While the healthcare industry continues its public hand-wringing about nursing shortages and burnout, healthcare staffing agencies are having their best year ever. Record revenues, expanding margins, and growth that's making investors extremely happy. It's almost like the crisis is... profitable for someone.

Turns out when there's a shortage of critical workers, the middlemen connecting workers to employers do quite well. Who could have predicted.

The Numbers Are Ridiculous

Staffing Industry Analysts reports that the U.S. healthcare staffing market will exceed $22 billion in 2025, up from $18 billion in 2024 and $14 billion in 2023. That's not incremental growth—that's a boom.

Travel nursing agencies specifically are seeing explosive revenue. Companies like Cross Country Healthcare, AMN Healthcare, and Aya Healthcare reported 30-45% year-over-year revenue growth in their most recent earnings calls. Stock prices for publicly-traded healthcare staffing firms are up an average of 67% in 2025.

For context, most industries would kill for 10% annual growth. Healthcare staffing agencies are tripling that while the industry they serve claims to be in crisis. The math isn't mathing.

Why This Is Happening

The nursing shortage is real—the American Nurses Association estimates the U.S. needs approximately 1.1 million additional nurses to meet demand. Hospitals are desperately understaffed, burnout is endemic, and turnover is brutal.

This creates the perfect environment for staffing agencies to thrive.

Hospitals can't fill permanent positions fast enough (or at competitive enough wages), so they turn to travel nurses and contract staff to plug gaps. Travel nurses can command $3,000-5,000 per week for 13-week assignments, significantly more than permanent staff nurses earn. The agencies take their cut—typically 30-40% of the bill rate—and everyone is theoretically happy.

Well, except the permanent staff nurses who are doing the same work for half the pay and growing increasingly resentful. But that's a different problem.

The Economics Are Working for Agencies

Healthcare staffing operates on a simple model: when supply is tight and demand is high, the spread between what agencies pay workers and what they bill clients expands. Right now, that spread is very healthy.

According to financial disclosures from major agencies, gross margins on travel nursing placements are running 38-42%, up from historical averages of 25-30%. When you're placing thousands of nurses per quarter and each placement generates tens of thousands in margin, that adds up quickly.

The agencies argue they're providing a valuable service—matching qualified healthcare workers with facilities that desperately need them, handling credentialing and compliance, and providing flexibility that permanent hiring can't match. They're not wrong, but it doesn't change the fact that they're profiting enormously from a crisis.

The Controversial Part

Here's where this gets spicy: some healthcare leaders argue that staffing agencies are actually making the shortage worse, not better.

Research from health systems suggests that the high pay rates for travel nurses incentivize permanent staff to quit and become travelers. Why would a nurse stay in a permanent role making $80K annually when they could travel and make $150K+ doing the same work?

The result is hospitals losing experienced staff to travel agencies, then having to pay those same agencies premium rates to fill the gaps with contract workers. It's a self-reinforcing cycle that benefits agencies while costing hospitals significantly more.

One health system CFO put it bluntly in an interview with Becker's Hospital Review: "We're paying agencies 2-3x what we'd pay permanent staff to place people who used to be our permanent staff. It's financially unsustainable and they know it."

Agencies counter that they're responding to market demand, not creating it. If hospitals paid competitive wages and created better working conditions, they wouldn't need to rely on travelers. The agencies are a symptom, not the cause.

Both sides have valid points, which means this will continue being messy.

The Legislative Response

Lawmakers are starting to pay attention, and agencies are getting nervous.

Several states have introduced legislation to cap agency markups or regulate travel nurse pay rates. California's AB 2488 would limit staffing agency fees to 25% of bill rates for healthcare placements. New York is considering similar measures.

The industry is lobbying aggressively against these regulations, arguing they'll reduce the supply of available healthcare workers and make shortages worse. American Staffing Association claims that price controls will drive agencies out of the market, leaving hospitals with even fewer options.

Whether regulation actually happens depends on political will and lobbying effectiveness. History suggests the industry will find ways to work around restrictions, but increased scrutiny is definitely coming.

What Hospitals Are Doing Differently

Some health systems are trying to break their dependence on staffing agencies through creative approaches.

Cleveland Clinic launched an internal travel program offering nurses higher pay to float between their facilities, keeping that premium in-house rather than paying agencies. HCA Healthcare invested heavily in nurse retention programs, including tuition reimbursement, mental health support, and better scheduling flexibility.

Other systems are partnering with nursing schools to create pipeline programs, offering scholarships in exchange for multi-year employment commitments. The goal is building sustainable staffing models that don't require paying agency premiums.

These initiatives take years to show results, though, and hospitals need bodies now. So in the meantime, they keep writing checks to staffing agencies.

What This Means for Recruiters

If you're not in healthcare staffing, you might be wondering why you should care about this. Here's why: healthcare is the canary in the coal mine for what happens when severe talent shortages meet strong demand.

The dynamics playing out in healthcare—skyrocketing contract rates, workers leaving permanent roles for contract work, companies competing primarily on price, middlemen capturing enormous value—could happen in other industries facing talent shortages (tech, skilled trades, specialized professional services).

The lessons are clear:

Retention matters more than recruitment: When replacement costs are 2-3x higher than retention investments, the ROI on keeping people is obvious. Healthcare systems that invested in retention early are in better shape now.

Compensation transparency is critical: When contract workers are making double what permanent staff make for the same work, resentment builds fast. Better to be upfront about market rates and adjust accordingly.

Flexibility has massive value: A big part of travel nursing's appeal is flexibility and variety. Permanent roles that build in more flexibility can compete better against contract positions.

Market intermediaries capture value during shortages: Whether it's staffing agencies, recruiting firms, or talent marketplaces, whoever controls access to scarce talent can command premium fees. That's just economics.

The Outlook

Healthcare staffing agencies are positioned for continued strong performance through 2026 and beyond. The nursing shortage isn't resolving quickly—it takes years to train new nurses and the workforce is aging out faster than new graduates are replacing them.

Agencies will continue benefiting from this imbalance until either:

1. Supply increases significantly (more nursing school capacity, better retention)
2. Demand decreases (unlikely given aging population and healthcare needs)
3. Regulation caps their economics (possible but faces industry resistance)
4. Hospitals find alternative models that work at scale (promising but nascent)

None of these are happening tomorrow, so expect more quarters of record revenue for healthcare staffing agencies while hospitals complain about costs and nurses navigate between permanent and contract work based on compensation.

It's a strange situation where everyone involved acknowledges the system is broken, but the economics work well enough for key players that there's limited urgency to fix it fundamentally.

Welcome to American healthcare, where the problems are unsustainable and the profits are excellent. At least for some people.