Three Essential Qualities for a Vendor Management System

Healthcare today is facing some unprecedented challenges. With a growing demand for services and a shrinking labor pool, many healthcare organizations have difficulty meeting patient demand and maintaining a high standard of care while adhering to budgetary guidelines. Vendor management systems (VMS) can be an invaluable asset to healthcare organizations.

An effective vendor management system offers many benefits. With a contingent workforce, healthcare organizations have access to on-demand employment and are always prepared to provide high-quality patient care even if there is a significant increase in demand for service. Additionally, scaling staff up or down is easier with a contingent workforce, making operations more cost-effective according to the demand for services.

Managing a contingent workforce takes significant time and organization. A vendor management system is a cost-effective way to manage your workforce, but you need to choose the right VMS to benefit. How do you know what VMS will be the best fit for your company? Below, find three of the most important considerations when choosing a VMS for your healthcare organization.

Compliance Management

Maintaining compliance is critical for healthcare organizations and staffing. When working with a vendor management system, it is important to work with one that understands the importance of compliance. Maintaining compliance is critical for several reasons, including:

●  Patient Safety: Patient safety is crucial, and regulations are in place to ensure patient safety is not compromised. Maintaining compliance with regulations and guidelines ensures that patients remain protected against harm.

●  Legal Liability: Litigation is time-consuming and costly, and failing to comply with regulations can result in lawsuits, as well as penalties and fines. Additionally, lawsuits can damage the reputation of a healthcare organization and erode patient trust. Maintaining compliance helps hospitals and other healthcare organizations avoid lawsuits and legal liability.

●  Patient Care: In addition to patient safety, patient care is at the center of all healthcare organizations. Most healthcare providers must have the necessary training, qualifications, experience, and certifications to provide services. Maintaining compliance with qualifications for employment ensures that patients receive a high standard of care. 

●  Ethical Considerations: Healthcare providers must treat patients with dignity and respect. Additionally, they must provide care without discrimination due to race, gender, or other factors. Compliance addresses ethical considerations in healthcare, ensuring equal access to healthcare services. 

To provide safe, respectful, and quality patient care, healthcare organizations must be in compliance with all established guidelines. An effective vendor management system will locate qualified professionals for open staffing positions, and thoroughly vet each candidate. Requirements can be set based on a specific position or location to help a VMS find qualified candidates, and further candidate vetting ensures hospitals and other healthcare organizations maintain compliance.

Vendor Neutrality

Neutrality is an important consideration when choosing a VMS for your healthcare organization. If a VMS is owned by a staffing agency then it would be considered a managed service provider (MSP), and its overall design and functionality will be driven by the financial objectives of the owners. The goal of a typical MSP is to fill as many of the staffing needs as it can directly in order to leverage its client and vendor relationships.   Staffing agencies (vendors) are typically reluctant to engage with many MSP’s but are usually forced to do so to increase their business revenues.  Some healthcare organizations don’t fully understand the most common MSP objectives and may engage too quickly out of desperation to immediately supplement their staffing needs with any healthcare workers that the MSP may have readily available.  This can be costly and may not align with the overall finical goals of the healthcare organization and can ultimately impact the continuity of healthcare services.  

Vendor neutrality attracts staffing agencies nationwide to participate in VMS programs.  This type of level playing field incentivizes staffing agencies to fill positions without fear of having their candidates solicited by a competitor such as an MSP. Ultimately the recruitment results for the healthcare organizations will improve significantly and the administrative burdens will decrease through streamlined communications with the vendor-neutral VMS.  When a VMS is truly vendor-neutral, there is no hidden agenda and no conflict with potential candidate solicitation which encourages vendor participation and expands client access to high-quality healthcare services.

Management Solution is not a staffing agency and is vendor-neutral. We have extensive staffing experience, which puts us in a unique position. With our staffing industry experience, established industry affiliations, and strong negotiation skills, we help healthcare organizations create cost-effective contingent workforce programs.

Reporting Capabilities

Healthcare organizations must make decisions with the information available to them. For effective and efficient operation, healthcare systems need to understand what they spend money on and when money is spent. Without access to this data, it is hard to make sound decisions. Before choosing a VMS, you must know what type of data you need to make informed decisions.

Transparency and clear communication are critical factors in improving access to the labor supply and increasing the chance of finding qualified candidates quickly. A vendor management system should be able to provide an organization with all workforce data at any time. Providing real-time reporting and analytics allows healthcare organizations to carefully monitor the performance of their contingent workforce and ultimately, to make informed staffing decisions.

At Management Solution, we offer a full-service on- or off-site program to healthcare organizations. This allows our clients to consolidate and manage workforce development through a customizable web-based program. With increased access and the ability to view all workforce data, our clients can make informed decisions that benefit their organization.

Ready to get started? Contact Management Solution today to start talking solutions. 

Rising Bill Rates in Staffing Agencies

VMS programs help standardize, centralize, and streamline all aspects of the business relationship between staffing agencies and healthcare organizations that utilize their services. There are a number of costs associated with facilitating these relationships which are all included in the bill rate. Bill rates are hourly rates that healthcare organizations pay for every hour of work performed by the contingent workforce. These rates are negotiated between the VMS with the client and are determined according to the specific costs involved for a staffing agency to recruit and employ the contingent labor they provide.

Bill rates are paid only for hours worked by contingent workers and can fluctuate according to supply and demand. In times of great need when healthcare organizations urgently need contingent staff, bill rates will increase. Conversely, when demand for staff is lower, bill rates will decrease. Given the current shortage of healthcare workers and economic climate, bill rates are on the rise.

Types of Bill Rates

Simply stated, a bill rate is an hourly rate paid to staffing agencies for their employee’s work time.  Bill rates are the foundation of contingent workforce packages which determine how much money agencies have to work with on any given assignment.

Bill rates must account for costs that include:

  • Agency Internal Operational Costs
  • Advertising / Recruitment
  • Continued Administrative Support for Duration of Contract
  • Onboarding and Compliance Costs
  • Paid Sick Time
  • Professional/General Liability Insurance
  • Workers Compensation Insurance
  • Costs Related to Malpractice/Employment Litigation
  • Employment Taxes
  • Travel and lodging
  • Advance payroll funding

    A bill rate is not the same as a pay rate as many factors influence bill rates. The pay rate is what the healthcare worker will earn per hour worked. While it is often the largest cost, the pay rate is only one variable in determining the bill rate. There are three main types of bill rates: standardized, negotiated, and bid bill rates.

    Currently, the most common type of bill rate is the standardized bill rate. A standardized bill rate is a rate agreed upon by the staffing agency and the client. The second type of bill rate is the negotiated bill rate. Unlike standardized bill rates, negotiated bill rates are determined by the specific project. This type of bill rate is not currently very common but may be used in instances where a client seeks a specific skill set or specialty. Bid bill rates are the third major type of bill rate. While bid bill rates tend to be more common than negotiated rates, they are still not as widely used as standardized bill rates. A bid bill rate allows entities to submit bids for bill rates. This system is intended to help clients get the best price possible, however, that does not always mean the lowest bid rate. While a lower bill rate is more attractive, clients are often willing to pay more for candidates who fit the demands of the position.

    Understanding the bill rate means understanding the categories of pay rates within bill rates. These are important considerations for vendors, clients, and members of the contingent workforce. Significant bill rate categories include:

    • Standard Rates
    • Specialty Rates
    • Regular Time Worked Rates
    • Overtime Worked Rates
    • Blended Bill Rates
    • On Call Rates
    • Call Back Rates
    • Crisis Rates
    • Holiday Rates

    Why Bill Rates are Rising

    COVID-19 did not start the nursing shortage. The United States has experienced periodic nursing shortages since the 1990s, however, the current nursing shortage is reaching critical levels. According to a data study by the University of St. Augustine, “the United States is in the midst of a critical nursing shortage that is expected to continue through 2030.” With an increase in demand for nurses and a labor shortage, bill rates have escalated.

    Why is there such a critical labor shortage in the healthcare industry? Multiple factors are contributing to the current healthcare labor shortage. Some of the most influential factors include:

    • An Aging Population: According to the World Health Organization, one in six people in the world will be aged 60 or older by the year 2030. Additionally, 19% of people over the age of 55 have three or more chronic conditions according to the CDC. Longer lifespans and multiple chronic conditions greatly increase the demand for healthcare services.
    • An Aging Workforce: An aging population means more people are approaching retirement, and the healthcare industry is no exception. According to a 2020 article published by The Journal of Nursing Regulation, the median age of all registered nurses is 52. An aging workforce means fewer registered nurses are employed by healthcare systems, but also contributes to the current shortage of experienced and qualified nursing instructors. As nursing programs struggle to find qualified nursing educators, the number of students enrolling in programs is reduced.
    • Burnout: Age is not the only factor driving the mass retirement of healthcare professionals. One in five healthcare workers affected by the pandemic has quit their jobs. The mental and physical toll the COVID-19 pandemic took on healthcare workers was great and accelerated burnout among employees.
    • Working Conditions: Healthcare workers are increasingly citing working conditions as a reason to leave their jobs. Labor shortages often mean additional overtime and increased workloads and responsibilities.

    In addition to the critical shortage of healthcare workers, operating costs are up across many industries. Inflation drives up many costs related to running a business from overhead costs like building leases to pay rates for talented nurses and healthcare professionals. Bill rates can include many factors, some of which include:

    • Work Performed by VMS/MSP
    • Liability and Insurance Coverage
    • Medical Malpractice Lawsuits
    • Employee Onboarding
    • Pay Rate of Healthcare Professionals
    • Travel Reimbursement
    • Non-Taxed Per Diems
    • Non-Taxed Housing Stipends

    According to the Bureau of Labor Statistics, the projected number of open positions for registered nurses from 2019 through 2029 is 175,900 annually. As hospitals and other healthcare systems operate with negative margins, the prevalence of contracting with staffing agencies is forecasted to continue.

    While the bill rates have been rising, there has been a call for federal oversight of pricing policies among travel nursing agencies. During COVID, many hospitals experienced a plummet in profit levels. With the pay for travel nursing reaching an all-time high during the pandemic, The American Hospital Association (AHA) notified the Federal Trade Commission of concerns over potential price gouging. The AHA and other lawmakers have urged further federal investigation as bill rates continue to rise.

    With the number of factors influencing the bill rate, staffing agencies maintain that the included costs are increasing not due to price gouging, but to meet demand. Addressing the factors contributing to the nursing shortage is one of the most significant ways to maintain, or lower, bill rates.