How to Start a Healthcare Staffing Agency

The demand for healthcare workers has exploded in the past five years. There are short-term reasons, like the surge in demand caused by the pandemic. But beyond that, the need for more nurses is here to stay. People are living longer, and with that extension in life span comes a need for more healthcare workers.?SIA values the US healthcare staffing industry at over $52B for 2023, and some expect it to reach over $100 billion by 2032.?

Many staffing agency founders are looking to enter this large, important segment of the staffing industry. However, healthcare staffing is one of the harder areas to operate due to regulation and capital requirements.

Incorporation?

The first step in starting a healthcare staffing agency is to incorporate. Choose Delaware, Wyoming, or Nevada, and use a Limited Liability Company (LLC). These states have the most friendly business laws in the US, and you can operate in any other state as long as you get a foreign entity designation from the secretary of state of the target state. If you are going to raise external capital, use a C Corporation in Delaware, which is where 60% of the Fortune 500 are domiciled. However, if you are not raising external equity capital, an LLC is preferable since it requires fewer formalities, such as stock votes and board meetings. You should use an incorporation service like First Base to get everything set up for you, including your bank and mailing address.

Website

Next, you will need a website. Don't reinvent the wheel here. Use a trusted recruitment agency website provider like?Shazamme,?which will give you a recruitment industry-geared website for a low monthly fee. One of the biggest differentiators we see recruitment agency founders can have is having a great website.

Insurance

The next item you will need is insurance. Staffing agencies take on a lot more risks than regular businesses, and healthcare staffing requires extra insurance compared to other staffing agencies.

Here are some things to remember when thinking about purchasing insurance. You will need staffing-specific insurance since most ordinary business insurance brokers will sell insurance that excludes staffing. You will also need to meet the very high limits that your healthcare clients require. Some of these insurances are required by law (Workers' Compensation Insurance), by healthcare staffing regulation (Medical Professional Liability), or by end clients (General Liability Insurance).

If you decide to use an Employer of Record (EOR) provider like Ascen, you will not need to purchase most insurance since you will generally rely on the EOR's insurance. However, if you decide to do it on your own, here are A few types of insurance that are essential to operating in the healthcare staffing field:

Medical Professional Liability Insurance

Medical Professional Liability (sometimes called Medical Malpractice Insurance) provides coverage if a claim of medical negligence is leveraged against someone you’ve placed at a healthcare facility. Even if the candidate you placed is not at fault, a small error can lead to significant lawsuits, so you must be covered. This insurance is generally the hardest to get and most expensive for healthcare staffing agencies after workers' compensation insurance.

General Liability Insurance?

General liability insurance provides you with broader coverage than standard professional liability insurance. It provides coverage against claims involving third-party injuries or property damage. This can be particularly useful in healthcare; for example, if an employee slips on a wet floor or a piece of medical equipment a candidate is operating damages someone’s property, you will be covered against any lawsuits.?

Employer Practices Liability Insurance (EPLI)

EPLI protects your staffing firm from any claims that employees, such as allegations of wrongful termination, harassment, or any other workplace issues, make. This is essential for staffing agencies when you place an employee since you do not control their working environment. Consequently, if they experience any damages, you are liable.

Workers' Compensation and Employer’s Liability?

Finally, another vital insurance policy is workers' compensation, which is mandatory in all US states except Texas. Workers' compensation essentially benefits employees who are injured or become ill while on the job. For example, if a nurse injures their back and has to take time off work, workers' comp will cover the medical costs and lost wages before they can work again.?

While most workers' compensation plans include employer liability, some do not, so you should check. Employer's liability covers the legal costs for claims related to an employee injury that are not covered by workers' compensation insurance, such as third-party lawsuits arising out of the injury.

The Right Licenses

Many US states require a license before you can operate as a healthcare staffing agency. Moreover, each state may also have its own reporting and insurance requirements. License requirements change from year to year, so it's important to stay on top of each state's staffing regulations where you operate.

Operating without the proper licensing or insurance can lead to criminal convictions, hefty fines, or reputational damage. If you use an Employer of Record provider, like Ascen, you can avoid the need to acquire these licenses since the EOR should hold the licenses on your behalf. However, if you decide to do it on your own, here are the licensing requirements for each state:

Colorado

Supplemental Healthcare Staffing Agencies Law (2022, Amended 2023)

• Applicability: Applies to agencies employing healthcare workers for temporary placements.
• Licensure: No licensure required unless classified as an “employee leasing company.”
• Reporting: Biannual reporting is required.
• Insurance: Agencies must maintain professional liability insurance.

Connecticut

Act Concerning Temporary Nursing Services Agencies (2022)

• Applicability: Applies to agencies providing temporary nursing services, including advanced practice registered nurses.
• Licensure: Annual registration with the Department of Public Health.
• Reporting: Annual reporting required, including detailed financial and operational data.
• Contractual Requirements: Written agreements with healthcare facilities required.

District of Columbia

Nurse Staffing Agency Act (2003)

• Applicability: Applies to agencies providing nursing personnel to healthcare facilities.
• Licensure: Mandatory licensure by the Department of Health.
• Credentialing: Verification of credentials is required before placement.
• Reporting: Agencies must report any disciplinary actions involving their personnel.

Florida

Health Care Services Pools Law & Nurse Registry Law

• Health Care Services Pools:Licensure: Registration with the Florida Agency for Health Care Administration.Reporting: No specific reporting requirements, but agencies must maintain proper documentation.Credentialing: Background checks and license verification are required.
• Nurse Registry:Licensure: Licensing is required for agencies placing nurses in healthcare facilities or homes.Reporting: Must maintain records and report disciplinary actions.Contractual Requirements: Compliance with extensive operational and documentation requirements.

Illinois

Nurse Agency Licensing Act

• Applicability: Applies to agencies placing nurses, including advanced practice registered nurses.
• Licensure: Required with the Illinois Department of Labor.
• Reporting: Monthly and quarterly reporting requirements.
• Contractual Requirements: Prohibits non-compete clauses for temporary placements; full disclosure of charges in contracts.

Indiana

Temporary Health Care Services Agency Law (2023)

• Applicability: Applies to agencies placing healthcare personnel, excluding physicians.
• Licensure: Annual registration with the Department of Health.
• Reporting: Must provide documentation of fees and contracts upon request.
• Insurance: Worker’s compensation and a dishonesty bond are required.

Iowa

Health Care Employment Agency Law (2022, Amended 2023)

• Applicability: Applies to agencies providing nursing services, excluding advanced practice registered nurses.
• Licensure: Registration with the Department of Inspections and Appeals.
• Reporting: Detailed reporting requirements, including submission of contracts and fees.
• Contractual Requirements: Agencies must comply with specific provisions regarding employee placements.

Kentucky

Temporary Staffing Agencies Law

• Applicability: Covers agencies placing healthcare workers on a temporary basis.
• Licensure: No specific licensure is required, but agencies must comply with labor and employment laws.
• Credentialing: Agencies must verify the licensure and credentials of all placed personnel.

Louisiana

Health Care Staffing Agencies Law

• Applicability: Regulates agencies placing healthcare workers, particularly in nursing homes and hospitals.
• Licensure: Required with the Louisiana Department of Health.
• Reporting: Agencies must maintain and submit detailed records of all placements and employee credentials.
• Contractual Requirements: Agencies are required to have clear contracts outlining terms of employment.

Maine

Temporary Nurse Staffing Agencies Law

• Applicability: Applies to agencies providing temporary nurse staffing services.
• Licensure: Required with the Maine Department of Health and Human Services.
• Reporting: Annual reporting, including detailed financial and operational data.
• Credentialing: Mandatory verification of licenses and ongoing education.

Maryland

Nurse Staffing Agencies Law

• Applicability: Covers agencies placing nurses in healthcare facilities.
• Licensure: Registration with the Maryland Board of Nursing is required.
• Reporting: Agencies must report disciplinary actions and maintain compliance with staffing ratios.
• Contractual Requirements: Contracts must include specific terms regarding employee conversion and fees.

Massachusetts

Healthcare Staffing Agencies Law

• Applicability: Applies to agencies placing healthcare personnel, particularly in long-term care facilities.
• Licensure: Required with the Massachusetts Department of Public Health.
• Reporting: Detailed reporting requirements, including employee work hours and pay rates.
• Contractual Requirements: Agencies must comply with state-specific labor laws and contractual obligations.

Minnesota

Temporary Health Care Services Law

• Applicability: Regulates agencies placing healthcare personnel on a temporary basis.
• Licensure: Registration is required with the Minnesota Department of Health.
• Reporting: Agencies must maintain records of employee placements and compliance with state regulations.
• Credentialing: Verification of credentials and background checks are mandatory.

Missouri

Healthcare Staffing Agencies Law

• Applicability: Applies to agencies providing healthcare staffing services.
• Licensure: No specific licensure is required, but compliance with state labour laws is mandatory.
• Credentialing: Agencies must verify the qualifications and licensure of all placed personnel.

Nevada

Health Care Staffing Agencies Law

• Applicability: Covers agencies placing healthcare workers in hospitals and long-term care facilities.
• Licensure: Required with the Nevada Division of Public and Behavioral Health.
• Reporting: Agencies must submit detailed reports on staffing levels and employee credentials.
• Insurance: Professional liability insurance is mandatory.

New Hampshire

Temporary Nurse Agencies Law

• Applicability: Applies to agencies providing temporary nursing staff.
• Licensure: Required with the New Hampshire Board of Nursing.
• Reporting: Agencies must report on staffing assignments and compliance with state regulations.
• Credentialing: Ongoing verification of licenses and continuing education is required.

New Jersey

Temporary Healthcare Services Law

• Applicability: Regulates agencies placing healthcare workers in various facilities.
• Licensure: Registration is required with the New Jersey Department of Health.
• Reporting: Agencies must maintain detailed records of employee assignments and compliance with state laws.
• Contractual Requirements: Compliance with state labor laws and contractual obligations is mandatory.

New York

Healthcare Staffing Agencies Law

• Applicability: Applies to agencies providing healthcare staffing services.
• Licensure: Registration is required with the New York State Department of Health.
• Reporting: Detailed reporting of employee placements and credentials is required.
• Insurance: Agencies must carry professional liability insurance.

North Carolina

Health Care Staffing Agencies Law

• Applicability: Covers agencies placing healthcare workers, particularly in long-term care facilities.
• Licensure: Required with the North Carolina Department of Health and Human Services.
• Reporting: Annual reporting of employee placements and compliance with state regulations.
• Credentialing: Verification of licenses and ongoing training is mandatory.

Oregon

Temporary Nurse Staffing Agencies Law

• Applicability: Regulates agencies placing nurses on a temporary basis.
• Licensure: Required with the Oregon State Board of Nursing.
• Reporting: Detailed annual reporting of employee credentials and placements.
• Contractual Requirements: Compliance with state labor laws and contractual obligations is required.

Pennsylvania

Healthcare Staffing Agencies Law

• Applicability: Applies to agencies placing healthcare workers in various facilities.
• Licensure: Required with the Pennsylvania Department of Health.
• Reporting: Agencies must maintain records of employee placements and compliance with state laws.
• Credentialing: Verification of licenses and background checks are mandatory.

Rhode Island

Temporary Health Care Services Law

• Applicability: Regulates agencies placing healthcare personnel on a temporary basis.
• Licensure: Registration required with the Rhode Island Department of Health.
• Reporting: Annual reporting of employee placements and credentials.
• Contractual Requirements: Agencies must comply with state-specific labor laws.

Tennessee

Healthcare Staffing Agencies Law

• Applicability: Applies to agencies providing healthcare staffing services.
• Licensure: Required with the Tennessee Department of Health.
• Reporting: Agencies must report on employee placements and compliance with state regulations.
• Insurance: Agencies must maintain professional liability insurance.

Texas

Temporary Nurse Staffing Agencies Law

• Applicability: Regulates agencies placing nurses on a temporary basis.
• Licensure: Required with the Texas Department of Health and Human Services.
• Reporting: Detailed reporting of employee placements and credentials is required.
• Contractual Requirements: Compliance with state labor laws and contractual obligations is mandatory.

Washington

Health Care Staffing Agencies Law

• Applicability: Covers agencies placing healthcare workers, particularly in hospitals and long-term care facilities.
• Licensure: Required with the Washington State Department of Health.
• Reporting: Agencies must submit detailed reports on staffing levels and employee credentials.
• Insurance: Professional liability insurance is mandatory.

Onboarding and Credentialing

After you sort out your licenses, healthcare staffing involves extensive onboarding requirements that go beyond normal employee onboarding. You will need to verify that your healthcare workers are properly allowed to work in the healthcare facility. This process of confirming the credentials of the healthcare clinician is called "credentialing." Here are some of the items you will need to perform:

1. Background checks: In addition to a comprehensive background check through a background check provider, you may be required to do a criminal search through the state government website. The background checks should include at least the following screenings:County Criminal Search?(Last 7 Years)National Criminal Search?(Standard)Sex Offender Search?Global Watchlist Search?OIG/SANS Exclusions
2. Drug screening: Most healthcare facilities require a 10-panel drug test, which covers 10 commonly abused drugs:AmphetaminesCocaineMarijuanaOpiatesPhencyclidine (PCP)BarbituratesBenzodiazepinesPropoxypheneMethadoneMethaqualone (Quaaludes)
3. Licensing Check: By law, RNs must hold an active and unrestricted nursing license verified by the state board of nursing. It’s worth noting that some states are part of the Nurse Licensure Compact (NLC), which allows one license to cover multiple states.?LPNs and CNAs have other license standards you should consider.
4. Certifications: In most states, nurses must have at least a Basic Life Support (BLS) certification to treat patients. However, some additional certifications are required. For example, if a nurse works in critical care or emergency rooms, they must have an Advanced Cardiac Life Support certification.?
5. Education Certification: It may seem simple, but it is essential to check that a nurse has an accredited nursing certification and valid transcripts.?
6. Health Screenings: Due to the physical nature of healthcare work, a general physical is usually required to ensure that nurses can do their job. Moreover, because nurses often work close to immunocompromised patients, disease screenings and vaccine checks are also required. For example, a Turbecoulosis test, MMR vaccine test, and COVID-19 test are common.?
7. Experience Verification: For most roles requiring experience, verifying at least 1-2 years of work before placing a candidate will ensure your employee can complete their job.?
8. Competency Tests: For many roles in the healthcare industry, consistent competency tests are required. As a result, you must ensure a candidate is up to date.?

It is worth noting that an onboarding process needs to be efficient for your employees. A complicated process can result in your staff feeling uncomfortable and ultimately leaving your agency for one where they feel better catered for.

One option for creating a smooth onboarding process is to work with an Employer of Record platform that already has an onboarding process built into its back office, such as Ascen.

Start-up Capital and Payroll Funding?

An overlooked aspect of operating a healthcare staffing agency is funding your operations. While it may be tempting to think you can rely on the invoices from your clients to pay wages, invoice payment times can often be 30 days plus. Healthcare staffing clients are notoriously late payers. Long-term care facilities are especially bad due to their reliance on Medicare, which pays on very long terms. Healthcare clients typically have Days Sales Outstanding (the number of days it takes to pay an invoice) consistently above 50.

Since healthcare staffing firms will typically pay their workers weekly, whether you will need invoice funding for your agency is a question of "when", not "if". You could try?invoice factoring,?or you could use an employer of record like?Ascen.

Ascen

Keeping track of compliance, payroll funding, insurance, licensing, and contracts can be daunting, especially if it’s your first time entering the healthcare staffing agency space. That’s why we developed Ascen for staffing agencies.?

Ascen is an Employer of Record platform, meaning Ascen can provide all of the legal infrastructure for you to run your healthcare staffing agency. Our back-office system is completely insured for healthcare staffing and can help you navigate each state’s complex employment laws.?

Moreover, Ascen features embedded payroll funding, so you never have to worry about paying your employees on time, especially when dealing with healthcare end clients, who typically pay substantially beyond terms. We also offer a full onboarding service, so you can mitigate risk by processing background checks and drug tests automatically.?

If you’d like to see Ascen in action, please book a demo here.