Why Small Healthcare Staffing Firms Should Take a Stand on VMS/MSP

business stanceRecently I have seen considerable ink dedicated to promoting the merits of VMS/MSP programs. Perhaps it is time to change the discussion to a more realistic view from the perspective of small to midsize agencies struggling with the challenges of today’s business climate.

As a co-founder of the National Healthcare Staffing Alliance (dedicated to the interests of small to midsize healthcare staffing agencies nationwide), I have had countless conversations with owners and operators over the last few, very difficult years, and the message is always the same: VMS/MSP companies pose many challenges for this industry, not the least of which include rate suppression, wage suppression, margin deterioration and a host of other ills.


After a client adopts VMS/MSP model, new, unhealthy realities for staffing firms (both in terms of fiscal integrity and quality initiatives are often created. They involve

  • Restrictions from working and communicating directly with the end users;
  • Onerous and one-sided terms and conditions, not the least of which includes allowing facilities to hire  your staff with no or very little compensation to you for the conversion;
  • In many cases you must provide an unreasonable amount of unbillable orientation;
  • Documentation requirements that may run afoul of  federal laws;
  • Significant penalties for failure to complete a contract, even if for a legitimate reason, such as death;
  • Reduced margins: bill rates are reduced by $8to $10per hour, and the VMS/MSP charges you 3 to 4 percent of sales  and other incidental fees; and
  • Your staff must learn yet another staffing software program.

More realities that affect your internal and contingent staff include raises that become nonexistent, the risk of private and critical information being accessed by strangers, and contingents become exposed to covert efforts to “poach” them from their home agency.

With 2014 and implementation of the Affordable Care Act, along with a sizable percentage of baby boomer healthcare workers retiring, healthcare staffing is poised for a healthy rebound. As margins continue to fall due to VMS/MSP proliferation, where does that leave the small staffing agency? As VMS/MSP gain strength, they will gain power and they can see to your demise. What is their end game? I believe it’s your client base, as with a reduced pool of staffing resources and market competition eliminated, rates will soar for the providers.

Most VMS/MSP models prevent staffing firms from working directly with clients to problem solve, manage risk exposure and develop agreements containing fair and equitable terms, conditions and rates, and make a reasonable profit.

Take back control of your destiny as a company. If you meekly accept what is being dished out, then you may not survive the next four years. Take a stand, make your voices heard:

  • Educate your client base about options to achieve their objectives and partner with them to successful solutions;
  • Educate your professional staff as to why their pay rates are stagnated and being reduced;
  • Demand fair and equitable terms, conditions and rates from VMS/MSP companies you work with;
  • Join and be active in associations or groups that are clearly advocating for you as small businesses, a collective voice is louder and more powerful;
  • STOP signing on to ridiculous indemnity clauses that cause you to take full responsibility over situations you do not control; and
  • Perhaps the most important action you could take: Talk to your competitors in your area, see if you are of like minds and take a stand. No collusion, just strategy to survive the assault. It’s your company, your professional staff, it’s your industry. Stand up, be heard!

MORE: Why the VMS Promotes Second-Class Citizens

Colleen Mills

Colleen Mills
Colleen Mills is senior VP, standards and government relations, for National Healthcare Staffing Alliance. She can be reached at colleenm (at) nhs-alliance (dot) org.

Colleen Mills

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24 Responses to “Why Small Healthcare Staffing Firms Should Take a Stand on VMS/MSP”

  1. kyle whitlow says:

    Hi everyone, great article and fantastic thread to read through. I oversee ops for a small staffing agency in Kansas. VMS and MSP companies have been around but are now becoming more apparent and wide spread. We’re about to lose Good Samaritan because a new VMS just took over. That said, I need to begin proactively communicating with my clients about this. Are there any white papers or data driven write ups on the negative consequences of using a VMS versus working directly with the agency?

  2. […] Why Small Healthcare Staffing Firms … – Recently I have seen considerable ink dedicated to promoting the merits of VMS/MSP programs. Perhaps it is time to change the discussion to a more realistic view from … […]

  3. […] Why Small Healthcare Staffing Firms … – Recently I have seen considerable ink dedicated to promoting the merits of VMS/MSP programs. Perhaps it is time to change the discussion to a more … […]

  4. […] Why Small Healthcare Staffing Firms … – Recently I have seen considerable ink dedicated to promoting the merits of VMS/MSP programs. Perhaps it is time to change the discussion to a more … […]

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  9. […] a piece urging small and mid-sized travel nursing companies and healthcare staffing companies to “Take a stand on VMS/MSP”. Days later, Bob Livonius, President of Workforce Solutions at AMN Healthcare, took exception and […]

  10. nursingray says:

    I read this article and the comments about VMS/MSP programs. I would like to comment from a nurse’s perspective. One of the writers commented that the agencies should be considered and treated more fairly…WELL WHAT ABOUT THE NURSES WHO DO ALL THE WORK???? I have worked agency on and off for the last 10 years and I think I have very good relationships with two agencies that I primarily work with. Since the advent and proliferation of these programs we, the nurses , have not received any pay rate increases from our agencies , in fact , they have come to the nurses many times and actually reduced our pay rates. The story goes like this , “ Acme Hospital just signed on with Broadlane, or some other vulture organization, and they have reduced our bill rates across the board by $8.00 – $10.00 an hour and therefore we must reduce your pay rate because we cannot continue to pay you what we were paying you given the devastating reduction in bill rates”. You know what I tell my agencies when they tell me that, I tell them “do not call me for assignments at those facilities”. I think it is ridiculous that  agencies agree to these kind of reductions ……and as I understand it , not only are their rates reduced they also have to pay the VMS company something like 3 or 4 % of their sales. What are they ….STUPID??? I would like to say to my fellow nurses, wise up! Don’t you see what these programs are doing to the nurses? They are, in effect, suppressing our pay rates, which to me seems illegal. So even if your agencies are not smart enough to realize they should just say no to these bad programs ……..we the nurses should be smart enough to say NO, we won’t work at facilities that use these programs. I understand that hospitals are under a lot of pressure to reduce costs but we are not a commodity, we are professionals who deserve to be treated like professionals and not like bedpans or syringes. Only when  facilities cannot get their needs filled will they realize that they cannot get away with this and go back to working directly with the agencies and coming up with agreements that are fair  for everyone. Right now it seems to me , the hospitals get cheap rates , the VMS operators get money for doing nothing and the agencies and nurses who do all the work get screwed. WHAT’S WRONG WITH THIS PICTURE ?? Don’t you see that by agreeing to these reduced rates we are undermining and cheapening our profession. I really think this is a conspiracy to suppress pay rates. Once the hospitals suppresses agency  pay rates they take away the attractiveness for nurses to work agency which forces the nurses to take staff jobs… and when a hospital has its staff jobs filled they eliminate the pressure of giving their staff nurses increases. We nurses are strongest when we have options, these programs ultimately take away our options and play right into the hands of the hospitals. And if agencies keep agreeing to these bad programs they will ultimately go out of business and then the hospitals will really control us. From what I understand the nurses in administration and on the floor at these hospitals have very little to say about these programs, I think they value us , but unfortunately it is the bean counters at the hospitals who do not care about us or about quality that drive these programs ……..they really do look at us like we are bedpans that can be purchased cheaper by the dozen. It is sickening!

    • colleenmills says:

      nursingray   WELL STATED!!!!!!!  Finally, after years of asking nurses if they really get the wage suppression side of VMS/MSP’s,  you have legitimized the argument and your challenge for nurses to help their employer agencies take a stand is such a breath of fresh air!  We should talk…….

    • Staffing Vendor1 says:


    • Staffing Vendor1 says:

      nursingray  YOU are right that the agencies shouldn’t sign on to work with these MSP/VMS vendors…unfortunately they are generally the only game in town, or they take over for large systems where many of the agencies already have most of their business.  So to “not sign on” is effectively closing the doors.  This new way of doing business is killing the industry and suppressing wages…and you are correct..it seems like a conspiracy   You should read the info on the Arizona lawsuit that found that some associations are in fact price fixing..but its up to the nurses to take a stand on that…http://palermo.zentraal.com/news/lawsuit-against-the-arizona-hospital-and-healthcare-association-azhha-has-been-settled.

      • colleenmills says:

        Staffing Vendor1 nursingray   Couldn’t agree more.  The very reason we started the National Healthcare Staffing Alliance was to lend a proud voice to smaller staffing agencies challenged to compete in a marketplace rife with suppression.  MSP/VMS, but MSP especially, is not healthy for the industry and they negatively affect many business  aspects that are tied to success and survival.  Interested in hearing more of your perspective if you would like to call me.

  11. George Reardon says:

    Without getting into the larger discussion about the merits of VMS/MSP, I would like to point out that the Affordable Care Act will give VMS/MSP programs incentives to seek out providers who either are small or who simulate being small (by franchising and other means), because such firms should be able to hold their ACA-induced insurance/penalty costs below those of larger firms.Even firms that are somewhat larger than 50 full-time employees can enjoy a competitive advantage created by the ACA.

  12. onastick85 says:

    This article is interesting but it did not talk about the difference between what I call “Bad and Worse”. The bad are the vendor neutral programs, the ones that come in and impose harsh terms and conditions and arbitrary below market rates and charge you 3-4 % of sales for the pleasure of working with them. They are BAD. The Worse are what I call predatory MSP programs operated by a competitor. The MSP master contractor (competitor) handles all the staffing processes for the client and of course staffs the facility with its nurses first and gives those need it cannot fill to sub-contractors. The subcontractors fight over the scraps to fill a few shifts only to have their nurses canceled should the MSP master vendor find one of its nurses to fill the need. Then of course when your nurses actually do get to work at a MSP controlled facility , it is made very clear to them that if they worked directly for the MSP master vendor they would have access to more work and they would not get cancelled first as they do now with their current agency who is only  a lowly subcontractor. The sub-contractor agencies slowly but surely see their nurses disappear.  In my opinion to participate in one of these programs as a sub is nothing short of crazy.

    • colleenmills says:

       Wow!  So many great comments to jump start such an important discussion.  First, onastick85 you are so spot on regarding the vendor-neutral and  competitor MSP’s.  I will deal with them in detail on my next post, but in the meantime I would like to say that in many instances we have found that the clients are in the dark about the seedy practices here.  It certainly serves the VMS/MSP’s purpose to keep you from communicating with the client because by keeping certain facts from them they are unwittingly complicit with the VMS/MSP.  Education of the providers is vastly needed so they are indeed making “informed decisions” regarding these detrimental and intrusive third parties to healthcare staffing.  Poaching of staff, “lost” profiles, deliberate slow payment of invoices, arbitrary use of proprietary candidate information, recent attempts to acquire private company financials from sub-contractors, and so much more.
      And fnudo19449 makes my heart sing!  When will the agencies in various markets realize that if you stick together and refuse to service contracts that are detrimental to your operations and fiscal viability, the VMS/MSP cannot meet the benchmarks of the client and it won’t take long for a reassessment of the need for them.  Win/win Partnership is always the goal, but we must do a better job of educating the client base and find better ways to streamline processes for them.

      helend289 speaks eloquently for the client side of the street.  The CFO’s only see dollar signs when the VMS/MSP comes calling.  They get into the exec suite and sell the idea of such great savings and the client leaves their agencies out of the conversation because in this climate of decreasing revenue streams the dollar signs speak louder than a few agencies talking to the folks closest to the patient touch.
      And ischex, couldn’t have said it better.  Well done.

    • staffnu123 says:

      onastick85 I could not agree more with you with regard to predatory MSP (aka Worse).  In addition to what you mentioned, the predatory MSP will usually have ridiculous payment terms to subcontracting agencies.  For instance, instead of having NET 30 or NET 45 day payment terms they will state payment will be made 10 days from the date they receive payment from the facility.  Call me crazy, but doesn’t this mean they could potentially never pay the subcontracting agency?  Our funding company literally laughed at the payment terms and would not fund the account for this MSP.  Who in their right mind would?  In addition to just getting the “scraps” the MSP could not fill with their Temps, the MSP aggressively recruits subcontracting agency staff, including office personnel.  What a joke!!!

  13. fnudo1949 says:

    The writer presents a very sophisticated perspective to this issue and I agree with many of his points.  At ground level the issues are very simple and very clear.  Under the current VMS/MSP models in our industry the supplier (agency) is not given any consideration in the process.  They are asked to provide people and service at arbitrary below market rates, they are restricted from interfacing directly with their clients, they are required to work with software which is redundant to their internal software, they have onerous terms and conditions forced upon them and to add insult to injury they are required to pay 3-4% of sales to the program.  I think we all understand the dynamics and economic drivers in the marketplace and while our first preference is to work directly with our clients in a true win/win partnership our position is that when we must work with and through a VMS program we should insist that the terms, conditions and rates are fair and equitable.  Anything other than that is unsustainable and the sad thing is that we seem to willingly give the stick to the client and VMS program administrator with which they we beat us with.  These are our resources, we worked hard to recruit, process, and position for placement, why do we so willingly and sheepishly give them away.  This should be a call to action for all nurse staffing agencies to stand up for themselves otherwise our sales, margins and profits will continue to decline.

  14. helend289 says:

    I read this article with interest and agree with many of the points raised. I am a staffer in a facility that utilizes a great deal of supplemental staffing. For many years we worked directly with our vendors and over those years the better agencies distinguished themselves and therefore earned more of our business. I was involved with the contract negotiations and felt that we always hammered out a fair win/win agreement. Then one day about 1 year ago we were told by our financial officers that we would be going with a VMS program. No one in the nursing area had any input into this decision, it was thrust upon us with no warning.  We were assured that it would be a good thing for us and that nothing would change because we would basically keep all the same vendors. That was a lie, virtually everything changed.  I am not adverse to change  if that change represents improvement. What I have seen since we have been working with the VMS program  is a steady deterioration in the quality of service and the quality of nurses. I violated the policy and spoke with the agencies and they were candid with me , my facility was no longer a preferred client for them or their nurses because rates and terms were so unattractive. Their focus was with clients with whom they had win/win relationships. Thankfully my administration is seriously considering canceling the contract with this VMS program and going back to working directly with our agencies. They have told me that we will find some middle ground that everyone can live with and be happy with, in other words win/win . Alleluia!

    • staffnu123 says:

      helend289 You make some very good points.  As an owner of an agency, I can tell you that we do funnel our contingent staff to the clients that pay more fair rates and have better payment terms.  The client under VMS does tend to get the “scraps” because why would we give our primary (more desirable) staff to a client that pays less(which means lower employee pay rates) when we could send them to clients where it is more beneficial for everyone involved?  I have worked with several VMS providers over the years and it seems to always be the case that not only is there suppressed bill rates but it is not unusual for VMS client facilities to drag their feet on paying vendors, sometimes well past 90 days.

  15. Madhavan Gopalan says:

    These observations are very interesting and valid from a Staffing Supplier perspective. However, there are some valid business dynamics that make MSP/VMS necessary. This is no different than the traditional indirect procurement BPO paradigm from a few years ago. The issue with Staffing Industry is that there is a lack of alignment within the eco-system. The MSP/VMS models today are very primitive and true Talent Supply Chain management models are non-existent, wherein incentives are aligned. Everyone – Clients, MSPs and Staffing Providers stand to lose in the current model as the spirit of collaboration is missing to make this a sustainable value add. This situation is very similar to the Auto industry back in the 1970s and 1980s when procurement was a function of price vs. today where there is true collaboration across the supply chain .. think of the procurement process for the 787 Dreamliner.

    • colleenmills says:

      Madhavan Gopalan 
       Thank you for your comment and first let me say I agree wholeheartedly with you that the lack of collaboration creates an unsustainable value add. I speak in terms of the healthcare arena specifically, and when you remove the ability of the staffing firm to “collaborate” or problem solve with the client, nothing good comes of that .  The industry itself has an image problem and separation of the parties does nothing to establish trust and enhance resources for the client or the staffing firm.  The only entity controlling communication is the VMS/MSP and this is only one of several critical issues.  
      And whether we like it or not – Price is the driving force for client administrators as they try to meet the challenges of rising operational costs and dwindling revenue streams from Medicare, Medicaid and insurance companies.  How can quality initiatives find a discussion point if there is no discussion allowed????
      Non-neutral Vendor Management and issues concerning proprietary information, privacy issues, margin suppression and a host of other issues will continue to plague this industry until as you state – an alignment within the eco-system   occurs.  Hopefully soon.

    • lschex says:

      Madhavan Gopalan
      This person makes some valid points but the fact is that
      there is a tremendous difference between widgets in the auto industry and
      people. One of the underlying concepts of a VMS or GPO program is that a select
      number of vendors are selected based on their willingness to make concessions
      to the end user. In return for their concessions they are promised additional
      business with the theory being they will make up for their concessions with an
      increase in business. Furthermore   a widget manufacturer can
      theoretically reduce procurement , production costs and other costs as volume
      increases, widgets literally are cheaper by the dozen. In other words his costs
      go down and his volume goes up, so between the production cost reductions and
      the additional sales volume a VMS or GPO situation may make sense for everyone
      involved.  This is where the concept breaks down when you try to apply it
      to the nurse staffing business. First of all there is no exclusivity or even
      real selectivity with VMS staffing programs in that the hospital winds up with
      the same number of vendors unless one of their historical vendors chooses not
      to participate. So rarely, if ever, does  the participating vendor realize
      additional volume. They wind up simply doing the same or less volume of
      business at worse margins. The other issue is that unlike the widget
      manufacturer nurses are not cheaper by the dozen and the agencies operating
      costs such as recruitment, screening, processing, positioning and
      placement  costs do not go down,  even if there were more volume.
       In fact, dealing with a third party VMS inevitably
      means that their costs will go up because of the demands of the agreement and
      of course the fact that they will have to use a new software while still
      maintaining their own internal software.  And nurses will still demand
      market pay rates, so direct costs, payroll , taxes , insurances do not go down
      even if volume increases. So again , nurses , unlike widgets are not cheaper by
      the dozen. All the vendors wind up getting is the same or less volume of
      business with higher operating costs, more demands , significantly reduced and
      below market  bill rates which all translate into a very unhealthy
      business model with shrinking  revenue, margins and profits. The last few
      years have been very tough for the nurse staffing industry  and agencies
      have been coerced and forced into participating in program that are not in
      their best interest or in the best interest of the industry. But the pendulum
      may be swinging back so I truly hope agencies will wake up find some courage
      and demand fair and equitable rates , terms and conditions if they choose to
      participate in a program. And I hope VMS companies will understand that
      agencies are an important part of their business model and will include them in
      the process with the objective being to have eager and willing partners rather
      than disgruntled suppliers who make VMS clients a very low priority and supply
      them begrudgingly.

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