VMS in Healthcare
Slow to catch on, but interest rising
Management of supplemental staff via automated procurement software - a vendor management system - is a trend emerging in the healthcare industry. Despite healthcare being more reluctant than some industries to jump into e-procurement, staffing companies and software sellers agree that more of the dollars spent on contingent labor used in hospitals and other facilities is likely to flow through a VMS.
“Vendor management continues to be an important trend within our acute care customer base,” Cross Country Healthcare Inc. CEO Joseph Boshart told Staffing Industry Healthcare News earlier this year.
Added Leanne Oatman, VP of sales and customer services at Comforce Inc.: “The interest is greater than we’ve ever seen, especially as hospitals try to decrease the amount of staffing utilization.”
To date, the VMS market in U.S. healthcare staffing is about $100 million, if calculated at about 1% of the total revenue in the sector ($10.5 billion), which several sources said would be a good estimate. The penetration rate is below 2%: Sources said only 500 to 1,000 U.S. hospitals have a VMS installed; that’s out of about 5,800 hospitals total, not including other facilities such as surgery centers. And Staffing Industry Analysts research shows that only about 12% of healthcare industry customers that buy supplemental staffing services plan to buy a VMS in the next two years.
Slow start
Unlike other industries that use contingent workers, healthcare has been slow to implement e-procurement. “They’re not as friendly toward technology,” said Jason Lander, founder of ShiftWise, a VMS sold directly to hospitals. ShiftWise is used in almost 300 facilities and recently licensed its product for Cross Country to sell.
Many hospitals don’t understand how getting a staffing company involved in managing temporary workers will help save dollars, when what they really want to do is eliminate agency nurses altogether, said Bob Livonius, CEO of Nursefinders Inc., a staffing company that sells a VMS. “The whole idea of letting the fox in the henhouse is a difficult sell. Most hospitals are looking to reduce temporary labor, and the client doesn’t view spending money [on a VMS] as doing that.”
Ed Scott, VP and general manager of the per diem division at InteliStaf Inc., added that education is key. “Many hospitals are not that well-versed in what these offerings bring to them,” he said. InteliStaf also sells staffing management products.
Significant savings
But optimism reigns among sellers of VMS who see rapid growth. One is Chris Rosebrough, CEO of Vendtegrity, a software company that sells to hospitals. He predicts that 30% of the healthcare supplemental staffing market will be managed by VMS by 2010.
Livonius concurs: “It wouldn’t be unrealistic, and it could be even earlier than that,” he said. Of Nursefinders’ $350 million in sales, about $90 million comes from VMS or related workforce solutions business, Livonius said. Rosebrough said Vendtegrity’s hospital installations, which manage about $16 million in contingent spending, should double this year to six. “More and more hospitals I talk to are interested in VMS,” Rosebrough said.
VMS proponents say the value proposition for hospitals can’t be ignored. For one small hospital, Vendtegrity saved $500 million in temporary labor spending in 12 months, Rosebrough said. At Hoag Memorial Hospital Presbyterian in Newport Beach CA, Comforce’s VMS reduced agency spending more than 70%, Oatman said.
Not all savings will be as dramatic, depending on the size of the hospital and how many temporary workers it uses. Chris Moseley, VP of labor services for Broadlane, a technology company that sells a VMS, said that in most cases savings may range from 6% to as high as 18% a year. Broadlane products are used in 180 acute care facilities.