Reeling from High Labor Costs, Hospital Systems Create Their Own Nurse Staffing Units

By Andy Miller | KHN

Like many nurses these days, Alex Scala got a big pay hike when she switched jobs recently.

Scala also received a welcome mix of assignments when she joined Pittsburgh-based Allegheny Health Network. She signed on with a newly created team that works shifts in various units within the system’s 14 hospitals.

After working as a registered nurse on staff at a facility elsewhere, Scala, 31, now commutes from her home in Butler, Pennsylvania, to the system’s hospitals across western Pennsylvania. “I can meet new people, learn new procedures, how hospitals do different things,” Scala said.

An increasing number of hospital systems like Allegheny Health Network have created in-house staffing teams to cope with the pandemic-fueled nursing shortage — and try to beat private temp staffing agencies at their own game. Depending on the system, the nurses could work a weeklong stint or a multiple-week assignment at a hospital and then do a similar schedule at another facility. Some even work self-scheduled shifts in various locations, unlike regular staff nurses, who typically work in a single medical unit within one hospital. These workers differ from traditional “float” nurses, who shift from unit to unit on an as-needed basis within a single hospital.

The goal of the in-house teams is to offer enough pay and flexibility to attract nurses to the jobs — and thus reduce the systems’ heavy dependence on more expensive RNs from outside agencies.

Nationally, such contract labor expenses are nearly 500% higher than they were before the pandemic, according to a consulting firm report commissioned by the American Hospital Association. That spending is pushing many hospitals into the red for 2022, the same firm, Kaufman Hall, estimated recently, although some systems have earned profits during the pandemic.

A Shift in Healthcare Staffing

The members of the new staffing units are typically just a small fraction of a hospital system’s workforce. And such teams probably wouldn’t be feasible for many small or rural facilities. But hospital officials said the internal staffing agencies will grow as nurses and other workers, such as respiratory therapists and surgical techs, seek flexible work arrangements.

“There’s a huge shift in the evolution of health care in creating more staff who can move around,” said Daniel Hudson, vice president of nursing administration and operations at Philadelphia-based Jefferson Health, which recently created a staffing unit that now has 35 full-time workers.

Although nursing shortages have existed for years, the staffing crunch deepened as the demands of covid care pushed many hospital nurses to exhaustion. Some quit, retired, or sought jobs at home care agencies, ambulatory surgery centers, and medical offices.

A lot of nurses left the workforce, including newly trained ones, said Beth Ann Swan, associate dean of Emory University’s Nell Hodgson Woodruff School of Nursing in Atlanta.

Turnover for hospital staff RNs rose to 27.1% last year, up from 18.7% in 2020, according to a NSI Nursing Solutions report.

So nurses from temp agencies filled more shifts. Their pay — and the subsequent cost to hospitals — soared as covid-19 surged. Travel nurses were earning up to $10,000 a week in late 2020, although the average price dipped to about $3,000 this year.

Before the pandemic, Atlanta-based Piedmont Healthcare spent $20 million annually on nurses from such agencies. “For the past fiscal year, we spent $400 million,” Piedmont CEO Kevin Brown said. About a third of that total went directly to the agencies, not the nurses, he added.

To cut out the middleman, Piedmont formed a hospital staffing unit to provide what officials called the best of both worlds — the flexibility of a staffing agency and the stability and support of a local health system.

Such work flexibility is a key draw for nurses, said Akin Demehin, senior director of quality and patient safety policy at the American Hospital Association. Relevant factors include work location and the frequency and structure of shifts.

Old Staffing Model Gets a Renewed Look

Internal hospital staffing agencies aren’t a new concept. The five-hospital Henry Ford Health System, based in Detroit, started its internal staffing unit in 2013. Besides nurses, the pool includes medical assistants, as well as surgical and emergency room techs. Members of the team get higher hourly pay than regular staffers do and can choose their shifts.

The overall cost is significantly less than using an outside agency’s personnel, said Kim Sauro, director of what the Henry Ford system calls the BestChoice program.

But for many nurses, the in-house hospital programs won’t overcome the allure of temp agency pay and travel opportunities, at least during some periods of their lives.

Ryan Bannan and his wife, Bharvi Desai Bannan, both Atlanta nurses, went on the road for nearly two years, working in Florida, Arizona, and Utah, among other locations. “The advantages first and foremost were compensation,” he said. Now that the couple is expecting a baby, they’re back in Atlanta. Ryan works as a staff nurse in an intensive care unit, while Bharvi is an “internal travel nurse,” with 13-week stints, for a second local hospital system.

Allegheny Health Network’s Scala said she, too, had considered being a travel nurse. “But I have a toddler,” she said.

The medical temp agency industry remains a profitable business even though revenues have dropped since the height of the pandemic. The president of one such firm — Chris Eales of Premier Healthcare Professionals, based in Cumming, Georgia — said the new hospital staffing units don’t pose an immediate threat to the temp agency field. “Their success would very much depend on their ability to attract, recruit, and retain nurses,” Eales said. “They have to build up some credibility.”

His firm, he said, is still placing temp nurses in hospitals that have set up mobile staffing units.

Allegheny Health Network is indeed continuing to use some temp agency help. But an exodus of nurses during the pandemic — many to higher-paying agency jobs — helped prompt the creation of its internal staffing team, said Claire Zangerle, the system’s chief nurse executive.

The system increased pay and benefits for staff nurses who stayed. Meanwhile, the new mobile unit offered even higher hourly pay than regular staff RNs get to draw agency nurses back. Those mobile employees move among hospitals yet have access to full benefits and “can sleep in their own bed,” Zangerle said.

“I don’t think we’ll ever be temp agency-free,” Zangerle said. But flexible hospital work teams, she added, “are going to change the labor market.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.