VMS? MSP?
What are they really?
We get it – these terms can be like a whole other language! But don’t worry, we’re here to break it down for you.
Let's start with some definitions.
What is a MSP (Managed Service Provider)?
A Managed Service Provider, or MSP, is an external group that handles contract, or contingent, labor management. They work with a network of individual agencies to provide travel or per diem workers. MSPs act as intermediaries between hospitals and agencies, charging a fee to the agencies to participate, sort of like a credit card processor. Workers pass through the MSP on their way from a sub-contracting agency to a hospital, and the MSP keeps a transaction fee paid by the agencies.
Often, this service appears “free” to the hospital. The MSP is funded by the fee charged to the agencies, often called a VMS Fee or Technology Fee. We call this the hidden tax.
What is VMS (Vendor Management Software)?
Vendor Management Software, or VMS, is the software hospitals use to submit requests for temporary assignments, but it does significantly more for the MSP who uses it to communicate and distribute orders to partnering agencies. The software also handles various aspects of workforce management, including invoicing hospitals, storing employee profiles, managing onboarding documents, credentials and schedules. It’s increasingly used by hospital staffing departments to reduce fees and encourage a free market for labor.
How do hospitals incorporate a MSP or VMS into their staffing model?
Self-Managed (No VMS, No MSP)
Kudos to you if you’re managing contract labor in-house without relying on a VMS or MSP. In the early days of contract labor, this was the norm; hospitals directly engaged with vendor agencies. You likely have a dedicated internal team wrangling spreadsheets, tackling processes manually and juggling agency contracts, each with their own negotiated rates & rules. While this approach may initially save on upfront costs, it’s challenging to scale and can lead to duplicate work and potential errors. However, it does offer the advantage of lower rates for travelers and per diem shifts, given the absence of the MSP markup.
MSP with VMS
This model introduces automation, such as allowing nurses to conveniently upload their documentation via a portal or mobile app, with the VMS acting as a central hub for these documents. While this can alleviate workload for the hospital, it also can lead to loss of transparency, or worse, an agency-owned MSP (we’ll talk about that a little later.)
Because there’s a service layer between your hospital and the agencies, travel and per diem rates tend to be higher compared to a self-managed model.
In-House MSP with VMS:
Agencies are accustomed to paying VMS fees ranging from 2-6%. Therefore, paying these fees to a hospital instead of an MSP doesn’t pose a significant disruption.
Although implementing this method requires an initial investment to tailor a program that aligns with each hospital’s needs, many opt for self-management with a VMS as it allows them to divert the 2-6% of every dollar spent on contract labor previously retained by the MSP. This newfound budget flexibility empowers hospitals to finance additional staffing initiatives, such as establishing a float pool or even “nice to haves” that were never in their financial grasp.Common Questions
Why did the MSP model take off?
Although MSPs offer benefits such as managing vendor relationships and contract negotiations, the VMS is arguably the primary selling point. The technology empowers MSPs to accomplish tasks efficiently, raising questions about why hospitals cannot adopt similar software solutions independently.
Why is vendor neutrality important for a MSP using a VMS?
We mentioned agency-owned MSPs, and they come into play when discussing vendor neutrality. So, what is vendor neutrality, sometimes referred to as being vendor agnostic? Glad you asked.
An agency-owned MSP may prioritize filling orders internally before considering external agencies in their network. This approach can potentially increase costs and time-to-fill.
Being vendor neutral, or vendor agnostic, means that no preference is given to any agency. In a vendor-neutral system, all agencies receive orders simultaneously, with equal opportunity to fill them. This fosters fair competition and ensures that the best candidates are selected based on merit rather than internal biases.
Sometimes, when an agency-owned MSP fills an order:
“They’re not going to send you the best people, they’re going to send you the people they want to send you” – Joe C.
How is the contract labor ordering process different between agency-owned and hospital-owned MSPs?
Agency Owned MSP (Outside Hospital)
The hospital places an order.
An external MSP distributes the order in line with their priorities, eventually taking a 5% cut of the order revenue.
Commissioned internal recruiters try to fill the order with their own nurses first even if it means hiring a traveler.
If they can't fill it with their own supply, they then wait for the highest bidder and eventually release the order to the rest of the agencies (many who may have local workers).
Hospital Controlled MSP
The hospital places an order.
The hospital controlled MSP releases the order to all parties simultaneously, and passes through 100% of the order revenue.
All agencies receive the order simultaneously and can bid, giving the hospital the best rate, fit, and time to fill without hidden fees.
By controlling the MSP, the hospital gains back the 5% in revenue lost to the external MSP, in addition to faster times to fill, better candidates, and lower rates.
How to choose a VMS when you're ready to build an internal MSP.
One acronym, one word. VMS Features. There are multiple VMS systems on the market today. Look for one that includes the following features. Request live demos of multiple options, starting with BlueSky , but look for these features with any vendor you’re planning to evaluate.
Credentialing.
A VMS typically has a user-friendly portal where nurses can upload their own credentials to a centralized repository that is automatically synced to the main database. These should be kept in accordance with your facility’s Joint Commission policies.
- Tip: Opt for a VMS that provides timely alerts to both you and the worker when credentials are nearing expiration, preventing non-compliance issues.
Scheduling.
A VMS typically has a user-friendly portal where nurses can upload their own credentials to a centralized repository that is automatically synced to the main database. These should be kept in accordance with your facility’s Joint Commission policies.
Vendor management.
Effectively manage agency relationships, contracts, and communications within a centralized database, promoting transparency and collaboration.
Automated Notifications.
Automated reminders for both facility staff and contract workers play a crucial role in maintaining compliance and facilitating efficient shift management.
Reporting.
A reputable VMS enables comprehensive tracking of contract labor expenses, providing accurate reporting and metrics to inform data-driven decision-making.
Mobile accessibility.
Workers on assignment shouldn’t be burdened with additional paperwork. Staff should be able to manage their own availability, clock in and out, submit timesheets and update credentials seamlessly from their mobile device.
- Tip: Look for mobile apps that offer geolocation features to ensure caregivers are within the facility perimeter before clocking in, enhancing accountability and compliance.
Highly integrated.
To be fully integrated, a VMS should seamlessly connect to your timekeeping, payroll, background screening and other vendors to create a single-source-of-truth for managing contract labor.
Invoicing and MSP Statement of Pay.
Accurate and automated invoice compilation to be send to your AP team as well as a statement of what you are going to pay the agencies, eliminating the hassle of bill reconciliation.
Submission Packages.
Look for a vendor that easily collects all required compliance documentation, that can easily be sent to hiring managers for review.
Proposals with rate bids.
Easily manage candidate proposals from vendor agencies, including the ability to underbid the target bill rate to the facility.
In conclusion...
Adopting a Vendor Management System (VMS) in healthcare offers numerous benefits for streamlining credential management, enhancing visibility and control over staffing operations, ensuring compliance with regulatory standards, and improving scheduling efficiency.
By leveraging the capabilities of a VMS, healthcare organizations can optimize their workforce management processes and focus on delivering high-quality patient care, while collecting a fee previously paid to an MSP.
We are here to help you become your own MSP.
Managing your own VMS is the most straightforward way to save on labor costs (with an added bonus of more revenue). But it can be daunting.
Let us answer your questions, and we’ll provide a tangible path forward.
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