Labor Cost Management

How a workforce marketplace ecosystem can reduce traveler nurse dependence and stabilize a hospital’s labor cost model

August 30, 2022 1:27 pm

An effective healthcare staffing solution requires flexibility, balance and reach, rather than reliance only on the costliest solutions.

The pandemic exposed many vulnerabilities in the healthcare industry during its earliest days and created more over time. Two years and over a million deaths later, frontline staff continue to bear the brunt of the crisis, to the point that burnout among them has caused significant disruption to many hospitals and health systems.

Workforce statistics underscore healthcare’ staffing challenges

  • $24B  Increase in hospital workforce costs nationwide in 2021 over 2020 costs
  • 132% Increase in the use of agency and temporary workforce for 2020 to 2021
  • 52%  Rise in overtime for from 2020 to 2021.
  • 38% Total RN paid dollars attributed to contract RNs in 2022
  • -4% Level at which U.S. hospitals’ operating margins hovered through most of Q1 2021

Sources: American Hospital Association, Cost of Caring, Report, April 2022; and Kaufman, Hall & Associates, LLC, National Hospital Flash Report, April 2022.

Foreseeing an ongoing decline in skilled workers, some healthcare leaders have adopted a workforce ecosystem approach based on a concept developed by MIT Sloan to ensure a stable, cost-effective workforce.a Defining features of the MIT Sloan concept are as follows:

  1. Coordination and cross-functional management of internal and external workers
  2. Hiring and engaging of the requisite internal and external talent
  3. Support for managers seeking to hire external workers
  4. Understanding of how to allocate work for internal and external contributor
  5. Alignment of the workforce approach with the organization’s business strategy

As an evolution, the workforce marketplace ecosystem approach, modeled after Uber’s “gig worker” approach, is led by human resources, but it requires active participation of the entire senior executive and management teams to champion its adoption. Reliance on legacy traveler models was an expensive short-term fix. However, that does not mean that we should cast aside the notion of a contracted or on-demand workforce. Such an approach can work if it is cost efficient and balanced with full-time resources in an ecosystem. (See the sidebar “Workforce marketplace ecosystem early adopters gain competitive advantage”  below for examples of early applications of the workforce ecosystem in healthcare.)

7 essential characteristics of a workforce marketplace ecosystem

With a focus on flexibility, retention and engagement and the application of marketplace technology, a workforce marketplace ecosystem can enable organizations to reduce their dependency on staffing agencies and traveler contracts.b The ecosystem counters such dependency by establishing a balanced, stable and cost-efficient solution having seven essential characteristics.

1  Targets workforce caregivers by type and fosters locally curated pools. Workforce marketplace ecosystems leverage technology to curate, and engage workforce pools based on different caregiver types and their predominant demographic characteristics (e.g., certified nursing assistants [CNAs] tend to be women who are socioeconomically disadvantaged and have limited transportation means). 

A chief goal is to activate a latent workforce of local professionals who would not be accessible under traditional approaches because they require flexibility (for example, early retirees who might be coaxed out of retirement, full-time employees wanting extra money to pay for debt and single parents). 

The approach constitutes an ecosystem because it is designed to curate not only “gig” or “on-demand flexible” workers, but also full-time, part-time, contracted and on-demand contingent workforce pools across a region and across skill mixes, as well as inpatient and outpatient modalities. 

Establishing the marketplace ecosystem can take months, but such a time frame may be necessary to methodically accomplish the requisite department-by-department, or location-by-location approach to curate local marketplace pools that can replace traveler contracts and unnecessary full-time position openings.

2  Requires flexible scheduling models and dynamic wage ranges. The notion of flexing schedules is not new, but this model encourages offering scheduling as short as once a month or a few hours per day.   An ecosystem approach is not possible without the ability to flex wage rates based on patient demand or the date a shift is posted.

Having wages fixed at a low rate can hurt an organization. Consider that a policy of not filling a position at a $1 higher rate is penny-wise and pound-foolish if it prevents a hospital from scheduling procedures worth thousands.c

3  Streamline onboarding and credentialing for a faster workforce activation funnel. The ability to rapidly activate staff is a hallmark of the marketplace ecosystem model. Hospital leaders therefore need to evaluate their organization’s caregiver activation funnel to identify and address inefficiencies that slow the process. An ineffective process can take months to complete, negating any possibility for on-demand shift filling. 

Many barriers are artificial and are maintained by rules that support employment or traveler models. For example, many staffing agency health system contracts prioritize higher-level preceptor or orientation slots for their sometimes 8-week, travel nurse contractors, leading to marketplace dysfunction because less expensive, local on-demand workers essentially cannot get activated.

A lengthy onboarding and credentialing process also is a barrier to an effective ecosystem. Technology is now available to digitize this process to help streamline this experience not only for new full-time employees but also for on-demand contractors.

Evaluate and streamline the professional activation process to support a workforce ecosystem approach

4  Fosters a full-time core and recruiting path for local, on-demand contractors. A workforce marketplace ecosystem prioritizes the placement of the organization’s full-time core and floating staff. Only after these staff have been placed can any remaining open shifts be filled by on-demand, local workforces.  Some marketplace workforce models support 1099 contractors (e.g., Clipboard), and only a few focus on w2 models (e.g., ShiftMed).  There are various legal worker classification and other risks in 1099 models and an increasing move toward w2 on demand workers to avoid lawsuits.

A full-time core is critical, but not everyone wants to work full-time because many feel it limits their options for growth. The World Health Organization says burnout is rooted in feeling little sense of personal workplace growth.d Lack of choices is a major factor leading to burnout.

A marketplace ecosystem allows for a try-before-you-employ approach, reducing burnout and turnover and increasing stability. It also saves money, because each percentage-point reduction in registered nurse (RN) turnover saves the average hospital $270,800 per year.e Many workforce marketplace technology platforms encourage seamless conversion to a health system, full- time employees via a click of a button.

5  Circumvents the challenges posed by vendor management systems (VMSs),  managed service providers (MSPs) and internal staffing agencies. A workforce marketplace ecosystem model is not about aggregating staffing agencies or operating an internal central staffing agency that heavily supports travel contracts. Travel nursing will continue to be an important tool to help fill niche roles, but relying on it to fill traditional nursing roles is simply not cost effective.

An organization can reduce short-term costs by using a workforce marketplace ecosystem to augment VMS/MSP resources and thereby reducing reliance on travel contracts. Given that the average travel nurse wage has skyrocketed through the pandemic to as much as $4,000 a week, a hospital could save as much as $4.16 million annually simply by eliminating 20 travel nurse slots.f

Overhead costs for an ecosystem also tend to be lower than the overhead fees for a VMS or MSP, which can be as much as 6%. Thus, savings from the ecosystem can go directly to professionals.

6  Offers shifts across inpatient, outpatient and professional classes. A marketplace ecosystem focuses on both RNs and allied health workers. Most important, it recognizes the importance of support staff for nurses, given that a lack of such staff is one of the key reasons nurses quit.g This consideration is why it is so important for the ecosystem to focus on allied support staff like the CNA as a specific caregiver type.

7  Enables wrap-around technology to recruit, educate and retain workforces.  Marketplace technology can provide a backbone for wrap-around technologies that can be used to engage workers in unique ways. For example, some marketplace platforms allows CNAs to become certified or take continuing education unit credits via the technology.  Also, UberHealth offers a marketplace plug-in to support transportation for CNAs as a benefit for filling a shift.  

Learning from other industries and drawing conclusions

Adopting a workforce marketplace ecosystem with a strong on-demand staffing component won’t mean reinventing the wheel, just the mindset that makes the wheels turn. Other industries have proven the model. The trucking and logistics industry has adapted a marketplace-based on-demand model, called Veryable, in response to its own workforce shortage. Veryable’s on-demand marketplace lets workers move between companies for manufacturing, logistics and warehousing jobs, and it has shown how providing a variety of opportunities can keep workers engaged through the promise of variety and career growth.

The bottom line isn’t complicated: On-demand workforce marketplace technology platforms that support an ecosystem constitute a practical operational innovation that benefits both front-line employees and management. When healthcare demand drops, so will the number of available shifts. The benefits of this model for addressing industry challenges presented by the pandemic are clear. But the greater flexibility and lower-cost options a workforce marketplace ecosystem can provide make this approach worthy of consideration as a long-term strategy.


a. Altman, E.J., et al., “Workforce ecosystems: a new strategic approach to the future of work,” MITSloan Management Review, April 13, 2021.

b. Until only recently, with the advent of successful healthcare marketplace companies, like ShiftMed, has there been technology that could serve as a backbone for a workforce ecosystem. Such marketplace technology, as is referenced in this discussion, is an essential component for making a cost-efficient, on-demand workforce ecosystem possible.

c. See, for example, Everhart, D., et al., “The effects of nurse staffing on hospital financial performance: competitive versus less competitive markets,” Health Care Management Review, April-June 2013.

d. World Health Organization, “Burn-out an ‘occupational phenomenon’: International Classification of Diseases,” News, May 28, 2019.

e. Nursing Solutions, Inc., 2022 NSI National Health Care Retention & RN Staffing Report, March 2022.

f. Sumner College, “The hottest job during a pandemic? Travel nurse,” page Accessed Aug. 5, 2022.

g.  See for example Shah, M.K., et al., “Prevalence of and factors associated with nurse burnout in the U.S.,” JAMA Network Open, Feb. 4, 2021.

Workforce marketplace ecosystem early adopters gain competitive advantage

After more than a year of operating amid a pandemic, some hospital and healthcare systems began seeing improved numbers on their income statements as a result of implementing, wholly or partially, the workforce marketplace ecosystem model.

St. Louis-based SSM Health System adopted a workforce marketplace ecosystem to alleviate its costly reliance on traveler agencies to address turnover and mitigate the pandemic shortages.a SSM identified then signed up local clinical professionals in locations where its workforce shortages were most acute. Having direct contact with the health system enabled people to choose their preferred locations, times and rates, and this locally focused response dramatically boosted fill rates across the health system.

The ecosystem approach included a digitized activation funnel for the recruiting and onboarding process, which reduced both the time and cost of access to qualified workers. The workers, in turn, reported more favorable experiences from being part of an on-demand workforce.

 The approach reduced dependency on traveler and staffing agency long-term contracts in two ways:

  1. By giving internal staff  priority via internal float pools
  2. By offering flexible, on-demand employees a path to full-time status

Within months, SSM Health System reported it had filled thousands of shifts with local healthcare professionals and was becoming the envy of its local competition. It projected a significant cost reduction simply by gaining the flexibility to:

  • Cancel shifts
  • Pay lower, direct-to-professional local per diem rates
  • Eliminate travel contracts
  • Make room for more employee-filled shifts

SSM’s effort remains a work-in-progress, but it has established an operational innovator for other systems to follow.

Although the goal ideally is to fully adopt the workforce marketplace ecosystem approach, health systems can see benefits in applying aspects of this approach incrementally. Mercy Health Saint Louis used a solution focused on internal staffing  to better manage floating internal professionals, reduce premium spend and maximize internal resources, with the following results:

  • 25% reduction in operational workforce
  • 11% reduction in premium workforce spend
  • 8% open shifts filled by employees

Froedtert Hospital in Milwaukee has seen success in applying a digitized recruiting platform, with automated interview scheduling, in-app reference capabilities and other digital innovations. The health system was able to reduce its time to hire nurses to fewer than 20 days, on average. It also noted demonstrably reduced staff turnover, with about a 15% increase in full-time employee retention.


a. Merrilees, A., “Fighting to find nurses, Mercy experiments with Uber’s ‘gig worker’ model,” St. Louis Post-Dispatch, May 22, 2022.

b. Torres, R., “Froedtert fills hundreds of nursing, staff shifts a week with CareRev employees,” Milwaukee Journal Sentinel, Feb. 24, 2022.



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