By Neal England
Practice Leader – Human Capital Management
The growing healthcare staffing sector is poised for vibrant merger & acquisition activity over the next two years, as companies look to capitalize and strengthen their value propositions in the evolving U.S. healthcare landscape.
Staffing Industry Analysts projects that U.S. healthcare staffing revenue will grow 6% this year and 5% next year, according to an update to its “U.S. Healthcare Staffing Market Assessment 2018.”
“While this is below the outsized rate of expansion the market has enjoyed over the past few years, it nonetheless outpaces anticipated growth in the broader U.S. temporary staffing industry,” SIA notes in a May update of its U.S. staffing industry forecast.
Healthcare staffing M&A will continue to make headlines as we enter the second half of 2018. Early this year, Medical Solutions, which has significant U.S. market share, announced plans to acquire PPR. PPR offers travel nurse staffing and interim leadership for acute and post-acute healthcare facilities. It will continue to operate under the PPR brand and maintain offices in Jacksonville and Tampa, Fla., according to a press release. Last year, PPR was the acquirer when it bought the travel nurse company 360 Healthcare Staffing.
Several significant deals closed last year as well. Cross Country Healthcare acquired the assets of Advantage RN and its affiliates, and Travel Nurse Across America (TNAA) acquired its competitor, Trinity Healthcare Staffing Group. The TNAA/Trinity acquisition catapulted TNAA from the 11th largest traveling nurse staffing company into the top five, TNAA says. In 2016 TNAA acquired Rise Medical Staffing and IPI Travel Nursing.
Why the growth?
Healthcare staffing took off after implementation of the 2010 Affordable Care Act (ACA) led to an influx of newly insured people who boosted patient volumes at hospitals and outpatient clinics. These newly insured drove up demand for healthcare labor — even in years when the strength of the overall U.S. economy was muted at best.
Now that the ACA effect has leveled off, managing healthcare challenges for our aging baby boomer generation has moved front and center, sparking demand for practitioners. Regulatory changes, data records management and health carrier integration improvements continue to drive growth in the healthcare technology area.
Certainly, there are potential headwinds for the healthcare staffing industry to consider. Foremost among them is the uncertainty around ACA, and whether the law will remain in effect, or if more of it will be rolled back.
Recruitment of registered nurses also remains a significant challenge for staffing firms, despite more nursing school graduates. One issue is that these new nurses lack the level of experience that some positions require. Staffing firms that are on their toes are looking for ways to address this disconnect, such as offering “apprentice programs” where a newly minted registered nurse works side by side with an experienced nurse to learn the job and prevent new nurse burnout.
Healthcare staffing firms will also be looking for ways to expand beyond acute care staffing, as the trend of doing more procedures at outpatient centers or in small specialty hospitals continues to gain steam.
We’ll continue to monitor the healthcare staffing M&A landscape as we enter into the second half of 2018. Companies that are successful at building shareholder return, growing revenue, and introducing (or expanding) high-demand or innovative products and services will be those best-suited for potential M&A transactions.
Capital Alliance Corporation is a Dallas-based investment banking firm with an extensive international reach and a 40-year history of providing trustworthy advice to private company shareholders who want to sell their businesses. Our team has deep operational and M&A experience across many sectors, including human capital management.