Barry Asin, president of Staffing Industry Analysts, discussed current competitive forces in healthcare staffing during his keynote speech at SIA’s Healthcare Staffing Summit on Nov. 3 in Houston. Asin shared key data points and statistics regarding where the industry is today and what the near-term and longer-term outlooks are. To better understand the industry, Porter’s Five Forces that shape strategy was explored and is summarized below.
Power of suppliers. The most critical factor in healthcare staffing are the clinicians. The labor market has shifted from a talent shortage to a talent crisis, where the significant imbalance in supply and demand has increased. According to the US Bureau of Labor Statistics, the ratio of healthcare job openings to hires, which was at 1.67 between 2012 and 2020, increased to 2.4 in August 2022.
The Bureau reported the number of hospital workers has finally returned to the levels seen in 2020. This is good news for the industry; however, the natural increase needed to cover the typical yearly expansion of services implies a shortfall of hundreds of thousands of workers. The data continues to reflect a talent crisis with solutions for solving the shortages being arduous in nature. To grow more healthcare workers, education systems have increased the number of RN candidates taking the NCLEX exam by 3% to 5% each year, but this does not keep up with demand nor does it provide an immediate solution. According to a recent projection estimate by McKinsey, the best-case scenario is that we arrive at 2025 with the same number of RNs as we had in 2019.
The Association of American Medical Colleges has similar projections on the physician side, with a shortage of 17,800 to 48,000 physicians in primary care by 2034 and a shortage of 21,000 to 77,100 physicians in specialty care by 2034. One factor driving the shortage is that the industry is seeing a high percentage of burnout, with clinicians considering leaving the workforce. According to the Mayo Clinic, 24% of physicians are at a high likelihood of leaving their current practice in the next two years.
This leaves us with what Asin calls “talent in the driver’s seat.” Identifying what makes clinicians happy and what motivates them to show up to work every day will be a powerful concept for success. Healthcare staffing firms are in an advantageous position to source talent, discover ways to satisfy healthcare professionals, provide pay packages of an appropriate caliber and ensure talent feels appreciated. The reality of the situation is that talent will find another staffing firm to partner with if their current firm cannot meet their needs.
Power of buyers. Healthcare systems are under immense financial pressure. According to a survey of over 900 hospitals conducted by the American Hospital Association, most health systems project they will have negative margins in 2022. Of those 900 hospitals surveyed, total costs have increased $135 billion in 2022 versus 2021. Taking the financial pressures placed on health systems into account, day sales outstanding has increased to 85 days in 2021 from a median of 73 days in 2020.
Threat of new entrants. Barriers to entry in healthcare staffing are low and SIA is tracking, in particular, the impact of staffing firms with more disruptive models such as staffing platforms that feature more automation, market visibility and self-service. The temporary staffing model grew nearly 200% in 2021, with much of the expansion occurring in healthcare staffing. By SIA estimates for last year, healthcare staffing only accounted for 6% of temporary staffing using traditional models, but healthcare staffing accounted for 72% of staffing revenue using a platform model. Considering the exponential growth in healthcare staffing platforms, Asin asked the question, “Who will be the Uber of staffing?”
Aya Healthcare implemented a platform model in 2020 with revenue around $1.4 billion and saw dramatic growth to reach $5.7 billion in 2021, mainly based on travel nurse staffing. Aya shared with SIA that it expects to reach $11 billion in staffing revenue this year. SIA’s projection for the future is that challenges will exist in distinguishing platform models from traditional models. The SIA NATHO Travel Nurse Benchmarking Survey identified 21 as the median number of travel nurses per recruiter for 2021. Some platform models have shared with SIA that they can get closer to 50 travel nurses per recruiter, which lends itself well to productivity enhancement and scale opportunities.
Threat of substitutes. Substitutes of healthcare staffing include hospitals forgoing backfills and scheduling without enough staff as well as developing float pools. There has also been a rise in direct sourcing, where health systems recruit their own contingent workers by curating a pool of candidates and by attracting talent using their employer brand. Robots and technology have increased in certain settings, including those with aging populations where robotics and AI also serve as substitutes.
Rivals among competitors. Healthcare staffing is a very collaborative industry where rivalry is low. The industry is very fragmented with many large staffing firms capturing no more than 2% to 3% of the market. According to SIA’s “Largest Healthcare Staffing Firms in the US” report, 11 companies have revenue over $1 billion. Fourteen of the 20 fastest-growing staffing firms are in healthcare, and this is net of acquisitions.
Porter’s Five Forces analysis can help staffing firms anticipate competitive movements, understand structural factors, and develop strategies and tactics to stay focused on the most important priorities for success. Staffing firms are well-positioned to continue to serve as advisors to both health systems and clinicians in a way that maximizes the satisfaction of both parties, and to do so by working collaboratively with other healthcare staffing firms, MSPs and vendors in the workforce solutions ecosystem.
These topics will be explored further at next year’s Healthcare Staffing Summit, which will be held at the Red Rock Resort in Las Vegas from Nov. 1-3, 2023. Corporate members can register for the event now.
