HSJ reports today that there “is now a clear case for clamping down on ‘egregious prices’ being charged by some staffing agencies, says Simon Stevens in his report to the NHS England board”.

At least some of the increase in temporary staffing costs has no doubt been caused by clinicians leaving permanent positions at NHS organisations in return for the higher remuneration available for locums and other temporary staff. For example, in another story today HSJ reports on the £300k being paid to consultant dermatologist locums in Nottingham.

With wages being held down in the NHS, the attraction of such a shift has been made greater. A point made by Alan Maynard in Health Policy Insight among others.

Moreover, with clinician numbers overall in short supply, the imbalance between demand and supply, is being reflected in the (unregulated) prices charged in the temporary staffing market rather than in the regulated NHS labour market. This is likely to be forcing up temporary staffing costs even higher than might otherwise be the case.

Given all this, it is an interesting question whether the ‘egregious prices’ referred to by Simon Stevens are simply a result of wages being held down in the NHS in combination with an overall shortage of clinicians, or whether these prices also reflect bad behaviour on the part of staffing agencies, as implied by the HSJ story.

The key to whether staffing agencies are ripping the NHS off is the size of their fees, not the total amount they charge to the NHS for staff (the bulk of which is paid to the temp they have supplied to fill the position).

If competition is working effectively in the staffing agency market, then agencies will compete each other to put staff onto their books, while at the same time competing with each other to place these staff into NHS organisations. A situation known in competition parlance as a ‘two-sided market’.

Agencies have an incentive to offer the highest rates possible to temp staff to attract them to their agency, but this is constrained by the rates they can get from NHS organisations for these staff. Agency fees are part of this overall equation. If agency fees are too high, and competition is effective, then agencies should struggle to place temps with NHS organisations and/or attract temps to their agencies.

However, if agency fees are higher than is justified – as Claire Murdoch at Central North West London NHS FT seems to think is the case – then maybe there is a competition problem in the temporary staffing agency market.

Fortunately, the NHS has just the tool to assess whether this is a problem: the Cooperation and Competition Directorate at Monitor. Market investigations by competition authorities, such as the ones that Monitor is able to carry out, exist to look at just this type of issue.

Monitor should be able to assess whether the staffing agencies are behaving in a way that is impeding effective competition and resulting in the NHS paying more than it should for temporary staff. (While the temporary staffing market is on the edges of Monitor’s jurisdiction, it would be a brave agency that refused to cooperate with an investigation by Monitor.)

If Monitor were to uncover evidence of anti-competitive behaviour, as seems to be the basis of some of the concerns being raised, then it could take action under the Competition Act (or work with the CMA to do so). Staffing agencies breaking the law could be punished appropriately. Alternatively, it might – having reviewed the issues – suggest ways in which NHS employers of temp staff can themselves avoid being ripped off.

Of course, if the problem is not one of anticompetitive behaviour in the temp staffing agency market, and is simply a result of wages being held down in the NHS combined with a shortage of clinicians, then the NHS can simply exercise its own market power to regulate the price it pays for these staff.

Whether, in the long run, this is an effective way of keeping staffing costs down or just pushes the problem elsewhere is, however, another matter.