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Measuring the Health of Health Care Staffing

July 22, 2009
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Related Topics: Contingent Staffing, Workforce Planning, Featured Article, Recruitment
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Early this year, Joe Boshart was forced to do something he’s never had to do in the 16 years he’s been in health care staffing.

In January, the CEO of Boca Raton, Florida-based Cross Country Healthcare had to lay off 6 percent of his company’s internal staff because of the recession.

“It was not a good day,” he admits. Cross Country normally loses people through attrition, but business was declining too fast, Boshart explains.

About half of Cross Country’s revenue comes from travel nurse staffing, and between January and March demand for travel nurses was down by 50 percent, according to Boshart. He describes the current environment as “brutal” and the toughest one he has seen in his career.

“Candidly, I don’t know how bad and how deep this recession will be,” he says.

Many health care staffing firms have been hit by the economic downturn. After several years of growth, health care staffing revenue is expected to decline 23 percent this year, according to Staffing Industry Analysts. Health care staffing is expected to generate $8.8 billion this year, down from $11.4 billion in 2008.

The two strongest sectors in health care staffing are locum tenens and allied, whose revenue is expected to grow by 5 percent and 20 percent, respectively, this year. Meanwhile, the two weakest sectors—travel nursing and per diem—are expected to decline by 33 percent.

“The physician area is the hottest; nursing is the coolest. Allied health is warm to hot,” says Rick Jackson, CEO of Alpharetta, Georgia-based Jackson Healthcare. Adds Cross Country’s Boshart: “Physicians are a revenue generator. Most nurses are a cost generator. You want more physicians and less nursing. Allied is somewhere in between.”

While health care staffing overall is down, it is still doing better than other sectors of staffing. Staffing Industry Analysts predicts industrial staffing to be down 24 percent this year, while office/clerical staffing is expected to dip 25 percent, and finance/accounting staffing is forecast to take a 25 percent hit.

The health care industry continues to add jobs in the recession—just not nearly as many as in the past. In March, health care added 13,500 jobs, whereas last year the industry added more than 30,000 jobs per month, according to Bob Livonius, CEO of Medfinders, formerly Nursefinders.

“The slowdown is significant, but the fact that [the health care industry is] still growing is a good thing,” Livonius says. “That means this is a place where people can still find employment.”

The number of hospital workers decreased by 700 in March, Livonius says, but that’s less than one-tenth of a percent of the total workforce, he points out.

“Seven hundred people is pretty insignificant,” he says. “We don’t believe those were clinical positions.”

Challenges
One of the challenges health care staffing faces is that people are losing their jobs, and therefore their health insurance, so they’re going to the doctor less, says Mark Stagen, CEO of Marina del Rey, California-based Emerald Health Services.

Another challenge is that hospitals are cutting back on temporary workers because their revenue is down, Stagen says.

“They can’t issue bonds or borrow money. Their endowments are down significantly. Endowments usually account for a big chunk of their budget,” he says.

Boshart says hospitals have hit the wall because of the credit crisis.

“Hospitals are seeing a fourfold increase in interest rates and thus interest cost to finance short-term liquidity,” he says. “That’s a new variable we’ve never dealt with before.”

Also hurting revenue is a lack of adequate reimbursement compared to expenses, says Andrea Boehme-Hernandez, president and CEO of North Carolina-based Medstaff.

“Reimbursement can put a strain on the hospital itself, and that can cause them difficulty in having the ability to bring more doctors in,” she says. “That means the existing doctors have to take on more patients.”

Boehme-Hernandez has retained existing clients because of longstanding histories with them, but adding new clients has been hard.

“New business development is slow,” she says.

Companies involved in nurse staffing are switching to allied staffing because it’s performing better, says Jeff Bowling, CEO of the Delta Cos. Also, many non-health care staffing companies are considering the allied and locum spaces, Bowling says.

“They’ll be in and out of the allied space before we know it,” he says. “The locum space is such a different animal than travel or per diem; we’re afraid they’re going to leave the customer with a bad taste in their mouth in the long term. We’re concerned about what it’s going to do to insurance rates down the road, to the image or the brand of locum tenens.

“Not to our brand, but to the industry’s image. It’s not as easy as it looks. People see the growth and the margins and they run to it, but it’s very complex and risky.”

Now more than ever, says David Baldridge, president of CompHealth’s locum tenens division, hospitals are looking at how they’re spending money.

“Everyone is looking at costs and figuring out how to manage them,” he says. “All costs need to be scrutinized. Everything has to go through a much more rigorous approval process. There’s more scrutiny on [whether] you need to bring on another locum tenens physician. A locum tenens physician is a revenue generator and will offset expenses.”

Peter Dameris, CEO of Calabasas, California-based On Assignment, says nurses are asking for more hours, and some retired nurses are seeking to rejoin the workforce.

“They had retired thinking they were OK [financially],” he says. “Now they’re thinking they should go back to work. Nurses are willing to work for less because there are fewer opportunities, and they want to work. Supply has increased; demand has dropped. That means more nurses are willing to work for a different price than they were just three or four months ago.”

Still growing, but at a slower rate
Health care staffing companies have still been able to grow in these difficult economic times but at a slower rate than the past. Delta Cos., which generated $55 million in 2008, expects its revenue to reach $70 million this year, Bowling says.

While 25 percent growth is good, it’s not anywhere near the on-average 60 percent growth the company has experienced the past five years. Delta has continued to grow because it’s focused on the allied and physician space and not nursing.

“Job orders are down, even for us—less so in locums than allied,” Bowling says, noting that he hired 45 internal staff companywide between January and April, bringing the total to 245. “We’re working harder to have the same level of growth, the same level of revenue.”

Jackson Healthcare expects revenue to grow 10 to 15 percent this year, down from the 20 to 30 percent growth it experienced in previous years.

Jackson says it’s the most challenging time he’s experienced in his 30 years of health care staffing.

“It was the most difficult year to budget because of the uncertainty,” he explains.

Yet Jackson Healthcare continues to beef up its staff. The company—which started off the year with 500 people—added 120 people between January and April but also lost 20 people due to turnover, so now it has 600 people on its staff, Jackson says.

Medstaff’s Boehme-Hernandez is hoping for 10 percent revenue growth this year, whereas last year she had 29 percent growth.

“We’ll be flat or a little better. There is no projection showing us declining. We’re not showing any projections of loss.”

David Alexander, CEO of Atlanta-based Soliant, is hoping for 2 to 7 percent growth this year, smaller than what his company experienced in the past.

Diversification, niches key to success
Health care staffing companies have found diversification or having a niche to be beneficial, especially in tough economic times. Alexander says his company is diversified in terms of both sectors it staffs and its client base.

The majority of Soliant’s business comes from allied and pharmacy staffing, which are strong. Just 33 percent of Soliant’s business comes from nurse staffing. Soliant’s largest client also accounts for just 3.5 percent of the company’s overall business.

Kathleen Gilmartin, CEO of Sunrise, Florida-based Interim Healthcare, says her company is growing because the majority of its business is generated from home health care. About 85 percent of her business comes from home health care, while the remaining 15 percent comes from health care staffing.

“It makes us more balanced,” Gilmartin says. “We’re not so vulnerable as a company. When staffing is on the decline, home health care is doing well. We enjoy that balance in our lines of business. If we had all our eggs in one basket, we’d definitely be feeling differently.”

Interim’s goal is to have double-digit growth this year, but Gilmartin would be happy if the health care staffing part of her business winds up flat.

“It’s a tight year for staffing,” she says.

TeamStaff has been able to weather the downturn because it has a division providing health care and logistical staffing to the federal government, says CEO Rick Filippelli.

“We see strong demand continuing,” he says. “You have more veterans returning, as people are pulled out of the Middle East.”

Don Mooney, president and CEO of Nurses Etc. Staffing in Universal City, Texas, says his company also has succeeded by focusing on the government sector.

“I think this is one of our best years. We’ve got some good people in place,” Mooney says. “That’s one of the reasons why. San Antonio is still a good market. We’re slow to get hit by any surge or downswing.

“San Antonio still has a large military contingency. The Air Force and the Army are consolidating down here. They’re spending about $2 billion to $3 billion. I’m busy writing proposals. It’s just hot. If you know what you’re doing and are good at it, if you’re small and nimble and don’t create too much overhead, you’ll do well.”

Stimulus should boost health care
The Obama economic stimulus package contains $59 billion for health care, of which more than $20 billion will be allocated to health information technology and the creation of electronic medical records.

“Hospitals usually have backlogs of medical records, and that impacts their revenue,” explains Kristin Ellis, president of Kforce’s health and life sciences division. “There’s a more manual process. Now there’s money flowing to them to give them financial incentive to migrate their records as quickly as possible. It automates the payment cycles of hospitals. Some hospitals are more automated than others, but there aren’t many that are fully automated today.”

The stimulus package also allocates $500 million to nursing and professional training, and of that, $200 million will be dedicated specifically to health professional and nurse development programs, says Medfinders’ Livonius.

“This is good news for health care staffing,” he says. “It means federal regulators are recognizing the importance of funding for education and building our own workforce versus going outside the country to get workers.”

The stimulus package also helps workers who lost their jobs by having the government pick up 65 percent of the cost of their COBRA health insurance premiums for up to nine months.

“People don’t sign up for COBRA because it’s too expensive,” Livonius says.

On Assignment’s Dameris says the stimulus package will provide states with the money they need to pay hospitals.

“There’s funding that goes to the states so they can pay the hospitals. This will allow them to be able to get back to normal staffing levels,” Dameris says. “It’s a liquidity event for many states so they can fund their health care programs. Much of this money is not creating new business. It’s just providing capital so people can pay for their existing operation and run their businesses as if they’re not going to run out of money. Do I think it’s going to stimulate the economy? No.”

Emerald Health’s Stagen thinks the stimulus package will be beneficial in the long run, but he doesn’t see an immediate impact.

“Money takes a long time to filter through the system,” he says. “It takes a long time for states to get money, and then the hospitals do. In general, it’s all positive—long term. I just don’t see any of it happening quickly. Hospitals are going to have more money, which is a good thing because they’re our clients.”

Although the recession is taking a toll on health care staffing, those in the industry know business eventually will improve.

“Ultimately, it’s a good industry to be in,” Boehme-Hernandez says.

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