Key Takeaways
- Over the past 10 years, $1.7 billion has been invested by venture capital in 13 companies that remain largely unprofitable today.
- The original “Amazon of health care staffing” thesis underestimated the importance of client control, relationship-based execution, and the operational complexity of health care labor.
- The Covid-19 pandemic was the single biggest factor in the lack of profitability today.
- 1099 platforms in long-term care are gaining more client acceptance.
- The core nursing segment of the industry is at overcapacity, and consolidation is imperative for a healthy future.
- The winners will offer an ethical, accountable MSP with lower-cost AI-driven technology and lower-cost internal staffing support roles.
Over the past decade, I have witnessed something new in my 35 years in health care staffing: a venture-backed model in which technology entrepreneurs would build technology platforms to automate the recruitment and placement of contract health care labor and, in effect, build the “Amazon of health care staffing.”
The premise was straightforward: A small number of technology platforms would use digital acquisition, automation, and self-service workflows to replace the traditional staffing agency model. Within a few years, two or three dominant platforms were expected to displace AMN, Aya, and many of the larger legacy staffing firms.
Based on my research, more than $1.7 billion was invested across 13 platforms. Collectively, these companies generate approximately $1.5 billion to $2 billion in revenue, yet all but one appear to remain unprofitable. Many venture investors are now focused less on market dominance and more on recovering as much of their original capital as possible.
Scope of the Analysis: Nurses in Per Diem and Travel Roles
This analysis focuses only on companies placing nurses in per diem and travel roles across acute, post-acute, and long-term care facilities. I refer to this as the “core nursing segment.” It does not include locum tenens, allied health, international staffing, or other health care labor categories.
Of the 13 platforms reviewed, only three primarily targeted travel nursing. The remaining 10 entered markets where Managed Service Provider and Vendor Management System restrictions on client access were less significant. Most initially focused on per diem staffing in long-term care, a market that was financially unstable and, in many cases, shrinking.
Seven of the platforms relied primarily on a 1099 independent contractor model. The other three operated under a traditional W-2 employer model but still focused on long-term care and per diem staffing.
According to SIA, the core nursing segment grew from $16.1 billion in 2020 to an estimated $17.7 billion in 2026, or only 10% over six years. These figures exclude 1099 revenue, which I estimate adds approximately $1 billion to the long-term care per diem subsegment.
The Original Strategy and Where It Broke Down
The strategic logic in the venture capital-backed model was to attract nurses through higher pay and digital channels, then use automation to lower the marginal cost of recruiting, onboarding, placement, and assignment management. In theory, scale would create a powerful operating advantage.
In practice, the model required extraordinary scale, deep capital reserves, and sustained demand. The platforms needed enough transaction volume to justify major investments in technology, infrastructure, and automation while operating in a market that remained relationship-driven and operationally complex.
The pandemic created the illusion that this scale had arrived. Demand surged, rates increased, and platform companies raised additional capital based on volumes that later proved artificially inflated. Many expanded infrastructure and accelerated product development under the assumption that pandemic-era growth would continue.
In conversations with 11 CEOs in the industry, there was broad agreement among those who led VC-backed platforms that in hindsight the pandemic was, ironically, the worst thing that could have happened to them. It pulled attention toward supply acquisition and away from the harder, slower work of building durable client relationships and demand-side control.
The Importance of MSP and Client Control
Having launched the MSP model in health care staffing at Kaiser in 2003, I acknowledge my bias toward the MSP model. However, the experience of the past decade reinforces the importance of client control in health care staffing. Process change requires access to facility-level relationships, and health care remains a relationship-driven business where decision-makers prioritize caregiving outcomes, continuity, and trust over strict ROI-only logic.
Two of the three acute care travel nurse platforms initially relied on third-party MSP and VMS providers for access to job orders. That strategy was understood to be risky, particularly during downturns. When demand tightened, companies without direct client control were more exposed.
A stronger alternative may have been to invest earlier in MSP capabilities, direct client sales, implementation, and account management. An MSP sales team, supported by VMS tools and funded through large contract wins and subcontractor fees, can create durable client access. Subcontractors follow access; if you control the client relationship, they will come.
To be fair, the acute care travel nurse platforms did begin investing prepandemic in direct-to-client resources, sales executives, and account managers. They understood the risk of depending on third-party channels. The pandemic disrupted those plans. At the moment when they might have built out demand-side infrastructure, they were forced to focus on supply.
The larger lesson is that technology alone is not enough. There must be process change at the client in order to adapt to a platform. A traditional model may be able to present multiple candidates quickly, and health care clients have been conditioned to want that. A platform model can provide fewer candidates that are properly vetted, well matched, and supported in a little longer time. That behavioral shift at the end-user level requires a strong direct relationship.
A Look at the Industry Impact
Despite the challenges, the wave of VC investment produced several positive effects. It pushed traditional staffing firms to invest more aggressively in automation and helped normalize the use of modern software-as-a-service (SaaS) tools across the industry.
At the same time, other technology entrepreneurs, backed by angel and venture capital, developed tools that integrate into existing staffing systems. These products helped traditional agencies modernize without abandoning the human engagement that health care professionals and clients still value.
Many VC-backed platforms have also reintroduced human recruiters, acknowledging that a purely digital experience is often insufficient. Health care professionals frequently rely on personal relationships, trust, and guidance when evaluating assignments.
Today, many platform companies are attempting to sell their software to traditional staffing firms as replacements for internal systems, while also selling directly to hospital systems to manage internal resource pools. This market is already crowded. I count at least seven companies pursuing similar offerings, while many traditional staffing firms have already built hybrid models combining SaaS tools with human engagement.
Factors Shaping the Market Today
The pandemic and its aftermath were the single most significant forces shaping the rise and decline of VC-backed staffing platforms. During the pandemic, staffing firms and platforms across the industry expanded capacity. VC-backed entrants were especially vulnerable because of their high development costs, low-margin models, and capital-intensive growth assumptions.
The postpandemic correction was abrupt and harsh. Health care facilities were shocked by their labor spending and often blamed staffing agencies for price inflation, despite emergency-driven purchasing decisions and the availability of government relief funds during the crisis. The result was frustration, reputational damage, and broad pricing pressure across the staffing industry.
Postpandemic, both health systems and long-term care facilities shifted toward becoming more attractive local employers of nurses. Their priorities included
- Higher pay for internal staff
- Greater scheduling flexibility
- Aggressive efforts to reduce reliance on agencies
The “agency-free” mindset that accelerated in 2023 drove pricing pressure, followed by demands for rebates and concessions in 2024 and 2025. Little improvement is evident in 2026.
The core nursing segment now faces overcapacity across settings, with too many providers chasing too few orders. Consolidation will be necessary for the segment to regain momentum.
Somewhat ironically, overcapacity was not caused only by venture-backed entrants. One privately owned player grew to approximately $4 billion to $6 billion of the $16 billion to $17 billion core nursing segment. Its strategy combined:
- A very strong MSP sales team and offering
- Meaningful, but disciplined, technology investment built from a staffing-experience perspective
- Aggressive recruitment techniques, lower bill rates, and creative client incentives
Long-Term Care and the 1099 Model
The 1099 model has gained meaningful traction in long-term care. The seven companies that pioneered placing CNAs, LPNs, and RNs into nursing homes as independent contractors were betting on the cost-saving opportunity in a financially pressured market.
Many nursing home operators have been willing to assume potential risks related to worker misclassification, workers’ compensation, professional liability, and full credential vetting. With one of the fundamental tests of 1099 classification for a CNA or RN being that the work performed is outside the usual course of business, it seems that a “nursing home” assignment would be a clear indication of a misclassification. However, with limited exceptions, state governments have also largely avoided aggressive enforcement of historical labor-classification standards in this area. At the federal level, the current administration has adopted a favorable view of independent contractor status.
The pioneers of 1099 in long-term care appear to be winning that battle. The model may be too large to reverse in that setting. Resistance remains strong in hospitals, but post-acute care appears more open to continued 1099 expansion.
M&A and Market Constraints
Merger and acquisition activity has slowed significantly. Two factors are particularly important.
- Companies with declining revenue and compressed margins are difficult to value.
- Many pandemic-era financial strategies left companies with debt burdens that now exceed realistic enterprise values.
VC-backed firms are facing sharp valuation declines while still needing to prove sustainable profitability.
The traditional investment rationale for the core nursing segment has rested on two long-term forces: an aging population and nurse shortages. Both remain relevant, but technology is improving productivity, and nurse shortages may be overstated if efficiency gains increase patient capacity per nurse.
Health care systems are also adopting a “community employer” mindset. Rather than defaulting to higher-cost travelers, they are asking how they can attract and retain local talent through more flexible scheduling and better employment models.
What Comes Next
Several trends are already emerging, including
- VC-backed companies are creating new revenue streams to survive in a shrinking spending environment. Technology platforms are shifting toward internal resource pools, direct hire models, and hospital-facing workforce tools.
- Per diem staffing is re-emerging within MSP models, with greater automation.
- Consolidation is slowly occurring and should accelerate. Private equity may find an opportunity to combine platforms, traditional staffing firms, and AI-enabled operating models.
- 1099 models will likely continue expanding in long-term care, and MSP/VMS frameworks may eventually incorporate them more directly in that setting.
The Investment Thesis After This Cycle
A small number of VC-backed platforms may succeed in acute care per diem, internal resource pool, and hospital-facing workforce technology. However, it is unlikely that venture investors will recover a significant portion of their original investment across the category.
The original “Amazon of health care staffing” thesis underestimated the importance of client control, relationship-based execution, and the operational complexity of health care labor. Pandemic-era supply-and-demand distortions, combined with high pre-AI development costs, made the original thesis even more difficult to realize.
The more durable investment thesis coming out of this cycle is likely built on consolidation, disciplined cost structure, centralized operations, thoughtful use of lower-cost labor, restructuring of high recruiter commission models, and capital-efficient use of existing SaaS and AI-enabled technology.
Client control remains a must-have. A competitive, ethical, and accountable MSP offering gives staffing firms the ability to drive process changes at the client level while preserving the relationship-based foundation of the business.
In long-term care, the winning model will likely include both 1099 and W-2 solutions. Across the broader core nursing segment, scalability and profitability will depend on combining technology with strong operating discipline and human trust.
At its core, health care staffing remains a people-driven business. There are no registered patents, no manufacturing plants, or even tangible products—only relationships and the ability to match professionals with opportunities. AI will continue to reduce reliance on traditional recruiting functions, but timing worked against the original venture-backed platform thesis.
Bob Livonius has been the COO of Spherion, CEO of Nursefinders, and president of Workforce Solutions at AMN Healthcare. He has served on 11 staffing company boards and helped lead 58 mergers, acquisitions, and exits in the staffing industry over the past 35 years. Livonius is a former chair of the American Staffing Association and a member of both the ASA Leadership Hall of Fame and the SIA Hall of Fame.