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Behind the News: When your supplier declares bankruptcy - CWS 30 April 2.7

Contingent Workforce Strategies 30





Healthcare staffing firms have not had an easy time of it. Not only have they been hit hard by the economic downturn, but hospitals are further cutting back on their use of temporary workers because of declining revenue. Falling revenue and rising bankruptcies seem to be characterizing the industry.

Around the third week of March, Boca Raton, Fl.-based Medical Staffing Network Holdings Inc., one of the largest healthcare staffing firms in the United States, said it's continuing discussions with lenders over a default, but said it could file for bankruptcy protection, according to a March filing with the U.S. Securities and Exchange Commission. MSN also operates a vendor managed system.

A few days prior to the announcement, Crdentia Corp., a Winter Park Fl.-based healthcare staffing firm, filed for Chapter 11 bankruptcy protection. Crdentia's filing included a proposal to sell the company at auction with an initial bid of $10 million.

What does this mean for end users of contingent labor? Customers need to be prepared to take a good hard look at their suppliers' financial health. When choosing a vendor, it's a good idea to do due diligence. Customers need to check the staffing agency's financial stability, number of clients, pass through monies, profitability etc.

Following is a list of actions that you can take to minimize workflow disruption in the event of a bankruptcy filing by a vendor:

  • Make sure your contracts are drafted appropriately by your legal experts.
  • Get definitive transition plan commitment from suppliers -- in writing, if possible; it may require an additional short-term financial investment, but would be worth it
  • Should a filing occur, notify internal customers and supporting agencies of potential disruption in flow and that you'll be back to them with an additional update before the day is over -- customers should be encouraged to email critical issues to an internal mailbox, including anything not yet resolved by the former onsite team
  • Conduct a formal review of contracts with program stakeholders, including legal, finance and accounts payable
  • Know your cycles -- invoicing & bill-pay typically runs weekly or biweekly and should be terminated immediately unless your interim plan (per bullet above) is iron-clad
  • Capture as much electronic data as possible through text-output reports for portability to internal or replacement technology
  • Secure technology assets (including interface touch-points) from unwanted access assuming failed VMS/ provider(s) haven't done so (e.g. password resets, user-type access permissions)
  • Determine critical-to-business processes and assess their failure modes

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