December 4, 2019

This new law was meant to target Uber. So why could it hurt hospitals?

Daily Briefing

    When a former labor organizer, California Assemblymember Lorena Gonzalez (D-San Diego), wrote a bill to regulate "gig" labor, she was trying to take aim at companies like Uber and Lyft. These ridesharing companies had been inappropriately classifying their drivers as "independent contractors," she argued, when they were really just run-of-the-mill employees—and she hoped to force the companies to provide ordinary employment benefits (such as a minimum wage, providing paid sick days, and insurance benefits) to all of their workers.

    Infographic: This law could hurt nursing experience (but you can fight to close the gap)

    But even though her bill wasn't specifically intended to impact the health care industry, the law could have significant consequences for hospitals—especially for a critical segment of the nursing workforce. Let's explore more.

    Why hospital leaders are concerned about the bill

    The law, as a result of significant lobbying efforts, has exemptions for several jobs and industries. Accountants, architects, travel agents, and—most importantly for hospitals—doctors are exempted from the rules.

    While many working in health care advocated for additional exceptions for other health care professionals, they were not incorporated. Gail Blanchard-Saiger, VP of Labor and Employment at the California Hospital Association—which represents more than 400 hospitals and health care systems—argued this was a crucial oversight. She noted that although hospitals employ 97% of their workforce, many rely on independent contractors to fill in the gaps.

    For instance, many rural or small hospitals don't have enough volumes to hire professionals full-time, and some independent contractors prefer the flexibility of that status over a traditional part- or full-time role.

    While there is still some ambiguity in the final law, it seems like the health care professionals affected include: certified registered nurse anesthetists; registered nurses; perfusionists; occupational therapists; speech therapists; optometrists; nurse practitioners; physician assistants; radiation therapists; licensed professional clinical counselors; marriage and family therapists; licensed clinical social workers; respiratory therapists; and audiologists (dentists, phycologists, and podiatrists are exempted like doctors).

    The legislation, which will take effect on January 1st next year, enshrines the "ABC" test for employees. To not be deemed an employee of the company, the worker must:

    • A: Be free of the hirer's control;
    • B: Do work that is "outside the usual course of the hiring entity's business"; and
    • C: Be established in a trade similar to the work being performed.

    It's part "B" of the test that most affects health care. For instance, if a nurse works as a contractor in a hospital system, then they are doing work that is very much within the course of the company's usual business.

    One affected professional is Jeffrey Darna, an assistant professor who directs the USC Program of Nurse Anesthesia and also works as a certified registered nurse anesthetist in local hospitals. He will do longer be able to hold his contract roles—and in rural counties, his work may be hard to get replacements. "Access to rural health care is at risk now because of this law," he told the Los Angeles Times.

    Of course, it's worth noting that proponents see many upsides to the law, most notably that workers who previously lacked the ability will able to get benefits, unionize, and receive legal protections. And, notably for the health care industry, it will likely increase the number of those with health insurance in the state.

    Why this law could shift the nursing workforce

    It will take time for hospitals and health systems in the state to determine how they need to shift and update their staffing in light of the law. Our fellow researchers at Advisory Board have reported that many health system CEOs have told them the effort will be challenging.

    The greatest challenge may be addressing the "experience-complexity gap." As retirement-age nurses exit the workforce while the number of new nurses surges, the net effect is a decline in the overall experience of the nursing workforce. At the same time, the patient population is becoming older and more complex, with more chronic comorbidities—requiring more novice nurses to deliver more complex care.

    Retirement-age nurses have been a crucial way organizations have been trying to close the gap. When an experienced nurse is nearing retirement age, many organizations will suggest per diem, PRN, or contract work as a way to extend their career. These arrangements can provide more flexible hours and allow nurses to work less before retiring altogether. In the meantime, younger nurses, patients, and the organization as a whole can benefit from their expertise.

    This law may make these arrangements impossible. In response, organizations may be forced to find other methods to retain nurses and, if unsuccessful, find other ways to distribute experience across their organization. For instance, organizations should consider:

    1. Creating a system-wide process to internally source and transition experienced nurses to units with a high volume of staff who are nearing retirement;
    2. Proactively anticipating possible vacancies for contract nurses and retirement-age nurses and backfilling these roles through specialty arrangements; and
    3. Elevating the role of experienced nurses on care teams through a team-based staffing model.

    For far more details on these tactics, as well as much more about how to close the experience-complexity gap, download our new report.

    Why this may not just stay in California

    While California's law is still very new and undoubtedly stronger than many similar laws, it's worth noting that 20 states have already implemented the ABC test in one form or another (although mostly in relation to worker's compensation claims or unemployment insurance).

    The passage of AB5 could certainly hasten similar efforts in other states. Given that California's economy is the largest in the country, political movements there tend to have a ripple effect across the country.

    Notably, more than a third of US workers—approximately 57 million people—might be considered part of the "gig" economy, so the problem of how to deal contract workers is not confined to California.

    That's why it's vital for health care leaders across the country to track California's experience. We'll certainly be watching.

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