Surveying the landscape
Facing a volatile economy, staffing agency executives assess the changing market.
The economic meltdown that began last year has vexed consumers and impacted business across the board, and the healthcare travel industry is no exception. We asked executives from travel staffing companies to offer some perspective on where the industry has been and where it's going. Nurses and market watchers will find their take on the industry's issues, and their advice for travelers, enlightening and in some cases, surprising.
How has the travel staffing industry changed over the past 5 years?
Allison Beer
The evolution of the industry from 2004 to 2009 has been really interesting. I think the industry has become more accepted. Research has shown that healthcare travelers have as much if not more experience than their permanent counterparts. I think they have a lot to offer facilities based on the fact that they get experience in varied clinical settings and they gain experience adapting in new environments. I think that hospitals have realized that staffing agencies are more than a necessary evil. I think the facilities are finally seeing us as staffing partners.
The other thing that I've seen over the past 5 years is the emergence of more and more vendor-management systems. Over the past couple of years, as needs reached new heights, facilities worked with hundreds of staffing agencies and were able to effectively manage those relationships and the pool of healthcare providers through the use of vendor-management systems.
Mark Stagen
For the past 5 years, the number of healthcare staffing companies, and travel-nurse companies in general, has been growing. There seem to be more and more companies out there. And then hospitals started cutting back on the number of vendors they used and started using vendor-management systems and following tighter processes.
Jonathan W. Ward
Over the past 5 years, the industry has seen a proliferation of new companies entering the travel staffing segment. Many were in nurse staffing on a per diem basis, then began to provide full travel staffing or short-term local contracts. Since the economy has turned, that dynamic has shifted significantly. I think another thing that we have seen over the last 5 years is a significant proliferation of "intermediaries," or companies that step in between the hospital or healthcare facility and the agency. Good examples of that would be technology companies such as ShiftWise, Medefis, Symbio and other companies that purport to help hospital clients better manage their agency utilization. This technology can be disruptive to the operational flow of how agencies work with healthcare organizations.
Other intermediaries are group-purchasing organizations such as hospital associations in states such as Ohio, South Carolina, Arizona, and New Jersey; and organizations such as Broadlane which provides labormanagement solutions to hospital clients. Again, it creates another layer between the agencies and the healthcare organizations, which just makes it a little bit more difficult and less efficient to serve both sets of customers. Finally, a few companies are now offering a master supplier program, where one company acts as the primary vendor and then works with other agencies to make sure all of the client's needs are being met.
How has the current economic crisis impacted the travel-staffing industry?
Susan R. Nowakowski
While orders were significantly down [in 2008], ... our decline in overall nursing volume was due primarily to international nursing, which was down about 200 nurses, as we continued to feel the effects of visa retrogression. Despite lower levels, there is still an overall consistent need from hospitals for clinical staff to serve the health care needs of the general population. ... The nurse and allied segment experienced single-digit growth that moderated throughout the year. Specifically short-term nurse staffing experienced consistent, year-over-year revenue growth of 2% to 3% over the [first 3 quarters of 2008].
Ward
The number of open orders from our hospital clients is down more than 70% since early November and down more than 40% since the start of this year. So I would definitely characterize this as the most difficult environment that we've seen since the mid-1990s. We believe the deterioration is being caused by unfavorable credit market conditions for hospitals that have significantly increased the interest expense they pay and as a result negatively impacted their profitability.
Also, most nonprofits have seen material declines in the value of their endowment funds, which were used to fund growth and expansion initiatives. Labor markets have obviously been deteriorating. That has likely pushed more nurses back either into the workforce or picking up more hours, thus greatly reducing the hospital's reliance on the kind of outsourced labor our industry provides.
Stagen
Over the past 3 to 6 months, demand has dropped precipitously due to the economy. Job orders are down significantly for a host of reasons. One is elective surgeries have all but disappeared. In addition, a lot of people don't have health insurance now because they've lost their jobs or their co-pays are extremely high. They're not going to hospitals.
Also, permanent staff nurses are working many more shifts, which means there's fewer opportunities for temporary staff. On the hospital side, their finances have just been devastated. A lot of hospitals operate on endowment income, and their endowments have been sliced 50% because of the stock market. They don't have access to the credit and bond markets like they used to. They're not being paid on time by the states.
In addition, the number of uninsured patients is going up. So they're looking to save budget costs and one of the ways they're doing that is by reducing staff to almost bare bones levels.
How do you see the industry evolving this year?
Nowakowski
During the first quarter [of this year], order levels have slowed for most of our business lines, most significantly with nurse and allied. This has resulted in travel-nurse volumes declining by double-digit percentages both sequentially and year-over-year. ... While the long-term drivers of our business remain well intact, and potentially more compelling than ever, we must deal with the realities of the short term. ... I think the unemployment rate has had an impact on the demand for nurses, as more permanent nurses are picking up more hours, going from part-time to full-time, going from retirement back into the workforce. We hear that from the nurses themselves. We hear that from our clients. And I think you have even seen hospitals say that publicly. I think that will definitely continue to have an impact. ...
[Also] it is something we are hearing from our clients somewhat across the board, that they actually have needs and demand, but they're having to conserve all operating cash to continue to proceed with maybe some capital projects, whether they be equipment- or building-related. It is hard to quantify, but there may be a bit of pent-up demand that could be relieved when they start to see better cash flow themselves. ... We [are taking] proactive steps to manage our business and strengthen our operating model through this economic downturn.
Ward
Hospital admission trends have been weak. I think that is a regional trend, meaning that some of those markets where we would typically have staffed for the season, such as Arizona and Florida, have been particularly hit hard by the economic downturn. Anecdotally, we have heard some hospitals have performed less than 50% of the cardiac surgeries they did in the prior year. So that's a pretty significant drop. And you're going to need a lot fewer open-heart ICU nurses in that case. Elective procedures are also way down. On the positive side we've seen relatively strong demand in the Northeast region and in the Midwest and upper Midwest. So what it suggests is obviously that people are staying in those markets and not migrating to the Sun Belt states for the winter season.
Beer
I've received varied feedback from multiple clients in different areas of the country. Some clients that had previously experienced very high levels of census during this time of the year, such as hospitals in Florida and Arizona, are seeing lower census because fewer people have come to these areas for winter. Hospitals there are using fewer travelers. But at the same time, we're seeing higher levels of census in colder areas, such as the Northwest and Midwest. So we've had to flex the healthcare traveler pool in a different way this year. And the travelers have had to become more flexible and open to opportunities in new and different areas.
Some of our clients are experiencing the same or higher levels of census but are feeling the pinch of tighter budgets. Overall, the volume of job orders within each facility has decreased and that means hospitals are also having the luxury of being more selective and holding out for more quality candidates. There's a great pool of very experienced, very capable healthcare travelers out in the industry, and the hospitals are getting the really good players. We still see assignments in plum areas. We have orders in San Francisco, Santa Barbara, San Diego, New York, and South Florida. So we still have the job orders, just not to the extent as in years past.
Another thing we're seeing is an increase in activity at hospitals focused primarily on uninsured patients. And so there's another opportunity that's emerging in the healthcare travel market: providing help to people who really need it. And I think that is at the core of what nurses are about. They are in this profession because they want to help people and they want to help people heal.
What changes do you expect to see in the future?
Nowakowski
The recently announced economic stimulus package and proposed federal budget includes significant healthcare-related spending that will likely drive increased need for physicians and nurses, although the timing and the magnitude of that impact are certainly very difficult to predict. A large portion of the spending is focused on increasing access to healthcare services. Also, there is long-term funding toward health information technology. We believe that this will also drive an increased demand for temporary physicians and nurses as hospitals implement new systems. In fact, this past year we have already worked with a number of clients who have begun such technology installations.
Stagen
There's going to be a huge shakeout in the industry. Weaker, less financially sound companies are going to go out of business, and the stronger, better run, better capitalized companies are going to survive. Some companies just don't have the financial wherewithal to make it through a prolonged downturn. I think the overall healthcare staffing market may contract by 5% or 10%. I'm optimistic long term. I understand that the next year or two will be a little bit challenging for the industry. But I think it's a short-term blip. Healthcare staffing is a great segment to be in because of the long-term demographics.
Beer
I think we will see fewer staffing agencies over the next 5 years. If a company doesn't have strong cash flow or cash reserves, it's very difficult to sustain the payroll and the operating costs associated with having a healthcare travel agency. Additionally, facilities are not only looking for quality healthcare provider candidates, they're also looking for quality agencies. They may choose to work only with Joint Commission-certified agencies. Hospitals are also growing less tolerant of the volume of agencies they are working with. A facility or hospital system may have historically worked with 50 vendors to fill their needs, but now they are choosing to work with only 10. They can satisfy their current open job orders by working with fewer companies. I also see VMSs (vendor-management systems) losing some of the appeal that they've achieved over the past 3 or 4 years, only because the volume of candidates is lower. VMS technology can be burdensome to some end users. Some nurse managers, I think, would prefer to pick up the phone, certainly if they only have two job orders.
Ward
The next 5 years will be dictated in part by what we do right now. Let's say we can turn around the credit markets, which would be a very good first step for hospitals. Unless their debt costs come down, they're not going to borrow money to build new hospitals and add beds, or have the money to operate their facilities. So that's the first thing that has to happen. The second thing is, we're probably going to see a continued increase in unemployment. And that means that over the period where unemployment is rising, there's going to be pressure on hospitals from the standpoint that there will be fewer admissions, and more nurses will be willing to work permanent jobs or take on additional shifts to make ends meet. So the outlook for the near future is certainly not a positive one for the agencies and travel nursing. But when employment starts to pick up, those nurses who moved back into the workforce to pick up shifts will pull back out, and then there should be an increase in patient admissions, which will then drive the long-term growth for the industry.
How do you think aging population, diverse healthcare settings, and staffing shortages will affect industry trends in the future?
Stagen
When you consider the aging population, baby boomers, drugs, and new therapies designed to keep people alive longer, the demographic trends and drivers are fantastic for the healthcare services industry in general. We're probably going toward more nationalized or socialized medicine. Let's say the government decides to cover every single American with health insurance no matter what. That's 50 million Americans not currently going to the hospital who are going to start going to the hospital. And it means that the hospital is going to get paid for their visits. It means they're going to be able to hire more staff and more travelers. It means increased demand. I think it will probably have a positive impact on the healthcare industry. Anytime you've got the government paying for something and inserting money where there wasn't money before, that's a good thing.
Ward
Long-term, the dynamics haven't changed. The population is aging, and people need healthcare. If anything, you could see a significant rebound at some point because there would in theory be a lot of pent-up demand for healthcare services. Everybody who has put off that surgery, put off that procedure, at some point, they're going to show up for care. Is that point any time this year or is it in 2010? That's the big question. Healthcare Traveler: Nurse staffing agency executives assess the market
What are some of the advantages of being a travel nurse?
Stagen
You get to be in different clinical environments, different geographic environments, big hospitals, little hospitals, mountains, deserts, I mean how many jobs are like that? I think it's an incredible opportunity.
Beer
Travel nursing is a really great choice for people who want to prioritize patient care. It also provides people with freedom and flexibility—the freedom and flexibility to make new and exciting choices in location and clinical setting every 13 weeks and a great opportunity to meet new people and experience new things. Again, this is a great career choice; nurses just have to go into it with the right frame of mind.
How have market dynamics changed the way travel nurses approach the market?
Ward
There are fewer jobs than there have been in the past and there are a lot of nurses who are going to be competing for those jobs. So the first thing is, travel nurses have to be open to taking a job in a geographic location that they may not have been open to before. Second, whereas in the past when there was a supply constraint, hospitals had to be relatively flexible about offering some time off as part of the contract. I think that in this marketplace nurses have to understand that there are 50 other nurses also willing to take that job that they're being submitted for.
Even though a nurse may have the best credentials and the best skill set, if you don't have a license for that state or you don't have all your paperwork in line and all your credentials ready and you're looking for time off in the assignment or you have some special requirements, you're not likely to be considered for the job. You have to be willing, in this type of economic environment, to say, as a traveler, I am willing to be flexible and I'm willing to do what it takes to get the job that I would like to have at this time.
The other significant change has been a move away from the traditional 13-week or 3-month assignment for travelers. Many facilities are just unable to forecast out that long and they're less willing to offer up a three-month assignment. However, they are willing to look at 6- and 8-week assignments. Oftentimes they do renew or extend those assignments as they bring those travelers on board, so it's important to think about the concept that you may need to be comfortable with committing to a shorter term contract than you have in the past. Realistically in this market, while it's difficult to swallow, pay rates and other benefits to contract.
Beer
There's as much opportunity in this industry today as there has ever been for people who want to do this because they want to help people, have freedom and flexibility, and experience our country in a unique and exciting way. The nurses are changing their way of thinking. They are being much more flexible right now: flexible on location, flexible on shift, flexible on floating, because they still want the all the benefits of travel and that is coming in new ways in this market.
Stagen
Right now we've got five travelers for every job opening, so it's hard for me to tell on the macro level if there's more nurses looking for jobs or just fewer jobs for the number of nurses. If you want to go to Tumbleweed, Arizona, there's probably a greater need for staff than in Newport Beach, California.
I think also what you're seeing is travelers are changing their habits and their expectations. They used to be able to dictate terms and conditions, pay and flexibility. Now, if they don't take the job on the hospital's terms, somebody else will. They need to be extremely flexible to geographic location, compensation, floating, and shift preference. Flexibility is the key word for travelers. Unfortunately the marketplace is what it is and the market dictates the way things work. Right now the hospitals are definitely calling the shots. It's all about the highest level of quality and flexibility. And it's a very big mind-set shift.
BIOGRAPHIES
Allison Beer, president
RN Network
Allison Beer is president of RN Network, a CHG Healthcare Services company based in Boca Raton, Florida. She joined RN Network as vice president in April 2007. She has more than 12 years of nurse staffing experience, including 4 years as vice president of sales at AMN Healthcare, where she managed the integration of a new company acquisition. Before joining RN Network, Beer served as vice president of Weatherby Locums, another CHG Healthcare Services company. She holds a bachelor's degree in journalism from the University of Missouri-Columbia.
Susan R. Nowakowski, chief executive officer, president, and director
AMN Healthcare Services, Inc. Susan R.
Nowakowski is chief executive officer, president, and a director of AMN Healthcare Services Inc., the largest healthcare staffing company in the United States and a leading nationwide provider of physicians, nurses, and allied healthcare professionals. Nowakowski is an active industry and company spokesperson with the financial analyst and investment community, and she has been one of the driving forces behind the company's major strategic and operational initiatives since joining the company in 1990. Before becoming chief executive officer and president, Nowakowski served in several other executive management positions at AMN Healthcare, including chief operating officer, chief financial officer, and senior vice president of business development. She also currently serves on the board of directors of Beckman Coulter, the University of California San Diego Sulpizio Family Cardiovascular Center, and San Diego State University College of Business Administration. Nowakowski takes an active role in promoting the value of women in leadership positions and in 2003 was recognized as one of the top "Women Who Mean Business" by the San Diego Business Journal. Before joining AMN Healthcare, she held various finance positions at a subsidiary of Eli Lilly & Co. and at BioVest Partners, a venture capital firm. Nowakowski holds a bachelor's degree in Economics and Accounting and a master's degree in Business Administration.
Mark Stagen, founder and chief executive officer
Emerald Health Services
Mark Stagen is the founder and chief executive officer of Emerald Health Services, one of the nation's fastest-growing healthcare staffing firms. Stagen founded Emerald in 2002, and the firm provides travel nurses to healthcare facilities through the nation. Emerald Health Services ranked number 185 in Inc. magazine's 2007 "Inc. 500" list in the category of fastestgrowing companies in the United States, and Emerald's revenue growth has exceeded 1,100% since 2002. Additionally, Emerald ranked number 6 on the Los Angeles Business Journal's list of fastest-growing private companies in 2007. In 2007, Stagen was awarded the Ernst & Young's Entrepreneur of the Year award in the Greater Los Angeles region. He was also selected as one of 30 national Entrepreneur of the Year finalists from the approximately 300 regional 2007 Entrepreneur of the Year winners. In 1998, He co-founded Telecore, a broadband staffing and engineering firm. Telecore was sold to Viasource Communications in 2000, and Stagen assisted Viasource with their initial public offering in 2001. After graduating from Yale University in 1994, he began his career as a real estate developer before entering the staffing industry in 1998. Stagen lives in Los Angeles and is a member of the Young Presidents Organization.
Jonathan W. Ward, president
Cross Country Staffing
Jonathan W. Ward is the president of Cross Country Staffing, a leading provider of healthcare-staffing solutions to hospitals throughout the United States. Ward joined Cross Country Staffing in 1993 and has held numerous executive positions including, executive vice president operations for Cross Country Staffing and chief marketing/strategy officer for Cross Country Healthcare, Inc., the corporate parent. Before joining Cross Country Staffing, he spent 3 years at W.R. Grace & Co. as Assistant to the chairman and chief executive officer. Ward holds a BA in Political Science from Drew University and an MBA from Rutgers University, Graduate School of Management.
What to look for in an agency
According to staffing agency professionals, you have to be comfortable with the agency that you're going to work with. Travelers should seek out agencies that offer a variety of job opportunities in the market.
Travelers should make sure they have a comfort level with their staffing agency representative. A successful business relationship starts with good chemistry and open lines of communication.
Another important consideration is the financial condition of the agency. Information on publicly traded companies is easy to obtain on the Internet. With privately held companies you have to ask them specifically. If the company is not willing to share that information, it is a red flag that you have to weigh against other factors.
Travelers should also review and examine the value of the benefits that are offered to them. In addition to the pay package, it is important to take all of the benefits into consideration, including whether the agency provides a professional liability insurance policy.
The NATHO connection
The National Association of Travel Healthcare Organizations (NATHO) is a nonprofit association founded in 2008 to promote ethical business practices in the travel healthcare industry, setting the standard for conduct that is aligned among member agencies on behalf of travel healthcare candidates and clients.
According to staffing industry professionals, NATHO's overall role is to promote the travel-staffing industry. A staffing agency that is a NATHO member is held to a strict code of ethics developed specifically for the travel healthcare industry.
The organization primarily serves in these capacities:
- Educate the healthcare industry on the benefits of travel healthcare staffing.
- Establish a set of service standards among travel healthcare companies.
- Share resources among member organizations
- Offer a formal dispute resolution process through an arbitration committee.
- Aid all members in cultivating market growth.
A recent NATHO initiative is collecting data on job orders and the number of travelers in the marketplace. This will help provide those companies that participate in the benchmarking with critical data concerning how they're doing relative to other companies. This type of information was not previously available.
Another NATHO initiative is an effort to find ways to educate hospital clients about the value that travelers bring to their organization. There is often a misconception on the true economic value a traveler brings to a facility as compared with the cost of a full-time nurse.
