Travel Nursing Podcast

TTATN 016: Travel Nursing Contract Cancellations

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In this episode, we’re going to discuss contract cancellations and we really want to cover all the bases so you know what to expect and how to handle these sticky situations. We’re going to look at three different angles for contract cancellations. First, we’re to look at several scenarios for when travelers cancel contracts. Then we’re going to look at some scenarios for when hospitals cancel contracts. Finally we’re going to discuss the rare occasion when agencies cancel contracts. [Please note that this is a transcript of a podcast episode. As such, grammar and spelling are not optimized for written content.]

Cancelling Your Travel Nursing Contract

Okay, so let’s start by looking at the scenarios involved with travelers cancelling contracts. It seems as though the two most common things that travelers focus on when it comes to cancelling a contract are the reasons for the contract cancellation and the consequences or penalties for cancelling a contract. While both of these are certainly valid concerns, the timing of a contract cancellation is also a very important factor to consider.

With that in mind, let’s start by discussing the consequences of cancelling a travel contract. And the reason that we’re starting here isn’t to scare you. Instead, knowing all the potential consequences helps us understand why the timing of the cancellation is so important.

Travel Nursing Agency Consequences for Cancelled Contracts

We’re going to begin with the consequences for the agency. When a contract is cancelled, the agency is always missing out on anticipated revenue. This is revenue that they were counting on earning. They may have even projected into their future earnings forecasts, which is not a big deal but I’m sure you can understand that it’s a bit of a letdown for them when this happens.

Now, depending on when the contract is cancelled, the agency could be on the line for various expenses. The biggest of these potential expenses is company provided housing. If they’ve signed a lease, then they could be out thousands of dollars if they aren’t able to get out of the lease or find another traveler that they’re working with to move in there.

It’s also important to consider everything that goes along with housing as well. There are potentially tons of little ticky-tack costs that the agency could face. For example, if they worked a deal out to get a great price on furniture, then they’ll be penalized for returning the furniture early. The great price was being given because they were securing it long term.

The same thing happens with extended stay hotels. Agencies are typically able to work out amazing deals for long term stays at Extended Stay hotels. However, if the traveler leaves early, then the agency will get penalized for the difference between the negotiated cost and the standard cost of the room.

Another cost for agencies to consider is the cost of compliance and credentialing. When the agency pays for any licenses, certifications, or medical exams, they typically spread the cost of these items over the course of the contract. Again, as we’ve mentioned in previous episodes, they break everything down to an hourly value. Another way to look at it is to say that each hour that the traveler works pays off a little more of those costs until they are fully paid off by the end of the contract.

And remember, there are a lot of these items to consider. We’re talking about drug screens, background checks, physical exams, PPD exams and others. And by the way, I’ve heard that background checks for some hospitals are getting out of hand these days. Some hospitals are requiring county level checks for every county the traveler has lived in and they’re requiring all aliases to be run. So if the traveler changed their name for marital status purposes, then both names need to be checked. I heard these can run north of $500.

Anyway, travel stipends and non-billable orientation costs are similar in this regard as well. For example, if the agency pays the traveler a $400 travel stipend on the first paycheck of the contract and then the traveler cancels the contract in week two, the agency is essentially out that money.

You’ll also find that agencies are quick to point to point out that a high volume of man hours goes into locking down each and every contract. Most of that effort takes place up front. The recruitment process and securing everything really do consume the lion’s share of the agencies resources. So they’re counting on travelers completing the contracts in order cover the labor costs that go into all that.

Finally, agencies could potentially get penalized by the hospital for the cancellation. You see, the contracts between agencies and hospitals often include an early an early cancellation penalty. These penalties are typically anywhere from 1-2 weeks’ worth of billing fess. So, at a $70 per hour for 36 hours per week, that’s $2520 for one week or $5040 for 2 weeks.

Of course, the consequences for the agency go beyond financial consequences. Cancellations can really damage their relationship with a hospital. I mean, one cancellation and one instance where there is a disciplinary action against one of the agency’s travelers could be all it takes to get the agency suspended or even booted from the contract altogether.

Hospital Consequences for Cancelled Travel Nursing Contracts

With that in mind, there can also be consequences at the hospital which is why cancellations can harm the hospital/agency relationship. Depending on the situation, the hospital may have you on the schedule. As you know, it can really be difficult for them when they’re short-staffed. They may also have some time and energy invested in getting things together for you.

Travel Nurse Consequences for Cancelled Contracts

So, those are the main consequences for the agency and the hospital, but what about the consequences for the traveler. Well, the traveler potentially faces some steep consequences as well. First, the traveler’s reputation could be tarnished. The hospital in question may decide that they won’t work with the traveler in the future. Now, it’s fair to say that whether or not this happens has a lot to do with the relationship that the traveler has with the hospital staff. If everything was going great, then the hospital will most likely be lenient in this regard. But if the working relationship was a little shaky, then they may blacklist the traveler.

This can come back to haunt you if the hospital is a part of a major hospital system. There’s always a possibility that you get blacklisted from the entire hospital organization. Now, that might not matter to you. There are some travelers that just won’t work with certain hospital systems because they simply don’t like the way they operate. However, when it’s a big hospital system, there is a good chance that you end up explaining this issue to future recruiters at some point in the future. You’ll have to say, oh you can’t submit there because I had an incident, or your future recruiters may just find out somehow and this of course raises a red flag.

It’s also important to remember that you most likely won’t be able to secure a reference for this position. And references have become a really big deal in landing both travel and permanent positions. Moreover, many hospitals are now requiring candidates to provide a detailed summary of the last 7 years. This means work history and everything else. They want any gap of more than a month to be explained. So it has become really important to maintain a stable work history. All that said, there is no guarantee as to how the hospital will react so take all of this with a grain of salt.

Now, the traveler’s status with the agency may be in doubt as well. The issues here are largely the same as they are with the hospital. One of the important things to remember is that if you’re working with a really large agency like American Mobile or Cross Country, then getting blacklisted from them could potentially haunt you. This is because these agencies have a lot of managed services provider contracts. We’ve discussed these in previous episodes. This essentially means that these agencies have exclusive contracts to handle all staffing needs for a hospital or hospital system. It also means that all agencies must go through them to get access to those jobs. So when another agency submits your profile for one of these contracts, it may get rejected because you’re blacklisted from the Managed Service Provider.

And the same thing happens with agencies in terms of references. You know, most hospitals require clinical references to get the job at the hospital. But agencies will call one another to check on how things worked out for them with the traveler. It’s a really small industry so word can spread easily.

There are also financial considerations for travelers to consider. For starters, you could face a lot of the same costs the agencies do. For example, perhaps you provided your own housing for the contract. Or perhaps you paid for your much of your own compliance and credentialing costs. Perhaps the travel stipend offered by the company didn’t fully cover the cost of your travel expenses. Moreover, you’ll be missing out on your pay, so unless you have something else lined up, you’ll miss out on several weeks’ worth of wages.

Finally, there is typically a penalty involved with contract cancellations. Different agencies handle these penalties in different ways. Some may include a clause that holds the traveler liable for all costs associated with the contract cancellations. It’s more common for the agency to have some set dollar amount in their contract, like $2000 for cancelling the contract early.

That said, it’s actually quite difficult for agencies to collect these penalties. They usually aren’t able to garnish your wages by law. Garnishing wages typically requires a court order which means the agency would have to take you to court in order to legally recoup the penalty. Often times, this is more trouble than it’s worth, so the agency won’t bother. If you ever have your wages garnished, you’re typically able to file a complaint with the state’s labor relations board and get the money back. That said, there is no telling what agencies will do in these scenarios, so it’s best to prepared for all possibilities.

How Timing of Contract Cancellation Affects Consequences

With all of that in mind, let’s talk about the timing of traveler initiated cancellations and how that effects the situation. As you may have noticed from our discussion, most of these costs and consequences are related to timing. For example, if the agency hasn’t actually paid for the travel stipend yet, then they’re not going to be out that money if you cancel the contract. If they haven’t secured housing yet, then they’re not going to be out that money. Similarly, if the hospital hasn’t added you to their schedule yet, then they probably won’t be missing you from it yet.

The point is that the earlier the contract is cancelled, the more palatable it will be for all parties. And I think the best way to define “EARLY” is to gauge by when you agreed to the contract. So if you sign the contract on a Monday and then call the agency on Tuesday and cancel it, then what’s the harm really? They can’t have done that much.

That said, it’s important to know that agencies start to work on these things immediately unless the contract is months in the future. So the longer that you that you let pass, the more likely it is that they’ve racked up expenses.

Now, even when you cancel a contract very quickly after accepting it, you can pretty much expect the agency to give you grief. And you should definitely expect the grief to be far greater if more time has passed. They may try may try any number of measures to get you to change your mind. They may take a positive approach by trying to sweeten the pot or take care of anything that’s preventing you from going through with the assignment. They may try to guilt you into taking the assignment. They may threaten to make you accountable for the contract cancellation penalties. They may even threaten to blacklist you.

It’s difficult to tell how sincere they’ll be with any threats they levy against you. Each case is different and each agency is different. However, it’s a good idea to expect the worst. Chances are, the worst won’t happen, but expecting it will help you be prepared.

With all that in mind, you’ve got to be thinking, well aren’t there any legitimate reasons for cancelling a contract or backing out of a contract? I mean, is it excused in any case? What about a death in the family, or the need to take care of ill family members?  Or what about a disability issue? And yes, there certainly are reasons. However, it’s always difficult for the agency to gauge the sincerity of the reasons they’re provided for cancellations and back-outs.

Reasons For Cancelling a Travel Nursing Contract

As a result, you’ll find some agencies that always give travelers the benefit of the doubt and you’ll find others who are always suspicious. It really is a tough spot for them to be in. Of course, if you’ve built up a good track record with an agency, then they will most likely give you the benefit of the doubt. But, it really is tough for them. You know, recruiters routinely hear the same excuses for cancellations over and over. And that wouldn’t really matter if it weren’t for the fact that they also hear that the same traveler has landed a new assignment somewhere else, or the fact that receive a reference inquiry for the same traveler immediately after the traveler cancels a contract. Like a lot of things in life, this is another case where bad apples ruin it for the bunch.

Documentation for Cancelled Travel Nursing Contract

So with that in mind, it’s always a great gesture when a traveler voluntarily provides documentation for the issue at hand. If you’ve become ill or have had an injury that prevents you from taking the assignment, then it’s a good gesture to provide documentation. The same can even be if there has been a death in the family and you’re able to get documentation. Again, this gesture will be well received and it’ll certainly smooth things over immediately.

Now, I’ve heard many travelers argue that they will not provide this type of documentation under any circumstances. This is fine, this is just a recommendation. It’s not a requirement. However, when the shoe is on the other foot and the hospital cancels a contract, then most travelers would like to receive documentation as to the reason for the cancellation. So this issue goes both ways. And that’s what we’re going to talk about next, hospital cancellations.

Hospitals Cancelling Travel Nursing Contracts

Okay, so hospitals certainly do cancel their share of contracts. Many times, they cancel contracts without good cause. For example, they might cancel a contract because census dropped. They might cancel a contract because they overestimated their need in the first place. They might cancel contracts because the implementation of their new EMR system got pushed back. There are tons of reasons that hospitals give for cancelling travel nursing contracts that are totally unacceptable from the traveler’s vantage point.

Here again though, the timing of the cancellation makes a huge difference. However, in my opinion, if a hospital cancels a contract any time within three weeks of the start date, it could potentially have a big impact on you as a travel nurse. And the same rules apply. You may have started spending a bunch of money to make the transition.

Moreover, you stand a good chance of missing at least one week of work, and it’ll likely be more like two or three weeks of work. So we’re talking about anywhere from $2000 to $8000 in lost wages. Which doesn’t sound like a lot to agencies, but it represents a significant percentage to you has a travel nurse.

Now, I’ve heard recruiters say things like, “Well, if a hospital cancels a contract, we can always find you a new one, so it’s really not as big of a deal as when a traveler cancels a contract.” And that’s just nonsense. Sure, you might be able to find them a contract somewhere in a America, but the chances of it starting on the same exact date, for the same exact pay, in the same exact city, for the same exact shift and unit are slim and none. The traveler is almost always going to take a financial loss when a contract gets cancelled on them.

And, with that in mind, hospitals are usually subject to cancellation penalties when they cancel contracts without cause. These cancellation penalties are usually very similar to the penalties that agencies incur when travel nurses cancel contracts. Again, that will typically be 1 to 2 weeks’ worth of billing and it will kick in at about 1 to 2 weeks prior to the contract starting.

Now, here’s where we can get into an issue where there’s a little hypocrisy…an issue that’s sort of “what’s good for the goose isn’t always good for the gander” sort of thing. And here’s what I mean. Remember that when a travel nurse cancels a contract, the agency will be quick to hold all of their financial losses over the traveler’s head. They may even make attempts to recoup those financial losses from the traveler. In addition, they may even blacklist the traveler.

So shouldn’t the reverse be true when the hospital cancels a contract. Shouldn’t the agency be going after the hospital for everything they can? And shouldn’t they make the traveler whole as a result? I mean, the traveler will certainly incur a financial loss due to missed hours. Even if they quickly secure a new contract, it will still take them at least a week or two. So shouldn’t the agency pay the traveler for lost time out of that penalty that the hospital should incur? And shouldn’t the agency consider blacklisting the hospital? After all, the hospital is most likely doing just as much damage to the agency as when a travel nurse cancels a contract on them.

Unfortunately, it’s really rare for agencies to man-up like this. The fact of the matter is that agencies are typically a little beholden to their client hospitals. They really need them. Without them, they wouldn’t have any jobs to place their candidates in. So agencies may not even hold the hospital accountable or go after the penalty. And even if they do, they most likely won’t cover the traveler’s pay. So when travelers complain that this cancellation issue doesn’t go both ways, they have a valid point, unless of course you’re working with an agency that offers some sort of coverage when hospitals cancel contracts. However, I’ve never seen a contract like that. Sure would be nice though!

Now, there are also cases when hospitals cancel contracts with cause. These cancellations could be the result of attendance issues, poor performance, or even insubordination. When this happens the agency should have standard set of processes and procedures in place to deal with the matter. In fact, JCAHO requires that they do.

That said, the agency is also subject to the whims of the hospital here. Some hospitals are great and they document everything and send it over to the agency in writing. Others are terrible and provide nothing. So how the agency proceeds will depend on what they receive from the hospital.

When contracts are cancelled for cause, then the traveler is ultimately responsible. Here again, most agency contracts will include a clause that holds travelers liable for penalties if the contract is cancelled for cause. And here again, the agency may or may not try to hold the travel nurse accountable.

Agencies should understand that their travelers will most likely want to know what happened. And travelers should know that agencies really want to know too because they are always concerned that hospitals may be cancelling a contract with cause, but in reality, they don’t really have a valid reason, they just want out of the contract for financial reasons.

You know, it’s important to point out that agencies never want contracts to be cancelled. They lose out no matter who cancels a contract. They’d love for contracts to go on forever! That said, this isn’t an excuse for agencies to abandon their travelers when a hospital cancels a contract. So that’s something for agencies to consider. I mean, in the end, travelers are looking to agencies to hold their hospitals accountable just like hospitals are looking to them to hold the travelers accountable. So agencies really should figure out a way to wear both hats.

Now, the last scenario that we want to discuss about cancellations initiated by the hospital is when the hospital actually cancels their contract with the agency. This is pretty rare, but it does happen. It can happen for compliance related issues. For example, if the hospital conducts and audit of traveler documentation and finds deficiencies, they may give the agency several warnings before finally cancelling the contract. They may also cancel a contract if the agency repeatedly sends them inadequate staff.

So this can be a problem for you if you’re on contract with the hospital, or if you have been offered an assignment with the hospital at the time the cancellation is initiated. It’s important to know that in most cases, the hospital would be glad to keep you on if you’d like to transfer to another agency. However, your current agency may try to prevent you from doing that and they may even use the non-compete clause in their contract to stop you from doing this. Why? Well, they’re going to lose you as a traveler and they don’t really want that. So how this plays itself out will depend on the hospital and agency.

When the Agency Cancels a Travel Nursing Contract

Okay, so finally, let’s take a look at the rare case when agencies initiate a contract cancellation. The only time that I could really see this happening is if the agency decides that they can no longer do business with the hospital in question, and so they cancel their contract with the hospital. They might do this because the hospital simply does not pay its bills. Remember that the agency bills the hospital for your time there. Some hospitals are just downright horrible at paying their bills. Some hospitals are on the brink of bankruptcy. In any case, this scenario is similar to when the hospital cancels the contract with the agency. As a traveler, what happens will just depend on both the agency and the hospital.

Okay, so before we wrap up, I just want to quickly mention verbal contracts because the question always comes up, can I cancel a verbal contract? As I mentioned in a previous episode, I am not a fan of verbal contracts. I think they’re bad for both agencies and travelers. And the main reason is that in order for a verbal contract to be legally binding, all the provisions included in the contract must have been agreed to by both parties. If that’s not the case, then there is no contract. Now, I’m not a lawyer and this is not legal advice, it’s for information purposes only, but in my opinion, unless you’ve agreed to all the provisions in a contract, then there really is nothing to cancel because a contract doesn’t exist. And this goes both ways. That said, always get it in writing. There is no reason that an agency shouldn’t be able to get you something in writing within a few hours at most.

Wow, we really covered a lot of information again here. So to recap, there really can be some big consequences for all parties when contracts are cancelled. The timing of the cancellation plays a big role in the magnitude of the consequences. While there are certainly valid excuses for cancelling contracts, it’s really nice to provide documentation when possible. Moreover, it’s important for agencies to understand that the issue goes both ways. Travelers are counting agencies to hold hospitals accountable as well.

So that does it for this episode on travel nursing contract cancellations. We’ll links to more resources on this topic in the show notes. You can also ask any questions or provide comments about this topic on the show notes page at blog.blupeipes.com/episode16. While you’re there, be sure to join bluepipes to take advantage of all the amazing features that you help you manage your travel nursing career and even your healthcare care in the years to come. It’s free and easy, and our members have great things to say about the service.

Also, just a heads up, that it will be a couple of weeks until our next episode. I’ll be off for my for my honeymoon. But I will get to the next episode as quickly as I can.

If you you’ve been enjoying this podcast, we’d greatly appreciate your rating us in whatever platform you’re using to listen. It really does go a long way in getting us more publicity so that we can keep this show going.

Thanks for listening and until next time, have a safe and prosperous travel healthcare adventure.

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4 replies
  1. Caroline Schmidt says:

    So here is the situation I am in. This will be my first travel assignment. I am excited and nervous. I have not yet seen or signed a contract but am looking this information up prior for a reason. The scheduled date for the travel assignment is December 1st 2015. I also have another nursing job opportunity allowing me to stay home with my daughters ages 8 and 6. I should hear about this position by the middle of November. If I sign a contract for the travel position and hear about the other job, am I legally responsible for anything at that time? I would be cancelling before I even start the assignment.

    Reply
    • Kyle Schmidt says:

      Hey Caroline,

      Thanks for the inquiry. It depends on the wording of the contract, but most likely, yes, you would be legally responsible for certain things at that time. The vast majority of travel nursing contracts include a clause that holds the traveler accountable for costs incurred by the agency in cases where the traveler cancels a signed contract. At that point, the agency will most likely have incurred costs for documentation like the background check, drug screen, clinical records, testing, etc. They may have also signed a lease by that point if you you’re taking company housing. And, there is a slight chance that they’d be liable to the hospital for 1 to 2 weeks worth of billing if they aren’t able to back-fill the assignment with another traveler. These hospital cancellation penalties usually activate 1 week before the contract start date, but sometimes 2 weeks.

      Of course, the agency would have to take legal action to force you to pay. Some agencies do this and others do not. In any case, once the agency receives a signed contract, it’s fair to expect they’ll start incurring costs to get everything together. And the more time that passes, the more work they’ll have put in. It’s also important to note that the hospital would be in a tough spot in this particular case as well. They would have stopped recruiting for the position for several weeks and would be picking up fresh. I think it’s fair to say that most would recommend against signing a contract unless you’re certain you’ll accept.

      I hope this helps! Best of luck with your decision.

      Reply

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