Even before the COVID-19 pandemic, health care leaders warned that hospitals face a nursing shortage. The repeated surges of COVID-19 have made the situation dire, in part due to nurse burnout and moral distress. In a survey of more than 6,500 critical care nurses released in September 2021 by the American Association of Critical Care Nurses, 92 percent of respondents reported that that pandemic had “depleted nurses at their hospitals, and, as a result, their careers will be shorter than they intended.” Sixty-six percent said they were considering leaving the profession because of their COVID-19 experiences; and 76 percent said that unvaccinated patients “threatened nurses’ physical and mental well-being.”
Addressing the shortage of nurses is no small matter. Research over the past three decades has established that inadequate nurse staff in hospitals is associated with increased patient morbidity and mortality. As such, in August 2021, 47 percent of nurse executives identified staff retention, furloughs, and layoffs as a significant challenge. The pandemic has already cost hospitals an estimated $24 billion to mitigate the staffing shortage.
Despite the impact of the pandemic on the nursing workforce, pre-COVID-19 factors for nurses’ dissatisfaction with hospital working conditions suggest that nurses may seek other employment options that provide them with more control over where and when they work. Travel nursing provides these options at a higher rate of pay.
The demand for travel nursing has exploded during the pandemic. Travel nurses are registered nurses who work in short-term roles at hospitals, clinics, and other health care facilities around the world. Traditionally, travel nurses have been employed by independent staffing agencies rather than a single hospital, although the staffing crisis has prompted at least one large academic health system to announce that it would be starting its own in-house travel nurse agency and give nurses the opportunity to travel to hospitals within its nationwide system. Travel nursing became popular in the 1980s in response to nursing shortages, but in 2020 traveling grew 35 percent compared to the previous year, and the practice is expected to grow by an additional 40 percent in the future.
One perk of travel nursing is the ability to potentially triple or quadruple an individual’s salary. In April 2020, during the early COVID-19 surges, national wages for travel nurses rose 25 percent. Prior to the pandemic, staff nurses at hospitals earned on average $73,300 per year, or approximately $1,400 per week. But travel nurses now can be paid between $5,000 and $10,000 per week. Besides the increased pay, travel nurses can decide to work when they want, taking weeks off between assignments, and work in locations they might otherwise be priced out of as a resident, such as Southern California or New York City.
If a hospital is overflowing with COVID-19 patients, human resources may be required to hire travel nurses to keep units fully staffed. But when that hospital’s full-time nurses learn how much the newly hired travel nurse is earning, it can negatively impact hospital employees’ morale and provoke the full-time nurses to ponder whether they should make a change. The pay discrepancy could cause employees to resign, then return soon after via staff agency’s help, though now making substantially more than their former colleagues.
While hospitals have been facing staffing shortages, the agencies placing travel nurses have been profiting. One San Diego, California-based staffing agency saw its travel nurse staffing business grow by 37 percent over the past year. Another staffing agency’s revenue increased by 58 percent over the same period. But these increased earnings for travel nurses and staffing agencies have many concerned.
Earlier in 2021, Seward Health Care Systems, LLC (a hospital chain) and Aya Healthcare, Inc. (a staffing agency) filed lawsuits against each other over unpaid bills. While Aya claimed that Seward owed more than $40 million in overdue bills, Seward countered that Aya had engaged in price gouging. Seward claimed that Aya’s rates were “illegally inflated,” and one of its hospitals had to stop taking ambulances because Aya-paid travel nurses did not appear for their shifts. In November 2021, a group of US senators and representatives wrote a letter to the White House COVID-19 Response Team Coordinator, urging him to investigate allegations of price gouging by nurse staffing agencies.
The simplest definition of price gouging is the unlawful or unfair raising of prices. However, defining and identifying price gouging is far from simple. To find an individual or entity liable for price gouging, the government must determine what makes an increase in prices “unlawful” or “unfair.” This can be a thorny issue because price gouging must be distinguished from normal price increases due to the law of supply and demand. There is no federal law prohibiting price gouging, but most state legislatures have passed laws forbidding price gouging on specific supplies during declared states of emergency.
The “fundamental ingredient” of a price gouging allegation is the claim that the seller’s prices rose excessively after a declared state of emergency. But what makes an increase in a seller’s prices “excessive”? Most state price gouging laws start with the presumption that sufficiently large price increases during an emergency are evidence of price gouging. That presumption places the burden on sellers to prove that mitigating factors exist, thus rebutting the presumption of price gouging. This focus on price increases can affect sellers whose prices ebb and flow on a seasonal basis.
In determining whether a price gouging allegation is valid, states may evaluate the seller’s behavior as compared to other sellers in the same market. An obvious difficulty in interpreting whether increased prices are “unlawful,” “unfair,” or “excessive,” is the fact that many sellers and businesses must increase prices during emergencies. As of January 2022, one cannot turn on the news without hearing about a nationwide supply chain crisis or how inflation is driving up costs for consumers. If employees must work in a physical location, businesses must have implemented new safety protocols and equipment due to the COVID-19 pandemic. While businesses may have perfectly legitimate reasons to increase (at times significantly) their prices during an emergency, if those prices cross a statutory threshold the burden will be on the businesses to prove that they are not engaged in price gouging.
State Price Gouging Laws
Most states have some type of price gouging laws, most of which take place during states of emergencies. For example, Florida’s price gouging law states: “Upon a declaration of a state of emergency by the Governor, it is unlawful…for a person or her or his agent or employee to rent or sell [any essential commodity]…at an unconscionable price within the area for which the state of emergency is declared….” The statute further defines an “essential commodity” as “supplies, services, provisions, or equipment that is necessary for consumption or use as a direct result of the emergency.”
To some critics, these state price gouging laws were not designed to deal with the length and national scope of the current pandemic. When states of emergency are declared after natural disasters such as hurricanes, price gouging laws generally apply to businesses within a specified geographic region. But the COVID-19 pandemic is a nationwide (and international) crisis, and businesses can end up being liable for price gouging in multiple jurisdictions. And those jurisdictions may define price gouging differently with some providing very little guidance to businesses. In response, businesses may be leery of anything that could raise prices. But this could mean sitting out the emergency instead of sending their products into new channels to respond to increased demand. In other words, price gouging laws—designed to protect consumers—may be harmful.
If some commentators are critical of how state price gouging laws apply during the COVID-19 pandemic, some state legislators may agree—specifically in the context of travel nurses and staffing agencies. For example, a law has been proposed in Pennsylvania imposing new requirements on staffing agencies that provide temporary employment in nursing homes, assisted living residences, and personal care homes. This proposed legislation is aimed at establishing maximum rates on agency health care personnel to end the practice of “gouging” the Medicaid program and Pennsylvania taxpayers.
In Minnesota, Illinois, and Massachusetts, staffing agencies face “wage caps,” meaning they can charge rates only up to 150 percent of the median wage rate average over the previous three years; some Pennsylvania lawmakers are working to enact similar legislation in their state. In Illinois, concerned parties are focused on eliminating non-compete clauses employed by staffing agencies. Those clauses can require hospitals or other staffing agency clients to sign a contract for eight weeks of work, even if the client only needs assistance for three shifts.
Despite the lack of a federal statute, the federal government has increased its involvement in trying to prevent price gouging. For example, then-Attorney General William Barr initiated a COVID-19 Hoarding and Price Gouging Task Force designed to protect Americans from hoarding and price gouging of “critical supplies.” Simultaneously, the Department of Health and Human Services issued a notice listing items considered to be “critical supplies,” which could not be hoarded or sold for “exorbitant prices.” Additionally, then-President Donald Trump issued an executive order prohibiting the hoarding of medical supplies needed to combat COVID-19. The statutory authority for that executive order is the Defense Production Act (DPA), which prohibits accumulation of certain products for the purpose of resale at prices in excess of prevailing market rates. The DPA further authorizes the president to designate a list of covered materials.
While price gouging alone is not an antitrust violation, the Department of Justice’s Antitrust Division may pay attention to allegations of price gouging. Those allegations may prompt the division not to focus on individual businesses but the conduct of an industry as a whole. Although unpassed, federal legislators have been working on several bills—including the Price Gouging Prevention Act (PGPA) and the Heroes Act—aimed at price gouging. The PGPA would cap a business’s markup on products at 10 percent and would authorize either the Federal Trade Commission (FTC) or state attorneys general to bring an action in federal or state courts. The Heroes Act would prohibit selling consumer goods or services at excessive prices due to the advantages of an unstable market caused by a public health emergency.
Finally, members of Congress have urged the FTC to act against allegations of price gouging. Although the FTC’s authorizing statute does not mention price gouging, the FTC has a broad mandate to combat unfair methods of competition and unfair or deceptive acts or practices.
There is a nationwide nursing shortage during one of the worst public health crises in this country’s history. An unprecedented number of nurses are retiring early and exiting the workforce or quitting their hospital employment to return as employees of staffing agencies. Those who return may wind up tripling the amount of money they earned as a full-time employee. Losing mass amounts of nurses means hospitals and other employers are essentially forced to pay staffing agencies whatever rates are necessary to secure help, further jeopardizing the financial viability of the health care industry or putting patient lives at risk.
This practice has raised allegations that staffing agencies are engaged in price gouging; thus far though, state laws have been ineffective in combatting the rise of travel contract nursing. Perhaps this is because price gouging laws have historically applied to product sales and retailers, not the hiring temporary employees and staffing agencies. It is also unclear what role the federal government plays, as no federal law specifically prohibits price gouging. Nonetheless, the continued nursing shortage has caused state lawmakers and members of Congress to urge their respective governing bodies to act. Dealing with the nursing shortage should therefore be at the forefront of many stakeholders’ minds. State and federal lawmakers would do well to implement effective price gouging laws that can help mitigate the nursing shortage crisis, without disincentivizing businesses from engaging in practices helpful to the public.