Healthcare staffing suppliers – now is NOT the time to lower your bill rates.

Seasaw When it comes to pricing, the healthcare staffing industry has it backwards.  I know every business is different and it’s hard to know where to set your price points when creating bill rates for your healthcare professionals.  Especially in this economy.  I also understand that the gap between logic and reality can be light years apart and that you have to do what you have to do to stay in business and make your clients happy.  

Lately, I’ve talked to a lot of staffing suppliers that are lowering their prices due to competition, lower hospital demand and other negative affects on healthcare staffing from the macro economy.  There certainly are some good reasons to offer lower pricing but competition and lower hospital demand are not always the most the appropriate reasons.

Why should you keep your prices the same right now?

Elasticity.  If you were awake in high school economics class you know elasticity is a fancy word that suggests prices should increase when demand increases and lower when demand decreases.  Many things are elastic in their pricing such as milk, tires, televisions, etc.  However, if you were awake and paying attention in your high school economics class you would know that staffing services are not elastic.  Lowering your prices isn’t going to make hospitals place more orders for your staff and often times, if the hospital is in need of the staff you have, high prices won’t keep them from buying.  It’s about patient care, acuity and staffing ratios.  The need for temporary healthcare staff is often present or absent regardless of price.  Yes, it's true that hospitals are able to hire more staff right now and pay them less than they were a year ago.  Again, however, lowering your prices isn't going to suddenly make the hospital start sending you more requests for staff.  It just means they'll pay less when they do have a need.

You’re sending the wrong message.  Lowering your bill rates right now suggests your prices were too high to begin with.  Further, you'll force your clients to suggest that if you can operate with lower bill rates now – certainly you can do it when the economy picks back up.  Once you’ve sent this message it is quickly received and difficult to recall.  Getting your prices back up to where they should be will be a long, uphill battle that will prove to be even more costly in the long run.

Your costs have increased.  Most likely, you’re like every other staffing supplier and your costs of doing business have increased during these challenging economic times.  Therefore, cutting your prices is a sure way to hurt your business even more.  Hopefully, your clients value your business enough to understand all of this.

It devalues your services.  Are your services any less valuable than they were last year?  If your prices were already a bit too high then the answer might be yes.  However, if your prices were market competitive then don’t send a message to your clients suggesting otherwise.

It's not all about price.  Simply lowering your bill rates because demand is lower or because your competition is doing it places too much focus on price and hurts the healthcare staffing industry as a whole.  Lets face it – you’re not making and delivering widgets here.  We’re talking about staffing healthcare professionals.  Price should not be the primary factor in the decision making process for your hospital clients so don’t let the conversation go there.  Quality, experience, and skill set are much more important factors to consider.  Therefore, if these factors have not changed why should your prices?

When should you consider lowering your prices?

Glass_half_full1 Volume.  If a client is offering you more of their business it can make sense to reduce your bill rates in exchange.  For example, staffing suppliers earning “First Tier” or “First Call” agreements with hospitals often increase, if not double their business.  Another example is receiving guaranteed orders or multiple positions for special projects that hospital is involved with such as implementing electronic medical records or opening a new unit.  Offering lower rates in these instances makes a lot of sense.

New business.  Often times to get your foot in the door at a hospital you may need to provide them with discounted rates on a position or for a specific time period.  If doing so wins you new business this too can make a lot of sense.  Just make sure the agreement regarding the discount isn’t evergreen and has specifics delineating the services to which the discount applies and when it ends.

Better payment terms.  Hospitals may offer to pay you faster or up front in exchange for lower bill rates.  To some healthcare staffing suppliers, receiving your money faster or up front is more beneficial than maintaining your current bill rates.  Therefore, lowering your bill rates in this case can be advantageous.

Add more services.  Instead of lowering your bill rates it might be easier or more cost effective to add more services and keep your current price points.  Perhaps you can offer increased staffing hours, more support, recruit for new modalities, provide additional orientation assistance or an automated order requisition process.  Most likely your company is already set up to deliver on these services and therefore, won’t increase your costs while still allowing you to hold on your bill rates.

Change fees other than your bill rates.  Take a look at your late cancellation, orientation and buy out fees.  Often times healthcare staffing suppliers are able to adjust these prices more easily while still preserving their bill rates.  There's a good chance these things happen less frequently so the impact to your margins won't be as severe. 

Again, every business is different and I understand the pressures that exist right now due to the economy.  However, I also think it’s important to look at your pricing from a logical perspective and not be reactionary to competition and lower demand.  Educate your clients on how the pricing for your business works so they better understand.  Sell your services at the necessary price to keep your business strong and only offer lower bill rates when it makes sense. 

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