IntroductionThe use of temporary nurses can be seen as one way to overcome cost pressures and demandfluctuations in the health care industry. However, economic theories suggest that hospitals' extentto rely on temporary nurses for their staffing needs may depend on the local labor market. Inparticular, widespread, persistent nursing shortages may increase temporary employment in thehealth care environment. Hospitals facing substantial unfilled vacancies may turn to temporaryplacement agencies to fill positions while recruiting permanent staff. Indeed, the CommunityTracking Study's nationally representative hospital survey collected data on the reasons for hiringtemporary RNs from agencies; the main factor was reported to be persistent labor shortages.Several studies have surveyed hospital executives and nurse managers who reported relying ontemporary agency staff due to labor shortages. Most respondents in these studies did not viewtemporary staff as cost-effective, explaining that they have to pay a higher hourly wage totemporary RNs, in addition to administrative fees and overhead costs. The per-diem markup hasbeen reported as ranging from 25 to 40 percent. Employers also stated that they reduced theirreliance on temporary staff due to concerns over quality control, with only hospitals with severeshortages of nurses relying heavily on temporary staff.One possible explanation for the link between labor shortages and agency employment is thathospitals can develop internal mechanisms to handle fluctuations in patient volume when thelabor market is slack but cannot do so when labor markets are tight. When there are manyworkers available in a market, employers can easily form in-house, on-call worker pools.However, when labor markets are tight, workers can more easily obtain permanent employmentwith regular schedules, and employers find it more difficult to maintain robust, flexible workerpools. This suggests that, during periods of a perceived nurse shortage, nurse managers find itmore difficult to get their regular staff RNs to work overtime, float across units, and be on-call.Indeed, during the last nursing shortage, First Consulting Group, American Hospital Association(2001) reported that one hospital paid permanent RNs US$6,000 bonuses to work undesirableshifts. The flexibility of temporary nurses in working shifts that are difficult would make suchtemporary hires attractive to hospitals during tight labor markets.Rising vacancy rates also lower the probability that hospitals can find qualified nurses with thedesired specialization and experience. Working with a staffing agency with access to anationwide network of qualified nurses may help hospitals staff vacant positions without theadded time and expense of recruitment.
