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WIKI ANALYSIS
AMN Healthcare Services, Inc. (NYSE:AHS) is the largest temporary healthcare staffing company in the U.S. by revenue, earning over $1 billion in revenue in 2007.[1] AMN provides temporary staffing of nurses, physicians (locum tenens), and medical assistants, as well as permanent physician placement services.[2] Despite its size in the highly fragmented, $12 billion temporary healthcare staffing industry,[3] AMN holds only 13% of the $6.2 billion travel nurse and allied healthcare market and 19% of the $1.9 billion permanent physician placement market.[4]
Economic downturns threaten temporary staffing companies, as clients prefer permanent staff to temporary professionals.[5] Despite this, long-term growth in healthcare staffing is driven by the rising shortage of healthcare professionals, notably registered nurses,[6] and growing demand fueled by the rapidly aging baby boomers. In 2005, the demand shortfall for registered nurses in the U.S. (or the percentage of total demand that went unmet) was 10%, up from 6% in 2000.[7]
Business Segments
Nurse & Allied Healthcare Staffing (69% of revenue)
This segment provides hospitals and healthcare facilities with temporary professionals, typically for periods of four to 26 weeks.[9] In 2007, nurses accounted for 90% of this segment's placements; since nurses account for around 25% of hospitals' operating expenses, they readily enlist staffing agencies to find temporary nurses.[10] Therapists, medical assistants, and technical staff comprised the other 10% of the Nurse & Allied Healthcare Staffing segment's business in 2007.[11]
Locum tenens staffing segment (27% of revenue)
Locum tenens staffing includes the temporary placement of physicians as independent contractors in healthcare settings. Assignment lengths range from a few days to one year, with the average assignment being a multi-week contract.[12]
Physician permanent placement services segment (4% of revenue)
In this segment, AMN charges hospitals a fee to find permanent physicians, as well as variable fees tied to the physicians' work after their placement.[13] The strong demand for physicians, coupled with the overlap of clients seeking physicians for temporary and permanent assignments, lets AMN cross-sell its locum tenens and permanent placement services.[14] Though this segment only brought in 4% of 2007 revenue, it accounted for 14% of operating income.
Business Financials
Revenue grew 7.6% in 2007 to $1.16 billion. The increase in revenue and net income between 2005 and 2006 is due to the acquisition of MHT in November 2005.[16]
The following four operating metrics are indicative of AMN’s performance in the healthcare staffing industry:
- Nurse and Allied Healthcare Staffing
- Travelers on assignment - the average number of nurses and other medical professionals on assignment during the quarter.
- Revenue per traveler per day - the average revenue each of the segment's professionals earns for AMN in one day, calculated by taking the segment's total quarterly revenue, dividing by the average travelers on assignment, and dividing by the number of days in the quarter.
- Locum Tenens Staffing
- Days filled - the total number of days worked by temporary physicians (where eight hours constitutes a work day).
- Revenue per day filled - calculated by dividing the segment's quarterly revenue by the number of days filled during the quarter.
| 1Q07[17] | 2Q07[18] | 3Q07[19] | 4Q07[20] | 1Q08[21] | ||
|---|---|---|---|---|---|---|
| Nurse & Allied Healthcare | ||||||
| Average travelers on assignment | 7,031 | 7,017 | 6,895 | 6,645 | 6,887 | |
| Revenue per day per traveler | $316.02 | $315.28 | $321.72 | $321.68 | $325.48 | |
| Locum Tenens | ||||||
| Days filled | 52,299 | 57,602 | 57,036 | 51,639 | 52,699 | |
| Revenue per day filled | $1,365.32 | $1,387.75 | $1,337.58 | $1,475.22 | $1,448.85 | |
Key Trends and Forces
Shortage of nurses in the U.S. growing
Between 2000 and 2005, the shortage of qualified nurses in the U.S. increased from 110,800 to 218,800; in 2005, 10% of all demand went unmet as a result of this shortage.[23] As nurses become more and more scarce relative to demand, hospitals and healthcare facilities turn to staffing agencies like AMN to meet their staffing needs. On the other hand, as competition increases for qualified nurses, companies have to offer higher compensation and more attractive benefits to stay competitive. In 2007, $23.9 million of the $35.4-million increase in operating costs for the nurse and allied healthcare staffing segment was due to increases in wages, housing costs, and health insurance costs.[24]
The aging U.S. population needs more medical care
According to estimates from the U.S. Census Bureau, the number of Americans age 65 or over is growing faster than the general population. As a wave of baby boomers hits 65, this growth is expected to outpace growth of people age 64 and younger by as much as four times by the year 2020.[26] Older people require much more healthcare per capita than younger age groups, meaning that the U.S. healthcare industry is having to grow to accommodate the additional demand.[27] As hospitals and healthcare facilities find themselves short of nurses, physicians, and other medical professionals, staffing firms like AMN benefit from the increased demand for trained medical staff.
Competition & Market Share
AMN Healthcare is the largest firm by revenue in the three fastest-growing segments of the healthcare staffing market: travel nurse and allied healthcare, locum tenens and physician permanent placement.[28] In addition to competing with recruiting departments and interim staffing pools of healthcare facilities, some of the company’s main competitors in the sector include: [29]
- Cross Country Healthcare
- CHG Healthcare Services
- On Assignment
- Maxim Healthcare Services Inc.
- Jackson Healthcare Staffing
- Medical Doctor Associates
| 2007, in millions USD | Revenue | Operating Income | Market Share[30] | |
|---|---|---|---|---|
| AMN Healthcare Services[31] | $1,164 | $73.2 | 10.3% | |
| Cross Country Healthcare (CCRN)[32] | $718.3 | $52.0 | 6.4% | |
| On Assignment (ASGN)[33] | $567.2 | $27.6 | 5.0% | |
| Maxim Healthcare Services[34] | $259.0 | N/A | 2.3% | |
References
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Selected Financial Data" Page 22
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Business Overview" Page 6-7
- ↑ Staffing Industry Analysts "Healthcare staffing 2008-2009 forecast, June update"
- ↑ Morningstar Analysis "AMN Healthcare Services 6/30/2008" Page 1
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Risk Factors" Page 13
- ↑ The Marquette Tribute "Nursing Shortage to Worsen" Page 2
- ↑ HRSA "What is Behind HRSA's Projected Supply, Demand, and Shortage of Registered Nurses?"
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Notes to Consolidated Financial Statements" Page 51
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Business Overview" Page 6
- ↑ BMO Capital Markets Healthcare Staffing Forum “Webcast: David Dreyer, CFO, AMN Healthcare”
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Business Overview" Page 7
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Business Overview" Page 7
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Business Overview" Page 7
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" Page 26
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Selected Financial Data" Page 22
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Results of Operations" Page 28
- ↑ AMN Healthcare (AHS) Form 8-K Filed 8/6/2007 "Supplemental Financial and Operating Data" Page 12
- ↑ AMN Healthcare (AHS) Form 8-K Filed 8/6/2007 "Supplemental Financial and Operating Data" Page 12
- ↑ AMN Healthcare (AHS) Form 8-K Filed 10/30/2007 "Supplemental Financial and Operating Data" Page 10
- ↑ AMN Healthcare (AHS) Form 8-K Filed 2/26/2008 "Supplemental Financial and Operating Data" Page 13
- ↑ AMN Healthcare (AHS) Form 8-K Filed 5/8/2008 "Supplemental Financial and Operating Data" Page 12
- ↑ HRSA "What is Behind HRSA's Projected Supply, Demand, and Shortage of Registered Nurses?"
- ↑ HRSA "What is Behind HRSA's Projected Supply, Demand, and Shortage of Registered Nurses?"
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Results of Operations" Page 29
- ↑ HRSA - Nursing Demand Model
- ↑ http://bhpr.hrsa.gov/healthworkforce/reports/nursing/rnbehindprojections/4.htm U.S. Health Resources and Services Administration - Nursing Demand Model]
- ↑ HRSA - Nursing Demand Model
- ↑ AMN Healthcare (AHS) Annual Report 2007 Page 1
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Business Overview" Page 3
- ↑ Market shares are based on a total healthcare staffing industry revenue of $11.3 billion for 2007 - Staffing Industry Analysts "Healthcare staffing 2008-2009 forecast, June update"
- ↑ AMN Healthcare (AHS) Form 10-K FY 2007 "Selected Financial Data" Page 22
- ↑ Cross Country Healthcare (CCRN) Form 10-K FY 2007 "Selected Financial Data" Page 24
- ↑ On Assignment (ASGN) Form 10-K FY 2007 "Selected Financial Data" Page 28
- ↑ Yahoo! Finance
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