Managed service providers (MSP) utilizing vendor management systems (VMS) have been a part of US commerce for decades, starting with Ford Motor Company and moving across all market verticals.
These systems can provide operational and financial efficiencies unavailable to firms not deploying their utilization. The need for a MSP can grow when demand for services exceeds supply. The US nursing shortage is one case in point. The ability to aggregate as many possible vendors for human capital is a great advantage of this system. The “fill rate,” or ability to reduce hospital vacancies, assists the hospital in revenue generation, adequate staffing ratios and relief from some of the “fixed-costs” associated with full-time employees. When supply is scarce and demand is high, aggregating as many vendors as possible with uniform terms and conditions is the most effective model.
Without such systems in place, the time required to manage, pay and orchestrate labor demands while working independently with a large vendor pool is expensive and inefficient. This is where operational efficiencies of MSPs are most valuable: Leveraging multiple vendors on one side of the MSP, but communicating singularly on the other side for hospital management. The larger number of vendors funneled through the MSP mathematically increases the odds of meeting the high demand for healthcare workers.
Financial leverage can be realized as contract talks can be standardized across all vendors. Standardizing rates simplifies financial planning for the client. Spreading demand across multiple vendors provides pricing leverage that can’t be realized when working with one supplier at a time.
The healthcare industry has been a later adopter of the human capital managed services, but has long used group purchasing organizations (GPOs) for supplies such as durable medical equipment.
One of the first start-ups to engage the contract labor spend of hospitals in the US was Shiftwise. Shiftwise was created in 2003 in Portland Ore., and was originally known as Origin Inc.
Another later player to the game was Hospital Corporation of America, a for-profit system. HCA has long known the value of managed services and has utilized its HealthTrust purchasing group since 1999. In 2011, it launched Parallon, another subsidiary designed to focus its managed services on contract labor throughout its expansive network of hospitals. In 2016, Parallon was rebranded to better identify with HCA’s original GPO subsidiary, and is now known as HealthTrust Workforce Solutions.
MORE: Parallon Workforce Solutions rebrands as HealthTrust Workforce Solutions
FocusOne Solutions is another platform that has also been a provider in the VMS/MSP space in hospitals for several years.
FocusOne Solutions is a sister-company to Aureus Medical Group, one of the nation’s largest healthcare staffing firms with more than 30 years of experience.
Another provider of MSP services in the hospital market is Medefis. Medefis was founded in 2003 in Omaha Neb., and also specializes in the healthcare staffing industry.
Although there are several other vendors for these services, these comprise over half the agreements in the healthcare staffing world.
So, what is the “incestuous nature” of these providers of MSP/VMS services? To explain, it’s important to understand in simple terms the relationship a VMS/MSP provider has with the hospital. There are a few important points that drive the status of the industry.
- The VMS/MSP is the sole gatekeeper for any agency that wishes to do business with the hospital.
- The hospital is typically forbidden to work with individual vendors as such vendors must only work through the VMS/MSP provider.
- Every staffing firm is 100% dependent on the VMS/MSP to provide their services.
- The VMS/MSP is repository for all staffing orders, and is the first to receive all orders for labor across the system.
The recent spate of acquisitions of VMS/MSP vendors by staffing firms presents an interesting question. Why would a healthcare staffing firm have a desire to get into the software business? A review of the aforementioned four items hold the key!
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[…] a follow-up from my prior blog post, “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 […]
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The way I see it, VMS adds more value to a healthcare staffing firm, making the recruitment process faster and simpler. Plus, it offers more control over the hirings/applicants and improves the overall smoothness of the process. This alone should be enough reason for a staffing firm to to get in the software business.