Consultant bill rates…have they reached their peak?

peakHaving monitored bill rates for consultants over the last several years, I’ve seen a new trend…flattening out.  Does this mean we’ve seen the peak in the industry and the needs for consulting services is slowing down?  Perhaps the market is so saturated with firms and resources.  Or maybe hospital purses are a bit tighter now than a few years ago.  I’m going to say a maybe to a couple of these and suggest a few other hypothesis that are worth considering.

Let’s look at the first suggestion that the market has peaked in the industry.  This is absolutely not the case.  With EHR vendors continuing to see profits year after year, our industry of consulting will see similar growth.  Reports from Epic, Meditech, Cerner, and several others all show continued growth in new clients both domestically and internationally.  2012 report shows less than 55% of hospital have even tapped Meaningful Use stage 1 requirements, and even less for stage 2.  Remember, this is for EHR conversion requirements giving the hospital money to do so.  Did I mentioned the impending doom of ICD10?  Finally don’t forget about all those small physician practice and specialty clinics being swallowed up by nearby eager hospitals to extend their referral base into the rural areas of every state.   The need for consulting services will continue to grow and boom in most vendor spaces….(well, not McKesson or Siemens).

Every day I read about some new consulting firm that is now offering EHR consulting services.  Billion dollar companies want a piece of the action and are buying up the small shops (since when did companies stop making photo copies to move into Healthcare IT?).  March of 2012, KLAS reported 45 unique firms that focused on Epic consulting services.  March of 2013, that number grew to 60.  What that means for the client/hospital is lot’s more options.  It used to be about quality of the consultant, now it’s expected they are all the same…and price shopping by firm is certainly cutting into bill rates.  And don’t forget about independent consultants, who if they can get in the door..are eager to bill $15-$20 less than you.

Is the market saturated with resources?  I don’t think so.  Look at LinkedIn on any given day and you’ll find literally hundreds and hundreds of job postings.  I myself posted a handful today and noticed the same jobs had already been posted by other firms.  We are desperate to find more consultants to fill those roles.  Everyone is desperate.  In my little town of Boston, there are 5 major hospitals converting to Epic within the next 12 months all within 60 miles of each other.  Where do you think they will be getting their resources?  Yep, watch the emails start flying from recruiters when the realization hits them all that there are not enough people in the state of Massachusetts to meet their needs.  Some will try to pretend they don’t need us, then they’ll call 6 months into it.  There is plenty of work for all of us.

Purse strings and budgets are certainly tightening up.  Hospitals can go to Neiman Marcus (Epic) or Target (Allscripts) to meet their budget, and most will get them to MU requirements.  But what about physician buy in and patient safety?  Hospitals are starting to consider the higher end vendors in favor of internal cooperation.  That leaves less and less for consulting services.  The hospitals don’t worry at first, as they are told they won’t need consultants.  Oops, I guess that was an error on someone’s part.  The money will come from somewhere…it always does.  However, when high end firms approach the $150+ an hour there is some consequences.  Mainly; restrict travel expenses.  Things like use local consultants, provide long term housing with bi-weekly travel, no per-diems, shared transportation, and roll travel costs into bill rate…are all becoming ever more popular.

Regardless of bill rate, consulting services will continue to be in demand.  Don’t be alarmed if you see a drop in bill rate…or don’t even know what your bill rate is.  Make sure your bonus structure is around hours worked, not bill rate…and be sure your expenses are covered.  Firms will have to work a little harder with clients to stay competitive.  Hospitals will have to continue to depend on firms to bring in qualified subject experts to get their software installed, their end users trained, and their IT staff confident to manage without you after go-live.  We are years away from peaking this industry.

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One thought on “Consultant bill rates…have they reached their peak?

  1. David Franzblau says:

    Doug, Just read this April 2013 post and was wondering if you’d post an update? How do you think things have changed over the past 16 months since you wrote this?

    I think your analysis is spot-on as the Brits say, but I had no idea some consulting firms were so spineless that they’d agree to no per diems or biweekly travel. (And I thought things were rough when we shared pooled cars back in Grand Rapids in 2009).

    The trend we are seeing toward lower billing rates is the same thing countless other industries have seen as markets move toward commoditization. Yeah, Kleenex invented the product, but a tissue is a tissue, right? – unless you carve out a value-based niche in the buyer’s mind. Maybe a better analogy is sugar. Pure commodity, right? So why do consumers spend an extra $0.35 a bag for Domino? Because the company has positioned the product as deserving of another $0.35. So where is the product differentiation for our consulting service?

    We consultants are somewhat at the mercy of our employers and the account executives who don’t position us and the firm as special, unique, better educated, more experienced, etc. So we are all, ultimately, responsible for, as Steven Covey puts it, “sharpening the saw” and constantly learning new skills, getting a new certification, or whatever to be the more experienced person with the top-of-the-pile resume. Most consulting firms are idiots in this regard. To them, continuing education, seminars, and new skills land on the expense side of the ledger and are rarely seen as an asset. Oh yeah, they’ll blow smoke at you with things like “education dollars” – but then make you jump through 27 hoops to use them. I think we all have to “look out for Number One” and take responsibility for skill maintenance and development as maybe the only path to increasing our incomes.

    So we consultants are becoming a lower and lower priced commodity. Salaries and bonuses are falling. Yet you say there are endlessd unfilled vacancies and situations like Denver and Boston where there will be hundreds of Epic needs in the coming 12 months. How do those of us with a few years experience and a few certifications stand out and be able to get the $130K+ you mention?

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