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Morningstar | AMN Healthcare Services Faces Increasing Headwinds as the Labor Market Tightens

The use of healthcare is expected to increase at a solid clip over the coming decades, and the pipeline of healthcare professionals is not expected to keep pace. This combination of factors will serve as a strong foundation for AMN Healthcare over the next several years. We believe baseline demand will steadily rise for the firm's core service--providing temporary and permanent labor for healthcare providers--over an extended period. The growth in healthcare services has historically remained relatively strong, even during economic downturns, and we expect this dynamic to continue over the foreseeable future. Given AMN Healthcare's major presence in this industry, its opportunity to leverage this dynamic is robust. AMN is one of the world's largest providers of healthcare workers, with the core of its business in the travel nurse market niche. The firm has a large nationwide client base, which has attracted a quality supply of job-seekers. We expect AMN's sizeable pool of workers should help the firm to drive top- and bottom-line growth over an economic cycle. AMN's ability to provide almost any type of medical worker is also highly attractive to its customers, as they can use one vendor for most of their placement needs. These managed services relationships have been a major focus for AMN Healthcare, and the firm has become one of the premier HR managed services providers as a result. A managed services arrangement entails AMN Healthcare taking over the entire staffing and employee measurement process for a provider system. We believe this strategy will serve to reinforce it's narrow economic moat. This service creates higher customer switching costs, allows AMN to gain access to a customer's entire staffing needs, and gives the firm the opportunity to see real-time leading metrics within the healthcare industry.Having said that, AMN is exposed to fluctuations in the larger labor markets and any hiccups in the growth of healthcare workers.