Okay, we're going to get started here. So we're very pleased to start out the health care services panels at the Goldman Sachs Conference. I'm Scott Fidel. I'm the health care services analyst here at Goldman. We're really pleased to have our first panel for health care services from AMN Healthcare. And here from the company, we've got Brian Scott, Chief Financial Officer, and Randy Reese, VP of Invest 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. And 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 You got it.

Thank you, God. Thanks for having us here. So, yeah, AIMON Healthcare has been around for 40 years now. One of the pioneers in healthcare staffing, started as a travel nurse company, but now today I have the broadest set of workforce capabilities serving the healthcare market exclusively. We provide kind of a total talent strategy for our clients, helping them plan, predict their staffing needs, and kind of optimize their total talent strategy. As you know, in health care, labor is typically the most expensive part of their P&L, and so we can make a significant impact if we're doing our job well. We provide both, like I said, analytics, planning capabilities, and then 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 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 $2.5 and $3 billion right now. And the market I'll talk about has 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. And now we're at somewhere closer to a $40 billion TAM as we've now cycled, you know, 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 a 30 billion.

Yeah, it was a little under 30 billion.

You grew out of it. Yeah, so it's still, if you look, if you kind of take out the spike of COVID, it is a growing camp, right, for all the things you'd think about with the aging gross population, increased utilization of health care, and then just some pricing increases. But 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 but it's a it's a significant market and growing as well and we see opportunities both with our fulfillment capabilities but now more than ever using technologies and entertaining 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 and how we actually run our operations internally as well well that's great uh great setup there and there's just it's such a great uh actually company to start out at the conference because you guys sit really at the intersection of so many key trends uh in health

care and have really you know since covid and it's i know it's been quite a roller coaster ride uh for the company in terms of uh of being so levered you know to those to that sort of covid cycle that 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, you know, this year, there's a lot of focus on healthcare utilization. And after several years of having a pretty robust utilization backdrop, you know, after we had sort of the COVID sort of drop, and then we had the post COVID just sort of as you know, so well, just that sort of recovery, but and then it seemed that we settled into a pretty uh you know a pretty aggressive still consumption environment um that felt like a little bit more post-covid and sort of returning to some of the more traditional drivers the traditional inputs of um of utilization but um feels like this year we've maybe turned the corner a little bit the first quarter clearly there was uh a step back uh but also some seasonal factors that you know from uh from my coverage of of the hospitals who managed care have sort of not bounced back from the second quarter, but I want to talk about in the context of your business and sort of demand trends. So maybe if you could sort of walk us through, and again, not asking for like, you know, the most recent sort of stat, but that sort of the backdrop that we're talking about across, you know, your different service lines in terms of how you're seeing that demand environment shaping up in 2026.

Yeah, and I'll talk a little bit. I'll start with nursing, because that's usually where everybody goes, but I'll give some other color on that, too. But the demand, both demand and pricing have been relatively stable for the better part of the last year plus. So if we go back to the beginning of 2025, our travel nurse demand was actually about 30% higher than the prior year. Then you came into the second quarter, and at that point, too, bill rates were still, you know, there's still some uh clients attempting to keep rates you know low so it's a harder hard to fill all that demand uh but then we got into the second quarter and you had the the tariff announcements and then you had the tax bill which both had a kind of a dampening impact on demand across you know they could just kind of slow down buying decisions across health care and in other industries and so that impacted us for several months in the middle of last year but then we had a steady improvement in demand, strong winter demand orders as well. And so actually our first quarter travel nurse volume was actually up for the first time in over three years. So 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. You need clinicians to the bedside to deliver care. And so when we got back to kind of normal conversations with clients, we saw demand picked back up again, and it's remained back up above prior levels for our travel nursing business. Improving our fill rates, speed to fill, and that's built on several years of initiative to improve our fulfillment capabilities, and that's flowing through. So at certain demand levels, we can just fill more of those orders. Allied demand has been up since the beginning of last year, and Allied is really going to be anything that's not a nurse or a doctor, So the therapy disciplines, imaging, respiratory lab, and then we also serve into the K-12 schools market as well. And 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 enter the year, we've seen more stability in demand year over year for a decade plus in physician staffing. I still see really positive trends there, but there was a little bit of a slowdown in demand, and that's impacted our bond. We may talk about that a little bit later as well. There's some other influences that we can go deeper on, too. But I'd say the general backdrop, as you said, is 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, you know, 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. So that's an interesting sort of start in terms of still seeing positive growth, albeit maybe some moderation in terms of the backdrop. Maybe we can talk about sort of 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, I mean, you have such a, you know, sort of 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. And so, you know, one of the things that's clearly been sort of, you know, key, a key sort of focal point has been the exchanges and how that market is adjusting post the sunset of the enhanced subsidies. It was a little, you know, sort of interesting because in the first quarter, we still had some false positives, I guess, would be the way that I would sort of, you know, put it in terms of grace periods. You still had, you know, sort of payment effectuation periods. So the market felt like it still, you know, was still sort of relatively, you know, sort of unchanged or consistent. But it feels like now sort of in the second quarter, this is where, you know, our expectation is that we'd start to see some more, you know, clear signs of that sort of normalization that, you know, sort of as we move towards those expected sort of 25% reduction in the exchange market. So why don't we start with that? Why don't we talk about the exchanges, maybe talk about how much that sort of, I guess, just even interacts with your business lines and what your perspective is on sort of 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. You know, we're not hearing a lot from clients about the exchanges influencing their buying decisions for our services. And I think it's, you know, there are other factors in play here. When you're thinking about your staffing models, even if they're, you know, 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 at the bedside. So I think for us, it's how do we ensure that we're delivering value? And 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? And those types of dialogues are more important than ever if they are dealing with these challenges of potentially increased reimbursement issues or lack of reimbursement from more patients coming in that may not have coverage. And so that's where we have to drive our value more than ever. And so that has not been a direct influence. And 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. And 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. So 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, so 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 permanent 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. And so that's where, 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, Randy, anything you'd want to add on that?

Yeah, if we go back to what happened during the pandemic, first thing out of the gate, health systems laid off recruiters in the spring of 2020. And then toward the end of the year, they had an overwhelming crush for hiring. But they actually hired very aggressively from 2021 on, but it was about mid-22 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. But there was a virtually unlimited budget for permanent hiring from about mid-22 through the end of 24 or so. Last year, we saw some change in sentiment that was amplified, I think, by administration actions. And then all of a sudden, our clients are wondering, should I put this? 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, and in any other time in history, I would think, well, if they're reticent to hire, it wouldn't be good for us, but they still have need to hire. They just are hesitant to hire more permanent staff. So 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.

Why don't you stick on demand because there's a number of things to talk about. And, I mean, just demand and supply, I mean, 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, you know, sort of whatever else we have time for. But a couple other things I definitely wanted to ask you about on the demand side. And maybe we'll go right to that physician, the physician staffing trends. You had sort of, you know, teased that up a bit in your comment. And, you know, in particular, you know, 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. And, you know, 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 an amazing perspective, but like that we've cycled through almost every specialty sort of having their shot at goal, right, and sort of getting that sort of big boost, but then continuing, you know, to have these significant increases. And, you know, even in some of our recent interactions with the hospitals and some of the visits that we've had recently, you know, they've continued to call out these pressures, you know, remain significant. So from your perspective, you know, maybe talk us through, you know, maybe against that sort of construct around, like, have we been largely sort of, you know, cycling through all the specialties, but how, I guess, sort of structural, you know, would you say this is at this point, and how do you develop, you know, strategies to potentially address it and provide, you know, some relief into the system and help to solve, you know, this key challenge?

Yeah, so thank you. With physician staffing, we provide both permanent placement solutions. So we have the largest physician placement business in the industry. And then on the temporary side, you have locum ten. And we staff across all those specialties, subspecialties in primary care, et cetera. that that that industry on the staffing side was much more consistent you know 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 you know you have this aging physician population and just these persistent shortages across specialties and so that that's always been a good backdrop for the industry overall um and 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. But the underlying trends, I think, are favorable. And 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 so i think the underlying backdrop there's some commonalities to what you've seen and even nurse and allied staffing we have you have physicians across their entire career 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 you know different different groups were made locum's purchases you're now seeing more of that being centralized like we've already had for years in nursing and allied, and so we've actually been trying to support that and, you know, highlight our clients, there's a lot of spend here. Let's help you get your arms around it and control and optimize it more effectively, and so that trend, I think, will play into our workforce solution strategy, our MSP programs, our vendor neutral, and the technology we've built to be able to support better visibility and utilization of spend, and really we think we're at the apex of, you know, being 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. And so what we try to sell the clients is, let's get your spend more into 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. and then we can layer in our placement services as well. And 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 physician technology and permanent solution. That's going to help our clients drive more cost savings there as well. But those underlying trends you started with are here and they're going to get worse, especially at the specialty level. And so 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 ensure that patient care is being delivered as well.

And 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? And then when you think about what you said in terms of these trends are only going to get worse, You know, similarly, where do you think, you know, as you look at the specialties, you know, where you think, you know, those structural, you know, constraints are going to be, you know, the most observable?

Definitely, number one with the bullets, mental health. The mental health.

100% agreed here.

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. I think that 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, CRNAs, varies greatly. Sometimes they're in the direct cost of sale. 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. So those are areas, their lower bill rate, the labor supply hasn't been extremely difficult because the population of the specialists has been growing 8% to 10% a year. They're just slowly being siphoned off of the nurse pile and 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. that the lifestyle element and the ability to use elder physicians in a flexible way still keeps those specialties viable.

Yeah, and it sounds like the last couple of quarters, at least, we've been hearing radiology seems to be at 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, you know, sort of mega themes that when we had launched coverage on managed care in hospitals in October, now we've been initiated coverage on a number of sort of provider stocks, including, for example, you know, some of the outpatient, like LifeStance, for example. And one of the themes that we had sort of, you know, focused on was around our view that we're still in the very early innings of a long-term mixed shift from inpatient to outpatient and non-outpatient, you know, sort of everything but, you know, on mental health, sort of similar to 20 years ago, right, when we had it in sort of acute care. and certainly it seems that sort of the market trends seem to be supporting that with Universal Health announcing their acquisition of Talkspace but 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 and mental health particularly in that massive outpatient sort of multi-compartmentalized categories, the data is very sort of scattered. So maybe talk about that. Are you guys really seeing that trend playing out in terms of that? Are you in terms of that mix shift playing out from inpatient to outpatient at this point and maybe where you're seeing across outpatient or digital? I mean, obviously, we had sort of the massive spike, right? But it felt like of all of the different sort of virtual categories that behavior was the one that sort of stuck at the highest sort of go forward, which makes sense, too. But 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, yeah, 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. And so we certainly serve some of those, like, you know, some of the virtual care providers as well as the acute. So, you know, 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. and 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 kind of more anchored into the acute care, but 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. And so as you follow that trend and you want to provide that point of care, Like I said, we can bring the staffing where it's needed most and 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. You're in this state and who can I bring in my pool of virtual counselors or whoever? that is eligible, that's probably, it's definitely one of the main difficulties in staffing those engagements.

Yeah, the regulatory structures are just not that mature, right?

Some of them are institutionalized by the groups as well because they want to, I mean, shortages are also good. So there's, in terms of the negotiating pay, so it's like finding a balance of, you know, that's going to serve patients the best way possible. but that's always going to be a push-pull as well.

All right, one more demand, and then we'll move to supply. But we have to, this is what we have to address, which is the Medicaid dynamics and sort of both on the look back and then what's ahead, right? So on the look back, clearly, you know, we've been in this compression phase because of redeterminations, which, you know, sort of I think a lot of the thinking in the industry was that that was going to sort of, sort of wrap up last year and Medicaid market would probably stabilize, but from our vantage point, the market, overall Medicaid has continued to compress somewhat even into 26, and then looking forward, clearly we've got some major regulatory aspects from the Big and Beautiful bill that are going to be significant, and we're getting the proposed regulations now, which are are significant with Medicaid state-directed payments and then also with the work requirements. And I'm sure that as, you know, you think about lining up sort of, you know, your capacity and your resources, sort of, you know, analyzing these end markets is an important aspect of it. And so maybe bring us into, you know, your thinking on this.

Yeah, and it goes back to the earlier conversation. It's, you know, just to be clear too with AMN, we don't have any direct reimbursement risk. You know, we're billing our clients for providing our services, so they're stuck with the difficult challenges. And so, again, our job is to be that thought partner to help them do that cost-effectively. We are, a lot of our largest clients, they're large health systems, you know, 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 up more as some of these reimbursement challenges impact smaller hospitals, community hospitals, more rural. And so they're going to be looking for these larger partners to help them drive more cost efficiency as well. So 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. And then 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. And so if there's lower reimbursements, they have to find a way to deliver this care in a more cost-effective way. And so that's a big focus for us. Again, as I mentioned, our allied business is already serving, you know, 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. And so that's where we look at it. There's increased utilization of health care over time. What are those points of care going to be? And then 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? But, again, thus far, our clients talk about these challenges directly, But at the end of the day, they're also asking us, 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 has been gating census ever since the pandemic, trying to get their effective capacity to align with their labor capacity. So they've been squeezing off some demand for the past couple of years. Probably not as much so now what the Census is going to look like. They're concerned about what their payer mix is going to look like. So that's the number one priority is control over costs. And 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. And it's squeezed about as much out of that as they can, minimizing overtime. And is that on nurses in particular or just across all that? Clinical, you can look at the data from a clinical perspective and you can look at it in total.

And that's both on the permanent side as well as on the contract labor.

Great data point. So then it's 2003, you said.

That lever is maxed out. Wage inflation right now is running at a very slow level, 2% to 3%. If they want to push hiring a little harder, there could be some resistance in terms of price.

It's going 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.

And that's across all staff, the two to three points.

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.

And they're even sitting at a long-time extreme in terms of supervisor-to-supervised ratios as well. So in a lot of these ways, they've squeezed about as far as they can squeeze, and they need another avenue of flexibility.

And maybe we can pinpoint it into nurse supply And, you know, maybe put it against sort of the construct of, you know, sort of maybe pre-COVID and sort of then let's just sort of let's not even sort of go towards COVID, but the structural sort of long term, secular, you know, trend there. Like, first of all, I guess, where are we now relative to, I guess, that pre-COVID trend line, you know, that we were talking about? And, you know, maybe what are some of the, you know, sort of the key sort of, you know, upside and downside sort of risk factors around nursing supply?

Yeah, I think the supply environment is constructive for us. And COVID, it is important because you had a lot of nurses that came into the industry because the pay rates were up so high. that would have normally not have come into the industry. So I think we've kind of cycled through long enough now where all those clinicians have kind of gone back to permanent jobs. And those that are looking for this lifestyle or this industry as part of their career, it's back to the normal.

What would you say, I sort of pique maybe what was the percentage that they were representing at, you know?

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.

And now we're at?

And now it's more like a little under 60. So it's still a larger market overall.

But I think that it's really about finding that right pricing point that allows us to offer the right pay packages. And there was actually an article in the journal about a week and a half ago about tribal nursing is worth a good read because it really focuses on all the things we always highlighted as a reason. It's not just pay. It's the ability to build your skills, live in different markets, kind of maybe test a place before you go into a permanent hire. We kind of back a lot of those buying decisions, but we need to have just a market clearing pay rate. And so 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 every time.

Well, I could have easily gone a double session, but I don't know if we have the room. So, 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 for having us. Thanks a lot.