SI Review: September 2012

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Trends that can help healthcare staffing firms rebound after the recession

By Greg Palmer

In 2009, a strong healthcare staffing market was brought to its knees. This is the first time the industry was negatively affected by a recession. Why did a healthy industry succumb?

The answers for this malady lie in the fact that when 8.7 million jobs were cut from U.S. payrolls, those unemployed workers lost their healthcare benefits, dragging down demand for healthcare staffing for the first time.

As a proactive measure, hospitals looked at per diem and travel nursing as an opportunity to beef up their own in-house nursing pools and recruited nurses from temp agencies. Nurses responded by going back to work full-time or opting into in-house pools for economic and family reasons rather than pursue more flexible work arrangements found with staffing firms.

Today, the healthcare staffing market continues to recover from the depths of 2008 and 2009 recession. Since the recession, certain patterns have emerged that affect the industry. Here, we take a look at those trends and explore how staffing firms can take advantage.

We start by looking at how the recession affected market size and growth rates, and how we expect the industry to stand at the end of the year.

Uneven Rebound

After posting $11.4 billion in revenue in 2008, the healthcare staffing market reached a low of $7.6 billion in 2010. It has been climbing since.

With 2.6 million new jobs having been created since 2009, the number of people with insurance has increased. The U.S. economy responded by adding more than 300,000 new healthcare jobs, by far the fastest-growing segment of employment, according to the BLS.

Further, while overall U.S. employment is about 2 percent less than it was 10 years ago, healthcare employment — inclusive of staffing — has grown by almost 25 percent. Sixteen of the top 30 occupations are in the healthcare field.

The travel nurse segment has come back the fastest because it was the most severely hit. Per diem is still under the previously mentioned cloud and in competition with in-house pools. Locum tenens (physician) and certain areas within allied, such as rehab, are considered revenue generating segments for facilities and demand has steadily increased as patient census has picked up.

The segment, specific skills within the segment, and geographic locations make a difference in the rate of recovery, as does the size of the staffing firm, of course. Global Medical, a midsize locum staffing firm that does both U.S. and offshore placements, has outpaced the market. For example, its 2012 U.S. locum tenens business volume is expected to see a 50 percent increase over 2011, COO Alan Lakomski reports.

Finally, as recently reported by Staffing Industry Analysts, the facility type plays a difference as well, with outpatient facilities, hospitals, and residential care and skilled nursing facilities posting job growth of 200,000, 100,000 and 30,000, respectively.

EMR Leads. The segment that is leading the way is that which is developing the electronic medical records (EMR) systems that are mandated by the Patient Protection and Affordable Care Act. The law provides incentives that help defray the cost of developing the new systems — and financial penalties for hospitals and related healthcare organizations that do not achieve a level of meaningful use by 2014. Therefore, the scramble to install these systems, and to make them useful, has created demand not seen in IT staffing since 1999 just before Y2K.

“We are experiencing very positive growth and margin expansion in our healthcare IT sector,” says Greg Hopkins, CEO of Partner Professional Staffing, a Cincinnati-based IT staffing provider that is No. 7 on Staffing Industry Analysts’ 2012 list of the fastest-growing staffing companies in the U.S. “We anticipate this trend to continue based on conversations with our customers and the leading indicators for many years to come. … Once these systems are implemented they will need to be optimized, supported and data analyzed via business intelligence — all net positives for staffing,” he asserts.

As optimistic as Hopkins is, other staffing firms worry that this will be more like the Y2K bubble — once the first wave of meaningful use is achieved, they believe the wheels will fall off the fast-moving EMR bus. Only time will tell who’s right.

Downward Cost Pressures

The U.S. government has put continued downward pressure on the escalating costs within the healthcare market. And this affects different areas of the segment in varied ways.

Mid-level Positions. One area where this is showing up in healthcare staffing is by way of the market accepting midlevel workers such as nurse practitioners or physician assistants. PAs and NPs can often provide most of the care previously provided by doctors at a much lower labor cost. The same is true for rehab and physical therapy assistant vs. physical therapist. This trend will continue to accelerate as the skills shortage grows and the cost to train and educate the highest level of workers accelerates.

VMS/MSP Models. Also pushing down costs is the increasing usage of vendor management systems and managed service provider models in healthcare staffing. As hospitals continue to control costs they are closely looking at labor and labor utilization models such as VMS and MSP as cost reduction solutions. Some of the bigger players such as AMN Healthcare and Medical Staffing Network — Numbers 1 and 5 on SIA’s 2012 list of the largest U.S. healthcare staffing providers — have embraced the concept, while others have not.

AMN bet big in this area when it acquired Medfinders (formerly branded Nurse Finders), which was known for its MSP model in 2009 at what seemed a premium price. Since that time AMN’s MSP model has helped to drive about a third of its nurse and allied business.

At the same time, midsize staffing firms are feeling the pinch in terms of lower gross profits and loss of direct contact with their clients. “Clients and VMS’ are asking for more and more in terms of information, orientation, testing and screening which adds tremendous cost to agencies and of course since we have not increased rates in years these added costs have taken a toll on our margins, which continue to decline. I expect continued and probably increased pressure on margins,” says Joe Spitale, CEO of Advanced Nursing, headquartered in New Orleans.

Whatever your position on VMS and MSP, you will need to have a strategy on the subject and keep abreast of the changes to this market.

How to Take Advantage?

There are ways healthcare staffing providers can leverage these trends. Here’s how.

Pick Your Spot. There are a number of good spots to expand on. Each category has its uniqueness with their respective pros and cons. The important thing is to focus and not get too distracted by the enormity of the opportunity.

You will want to make a decision by the size of the health organization, the settings, and consider VMS or no VMS when picking your segment. There are also numerous opportunities in government (such as VA facilities).

One other major decision to weigh in most segments is whether or not you want to consider travel positions. Travel positions typically have a 13-week minimum and attractive margins — and often get extended. However, they come with travel costs, logistics, payroll and sales tax issues that need to be carefully weighed.

Talent. In today’s environment, receiving orders is not typically the issue. Unemployment rates among healthcare practitioners tend to be well below the national average, with some specialties hovering below 3 percent, according to recent data from the Bureau of Labor Statistics. So finding talent is a challenge. “We receive over 200 orders a day and we are lucky to fill five orders by the end of the week,” says Sara Palmer, CEO of StaffRehab, a two-year-old startup in the therapy staffing space.

Firms such as Jackson Therapy attack the opportunity by creating their own job boards for candidate recruiting in the locum and therapy spaces. Others have offered unique referral bonus programs as well as healthcare benefits and tuition reimbursements to their candidates.

Supplemental Health Care recently designed its new website to improve the job searching experience by uniting the company’s staffing expertise with digital technologies that help online visitors access exclusive healthcare job opportunities. Popular features of the site include a robust job database, a new job alert system, a healthcare library, and a dream job locator that creatively identifies career opportunities based on hobbies or pastimes.

A-Level Candidates. With so many opportunities and such a tight supply of talent, the best practice for operational focus is to define, prioritize and track, the matching of the best talent you can find against the best orders you can receive.

It sounds simple but my experience has been most firms spend too much time and too many resources on orders that they have a low probability of filling and with candidates that they have a low probability of placing. In my consulting practice we call this process CRQ — where you determine the commitment rate and qualifications from both the clients and the candidates before work on the orders ever begin.

New Job Creation

The demographics of the U.S. population is aging, with the over 65-age group considered the fastest-growing segment of the population and the group requiring the most healthcare. In the next 10 years, about 15 million new Americans are expected to enter this age group. Longer life expectancy rates will contribute to this group’s growth rate.

A new study conducted by the Georgetown University Center on Education and the Workforce in June of this year, predicts that 5.6 million new jobs will be created as a result of the growth in demand for healthcare by 2020. This increased demand for healthcare-related jobs represents a 29 percent increase over 10 years, according to the study. The study has taken into account demographics (the aging population) and the Affordable Care Act (30 million new insured people opting into the U.S. healthcare system). Add in the projected skills shortages, and the services of healthcare staffing firms will surely be in great demand.

Staffing firms that embrace the challenge of participating in the growth will be rewarded if they can focus on a strategy that emphasizes on finding, retaining and rewarding the talent.

Greg Palmer is the former CEO of Remedy Temp Inc. and founder of G Palmer and Associates, a management-consulting firm focused on the staffing industry. You can find the recently published G Palmer temp labor forecasts and related material at www.GPalmerandassociates.com

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