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
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.

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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!

George Reardon
George Reardon

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.


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.


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.


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!

Madhavan Gopalan
Madhavan Gopalan

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.


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