Okay, we're going to get started here. We're very pleased to start out the healthcare services panels at the Goldman Sachs conference. I'm Scott Fidell. I'm the healthcare services analyst here at Goldman. We're really pleased to have our first panel for healthcare services from AMN Healthcare. Here from the company, we've got Brian Scott, Chief Financial Officer, and Randle Reece, VP of Investor Relations and Strategy. We're going to do a detailed fireside chat. I have plenty of questions. First of all, I want to welcome you and thank you for coming to the conference. Brian, I thought maybe just kick it over to you and just give you a couple of minutes if you want to just introduce the company and yourselves and sort of set us up for the Q&A. You got it. Thank you, Scott. Thanks for having us here. You're welcome. Yeah, AMN Healthcare has been around for 40 years now, one of the pioneers in healthcare staffing, started as a travel nurse company, but now today have the broadest set of workforce capabilities serving the healthcare market exclusively. We provide a total talent strategy for our clients, helping them plan, predict their staffing needs, and optimize their total talent strategy. As you know, in healthcare, labor is typically the most expensive part of their P&L. We can make a significant impact if we're doing our job well. We provide both, like I said, analytics, planning capabilities. We can bring the full fulfillment along with that, both temporary staffing as well as permanent placement. We serve predominantly the hospital market, but we serve really all the endpoints, whether it's acute and post-acute, and that non-acute growth has been a big part of our growth strategy as well. We've been a public company since 2001. Revenue is between two and a half and $3 billion right now. The market I'll talk about is just, it's gone through obviously a pretty significant cycle with COVID. There was a significant increase in the staffing TAM for the industry up to about $70 billion. Now we're at somewhere closer to a $40 billion TAM as we've now cycled three-plus years out, and we've hit this point, we believe, of more normalization. Where was that pre-COVID? Pre-COVID, it was about $30 billion. Yeah, it was a little under $30 billion. Okay. You grew out of it. Yeah. It's still, if you look, if you take out the spike of COVID, it is a growing TAM, right, for all the things you'd think about with the aging population, increased utilization of healthcare, and then just some pricing increases. It just had that large increase, and so there's been a lot of structural changes in the way we operate the clients since then. It's a significant market and growing as well. We see opportunities both with our fulfillment capabilities, but now more than ever, using technologies and underpinning to both help our clients plan better, more effectively, but also use technology to enable our services, and now more so, like many companies with AI, in how we actually run our operations internally as well. Well, that's great. Great setup there. It's such a great actually company to start out at the conference because you guys sit really at the intersection of so many key trends in healthcare and have really since COVID. I know it's been quite a rollercoaster ride for the company in terms of being so levered to that sort of COVID cycle that we've seen in terms of the demand trends, which really brings us to, I think, a really important moment right now, given that this year there's a lot of focus on healthcare utilization. After several years of having a pretty robust utilization backdrop, after we had sort of the COVID drop, and then we had the post-COVID, just sort of as you know so well, just that sort of recovery. It seemed that we settled into a pretty aggressive, still consumption environment that felt like a little bit more post-COVID and sort of returning to some of the more traditional drivers, the traditional inputs of utilization. Feels like this year we've maybe turned the corner a little bit. The first quarter, clearly there was a step back, but also some seasonal factors that, from my coverage of the hospitals who managed care have sort of not bounced back from the second quarter. I want to talk about in the context of your business and sort of demand trends. maybe if you could sort of walk us through and again, not ask you for the most recent sort of stat, but that sort of the backdrop that we're talking about across your different service lines in terms of how you're seeing that demand environment shaping up in 2024. Sure. Yeah. I'll talk a little bit. I'll start with nursing because that's usually where everybody goes, I'll give some other color on that too. Yeah, both demand and pricing have been relatively stable for the better part of the last year plus. If we go back to the beginning of 2023, our travel nurse demand was actually about 30% higher than the prior year. You came into the second quarter, and at that point, bill rates were still some clients attempting to keep rates low, it was hard to fill all that demand. We got into the second quarter and you had the tariff announcements, you had the tax bill, which both had a kind of a dampening impact on demand across. They just kind of slowed down buying decisions across healthcare and in other industries. That impacted us for several months in the middle of last year. We had a steady improvement in demand, strong winter demand orders as well. Actually our first quarter travel nurse volume was actually up for the first time in over three years. I think that's just another sign that underneath some of that just kind of external influences going on that ultimately said patient volumes are still higher, that you need clinicians to the bedside to deliver care. When we got back to normal conversations with clients, we saw demand pick back up again, and it's remained back up above prior year levels for our travel nursing business. In improving our fill rates, speed to fill, and that's built on several years of initiatives to improve our fulfillment capabilities, and that's flowing through. At certain demand levels, we could just fill more of those orders. Allied demand has been up since the beginning of last year. Allied is really going to be anything that's not a nurse or a doctor. The therapy disciplines, imaging, respiratory lab, and then we also serve into the K-12 schools market as well. Allied demand has been very healthy since the start of last year. Our volume in allied turned positive also in the first quarter, and see that trajectory continuing going forward as well. The only area where we've seen a little bit of a slowdown is on the physician staffing side. As we entered the year, we've seen more stability in demand year-over-year for a decade plus in physician staffing. Still see really positive trends there, but there was a little bit of a slowdown in demand, and that's impacted our volume. We may talk about that a bit later as well. Yeah. There's some other influences that we can go deeper on, too. I'd say the general backdrop, as you said, is that you still have increased patient utilization at hospitals, both acute and non-acute. Although it's slowing down this year, it's still up year-over-year, and that's a healthy backdrop for us. That's not the only driver of demand for our services. It's really about supply-demand imbalances, if they have higher turnover, other factors that influence the utilization of our staffing services, but certainly a positive volume environment is a good backdrop for us as well. All right. Okay. That's an interesting start in terms of still seeing positive growth, albeit maybe some moderation in terms of the backdrop. Maybe we could talk about, drill into some of the underlying dynamics that have been in focus and to the extent that you see them. I'm sure you do, because you have such a broad and deep perspective on what's going on across payer classes and across service classes and then in terms of different types of facilities. One of the things that's clearly been a key focal point has been the exchanges and how that market is adjusting post the sunset of the enhanced subsidies. It was a little interesting because in the first quarter we still had some false positives, I guess, would be the way that I would put it in terms of you still had grace periods, you still had payment effectuation periods. The market felt like it was still relatively unchanged or consistent. It feels like now in the second quarter, this is where our expectation is that we'd start to see some more clear signs of that normalization as we move towards those expected 25% reduction in the exchange market. Why don't we start with that? Why don't we talk about the exchanges, maybe talk about how much that, I guess, just even interacts with your business lines and what your perspective is on how that market is evolving. Yeah. We pay close attention to obviously all those factors, whether it's the exchanges, reimbursement, any external regulatory or government influences. It doesn't directly correlate to the demand for our services in most cases. We're not hearing a lot from clients about the exchanges influencing their buying decisions for our services. I think there are other factors in play here. When you're thinking about your staffing models, even if our clients are dealing with the reimbursement environment and how they're going to be able to make sure that they are operating profitably, they're still, again, going to need clinicians to the bedside. I think for us, it's how do we ensure that we're delivering value? That gets back to the tools we have around workforce planning. What's the right mix of permanent and contingent labor? Where does flexibility actually become more cost-effective for our clients? Those types of dialogues are more important than ever if they are dealing with these challenges of potentially increased reimbursement issues and/or lack of reimbursement from more patients coming in that may not have coverage. That's where we have to drive our value more than ever. That has not been a direct influence. If anything, again, if they're looking for more flexibility to ensure that they can optimize and operate in the most cost-effective way possible, we can bring a lot of those insights in. What's interesting is that coming through the cycle and the pressure that clients have put on our industry around bill rates and bringing them down post-COVID, is that the premium they're paying for contract labor is at the lowest point to an all-in permanent labor, like a permanent hire, that it's been historically. By our internal measure, it's a single digit, somewhere between 5% and 7% right now differential. Exactly what the exchange market has been in terms of the percentage of coverage. Yeah. If you're a client and you're like, do I want to bring on more permanent staff, which is more of a fixed cost, or do I want to infuse a component of contract labor, and that differential is only 5% higher than the all-in cost of a perm nurse. There's a third-party study done by KPMG that came out a couple of months ago, and by their calculation, when you look at all the components of permanent hiring, so the hiring cost, turnover cost, training, malpractice, it's not just the hourly rate. Contract labor per hour is actually lower than permanent staff. If we can help our clients understand that and plan and staff appropriately, we can help them reduce their overall costs. To navigate through this reimbursement environment that's changing pretty rapidly. I don't know, Randle, anything you'd want to add on that? Yeah. If we go back, what happened during the pandemic, first thing out of the gate, health systems laid off recruiters in the spring of 2020. Toward the end of the year, they had an overwhelming crush for hiring. They actually hired very aggressively from 2021 on, but it was about mid 2022 when they stepped it up to another level. Previously, the aggressive hiring didn't seem to make much of a difference because the attrition rate was so high. Working in the acute care environment during COVID was not a pleasant place to be. There was a virtually unlimited budget for permanent hiring from about mid 2022, through the end of 2024 or so. Last year, we saw some change in sentiment that was amplified, I think, by administration actions. All of a sudden, our clients are wondering, This is essentially a fixed cost I'm taking on, another permanent worker at this wage level. At the time, nurse wage inflation was running 6%, 7% year-over-year. It was a very competitive labor market for nurses. Since our clients have backed off, in any other time in history, I would think, well, they're reticent to hire, wouldn't be good for us, but they still have need to hire. They just are hesitant to hire more permanent staff. It's a really good alternative we're providing. Where they can take on the cost for as long as they need it and let it go without any layoff costs. Great. I want to stick on demand because there's a number of things to talk about. I mean, just demand and supply, and then maybe some of the technology stuff. That's probably where we're going to spend our time, I think, for the most part, and then sort of whatever else we have time for. A couple other things I definitely wanted to ask you about on the demand side, and maybe we'll go right to that, physician staffing trends. You had sort of teased that up a bit- In your comment. In particular, for us and what we focus on a lot have been the trends in hospital-based physician specialists and a very sort of tight balance between supply and demand that's put a lot of expense pressure on the hospitals that we cover. It's been really interesting over the last couple of years how it feels like, and would love your observations on this, you guys probably have amazing perspective, but that we've cycled through almost every specialty- sort of having their shot at goal, right? sort of getting that big boost, but then continuing to have these significant increases. Even in some of our recent interactions with the hospitals and some of the visits that we've had recently, they've continued to call out these pressures, you know. remain significant. From your perspective, maybe talk us through maybe against that sort of construct around have we been largely sort of cycling through all the specialties, but how, I guess, sort of structural would you say this is at this point, and how do you develop strategies. to potentially address and provide some relief into the system. help to solve. this key challenge. Yeah. Thank you. With physician staffing, we provide both permanent placement solutions. We have the largest physician perm placement business in the industry. Then on the temporary side, you have locum tenens. We staff across all those specialties, subspecialties in primary care, et cetera. That industry on the staffing side was much more consistent over the last decade plus. It didn't have the big spike and come down like you saw in nursing and allied. It's just been a steady grower as you have this aging physician population and just these persistent shortages across specialties. That's always been a good backdrop for the industry overall. Expectations are that's going to continue. I think the rate of growth is slowing down in part because rates have gone up. Again, clients are more focused on it. The underlying trends, I think, are favorable. You're also seeing behavior changes with more physicians looking at locums as a part of their career journey, whereas historically it kind of skewed towards end of career physicians that maybe wanted to extend their career, work part-time, not have to deal with the administrative burden, or if they were coming out of selling a practice, they just wanted to provide patient care. Now you see a lot of early career physicians as well doing locum. I think the underlying backdrop, there's some commonalities to what you've seen in even nurse and allied staffing, where you have physicians across their entire career at different points wanting to provide the service. What we've also seen from the buyer side, though, is a greater focus now on what they're really spending. Historically, in hospitals, a lot of the buying decisions were made at the unit level. Different groups were making locums purchases. You're now seeing more of that being centralized, like we've already had for years in nursing and allied. We've actually been trying to support that and highlight clients. There's a lot of spend here. Let's help you get your arms around it and control and optimize it more effectively. That trend, I think, will play into our workforce solution strategy. Our MSP programs are vendor neutral, and the technology we've built to be able to support better visibility and utilization of spend. Really, we think we're at the apex of being able to be a thought partner of our clients. If you look at the two largest players in the temporary physician space, they're typically going to be top of market on bill rates, and they're making a higher margin. What we try to sell the clients is, let's get your spend more under control, and if we actually can provide more of the staffing for you, we don't have to lower our rates to do that. We can immediately save them money because they're moving from the most expensive option to something more cost-effective. Then we can layer in our perm placement services as well. Again, let's find the right mix between if you have persistent shortages you're using locums for, let's help fill those jobs, and we'll help you recruit more permanent physicians. Technology and temporary and permanent solution, that's going to help our clients drive more cost savings there as well. Those underlying trends you started with are here, and they're going to get worse, especially at the specialty level. Anything you can do to create more options for physicians to extend their careers, move around where they're needed to fill the largest voids, that's going to be really important to make sure that patient care is being delivered as well. Maybe just to stay on this, can you give us a snapshot in terms of, I guess, sort of two parts. One, where are you seeing right now the most particular tightness, in terms of specialties? When you think about what you said in terms of these trends are only going to get worse. Similarly, where do you think, as you look out to specialties, where you think those structural constraints are going to be the most observable? Definitely number one with the bullets, mental health. For sure. The mental health- 100% agree here. Yeah Employment in the U.S. has grown at an astonishing rate since 2019 and hasn't flagged a bit. That is a couple of levels above everything else. In our latest just review of specialties, the rest of them were fairly bunched up. Brian was talking about how we help clients understand how much they're actually spending. If you go across the industry, where health systems account for nurse practitioners, physician assistants, CRNA, varies greatly. Sometimes they're in the direct cost of sales, sometimes they're in professional services. A lot of clients don't treat them the way they treat the rest of the physicians, but that is the fastest-growing area of spend, has been for the past 10 years. Those are areas, they're lower bill rate. The labor supply hasn't been extremely difficult because the population of the specialists has been growing 8%-10% a year. They're just slowly being siphoned off of the nurse pile. Upskilled. That's a completely different set of issues from the traditional specialties, which all are very hard to recruit, and people don't move very quickly. The lifestyle element and the ability to use elder physicians in a flexible way, still keeps those specialties viable. Yeah, it sounds like the last couple of quarters at least, we've been hearing radiology seems to be at the. Yeah Sort of that tip of the spear. Yeah, we can see that in Allied too. where our imaging adjacent demand is very strong. Yeah. I want to follow up, though, on the mental health point, because this is something that we've been very focused on and as sort of one of our mega themes that when we had launched coverage on managed care and hospitals in October. We've been initiating coverage on a number of sort of provider stocks, including, for example, some of the outpatient, like LifeStance, for example. One of the themes that we had sort of focused on was around our view that we're still in the very early innings of a long-term mix shift from inpatient to outpatient and non-outpatient, sort of everything but on mental health, sort of similar to 20 years ago, right, when we had it in sort of acute care. Certainly, it seems that the market trends seem to be supporting that with Universal Health announcing their acquisition of Talkspace. You guys probably have an incredible vantage point around that in terms of, because the data is really tough. This is an area where we have so much data on so much of healthcare, but when you get into behavioral, into mental health, particularly in that massive outpatient, sort of multi, sort of compartmentalized categories, the data's very sort of scattered. Maybe talk about that. Are you guys really seeing that trend playing out in terms of that mix shift playing out from inpatient to outpatient at this point? Maybe where you're seeing across sort of outpatient or digital, I mean, obviously, we had sort of the massive spike, right? Right. It felt like of all of the different sort of virtual categories that behavior was the one that sort of stuck at the highest. Sure Sort of go forward, which makes sense, too. Of all the other sort of dynamics. I know there's a lot in there, but hopefully. Yeah. I agree, though. You still see a decent amount of demand for virtual mental health care, and part of it is for convenience. It's also just getting access to the right providers in different markets can be very challenging, especially to get into rural markets. We certainly serve some of those, some of the virtual care providers as well as the acute. We serve both acute and post-acute. One of our large contract wins more recently was with a state system that is providing mental health services, so a lot of psychiatry and other related services, that's just, I think, an indication of the high level of demand. It's an area of focus for us to grow as well, particularly in the non-acute. On the nursing side, we've been sort of more anchored into the acute care. When you talk about both allied and physician services, we really serve a multitude of markets. The traditional acute, but a lot of it is non-acute settings, whether it's, you said it could be outpatients, behavioral health centers, virtual physician practices, et cetera. As you follow that trend and you want to provide that point of care, like I said, we can bring the staffing and where it's needed most, we definitely agree this is an area that will continue to grow. It would be helpful if we could get some standardization of licensing. That's one of the things that providers have to juggle. Yeah, getting multi-state you're in this state, who can I bring in my pool of virtual counselors or whoever that is eligible? That's definitely one of the main difficulties in staffing those engagements. Yeah. The regulatory structures are just not mature, right? Some of them are institutionalized by the groups as well. Shortages are also good. Yeah in terms of the negotiating pay. For sure. It's finding that balance of that's going to serve patients the best way possible. That's always going to be a push-pull as well. Yeah. All right, one more demand, then we'll move to supply. Okay. This is one we have to address, which is the Medicaid dynamics and sort of both on the look back then what's ahead, right? On the look back, clearly, we've been in this compression phase because of redeterminations, which I think a lot of the thinking in the industry was that that was going to sort of wrap up last year Medicaid market would probably stabilize. From our vantage point, the market, overall Medicaid has continued to compress somewhat even into 2026. Looking forward, clearly we've got some major regulatory aspects from the Bipartisan Budget Act bill that are going to be significant. We're getting the proposed regulations now, which are significant with Medicaid state-directed payments, also with the work requirements. I'm sure that as you think about lining up sort of your capacity and your resources, sort of analyzing these end markets is an important aspect of it. Maybe bring us into your thinking on this. It goes back to the earlier conversation. Just to be clear, too, with AMN, we don't have any direct reimbursement risk. We're billing our clients. We're providing our services. Again, our job is to be that thought partner to help them do that cost effectively. A lot of our largest clients, they're large health systems, and they're, in many cases, more in the urban areas, and they may extend into suburban and rural areas, but they're, in most cases, profitable and growing as well. They're likely to be rolling out more as some of these reimbursement challenges impact smaller hospitals, community hospitals, more rural. They're going to be looking for these larger partners to help them drive more cost efficiency as well. We can partner with the larger systems to help navigate through this reimbursement environment because it's going to limit access to care if not done accurately. The other thing we're looking at is how do we serve both acute and post-acute, because some of the care is going to have to move outside of hospitals because it's a lower cost setting. If there's lower reimbursement, they have to find a way to deliver this care in a more cost-effective way. That's a big focus for us. Again, as I mentioned, our allied business is already serving a much more diverse client base, both acute but also standalone imaging centers, standalone physical therapy. There's a lot of different ways that we can serve clients with those services, and we're doing the same with nursing, looking at other endpoints where there's been more utilization, and it's partly to navigate through reimbursement changes. That's where we look at is there's increased utilization of healthcare over time. What are those points of care going to be? How do we partner with the right clients so that we can kind of make sure we're there to help them in the most cost-effective way possible. Again, thus far, our clients talk about these challenges directly, but at the end of the day, they're also asking us then, well, how can we make sure we bring our workforce in the most cost-effective way to offset any reimbursement changes that are occurring? The hospital industry's been gating census ever since the pandemic, trying to get their effective capacity to align with their labor capacity. They've been squeezing off some demand for the past couple of years, probably not as much so now census is going to look like. They're concerned about what their payer mix is going to look like. Mm-hmm. Yeah. That's the number one priority, is control over costs. Yeah. We happen to be sitting here at a pretty advantageous position in terms of our relative cost to permanent hiring. There's a couple of other elements that you, as a hospital analyst, should be aware of. Hospital industry rapidly managed down average hours worked over the past two years to the lowest level since 2003. Just an abrupt change. If you look at the chart, it looks like this, and then poof. They've squeezed about as much out of that as they can, minimizing overtime and using part-time. Is that nurses in particular? That's all staff. or just across all staff? Right. Clinical, you can look at the data from a clinical perspective, and you can look at it in total. That's both on the permanent side as well as on the contract labor side. Yeah. Great data point. Yeah. Since 2003, you said? That lever is maxed out. Wage inflation right now is running at a very slow level, 2%-3%. If they want to push hiring a little harder, there could be some resistance in terms of price. It starts to push more of a war for talent, which is just going to increase their wages overall, which then permeates through their entire wage base. That's across all staff, the 2-3 points? Yeah. Yeah. That's where we can, again, if they've slowed down hiring and you start to see wage growth decelerate, if they start to try to push the permanent hiring again, you're likely to create increased wage inflation, which then is going to be a larger cost impact. Yeah. They're even sitting at a long time extreme in terms of supervisor to supervised ratios as well. In a lot of these ways, they've squeezed about as far as they can squeeze, and they need another avenue of flexibility. Maybe we can pinpoint it into nurse supply. Maybe put it against in the construct of maybe pre-COVID and sort of, let's not even go towards COVID, the structural long secular trend there. First of all, I guess, where are we now relative to, I guess, that pre-COVID trend line that we were talking about? Maybe what are some of the key upside and downside risk factors around nursing supply? Yeah. I think the supply environment is constructive for us. COVID, it is important because you had a lot of nurses that came into the industry because the pay rates were up so high. Yeah that would have normally not have come into the industry. Yeah. I think we've cycled through long enough now where all those clinicians have gone back to permanent jobs. Okay. Those that are looking for this lifestyle or this industry as part of their career, it's back to more normal usage. What would you say a sort of peak maybe, what was the percentage that they were representing at? It's hard to say exactly what percentage, but I do know that we went from about 40,000 travel nurses to over 150,000 travel nurses within a couple of years. Now we're at? Now it's more like a little under 60. Okay. It's still a larger market overall. Yeah. I think that it's really about finding that right pricing point that allows us to offer the right pay packages. There was actually an article in the journal about a week and a half ago about travel nursing. It's worth a good read. Yeah. It really focuses on all the things we always have highlighted as the reason. It's not just pay, it's the ability to build your skills, live in different markets, maybe test a place before you go into a permanent hire. We back a lot of those buying decisions, but we need to have just a market clearing pay rate. That's where clients are getting bill rates to the point that allow us to fill those jobs. When we have bill rates that are appropriate, we fill jobs very quickly and over time. Well, I could have easily gone a double session. Yes. I don't know if we have the room. I want to thank you guys so much for joining us, and I hope that the conference goes really well for you. Thanks, Scott. Thanks. Thanks for having us. Thanks a lot.