Tim Teague

Recent Posts

MSP/VMS in Healthcare Staffing: How it affects the industry

Posted by Tim Teague on Mon, Nov 20, 2017 @ 05:48 PM

As a follow up from my prior blog, “The Incestuous Nature of Healthcare Staffing VMS/MSP", I thought it may be instructive to dig a little deeper into the real-world consequences of this growing model. This blog will hopefully help the
reader decide if this practice is in fact a zero sum game. It is critical to measure the considerations of both the candidates being placed around the country, and the temporary staffing firms subcontracting their talent through these arrangements.

This focuses on three areas of the staffing industry and how they are impacted by VMS/MSP proliferation.

1. Direct Impact on the “Supply Side” – Agency Affiliation with the MSP

The first item concerns the agency affiliation through the various Managed Service Providers (MSP's). This is a two-edged sword. Acquisition of new clients is one of the most expensive and time-consuming activities of a staffing firm. Since most MSP's hold contracts with multiple clients, the temp firm connecting with the MSP can, by proxy, provide candidates to the hospital client. This assumption is based on the MSP “clearing” the agency to connect. Most MSP's are interested in leveraging their reach to candidates, as clients are always mindful of the “fill rates” provided by the MSP.

The downside to this is firms that previously had agreements with the client hospital no longer can communicate or negotiate with the client. The fees charged for these pass-through invoices can also be a downside. A benefit to this arrangement is smaller staffing firms can leverage the MSP’s to indirectly work with clients they may never have acquired. There has been an uptick of staffing start-ups devoted to utilizing the MSP model to pass through candidates. However, many times they find they are placed in a lower “tier” for job releases, as they do not have the database of candidates the larger firms enjoy.

2. Direct Impact on the “Demand Side” – Hospital Engagement

The second item of interest is demand, or, the orders for talent requested. The client advantage is “one-click” distribution of requests is pushed to dozens of available vendors. What used to take non-stop phone messaging and communication now becomes a one-stop-shop. This funneling of orders through a broadcast network is an efficient model for maximizing fill rates. Many of these VMS platforms have been around for years and hospitals are very familiar with their execution. Many in the industry have complained that since many in the staffing world are paid on commission, the orders that come through the system could be “cherry picked”. Recent lawsuits have brought that into question including claims that candidates coming through the system are poached. This will ultimately be a question for the courts to decide.

3. Direct Impact on the Financial Outcomes of Subcontracting Agencies

The final item of discussion is the financial impact of the MSP model. The fees that
are associated with the MSP model are in some ways similar to the percentages that
agencies are charged for their workers compensation coverage with one major difference. The insurance fees are usually calculated as percentages of actual payrolls, whereas the VMS fees are applied to the gross revenue generated. The MSP fees are calculated for each invoice and are subtracted from the gross.

On the surface, it seems like a pretty fair percentage considering the time and effort required to acquire a new client. The basic accounting principals for staffing firms has not changed since its inception. The gross margin is the amount that is left after all labor costs for the temp staff have been calculated (i.e. a bill rate of $100 with total costs of labor at $75 will yield a gross margin of $25, or 25%). Examining the financials of the largest staffing firms in the industry show gross margins anywhere from 25% to as much as 32%. Overhead (office staff, rent, supplies, etc.) for these firms can run from 8% to 12% of total revenue. Smaller companies may not enjoy the economies of scale of larger companies, and are also tied to a bill rate they did not negotiate with the hospital.

If a smaller company with fewer resources can only manage a margin of 25%, along with operating expenses of 15%, their profit as a percentage of revenue might only be 10%, calculated as Billing Total – Cost of Labor – Overhead. If vendor management fees are pulled out of revenue at 5%, earnings are now cut in half, with VMS fees taking 50% of profit! This is probably a worst-case scenario, but it not unusual for VMS fees to take as much as 33% of earnings. (To calculate the amount your company is currently losing to VMS Fees, click here.)

Considering the impact to profit, and working against fixed billing rates, the agencies only have two choices to recover profit levels; cut overhead, or cut temp labor pay. Cutting the wages of the temp workers to offset the impact of the VMS fees creates an invitation for the temp workers to move to greener pastures. In the MSP world, it makes sense that higher pay rates should be available at those agencies that do not have to pay those fees, hence the big sucking sound of candidates moving to the agencies holding the MSP contracts who do not pay those fees.

It will be interesting to see how the market evolves over the next few years within this paradigm.


BlueSky Medical Staffing Software and VMS was built for the healthcare contingent staffing industry and allows agencies to streamline and automate their entire process, while simultaneously reducing speed to market, ensuring higher quality placements, and helping you get the right people at the right time. Ready to become your own MSP with BlueSky's VMS? Request a demo today.

Tags: Healthcare Staffing, Medical Staffing Software, VMS, MSP, healthcare staffing trends

The Incestuous Nature of Healthcare Staffing VMS/MSP

Posted by Tim Teague on Thu, Jan 12, 2017 @ 08:40 AM

handshake pic.jpgManaged Service Providers (MSP) utilizing Vendor Management Systems (VMS) or Workforce Management Systems have been a part of U.S. commerce for decades, starting with Ford Motor Company and moving across all market verticals.

These systems can provide operational and financial efficiencies unavailable to firms not deploying their utilization. The need for a MSP can grow when demand for services exceeds supply. The U.S. nursing shortage is case in point. The ability to aggregate as many possible vendors for human capital is a great advantage of this system. The “fill rate”, or ability to reduce hospital vacancies assists the hospital in   revenue generation, adequate staffing ratios, and relief from some of the “fixed-costs” associated with full-time employees. When supply is scarce and demand is high, aggregating as many vendors as possible with uniform terms and conditions is the most effective model.

Without such systems in place, the time required to manage, pay, and orchestrate labor demands while working independently with a large vendor pool is expensive and inefficient. This is where operational efficiencies of MSPs are most valuable. Leveraging multiple vendors on one side of the MSP, but communicating singularly on the other side for hospital management. The larger number of vendors funneled through the MSP mathematically increases the odds of meeting the high demand of healthcare workers.  

Financial leverage can be realized as contract talks can be standardized across all vendors. Standardizing rates simplifies financial planning for the client. Spreading demand across multiple vendors provides pricing leverage that can’t be realized working with one supplier at a time.

The healthcare industry has been a late adopter of human capital managed services, but has long used GPOs (Group Purchasing Organizations) for supplies such as durable medical equipment. 

One of the first start-ups to engage the contract labor spend of hospitals in the US was Shiftwise. Shiftwise was created in 2003 in Portland, Oregon and was originally known as Origin, Inc.

A later player to the game was Hospital Corporation of America, a for-profit system. HCA has long known the value of managed services and has utilized HealthTrust purchasing group since 1999. In 2011, HCA launched Parallon, another subsidiary designed to offer workforce management solutions throughout its expansive network of hospitals. In 2016, Parallon rebranded its workforce management solution to better identify with HCA’s original GPO subsidiary, and is now known as HealthTrust Workforce Solutions.

FocusOne Solutions is another provider in the VMS/MSP space serving hospitals for several years. FocusOne Solutions is a sister-company to Aureus Medical Group, one of the nation’s largest healthcare staffing firms with more than 30 years of experience.

Medefis, yet another provider of hospital vendor management solutions, also founded in 2003, owns significant market share.

Although there are several other vendors for vendor management and workforce solutions, the companies listed above comprise over half the agreements in the healthcare staffing world.

What is the “incestuous nature” of these companies? To explain, it is important to understand in simple terms the relationship a VMS/MSP provider has with the hospital.
  1. The VMS/MSP is the sole gatekeeper for any agency that wishes to do business with the hospital.
  2. The hospital is typically forbidden to work with individual vendors; as such vendors must only work through the VMS/MSP provider.
  3. Every staffing firm is 100% dependent on the VMS/MSP to provide their services.
  4. The VMS/MSP is repository for all staffing orders, and is the first to receive all orders for labor across the system.
The recent spate of acquisitions of VMS/MSP vendors by staffing firms presents an interesting question. Why would a healthcare staffing firm have a desire to get into the VMS software business? A review of the aforesaid four items holds the key and prompts further questioning. Who owns whom? What does vendor neutrality mean?

Let’s take a closer look at the companies we’ve previously mentioned.

HealthTrust Workforce Solutions – If you are a staffing agency wanting to provide services to a HCA hospital, get ready to go through HealthTrust.  HCA brilliantly put this together in-house as a cost reduction and operations reduction play.

Shiftwise – As one of the early software solutions in the Healthcare space, Shiftwise accumulated hundreds of contracts with hospitals across the country. In a brilliant move, AMN purchased them in late 2013.

MedefisThis company was founded in 2003 and had acquired many contracts, specifically in the healthcare staffing space. As such, Medefis became a strategic target of AMN and was purchased in 2015.

FocusOne Solutions – This Omaha Nebraska firm is also a VMS/MSP driving contracts in the healthcare staffing space. They are a sister company to Aureus Medical Group, one of the nation’s largest healthcare staffing firms.

Now, back to “vendor neutrality.” When the VMS/MSP providers have no affiliation with staffing firms, their sole responsibility is to provide seamless transactions between the hospital client and all subcontracted vendors. Now that the largest staffing firms have acquired these popular systems they in essence “own” every order that is generated by the hospital client. There is speculation, but no proof that these staffing firms are taking advantage of having total access to every order before any other company “sees” these opportunities. True transparency would be the simultaneous release of all orders to all vendors including the staffing firm that owns the VMS/MSP. 

It is an interesting exercise to review how revenues have grown or diminished since the largest healthcare staffing firm in the United States, AMN, has made their acquisitions.

According to Harris Williams & Co., a research and M & A firm, the healthcare staffing industry was expected to finish 2016 with approximately 7% in growth year over year. This follows several prior years of single digit growth.

Considering single digit growth in the industry AMN healthcare has provided the following staffing revenue increases, both prior to, and then after VMS/MSP purchases.

  • 2011 to 2012   7.5%
  • 2012 to 2013  6.1%
  • 2013 to 2014  2.4%
  • 2014 to 2015  41%
  • 2016 QTR 3 To date 33%

If the entire market is growing at around 7%, and AMN is growing at 30% to 40%, it might be inferred that the pie is getting smaller for all other staffing agencies in this space. An argument can be made that this growth can be attributed to acquisitions, or sheer management superiority. The reader will have to be the judge.

The good news is that staffing firms that have been “blocked” from direct access to these clients can now present their own VMS/MSP solutions to compete head to head with the largest in the industry. A sea change is coming in this industry, and it will be driven by technology.

BlueSky Medical Staffing Software Unleashes Industry-Leading Pay Package Tools in Version 5.3

Posted by Tim Teague on Wed, Aug 03, 2016 @ 10:40 PM

Nashville, TN - Aug. 3, 2016 - Industry leading software unveils its highly anticipated version featuring its groundbreaking margin calculator and advanced pay-package along with even more features

Bringing 10 years of industry experience to their latest update, Bluundefined-586896-edited.jpgeSky Medical Staffing Software releases its most advanced tools for recruiters and finance managers in the healthcare staffing industry.

As an ongoing business practice, BlueSky monitors feedback from clients and continually adds and enhances features needed in the healthcare staffing market. For the latest version, Tim Teague, BlueSky CEO and President, commented.

“In today’s healthcare staffing industry, speed to market has become a differentiator for our clients. Recruiters must be able to construct a complete pay package while on the phone with a candidate. This new system provides a quick analysis of every combination of pay rates, non-taxable payments, along with actual candidate take-home pay. The significance of this product is the underlying burden tables that automatically calculate state-by-state workers compensation, unemployment insurance, and other more granular expenses associated with any assignment. This frees the recruiter to submit candidates without the worry of margins that haven’t been carefully scrutinized automatically. The system can fix the margin and allow the recruiter to toggle back and forth with the pay rate and travel stipends, or let the margin “float” while different packages are presented. This new technology assures the recruiter of extremely accurate margins, and protects the organization from inconsistent profit from state to state.”

 BlueSky is aware that more than ever before, healthcare workers and clinicians have more choices that ever. The ability to provide accurate and fast offers to these candidates is a game changer in this very competitive environment.

Version 5.3, which includes the newest margin calculator and pay package, will be released August 11, 2016. Significant testing of the new version has been underway for last several months. New clients may take advantage of reduced fees through the first two months after the product launch. (August-September).

To take advantage of this reduced offer window, and to experience this innovative new version, please contact Polina Sologub at 615-349-1985 ext. 714.

Tags: margins in healthcare staffing, Gross Margin

Will Affordable Care Act Ultimately Result in Greater Contract Labor?

Posted by Tim Teague on Tue, Jun 21, 2016 @ 02:32 PM

Two of the driving tenets of the Affordable Care Act are the push for better patient outcomes and reduction of costs. Since labor spend accounts for the largest percentage of acute care expense, it is a prime target for cost cutting.


This presents a conundrum for the hospital. How to cut labor costs while improving the quality of care (decreased re-admission rates).  A corollary to this dilemma has been the “just-in-time” staffing models the industry has used for years.  The difference is while a manufacturer can judge work in process by the amount of incoming orders, the healthcare industry has not been able to predict the number of orders (average length of stay) in a reliable manner.


Peter Drucker, foremost business analyst declared just before his death in 2005 that “increasing the productivity of knowledge workers was the most important contribution management needs to make in the 21st century.” The question here is how can data be used to transform the healthcare industry to both decrease costs and improve quality?


The answer is equal parts simple and complex. There is enough historical data from millions of hospital admissions across the country to fine-tune a census model that provides extremely accurate daily figures for a unit-by-unit count. Several firms have been working on the analysis of these figures for years. In the same way the electronic medical records have grudgingly made their way into our healthcare system, strategic census models will soon be the norm.


When this data becomes granular for hospital systems, the current models for large scale census predictors will become extinct.  This new model for just-in-time staffing will finally provide a day-to-day, week-to-week picture of labor needs. Fine tuning the levels of FTE’s will become better, and non-fixed-cost labor will boom.

Tags: Affordable Care Act, Affordable Healthcare Act, Contract Labor, staffing, Staffing Agency

Donald Trump and Affordable Care

Posted by Tim Teague on Fri, Jun 03, 2016 @ 03:37 PM

Donald Trump and Affordable Care Act


As Donald Trump moves closer to becoming the Republican’s presidential candidate in the general election, there are new ramblings of what he would do to Obamacare if elected. Many arguments have been made against the continuance of this growing governmental entity, but odds are the ACA has already “left the station”, never to be diminished or ended. The last battles are likely to be held in state legislatures where expansion of Medicaid and State sponsored exchanges are still in flux. A particularly interesting outcome will be the Commonwealth of Kentucky where a recently elected Republican governor has vowed to dismantle and discontinue a well-entrenched statewide exchange that had been operating for years.


If history is to be repeated, the Affordable Care Act is here to stay, and massive changes to its structure are very doubtful. Let’s take a quick look at what was said in the 60’s when Medicare, a similarly tagged national health plan was proposed.


Ronald Reagan: “[I]f you don’t [stop Medicare] and I don’t do it, one of these days you and I are going to spend our sunset years telling our children and our children’s children what it once was like in America when men were free.” [1961]

George H.W. Bush: Described Medicare in 1964 as “socialized medicine.” [1964]

Barry Goldwater: “Having given our pensioners their medical care in kind, why not food baskets, why not public housing accommodations, why not vacation resorts, why not a ration of cigarettes for those who smoke and of beer for those who drink.” [1964]

Bob Dole: In 1996, while running for the Presidency, Dole openly bragged that he was one of 12 House members who voted against creating Medicare in 1965. “I was there, fighting the fight, voting against Medicare . . . because we knew it wouldn’t work in 1965.” [1965]


If these arguments sound familiar, so will the likely outcome of the more recent protests against the ACA. In a period when both major parties are struggling to figure out who their constituencies really are, odds are the Affordable Care Act will just keep lumbering along.


Good news for those seeing increased healthcare dollars expanding their business, but not necessarily for those desiring less government intervention.

What are you writing about today?

Tags: Affordable Care Act, Healthcare, health

Live Demo

Subscribe via Email

Latest Posts

Follow Me

Most Popular Posts