client. The second type of bill rate is the negotiated bill rate. Unlike standardized bill rates, negotiated bill rates are determined by the specific project. This type of bill rate is not currently very common but may be used in instances where a client seeks a specific skill set or specialty. Bid bill rates are the third major type of bill rate. While bid bill rates tend to be more common than negotiated rates, they are still not as widely used as standardized bill rates. A bid bill rate allows entities to submit bids for bill rates. This system is intended to help clients get the best price possible, however, that does not always mean the lowest bid rate. While a lower bill rate is more attractive, clients are often willing to pay more for candidates who fit the demands of the position.
Understanding the bill rate means understanding the categories of pay rates within bill rates. These are important considerations for vendors, clients, and members of the contingent workforce. Significant bill rate categories include:
- Standard Rates
- Specialty Rates
- Regular Time Worked Rates
- Overtime Worked Rates
- Blended Bill Rates
- On Call Rates
- Call Back Rates
- Crisis Rates
- Holiday Rates
Why Bill Rates are Rising
COVID-19 did not start the nursing shortage. The United States has experienced periodic nursing shortages since the 1990s, however, the current nursing shortage is reaching critical levels. According to a data study by the University of St. Augustine, “the United States is in the midst of a critical nursing shortage that is expected to continue through 2030.” With an increase in demand for nurses and a labor shortage, bill rates have escalated.
Why is there such a critical labor shortage in the healthcare industry? Multiple factors are contributing to the current healthcare labor shortage. Some of the most influential factors include:
- An Aging Population: According to the World Health Organization, one in six people in the world will be aged 60 or older by the year 2030. Additionally, 19% of people over the age of 55 have three or more chronic conditions according to the CDC. Longer lifespans and multiple chronic conditions greatly increase the demand for healthcare services.
- An Aging Workforce: An aging population means more people are approaching retirement, and the healthcare industry is no exception. According to a 2020 article published by The Journal of Nursing Regulation, the median age of all registered nurses is 52. An aging workforce means fewer registered nurses are employed by healthcare systems, but also contributes to the current shortage of experienced and qualified nursing instructors. As nursing programs struggle to find qualified nursing educators, the number of students enrolling in programs is reduced.
- Burnout: Age is not the only factor driving the mass retirement of healthcare professionals. One in five healthcare workers affected by the pandemic has quit their jobs. The mental and physical toll the COVID-19 pandemic took on healthcare workers was great and accelerated burnout among employees.
- Working Conditions: Healthcare workers are increasingly citing working conditions as a reason to leave their jobs. Labor shortages often mean additional overtime and increased workloads and responsibilities.
In addition to the critical shortage of healthcare workers, operating costs are up across many industries. Inflation drives up many costs related to running a business from overhead costs like building leases to pay rates for talented nurses and healthcare professionals. Bill rates can include many factors, some of which include:
- Work Performed by VMS/MSP
- Liability and Insurance Coverage
- Medical Malpractice Lawsuits
- Employee Onboarding
- Pay Rate of Healthcare Professionals
- Travel Reimbursement
- Non-Taxed Per Diems
- Non-Taxed Housing Stipends
According to the Bureau of Labor Statistics, the projected number of open positions for registered nurses from 2019 through 2029 is 175,900 annually. As hospitals and other healthcare systems operate with negative margins, the prevalence of contracting with staffing agencies is forecasted to continue.
While the bill rates have been rising, there has been a call for federal oversight of pricing policies among travel nursing agencies. During COVID, many hospitals experienced a plummet in profit levels. With the pay for travel nursing reaching an all-time high during the pandemic, The American Hospital Association (AHA) notified the Federal Trade Commission of concerns over potential price gouging. The AHA and other lawmakers have urged further federal investigation as bill rates continue to rise.
With the number of factors influencing the bill rate, staffing agencies maintain that the included costs are increasing not due to price gouging, but to meet demand. Addressing the factors contributing to the nursing shortage is one of the most significant ways to maintain, or lower, bill rates.