Healthcare Details Explained: What is a VMS? What about the MSP?

Both vendor management systems (VMS) and managed service providers (MSP) offer hospitals efficiency improvements in contingency staff management. What are the differences and what do they even do?

A Vendor Management System (VMS) is software as a service that essentially covers subcontractor operative management.

A vendor management system (VMS) is a technology solution that provides a web-based application to help hospitals obtain and manage its contingency staff.  Since a VMS does not recruit candidates, it is considered vendor neutral. A system that recruits candidates or manages applicants is called an Applicant Tracking System (ATS).

Consequently, hospital administrators evaluate candidates on their own. This DIY model could be an asset to hospitals that do not have hard-to-fill vacancies or require direct communication from a staffing agency.

A VMS offers several benefits, including:

  • Order distribution
  • Consolidated billing
  • Detailed reporting capabilities

A VMS tends to be most effective when the supply of candidates outnumbers open jobs. Today, competition for quality candidates is increasing while the supply of qualified labor is shrinking. This makes staffing challenges are more complex.

A Managed Services Provider (MSP) in Healthcare is a service as a solution. Basically the party that manages subcontractors and utilizes a VMS. An MSP is almost never vendor-neutral.

In contrast, a managed service provider, (MSP) is a service solution that helps source and manage the short-term staffing needs of a facility through one central business partner. The MSP model tends to be a predatory and cost-ineffective tool for hospitals facing severe staffing shortages, fluctuations in its staffing needs, or an EMR/EHR conversion.

An MSP typically covers these duties for your facility:

  • Recruit and onboard candidates
  • Consolidate contracts into one master agreement
  • Streamline and simplify inefficient processes
  • Increase vendor visibility
  • Leverage data to drive the planning process

Many MSPs have developed their own in-house technology platforms or have even partnered with a VMS to create a “one-stop shopping” experience for their hospital partners. Many healthcare staffing experts agree that the MSP model is the wave of the future, despite being the exact audience that pays for these services from their bottom line.

Managed Service Providers (MSP) utilizing Vendor Management Systems (VMS) or Workforce Management Systems have been a part of U.S. commerce for decades, starting with Ford Motor Company and moving across all market verticals.

The hilarious anecdote of “you can have any color car you want as long as it’s this one,” will make this resonate in a whole new way.

These systems can provide operational and financial efficiencies unavailable to firms not deploying their utilization.

Wait, didn’t the definition of VMS mention “vendor-neutral” just now? The MSP is how the vendor bias and favoritism comes into play.

The need for a MSP can grow when demand for services exceeds supply. The U.S. nursing shortage is case in point. The ability to aggregate as many possible vendors for human capital is a great advantage of this system. The “fill rate”, or ability to reduce hospital vacancies, assists the hospital in revenue generation, adequate staffing ratios, and relief from some of the “fixed-costs” associated with full-time employees.

This fixed cost is called the “burden” in temporary staffing.

When supply is scarce and demand is high, aggregating as many vendors as possible with uniform terms and conditions is an most effective model.

Without such systems in place, the time required to manage, pay, and orchestrate labor demands while working independently with a large vendor pool is expensive and inefficient. This is where operational efficiencies of MSPs are most valuable. Leveraging multiple vendors on one side of the MSP, but communicating singularly on the other side for hospital management. The larger number of vendors funneled through the MSP mathematically increases the odds of meeting the high demand of healthcare workers.  

Financial leverage can be realized as contract talks can be standardized across all vendors. Standardizing rates simplifies financial planning for the client. Spreading demand across multiple vendors provides pricing leverage that can’t be realized working with one supplier at a time.

Wow just imagine the non-compete population with that level of standardization and distribution! Your facility may never be able to hire that provider without the subcontractor again…

The healthcare industry has been a late adopter of many technology advances (see Practice Fusion’s contribution to the Opioid Crisis in the US thanks to late adopters of EHR software) so it is important to remain aware and not be taken in by predatory business models and allow the trickle-down to impact community healthcare.

The healthcare industry is using the MSP model and staffing agencies still play into the VMS to place candidates, for now.

One of the first start-ups to engage the contract labor spend of hospitals in the US was Shiftwise, created in 2003 in Portland, Oregon and was originally known as Origin, Inc.

A later player to the game was Hospital Corporation of America, a for-profit system. HCA has long known the value of managed services and has utilized HealthTrust purchasing group since 1999. In 2011, HCA launched Parallon, another subsidiary designed to offer workforce management solutions throughout its expansive network of hospitals. In 2016, Parallon rebranded its workforce management solution to better identify with HCA’s original GPO subsidiary, and is now known as HealthTrust Workforce Solutions.

FocusOne Solutions is another provider in the VMS/MSP space serving hospitals for several years. FocusOne Solutions is a sister-company to Aureus Medical Group, one of the nation’s largest healthcare staffing firms with more than 30 years of experience.

Medefis, yet another provider of hospital vendor management solutions, also founded in 2003, owns significant market share.

Although there are several other vendors for vendor management and workforce solutions, the companies listed above comprise over half the agreements in the healthcare staffing world.

What is the “incestuous nature” of these companies? To explain, it is important to understand in simple terms the relationship a VMS/MSP provider has with the hospital.

  1. The VMS/MSP is the sole gatekeeper for any agency that wishes to do business with the hospital.
  2. The hospital is typically forbidden to work with individual vendors; as such vendors must only work through the VMS/MSP provider.
  3. Every staffing firm is 100% dependent on the VMS/MSP to provide their services.
  4. The VMS/MSP is the repository for all staffing orders, and is the first to receive all orders for labor across the system.

The recent spate of acquisitions of VMS/MSP vendors by staffing firms presents an interesting question. Why would a healthcare staffing firm have a desire to get into the VMS software business? A review of the aforesaid four items holds the key and prompts further questioning. Who owns whom? What does vendor neutrality mean?

Let’s take a closer look at the companies we’ve previously mentioned.

HealthTrust Workforce Solutions – If you are a staffing agency wanting to provide services to a HCA hospital, get ready to go through HealthTrust. HCA brilliantly put this together in-house as a cost reduction and operations reduction play.

Shiftwise – As one of the early software solutions in the Healthcare space, Shiftwise accumulated hundreds of contracts with hospitals across the country. In a brilliant move, AMN purchased them in late 2013.

Medefis – This company was founded in 2003 and had acquired many contracts, specifically in the healthcare staffing space. As such, Medefis became a strategic target of AMN and was purchased in 2015.

FocusOne Solutions – This Omaha Nebraska firm is also a VMS/MSP driving contracts in the healthcare staffing space. They are a sister company to Aureus Medical Group, one of the nation’s largest healthcare staffing firms.

Let us revisit the vendor-neutral claim that keeps coming up with agency owned MSPs and VMS providers.

When the VMS/MSP providers have no affiliation with staffing firms, their sole responsibility is to provide seamless transactions between the hospital client and all subcontracted vendors. Now that the largest staffing firms have acquired these popular systems they in essence “own” every order that is generated by the hospital client. There is speculation, but no proof that these staffing firms are taking advantage of having total access to every order before any other company “sees” these opportunities.

Actually since that article source was written, there’s proof, and so much of it.

True transparency would be the simultaneous release of all orders to all vendors including the staffing firm that owns the VMS/MSP. 

It is an interesting exercise to review how revenues have grown or diminished since the largest healthcare staffing firm in the United States, AMN, has made their acquisitions.

According to Harris Williams & Co., a research and M & A firm, the healthcare staffing industry was expected to finish 2016 with approximately 7% in growth year over year. This follows several prior years of single digit growth.

Considering single digit growth in the industry AMN healthcare has provided the following staffing revenue increases, both prior to, and then after VMS/MSP purchases.

  • 2011 to 2012   7.5%
  • 2012 to 2013  6.1%
  • 2013 to 2014  2.4%
  • 2014 to 2015  41%
  • 2016 QTR 3 To date 33%

If the entire market is growing at around 7%, and AMN is growing at 30% to 40%, it might be inferred that the pie is getting smaller for all other staffing agencies in this space. An argument can be made that this growth can be attributed to acquisitions, or sheer management superiority. The reader will have to be the judge.

The good news is that staffing firms that have been “blocked” from direct access to these clients can now present their own VMS/MSP solutions to compete head to head with the largest in the industry. A sea change is coming in this industry, and it will be driven by technology.

RapidHire Tool is a product inspired by the need to remove this model from the healthcare staffing agency and stop sacrificing healthcare providers and communities for profit.

It’s time to switch to a software that provides the operational improvements, capability to bring these workflows in-house, communicate directly with your workforce and make decisions based on valid information. Reach out today to find out why we care so much about this and what we’re doing to help the industry move forward.

Source 1. Source 2.


RapidHire Tool is a mobile-friendly web-based application for recruiters and staffing agencies.  This pay package calculator allows customizable and accurate pay package calculations that managers can control, recruiters can access anywhere, and RapidHire expedites the entire offer process to increase SPEED to market – and we all want to feed our hungry recruiters with good PBJs.

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