Hospice providers, like much of the health care community, have turned to contract staffing services to supplement their workforce during the pandemic. Hospices have stated intentions to reduce that trend as infection rates fall, but evidence suggests that contract labor utilization is unlikely to return to pre-pandemic levels. Hospices may continue to find themselves competing with staffing services for new hires.

Hospice operators have relied on contract nursing to stay afloat during a time of worsening labor pressures, elevated turnover and rising demand for care. A key factor has also been the virus itself as COVID infections and exposures have pushed full-time staff into quarantine.

While the staffing services have enabled providers to maintain continuity of care, labor costs have risen substantially as a result.

“When you’ve got upwards of 3% or 4% of your entire front-line workforce on quarantine, you’re now having to supplement that with contract labor and with much higher cost labor sources,” LHC Group (NASDAQ: LHCG) President Joshua Proffitt at the Bank of America Securities Virtual Home Care Conference.

Proffitt indicated that the company would save $1.4 million per quarter for every 100 basis points it can reduce its dependence on nursing contract labor, and that reducing dependency on contract labor would be a priority in 2022. 

Other providers also feel the sting.

Fellow home health and hospice giant Amedisys (NASDAQ: AMED) saw Q3 2021 hospice revenues fall by $2 million, which the company largely partially attributed to higher than normal utilization of contract nurses, the company indicated in an earnings call. Hospice segment revenue in Q3 totaled $198 million.

Amid the rising costs, some in the health care industry, as well as some legislators, have accused staffing services of price gouging. That view is not universal, however, with some executives noting it as a simple result of rising demand versus a dwindling supply.

Staffing services have seen a steady stream of increasing clientele during the past two years, particularly among the well-capitalized national companies like LHC Group and Amedisys. This includes the staffing services business operated by Interim HealthCare, a subsidiary of Caring Brands International, according to Bobby Conlon, the company’s senior national staffing manager.

“We have seen a sustained increase in our staffing side of the business since the onset of the pandemic,” Conlon told Hospice News. “In the very early days, we sent supplemental staff into hospital systems and nursing homes experiencing outbreaks who were resource strained, and more recently have helped with COVID-19 vaccine administration by tapping into our nationwide network to reach more communities.”

A number of hospice companies have signaled that they intend to dial back contract nursing services as the recent variant-driven surges start to recede, as new infections are already trending downward, according to the U.S. Centers for Disease Control & Infection (CDC). The CDC reported that the 7-day moving average of daily new cases as of Feb. 9 fell 42.8% compared to the prior week.

But even if contract nursing takes a dip, demand is fall back to pre-2020 utilization, according to industry observers.

“The fundamental demand drivers for nurses that existed even before COVID (i.e., nurse population demographics) have been boosted by the lingering effects of the pandemic on the profession and are likely to boost demand for temp staffing post-2022 and keep bill rates significantly elevated relative to pre-COVID going forward,” Brian Tanquilut, equity analyst for Jeffries Financial Group, indicated in a Feb. 8 research report.

This means that hospices may not only continue to use these services but continue to compete with them in the labor market. A prospect that may prove challenging as staffing companies in many cases offer nurses higher pay and more flexible schedules than many full-time health care employers.

Travel and local contract nurses have seen their pay rates double and sometimes triple pre-pandemic amounts, driven by the rising demand and the higher workplace risks they experience due to COVID, according to Conlon.

Likewise, scheduling flexibility and improved work/life balance are becoming more crucial to recruitment and retention in the hospice industry, in which 62% of clinicians reported experiencing burnout even before the pandemic. 

Many hospices have been reevaluating their employee policies during the past two years to give workers more opportunity to stave off burnout and remain effective in their jobs. But this too comes with its own set of costs, including rising expenses for paid time off and leave, as well as the need to ensure patient care doesn’t fall behind while employees are out.

“One of the biggest draws of working for a staffing agency is the ability for individuals to set their own hours and schedule,” Conlon said. “This has become especially important over the past two years when family obligations like childcare and remote learning have taken priority for many people.”