Nursing shortages, while prevalent before 2020, quickly worsened in the face of a pandemic.
Widespread burnout has driven many clinicians to retire or change careers, and the sentiment stuck around even as COVID-19 infection rates waned – in a survey conducted in February by the staffing startup Incredible Health, 34% of nurses indicated they planned to quit their job by the end of this year.
As demand for nurses outpaces supply, investors have turned to startups aiming to solve healthcare’s labor crisis. In the past year, staffing startups have raised at least $ 700 million, according to a tally by Crunchbase.
While incumbents like AMN Healthcare and Cross Country Healthcare have historically used recruiters to seek out clinicians and manually match them with open positions, a new wave of
startups is aiming to use technology to make the process faster and cut costs for health systems. Startups for traveling clinicians, permanent job seekers, and per diem workers are addressing the staffing market from all angles to tackle skyrocketing demand.
“Those companies saw a huge tailwind in the last couple years, when we’ve seen everything from burnout to wage inflation,” said Julie Yoo, a general partner at Andreessen Horowitz who’s invested in a staffing startup. “There are a dozen factors creating tons of constraints in staffing. It’s logical you would see response from the market to fund those businesses.”
Big raises, despite the downturn
Investments in healthcare-staffing startups have continued this year, even as digital-health funding has slowed. Nomad Health, which offers a staffing marketplace for travel-nursing jobs and allied health positions, announced a $ 105 million funding round on June 27 co-led by Adams Street Partners and Icon Ventures. Two staffing companies, IntelyCare and Clipboard Health, crossed the $ 1 billion valuation threshold in funding rounds this year.
Garheng Kong, a managing partner at HealthQuest Capital who participated in Nomad Health’s funding round, said his firm had identified the healthcare-staffing shortage as a key trend in which to explore investments, adding that it picked Nomad Health because of its technology stack and its impressive growth in 2021.
Other companies targeting healthcare staffing raised substantial rounds in 2021.
Trusted Health announced $ 149 million in fresh funding in November for its staffing marketplace and tech platform to match nurses with open roles while helping hospitals balance costs. ConnectRN, ShiftMed, and CareRev raised capital for their own versions of healthcare-staffing marketplaces, too.
A ‘huge’ market
Though venture-capital funding has slowed this year, the nursing shortage is only expected to intensify, and investors are still betting on healthcare-staffing startups.
“The market size is huge, and the current state of healthcare staffing, despite the capital that’s gone into it, is still dominated by legacy players and mom-and-pop solutions,” said Lainy Painter, a partner at Craft Ventures who participated in the firm’s investment in Trusted Health. “There’s an opportunity to improve the experiences of both nurses and hospitals.”
Lucy Deland, a partner at Inspired Capital, expressed concerns that not all staffing startups would continue to grow. Deland, who hasn’t invested in healthcare-staffing companies, questioned whether the startups are tackling the root of healthcare’s labor shortage or merely capitalizing on the supply-demand imbalance.
“There’s a burning need, so their business models can take off because if they staff them, they get paid for it,” she said. “But is this increasing the overall retention of nurse practitioners?”
Solving the supply issue?
Deland said that while Inspired Capital had considered a few staffing startups working to improve the experiences of nurses, such as by giving nurses more scheduling flexibility, the firm has not bought into any companies in the market.
“I think there are green shoots, but we have not seen anything in the pure staffing space that we think is going to help solve our supply issue,” she said.
Nurse salaries have shot up since the start of the pandemic as more clinicians have left their jobs, too, and Yoo said the startups soaring on a promise to pay high wages to travel nurses could be in trouble.
“Hospital execs are starting to put travel-nurse-based staffing strategies in the ‘not sustainable’ bucket from a cost-structure perspective, so that tailwind is starting to die down,” she said.
Yoo is an investor in Incredible Health, a staffing platform to automate the hiring process for nurses, with options for permanent, part-time, and per diem roles.
The staffing startups likely to survive, she said, are those with strong technology at their core – “like technology-based solutions that enable a smaller number of clinicians to treat a larger number of patients without compromising on quality, or models that leverage underutilized pools of clinical labor. “
Kong said startups not adequately using technology to make hiring more efficient would have to adjust their strategy if they want to survive.
“If you do not have a heavy tech component, you do not really have a competitive advantage over the incumbents,” he said.