Inflation has been a very hot topic lately. This isn’t a surprise considering, in the US, we’re seeing the highest inflation rates in the past 40 years. The latest Consumer Price Index (CPI) reading for April 2022 was 8.3% and March 2022 was even worse than that at 8.5%. The massively inflationary decade between the early 1970s and early 1980s was the last time we’ve seen numbers even close to these.
To make matters worse, the CPI calculation has changed since the 1980s and now understates inflation compared to how it used to be measured. If measured how it was in the past, the inflation rate is likely closer to 16%, making it the worst inflation in over 100 years! Anyone that’s signed a new lease or bought a house in the past year certainly knows that housing inflation is far exceeding a yearly rate of 8.3%.
Inflation Squeezing Healthcare Travelers
The housing price inflation in particular has a big impact on healthcare travelers since the vast majority of travelers are duplicating housing expenses (paying at both their tax home and travel contract location) in order to receive tax free stipends for housing, meals, and incidentals. If you’re unfamiliar with how travel therapy pay works, this article will be helpful. Along with housing though, travelers also drive a lot more than the average due to moving from assignment to assignment, which makes the historically high gas prices hurt as well.
With inflation being at the top of mind for many travel therapists lately, we’ve gotten many questions about how this will impact traveler pay, and if we can expect to see our take-home pay rise with inflation. This question makes sense because with higher expenses, travelers want to earn more per week on each contract to offset the additional cost.
When considering this topic, it’s important to note that pay rates right now for travel therapists are actually at historically high levels on average, and have been since the beginning of 2022– but this isn’t due to inflation at all. Check out this live video for insight on the recent travel therapy job market and factors that have raised traveler pay rates.
Unfortunately, the sad reality is that inflation actually has a net negative impact on our pay, not positive like you’d imagine. The cost of living in an area actually has a relatively small impact on travel therapist pay, so rising costs across the country also has a small impact. So if not inflation and cost of living, what has the biggest impact on traveler pay? Two main things: insurance reimbursement rates, and supply and demand dynamics for staffing.
Insurance reimbursement rates for our services have the single biggest impact on travel therapy pay packages. This shouldn’t be a surprise, since reimbursement rates are also the biggest driver of permanent therapist pay as well. The reason for this is that the amount a facility is able to pay for an employee, either permanent or travel, is dictated by the revenue that the therapist is able to generate, which is directly tied to insurance reimbursement for our services.
If the amount a facility receives from insurance companies for units billed is less than the amount paid to the therapist, including benefits, plus the costs of running the facility (building rent, utilities, support staff, etc.), then the facility is losing money and can’t stay in business very long. Reimbursement rates can vary quite a bit from state to state and setting to setting, which is a big reason why some states and settings seem to always have much higher pay rates for travel therapists than others. Unfortunately, reimbursement rates do not increase proportionally with the rate of inflation. In fact, insurance reimbursement rates for therapy services have been stagnant or declining for many years, and that’s unlikely to change in the near future.
Supply and Demand
Supply and demand is the second biggest driver of travel therapist pay. This has been on full display for the past two years. If you were a traveler throughout the COVID pandemic, then you’re probably very aware of this. You see, travel therapy job availability and pay packages have fluctuated wildly throughout the pandemic. During the height of COVID in 2020, the number of total open jobs for travelers was reduced by around 90%, and travel pay rates were down 10-20% on average compared to pre-pandemic levels. At times there were less than 50 job openings for each discipline in the entire country, and seeing pay packages over $2000 was almost unheard of for nine months or more.
Pay rates and job numbers gradually recovered throughout 2021. At the end of 2021 going into 2022, pay rates returned to pre-pandemic levels, with some pay rates even higher, and job numbers exceeded pre-pandemic levels especially for PT & SLP. In 2022, we have seen some extremely high pay packages ($2500-3500+/wk after taxes), which is over 20% higher than average pay prior to COVID, with average jobs across the country paying up to 5-10% higher than before the pandemic.
Why did all of this happen during the pandemic? Reimbursement rates stayed about the same for most settings during this time period, so that wasn’t it. What changed was the supply and demand dynamics in the travel therapy job market. At the beginning of the pandemic, elective surgeries were halted around the country, resulting in lower caseloads across all medical settings from the hospitals, to SNFs, home health, and outpatient. Some outpatient clinics closed down completely for a period of time, and there were mass lay-offs through various settings. This meant that the demand for travel therapists was reduced drastically in a very short period of time, but the supply of therapists looking for travel contracts stayed the same or even increased to a degree. We saw many permanent therapists that had been laid off from their jobs looking at travel contracts to bridge the gap until they could find a new perm job.
With less demand for travelers and the same or higher supply, the power was completely in the hands of the facilities. Every open travel job was getting dozens of submissions for a while, plus caseload and need for staff was very uncertain, so facilities started to reduce the bill rate they would pay for travelers since they could easily fill the job even at a lower rate with so many candidates, and because they didn’t want to be on the hook for paying high rates if the caseloads weren’t there.
That dynamic shifted completely as elective surgeries resumed during 2021, and there were more post-COVID patients needing therapy, causing a resurgence of caseloads in all settings. The demand for travelers gradually increased throughout 2021 and into 2022, and it eventually passed pre-COVID levels (2019 and prior) and reached all-time high job openings for travel therapists. The supply of travelers remained steady or even decreased slightly due to some therapists taking perm jobs or leaving the healthcare field completely during 2020. This meant that the negotiating power shifted rapidly in the traveler’s favor, and bill rates were forced higher due to low paying contracts often getting zero applicants, and a more urgent need for staff to cover the rising caseloads.
As we progress through 2022 though, the really high paying contracts are getting much harder to find. The reason for this is that the supply and demand dynamics are constantly in flux and starting to normalize. The demand for travelers has leveled off now, and the supply of travelers has increased due to some permanent therapists choosing to give travel a shot after seeing the recent high pay rates. With supply and demand dynamics starting to shift from extremely in favor of travelers to a more moderate position, naturally the upward pressure on bill rates is dissipating as well and we are starting to see pay packages go back to the averages from pre-COVID.
Why Downward Pressure on Travel Pay?
The supply and demand shift I explained above will put downward pressure on pay rates, but counterintuitively, so will inflation as I mentioned above. The reason for this is that inflation doesn’t only affect therapists, but it affects the facilities as well. Their costs are also increasing rapidly with inflation. From rent, to utilities, to having to pay more to keep support staff as entry level wages increase, there’s no doubt that lots of pressure is being applied to these companies. With the cost of running a facility increasing, and reimbursement rates staying the same or even decreasing, the only variables that can realistically be adjusted are therapist pay and facility profit. For many facility owners, especially private practice outpatient clinics, profit has already been reduced significantly in the past few years, which leaves therapist pay to take the brunt of the impact.
This is the big reason that inflation will actually push travel pay down, not up. Except in certain cases, such as hospitals that receive government funding, most facilities would close their doors before paying a traveler so much that their profit margin goes negative. After all, why keep a facility open that’s losing money after accounting for all costs?
Obviously the amount of downward pressure on pay will vary based on the setting and location. A hospital will have a lot more leeway to absorb increased costs than a private practice outpatient clinic will. Also the cost increases from inflation will be very different for a Skilled Nursing Facility in Alabama than for a Home Health agency in California. This doesn’t change the fact that the overall impact on travel pay from inflation is clearly going to be negative unless reimbursement rates suddenly increase substantially.
What Will This Mean for Travelers?
Even though the rate of inflation likely peaked in March 2022, it will still almost certainly be a long time until the CPI is anywhere near the historical 2% target. Even when we do get back to 2% eventually, that doesn’t mean that costs will decrease back to where they were before, but only that they will just continue to increase at a slower rate. This is bad news for all therapists, travelers included, in an environment of stagnant reimbursement rates. Combine this with a normalizing supply and demand dynamic in the travel therapy market, and it’s much more likely that the average travel therapy pay package decreases than increases going into 2023, barring any sudden change in the market.
I hate to be the bearer of bad news in situations like this, but it’s better to be realistic and honest so that travelers can make informed decisions than to be overly optimistic. The best thing that we can do as therapists is to put pressure on CMS and other insurers/payor sources to increase therapy reimbursement rates and encourage our professional organizations to do the same in light of the unprecedented inflation we’re seeing. Whether or not this will be fruitful remains to be seen.
To end on a positive note, although pay rates for travelers are likely to decrease in response to supply/demand dynamics and inflation, that hurts a lot less coming off significantly elevated pay packages compared to pre-COVID levels than it would otherwise. All indications are that travelers will continue to make significantly more than perm therapists, making travel still a good choice overall. It’s just that now travelers may have to be more selective on the assignments they take especially in high cost of living areas, and more mindful of their fixed costs at their tax home than before, in order to ensure that travel therapy remains lucrative for them after accounting for expenses. We went into more detail on managing expenses even with rising housing costs in this video.
Tune in as we will be doing an updated video discussing the topic of inflation & traveler pay very soon!
Message us if you have any questions!
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