Colorado House bill prohibiting direct-hire fees by healthcare staffing agencies advances to Senate


Boram Kim


Colorado House lawmakers passed House Bill 1030 by a vote of 52-12 with one abstention on Monday. The bill would prohibit healthcare staffing agencies from charging fees to providers when they hire contracted workers.


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The initial version of the bill only prohibited the fees for nursing homes and assisted-living facilities, with the Department of Labor and Employment (DLE) having regulatory oversight, but it was amended on Thursday to include all healthcare facilities, with providers now having a private right of action instead of DLE. 

“This bill seeks to address a larger issue that we have related to our nursing workforce in the state and the challenges that our healthcare facilities have seen as there has begun a shift from permanently employed staff to temporary nursing staff all across our healthcare facilities,” said the bill’s co-sponsor, Rep. Emily Sirota (D – Denver), on Thursday.

“When healthcare facilities contract with staffing agencies, oftentimes there is a provision in that contract that would require if a healthcare facility wishes to employ one of their temporary nurses, if that temporary nurse wishes to come on to that healthcare facility’s staff permanently, then what is written into the contract is a requirement to pay something called a conversion fee, or liquidated damages, which can rise to the amount of even $5,000.

Last year, the state of Colorado addressed the non-compete clause portion that you often find in these contracts. [HB 1030] is one remaining piece to allow freedom in the economy for our workers to be able to move from employment conditions [to jobs] that they want to move to, instead of being held hostage by these contracts, which also prevent our healthcare facilities from trying to stabilize our workforce and improve the safety and the well-being and the care of our patients across our healthcare facilities.”

Rep. Matt Soper (R – Delta), the bill’s other co-sponsor, reiterated those sentiments in his remarks on the House floor. 

“It’s a barrier to the free market, it’s a barrier to competition, and hospitals told us over and over again they have their workers stolen and then to try to get them back, they had to pay this ransom fee,” Soper said. “And after they paid the ransom fee because they knew that the long-term made sense—that when they did the math, that may have taken a year to actually have the return on investment of bringing that worker back—they then have to hit all of our insurances with a bump because Medicaid is not paying more, Medicare’s not paying more.

If you’re a small hospital, you’re probably not going to get more out of some of the big health insurance carriers. So you bump up the people that are paying cash and it affects all of us because of that. This practice is against conscience which is why for healthcare we’re asking in this bill that it no longer be allowed.”

Doug Farmer, president and CEO of the Colorado Health Care Association and Center for Assisted Living (CHCA) said up to a third of all nursing staff across its membership last year was being supplied through staffing agencies. The nursing shortage compounded rising operational costs and contributed to a 10% decline in patient occupancy within the state’s long-term care and assisted living facilities last year. 

Despite measures to address compensation and retention, Farmer says the workforce situation has not improved. 

“We’re still strapped with a shortage of workers,” Farmer said. “And so it’s really hard to get those higher-level [needs met for workers]. That shortage of actual people is what’s making [support for staff] most challenging right now.

We saw the amount that was paid hourly—wages paid to RN staffing, CNA, LPN, and RN—all increased by more than 20% year over year from 2020 to 2021. So [providers are] certainly making strides in what they’re paying [for wages]. They’ve offered things like incentive [and] retention bonuses for staying on board, doing their best to offer people access to education, but again, until the hours are down to 40 or less a week, it’s kind of hard for people to avail themselves of educational opportunities most of the time.”

Farmer said that with the growth in the number of temporary healthcare staffing agencies during the pandemic, the state has witnessed a shift from long-term employment to contract work. Many of these contracts prevent workers from freely choosing their place of employment and serve as barriers to hiring longer term. 

“There’s a separation fee that must be paid contractually and it is often $5-7,000 in average cost to buy someone out of one of those contracts,” Farmer said. “But the challenge is really less about the one-time costs than it is about the fact that it’s not a guarantee.

A provider pays the fee, has that employee come to work full-time for them, and within a few weeks, maybe that employee goes to work for somebody else where they got an extra 50 cents an hour. That’s not a slight on the employee. People have to do what’s best for them. But it is a challenge within the system because I have now paid out $5-$7,000 of money I didn’t have to an employee that left and so I am right back to the drawing board where I’m paying three or four times the average hourly rate.

And so what we’re trying to do with this bill is really make it so that there’s freedom of work for people that work. They can choose who they work for without having a cost held over their head, but also making it so that if you know we’re out here transacting in this marketplace, we have an opportunity to hire some employees and bring them back to full-time employment without having to take great financial risks that we cannot afford.”

CHCA has been working with state leaders on increasing Medicaid reimbursement rates for long-term and assisted-living providers, a measure that Farmer said will be introduced soon.