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 trends, Healthcare Staffing, Medical Staffing Software, VMS, MSP

Daily Pay a "Taxing" Issue

Posted by Tim Teague on Fri, Jan 24, 2014 @ 11:49 AM

describe the imageCompanies often claim that their employees are their greatest assets. In the world of temporary staffing, aside from existing contracts and operations, nothing could be closer to the truth. Human capital is the currency of staffing firms, and needs are constantly changing to provide the best possible experience for the temp worker.

One of the debates in the staffing world is the flexibility of pay periods provided to the workforce. One aspect of this debate is the cost-to-benefit analysis of providing daily pay for temporary workers. The question that is most frequently heard, is, "will the fact that I am not offering daily pay adversely affect my recruiting efforts, and if so, will it do so to an extent that surpasses the additional costs associated with implementation?" An early assumption of this question was the notion that as socio-economic demographics move downward (i.e. pay scale), payroll cycles must increase from bi-weekly, to weekly, and then to daily. Companies that have elected not to offer daily pay options due to their higher-paid temp workers are potentially making a recruiting error. In an era when debit cards, EFTs, ACHs and direct deposits have become the norm, daily pay can become an expected benefit for the temp worker.

If in fact daily pay is determined to be a market differentiator, the obstacle has historically been the back-office consequences of attempting to process pay in 24-hour increments. The largest obstacle in daily pay typically begins and ends with the onerous calculation and accounting for taxes in anything less than a one-week pay period. Most of the larger payroll processing companies are not designed to facilitate daily payrolls. From a sheer processing standpoint, this makes perfect sense. Imagine the scope of multiplying the pay and tax calculations for every client up to five times each week with the corresponding tracking and calculations for overtime for cumulative tax deposits!

Fortunately today, through technology, there are low-cost methods available to manage daily payroll without causing havoc with the existing payroll provider. Low-cost subscriptions are available that will calculate taxes on a day-to-day basis and then push that accumulated data directly into the weekly or bi-weekly payroll format. These subscriptions not only integrate with existing payroll systems, but are granular enough to provide exact tax rates to the geo-coded employee residence or workplace.

Another benefit to such functionality is the ability to directly populate "cash cards" or other deposit mechanisms for the best possible candidate experience. If your firm has been hesitant to offer daily pay due to operational concerns, check out the newer low-cost benefits of daily pay technology.

Tags: Medical Staffing Software, Daily Pay, Tax Calculations, Temporary Workforce, Payroll Processing

BlueSky's SMS Solution

Posted by Doug Word on Fri, Aug 30, 2013 @ 09:31 AM

Ever had a job to fill but wondered what the best way was to get the message out quickly to your candidates?

describe the imageShort Message Service (SMS) text messaging is one of the fastest and most effective ways to reach your caregivers, and it yields a very high "read rate," meaning you are literally "getting the message out" to the candidates you want to place.

SMS allows your agency to reach its selected caregivers with new shifts instantly, and you can connect with them at any time of day.

Once you receive a response confirming a shift it comes directly to your email address, enabling you to make on-the-spot decisions about which caregiver to place for an open job. All of this is typically executed in a brief amount of time without either party ever having to pick up the phone and make a call.

The way it works in BlueSky:
In BlueSky, you can designate a company user to manage your SMS messages (both outgoing and incoming). Be sure the caregivers you are texting have a cell phone in your system records. Keep in mind that our system will not send a message to a home telephone number. From here, just type in your message with all relevant details, and fire it off to the group of caregivers you want to include. It's that easy!

describe the image

Each caregiver will receive all of the information you enter, along with a special code and simple instructions on how to respond to the opening.

You can even go back into each caregiver's record, and a note will appear reminding you that the message was sent along with the date, time and any other relevant information.

Ready to experience positive change with BlueSky Medical Staffing Software? Our goal is to save you time and money by housing all of your credentialing, scheduling and caregiver documentation in one easy-to-access location. You can count on our experts to provide answers to all of your burning questions. Call us at 615-349-1985 to schedule a demo, or email us at support@bluesky.com.

Tags: BlueSky, healthcare staffing software, BlueSky MSS, Medical Staffing Software, SMS, Text Messaging, Caregivers

BlueSky's Global Cash Card Integration

Posted by Doug Word on Tue, Aug 27, 2013 @ 03:16 PM

GCCThese are exciting times here at BlueSky. At this year's Healthcare Staffing Summit in Chicago we will unveil a long-awaited feature: an integration with Global Cash Card! Be sure to stop by and visit us in Booth No. 101 for a live demo! We are thrilled to share this seamless enhancement with our loyal customers.

What is Global Cash Card?
Global Cash Card is a paycard program designed to make payroll and invoicing much more convenient for your company and employees. It essentially takes the place of a paper check.

Global Cash Card is ideal for daily pay, because it loads funds electronically onto the card, effectively bypassing paperwork and paper checks as well as their costs. It also works great for travel assignments, because the caregiver will no longer have to visit his or her branch office to pick up a check.

Find out more here: GlobalCashCard.com.

How will it work?
The employee will have his or her compensation loaded onto a paycard, which looks like a standard credit, debit or gift card. Equipped with top-notch security, the card funds are FDIC insured and 100 percent paperless. The card will get funded after you run payroll, and the caregiver's net pay will load.

When will it be ready?
BlueSky will unveil this feature at the 2013 Healthcare Staffing Summit in Chicago. If you haven't signed up yet be sure to do so here. You don't want to miss this!

Ready to experience positive change with BlueSky Medical Staffing Software? Our goal is to save you time and money by housing all of your credentialing, scheduling and caregiver documentation in one easy-to-access location. You can count on our experts to provide answers to all of your burning questions. Call us at 615-349-1985 to schedule a demo, or email us at support@bluesky.com.

Tags: Healthcare, Global Cash Card, BlueSky MSS, Healthcare Staffing, Medical Staffing Software

Live Demo

Subscribe via Email

Latest Posts

Follow Me

Most Popular Posts