+ 1-615-349-1985

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

Customize your VMS Portals

Posted by Tim Teague on Mon, Jul 20, 2015 @ 11:03 AM

Today, businesses require customizable and efficient workflow, especially for healthcare-staffing VMS portals.

The early days of the VMS/MSP penetration into the healthcare staffing industry, thfeatures-news1e choices were pretty vanilla. While purchasing departments had been using the process for everything from syringes to bed linens, the management of outsourced personnel was slower to catch on. Much of the hesitation was the minimal amount of documentation available in most systems for the extensive list of credentials, work histories and any Joint Commission required documentation.

Early examples of the system were simple pass-throughs of time and attendance with minimal information regarding the actual temp. The acquisition of a commodity such as syringes could be easily identified with a few required specifications. The number of requirements for personnel, however, was so complex that part of the process was usually handled outside the VMS application.

As the industry has become more sophisticated, most of the criteria for personnel have been added to the applications via portals that are viewable at the client end.

BlueSky has taken this one step further to allow subcontractors to “customize” their portal, and even allow for the end client to customize their portal to look and feel the way they want.  Although BlueSky provides a simple plug-and-play template for the VMS application, there are actually over 2,100 variable permissions that may be customized to better meet the client, or subcontractors’ needs.

Tags: VMS, MSP, hospital float pool,

How Flexible is your MSP / VMS?

Posted by Tim Teague on Wed, Mar 20, 2013 @ 12:40 PM

MSPVMSLinkI recently attended a seminar that included topics on how to maximize the value of an MSP/VMS relationship. One of the most interesting take-aways from the meeting was the examination of what were the best as well as worst attributes of most MSP/VMS systems. Not surprisingly, the most valuable asset an MSP/VMS provides is uniformity of supply. Automating the ability to find the greatest number of qualified candidates at uniform rates and uniform competencies. On the negative side of MSP/VMS systems, the uniformity issue was also identified as it’s major weakness!

In the world of supply-chain logistics, there will always be a significant difference in the acquisition of durable medical supplies versus the onboarding of real live humans!  It is at the point of order-entry that most problems seem to occur. Unlike the quality or cost of a needle or syringe or scrubs, the human requesting another human in the delivery of care wants more of a voice in the interaction.

It seems this desired “voice” takes several forms. In a pure supply and demand environment, compliance is about making all pieces of the supply criteria perfectly match components of the need that is demanded. Human interaction may too often be limited to the dry components that establish the requested profile. Understanding the need for human interaction, automated supply-chain vendors are working to allow for the “human touch” in the staffing world.

Making end-user portals configurable to best simulate preferred candidate retrieval and profile acquisition is a big step toward better integration.  Just as no two people will drive a car the exact same way, there are extensive variables in how two different people manage exposure and selection of desired candidates.  The inability to account for differences in process is a sure way to doom an MSP/VMS to lack of compliance.

Tags: BlueSky Medical Staffing Software, healthcare recruiting and staffing software, healthcare industry, BlueSky, healthcare staffing industry, Healthcare, healthcare staffing and recruiting software, healthcare scheduling software, healthcare staffing software, healthcare staffing agency, healthcare staffing credentialing, healthcare staffing trends, hiring for healthcare staffing agencies, healthcare scheduling, Staffing Agency, Staffing Industry, staffing software, healthcare recruiting, healthcare hiring, healthcare staffing payroll, VMS, MSP

Live Demo

Subscribe via Email

Latest Posts

Follow Me

Most Popular Posts