Acquisitions of healthcare staffing companies in 2022 are approaching last year’s record total as they work to fill positions amid a severe worker shortage that shows no signs of ending.
According to the LevinPro HC database, investors and dealmakers have announced 31 healthcare staffing deals this year through November 14. This compares with a record-high 35 transactions in 2021. These totals are in sharp contrast to the 13 deals posted in 2020 and 17 in 2019.
As has been the case with other healthcare segments, private equity has targeted the healthcare staffing subsector. So far in 2022, 15 of the 31 (48%) acquisitions have come from private equity firms and/or their portfolio companies.
Private equity firm FTV Capital acquired Tampa, Florida-based Gale Healthcare Solutions in a $60 million deal in January. It has held its position as the largest reported healthcare staffing transaction of 2022. Gale Healthcare provides recruiting, credentialing, staffing and payroll solutions for the acute, long-term care and travel industries in 38 states nationwide. Gale Healthcare employs a credentialed network of more than 38,000 healthcare professionals across the U.S.
Last year’s deal total of 35 included 14 private equity (and/or their portfolio companies) acquirers, accounting for 40% of the total. In 2020, five of the 13 transactions came from private equity, representing 38%. During 2019, the 17 deals included only three that came from private equity for 18%.
Total combined deal values in the subsector reached approximately $84.4 million, based on four transactions with sale amounts reported in 2022. Stockholm-based Dedicare acquired U.K.-based Templars Medical Agency Ltd. in September for just over $2 million. New York-based Staffing 360 Solutions, Inc. (STAF) acquired Raleigh, North Carolina-based Headway Workforce Solutions for $14 million in May. Blainville, Quebec-based Premier Health of America Inc. (PHA) purchased Canadian Health Care Agency of Cambridge, Ontario, for $8.4 million in April.
In 2021, based on two deals with reported prices, the transaction total was approximately $3.4 million. HireQuest, Inc. of Goose Creek, South Carolina, acquired Carrboro, North Carolina-based Dental Power Staffing in November 2021 for $1.9 million. Premier Health of America Inc. purchased Solutions Nursing LFC Inc. of Lachine, Quebec, for $1.52 million in March 2021.
Two deals with reported prices in 2020 amounted to approximately $76.8 million. Premier Health of America Inc.acquired Code Bleu Placement en Sante of Montreal in August 2020 for just over $12.8 million. Onex Corporation (ONEXF) of Toronto purchased a majority stake in Independent Clinical Services Ltd. of London for $64 million in April 2020.
The U.S. faces a projected shortage of between 37,800 and 124,000 physicians within 12 years, according to “The Complexities of Physician Supply and Demand: Projections From 2019 to 2034,” a report released by the Association of American Medical Colleges. Specific projections by 2034 include shortages of between 17,800 and 48,000 for primary care physicians and between 21,000 and 77,100 for non-primary care physicians. This includes shortages of between 15,800 and 30,200 for surgical specialties, 3,800 to 13,400 for medical specialties and between 10,300 and 35,600 for other specialties.
A March 1 letter sent to members of the House of Representatives by the American Hospital Association (AHA) stated that it is anticipated that 500,000 nurses will leave the workforce in 2022, bringing the overall shortage to 1.1 million.
The letter also said that almost every U.S. hospital has been forced to hire temporary contract staff to maintain operations at some point during the COVID-19 pandemic. The AHA cited a study that stated contract labor expenses for hospitals have more than doubled over the last decade. It also mentioned media reports that said pay rates for contract nurses have been as high as $240 per hour or more.
Wall Street has also noticed the attractiveness of the healthcare staffing industry.
AMN Healthcare Services, Inc. (AMN) on November 3 reported third-quarter financial results. Consolidated revenue for the quarter was $1.139 billion, a 30% increase over the prior year. Net income was $92 million, or $2.10 per diluted share, compared with $74 million, or $1.54 per diluted share, in the third quarter of 2021. Revenue for the Nurse and Allied Solutions segment was $828 million, up 32% year over year. Travel nurse staffing revenue grew 31% year over year. The Physician and Leadership Solutions segment reported revenue of $175 million, growing 16% year over year. Locum tenens revenue was $106 million, up 19% year over year. Interim leadership revenue grew 9% year over year. The physician and leadership search businesses grew revenue 21% year over year.
Susan R. Salka, CEO of AMN Healthcare, said, “AMN is collaborating with a broad spectrum of organizations and investing to create solutions to address the labor shortages that are expected to endure for years.”
AMN provides healthcare workforce solutions and staffing services for healthcare organizations across the U.S. AMN’s clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, schools and other healthcare settings. During 2021, AMN’s consolidated revenue was $3.984 billion, a 66% increase over the prior year.
Along with professional staffing and recruitment services, AMN’s healthcare workforce solutions include MSP (managed service program), vendor management systems, medical language interpretation services, predictive labor analytics, workforce optimization technology and consulting, clinical labor scheduling, recruitment process outsourcing, revenue cycle solutions, credentialing software services and virtual care management services.
AMN has been active on the M&A front this year.
On May 13, 2022, the company completed its acquisition of Connetics Communications LLC, which specializes in the direct hire recruitment and permanent placement of international nurses and allied health professionals with healthcare facilities in the U.S. The initial purchase price of $78.76 million included: $70.76 million in cash consideration paid upon acquisition, funded through cash on hand and; a contingent earn-out payment of up to $12.5 million with an estimated fair value of $8 million as of the acquisition date. The contingent earn-out payment is based on the operating results of Connetics for the 12 months ending May 31, 2023.
The labor shortages in healthcare are impacting every profession involved in caring for patients.
With worker shortages expected to impact the healthcare landscape for years to come, and the potential to worsen regarding numerous specialties, staffing companies can expect to be active for the foreseeable future. And that means interest in acquiring these organizations should continue to be part of the healthcare M&A landscape.
