The COVID-19 pandemic stressed hospitals and health systems to their limit. It also forced them into new ways of operating.
Legacy staffing agencies experienced above-average growth during the pandemic in 2020 and 2021. However, the market demand still exceeded their ability to meet the surging need for nurses, particularly in rural and acute-care facilities. Their antiquated processes — where individual recruiters text or call available nurses with openings, then ask interested candidates to email their credentials and documents (or send them through snail mail) to be validated — simply could not move fast enough to meet the crisis.
To fill critical staffing gaps, acute and post-acute care facilities turned to AI-enabled healthcare staffing platforms giving them direct access to qualified, available nurses. Providing a global view of searchable job postings to nurses and a faster hiring process to hospitals, these platforms outperformed legacy staffing companies in the pandemic. Why, then, did so many hospitals return to the old brick-and-mortar approach after the pandemic had passed? (Or another way to put it: Why go back to Blockbuster after you've tried Netflix?)
The answer is an institutional form of "Stockholm syndrome": a psychological and institutional aversion to change, even when the need is painfully clear.
Controlling costs: Theory vs. practice
In healthcare, the legacy approach to staffing consists of two middlemen: 1) the agencies that recruit nurses for placement; and 2) the managed service providers (MSPs) and vendor management systems (VMSs) that contract and manage those agencies for the hospitals. Theoretically, this second type of middleman will help hospitals control staffing costs by ensuring competitive pricing. With their access to numerous competing agencies, the thinking goes, MSPs and VMSs should be able to secure the best nurse candidate for the lowest price.
In practice, these middlemen do what middlemen always do: add bureaucracy, increase friction, and decrease transparency.
Taking a digital approach
For decades, hospitals thought that MSPs were their only option for containing staffing costs. An Amazon-style platform can achieve the same goal of cost containment — not by pitting different staffing agencies against each other, but by eliminating overhead and improving transparency. Instead of middlemen adding costs at each layer, interested clinicians can connect directly with the hospitals who need them. This doesn't necessarily mean that the market wages for nurses will decrease. But without the MSP in the middle, hospitals have greater insight into the breakdown of wages to the cost of delivery, and a clearer picture of the bill rate overall.
A platform-based approach to staffing also has overhead, of course: it employs people to design, maintain, and secure the platform as well as to "teach" the AI to determine appropriate qualifications and acuity. Yet this overhead is vastly less than the intensive, slow, analog approach taken by legacy staffing companies. And platform-based approaches have the added benefit that any shocks in demand (such as COVID) can be absorbed at the speed of a technology company.
Organizational pathology
The particular "syndrome" keeping hospitals tied to their legacy staffing services depends on three pathologies: bureaucratic inertia, incumbency advantage, and the education gap.
1. Bureaucratic inertia: the belief that compliance with existing regulations can only be achieved with existing processes. In the case of nurse staffing, the inertia revolves around a sense that necessary steps — recruitment, verification, placement, validation, and payment — have to happen sequentially. With the platform approach, many of these things can happen in parallel. This cuts the staffing process by days or even weeks.
Another dimension of bureaucratic inertia was disrupted by the pandemic, when many state governments issued executive orders enabling any nurse with a valid single-state license to practice in another state. Removing this obstacle transformed the flow of nurses across the country and offered a glimpse of where we should be headed: away from a patchwork of regulatory requirements and toward a national model of nursing licensure. Coupled with a platform-based approach to staffing, universal licensure and potentially nationally standardized credentials would transform the ability of qualified nurses to go wherever they are most needed: in urban facilities, rural areas, or even healthcare "deserts."
2. Incumbency advantage: Dislodging an incumbent requires dramatic outperformance on the part of the contender. In terms of healthcare staffing, despite the demonstrable successes of the platform-based model, legacy services have reasserted their advantage over the hospitals through the renewal of old contracts.
They don't have the same power over the nurses, however. Over the past several years, nurses have flocked to the digital platform model. Hospitals will need to align with these clinicians in a shared digital future, rather than cling to their middlemen in an analog past.
3. Education gap: Health systems like the Allegheny Health Network and Philadelphia-based Jefferson Health have acknowledged that staffing costs posed a major threat to their operations and sustainability. Their solution was to establish their own in-house staffing agencies in order to reduce payments to private staffing agencies and MSPs while still placing clinicians where they were needed across their facilities.
This is an innovative approach to the problem of the middleman — but not necessarily to the problem of antiquated technology and an overreliance on texts, phone calls, and other delay-prone communication. Visible here is the final piece of organizational Stockholm Syndrome: the inability to see the viability — and inevitability — of new approaches to old problems.
Cautionary tales for healthcare
Many industries have fallen prey to their own Stockholm moment. The home video industry is a vivid example: through the mid-2000s, even as Netflix's customer base expanded, Blockbuster was an international giant, commanding the lion's share of the home video market. Acknowledging the competition posed by a fast-growing Netflix, the legacy company made a few attempts to improve its reach, for instance by imitating Netflix's DVD-by-mail service in the early 2000s. But when Netflix's algorithm-based streaming service went live in 2007, Blockbuster's answer was way too little, way too late. And healthcare staffing agencies and MSPs that ignore the imminent shift toward algorithm-powered, platform-enabled staffing are likely to go the way of Blockbuster.