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Carolina health staffing.

"This business is my passion. It provides income to all my nurse anesthesiologists and provides staff for hospitals and clinics. But ...," Max, one of the owners of Carolina Health Staffing paused and scratched his head, "I'm not sure whether this new business makes much sense or not. Of course, our newest partner is really pushing it, and he has brought a lot of business to us, so I don't want to just dismiss it either. I just wish we had more time to puzzle this out.

"And the timing of this," he continued. "If we lose the Claiborne Clinic and the Northeast Regional Hospital accounts, we need this income. On the other hand, if we get this business and don't lose those accounts, I don't know if I can staff it."

The Certified Registered Nurse Anesthesiologist Situation

After becoming a registered nurse and usually after several years' experience, a nurse could go back to school and, after extensive coursework and licensing exams, become a CRNA. CRNAs were similar to nurse practitioners in that they were able to do more procedures than a regular registered nurse could do, procedures that usually required a doctor. This highly specialized field was considered a stressful field and extensive vacation time was awarded CRNAs, totaling to three months/year in the Southeast United States.

Many CRNAs, on the other hand, often found that they really did not need or want all of their vacation time, especially if their families did not have as much time off. Others preferred not to have a full time job but to pick and choose when they worked in order to accommodate child care or other lifestyle decisions. As the salary levels of CRNAs were quite high ($300,000/year was not unheard of in this region), many CRNAs found that they did not need to work full time and yet enjoy a comfortable life style.

Since hospitals and clinics awarded such a generous vacation, they essentially needed four CRNAs to cover three jobs. While a hospital could do this, they could only make it work if they enforced a strict vacation policy-no over lapping time off. Even with this, they would have the usual sick days, medical leaves and the normal turnover of jobs. These vacancies were filled with "locum" (temporary) workers usually CRNAs from other facilities on their days off.

Prior to formation of locum placement agencies, CRNAs wanting locum work needed to be on the call list of each hospital or clinic at which they wished to work. A hospital needing to fill a spot would work down their list until they found someone to fill the position. The next time they needed the position filled they would continue down that list and fill positions in strict rotation. Unfortunately, if a CRNA was called and happened to be working that day, he or she then went to the bottom of the list; on their days off, he or she might not be high enough on any list to get a call. A hospital, too, might have to call dozens of people before finding a single replacement.

With a huge staff at major hospitals, the human resource departments had been overburdened with having to solve temporary shortages. In many cases, mandatory overtime was not an option as this staff was making critical decisions and should not be overtired. Hospitals were turning more and more to locum agencies to provide doctors, registered nurses, pharmacists, technicians and specialist such as CRNAs.

Locum agencies not only recruited qualified personnel, but handled the managing of their diverse schedules. For example, they managed the availability of time by their locum CRNAs against the varying shift times and days of the hospitals and clinics that needed them. More and more hospitals and clinics were turning over the staffing of their entire departments to locum agencies, hiring few or no permanent staff. This was a system that had worked out well to the benefit of both the locum placement agencies and the hospitals and clinics.

Carolina Health Staffing

Max and Steve were co-workers at a regional hospital and complained to each other about the randomness of whether or not they would get a locum placement when they had their times off. They decided they could develop a system that better meet their needs, the needs of other CRNAs seeking locum work, and hospitals and clinics using them. Carolina Health Staffing was founded 2004 as an S-Corp, with Steve and Max holding equal shares. (See mission and vision in Exhibit 1.)
Exhibit 1

Our Mission

To establish a reputation for quality work and commitment by
creating innovative, unique and cost- effective solutions to
problems and needs face by our clients.

Our Vision

We are committed to be a corporately responsible company that
benefits the patients, the facilities, the communities, and
healthcare providers by promoting a thorough credentialing process
employing competent healthcare professionals that practice patient
safety with a healthy attitude.

As usual, at first the financial situation was little lean and they made mistakes, but these were quickly ironed out. In 2008, they had just over $940,000 in billed revenues. In addition, they had totally paid off their line-of-credit and were able to operate without using credit.

Initially, Carolina Health Staffing's market was the northeast region of South Carolina. Gradually this expanded to their current status nearly all of the state and throughout most of southern North Carolina. At first they stayed with major hospitals, but more recently they had branched out into clinics and larger medical offices. As the industry evolved, they were able to land several major contracts to totally staff anesthesiology departments. Eventually, they were asked to manage these departments as well.

Quickly, Carolina Health Staffing developed a good reputation in the areas they served. Their competition remained limited and included some "hold out" hospitals and clinics who still preferred to fill their vacancies themselves and the occasional placement of locum CRNAs by traditional temporary agencies. Carolina Health Staffing grew mostly by word of mouth, and acquired additional locums CRNAs at roughly the same rate as their customer base grew. Since Steve and Max were both CRNAs themselves, they also worked as locums and were able to help ensure that their clients had enough staff.

The Current Situation

2007 had been a good year for them; the business was growing at a steady state and profitability was to the point they could add personnel. Max and Steve started with hiring more permanent staff to help them manage the business. Prior to that Steve and Max paid bills, created schedules, paid locums and all the other office work with only one office assistant.

At this same juncture they considered where they might be able to take their business. Three ideas sounded good to them:

First, they intended to expand their geographic range gradually, hoping eventually to be nationwide. Locums often traveled to locations throughout the Carolinas at the expense of the client (both transportation and boarding). Many locums liked the idea of servicing a hospital or clinic further afield in the United States. Since the client would provide transportation a locum could stay longer at their own cost, but without transportation expense-a mini vacation in Seattle, or New Orleans, perhaps.

Secondly, they decided to go into the permanent placement business, securing permanent CRNAs for their current clients. They had been doing this somewhat informally, generally, helping current locums find permanent places in location where they had enjoyed their locum work.

The third possible expansion was to start moving into related medical areas to provide locum and eventually permanent placement services. Why should a hospital call one place for CRNAs, another for RNs and still others for other specialties? It would be more convenient to call Carolina Health Staffing and allow them to fill multiple needs. In order to develop these second two options, they hired Marie, a headhunter with a current nurse staffing firm. Unfortunately, Max and Steve found out after she arrived that she had a non-compete contract from her former employer. She could place other medical professionals but not nurses until her non-compete contract expired in two years. While Steve and Max were not particularly happy about this, they figured she could start with CRNAs and add other professions, leaving nurses until the non-compete expired.

While word of mouth and their reputation had served them well in the local market, especially at the relatively slow pace they were growing, they were beginning to find it more and more difficult to recruit new clients. They had done limited cold calling as they had generally relied on referrals. As they had nearly saturated the immediate area, they were finding that they had to reach out. If they could get established in one location in a new areas, then word-of-mouth would eventually get others to them. But, that required making numerous calls trying to find the right person to talk to at each institution. They were finding it particularly tough to get past the "gatekeeper" and to decision makers at these places. Jerome, a physician anesthetist with whom Steve and Max had worked for several years, suggested that he make a call to get past a particularly difficult gatekeeper. Using the "doctor" title got them to the right person and they landed a new customer.

Jerome was impressed with Max and Steve and the work they were doing. Max and Steve liked the entree into upper levels of hospital and clinic management Jerome could provide. Jerome also had connections and ideas that Max and Steve thought they might use, so in early 2009, Jerome came aboard with an ownership portion equal to Steve and Max. Jerome did pave the way to landing several local accounts, some of which Max and Steve had tried in vain to get. Jerome also used his contacts in local states to help expand Carolina Health Staffing's geographic scope and to find additional CRNAs willing to work as locums.

On the other hand, though, the tough economy had hospitals looking for ways to save costs, and hiring their own CRNAs-even with the headache of staffing for absences-was one way of doing so. One of Carolina Health Staffing's largest accounts, Claiborne Clinic had served notice that they would not be renewing their contract at the end of the year and a second large account, Regional Hospital, was talking like they might be considering doing so as well. Regional was clearly waffling, though, and might be won back.

Max commented, "Churning of accounts in this business happens, but since these two accounted for 50% of the revenues generated the previous year, we're concerned. Claiborne wants some prices cuts and guarantees and other stuff, and I just don't know if that makes any sense. I mean, we could probably pay the locums and maybe have a little left over, but maybe handling all the paperwork means it's just not worth it. Regional might stay. They claim that they love the work we do for them, so I don't know what I could say that would improve on that!"

Jerome's contact list came into use once more. He became aware of a large, out-of-state oral surgery operation, Dental Health, Inc. (DHI). DHI intended to open larger, full service oral surgery clinics in medium to large cities throughout the United States and was willing to joint venture with Carolina Health Staffing to manage anesthesiology operations in each. DHI intended to open the first clinic in early fall 2009 and open three to four additional sites per month over the next year.

Max and Steve were uncertain and approached the Center for Entrepreneurship at Francis Marion University, a local regional public university. Max e-mailed the center stating "Our business has made profits consistently in the past but we expanded the office staff and hired some recruiters over the last 18 months. Currently, we are presently meeting our expenses but have failed to make any profit to speak of."

At the initial meeting, Max provided a complete history of the company and discussed the potential loss of two major clients, plus the DHI offer. He stated, "The DHI joint venture looks good, but I'm not really sure that's what we need to do. Right now we stand to lose nearly half our revenues, and while DHI might replace that, the contract is different. With them, we have to staff and pay CRNAs and don't get paid back by the joint venture for three months.

"I don't want to lay off the staff we've hired-I don't even want to cut back on hours," he continued. "We've got a lot of locum CRNAs counting on us and I'm not sure how to take care of them. I'm not sure where to go for extra business, but I'm uneasy about DHI; it's just so big and so much all at once and we're not all that large and sophisticated.

"Our goals are simple. We provide a service for medical centers. We provide locum work for CRNAs-most of whom we know personally. We provide some work for office staff, our CPA, etc. We make some profit doing so-a nice little next egg. We are proud of what we have accomplished. We were having fun, but now it's more like work.

"Don't get me wrong: I want the business to grow, but something this big, this quickly People we don't know. A big company. It feels different. I thought I'd do this all my life, but now, I'm not certain. Maybe, I'm just too conservative to really run a business."

The three owners rarely see each other face-to-face, coming to the business office on different days of the week based on the schedules of their CRNA and physician jobs. The director of the Center for Entrepreneurship was able to get Steve by phone that same day and the phone interview with him went nearly the same as Max's. Both Steve and Max had known Jerome a long time before bringing him into the business and were delighted with what he had been able to do for them. They were nervous, though about the potential of losing two major accounts with nothing comparable "in the pipeline" and uncertain of how to replace this revenue. They both had some concerns about the DHI business, which had now given them a one-week deadline to make a decision.

After some telephone tag, the Center for Entrepreneurship was to conduct a telephone interview with Jerome as well. "I watched Max and Steve build this business almost from the beginning. At first, I was a little skeptical, but these guys really know their stuff and found just the right niche. We provide a needed connection between the CRNAs who want work and the places that need them and pretty soon it won't be just CRNAs. I suspect that in a year or so, we'll be just as effective in nearly every medical profession.

"Max and Steve really figured it out and knew just how to grow this business into one that's really something. That's one of the reasons I was so ready to buy into the firm. And now, WOW, we are on the cusp of really, really taking off. We do this DHI business-and maybe one or two more similar things, and we'll really grow Carolina Health Staffing.

"Now, I know that they are a little concerned about DHI, but then this is a pretty big leap for them. As a part owner in this DHI venture we'll never have to worry about losing a major account like we're facing now. We'll be national in no time and we'll be hiring people right and left. I'm already looking for some additional office space-maybe even building where we can headquarter the operation. If this goes the way I think, we can sell Carolina Health Staffing in a few years and all of us retire as millionaires."

Susan D. Peters



This case is based upon a consulting project by the author. It is slightly disguised for reasons of confidentiality.
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Title Annotation:Carolina health staffing backs the labor markets for anesthesiology
Author:Peters, Susan D.
Publication:American Journal of Entrepreneurship
Geographic Code:1U5SC
Date:Jun 1, 2016
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