illustration by Pablo Amargo

illustration by Pablo Amargo

There is a doctor shortage in the United States, according to the Association of American Medical Colleges, which predicts that the deficit could increase to more than 90,000 doctors by 2025. Meanwhile, the Bureau of Labor Statistics reports that today’s nurse shortage could reach 1.2 million vacancies in the same time frame.

Alexi Nazem (MBA 2011) has seen the impact of these shortages firsthand. “Health care is a very broken system,” says the doctor and cofounder of Nomad Health, an online marketplace for health care institutions seeking temporary staffing. Finding talent is an enormous source of expense and inefficiency in the industry, adds Nazem, who estimates that “nearly 100 percent” of health care institutions will need temporary staff this year.

The idea isn’t new. Temporary medical staffing is a $15 billion market, and small, regional employment agencies have existed in the space for decades. But Nomad’s digital marketplace is an innovation, allowing clinicians to advertise their availability and health care institutions to advertise their needs. Once a match is made and the salary is negotiated between the employer and employee, Nomad manages the process, from background checks to malpractice insurance to payroll. It charges health care institutions a 15 percent commission for each hire—a transparency unheard of in a sector in which the employment agency typically serves as an opaque broker between institution and doctor.

Less than two years after launching its first marketplace, Nomad Health is working with 20,000 clinicians and 600 health care facilities in 12 states.

The Question:

Nomad Health’s long-term goal is to work in all 50 states—but how quickly should it expand? Because Nomad is creating a two-sided marketplace, it must achieve a critical mass of both employers and employees in each market to be successful, an endeavor that takes time and resources. Focusing on a small number of states would allow the company to prove the value of its model before thinking nationally. But two-sided marketplaces are often “winner take all,” and Nomad is not alone in pursuing a technological fix to health care staffing; delaying expansion risks ceding ground to new competitors. Which path should the company take?

The Answers:

Having built three successful two-sided marketplaces (and one failure) I understand the dilemma. The answer depends on where revenue comes from, how your buyers and sellers are structured (regional, national, or stand-alone), and how strong the network effects are. In this case, staffing doesn’t have as much network effect as collectible markets like eBay, and a staffing business should be cash-flow positive quickly in a given market, so focus on building critical mass dynamics in the top 25 health care markets.
—Paul Sims (MBA 2002)

Much to my surprise, Lyft’s success proves that often it is two or three winners take all. Why couldn’t doctors and nurses list their availability on more than one platform and accept the best offer? That said, there’s less risk in moving quickly than there is in moving slowly. The key business challenge isn’t in contemplating a careful choice between fast and slow, it’s in figuring out how to execute an expansion that’s as rapid as possible. Step on the gas!
—Randy Shayler (MBA 2012)

Iron out the model first, then roll it out. Build national demand and reputation by executing flawlessly locally—solve a complex and broad problem well enough, and your reputation will precede you and pave the road into your expansion markets. That said, “marketplace” models only support so many players, so start in the two to three markets that represent a disproportionate amount of the demand.
—Andrew Goldberg (MBA 1999)

Creep, crawl, walk, run. Do it in the top five states, then expand as you learn more. Eighty percent of what you’re doing today will change as you evolve. Don’t give the doctors and hospitals a suboptimal experience on their first try with your service. Don’t let the VC hype force you to expand faster than you should. (I say this as a health care VC.)
—John Lonergan (MBA 1976)

Given the fragmented nature of the market for medical services there is almost no risk of being swept by “winner takes all.” Every regional market will have to be sold individually, so there is ample time to build up the business. The real challenge will be getting sufficient supply and demand in a limited number of markets to prove the concept while preserving and establishing satisfactory cash flow.
—Roger Strang (DBA 1977)

Expand as rapidly as possible within any con straints of capital. There are probably very few barriers to entry in creating such a marketplace. This is a situation where the buyers are not mobile, and the sellers can be highly mobile, although subject to licensure by states. Therefore, you want a national (or international) pool of sellers, and you want it to be as large as possible as soon as possible.
—Roger Cole (MBA 1985)

While this is an online platform, significant man power still needs to be put in place to convince hospitals and clinics to sign up and then to follow up with them to ensure a good user experience. The reason why this space was filled with regional agencies is because it is still a market where local demand needs to be met with local supply. I would stay focused and develop a solid business model with value-added services. It’s difficult to have exclusivity for this type of marketplace, so retention is key.
—Yishan Cao (MBA 2007)

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