VMSs and MSPs: Friend or Foe
By Dr. Ellen Kuhnert
What are VMSs and MSPs?
The industry actually has changed quite significantly over the last 15 years. The MSP component is rather new in comparison to the VMS. The definitions of both of those has changed over the years. Back in the early 2000s in healthcare a VMS company, a Vendor Management System, was really a company that came in and managed the clinical contingent labor, the RFP process, pricing, vendor selection, vendor contracts, compliance documentation, sort of all of the pieces that went around that they took that off of the health care system or facility’s plate and managed that themselves. In many instances, in the beginning, it was very much and still a manual process. Things were done on pencil and paper such as signing time cards and all of that stuff. But it became apparent to those that were doing vendor management for health systems and hospitals that there needed to be some technology to back it all up.
The original technology were offshoots of access databases that could sort of keep track of all this information and that was the birth that began what we know of today as a vendor management system or VMS. When most people today refer to a VMS, they’re referring to the piece of technology that a master service provider or an agency uses now to manage the vendors or the hospitals they serve. So the MSP concept was born out of that. Initially, when VMS companies were working with hospitals and health systems, hospitals were still doing a lot of manual work themselves.
Their staff office was still calling for the staff and booking staff, managing time cards, managing invoices, which was still being done at the hospital level. Out of demand from the clients, the VMSs were pushed into coming up with a technology to not only handle the backend of these roles but the front end as well, the MSP role.
In addition to taking that piece of the equation out of the staff’s hands so that an MSP, master service provider. The MSP provides the service that manages the entire contingent labor process from start to finish. From the RFP and contracting to the point of service where a contingent nurse is working with a hospital and their agency is billing the hospital, and the invoices are taken care of and the vendors are getting paid.
So now when you say MSP, it’s all-encompassing because MSPs have their own VMS that they have deployed for all of their clients. 95% deploy some kind of tech that helps them and their facilities manage the back and forth and the go-between that happens in that process, but the MSP really now has fully encompassed what we used to think about as a VMS.
Who do VMSs and MSPs Help?
The really help hospitals and health systems take that daily transactional work off their plates that has to happen in order to work with a contingent labor provider, a travel company or a per diem company. In addition to that, they’ve really taken over the responsibility for managing a lot of the credentialing, onboarding, and compliance documentation as well as the billing and the back office piece of it. So now that whole piece can come off of the CNO’s or the Assistant CNO’s or the staffing office, health supervisor’s plates and allows them to focus on other things. They still need to know what is going on, and stay in touch with that and be the contact between and MSP & the hospital operational leadership, including nursing leadership, but it’s really taken a lot of those transactional pieces off their plates and allows them to focus on more strategic initiatives. Such as getting really important data out of the VMS that their MSP’s use. So they can use that data in a meaningful way to drive better decisions about how they’re using not just the contingent resources, but their entire hospital operational labor component. And how they use both to optimize patient care delivery and labor productivity.
It allows the hospitals to reallocate their resources depending on whatever their operational priorities are. Generally, hospitals have increasing pressures around regulatory management and components such as meeting the standards for the California Department of Health Services, joint commissions, dmv, cms, or magnet status. Any of those types of regulatory management bodies, or extra certification bodies such as magnet status. Meeting all of the elements and requirements that fall into those categories. MSPs free them up to focus on that and it frees them up to be able to focus on the recruitment, retainment and management of their core staff.
How do they make money?
They make money in a couple of different ways. They all make money by charging the vendor partners who participate with them in their Master Service Provider contracts with the health systems and hospitals. They charge a 3-5% admin fee on all contracts they facilitate. For example, if an agency works through an msp to staff a traveler at hospital x, every time that traveler works, the agency bills the hospital for each shift the traveler works and the MSP is going to take a percent off the top of that invoice before the agency gets paid. The thinking behind that is that this really helps the hospitals and the vendor partners on the other side. It streamlines the process for them and really reduces the overhead and amount that they’d have to spend on rebooking assignments, managing assignments in their own system. Because they now have a one way street to talk to everybody. It takes a burden off the agencies and it helps agencies grow their volume. Before signing with an MSP they could have been working with 2 hospitals but with an MSP they have access to 50 hospitals. Now the agency has more hospitals to staff, just because there is an admin fee, it’s a mutually beneficial relationship as the agencies benefit from the increased volume that is driven by the contracts the MSP has with various health systems.
Competition is always good in the marketplace. IN the beginning, most MSPs will say to hospitals that they can save them money which is true. They save hospitals money by reducing the number of vendors on any given panel to allow for strategic pricing. They enable hospitals to use big data to ensure that the hospitals are paying the right price for the right person at the right time. Instead of just agreeing to some inflated rate for a traveler because they’re unsure of what the competition is paying, the MSP is bringing all that data to the forefront to depict what the whole market looks like and here is what data says you should be paying for an L&D nurse in orange county today and here is what your competitors are paying so to be competitive you have to pay them X amount. It does help the agencies because they can then decide on their pricing package. The agencies get a set bill rate on that need from a hospital and they can decide how that’s broken up: what kind of tax-free stipend, what kind of hourly rate they pay, what kind of housing package. The MSP allows agencies and nurses to break it down, however is needed. It gives the agencies the standardization needed to really allow for full creativity in pay package creation so that they’re enticing and attractive to nurses and other healthcare professionals. The first to market is the candidate that meets the qualifications and is willing to accept the rate. If qualifications are equal then generally the first agency in the door with a qualified candidate is the one that gets the contract.
It’s muddy. The industry has changed from the VMS to the MSP model. Back in the day, these systems were really neutral across all vendors. They weren’t agencies, they were companies that were group purchasing companies that would go to a cat scan manufacturer and find that manufacturer 10 clients that wanted to buy cat scan machines. So they would ask if they could get a discount on 10 cat scan machines instead of one and keep that discount as their finder fee. They took that same group purchasing or collective bargaining concept and applied it to labor. At first, it worked really well when the vendor management was a third-party neutral platform that didn’t have any skin in the game. It didn’t matter to them who acquired their services, so long as somebody acquired them. Where it has gotten muddy in the last 7 to 9 years is that a lot of agencies who supply the travelers are also now providing an MSP service to clients. What has happened is, when a client has a need and an MSP provider is also an agency, the agency takes those needs first and only put it out to their nurses first. Only if it doesn’t get filled by their own internal agency staff, then they send it out to the other vendors. The misconception for a lot of nurses. Say they work for an agency that is just an agency without the MSP component, they feel like the MSP has made it more difficult for them to get assignments because the MSP is also an agency that puts their own people into the most desired assignments first. Only if they can’t fill it will someone who doesn’t work for an MSP related agency get a chance at the assignment.
How could they be better?
MSPs and VMS could have some more vendor neutrality. I’m not a big fan of agencies that also do this work for the hospitals. It muddies the water, it puts the fox in the hen house so to speak, hospitals and health systems really rely on these MSP providers to help them curb and control cost, and control utilization and trap meaningful, useful data. A lot of those needs are undesirable for an MSP partner that is also an agency. The agencies want to drive prices up and generate more needs and put more of their own people into those needs because that drives their bottom line. Even though they’re charging 3 % fee to everybody else on needs they can’t fill themselves, anything they fill on the front end isn’t subject to that 3% fee and they just pocket it themselves because of their price setting ways. So it has created this illusion of vendor neutrality that really doesn’t exist anymore if agencies also are providing the MSPs. It has muddied the waters and created a lot of backdooring small mom and pop types of agencies that don’t have the right amount of insurance, worker’s comp or competencies/quality of staff that health systems expect from partners. It’s created this kind of backdoor competition that is unhealthy for the whole ecosystem of the VMS and MSP world.
There are two camps. There are those that love that model, and there are those, like me, that are more old school that doesn’t like that model because it has made things muddier. It really depends on where the hospital/health system is coming from. Some systems take everything and hand it over to this one agency that is going to do everything for me and only when they can’t fill do they turn to the open market to get the need filled.
It just depends on the level of control and cost containment that the hospital wants to keep their pulse on. But it has created a lot of ambiguity and blurry lines out there in the healthcare ecosystem.
How does the blurring of those lines affect our nurses?
The nurses get caught in the middle of it. A lot of the nurses work for more than one agency so they may get submitted to the same assignment with two different agencies and those agencies then will battle it out to determine who gets to book the nurse.
The nurse gets caught in the battleground lines and the nurses don’t understand it or even want to be involved. The nurses don’t feel as though there is a lot of transparency and don’t understand why there may be discrepancies in agency a and agency b’s pay rate. Well, agency a may be providing an MSP and agency b may lose 3 % of the bill rate to agency a’s MSP. There are fewer admin fees sometimes more and the nurses don’t understand how it affects their pay package. The nurses get lost in the alphabet soup world of VMS and MSPs and vendor neutrality while they don’t want to be bothered by that at all. They just want to be booked on their next assignment hassle free. They don’t want to be caught in the middle of recruiters a, b and c offering different rates for the same job and then fighting over who is going to take credit for their work.
Wanderly takes the nurse out of those crosshairs, and with Wanderly the nurses are more in the driver’s seat with all pay package information 100% transparent and digestible.