The Services Travel Nursing Companies Provide to Healthcare Employers

Criticisms of travel nursing companies often frame these companies as unnecessary middlemen that gouge hospitals and force travelers to make less money. While travel nursing companies certainly are middlemen, that doesn’t necessarily mean they are net negative for the marketplace. In fact, middlemen in many industries actually add value by reducing costs. So, in this article, we’ll discuss the middleman narrative and review the services travel nursing companies provide so travel healthcare professionals and employers can approach this topic with confidence.

Common Travel Nursing Agency Middleman Narrative

I’ve seen a number of social media posts where a travel nurse discovered the bill rate for their assignment and assumed that the difference between the bill rate and their payrate was the travel nursing company’s profit. As I’ve explained in many articles, this is not the case. There are many costs related to the travel nurse that are not a part of the travel nurse’s payrate.

Similarly, I’ve spoken to hospital administrators who wonder why the bill rate is so much higher than the hourly rates that the hospital pays their permanent staff. Here again, we’re typically able to clear the confusion with a simple discussion about everything the bill rate covers.

That said, both parties typically express a desire to bypass the middleman with the belief that doing so will reduce costs for the hospital and increase pay for the travel nurse. However, in order for that to be the case, the hospital and/or travel nurse would need to provide the services the travel nursing agencies provide but do so at a lower cost.

Travel Nursing Companies’ Economies of Scale

The reality is that hospitals and healthcare professionals would find that quite difficult given the economies of scale that travel nursing agencies experience. In case you’re not familiar, “economies of scale” is a term that refers to the cost advantages a business experiences as it scales up or grows.

Economies of scale occur for several reasons. First, a larger organization is able to spread its fixed-costs over more units thereby reducing the cost per unit. Second, larger organizations enjoy discounts for purchasing in bulk. Third, as companies grow, they can invest in specialized services, technological efficiency and productivity improvements.

As we’ll discuss below, travel nursing agencies realize economies of scale in many ways that allow them to provide their services at a lower cost relative to what a hospital might experience. With that in mind, let’s take a look at the services that travel nursing agencies provide and the competitive advantages they have in providing them.

Travel Nursing Agencies Provide Recruitment Services

Recruitment is perhaps the most salient service that travel nursing agencies provide. Many people seem to think that qualified candidates just magically appear when a job opens. Unfortunately, nothing could be further from the truth.

Travel nursing jobs require highly experienced, licensed professionals that are already in high demand and experiencing a shortage. Additionally, these jobs are temporary positions only available to candidates outside the job’s metropolitan area. These are some of the hardest jobs in the nation to fill.

You might think that’s not true given the speed at which agencies fill many travel nursing jobs. However, fast fill rates are a testament to the travel nursing agencies’ expertise rather than an indication that anyone else could easily fill these jobs.

Here is how it works.

Large databases, labor pools and recruitment technology

First, travel nursing agencies have amassed vast databases of qualified candidates who have expressed interest in travel nursing. They also might have hundreds or even thousands of travel nurses currently on contract.

So, the moment that a new job opens, travel nursing agencies utilize the advanced software solutions they have procured and/or developed over the years to attempt to fill that job with a candidate from their vast, high-quality database. These software solutions include job order management systems, applicant tracking systems, credentialing systems, candidate matching features, text and email notification systems, referral systems and more.

This is how agencies are able to deliver qualified candidates so quickly for a fairly large percentage of travel nursing assignments. However, agencies don’t fill every job this way. Often times, they need to engage in recruitment marketing to source new candidates.

Healthcare staffing recruitment marketing expertise

Here again, healthcare staffing agencies have the expertise and systems in place to achieve much better recruitment marketing results for travel nursing jobs than hospitals can achieve. For example, travel nursing companies have developed robust job board software that converts at a higher rate. Additionally, they’re highly experienced with programmatic advertising specifically for travel nursing jobs. Moreover, they’ve nurtured large social media followings specifically for travel healthcare.

The power of pooling jobs

Next, an agency’s ability to pool jobs is perhaps the biggest recruitment marketing advantage agencies have. Essentially, agencies work with thousands of hospitals. Therefore, they’re essentially pooling all the jobs together. It doesn’t sound like much, but it has a massive impact on costs. Let’s look at some examples.

Let’s say a hospital system has one job opening for an ICU RN to work a 13-week assignment. They might advertise that job and get 5 qualified candidates. But they only need one candidate, so they simply release the other 4 candidates they don’t choose back into the job market. And, when the 13-week assignment is over, they release the candidate they did choose back into the job market.

By contrast, a healthcare staffing agency will continue working with the 4 candidates who didn’t get the job. Ultimately, they’ll place a certain percentage of such candidates. Additionally, when the 13-week assignment is over for the candidate who got the job, the agency will most likely place them in another job somewhere else.

Meanwhile, travel nursing companies generally have to spend less on job advertising overall due to the sheer volume of jobs they are able to pool together. For example, job boards that charge per job posting often give discounts for bulk purchasers. Similarly, agencies can bid less per click on job boards that charge per click because the agencies are more likely to get the same amount of traffic by simply having more jobs for candidates to click on.

When you add all of these advantages together, the overall differences in efficiency and cost are profound. Simply put, travel nursing agencies are able to provide recruitment services more efficiently and for a much lower cost than any single hospital.

Travel Nursing Companies Provide Credentialing and Compliance Services

Travel nursing agencies also provide credentialing and compliance services. In this regard, they ensure that they have, or obtain, all the licenses, certifications, medical records, competency exams, background checks, reference checks and any other documentation that the hospital requires prior to the start date.

Travel nursing agencies have 2 main advantages when it comes to credentialing and compliance. First, they have the experience and expertise to get this done no matter where in the country the candidate is. The hospital is used to handling these tasks only in their general area. By contrast, the agency has relationships with service providers nationwide, which is necessary if you’re working with travel nurses.

Second, agencies are able to spread the cost of compliance over more contracts. Again, the agency will typically place the candidate in multiple contracts by virtue of pooling jobs as we described above. By contrast, the hospital will most likely work with the traveler nurse for one or maybe 2 contracts in total.

Travel Nursing Companies Provide Logistics Services

Travel nursing agencies also provide various logistic services. For example, they might provide services related to travel and lodging.

Here again, travel nursing companies are typically able to provide these services for a lower cost. For example, Aya Healthcare, one of the nation’s largest healthcare staffing companies, most likely obtains discounts from major apartment building operators because Aya is most likely a bulk purchaser of apartment leases.

Travel Nursing Companies Provide Human Resources as a Service

Human resource services are perhaps the most valuable set of services that agencies provide. Essentially, the travel nurse is a W2 employee of the agency, not of the hospital. That means the agency is responsible for payroll processing, payroll taxes, worker compensation claims, disability insurance, unemployment insurance, liability insurance, disciplinary actions, benefits management and everything else that laws or the market require.

It’s important to acknowledge that healthcare employers can provide many of these human resource services for costs that are equal to or better than what travel nursing agencies can provide. However, the services that travel nursing agencies can provide for a lower cost far outweigh the others.

For example, travel nursing agencies will always have additional work to offer when an assignment ends due to their ability to pool jobs from thousands of hospitals. By contrast, the hospital will rarely if ever have additional work to offer.

That means the hospital will payout a much higher number of unemployment claims than the agency. In turn, the hospital will experience cost increases for unemployment insurance and legal expenses.

It’s important to note that hospitals legally can’t, or simply won’t, classify travel nurses as independent contractors. Therefore, if they choose to staff their temporary positions themselves, then they will need to add the candidate to their W2 payroll. This is what opens them up to all the legal requirements that pertain to employees.

Agencies are better able to provide tax free reimbursements

It’s also worth noting that agencies are better able than hospitals to provide the nontaxable reimbursements that travel nurses have come to love. This is because hospitals would struggle more with wage recharacterization issues.

You see, hospitals employ a full-time workforce of registered nurses whom they pay the prevailing market wage. The hospital would need to pay their travel nurses a much lower taxable wage than they pay their perm staff in order to also provide the reimbursements. It’s this act of paying lower taxable wages, but the same overall wage when adding in the reimbursements, that equates to wage recharacterization.

Travel Nursing Agencies Provide Contract Procurement Services

Finally, it’s important to acknowledge that travel nursing agencies secure contracts with hospitals. This means they negotiate contract terms which can be a lengthy process.

As a result, they remove this step from the hiring or onboarding process thereby making it more efficient for all parties. The hospital has to negotiate this contract just once with an agency. The agency then streamlines each travel nurse’s contract for specificity and ease.

Altogether, the services agencies provide make them a valuable component of the marketplace. These services, and the cost savings they represent, constitute the agency’s sales pitch to prospective clients.