Locum Tenens Drives Healthcare Staffing Industry M&A, Technology-Enabled Providers Close High-Caliber Funding Rounds
Healthcare delivery organizations continue to struggle with clinician shortages fueled by the graying of America, clinician burnout, and lack of new graduates necessary to not only meet increasing demand but replace the oncoming wave of clinicians reaching retirement age. The pandemic exacerbated many of these long-term trends, placing an immense burden on healthcare professionals and delivery organizations—creating a dire need for outsourced labor solutions. Heightened levels of demand for healthcare services related to COVID-19, staff burnout, and talent scarcity propelled Healthcare Staffing sector revenue to $39.8 billion in 2021, an increase of 85% year-over-year (YOY), according to Staffing Industry Analysts.1 The Travel Nurse segment drove a substantial portion of this gain, with revenue rising 150% YOY as hospitals faced severe capacity constraints amid COVID-19 case surges.
As COVID-related hospitalizations have subsided, healthcare systems have seen a gradual improvement in capacity. This has contributed to moderated growth outlooks for select Healthcare Staffing segments, largely driven by a projected normalization of bill rates. The Travel Nurse segment is forecasted to experience a 20% decline in revenue YOY in 2022, with Per Diem and Allied Health expected to both record 10% declines. However, the Locum Tenens segment is projected to experience healthy revenue growth in 2022 of 7% YOY. The severe lack of physicians, which could lead to a shortage of up to 124,000 medical doctors by 2034 (Association of American Medical Colleges2), and healthcare delivery organizations’ search for labor flexibility and desire to offer enhanced access to care are expected to be key drivers of Locum Tenens segment growth. In addition, expanded use of advanced practice professionals (APPs) adds another demand driver for the segment, with nearly 74% of healthcare leaders planning to expand APP coverage, according to LocumTenens.com.3 Moving through the second half of 2022 and into 2023, privately-owned staffing companies are expected to see sustained buyer and investor interest as sector players look to bolster competencies and financial buyers search for recession-resilient plays.
Healthy Combination of Strategic and Financial Buyers Drive M&A Volume
M&A activity through year-to-date (YTD) 2022 has been driven by an equal mix of strategic and financial buyers, each accounting for 50% of transaction volume. Total deal volume of 18 transactions through the first half of the year (July 19) has trailed the prior year by 32%. Despite a YOY decline, buyer appetite remains high for quality staffing providers with proven management and recruiting teams, high client and clinician retention, technology-enabled capabilities, as well as the ability to fill niche, specialty positions. Strategics have actively consolidated to scale and bolster their suite of services provided to healthcare delivery organizations. In the financial buyer universe, private equity has continued to develop platforms in the sector, attracted to long-term favorable sector dynamics. Cornell Capital and Trilantic North America have emerged among the most active sponsors in the space and recently added to their platform holding company Ingenovis Health. In April, Ingenovis acquired leading locum tenens healthcare staffing provider VISTA Staffing Solutions for an undisclosed sum (see more details below). Several additional notable M&A transactions are outlined below.
- Medical Solutions Acquires Matchwell (July 2022, Undisclosed) – Medical Solutions has acquired Matchwell, a technology-enabled nursing and allied healthcare jobs marketplace. Terms of the transaction were not disclosed. Matchwell leverages artificial intelligence (AI) to assist healthcare organizations in efficiently utilizing their existing workforces and attracting new clinicians.
Medical Solutions is a leading healthcare staffing provider that focuses on the placement of travel nurses, allied healthcare professionals, interim clinical leaders, and non-clinical professionals in contingent and permanent positions. The addition of Matchwell significantly expands Medical Solutions’ total workforce offerings and broadens its existing suite of services in Per Diem and Local markets.
- Ingenovis Health Acquires VISTA Staffing Solutions (April 2022, Undisclosed) – Ingenovis Health, a portfolio company of Cornell Capital and Trilantic North America, has acquired VISTA Staffing Solutions from Envision Physician Services. Terms of the transaction were not disclosed. VISTA is a premier locum tenens healthcare company offering an extensive network of physicians and advanced practitioners. It provides staffing solutions to hospitals, clinics, medical practices, and government agencies. VISTA expands Ingenovis’ capabilities in physician and advanced practitioner staffing solutions and further diversifies its service offerings.
The addition of VISTA enhances Cornell Capital and Trilantic North America’s sector penetration, adding to the Ingenovis platform formed in 2021 by the combination of Trustaff, Fastaff Travel Nursing, U.S. Nursing Corporation, and CardioSolution. The acquisition of VISTA also highlights the strong demand for high-quality locum tenens players, a segment of the market expected to experience robust growth in 2022. “Against the backdrop of a turbulent Healthcare market, the healthcare systems are in strong need of locum tenens solutions,” said Andrea Nelson, Chief Operating Officer of VISTA, in a press release.4
- LJC Investments Acquires Alto Healthcare Staffing (January 2022, Undisclosed) – LJC Investments V, an investment vehicle operated by Littlejohn Capital, has acquired Alto Healthcare Staffing for an undisclosed sum. Founded in 2003, Alto’s core services include clinical temporary staffing for nursing homes and long-term care facilities, travel nursing for hospitals, and medical assistance to doctors’ offices. With Littlejohn’s backing, Alto will be able to accelerate its growth and build on its existing relationships with healthcare providers.
Anecdotally, dealmakers are noting that middle market valuations for healthcare staffing providers have remained at healthy levels. However, buyers are increasingly assessing what normalized EBITDA looks like, particularly for travel nursing businesses which have seen a surge in earnings on the heels of heightened bill rates. Staffing providers that can maintain steady earnings growth are poised to attract M&A interest through the remainder of 2022 and into 2023.
Bill Rates Normalize but Remain Above Pre-Pandemic Levels
The surge in bill rates for travel nurse professionals has been a hallmark of the pandemic era Healthcare landscape. Notably, at the peak of COVID-19, pay for select travel nursing positions reached up to $10,000 per week, according to MSG Staffing.5 Bill rates have since moderated, although remain well above pre-pandemic levels. Travel nursing pay in the last 90 days has averaged $2,667 per week which represents a decline from February 2022 of $3,334 per week, according to Vivian Health.6 However, compared to the average travel nurse's weekly pay of $1,786 in 2019 (Trusted Health7), the current pay rates, which many industry participants believe are stabilizing, represent a sizable increase over pre-pandemic rates. Leading public and private healthcare staffing players have reaped significant revenue growth due to elevated bill rates and surges in demand coinciding with COVID-19 caseloads.
AMN Healthcare (NYSE:AMN) and Cross Country Healthcare (Nasdaq:CCRN) recorded Q1 consolidated revenue increases of 75% and 140% YOY, respectively, according to their earnings releases.8,9 The supply-constrained environment has fueled the rapid sales growth of top sector players as healthcare job openings stand at 2.9x the number of monthly hires, according to AMN. However, the sector has come under pressure in recent months by lawmakers seeking greater transparency into billing rate practices. The Travel Nursing Agency Transparency Act, a bill announced on June 6, calls for a study on the business practices of healthcare staffing firms during the pandemic. While bill rates rose substantially during COVID-19, sector participants have pointed to the supply-driven nature of these rates, particularly for regions that experienced devastating pandemic impacts. Bill rates, which have declined in the recent quarters, are now stabilizing. AMN and Cross Country expect stabilized rates to remain approximately 30% above pre-pandemic levels. A tight labor market and inflation make it unlikely rates will revert to 2019 levels. Additionally, burnout will continue to be factor fueling clinician shortages. Notably, 63% of nurses are considering quitting the profession in the next five years, an increase from last year's survey where 43% of nurses were considering quitting, according to Vivian Health.10 As employee attrition becomes increasingly important, healthcare staffing firms are expected to continue to invest in solutions to boost recruitment productivity and clinician retention.
Capital Flows to Technology-Enabled Healthcare Staffing Players
Technology-enabled healthcare staffing firms have garnered heightened investor interest in 2022. Sector players that can offer automation, efficiency, and cost savings in the hiring and recruitment process have proven invaluable in the pandemic era. Capital has flooded the Healthcare Staffing space, largely to innovative technology-enabled providers. Through YTD 2022, $571.8 million in venture capital (VC) and private equity growth investment has been allocated towards the sector—exceeding the full year 2021 level of $448 million, according to PitchBook and Capstone Partners. Notable recent venture capital deals in 2022 are outlined below.
- Nomad Health Raises $105 million in Later Stage Venture Capital (June 2022) - Nomad Health, developer of an online healthcare staffing platform, has raised $105 million in later stage VC funding led by Adams Street Partners and Icon Ventures. The new funding will be used to expand Nomad's digital marketplace for temporary healthcare jobs to serve allied healthcare professionals in addition to travel nurses. Nomad's user base consists of over 250,000 healthcare workers who have submitted ~500,000 job applications through the platform, according to a press release.11 The infusion of capital represents the value investors are finding in sector players offering digital solutions to healthcare staffing.
- IntelyCare Raises $115 million in Series C Venture Capital (April 2022) - IntelyCare, a provider of an intelligent healthcare workforce management platform, raised $115 million in a Series C funding round led by Janus Henderson in April—bringing IntelyCare's post-money valuation to $1.1 billion. Since IntelyCare's Series B funding round in February 2020 ($50 million), its annual revenue has grown over 850%, according to a press release.12 IntelyCare utilizes its AI-based platform to match nursing professionals with open positions. Notably, client demand in 2021 nearly tripled from the previous year. IntelyCare plans to use the new funding to expand its geographic presence and invest in its AI capabilities and data science technology.
To discuss sector M&A activity, provide an update on your business, or learn about Capstone's wide range of advisory services and Healthcare Staffing sector knowledge, please contact Capstone's Co-Head of Healthcare Investment Banking Eric Williams.
Staffing Industry Analysts, "SIA PROJECTS THAT AT LEAST ONE HEALTHCARE SEGMENT WILL CONTINUE TO SEE GROWTH FOR 2022," https://www2.staffingindustry.com/Editorial/Healthcare-Staffing-Report/May-12-2022/SIA-projects-that-at-least-one-healthcare-segment-will-continue-to-see-growth-for-2022, accessed July 21, 2022.
Association of American Medical Colleges, “The Complexities of Physician Supply and Demand: Projections From 2019 to 2034,” https://www.aamc.org/media/54681/download, accessed August 22, 2022.
LocumTenens.com, “Client Survey Report July 2022,” https://www.locumtenens.com/media/4qcd0yjs/innovation-flex-report.pdf, accessed August 22, 2022.
PR Newswire, "Ingenovis Health Acquires VISTA Staffing Solutions," https://www.prnewswire.com/news-releases/ingenovis-health-acquires-vista-staffing-solutions-301534471.html, accessed July 25, 2022.
MSG Staffing, "The Direction Of Travel Nursing Pay In 2022 And Beyond," https://msgstaffing.com/the-direction-of-travel-nursing-pay-in-2022-and-beyond/, accessed July 25, 2022.
Vivian Health, "Travel Nurse salaries in the United States," https://www.vivian.com/nursing/travel/salary/, accessed July 25, 2022.
Trusted Health, "2019 Travel Nurse Compensation Report," https://assets-global.website-files.com/ 5c5b66e10b42f155662a8e9e/5d72b71e8c31f4266033ac46TrustedHealth-Nurse-Compensation-Report-2019.pdf, accessed July 25, 2022.
AMN Healthcare, " AMN Healthcare Announces First Quarter 2022 Results," https://ir.amnhealthcare.com/press-releases/press-releases-details/2022/AMN-Healthcare-Announces-First-Quarter-2022-Results/, accessed July 21, 2022.
Cross Country Healthcare, " CROSS COUNTRY HEALTHCARE ANNOUNCES FIRST QUARTER 2022 FINANCIAL RESULTS," https://ir.crosscountryhealthcare.com/news-releases/news-release-details/cross-country-healthcare-announces-first-quarter-2022-financial, accessed July 21, 2022.
Vivian Health, " The State of the Healthcare Workforce 2022," https://hire.vivian.com/reports/state-of-the-healthcare-workforce-2022, accessed July 25, 2022.
Business Wire, " Nomad Health Raises $105 Million to Expand to New Specialties and Address Healthcare Staffing Crisis," https://www.businesswire.com/news/home/20220627005211/en/Nomad-Health-Raises-105-Million-to-Expand-to-New-Specialties-and-Address-Healthcare-Staffing-Crisis, accessed July 25, 2022.
Business Wire, " IntelyCare Secures $115 Million Series C Financing Led by Janus Henderson Investors," https://www.businesswire.com/news/home/20220406005201/en/IntelyCare-Secures-115-Million-Series-C-Financing-Led-by-Janus-Henderson-Investors, accessed July 25, 2022.
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