Approximately 70% of healthcare organizations contract with an MSP or VMS provider for the procurement and management of contract labor. Most of these programs are managed by staffing agencies eager to box out their competition, control pricing and maximize profits in each client account.
However, one tactic that many of these healthcare MSP/VMS providers use is requiring a binding exclusivity clause that limits an organization's options, particularly when it comes to severing that partnership due to underperformance or fluctuations in the job market. Companies such as Healthcare Workforce Logistics (HWL), on the other hand, do not require such clauses for two main reasons:
- Exclusivity clauses raise a red flag because they can incentivize lackluster work. If an MSP or VMS provider has you locked in regardless of whether or not they uphold their end of the agreement, the healthcare organization will be the one to bear the losses when things don't work out as planned.
- Confidence. We have filled over 12,500 jobs so far and we are confident in our track record. Our business model allows us to do what we do best and allows you to work with other vendors or staffing agencies if you so choose.
Ups and Downs of Typical MSP/VMS Providers
Provided that most, if not all, of the needed positions are filled by the MSP/VMS, the benefit to the healthcare organization is having a single point of contact, standardization of contracts, streamlined communications and more efficient processes. The benefit to the Agency MSP/VMS provider is guaranteed revenue on every requisition filled; however, if positions are not getting filled, the value of this arrangement to the healthcare organization goes down….way down.
Unfilled positions can translate into lost revenue, closed units, and overstressed departments. As we are witnessing during the COVID-19 pandemic, when demand outpaces supply, the client bears the greatest burden, suffering a great deal more than their Agency MSP/VMS partners. The inclusion of onerous exclusivity provisions and limitations on the ability of clients to terminate existing agreements with Agency MSP/VMSs who are not performing, are commonplace in many existing contractual agreements. By holding the customer to an ironclad, exclusive arrangement, the Agency MSP/VMS is able to limit the number of suppliers that can service the client which results in above-market bill rates. Perhaps even more damaging is that by removing the ability for the healthcare organization to contract with other MSP/VMS providers, the Agency MSP/VMS imposes a distinct disadvantage to their customer when it comes to sourcing enough critically needed staff within a short time frame—risking quality patient care.
Relevant Reading: Learn about HWL’s COVID-19 Rapid Staffing Program.
What is an Exclusivity Clause?
An exclusivity clause is a section in a contract that restricts the signer from working with or engaging in services with other providers. Put simply, the signer is forced to work exclusively with the issuer of the contract until the agreed-upon initial term period ends.
According to UpCounsel, “An exclusivity clause mandates that the parties who have signed are legally restricted to sell or purchase goods to or from a single party. The buyer is restricted from promoting, buying, or using similar products from any other vendor or provider.”
5 Compelling Reasons You Should Rethink Your Exclusive MSP/VMS Contract
Ask any vendor or talent acquisition manager if they would prefer to be locked into one vendor exclusively and they will fervently tell you, “No,” and here’s why; healthy competition ensures you receive superior service and attention.
Before you agree to an exclusive MSP contract consider the potential drawbacks.
- Locked into one vendor for a significant period despite changing market conditions
- Not incentivized to research new opportunities or close deals quickly
- Lose the option to add new vendors as needed
- Higher likelihood of incurring ‘crisis’ rates
- Less proactive market intelligence provided
Protect Your Freedom to Choose
Is it ever good to have only one choice of anything, especially in a volatile staffing market? Of course not. Freedom to choose is the cornerstone of a competitive marketplace keeping costs low and quality high. Making vendors compete for your business is not only a good choice for you, but it also keeps your vendors focused on your organization’s needs.
When you are free to work with any vendor you remain in control. And in this market, control is good and management is likely looking to control or mitigate what they can, when they can, in these uncertain times.
Elements to Look for in an MSP/VMS Contract
When it is time to evaluate MSP contracts, pay close attention to these elements:
- Scope of agreement - look for non-exclusive MSP
- The initial term and renewal period
- What constitutes a breach of the agreement
- Fees - when and with what notice the vendor can modify their price list
Balance, Manage & Reduce Contingent Staffing Costs
Patient demand is not static, and neither is the availability of your healthcare workforce. With multiple vendors vying for your attention, vendors are required to balance the demand in the market with the right number of partners to ensure everyone’s success and solidify their partners’ commitment. Only with a program that gives you access to the entire market and the ability to negotiate rates freely do you retain control over costs.