Healthcare Staffing Report: May 11, 2017

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1Q17 healthcare staffing results recap: Conditions remain conducive to growth

While our industry forecast projects growth in the US healthcare staffing market to decelerate to 7% in 2017 from its double-digit pace over the past two years, this is still a historically good time to be in the business of providing healthcare workers. Such was the overarching takeaway from the first quarter earnings releases of the two largest suppliers in the US.

AMN Healthcare (NYSE: AMN) reported $495.2 million in revenue for 1Q17, up 5.8% year over year. Its largest segment, nurse and allied solutions, was up 5% from the prior year, driven by 9% growth in travel nursing and 14% in allied health staffing. Locum tenens revenue was flat year over year at $102.8 million, as a 5.0% decline in volume was offset by a 5.4% increase in revenue per day filled. The Other Workforce Solutions segment — including VMS, interim leadership and workforce optimization — grew 17% from 1Q16, to $78.8 million. Gross margin reached 32.7%, an improvement of 20 basis points year over year.

Looking ahead to the second quarter, AMN guided revenue to fall in the range of $486 million to $492 million. This implies year-over-year growth of 3% to 4%, or 7% to 8% excluding the impact of the more volatile labor disruption revenue, of which AMN had a significant amount in 2Q16. The company also anticipates the typical seasonal sequential decline in travel nurse business as compared to the first quarter, partially offset by growth in all of its other lines of business.

First-quarter revenue was up 5.6% year over year, to $207.6 million for Cross Country Healthcare (NasdaqGS: CCRN). Nurse and allied staffing revenue swelled 8.5%, to $183.1 million, more than offsetting a 12.2% reduction in physician staffing, which fell to $21.5 million. While pricing improved in both segments, results in the physician staffing business suffered due to a 10.7% year-over-year drop in total days filled. The company’s overall gross margin contracted by 30 basis points from 1Q16, to 25.7%, as it boosted the compensation offered to healthcare professionals in order to fill openings at certain large accounts.

Assuming a year-over-year growth rate of 4% to 6%, Cross Country expects revenue in 2Q17 to be in the range of $207 million to $212 million. The anticipated increase will be driven by “high single digit” growth in nurse and allied staffing revenue through improvements in both pricing and volume. Gross margin is seen in the range of 26.0% to 26.5%, with the continuing effect of the previously mentioned increase in compensation costs bringing a negative impact of 30 to 40 basis points.

Though the prospect of repeal and replacement of the Affordable Care Act is something of an overhang for the healthcare staffing industry, particularly now that a form of the bill has passed the House of Representatives, management of both firms downplayed the likely impact on their businesses during their respective analyst calls. Cross Country’s Bill Grubbs pointed to the possible curtailment of state Medicaid program expansion and coverage of preexisting conditions as potentially worrisome, but predicted that the legislation would probably not emerge from the Senate in its current form. Susan Salka of AMN noted that a review of their demand trends over the past three years showed very little difference in results between those states that expanded Medicaid versus those that did not.

As the healthcare staffing industry is particularly exposed to the legislative and regulatory impact from healthcare reform and other sources, we continue to closely monitor developments and assess the potential effect on future demand.

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