SI Review: September 2011

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Growing Success

Growing Success

Acquisitions and diversification do the trick for healthcare giant

By Subadhra R. Sriram

AMN Healthcare Services Inc. is the biggest kid on the block. The $700 million company has a finger in every slice of the healthcare staffing pie, bringing a wide range of innovative workforce solutions to its clients.

That is the San Diego, Calif.-based company’s competitive advantage. “We leverage our unparalleled national network of quality clinicians,” says Susan Salka, AMN president and CEO. She has been at the company’s helm for the last eight years.

But AMN’s goal is not just to be the biggest. It wants to provide a slew of healthcare-related services. The idea is to deliver quality labor and establish a strong relationship with the customer. Trust is then a natural corollary. It leaves the customer wanting more — more patient care-related services.

The Strategy

And AMN can give them a range of options. To that end, in July 2010 the company bought Medfinders, a healthcare managed services provider headquartered in Arlington, Texas, in a $220 million deal. With the acquisition, the company has shored its managed services offering and positioned itself strategically to meet the United States’ impending nurse and physician shortage. For example, Texas alone is facing a shortage of 71,000 nurses by 2020 as demand continues to outpace supply, according to the state’s health services division. That is the future, industry experts say.

To gear up, hospitals have to hire personnel — contingents and employees. But AMN is not just jumping on the talent-provider bandwagon. It is also looking at launching into new fields, such as ambulatory surgery centers and units that support home health businesses.

The company is also taking steps to boost its recruitment process outsourcing and managed service provider businesses.

Can AMN maintain its market leader role this way? The answer from many industry insiders is a resounding “yes.” Critics of the company, however, claim not building from within is AMN’s Achilles heel. Others accuse the company of lacking a deliberate strategy.

Salka disagrees, noting that the company’s nurse and allied segments have had significant organic growth. Supporters agree, pointing to the fact that AMN has regularly beat Wall Street expectations since the Medfinders acquisition.

Clients, meanwhile, seem to appreciate AMN’s initiatives. “Our clients tell us we are far more innovative and invest more in being first to market with different types of service,” Salka says. A case in point is recruitment process outsourcing (RPO). AMN was the first to introduce it in healthcare around three years ago.

The Challenges

Long-time AMN watchers are waiting to see if the company’s strategy of having access to an extensive network of providers and affiliate vendors will pay off. These are interesting times for the healthcare market. On the one hand, unemployment remains relatively high, but healthcare workers are already in demand. The uncertainty of the 2012 presidential election and any resulting legislative changes and an aging population spice things up further.

The healthcare staffing business, once thought to be recession-proof, crashed in 2009. AMN was hit hard. 2010 revenue was $689 million, down from $1.2 billion in 2008, a 43 percent drop. AMN fought back. “We consolidated into fewer locations and into a single operating system,” says Ralph Henderson, president of AMN’s nurse and allied divisions. “These kind of changes are a distraction and can be rough on the numbers,” he adds.

Because customers want one point of contact, sales and service teams across business lines are being organized to present a united front. To stay ahead of the curve, the C-suite also took a look at its various brands. It decided to advertise fewer products and go more digital. That approach has paid dividends.

Of course, there can be no growth without excellent workers. Salka believes investing in social media tools is one way to get the word out to attract the right talent. Mobile apps, video campaigns, social media sites — AMN has made investments in technology as well as people to power those tools.

Meanwhile, the MSP business took off even before the Medfinders acquisition, Henderson asserts. Organically, it’s all coming together. Recruiters have become more productive and the percentage of candidates being placed has increased. Customers are realizing the benefits of MSPs and want more.

Hospitals also are “starting to recognize the need to add supplemental resources in the appropriate levels,” says Bob Livonius, president of strategic workforce solutions for AMN.

The result is growth: AMN has posted four quarters of sequential growth and first quarter 2011 revenue jumped 60 percent year over year to $229.4 million.

The View

It’s not just hospitals that are driving AMN’s success. Emergency room and hospital contract management companies, radiology firms, private practice groups, pharmaceutical and pharmacy companies are demanding more workers as the economy limps back.

These businesses are also preparing to deal with the ramifications of the Obama health plan. When the political dust settles, around 30 million extra Americans will have healthcare coverage. This is going to mean further increased demand for healthcare workers. And AMN is ready to step up.

Consider the company’s foray into new specialties and beefed up recruitment process outsourcing capabilities. “Most of our clients eventually look for people that can fill permanent positions. We felt we could leverage our strength in recruitment, credentials and our vast network of clinicians,” says Salka. RPO is just another way to meet the customers’ needs. It’s not a big money spinner, providing less than $10 million of the company’s revenue.

AMN’s integrated salesforce sells the different offerings. “We pride ourselves on our sales teams,” Livonius says. These groups help create that deep relationship with the client, he says.

What Lies Ahead

“We are constantly looking at our strategy; improving, evolving and building for the future,” says Salka. And that may involve a radical approach. For example, some hospitals prefer relying on their own workers. So AMN is exploring a few options. One is a full pool management area model. This refers to a practice where hospitals employ a pool of nurses either, part time or full time, to work in various departments to fill open positions. AMN provides its expertise in managing this group of nurses, including their scheduling.

Then there are those hospitals that want to have their own dedicated inhouse staffing agency. Here, AMN leverages its expertise to manage the agency more on the lines of an outsourced model. Much of this is still in the planning stages. The hope is that these developments keep AMN on the cutting edge of healthcare staffing.

But it’s not just about innovation. Or being the biggest player. The goal is to outperform — or at least keep pace with — the rest of industry over the next few years. And if in the process the company grows to be even larger, no one’s complaining.

Subadhra R. Sriram is editorial director of SI Review. She can be reached at ssriram@staffingindustry.com.

[SIDEBAR]

Mutual Attraction: Acquiring Medfinders in 2010

It wasn’t an arranged marriage or a hostile takeover. “We knew each other; we felt it would be a good relationship,” says Bob Livonius, commenting on AMN’s July 2010 acquisition of Medfinders. In 2003, Medfinders, under Livonius, decided to focus on the MSP space. In the process, the company encouraged relationships with other healthcare providers, including AMN.

“We actually found that AMN was our best service provider when it came to sub-contracting,” says Livonius, former CEO of Medfinders and now president of strategic workforce solutions for AMN. “They ended up filling a lot of our orders.” The reverse was also true. Medfinders was a subcontractor to the healthcare staffing giant. It was a good working relationship. As a result, it made financial sense for the two companies to unite and fill those work orders as one entity, Livonius claims. It wasn’t because Medfinders was beating AMN at its own game.

Numbers aside, culturally, it was a good match, too. Both companies focus on developing internal talent, showing they care for more than just the client. As a result, the acquisition resulted in very little turnover within the company. In fact, the larger AMN has attracted new talent.

As the country dove into a severe recession, it made sense to explore consolidation opportunities. “In fact, we are expecting to get around $10 million worth of synergies alone out of the combined companies largely around cost savings in the back office,” Livonius says. Accounting, information technology, and finance have all been streamlined so the two companies can operate efficiently as one.

But the benefits go beyond the back office. The acquisition gave AMN instant access to new markets while strengthening old brands. “We are able to immediately bolster our managed services capabilities, which are increasingly preferred by clients today,” Livonius says. The acquisition also gave the company an entry into home healthcare services. But the MSP is what has given AMN its edge. It has helped to grow the business, particularly in the travel nursing division.

The result is a formidable brand. “AMN can now offer its clients a wider range of services. “No one company can fill all the orders but we have over 400 subcontractors as well as well as a network of affiliate vendors that we can offer our clients,” Livonius says. Everyone is watching the economy. And sees the changing demographics — an older retired population — healthcare reform demands, etc. As a result, healthcare systems and facilities are going to change and need quality labor.

AMN hopes to fill these gaps. “We’ve reported significant year-over-year growth in the last quarter in every segment we have,” says Livonius. The future looks bright for AMN. Not only has the company acquired some very talented folks, it is now looking add to its 2,000-plus employee population. Great staff, increased revenue, more services to offer the client — so far the benefits of the deal have been tremendous, says Ralph Henderson, president of AMN’s nurse and allied divisions. “I think as we look at the next year, everyone’s going to say our timing (to buy Medfinders) was just right.”

[SIDEBAR]

Lines of Service

AMN Healthcare Services Inc. provides an array of healthcare staffing and workforce solutions. The company offers travel nurse, per diem (local) nurse, allied and locum tenens (temporary physician) staffing and physician permanent placement services, healthcare managed services programs and recruitment process outsourcing solutions. It also recruits and places healthcare professionals on assignments of variable length and as employees with clients throughout the United States. In certain regions, AMN Healthcare also supplies home healthcare services. In some cases, more than one brand provides similar services. For example, both Staff Care and Linde Healthcare specialize in temporary physician placement.

  • AMN Healthcare’s managed services program — MSP offering
  • Locum tenens — Temporary physician placement
  • Permanent placement of physicians — Placing permanent physicians for a medical practice, hospital or healthcare organization
  • Allied health — Providing per diem, travel/temporary and permanent placement professionals in imaging, therapy, laboratory or pharmacy
  • Nurse staffing — Recruiting nurses for any situation
  • Traditional travel nursing assignments
  • Per diem nursing
  • Quick-start/short-term nursing assignments
  • Electronic medical record implementations
  • Long-term, temporary placements
  • Permanent nurse placements
  • International nurses
  • Recruitment process outsourcing — Helps fill permanent nursing, physician and allied healthcare positions. AMN's RPO program takes on the entire process of recruitment, hiring and on-boarding employees in clinical positions.
  • Home health staffing — Placing home health nurses and therapists

[SIDEBAR]

Suggestions from the Trenches

Advice for healthcare staffing firms looking to grow:

  • Find an underserved niche
  • Have a clear and well-defined process for measuring quality
  • Assist healthcare workers in credentialing
  • Help with relocation
  • Get a big picture overview of the staffing universe
  • Understand the MSP game and learn its benefits
  • Accept change
  • Maintain high standards of quality and service
  • Be a client-centric competitor

[SIDEBAR]

AMN Revenue Mix

  1Q08 1Q11
Nurse/Allied  $           204,000,000  $           134,774,000
Travel Nurse  $             18,360,000  $             84,819,200
Per Diem Nurse  $                               -    $             23,000,000
Allied  $             20,400,000  $             26,954,800
Locum tenens  $             76,400,000  $             70,189,000
Physician Permanent Placement  $             13,300,000  $             10,842,000
Home Healthcare  $                               -    $             13,597,000
Total  $           293,700,000  $           229,402,000

Staffing Industry Analysts estimated that travel nurse made up a majority of the company’s revenue in 2008. Driven by market trends and the Medfinders acquisition, the company’s mix is now more diverse.

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