TTATN 022: Are Travel Nursing Agencies Necessary?
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Hey everyone! Welcome to The Truth About Travel Nursing Podcast. My name is Kyle Schmidt and I am your host, and this is episode 22 of the podcast. In this episode, we’re going to discuss what it takes to start a travel nursing agency and the various services that travel nursing agencies provide. [Please note that this is a transcript of a podcast episode. As such, grammar and spelling are not optimized for written content.]
On the surface, this topic might seem to be boring and uninteresting. However, understanding everything that agencies are dealing with will help you understand the industry, your recruiters and ultimately help you get more out of your time as a travel healthcare professional. Also, I routinely get questions from travelers expressing an interest in starting their own travel nursing agency. Many travelers feel that they could do a much better job running an agency than what they’ve experienced out there in the market. And they may be right…but knowing what you’re in is an important part of the decision to move forward. Additionally, there seems to be a lot of confusion out there as to why agencies even need to exist. So let’s take a detailed look at why agencies exist, what’s needed to start an agency and the services that agencies provide.
Can Travel Nurses Work As Independent Contractors?
Okay, so I think the easiest way to start this discussion is to address the question of whether or not agencies even need to exist. I mean, aren’t agencies just middle men who can be cut out of the process? The simple answer is no, they can’t be cut out of the process. There are actually some very good reasons, both legal and logistical, that agencies exist.
That said, you’ll certainly find those who argue that agencies could be cut out of the loop. They typically cite two possibilities. First, travelers could work as independent contractors. Second, travelers could work directly for the hospitals that are using their services which actually happens in states like Florida and Arizona. But neither of these scenarios is able to replace agencies, and here’s why.
For starters, the vast majority of healthcare professionals don’t qualify to be independent contractors under the IRS’s guidelines. Now, you may have come across agencies and other employers who offered to treat you as an independent contractor, and you may have even worked as an independent contractor, but that doesn’t mean it was legal. The IRS is very clear on this. Consider the following quote from the IRS’s Independent Contractor Definition:
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
With that statement in mind, think about the relationship between the vast majority of healthcare professionals and their employers. In almost every case, the employer, or the hospital in this case, maintains control in the working relationship. For example nurses report to charge nurses and managers and they execute orders provided by physicians, Nurse Practitioners and other staff members.
Typically, the only healthcare professionals that can be considered independent contractors are physicians and dentists. It’s true that in rare cases Registered Nurses, Nurse Practitioners, Physical Therapists and others can be independent contractors, but certainly not in a hospital setting.
Moreover, being an independent contractor is more trouble than it’s worth. You have to report taxes more frequently, you have to be involved with collecting the money you’re owed and on and on. It’s really a pan in the rear end.
Why Don’t Hospitals Hire Travel Nurses Directly?
So, what about working directly with a hospital? Why wouldn’t that work as a way to cut out agencies? Well, there are quite a few hospitals that directly hire what they call “seasonal workers”. The vast majority of these hospitals are in states like Florida and Arizona. The real question then is why don’t all hospitals do this?
Well, it’s a logistical nightmare for most hospitals. It’s also cost prohibitive for most hospitals. You see, if a hospital is in a state like Arizona or Florida, then they’ll have a consistent and routine need for travelers during periods of the year when their regions experience population spikes. The vast majority of hospitals don’t find themselves in that situation. Instead, their need for travelers is mostly unpredictable.
But why does this even matter…why does it matter that their needs are unpredictable? The reason has to do largely with retention rates. You see, recruiting travel nurses and other travel healthcare professionals is an expensive endeavor. One of the main ways to reduce costs is through retention. If you’re always engaged in the recruitment process, which involves advertising, interviewing, compliance and credentialing and all the other details involved with recruitment, then you’re spending a lot of money.
So hospitals that have a routine need that can be counted on year in and year out tend to bring back many of the same travelers year after year. These travelers can pretty much count on those jobs being available at the same time every year. That’s a form of retention.
When it comes to travel healthcare agencies, well they work with tons of different hospitals…hundreds, sometimes thousands of hospitals. So, they have lots of different jobs in different locations to offer their travelers when the travelers’ current assignment ends.
By contrast, the hospital that doesn’t have routine needs is in a really tough spot. They’ll be stuck recruiting travelers at random and only for the contracts they have available. They won’t have a routine need and they won’t have other jobs to place the travelers in when the current assignment is complete or the traveler decides it’s time to move on. I’ve seen so many hospitals in this scenario try to take on the task of bringing in their own travelers and it pretty much always flops.
Business Formation Of Travel Nursing Company
So those are pretty much the legal and logistical reasons that travel healthcare companies exist. But in addition to that, there are tons of services that agencies provide as well as issues to consider if you’re interested in starting an agency or if you’re a hospital interested in filling your own travel needs.
First, and most obviously, for anyone interested in starting an agency, you’ll need to get your business set up with the state in order to avoid personal liability for any problems that occur. Many agencies start out as Limited Liability Corporations, but you could form an S-Corp or a C-Corp if you wanted as well.
Line of Credit and Collections for Travel Nursing Company
Next, you’re probably going to need to secure a line of credit. And that’s primarily because you’re going to need to meet your weekly payroll. You see, agencies pay their travelers, their employees, either weekly or bi-weekly. However, they don’t actually collect the money for 30, 60 or even 90 days from the time of the invoice.
Typically, the traveler turns in their time sheet to the agency, or the time Is entered in the hospital’s kronos system or some other electronic system. The agency must then bill the hospital for the time worked. Then they have to wait for the hospital to pay it. And sometimes they even have to go after the hospital to collect from them. I remember one time at my old agency, we had to stop sending our travelers into a particular hospital because they were over $100,000 past due.
So those are couple of things to think about…a line of credit and collections. Things don’t always work perfectly, you’re not going to get paid on time always. As you’ll see, it’ll be a recurring theme throughout this discussion…things not working out perfectly.
Anyway, both of these issues, the line of credit and collections, cost money. Creditors charge interest for borrowing and when you engage in collections you’re going to spend time for sure, which time costs money, and you may even have to take less than what you have coming to you just get something out those deadbeats.
Landing Travel Nurse Staffing Contracts
The next thing you’d need to do is to get some contracts with hospitals in order to start staffing them with travel healthcare professionals. Even the easiest contracts to land can be pretty difficult to land if you don’t know who to contact. That said, there are some contracts that are very easy to land. You could probably get on fairly easily with a lot of Vendor Management Systems and Managed Service Providers. The only problem with that is that all the other agencies in the business will have those same contracts, so it will be pretty competitive to staff those positions.
As far as direct contracts are concerned, those are the contracts that are between the hospital and agency, with no middle man, those can be pretty difficult to land these days. Many agencies have Account Managers who are engaged strictly in the process of getting new contracts, so there is a lot of competition. Moreover, there is a lot of red tape these days.
Recruiting Travel Nurses
Okay, so now you have your business set up, your line of credit and your job orders, and you’re ready to start staffing. This is where recruiting comes into play. You’ll need to start attracting healthcare professionals, talking to them and convincing them to work with you. This is a really difficult part of the process and it’s one of the most important services that agencies provide to their client hospitals.
There are many ways that you could get started with this. Probably the best way to get started would be to advertise on job boards like Indeed, Monster, and CareerBuilder. The reason is that agencies need a large database of potential candidates to work with. Finding the right traveler for the right job at the right time is a lot like finding a needle in a needle stack…So the first thing you need is a needle stack.
Sites like Monster and Indeed will give you access to tens of thousands of resumes. Many people don’t know that…but when you enter your resume on Monster or Indeed, the default settings are set to share your information with employers and others who have purchased the ability to view it.
Another resource that agencies use to get their needle-stack is to purchase a list from some list generator. There are companies out there that sell contact information to third parties. For example, you could purchase a list of 100,000 registered nurses with their names, email addresses and telephone numbers. As we discussed in episode 6 of the podcast, there are also companies devoted strictly to travel nursing leads…companies like RNVIP and TravelNursing.org basically get interested travel nurses to enter their contact information on the company’s website and then sell it to agencies. So, these are all tools that agencies use to find and contact potentially interested contacts.
This really is a sales process at the end of the day. I mean, you’re essentially selling them on the job and your services. And most travel healthcare professionals don’t just accept the first sales call that comes their way. They’re inquisitive, they comparison shop, they’re basically a pretty tough sell!
Travel Nurse Agency Compliance and Credentialing
Okay, so this whole recruitment process is one of the major services that agencies provide. And once the candidate has landed a job, the agency is responsible for the compliance and credentialing process. That reminds me, you’ll most likely want your agency to be JCAHO certified so you’ll need to go through that process at the outset as well.
Okay, so compliance and credentialing is a big service that agencies provide. Essentially, the traveler is the agency’s employee, so the agency is ultimately the one responsible for maintaining the documentation. Unfortunately for agencies, they also need to comply with the requirements of their client hospitals. And the hospital requirements can often be totally overkill.
Either way, the agency is responsible for getting everything in order. They need to schedule all clinical examinations, physical exams, drug screens, and make sure the traveler completes all the paperwork required by the hospital.
Let me tell you, this isn’t always easy. I mean, as a traveler, I’m sure you know that because you’re the one actually doing the work. But for agencies, compliance and credentialing is a huge source of stress. I mean, things are routinely turned in at the 12th hour before the deadline. Or, things are turned in late under threat of the contract being cancelled.
The worst is that agencies are regularly thrown curve balls by hospitals. Hospitals always pull something out of thin air at the last moment, or they have some seemingly ridiculous requirement that no other hospital has. For example, they might require specific wording on a particular document like a chest x-ray for TB. If you don’t have these specific words on the document, then it can’t be accepted…and they only inform you after you turn the results into them.
It can be a real nightmare for everyone involved. Anyway, at the end of the day, the agency needs to submit all the documentation to the hospital and the agency must keep all the documents on file in case the hospital decides to audit them in the future or in case the hospital requests a copy in the future…and they have to do all this by JCAHO standards.
Travel Nursing Agency Travel Services
Okay, so in addition to compliance and credentialing, agencies also provide all the services related to travel, at least most agencies do anyway. And what we’re talking about here are things like housing, flights, transportation, itineraries, and various other arrangements. The thing that typically takes the most time here is housing. At a small to mid-sized agency, you don’t have the volume of travel nurses necessary to have established housing options in every market that you work in. So, you ultimately end up figuring things out as you go along. And that takes tons of time. This is why many agencies are now outsourcing this part of their business to companies like Travelers Haven which provides housing services to agencies.
Travel Nurse Payroll Processing
Okay, so once the traveler starts working, a whole host of other services starts to kick in. First, the agency is responsible for payroll. I think that this is something most people take for granted, but payroll is a time-consuming process. Most agencies use a service like ADP or Paychex to help them run their payroll service.
But even with the help of these services, and agency’s payroll is still really complex relative to that of most companies. Each traveler could have a different set up for their pay package. There are travel reimbursements, stipends and other unique items to work with. There are different overtime rules in different states, and there are penalties for missed shifts to contend with. These are all things that or outside the ordinary and they tend to complicate the service.
Travel Nursing Agency Human Resources
In addition to payroll, the agency is also responsible for all the human resource related issues. For starters, the agency must provide liability insurance for all of their travelers. Most hospitals require the agency to provide proof of this insurance.
Of course, most agencies offer Medical Insurance to their travelers as well. And medical insurance is another ball of wax that can really soak up a lot of resources. The problem for travel healthcare agencies is that they have a lot of turnover because of the temporary nature of travel nursing contracts. So they’re getting people set up with insurance and then cancelling the policies much more often than normal. And there are problems with travelers actually receiving their insurance cards all the time because the addresses get mixed up…the home address versus the mailing address…which leads to even more work for the agency.
On top of these issues, there are worker’s comp claims. Healthcare is a risky business so there are more claims than usual. And then there are disciplinary issues. Just like every other group of employees on the planet, travelers have their share of folks who show up late, or are insubordinate, or make mistakes on the job and it’s the agency’s responsibility to remedy these situations.
Now, when it comes to worker’s compensation claims, disability and unemployment claims…these are more services that agencies basically provide for the hospitals. When these types of claims go through, the agency is ultimately the one responsible for paying them, which takes the burden off the hospital’s hands.
And when it comes to unemployment in particular, the agency is in a much better position avoid this potential cost. You see, the hospital would essentially be laying off a seasonal worker at the end of the assignment. And in some states, seasonal workers qualify to receive unemployment benefits. Now, the agency maybe subject to the same cost, but the agency will be in a position to offer the traveler additional work, so they could deny the unemployment claim based on the fact that they offered the traveler additional work. That said, travelers shouldn’t be discouraged from filing unemployment claims because they are often honored. Either way, the main point is that the hospital is off the hook, so this is viewed as a service that the agency provides to the hospital.
Legal Issues
Another thing agencies deal with is legal issues. If you’re in business long enough, you will inevitably get taken to court. Sometimes it’s justified and sometimes it isn’t. But the bottom line is that you’ll have to deal with that. And, in a sense, this is another service that agencies provide to their client hospitals. Agencies essentially shield the hospitals from certain legal issues, not all legal issues, but many of them.
Travel Nursing Customer Service
Finally, let’s not forget the customer service aspect that agencies provide to their travelers. Service takes place on a lot of different levels. First, the agency sometimes acts as the liaison between the traveler and the hospital. They will iron out various requests like time off and float policy parameters. When the hospital isn’t holding up their end of the bargain, the agency will often be called on to step in and address the issue.
The agency must also work with their travelers to find them positions that suit the travelers’ needs. It’s not a matter of just slamming travelers in any old job that’s available. Each traveler is looking for something different and they count on their agencies to help them find the right fit. So even after the traveler has landed a job, the agency is always on the lookout for the traveler’s next job. And it can take time to find the right fit.
Of course, the agency must also provide support for all the little things that can go wrong during the contract. Many of these things are caused by the agency, things like payroll errors for example. But many of them are not caused by the agency, things like unruly neighbors or broken furniture from the furniture rental company. And there tons of other issues that can pop up that agencies should be helping their travelers with.
At the end of the day, agencies actually provide a ton of different services. There are probably many more that we didn’t even touch on here. In my view, running a travel healthcare staffing agency is a very labor intensive endeavor. And at the same time, they operate with pretty thin gross and net profit margins. As we’ve mentioned in previous episodes, the largest healthcare staffing companies are publicly traded, so their balance sheets are public. These companies report gross profit margins of 25% to 30% which puts them at the low-end of profit margins compared to other industries. In fact, if you compared them to other types of staffing agencies, they’d still be on the lower end of profit margins.
Now, if you’re a traveler who is interested in starting an agency because you’d like to provide a higher level of service than what you’ve been finding in the market, then you may be interested in looking into one of the many Nurse owned and operated travel healthcare companies. There are actually quite a few of them out there. For example, Expedient MedStaff, Travel Nurse Across America, and The Right Solutions were all founded by Registered Nurses. And, these companies will all accept your BluePipes Resume, Application and Skills Checklist which will help you save countless hours of completing paperwork. There are many other nurse owned companies out there as well so be on the lookout if that’s important to you.
Okay, so that’s going to do it for this episode. I hope you’ve found the information useful and I hope it helps you gain a deeper understanding of agencies and the industry and get more out of travel healthcare in general.
As always, we’ll have the transcript of this episode along with related links up on the show notes page. The show notes for this episode can be found at blog.bluepipes.com/episode22. You can post any questions or comments on the show notes page as well.
While you’re there, be sure to create your free BluePipes account so you can take advantage of the documentation management and professional networking tools designed to help you simplify travel healthcare.
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Okay, so until next time, have a safe and prosperous travel healthcare adventure!
