Profit Caps Won’t Fix New York’s Health Care Staffing Shortage

Jeffrey A. Singer

New York lawmakers say they want to reduce hospitals’ reliance on temporary nurses and other clinicians. Their proposed solution—government profit caps on staffing agencies—would make the state’s health care staffing shortage worse.

As lawmakers in Albany consider the fiscal year 2027 budget for Health and Mental Hygiene, Part J of the proposed budget aims at “reducing reliance on temporary staff.” In practice, however, it would significantly curtail the ability of temporary health worker agencies to provide essential services to hospitals and clinics.

The bill would require temporary health care staffing agencies to disclose detailed information on their payments to nurses and other clinicians, the benefits those workers receive, and all entities involved in the contracting process. Essentially, the state seeks a complete record of who is paid—and how much—at every stage of the transaction.

Transparency is reasonable, but the proposal goes further. It would authorize the Department of Health to set maximum profit margins for staffing agencies, giving regulators the power to determine how much these firms may earn. The stated goal is to “stabilize” the health care workforce. The practical effect is price control.

Price controls have a long track record. Since the time of the Roman Emperor Diocletian, governments have tried to cap prices in the hope of making essential goods more affordable. The results are familiar: shortages, declining quality, and black markets. President Richard Nixon had to learn this lesson again in 1971. While the price caps helped Nixon’s re-election in 1972, “Nixonflation” followed their lifting.

As a surgeon practicing for decades, I’ve seen firsthand how important temporary clinicians can be. These skilled professionals often comprise large portions of hospital and other health care facility staff in rural and underserved communities, where attracting them to settle permanently can be challenging.

Hospitals rely on staffing agencies for a reason. Health care demand varies throughout the year. Flu season arrives. Trauma cases increase. Elective surgeries fluctuate at different times. Instead of hiring a permanent staff for the busiest periods and paying them to be idle during slower times or laying them off, hospitals keep a core team and use temporary clinicians to manage surges. 

This flexibility enables administrators to adjust staffing based on patient volume and keep their budgets stable. If profit caps push agencies out of the state or force them to cut back, hospitals lose that flexibility. Their labor costs become more rigid and less predictable. It may also, most critically, result in shortages of care for patients by effectively making it illegal for providers to work at certain wages. The result isn’t savings, but higher operating costs, increased prices, and ultimately higher bills for patients and taxpayers.

Temporary staffing is also a lifeline for rural hospitals and underserved communities that struggle to recruit permanent staff. Agencies help fill gaps in regions where clinicians may not want to relocate full-time but are willing to work short-term assignments. If regulators squeeze these agencies with profit caps, patients in those communities are likely to feel the impact first and most severely.

It’s easy to see why nurses’ associations and other health professional groups support restrictions on temporary staffing agencies. Agencies create competition—providing flexibility and often higher pay—which can weaken the influence of established organizations that negotiate wages and staffing rules. In Albany, where organized health care interests play an active role in shaping workforce policy, proposals like these rarely emerge in a vacuum. So, while these restrictions are often framed as protecting patients or stabilizing the workforce, limiting competition also protects the market position of those organizations themselves.

Economists have a name for this behavior: rent-seeking. It’s a tale as old as time. If those limits reduce staffing flexibility or increase hospital costs, it’s patients—not the organizations advocating the restrictions—who will ultimately bear the burden.

Lawmakers should be careful not to mistake flexibility for instability. Temporary staffing agencies emerged to fill genuine workforce shortages and variable patient demand. They enable hospitals to remain operational, especially in rural and underserved regions, and help administrators manage budgets effectively.

If Albany imposes price controls that drive these agencies out or shrink their role, access to care will suffer, and costs will rise. New Yorkers need policies that expand their health care workforce—not ones that quietly make it smaller, less flexible, and more expensive.

Source: https://www.cato.org/blog/profit-caps-wont-fix-new-yorks-health-care-staffing-shortage