Health care temporary staffing companies see growth.

With California hospitals scrambling to meet state-mandated nurse-patient ratios and new technology at many of the facilities, demand is up at temporary staffing agencies specializing in health care services such as Calabasas-based On Assignment Inc. after a down year.

As of last January, California's tougher nurse-to-patient ratio laws have required hospitals to spend millions of dollars more on nurse salaries. Carey Stanton, spokeswoman for Northridge Hospital Medical Center said that before the ratio came into effect, the hospital was spending between $150,000 and $200,000 per month on temporary nurses. Since last January, it's been spending over $300,000 every month, she said.

Angel Cotton, director of nurse recruiting at Northridge, said there are a number of recruiting programs at the hospital to attract new nurses. They include a new nurse residency program, a mentoring program, continuing education opportunities and some relocation bonuses. Still, Cotton said, those efforts have not significantly reduced dependency on temporary nurses since the ratios came into effect.

"We don't like to use them, they charge a lot," Cotton said. "(But) there is a shortage out there."

The increased demand means that On Assignment, which has 58 offices throughout the United States and Europe, routinely diverts nurses from other states to work in California, according to Shawn Mohr, On Assignment's chief sales officer. He said that nurses, sensing their stock is rising, are contacting On Assignment looking for better offers. Mohr said that On Assignment's primary recruiting tool is word of mouth, implying that the more nurses that work for the company, the larger the hiring pool becomes.

On Assignment posted a net loss of $36.7 million in the first nine months of 2004, compared with a net loss of $79.8 million for the same period in 2003 when hospitals were spending less on nurses, technicians and other positions. In 2002, its net income was $12.2 million.

In 2003, total U.S. spending on healthcare rose 7.7 percent to $1.7 trillion. Although the increase, which includes expenses from medicines to doctor appointments and other healthcare costs, outpaced overall economic growth by almost three percent it was still the lowest annual increase in seven years, according to a report by the Centers for Medicare and Medicaid Services Office of the Actuary.

Tighter rules

Much of the slowed spending is a result of 37 states tightening eligibility and benefits for Medicaid.

Health and Human Services Secretary Tommy G. Thompson said the report is good news for the public and the healthcare system overall, attributing the slower growth to changes designed to slow down health care spending.

Hospital spending, which is nearly one-third of total national health expenditures, also saw a slowdown in spending growth; it increased at a rate of 6.5 percent in 2003 down from 8.5 percent in 2002. Health Care staffing firms found themselves victims of that slowed spending.

According to a report by Staff Care Inc., an economic boom, technical advances and other factors helped turn temporary practice into a rewarding career practice several years ago. By 2002, the clinical healthcare staffing industry topped over $13 billion. In 2003, spending fell to $10.4 billion

"From a demand perspective in health care staffing the industry certainly experienced some decline," said Mohr.

Mohr said that nurses, which make up a large portion of On Assignment's staff, worked more overtime and were likely to stay at their current hospitals. Hospitals were also having better luck finding job candidates on Internet job boards, which hurt On Assignment's business, Mohr said. Even the Internet can't fill holes created by the new ratio laws, however, and the best technicians don't often post resumes on the Web, Mohr said. Chasing larger profit margins, On Assignment expanded into health information management staffing during the second quarter of 2004.

American Health Services, a San Diego-based company which is the largest nationwide provider of travel nurse staffing services, also saw demand for its services drop in 2003, but said in a November SEC filing that demand increased in every quarter in 2004. It cites California's new nurse to patient ratio laws and increased hospital admissions as a reason for the rising demand.

Aside from the demand for nurses going up, Mohr said that new medical devices and other new technology in the health care industry are driving up demand for highly trained technicians. He said that some of the fastest growth is in health information management. Employees with expertise in both areas are rare he said, and can demand top dollar as hospitals, doctors' offices and anyone else who keeps medical records is rushing to build an electronic infrastructure or outfit their offices with the latest diagnostic technology.

"We continue to see early indications of positive signs for the increase of the health care sector as a whole, a tightening supply pool is leading to an increase in demand from our clients," said Mohr. "Accounts at On Assignment are at an all time high."