Nurse staffing companies tentatively eye rebound

Monday, March 22nd 2004, 12:00 am

By: News On 6

PITTSBURGH (AP) _ There's good news about the nursing shortage: Some companies that supply nurses quickly for hospitals in need are diagnosing a healthier market after an 18-month shakeout.

Analysts see a consolidation under way in the industry, which had gone into overdrive in the 1990s, growing by as much as 20 percent annually in the later half of the decade with hospitals desperate for nurses.

As the economy worsened, hospitals clamped down on outsourcing. More nurses became primary wage earners and worked more hours as spouses were laid off. Hospital visits also dropped as people lost jobs and health insurance or took on bigger deductibles.

Several companies, counting on an uptick in the economy, are moving forward with sizable acquisitions in anticipation of full hospital beds.

This month, World Health Alternatives, Inc., based in Pittsburgh, said it would acquire a Texas-based firm in a cash-and-stock deal in World Health's third acquisition in about a month.

In December, World Health completed an acquisition of its crosstown rival and expects current revenues of less than $15 million to triple if the most recent deals go through.

``It's a hot market,'' said Richard McDonald, president of World Health.

Other executives in the industry also say the market is due for a turnaround, though most stopped short of saying a recovery was under way.

Cross Country TravCorps in Boca Raton, Fla., reported its first bump in orders in two years, chief executive Joseph Boshart said.

The company also acquired Philadelphia-based MEDStaff in June, the company's largest deal ever.

``This market is still very fragmented, but we certainly have done a number of acquisitions which has accounted for about 40 percent of our growth,'' he said.

Industry analysts are also hesitant to say there will be any significant recovery over the next two quarters, but believe it is only a matter of time.

``It's just not sustainable and hospitals can't operate the way they are with nurses doing those hours. Nurses are just not going to stand for it,'' said Nick Aberle of Caris & Co.

Staffing companies are counting on that.

``It's always hard to call when daybreak is going to occur, but the sky is a little bit brighter in the east compared to six or nine months ago,'' said Ralph Friedmann, chief executive officer at InteliStaf, based in Oakbrook Terrace, Ill.

Staffing firms, however, said they are still feeling backlash from the number of organizations that entered a market experiencing double-digit growth. Hospitals that once dealt with dozens of staffing companies cut back drastically because of poor service.

Staffing companies increasingly favor a more integrative approach in which they also manage other staffing contracts at hospitals.

Comforce Corp., of Woodbury, N.Y., which offers staffing for about a half-dozen different service sectors, said nursing is now its strongest sector.

``We are very optimistic,'' said Brad Turkin, executive vice president. ``We just think that other companies weren't able to fully serve hospitals because there is more to this than just finding nurses.''