What You Ought To Know About the Travel Nursing Job Market in 2017

The travel nursing job market was on fire in 2015 and 2016. In fact, it got so hot that we published a list of tips and things to know about hot travel nursing job markets. However, in early 2017 we began to see travel nurses and recruiters discussing a slow down in the travel nursing job market on various social media channels . In this article, we’ll take a look at the current travel nursing job market from several different angles so you can plan accordingly.

Community Discusses Depressed Travel Nursing Job Market

We first started seeing travel nurses and recruiters indicate there were fewer jobs available in March of 2017. Here is a quote from a potential travel nurse who had been following a social media group devoted to travel nursing:

Starting to wonder if I should stay at my job. I was considering travel nursing and to start in July but it looks like everyone is having trouble finding jobs? Thoughts?

A recruiter chimed in with the comment below:

Recruiter here. Job orders are way down from last year. It’s slim pickens out there right now. We’re hoping it will turn around soon but the best thing you can do until then is to be flexible. The more flexible you are the more likely it is you’ll land a job.

Eventually, the travel nursing community started pondering the causes of the slowdown. Some people argued the market had become saturated with travel nurses. After two years of strong demand, so many newcomers wanted to get in on the action that supply was outstripping demand.

I love travel nursing and I would recommend it to anyone! I love my fellow travelers and I want the best for everyone! But….. the travel nurse market is getting flooded. I haven’t had trouble finding assignments but I am worried. I am worried that the hospitals are going to lower pay and deny vacation because there are other submissions that aren’t asking for much.

I am worried that that this wonderful travel life is being threatened and my recruiters are saying the same thing! I got into this to have adventure and have control over my vacation, pay, location and to stay out of the ridiculous hospital politics! And I don’t want to go back to staff nurse BS and I don’t want the hospital getting more power and making this a hospital market and not a travelers market!  I wanted to let my worries out there and I didn’t know if anyone else is worried!

Others argued the uncertainty surrounding healthcare policy in the United States was causing hospitals to pull back.

I’ve been hearing here that the hospitals are extremely worried about “Trump Care” and the elimination of the Affordable Care Act. They said they are holding off on contracts and really watching the budgets.

What Can We Glean From These Accounts?

The quotes above tell a pretty bleak story. Both recruiters and travel nurses asserted that travel nursing jobs were declining as early as March of 2017. By June of 2017, folks were still registering complaints. Was the entire market experiencing a slowdown or were these isolated incidents?

Of course, the problem is that all of these quotes are based on anecdotal observations and experiences. There is no doubt individuals were enduring these experiences. However, we can’t necessarily make broad market generalizations based on individual accounts.

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So, let’s color these individual accounts and observations with some additional information and data where possible. First, we’ll discuss whether the travel nursing job market is down or not. Then we’ll take a look at whether or not the supply of travel nurses and the uncertainty surrounding healthcare legislation are having an impact on the market. Finally, we’ll discuss some of the less obvious forces that may be affecting the travel nursing job market.

Has The Number Of Travel Nursing Jobs Decreased in 2017?

As we saw above, some travel nurses and recruiters asserted that the number of jobs had decreased in the first part of the year. Unfortunately, it’s really difficult to measure the total number of travel nursing jobs in the country. Many agencies share the same jobs so there is a lot of overlap in the market. At the same time, different agencies work with different hospitals. As a result, it’s simple to measure the variance in travel nursing jobs for an individual company, but not so much for the entire industry.

What The Biggest Travel Nursing Companies Are Saying

However, there are certainly some very good barometers. For example, we can look at the quarterly reports and investor conference calls of two of the largest healthcare staffing companies, AMN Healthcare and Cross Country TravCorps.

Cross Country’s CEO, Bill Grubbs, said the following during the company’s conference call for the first quarter of 2017:

From an overall market perspective, we have seen a slight decline in demand for nurses in recent months as compared with the historically high levels we experienced the last couple of years.

Meanwhile AMN’s President of Professional Services and Staffing, Ralph Henderson, said the following during the company’s conference call for the first quarter of 2017:

Our demand in the second quarter, at the beginning of the quarter, is down even a little bit more than it was down in the first quarter. And the number of open orders we have in the last couple of weeks that have been open, actually have started to improve just slightly.

As you can see, executives from both of the nation’s largest travel nursing companies verified that the number of job openings was down. However, Ralph Henderson indicated it was trending up in the early days of the second quarter of 2017. Moreover, Susan Salka, AMN’s CEO pointed out that the number of job openings was still about double what it was in 2014.

Given these statements, it’s fair to assume the number of open jobs was certainly down during the first quarter of 2017. However, neither AMN nor Cross Country indicated there was a drop big enough to warrant the gloomy descriptions offered by travelers and recruiters on social media.

What Our Clients Are Saying

For our part, we speak to a lot of healthcare staffing company executives regarding our services. We always inquire how the job market is doing. Recently, we’ve heard that job orders are down between 20% and 40%.

It’s important to note that the healthcare staffing executives we speak with represent small and medium sized companies. It’s possible these companies are seeing a bigger reduction in job orders than their larger counterparts. However, we believe the difference wouldn’t be large enough to account for the gloomy depictions on social media.

We’re actually inclined to believe that AMN and Cross Country were overly optimistic about the travel nursing job market during their quarterly conference calls. We believe both companies will report greater job reductions during their next quarterly conference calls in August of 2017.

That said, both Grubbs and Salka indicated that such slowdowns happen from time to time and are followed by continued growth. So, we could definitely be wrong about the reduction in job openings. We hope to find out when AMN and Cross Country release their second quarter earnings reports in early August of 2017. Stay tuned!

Is the Travel Nursing Job Market Saturated with Travel Nurses?

It’s clear there is room for debate as to whether or not travel nursing jobs declined significantly in the first half of 2017. Therefore, we have to wonder if it is possible the travel nursing job market is saturated with new travel nurses.

Unfortunately, it’s not really possible to nail down the number of healthcare professionals engaged in travel nursing. There’s no way to quantify the number of qualified professionals who are entering the market. Again, this could be done at the individual agency level. However, it could only be done for the whole industry if all agencies came together to share their data. Don’t hold your breath.

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Anecdotal Accounts of Travel Nurse Supply

With that in mind, we’re left with anecdotal information. For example, Ralph Henderson was asked about AMN’s supply of travel healthcare professionals during AMN’s first quarter conference call. He said that AMN travel nurses referred double the number of candidates in the first quarter of 2017 compared to the first quarter of 2016. Wow! That’s a lot. AMN also indicated that supply was not a problem for them except in the Locum Tenens market.

We also saw anecdotal evidence from travelers and recruiters on social media. Consider the quote below:

I absolutely agree that it is also a supply and demand thing too. I spoke to a manager for a contract the other day that had 97 travel applicants for 1 position for labor and delivery.

Now, at first glance, it may appear as though there is indeed a glut of travel nurses in the market. AMN and Cross Country indicated jobs are down, but not enough to result in the gloomy environment described by travelers and recruiters. Meanwhile, AMN indicated they have a very solid supply line. Moreover, travelers and recruiters indicate that huge numbers of candidates are submitted for each job opening.

Travel Nurse Supply is Not a Zero-Sum Game

Despite this seemingly convincing evidence, we believe the increase in travel nurse supply is but a minor issue affecting the overall travel nursing job market.

First, let’s consider how an increase in the supply of travel nurses affects the market. We believe there is some validity to this quote found on a travel nursing social media group:

There is still a critical nurse shortage in the US. Every time a staff nurse leaves a position it opens up a spot for a traveler. And there still won’t be enough nurses to go around.

The Nursing Shortage Affect

The conventional wisdom contends there is a nursing shortage. Of course, hospitals have to fill positions left vacant when permanent staff leave to engage in travel nursing. Logic follows that a hospital could very well fill that need with a traveler until they’re able to hire a permanent replacement. And finding the replacement could prove difficult given the nursing shortage.

The hospital may experience so much difficulty hiring an experienced replacement that they resort to hiring and training new-grads. However, this is a very expensive option. Moreover, it takes 6 months to a year for a new-grad to be a full contributor. During this time, the hospital would need to enlist the services of a traveler.

Despite that, it would appear that many hospitals are in fact hiring and training new-grads. Ralph Henderson stated that AMN conducted a survey of clients to determine why job orders were lower. Their clients reported hiring new-grads and experienced RNs as among the reasons.

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Increased Supply Means Increased Demand…Sometimes

Given all of this, our view is that it is not a zero-sum game when permanent nurses leave their jobs for travel nursing. Some of those vacancies are going to result in job openings for travel nurses. Others are filled by PRN staff. Finally, some are filled with permanent staff.

So, while the increased supply will have an impact on the market, it wouldn’t be enough to cause the problems expressed by travelers and recruiters on social media. We contend that the decrease in job openings is the ultimate driver of the downturn. But what’s causing the decrease in job openings?!

Is National Healthcare Policy Affecting the Travel Nursing Job Market?

As we saw above, many people contend that hospitals are hiring fewer travel nurses due to uncertainty regarding the future of national healthcare policy. This topic was certainly on the minds of stock analysts during the quarterly conference calls for AMN and Cross Country. Both executive teams faced several questions on the subject.

The executive teams expressed slightly different views. Bill Grubbs was asked to offer details as to why they were seeing a reduction in demand. He mentioned uncertainty regarding the future of the Affordable Care Act as one of several possible drivers.

By contrast, Ralph Henderson did not directly mention uncertainty about the future of the Affordable Care Act. However, he did mention concern about future reductions in patient volumes. It would be a stretch to assume this concern was driven by uncertainty over the healthcare laws, but it’s possible.

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It’s important to note that neither team definitively indicated that uncertainty over the healthcare law was a major factor. At best, it was cited as one of 5 to 10 different factors putting downward pressure on demand.

Future Impact of ACA Repeal on Travel Nursing

The teams at AMN and Cross Country also expressed differing opinions on the impact that repealing the Affordable Care Act would have on the travel nursing job market. Bill Grubbs indicated that he would be worried if Medicaid was cut back or pre-existing coverage requirements were dropped.

By contrast, Susan Salka said that she was unable to speculate on the impact that cutting the pre-existing coverage requirements would have on the market. Meanwhile, she believes that cutbacks on Medicaid would have little to no impact on the market. She pointed to AMN’s internal data analysis which indicated that demand for travel nurses increased more in states that didn’t adopt the medicaid expansion measures.

JOLTS Are Potentially The Deciding Factor In the Debate

Personally, I found that hard to believe. I was in the camp of folks who firmly believed the uncertain future of national healthcare law was negatively impacting the travel healthcare job market. Then I reviewed the JOLTS reports for 2017.

For those that aren’t familiar, the Job Openings and Labor Turnover Survey (JOLTS) results are compiled and published monthly by the Federal Bureau of Labor Statistics (BLS). The report breaks down the number of job openings, hires and “separations” (people leaving their jobs) by industry. It’s a widely respected barometer of the labor market.

To my surprise, hires in the healthcare sector have been up every month in 2017 compared to 2016. Job openings were up year-over-year for every month except January. Given that we know travel nurse hiring is down, it’s safe to conclude that hiring for permanent positions is up.

How is this possible if healthcare employers are concerned about the future of national healthcare policy? If you were concerned about the near term future, wouldn’t you be more likely to rely on supplemental staff? Especially if the supply is so strong? This simple fact leads me to believe that other factors are having a bigger impact on the travel nursing job market.

What’s Impacting the Travel Nursing Job Market?

We believe there are two primary factors impacting the market. First, the travel healthcare job market is trending back to an equilibrium as defined by hospitals and other healthcare employers. Second, hospitals are adopting the Managed Service Provider model at an increasing rate. This has a disproportionate impact on many small to mid sized companies and the travelers who work for them. Let’s take a look at each of these factors in detail.

Travel Nursing Job Market Trending Toward Equilibrium

Before we discuss the equilibrium issue in detail, it’s prudent to consider the list of reasons AMN and Cross Country provided for decreased travel nurse demand during their quarterly conference calls. They were as follows:

1. Hospitals looked at spending on contingent staff over the last two years and decided they needed to pull back.
2. Hospitals are making new hires.
3. Concern over lower patient volume.
4. Fewer capital projects.

What is Equilibrium in the Travel Nursing Job Market?

Ultimately, the important thing to remember is that supplemental healthcare staffing, travel nurses and agency PRN, will eventually settle on an equilibrium as determined by hospitals. What is “equilibrium” in the healthcare staffing market? Essentially, hospitals and healthcare employers generally believe that there is an ideal ratio of permanent staff to contingent staff.

For example, a 2011 survey conducted by KPMG found that the average hospital believes the ideal percentage of contingent staff is 10%. This number might vary from hospital to hospital. It may even vary over time. But the bottom line is that hospitals want to maintain some level of equilibrium between permanent and contingent staff.

The Market Became Imbalanced

Given the reasons for lower demand cited by AMN and Cross Country above, it appears likely the market became imbalanced during 2015 and 2016. Between 2011 and 2017, the economy rebounded and more people got healthcare coverage. As a result, hospitals nationwide experienced census spikes. Meanwhile, the average age of registered nurses reached 50 in 2013. Therefore, it’s possible that nurses began retiring and/or cutting back on their hours.

These factors caused a spike in the demand for experienced RNs in highly specialized units. Of course, hospitals will first turn to the supplemental staffing market when they need to get positions filled quickly. This causes demand for travel healthcare professionals to spike. There are several causal factors.

Difficult to Hire Experienced RNs

First, the job market for highly experienced RNs becomes very competitive when the entire healthcare system is experiencing a spike in census. As a result, the time to hire increases. Of course, hospitals need people immediately so they turn to travelers.

Hesitant to Invest in Training

Meanwhile, hospitals are initially hesitant to invest in training inexperienced RNs during the early days of an economic recovery. Economic recoveries are fleeting sometimes. Hospitals need time to build confidence that the recovery is sustainable before making large investments in inexperienced new hires.

Training New-Grads Takes Time

Now, there is no shortage of new-grads and others who are eager to work in these highly specialized units. However, once hospitals decide to hire them, it takes time to train inexperienced RNs to the point they are productive members of the team. During this time, hospitals need experienced travelers to cover the hospital’s needs.

Initiatives Requiring Travel Nurses

Additionally, hospitals tend to carry out strategic initiatives when the economy is strong. For example, there will be more EMR conversions, unit additions and expansions, and various initiatives that require additional staff training. Executing these initiatives almost always requires supplemental staff.

Regaining Balance

All of these factors combined to make 2015 and 2016 record years for the healthcare staffing industry. However, all of the factors are temporary in nature. At a certain point, hospitals are bound to recognize they are utilizing a higher percentage of contingent staff than desired. Then, they pull back on contingent staff utilization and ramp up their permanent staff. All things considered, our view is that we are in the midst of such an adjustment and it is the primary driver of reductions in travel nursing demand.

Travel Nurse Demand Reduction Is Not The Only Factor

The question still remains, how large are the demand reductions for travel nurses? On one hand, we have recruiters and travel nurses sharing experiences that indicate the demand reduction is very significant. We also have our own discussions with many different staffing company executives indicating the reduction is significant.

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On the other hand, we have AMN and Cross Country speaking as though the reductions are minor. We also have some financial evidence from Cross Country and AMN which gives the impression the reduction was minor in the first quarter of 2017. For example, Cross Country’s nurse and allied business division grew 8% year-over-year. AMN’s grew 5%. Meanwhile, AMN’s travel nurse division grew 8% on it’s own. They set an all time revenue record.

The Impact of the Managed Service Provider Model

So what gives? We believe the answer involves the expanding adoption of the Managed Service Provider (MSP) model in the healthcare staffing industry. For those who aren’t familiar, an MSP is a healthcare staffing company that signs an exclusive contract with a healthcare employer to provide the employer with 100% of the employer’s contingent staff in various healthcare fields.

The MSP “sub-contracts” with other agencies to help them fill all of the employer’s job openings. In addition, the MSP typically provides a software platform to help all parties manage the process. For the employer, this is much more efficient than working with many different different agencies in an unorganized fashion.

Growth of MSP Adoption in Travel Nursing

The healthcare industry was slower to adopt the MSP model than others. However, adoption rates have increased dramatically in recent years with AMN and Cross Country leading the way. For example, in 2008, only 1% of AMN’s consolidated revenue came from MSP contracts. By 2016, it was up to 35%.

MSP adoption for the travel nursing  and allied segments has been growing especially fast. In 2014 43% of AMN’s revenue in this segment came from MSP contracts. It was over 55% in the first quarter of 2017. It was over 60% of the revenue for AMN’s travel nursing business alone.

In the first quarter of 2017, AMN won MSP contracts that were worth $60 million. Perhaps more importantly, all of their contracts were net new MSP users. This means the employers weren’t already using an MSP. This verifies that the market for MSPs is continuing to expand.

Cross Country’s experience with MSPs is quite similar. Their MSP business accounts for 34% of their travel nursing and allied revenue. They won 24 MSP contracts in 2016 and have already won 19 in the first quarter of 2017. 38 of the 43 contracts they’ve won over the last 2 years have been net new MSP users.

Travel Nursing MSPs Capture Market Share

So what’s the big deal?! Well, both Cross Country and AMN assert that their “fill rates” are higher on their MSP contracts. This means they fill a higher percentage of their MSP job orders with their own travelers than when the orders come through a VMS, third party, or direct relationship. So essentially, the MSP model allows these companies to increase their market share.

The reason is that the MSP gets the first opportunity to fill the job orders. They’re the ones who receive the job orders first. Moreover, they typically give themselves a 5 to 10 day lead on filling the orders. That’s a huge advantage in the healthcare staffing industry.

The advantage strengthens when demand is reduced and the number of job orders decreases. Here is how Susan Salka put it in AMN’s quarterly conference call:

During the quarter and currently, our fill rates are rapidly increasing, offsetting the lower demand. As we mentioned before, our MSP direct fill rates rise during periods of slower demand, shielding us to some extent from these events.

Meanwhile, Ralph Henderson said that AMN’s fill rates were up over 5% primarily driven by their MSP wins and their MSP clients. Moreover, he said their fill rates are still 10% lower than they were at their peak.

This is how the MSP model disproportionately affects many of the small to mid-sized companies in the industry. Essentially, the smaller companies and the travelers who work with them are experiencing a slightly more depressed version of the market. Unfortunately, it’s difficult to quantify how big of hit the smaller companies are taking.

How Is All Of This Affecting Travel Nursing Pay Rates?

With job orders down and the large MSPs gaining market share, it’s reasonable to assume that travel nursing bill rates are also down. If travel nursing bill rates are down, then it’s fair to assume that travel nursing pay packages are also lower. Many in the travel nursing community are sharing stories that verify a decline in pay. Consider the quote below:

I haven’t taken any contracts because they are totally low balling!!! My normal take home in the least has been $2200. I’ve been offered anywhere between $15-1700 these days. Total slap in the face.

However, other travelers are sharing stories that indicate the opposite. Consider the quote below:

I guess it depends on the specialty. I haven’t had trouble finding jobs. I get more than $2,000 in take home pay.

What Travel Nursing Companies are Saying?

Given these opposing accounts, it is difficult to tell whether or not the overall market has experienced a pay reduction. However, it would appear as though bill rates have continued to increase.

Both AMN and Cross Country stated that their ability to grow revenue despite a reduction in demand during the first quarter of 2017 was the result of higher prices. For them, prices are bill rates. Both companies stated they realized price increases of 3% to 5% for their travel nursing and allied divisions. Susan Salka indicated that their price increase was in line with overall nurse wage growth.

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Meanwhile, Staffing Industry Analysts published a synopsis of results based on a survey of travel nursing companies they conducted. 21 companies responded to the survey. These companies accounted for $2.9 billion in revenue which accounts for 68% of the US travel nurse market.

The survey found that the aggregate bill rate for RNs, LPNs and Surgical Technicians was $73.88 in 2016. It’s safe to assume the average bill rate for RNs was a little higher than the aggregate bill rate for all 3 modalities.

The survey also found that the aggregate gross profit margin was 25.8% for the 21 respondents. Cross Country reported gross margins of 25.8%. AMN reported gross margins of 27.7%.

As you can see, there are many complex factors at play in the travel nursing job market. This is an interesting time for the industry. We’re very much looking forward to the next quarterly reports from AMN and Cross Country. We hope we’re proven wrong about the level of demand reduction!

As always, we’d love to hear your thoughts on this topic. Please share them along with any questions you have in the comments section below!