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Healthcare Staffing Firms Consolidate for Efficiency

With the passing of healthcare reform and a continued alignment toward clinical integration, the medical provider community is looking for new alternatives that will keep it ahead of the curve. Despite surrounding changes, health systems, medical groups and hospitals are experiencing a boom in consolidation mergers and other transactions that were not previously available. As a result of these trends, the medical community is expecting a permanent change within the industry.

Following this pattern is healthcare staffing firms as consolidation within this industry is also seeing an upswing. Efficiency is the motivating factor as staffing firms position themselves to capitalize on the predicted demand and changes in the medical field. With the cost of labor still reigning as the largest segment of expenditures at most medical facilities, firms recognize that operating within a leaner business model gives them more flexibility to deliver benefits.

How Consolidation Benefits Staffing Clients and Firms

Consolidating operations allow healthcare staffing firms to offer clients:

  • Real-time data analysis and customized reports for strategic staffing plans
  • Consistent skills matching, credentialing and compliance for quality performance improvements
  • Faster responses to client orders, which lead to fewer vacancies and better service to patients

At the same time, healthcare staffing firms also benefit from consolidation through:

  • Efficient operations due to the sharing of specialized resources and determining the optimal mix of office staff and temporary personnel
  • Web-based technologies to automate office functions such as invoicing and payroll data
  • Coordinated efforts of staff ordering, training, orientation and tracking
  • Improved retention to core staff and patient experience when clinical staffing requirements are met in a timely manner

Efficiency Gains from Horizontal Mergers

Horizontal mergers are defined as business consolidation that occurs between two or more companies in the same industry. Healthcare staffing remains a highly competitive industry, but that has not stopped some firms from taking advantage of a merger opportunity. Although horizontal mergers are more common within industries that have fewer firms operating, healthcare staffing firms are finding strength in numbers. Where one firm holds a strong position, consolidating with another firm actually makes both firms stronger and capable of meeting the growing demands of healthcare services.

Efficiency gains are important within the healthcare staffing industry for several reasons. With rapidly changing business conditions as a result of healthcare reform, staffing firms must adapt to industry changes. Consolidating into a small firm can help healthcare staffing firms focus on innovative efficiencies that benefit them and their clients. Depending on the geographic location, some firms can improve 100 percent even when unemployment remains high in the area.

Being committed to enhancing systems, processes and procedural infrastructure plays a large part in having an effective merger. Staffing firms can also run more efficient operations by taking advantage of the latest technologies that allow them to compete with larger firms.

In many cases, healthcare staffing firms can realize multimillion dollar revenues with efficient operations resulting from consolidation. Instead of expending most of their energy trying to take clients away from other firms, time and resources are invested into maximizing a resourceful firm.

Execute a Growth Strategy Through Acquisition

Consolidating helps to strengthen growth strategies as firms have more capital to implement small and ambitious goals. The healthcare staffing industry boasts billions of dollars in revenues even though much of this sector remains fragmented. While some might see this as a negative, this fragmentation presents a unique opportunity for well-capitalized firms to benefit from consolidation trends.

Acquiring a healthcare staffing firm for efficiency also creates a growth strategy opportunity that might not otherwise exist. During the initial cycle after consolidating, the staffing firm may focus on gathering data about their clients' perspective. The purpose is to learn where the firm is currently failing in service offerings. Responses should highlight how clients are hurting from the firm's deficits. In addition, staffing firms will have an efficient back-office operation as functions are centralized and focused on key internal staff and candidates for clients.

A valid approach to collecting unbiased data is to use an outside marketing company. Such firms will not only collect the data, but will also generate written reports that contain valid and reliable recommendations. Firms can use the reports to develop strategic plans to innovate services.

For the next cycle, healthcare staffing firms can begin the creation and implementation of innovative services. Knowing what clients desire will guide the development and execution of a growth strategy. Some firms may find that testing program changes in a controlled environment works best.

Following the test, study results are used to determine if proposed changes will be accepted. If so, changes are accepted and adopted on a company-wide basis. For changes that are rejected, the firm can go back to the planning stage.

Of course, there are times when consolidated staffing firms are content with adopting existing practices in one firm or the other. In other cases, acquired firms continue to operate independently with no change. This is most likely to happen when marketing research shows that certain practices are good for a specific geographical location.

Still, executing a growth strategy may largely depend on making an investment into addressing the diverse needs of clients. Options available to medical facilities are unique based on those needs. Expansion solutions for the firm are dictated by what is most important to the medical facility client.

For the most part, healthcare staffing firms will benefit from general improvements even as medical services undergo transitions with the healthcare law. Consolidation only strengthens their position to implement strategic objectives that allow growth and profitability.

As 2013 ended with a number of transactions among firms, this year is positioned to continue the trend towards consolidating to serve the growing number of healthcare beneficiaries. One example of this is the third largest healthcare staffing firm in the U.S. acquired a national healthcare executive firm to add to its five percent market share. Small industry players were also acquiring multiple firms that will go a long way to changing the industry's fragmented state.

Other examples include healthcare staffing firms that decide to beef up core functions such as healthcare IT and physician staffing divisions. Travel nurse divisions, which have been in existence for many years to fill nursing shortages, are also undergoing transitional changes as more firms merge. The need to scale to seize opportunities and maintain profitable revenues will encourage more consolidation for the healthcare staffing industry.

Consolidation Trends in Recent Years

The healthcare staffing industry has been moving towards consolidation trends for the past few years. Rather than expand existing firms, larger players have been searching for acquisitions in areas where they do not have a strong presence. Smaller healthcare staffing firms that cater to niche markets such as single group practices or local hospitals are attractive to larger firms.

Likewise, small or medium staffing firms are combining efforts to improve their standing and ability to meet the growing demand in healthcare services. Even hiring in the healthcare industry is moving towards unconventional ways of hiring personnel. The healthcare staffing firm that runs an efficient operation will be able to fill fragmented areas that increase their geographical reach. A broader strategic interest is on the horizon for the market, which means potential future growth in the healthcare staffing industry.