20 October 2022 |

Meet Healthcare’s Latest Middleman: Healthcare Staffing Firms

By Blake Madden

Today’s essay focuses on the emergence of major investment into healthcare staffing firms. Staffing agencies have been around for a while, but recently enjoyed a huge bump in performance thanks to ‘Rona.

While most operators expected the staffing firm explosion to settle down, it has actually stuck around in the midst of labor shortages and increased investment from venture and private equity players.

Here’s what’s going on and why staffing firms now have staying power for the long-term.

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Key Takeaways

  1. Healthcare staffing firms benefited big-time from Covid surges and travel nurse rates
  2. While contract labor and travel nursing is winding down, staffing agencies have more stickiness than previously thought and a ton of investment is entering the space
  3. Staffing is a great investment for 2 reasons: controlling the supply and therefore pricing power (shortage of clinicians) and healthcare hiring resilience during a recession – hospitals always need nurses. Plus, there is little to no regulation around staffing agency pricing (yet)
  4. Hospitals and health systems in general are inefficient and staffing agencies can provide real value here. Turnover is a big expense. Shutting down service lines is an even bigger hit
  5. In the long-term, it’s possible that hospitals might outsource labor altogether to staffing agencies. Labor comprises about half of hospitals’ expenses and they’ll flock to whoever can solve these problems.

The Emergence of Healthcare Staffing Firms

Staffing agencies have been around for a while. Hospitals need nurses and physicians. Sometimes they need more than normal. Agencies provide those positions. Supply and demand at work! Some agencies specialize in travel or contract labor staffing, while others focus on permanent placements at hospitals or other sites of care.

In 2019, the 48 largest staffing firms generated a combined $13.9B ($18.1B in total) in temporary staffing revenue.

Then Covid struck. Cue dramatic music

That already large revenue figure was likely eclipsed by a wider margin in 2020 due to surge capacity, sick clinicians, and insane (more like dire) demand for travel nursing during Delta and Omicron in late 2021 / early 2022.

You can pretty clearly see why PE and venture are circling the healthcare staffing industry when looking at the recent financial performance of the two big publicly traded players, Cross Country Healthcare (CCRN) and AMN Healthcare (AMN):

healthcare staffing firm growth and investment - Hospitalogy

From FYE 2019 thru the last twelve months ended Q2 2022, combined revenue of the public players has jumped over 155%. Similarly, adjusted EBITDA jumped 322%, increasing from an average 8.6% margin up to a 14.2% margin.

healthcare staffing firm growth and investment - Hospitalogy

The Covid surges led to outsized performance for CCRN and AMN, and outsized costs for operators like HCA and Tenet, who noted higher than expected travel nursing expenses for both.

healthcare staffing firm growth and investment - Hospitalogy

While most expected the surges and staffing firm power to settle down after Q1 (note the dip in performance in the below graph around April and the sequential decline in revenues in the chart above), the financial outperformance has afforded these companies the ability to reinvest in their businesses, add additional service lines through acquisition, and buy back shares.

Long story short: they’re sticking around, folks.

healthcare staffing firm growth and investment - Hospitalogy

Clearly investors (and I, too) think that staffing firms can provide value beyond surge capacity during ‘Rona. Labor issues in hospitals go beyond the Covid surges. There are longstanding structural issues within healthcare staffing that new startups who raised recently like Incredible, Nomad, and Vivian Health (listen, I’m sorry if I didn’t mention you here – I’m only human!!) are aiming to fix, namely:

These structural issues provide an interesting value prop for investors. Beyond the operating needs, here are some reasons why staffing firms are so enticing from a financial standpoint:

  • They’re scalable – public profit margins swelled despite unprecedented growth
  • Staffing is highly fragmented and investors can deploy the roll-up playbook similarly to how Envision or USAP cornered local physician markets and jacked up prices in certain cases (I’m not saying that’s what’s gonna happen here, I’m just saying it’s economically possible right?)
  • Unlike services companies, staffing agencies have pricing power and there is little to no state regulation on pricing yet (just however much the hospital is willing to pay), something that the AHA has bemoaned
  • Healthcare hiring was unaffected by the last recession. Volumes are still recovering from 2019 levels, and healthcare is generally resilient as seen by the September jobs report.

As a result, we’ve seen a ton of investment activity from private equity players and VC-backed startups. Staffing startups have raised at least $700 million according to Business Insider (valuations noted where available):

  • Trusted Health raised $149 million
  • IntelyCare raised $115 million at a $1.1B valuation
  • ConnectRN raised $76 million
  • Vivian Health raised $60 million, which apparently filled 15% of all travel nursing positions in 2021!!
  • Nomad raised $105 million
  • Incredible Health raised at a $1.65B valuation
  • Clipboard Health raised $30 million at a $1.3B valuation

Along with startup activity, here are some other recent PE-backed investments (paywall – PE Hub) in the staffing space:

  • One Equity Partners acquired Prime Time Healthcare (consolidator, nursing and clinicians)
  • HIG Capital acquired Barton & Associates (temporary staffing services)
  • HCAP Partners invested in FleetNurse
  • PE-backed Ingenovis Health acquired VISTA

So as you can see, these companies have amassed pretty big valuations and hefty investments in a pretty short amount of time. AMN Healthcare’s latest enterprise value sat at around $5.5B (1.3x NTM revenues; 8.6x NTM EBITDA) while CCRN’s totaled $1.5B (0.7x NTM revenues; 7.3x NTM EBITDA).


Even though travel staffing effects decreased, staffing agencies are a much larger player in 2022 and will continue to be moving forward.

Healthcare staffing companies are fragmented and will continue to grow in prevalence as seen by the massive raises in 2022. But at the same time – how big is the TAM pie here?

Clinician shortages are not going anywhere, and staffing agencies are the best positioned to take advantage of that crunch.

There’s a real opportunity for these firms to work with hospitals and optimize staffing during a time of real need for hospitals as labor is the number one issue at most provider organizations.

I’m willing to bet we’ll see some price gouging happen among bad actors in this space, and regulations are bound to come.

The biggest factor in my mind: how will staffing firms ultimately affect patient care, if at all?

Thanks for reading – this was a fun one! Hit me with any and all thoughts related to healthcare staffing and the dynamics at play by replying to this e-mail or on Twitter.

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