Amidst uncertainty regarding healthcare reform, AMN Healthcare Services Inc. (NYSE: AHS) and Cross Country Healthcare Inc. (NASD: CCRN) — the two largest publicly traded healthcare staffing firms — again reported better than expected revenue in the fourth quarter of 2016 and provided cautiously optimistic guidance looking forward towards 2017.
The results
Consolidated fourth-quarter revenue at AMN Healthcare grew 21% year over year during the quarter (10% on an organic basis), reaching $487.9 million. Its nursing and allied segment grew 17% year over year (12% on an organic basis) to $308 million, benefitting slightly from an increase in its labor disruption business. Its locum tenens division grew 5% year over year to $104 million. AMN also noted in its earnings transcripts that its MSP business was a key driver in its revenue and profitability growth, now representing about 40% of AMN’s staffing revenue. Revenue in AMN’s other workforce solutions business (which includes VMS, interim leadership, physician permanent placement, workforce optimization and the newly acquired medical coding business) grew 89% year over year to $76 million through a combination of organic growth and acquisitions.
Cross Country Healthcare grew its revenue 15% in the quarter, reaching $222.5 million. The firm attributed its revenue growth to strong demand from existing clients, as well as new customer wins and investments it had made in internal capacity. Specifically, the firm reported 34 new MSP wins over the last 14 months, representing approximately $150 million to $200 million in annualized spend. By segment, the firm’s nurse and allied division grew revenue by 20% (16% on an organic basis), with roughly one-fifth of that growth attributable to volume and the rest attributable to price increases. Locum tenens revenue declined 9% to $24.8 million, an improvement from previous quarters’ double-digit declines. One particular area of strong growth was Cross Country’s “branch” operations, which were up more than 20% in the quarter. This division, in addition to supporting local MSPs, mostly serves ambulatory and outpatient facilities in local markets.
The ACA and healthcare staffing demand
One question that has hung over the healthcare staffing market has been what effect the new administration’s plans for repealing and replacing ACA will have on demand for healthcare staff.
In their earnings transcripts, both firms were asked about and commented on the uncertainty around the new administration and the Affordable Care Act. Both AMN and Cross Country seemed to expect the demand environment to remain similar to the current one for the next two years. AMN’s Susan Salka noted that even given some uncertainty regarding the discussions of ACA, she didn’t believe “…any of that will have any sort of material effect this year or quite honestly even into next year based on the changes that they [the administration] are discussing.”
Cross Country’s Bill Grubbs noted that while a few customers were taking a wait-and-see approach due to the uncertainty, nothing had changed the firm’s overall demand: “We still have close to a record number of orders … I don’t think anyone sees that there’s going to be a big change, certainly not in the short run … The open enrollment period [for this year] has passed already, and the people that have insurance have insurance. And I’m not even sure that they [the administration], we believe, will make significant changes by 2018. So most everybody is thinking that as long as these people stay insured that the level of demand for healthcare in the hospitals and in their healthcare facilities shouldn’t fall off from where it is today.”
The firms’ sentiments and results corroborate our recent forecast and analysis of the healthcare staffing market. We note that while the current administration has proven it is unafraid to act quickly or exercise executive orders on various issues, it does appear to be moving more methodically (or at least with more restraint) when it comes to the idea of repealing and replacing ACA. It seems likely that a replacement bill will not be introduced until 2018, and any major changes probably wouldn’t go into effect until 2019. This is welcome news for healthcare staffing firms, as according to our Annual Healthcare Staffing Growth Assessment, the current demand environment has been one of the most robust in memory.
The firms also provided cautiously optimistic forward guidance, citing the continued aging of the workforce, a stable-to-improving economy, record levels of attrition among healthcare staff and a seeming shift in work preferences among younger healthcare workers as drivers of demand moving forward.
Corporate members interested in learning about these trends and others in the healthcare staffing market can access our full Healthcare Staffing Growth Assessment online.
