Rising Bill Rates in Staffing Agencies

Fusebox Marketing on February 8, 2023

Rising Bill Rates in Staffing Agencies

February 8, 2023

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.

Standardized Bill Rate

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.

Negotiated Bill Rate

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 Rate

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

Understanding the bill rate means knowing 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 Waldon University, “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:

Aging Population

According to the World Health Organization, 1 in 6 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.

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. 1 in 5 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.

Operating Costs Increase

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

The American Association of Colleges of Nursing cites a Health Workforce Analysis that states the projected shortage number of open positions for registered nurses in 2025 will be 78,610 full-time RNs and a shortage of 63,720 in 2030.

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.

Read next: Quality in Healthcare Staffing

Benefits of Using VMS in a Candidate-Driven Labor Market

Fusebox Marketing on December 14, 2022

Benefits of Using VMS in a Candidate-Driven Labor Market

December 14, 2022

With a labor shortage and an ever-increasing demand for healthcare services, healthcare staffing is currently in the midst of a candidate-driven market.

Vendor management systems are poised in a unique position to facilitate expedient hiring, which is critical to obtaining a qualified and skilled workforce in a candidate-driven market.

Administrative tasks related to maintaining a workforce require significant investments of time and money. This can lead to a drawn-out recruitment process during which qualified candidates lose interest.

Hospitals and healthcare systems want skilled and qualified top talent. An efficient and timely recruitment and hiring process are necessary to attract quality candidates in a candidate-driven market.

In a candidate-driven market, it is more important than ever to place candidates efficiently.

What Created a Candidate-Driven Market?

A shrinking labor pool and an increase in demand for services have led to intense hiring competition among hospitals and other healthcare systems. The current nursing shortage began long before COVID, but the pandemic worsened the problem.

In the aftermath of the pandemic, many healthcare employees who left their positions have also said goodbye to the profession entirely.

There is no single cause of the current labor shortage. Multiple factors influenced the healthcare professional shortage, including:

Aging Population

An aging population affects the labor market in two ways:

increased demand for healthcare services
healthcare workers aging out of employment

Excessive Turnover

Turnover rates increased significantly following the COVID-19 pandemic, not only affecting the ability of healthcare organizations to provide care, but it also the impact that has on remaining employees.

As healthcare employees leave their jobs, the remaining workers experience higher patient loads and more responsibility – without a pay increase. This results in exhaustion and burnout, causing even higher turnover rates.

Lack of Nursing Educators

According to the American Association of Colleges of Nursing (AACN), “faculty shortages at nursing schools across the country are limiting student capacity at a time when the need for professional registered nurses continues to grow.”

Between budget constraints, aging faculty members, and increased job competition, finding qualified nursing instructors is becoming increasingly difficult.

Why Placing Candidates Quickly Matters

To remain competitive in candidate-driven markets, speed is essential. Understanding why a quick hiring process is necessary can help you to identify candidates and fill positions with more qualified individuals quickly.

An expedient hiring process is attractive to both businesses looking to hire and those seeking new employment opportunities. When faced with an extended hiring process, many candidates will choose to remain in their current position or move to another opportunity.

In-demand candidates can afford to be more selective. This means you must act more quickly during the hiring process to attract and retain top talent.

Not only do highly qualified candidates tend to make hiring decisions more quickly, but they also tend to view a fast hiring process favorably. To candidates, a lengthy hiring process can negatively impact the assessment of your corporate culture.

In addition to attracting top talent, a swift hiring process can be fiscally beneficial. With a shrinking labor pool and an increased demand for skilled workers, candidates may often receive multiple bids.

Extending an offer quickly can avoid a bidding war, allowing you to attract top talent at a lower salary cost.

How a VMS can Help Healthcare Organizations Find Top Talent

Finding the right talent in a timely fashion can be difficult. Hospitals and other healthcare systems have difficulty adapting to the growing demand for skilled and talented professionals. With a shrinking labor pool and time constraints due to other operational duties, finding the perfect candidate for placement is difficult.

Fortunately, an experienced VMS can help. VMS’s innovative technology can streamline the entire recruitment and hiring process.

There are several ways in which a VMS can help with expedient hiring, including:

Tracking Talent

When using a contingent workforce, it is expected that professionals will come and go. The right VMS will maintain meticulous records of the professionals they have placed, which can make it easier to rehire top talent.

A VMS can automate tracking of candidates whose performance exceeds expectations, making it easier to rehire valuable individuals. This helps not only provide adequate staffing levels but also reduces the amount of time spent training and onboarding.

Additionally, because all employees are tracked, you can eliminate candidates who are ineligible for rehire. Some employees attempt to return to positions by using different staffing agencies, and a VMS that tracks everything can identify this and automatically rule out those candidates.

Experienced Suppliers

Suppliers with more experience tend to do a better and more efficient job at finding the right candidates for open roles. When using a VMS to handle an extended workforce, you can reduce waiting times for locating candidates by specifying the exact skills each open role requires.

Staffing suppliers use the guidelines from the VMS to streamline the hiring process.

Competitive Rates

The more administrative time it takes to find, hire, onboard, and subsequently offboard contingent workers, the higher the rate. Reducing time spent dealing with administrative tasks allows you to offer more competitive rates to attract top talent.

With bill rates on the rise as a result of increased demand for talent, it can be hard to stay competitive. Working with a VMS to streamline and centralize the hiring process can help save money that can then be used to help offer more competitive rates.

With a shortage of labor expected to remain through 2030, industry forecasts suggest a continued increase in demand for talent. Creating a contingent workforce is an efficient and cost-effective way to get the staff necessary for daily operations.

A VMS can be an invaluable resource when building a contingent workforce. By streamlining the entire process, a VMS saves hospitals and other health systems a significant amount of money and time required to recruit top talent.

In a candidate-driven market, the speed of the hiring and placement process is more important than ever. Working with a VMS can facilitate easy and efficient hiring, helping you build the workforce you need when you need it.

At Management Solution, our vendor-neutral approach and experience managing contingent workforces help you get the top talent your healthcare system deserves.

Contact us today to answer your questions or partner with us.