Key Takeaways from SIA Healthcare Staffing Summit
Members of Baird’s Human Capital Management (HCM) team attended Staffing Industry Analysts’ (SIA) Healthcare Staffing Summit in Q4 2024. The annual conference brings together healthcare staffing executives to discuss the latest perspectives and information on trends related to healthcare staffing. From nursing to locum tenens to allied health, and more, the Summit provides deep-dive discussions into key healthcare segments.
Looking at healthcare staffing M&A, the market has understandably been relatively muted with some transactions occurring but volumes down overall. As we outline in observations and opportunities below, the market is expected to change materially in the next 12–18 months, and we expect to see an uptick in platform M&A activity. Read our key takeaways from the conference for more:
COVID Rebound: Market Levels Out, Bill Rates Stabilize
The healthcare staffing market has been a rollercoaster the past few years following COVID-19. As we look to close out 2024, it appears that the market has finally bottomed out with volumes leveling out to pre-pandemic levels (per SIA). Q4 2024 performance is tracking to outperform Q3, and 2025 is expected to show a continued slow climb to sequential quarterly growth.
While bill rates remain elevated compared to pre-pandemic levels, gross margins of public and private providers have come under meaningful pressure across the board. Travel nurse staffing gross margins declined 220 basis points from 2018 to 2022 and then another 280 basis points between 2022 and 2023. Similarly, allied (placing healthcare professionals in non-physician roles) gross margins decreased 200 basis points from 2022 to 2023. This dip is due to multiple factors, including an increase in pay rates required and the expansion of Managed Service Provider (MSP) and Vendor Management System (VMS) usage, which has directly impacted margins of those staffing providers now increasingly beholden to MSP / VMS programs.
An Era of Digital Transformation
Accelerating through the pandemic, healthcare staffing has emerged as a leader in technology use when compared to the broader staffing sector. Staffing firms are, in general, seeking out ways to more efficiently acquire, deploy and manage talent. Similarly, hospitals / clinics are adopting new technologies both for more efficient use and access to contingent labor, as well as to minimize their reliance on contingent labor providers – technology is helping make this a possibility – which is also a potential headwind to staffing providers in the space.
These factors are driving an evolution for staffing providers to become “workforce solution” providers, which is only possible through more robust talent platforms (e.g., on-demand career marketplaces for contract and direct-hire roles). Talent Platforms that succeed will be those that make signing up and interfacing with the solution as easy and seamless as a streaming service or social media platform.
Additionally, in some cases, hospitals are attempting to establish their own float pools introducing new software platforms that work in conjunction with their internal systems to make the idea of running their own float pools a reality. If this becomes the case, an expansion in the use of float pools may put additional pressure on the healthcare staffing industry.
While slower to make a splash in the space, the opportunity for AI continues to be a meaningful way to improve operational efficiency and service quality. We’re already seeing some of this displayed through powerful matching capabilities. Other emerging areas include credentialing technologies and AI adoption. We’re seeing powerful credentialing capabilities become a competitive advantage for some, proving to help reduce internal costs and improve service quality.
Despite the meaningful growth in technology adoption, the human element remains critical to the market and technology simply makes the human element more efficient, more accurate and more precise.
The Spotlight Remains on Travel Nursing
Travel nursing continues to be the focal point for most conversations regarding healthcare staffing. While the segment has experienced a meaningful and sustained decline since 2021, the travel nurse staffing market remains substantially larger at $19 billion in 2024 versus its pre-pandemic size of $8.5 billion in 2019. However, the relationship between hospital systems and contingent staffing remains strained, and hospitals are continuing to seek out ways to reduce their reliance on contingent labor, particularly within travel nurses.
Doctors As Independent Contractors Draws Demand
Locum tenens remains a bright spot in the market and continues to outperform compared to the broader healthcare staffing landscape. The acute U.S. physician shortage, in addition to increasing use of specialized care, provide meaningful tailwinds and are expected to continue to drive growth in the segment.
Notably, while the ability for locum tenens providers to establish deep specialization is somewhat unique to the segment and allows for significant competitive advantages to be established, M&A activity within the segment needs to be carefully considered, as each specialization is unique.
Outlook: What’s Next?
Despite its recent struggles, the healthcare staffing market remains a very attractive space. There are substantial tailwinds that will persist including, but not limited to:
- Skill shortages across all major categories,
- Increasingly complex regulatory and compliance environment
- Aging population which requires increasingly specialized care
- Increased overall spend in healthcare nationally.
Ultimately those tailwinds are expected to propel the healthcare employment market to grow 2–3x faster than the overall employment market.
Interested in learning more? Connect with the Baird Human Capital Management Investment Banking Team.