Dear shareholders and investors,
I am pleased to report Premier Health’s results for our third quarter ended June 30, 2024, and to update you on the status of our operations as well as recent developments.
Results and operations
The company’s revenues reached $41.5M for the third quarter ended June 30, 2024 ($23.6M for the same period in 2023). This material increase ensued from the consolidation of Solutions Staffing when compared to the same period last year. However, revenues at our two Quebec based per diem subsidiaries decreased sharply by over 35% during the quarter due to the impact of Bill 10. This resulted in an operating loss of $1.6M and triggered a non-cash impairment of $5.5M representing Code Bleu’s acquisition goodwill. The company generated an adjusted EBITDA of $0.4M for the three-month period compared to $2.7M for the same period in 2023 and the net loss for the quarter was $8.5M (net income of $0.5M for the same period in 2023). Over the three-month period ended June 30, 2024, 393,576 hours were billed on a consolidated basis.
Per diem / locum tenens segment
The per diem and locum tenens segment includes Premier Soin and Code Bleu, two of our Quebec subsidiaries that offer their respective services for nursing and assistance by profile and by region. Per diem (“by the day”) and locum tenens (“to substitute for”) nurses work on an as-needed basis, sometimes for multiple health care institutions, and are typically assigned shifts at the last minute and paid directly tied to worked hours, or to occupy temporary vacant positions. Code Bleu and Premier Soin offer similar services but are independently managed, the weighting of different type of professionals active on the respective platforms are materially different, and geographical focus also varies from one business unit to the other, resulting in different revenue profiles.
Our two per diem business units’ revenues have decreased sharply during the third quarter. The per diem units are active mainly in urban centers in the province of Quebec where the provincial government has, in our opinion, wrongly targeted staffing agencies as the source of all the province health care system issues. Revenues for these business units have been fluctuating and trending downward from one quarter to another since Bill 10 was sanctioned in April 2023. Both business units are now currently operating within the parameters of the recent April 14, 2024, award that integrated the notion of hourly rates ceilings previously indicated in decree 1481-2023. While the rate ceiling has an impact on gross margins, it favors bigger and better organized staffing agencies and is not the direct factor behind the recent sharp decrease in revenues. Currently approximately 125 staffing agencies have been retained following the April 14, 2024, award, and are offering personnel at identical rates as per the parameters of the last award. This recent call for tenders did not introduce any barrier to entry or differentiator such as performance security guaranties, staff availability, or track record thresholds. The only differentiator between all these service providers is a randomly attributed rank on a calling list, without any notion of personnel availability of or quality of service, thus creating perverse effects on the ability of healthcare institutions to fill their requests for personnel, and for agency nurses to obtain work shifts, in a situation of acute shortage of staff.
For the third quarter ended June 30, 2024, per diem’s revenues were 35.1% lower than the previous quarter. It is not possible at this point to confirm if this decrease will be permanent or not. The government has stopped updating the human resources segment of its dashboard earlier in March and we are hearing conflicting messages from stakeholders. Provincial governments policies are resulting in drastic operational measures, including temporary closing of departments and hospital floors, postponement of non-critical medical procedures, and limited emergencies operating hours, with the expectative of weaning the provincial healthcare system from non-permanent employees to implement the single employer model.
Meanwhile, the logical course of action for Premier Health is to undertake a series of measures to mitigate the negative financial impact of these two subsidiaries on the group’s overall results. During the quarter measures to decrease general and administrative expenses and streamline operations for the two subsidiaries were undertaken with the expectative that bottom line savings will reach approximatively $1M on an annual basis. Whether per diem revenues go back to normal or not, this exercise will have a positive impact on EBITDA and will not impair our ability to grow these business units organically in the future should the situation improve. The decision to go ahead with a non-cash impairment of $5.5M also reflects the current incertitude but has no impact on operating capabilities.
Quebec’s Ministry of Health & Social Services has a system management dashboard that shows use of independent workers historically represented between 3% and 5% of the overall workforce (authorities stopped updating their public dashboard as of March 9, 2024). Dashboard numbers indicated at that time that the use of independent workers had stabilized since the introduction of Bill 10. Our per diem business units currently represent approximately 17% of the group’s revenues and less than 15% of Quebec’s ultimate 2026-2027 target.
In this context we still anticipate that a fair number of smaller agencies, unable to cope with the new regulatory framework, will disappear over a ~24-month period. Personnel working for these small players will either migrate to bigger, better organized agencies, go back to the public system, or leave the sector altogether. Accordingly, we see this as a recruiting opportunity that could eventually result in an upward trend for revenues at our per diem business units assuming recruiting momentum picks up.
The travel nurse segment includes Canadian Health Care Agency, Premier Soin Nordik, Solutions Nursing as well as Solutions Staffing, four of our subsidiaries that offer their respective services to the federal and provincial governments for nursing and assistance including in remote regions. Travel nurses are healthcare professionals who work in temporary positions, carrying out short- and medium-term assignments that require travel.
Over the quarter, hours billed at our travel nurse units fluctuated from one unit to the other for diverse reasons, but overall, the outlook for the travel nurse sector is very positive with an average organic growth of 5.7% over the last quarter.
Solutions Staffing successfully onboarded 4 new healthcare organization clients over the quarter. SSI maintains a high client retention rate due to high fill rates, data sharing, and customized invoicing, all important aspects of a sound service provider-to-client relationship in our sector. As the healthcare industry returns to pre-pandemic norms, the importance of long-term relationships with clients is becoming paramount. During the pandemic, the reliance on agency staff led to operating cost pressures for healthcare systems across Canada. Now, as provinces seek to reduce these costs, there is an increasing preference to work with fewer, more reliable agencies. While this trend might seem challenging, we view it as a significant opportunity to establish Solutions Staffing Inc. as the leader in Canada. Health Authorities experienced varying levels of consistency and professionalism from many agencies during COVID-19, and they are now looking to partner with agencies that can deliver dependable, high-quality staffing solutions.
Premier Soin Nordik and Solutions Nursing, our two Quebec based travel nurse business units, were much less affected by the operationalization of Bill 10 than our Per Diem segment and we anticipate that the demand for independent labor for nursing and assistance in the province’s northern regions will remain stable, as it is the case with most Canadian northern and remote regions. Travel nurse business units were able to attract additional professionals in their network over the quarter including educators and social workers, a trend toward diversification that we are monitoring closely. The increased collaboration between CHCA and other units over the period decreased the revenue volatility by stabilizing employee placement rates. This also helped Premier Soin Nordik gradually develop activities in Northern Ontario and positioned itself for future federal government awards.
Revenues at CHCA decreased slightly over the quarter. This is the tail effect of a temporary situation resulting from the transition to a long-term contract award by Indigenous Services Canada, CHCA’s main contractor. The transition from ISC’s new contracts with CHCA was more difficult than usual due to new federal training requirements. This resulted in a timing issue in adjusting nurses’ salaries versus being able to apply the new contract rates gradually over the course of the last two quarters. New assignments under the new ISC contracts for Manitoba and Ontario also started at the end of May and are expected to have a positive top line impact in the next reporting period. Generally speaking, the new 4-year contracts transition is well underway and is expected to provide revenue stability for our business unit over the contractual period and eventually a good opportunity for organic growth.
Staffing Agencies Dynamics
Choices and options for healthcare professionals
Public system nurses’ salaries and conditions are dictated by collective agreements negotiated by unions. An individual’s overall conditions are linked mainly to qualifications and seniority. Remuneration will include valuable benefits such as a defined benefit pension plan, health insurance, vacation pay, and in certain cases premiums and overtime. Agency nurses’ remuneration typically does not include these benefits, this being compensated by a higher rate per hour paid to the nurse. Simply put on a dollar-for-dollar basis, agency and system personnel’s level of remuneration is approximately at par. In a similar fashion, nurses opting for agency work will trade job stability and security for schedule flexibility. It’s a matter of personal choices.
Main motivation to work for an agency
For most individuals, stability is paramount and one important argument to follow the path of the public system. Not everyone is created equal and some value flexibility above all. A large proportion of these independent professionals choose this mode of work for personal, family, or logistical reasons. Working at a staffing agency allows them to practice their profession within their own constraints and without that possibility, a large proportion of them would leave the healthcare system to work in other sectors (+/- 70% of independent health professionals according to an internal 2023 survey). Our business model, digital platform, and mobile app were built precisely to fit this global reality.
Global trend
The attractiveness of flexibility is not limited to the healthcare sector. According to the World Bank, the gig economy accounts for up to 12% of the global economy. In the United States only, Bureau of Labour Statistics’ data suggest that there are over 57M gig workers working between 11 to 30 hours a week. On a more local scale, and depending on the source, the number of Canadian involved in some fashion in the gig economy will vary from 10% of the active workforce (Statistics Canada) up to 28% of Canadian Adults (Angus Reid). The gig economy is a section of the economy characterized by short-term engagements, as opposed to permanent jobs. The impressive statistics mentioned above are driven by an ever-larger number of individuals seeking increased flexibility, work-life balance, and income on one side, and organizations looking for new ways to optimize costs and increase business efficiencies on the other. Connections and interactions between workers and organizations are typically facilitated by digital platforms that are constantly evolving. Over 60% of our professionals across Canada are within the 18-40 years old age group that represent the bulk of gig economy workers.
Healthcare organization’s HR challenges
Continuity of service is a priority and a constant challenge for healthcare organizations managers. The healthcare sector in North America is currently experiencing the compounded effect of an aging population, an important wave of early retirements, and the aftermath of the pandemic. These circumstances, like a perfect storm, are producing a general physical, mental, and emotional exhaustion amongst healthcare workers, more early retirements, and career changes, exacerbating the already important shortage of personnel. In that context, staffing agencies are generally perceived by organization managers as a tool to prevent discontinuity of service. Most managers also understand that the cost of an agency nurse is only marginally higher than a nurse in the system. However, integrating temporary staff in existing teams does create tension points evolving around proper orientation, tasks ownership and staff leadership. This reality is very different from party guidelines and political messages. Comparing the daily challenges of healthcare organizations and recent politics and actions demonstrate a clear disconnection between the stakeholders.
Staffing agencies’ role as a stakeholder
Addressing the challenges associated with the use of temporary personnel in healthcare is essential for ensuring that patients receive high-quality care and that healthcare facilities operate efficiently. Staffing agencies need to support the development of clear policies and guidelines, to provide adequate training and support, and to improve communication, collaboration, and data sharing. Staffing agencies also need to work with healthcare system management to iron out integration issues. On the other end, policy makers in Canada should provide a framework for the use of temporary personnel and overcome the perceived challenges associated with temporary staffing in the healthcare system. This is the foundation on which we can ensure that the quality of care provided by our personnel is consistent in all environments.
Importance of policy and best practices
As an organization we have been encouraging stakeholders to use wider qualitative and quantitative criteria in request for proposals, to establish vendors of record, and other measures to ensure quality of service. In 2023, Indigenous Services Canada (ISC) proceeded with a request for proposals for their remote, isolated, and semi-isolated First Nations nursing services. ISC works collaboratively with partners to improve access to high quality services for First Nations, Inuit and Métis. Public Services and Procurement Canada (PSPC) lead the project. The particularity of this RFP is that it was built not only to acquire a service at the best cost possible, but also to evaluate the quality of the service provider on different fronts, including financial capacity, available resources and track record. We believe it is an excellent example of how RFP processes should be built to fill the needs of a specific organization and ensure government spending generates proper return for the population.
Moving Forward
Our business model, digital platform, and mobile app are perfectly aligned with the gig economy framework and global service trends in general. We offer a level of flexibility that health systems cannot offer, both in terms of schedules, experiences, and remuneration options. It is this flexibility that makes it possible to stem the exodus of certain individuals who cannot function in rigid health networks. At this level we believe that we play a vital role in these ecosystems. It is also this flexibility that gives us the agility to adapt quickly to changing environments. With a geographically diversified revenue base and an excellent management infrastructure in place across Canada, we have the capacity to further diversify our revenue stream with other regional opportunities. We have had a good track record of acquiring solid organizations and we intend to capitalize on this.
I wish you all the best,
Martin Legault
Chief Executive Officer
