Financial pressures stemming from inflated labor costs and the No Surprises Act have spelled trouble for staffing companies like American Physician Partners and Envision Healthcare.
As companies adapt after the COVID-19 pandemic-era business challenges, some are relying on strategies like consolidation and exclusive partnerships to stay competitive.
The No Surprises Act, which took effect Jan. 1, 2022, prohibits out-of-network bills for services rendered at in-network facilities. The measure severely affected the bottom line of staffing companies providing out-of-network physicians to hospitals.
Staffing organizations are also trying to keep up with increased demand for physicians as health systems struggle to replace doctors retiring or leaving the workforce. By 2034, the U.S. is expected to have a deficit of between 37,800 and 124,000 physicians, according to 2021 data from the Association of American Medical Colleges.
Here’s how companies are working to grow their physician staffing businesses amid labor shortages and marketplace strains.
AMN Healthcare Physician Solutions
In October, San Diego-based staffing company AMN Healthcare merged its Merritt Hawkins and Staff Care brands to create AMN Healthcare Physician Solutions.
The combination reflects hospitals’ growing need for both locum tenens and permanent physician roles, and makes it easier for health systems to use the company as a “one-stop shop” for staffing needs, said Cody Futch, vice president of recruiting. Having temporary and permanent staff under the same brand aids the transition of physicians from locum tenens positions to full-time roles, which health systems are increasingly interested in, he said.
Annually, the company oversees around 3,000 physician recruiting assignments with health systems, placing staff in both in-person and telehealth settings. AMN has had to accommodate more requests for advanced practice providers such as certified registered nurse anesthetists, assistant physicians and nurse practitioners to supplement physician workforces.
Despite business rebounding in 2021 and 2022 following the end of pandemic-related hiring freezes and layoffs, physician recruitment growth slowed this year, Futch said.
“[Demand] this year has leveled off a little bit more, probably because people were recruiting so aggressively the last couple of years,” he said. “That has caused some health systems to try to do more recruiting internally.”
For the third quarter, the publicly held company reported that revenue of its physician and leadership solutions business was $160 million, down 9% year-over-year. Revenue from locum tenens placements, which comprised the majority of the segment’s profit, fell 6% year-over-year.
Tacoma, Washington-based Sound Physicians is hoping its focus on skilled physicians and value-based care will attract more business and offset recent setbacks.
“2022 was a disaster financially, not only for hospitals, but for large-scale medical groups,” said Dr. John Birkmeyer, president of its medical group. “For the first time in our history, we had a material percentage of our hospital partners that were unable to pay us because they were undergoing or at risk of bankruptcy.”
While the company was not greatly affected by the No Surprises Act because its providers have always been in-network, other factors like a 10% increase in physician compensation due to inflation and doubling of interest rates on debt were significant hurdles, Birkmeyer said.
One element the company uses to stand out is its physician leadership training, with the mission of providing doctors who help health systems achieve shorter lengths of stay, lower readmission rates and better patient outcomes.
“Physicians want to work for companies that are delivering value in the healthcare system,” said CEO Jeff Alter. “We create an organization where our clinicians can go back to doing medicine as opposed to administrative tasks.”
Sound Physicians aims to be part of hospitals’ clinical model and assist physicians with meeting their risk-based contracting goals by advocating for evidence-based quality practices like multidisciplinary rounds and implementing technology platforms that enable value-based care workflows, Alter said.
The company has hired nearly 950 physicians this year, he said. Pre-pandemic, a strong year of growth was marked by recruiting for 500 positions.
Partially owned by UnitedHealth Group’s Optum Health, Sound Physicians oversees more than 4,000 doctors in emergency medicine, critical care and anesthesia who practice at more than 400 hospitals.
Medstaff National Medical Staffing
Medstaff National Medical Staffing is focusing on its partnership program where health systems and individual facilities can work with the company to plan for future workforce gaps.
Under the partnership, Medstaff conducts annual and quarterly forecasting of a hospital’s staffing levels, helping facilities budget and recruiting physicians well in advance of upcoming retirements or maternity leaves, said CEO Andrea Boehme-Hernandez. The program also includes comprehensive candidate vetting and matching doctors to hospitals based on the working environment they desire.
“While we have a huge amount of our revenue and our staff that works on those last-minute locum tenens calls, [for] facilities that have the partnership set up, we're in a better position to serve them and they're in a better position to reap the benefits,” Boehme-Hernandez said.
The Cary, North Carolina-based company has seen a threefold increase in annual revenue in each of the past three years.
“We were very fortunate that we didn't have a lot of loss in revenue,” she said. “A lot of facilities stopped doing elective surgical procedures and it caused a disruption in the locum tenens companies that were providing those specialists to them.”
Around 30% of Medstaff’s physicians are filling locum tenens roles as their full-time career, though the majority are covering shifts on a part-time basis.
In the months following its May filing for Chapter 11 bankruptcy protection, Nashville-based Envision Healthcare restructured its operations and reduced its $7.7 billion in debt by 70%.
The bankruptcy filing was preceded by a series of financial struggles, including several payer lawsuits, rising labor costs and downstream effects of the No Surprises Act.
An Envision spokesperson declined to comment.
Envision received court approval to split into two companies. Envision Physician Services will provide doctors to hospital emergency rooms, intensive care units and birthing suites, while Amsurg will staff outpatient surgery centers specializing in gastroenterology, ophthalmology and orthopedic care.
On Dec. 1, Chief Financial Officer Henry Howe will take over as the company's interim CEO.
American Physician Partners
Debt paired with headwinds from the No Surprises Act proved insurmountable for American Physician Partners.
Since announcing plans to file for Chapter 11 bankruptcy in July, the staffing company has transitioned its medical service contracts to other organizations. It filed for bankruptcy in September and is in the process of liquidating its remaining assets.
Founded in 2015, the company at one time had around 150 active contracts with emergency departments and hospitals, and staffed more than 2,500 physicians, the company said in court documents.
Community Health Systems in Franklin, Tennessee, hired 500 doctors formerly employed by American Physician Partners. Other medical staffing firms, including Vituity, U.S. Acute Care Solutions and TeamHealth, hired the rest of the physicians.
American Physician Partners did not respond to requests for an interview.