Mar 23, 2022

Healthcare Staffing Market Update: Pandemic Exacerbates Labor Challenges, Aging Population to Drive Long Term Demand

Healthcare Staffing Market Update Staffing Shortages Persist, Drive Heightened Use of Outsourced Providers

Capstone Partners released its March 2022 Healthcare Staffing Sector Update, reporting that severe labor supply and demand imbalances, heightened clinician turnover, and elevated healthcare utilization have created substantial demand for healthcare staffing providers through early 2022. While the effects of COVID-19 and its variants wane, hospitals are still experiencing drastic workforce shortages. Clinician shortages are widespread but are worse in rural regions and especially acute for specialties such as anesthesiology, neurology, emergency medicine, pathology, and radiology. The anesthesia professional shortage, in particular, is glaring in rural regions. As hospitals and ambulatory surgical care centers face rising surgical volumes, anesthesiologists and certified registered nurse anesthetics (CRNAs) are a critical component to satisfying procedure backlogs and ensuring optimal patient outcomes. However, staffing has remained a significant challenge for healthcare providers, leading to heightened usage of outsourced providers.

Merger and acquisition (M&A) volume in the Healthcare Staffing sector surged in 2021, with deal count doubling from the previous year to 38 transactions announced or completed. Several factors, including prospective capital gains tax increases, drastic nursing and physician shortages, and fatigue among business owners, converged to create a strong dealmaking environment in the past year. Healthy valuations and elevated buyer appetite are expected to fuel transaction activity in 2022, especially as many buyers have regained capacity to evaluate growth opportunities following the frenetic pace of deal activity in the closing months of 2021.

Moving through early 2022, strategic consolidation is expected to sustain a healthy pace, especially as hospitals continue to combat labor shortages and increasingly seek outsourced solutions. Private equity firms have demonstrated increased interest in the sector, attracted to the defensibility of revenues and ability to scale platform investments. Sponsors are actively deploying capital to the sector, evidenced by the eight platform deals in 2021, which surpassed the past three years combined.

“Clinician shortages are widespread but particularly dire in rural, often underserved markets. Rural hospitals, often the primary or sole provider of essential acute care to their communities, desperately need innovative outsourced clinical staffing providers to meet this gap in clinical coverage. This gap is expected to widen due to the graying of America, increase in healthcare utilization, wave of clinicians reaching retirement age, and shift in population migration from cities to rural areas,” said Capstone Managing Director Eric Williams, the lead contributor in the newly released report.

Also included in this report:

  • Capstone’s growth outlook and key drivers of demand for the sector
  • How leading public players have performed through Q4 2021
  • Analysis of sector M&A transaction multiples

Related Transactions

Insights for Middle Market Leaders

Receive email updates with our proprietary data, reports, and insights as they’re published for the industries that matter to you most.