Medical recruiters in the firing line as the usual suspects flog the wrong horse (yet again)
Recruitment agency bashing was back in fashion this week when the New South Wales Health Minister Ryan Park vowed to crack down on the use of private recruitment firms saying the government’s over-reliance on costly third-party companies to service the state’s health system is unsustainable.
Park, who has ordered a special commission of inquiry into health spending due to release its terms of reference imminently, said the system had become “over-reliant” on what he described as a “temporary fix to regional and rural health worker shortages”.
The Sydney Morning Herald started the pile-on earlier in the week when it quoted state Greens MP Amanda Cohn – who worked as a locum doctor in regional NSW towns for years before entering parliament at the last election, accusing recruitment agencies of “deliberately driving up staff costs while also discouraging medical workers from taking full-time jobs in the public health system.”
Cohn said because some recruitment agents were paid via commission, they were “incentivised to price gouge our hospitals”. In a speech in the NSW parliament, Cohn said agents had “discouraged me from accepting placements before the hospital was offering crisis rates”.
The Herald showed its flawed understanding of how recruitment agencies operate when it breathlessly stated, “Documents also reveal that in some cases the contracts between doctors and third-party agencies discourage health workers from permanently filling roles in the public hospital system by including breakage fees. A copy of a contract between a medical worker and one third-party provider states that a doctor who accepts a role with a “client” – which can include NSW Health – within 12 months of accepting a locum placement must pay “damages” to the private company.
This “breakage fee” refers to a temp-to-perm fee that is common in all recruitment agency contracts with end-users, regardless of sector, role type or seniority. There is nothing unique about NSW Health or doctors in having such a clause in the terms of business or candidate agreement – it’s standard practise.
The Herald article continues,
NSW Health did not answer questions about the cost of third-party agencies, but a spokesperson said they typically received 15 per cent of the doctor’s fee per placement. However, those fees can be as high as 20 per cent. It means that based on one 13-week placement of $3000 per day on a five-day roster the placement agency would be paid $29,250.”
The Herald goes on to say that Cohn believes NSW could potentially save hundreds of millions of dollars by cutting out the agencies and managing the health workforce through a central database. This same suggestion was made 15 years ago in the report of a special commission of inquiry into NSW health services.
The ignorance and naivety of politicians, public servants, and journalists with respect to recruitment is laid bare in this latest beat-up.
The delusion of all concerned is captured through the stakeholders’ explicit or implicit sentiments along the lines of ‘recruitment isn’t that hard’, ‘recruitment agencies are unethical and/or profiteering’, and ‘we should do this ourselves and save a bundle’.
It’s yet another example of where recruiters are belittled and demonised and the difficulty of effective and timely recruitment is demonstrably misunderstood and underrated.
If it was genuinely cost-effective for governments and government agencies to create a big centralised recruitment function you can be sure it would have been accomplished somewhere else, either in Australia or elsewhere around the world, long before now.
The fact that it hasn’t been accomplished anywhere, to my knowledge, is market-based evidence that recruitment agencies are providing a valuable service that the government sector is incapable of providing for the equivalent investment of time and money.
The reality of the healthcare market is that there exists a much greater demand for highly-skilled health workers, such as doctors, than there is supply. Recruiters drive the efficient allocation of these scarce resources through pay rates and other incentives.
Recruiters have no control over the overall supply of these highly-skilled workers; however, the government does have this control – through the many ways in which it explicitly and implicitly endorses both the medical student quotas of tertiary institutions and the licensing requirements of the various member bodies that represent these professionals (eg RACGP, RACS etc). These quotas and licensing requirements directly impact the supply of qualified health professionals.
How often do you see politicians and journalists have a go at these tertiary institutions or representative bodies when it comes to expenditure on health workers?
You never do, of course, because it’s much easier to slam recruitment agencies and demonise them for a problem not of their making.
It’s predictable and pathetic and it needs to stop.
Note (14 July 2023): An earlier edition of this blog included the following paragraph: Unless NSW Health has an unusual agreement with recruitment agencies with respect to placement fees the calculation stated in the above quote demonstrates the Herald journalist’s fundamental misunderstanding of what he was told and is simply wrong. I suspect the 15%-20% quoted refers to the margin included within the stated daily payment to the doctor, rather than on top of the daily $3000 wage example used.
I have subsequently been contacted by a medical recruitment panel supplier to NSW Health with the following advice: NSW does indeed have an unusual agreement. They pay the doctors, not the agency, either by PAYG or if they are ABN Sole Traders or Pty Ltd (lots of senior docs have their own companies to locum through) the agency charges only the margin, so the 15% is on top. I must note however that an agency has to sign and agree to NSW health terms with every single LHD to supply non-specialist doctors and they often determine the price – sign or don’t supply basically. They are usually lower and a lot are 12%. Some we have at 14 or 15.
Related blogs
New Zealand’s new AoG contract is an insulting joke of a document
Federal Government clueless (again) with latest recruitment tender
Recruitment incompetence is sending businesses broke (and embarrassing governments)
ABC News stoop to new low in pathetic recruitment industry hit piece
Well said Ross
13 July 2023: “Catastrophic Consequences” RCSA warns New South Wales Government against restricting healthcare recruitment.
Australia’s peak body for Recruitment and Staffing (RCSA) has written to the New South Wales Health Minister warning that hospitals could struggle to fill critical staffing gaps, if agencies are blocked or restricted from supplying nurses and doctors into the system.
The State Government has agreed to examine the use of private recruitment and locum agencies following a motion proposed by Greens politician Amanda Cohn to ban the use of external recruitment services in favour of bringing the process in house.
“I am concerned by Amanda Cohn’s proposed motion to Parliament in June and a subsequent ‘onesided’ article published by The Sydney Morning Herald this week, says RCSA CEO Charles Cameron. “For the Greens to blame an agent for representing the increasing price of talent in the middle of a medical staffing crisis indicates they don’t understand how markets operate. We need structural solutions, not scapegoats, from our political leaders.”
RCSA is concerned that the reckless and unfounded comments could undermine the crucial role locums play in helping the health system overcome staffing challenges when there are critical skills shortages and other market failures.
“The ability of NSW Health to effectively and efficiently find and place staff should be the priority of any Parliamentary review before the idea of changing the status quo should even be entertained,” adds Cameron.
At present local health districts (LHDs) in NSW manage their locum workforces through different agencies, engaged through contractual agreements that are drafted by the LHD. These agreements establish the terms of the engagement AND the fee that the agency will receive for placing a worker. Allegations that recruitment agencies are demanding unjustifiably high fees to drive up their profits don’t stack up.
“In our experience placement fees for doctors in LHDs across NSW sit between 10-15% and many are working to tighten this percentage even further as existing agreements expire, says Cameron.
“In reality, a staffing agency’s profit margin constitutes only a very small portion of the placement fee. The majority of the money raised goes on overhead and service costs and other expenses such as general insurances, travel costs and accommodation. If the fee was lowered below the current rate it would make it extremely difficult for agencies to cover expenses and provide high calibre healthcare staff.”
RCSA’s members provide vital resources to public, private hospitals, clinics, and facilities. Private recruitment agencies ensure continuum of care by plugging the gaps of the permanent workforce and act as a safety net for the doctors and nurses who were overworked during the COVID-19 pandemic, enabling them to remain in work but in a more flexible, and sustainable, manner.
Agencies have the expertise and databases to source and attract workers to regional and rural areas where shortages are dire. These areas often lack sufficient infrastructure and as a consequence are not typically appealing for workers to relocate permanently or commit to longer placements.
“In addition to having access to a broad pool of doctors and nurses, across multiple jurisdictions, agencies have experience, and time, to nurture a candidate into a rural placement. They have established structures and contacts to help workers relocate and find suitable housing, meals, and transportation. These costs can be absorbed into the placement fee. They are responsibilities that exceed the capabilities of the NSW Health LHDs and even individual hospitals, which are already burdened with limited time and internal resources.
“There has been a shortage of health care professionals for over 20 years and rates of pay and fees have responded accordingly. This is likely to continue until Australia can develop a larger pool of domestic doctors and nurses or streamline the process for global candidates to live and work in Australia. In the meantime, healthcare recruitment services have never been more vital and shaking up the way things are done in the middle of a skills shortages could have catastrophic consequences.”