Hospitals are creating internal staffing agencies to stop nurses from flocking to third-party agencies

Since the onset of the Covid-19 pandemic, hospitals have hired huge swaths of travel nurses to help meet the massive spike in demand for care. As the pandemic has left many nurses exhausted and traumatized, more have chosen to make the switch to third-party staffing agencies that offer more flexible working hours and much higher pay—in some cases as high as $10,000 per week.

Travel nurses are typically employed by third-party staffing agencies that a hospital calls on when in need of extra staff for a short period of time (the average assignment length is 13 weeks). An agency matches a hospital with one of their nurses, who usually temporarily relocates to work at the hospital, with travel and housing stipends sometimes provided by the agency.

Now, some health systems have decided to create their own in-house staffing agencies to compete with those third-party agencies and slow the cascade of salaried nurses leaving.

Hospitals dive into the staffing business

A handful of health systems have announced their own agencies, according to Pam Damsky, director at healthcare consulting firm Chartis. However, she noted there’s no data on how widespread the trend has become. Although the pandemic is credited in part with some of these shifts, Henry Ford Health was ahead of the curve with BestChoice Internal Staffing Resource Pool, which launched nearly a decade ago in Detroit.

Novant Health started its in-house staffing agency about five years ago, but it expanded in the last year as travel nursing became more popular, said Michael Vaccaro, Novant’s senior vice president of acute inpatient nursing. The health system has what it calls “float pools,” which consist of about 200 nurses that can travel between the system’s hospitals, 15 of which are in North Carolina.

WellSpan developed its internal staffing agency in spring of 2021 after some of its nurses quit in favor of travel nursing—then a national trend, according to Bob Batory, the system’s chief human resources officer. The Pennsylvania system officially launched its internal agency, called WellStaffed, in September 2021 and now has 105 nurses and nursing assistants.

The program is run by a nurse manager who was already employed at the system, and WellSpan didn’t have to hire any new employees to run WellStaffed, Batory said. The only cost to run the program is the nurse manager’s salary, and Batory said the cost of the nurses in the WellStaffed program is much less than what WellSpan would have to pay to a third-party agency for a travel nurse.

CHI Health—which became the Midwest division for CommonSpirit Health in 2019—decided to create its internal staffing agency during the pandemic. Over the last year it has recruited more than 100 nurses into the in-house agency, said Tim Plante, the division’s chief nursing officer.

Health systems save cash

Health systems generally save money with their internal staffing agencies because they don’t have to pay the fees that the agencies collect for themselves. Staffing agencies typically make a near 15% operating profit margin, according to Axios. At some health systems, like WellSpan, it can be cheaper to use a travel nurse from its internal agency than paying a regular full-time nurse time and a half to cover an extra shift, Batory said.

Still, the internal agencies have yet to entirely wipe out health systems’ need to hire some nurses through third-party agencies. At CHI Health, the internal staffing agency has reduced the need to use travel nurses from third-party agencies by 50%, according to Plante. It has reduced labor costs “in the millions every month.”

Novant also still relies on third-party staffing agencies for some nurses, but Vaccaro said they may be less likely to rely on them over time. In terms of results, Vaccaro said Novant has seen some nurses who had left the health system for an agency during the pandemic come back to Novant after learning of the internal agency.

Workers get better benefits and higher pay

Most of the health systems’ internal staffing agencies are primarily for nurses, though some, like CHI Health, include other positions such as radiology techs and respiratory therapists, said Plante. At WellSpan, CHI Health and Novant, travel workers get to keep the benefits of a non-travel employee. Hospitals typically don’t pay insurance for travel nurses through third-party agencies.

The health systems also offer significantly higher pay for travel workers compared to regular staff. At WellSpan, travel workers get paid 40% more than non-travel staff, and CHI Health travel workers make about twice as much as non-travel staff.

“It’s just a win-win for us. We get to keep the talent in the organization, and our nurses get a variety of places that they can go to and don’t have to be tied to a particular unit in the hospital for a lengthy period of time,” Batory said.