An aging U.S. population is driving demand for healthcare services. People age 65 or older accounted for 13% of the U.S. population and 37% of hospital spending in 1999. By 2020, the percentage of the population over age 65 is expected to increase to 17%, according to Health Affairs magazine.

Americans are living longer as well; U.S. life expectancy recently hit an all-time high of 77.6 years. The aging population increases demand for hospital services since hospital utilization rates are significantly higher among older Americans - approximately three times higher than the overall population.

The number of Americans aged 55 to 64 is forecast to increase from 29 million in 2004 to 40 million in 2014. One-half of this group has high blood pressure and two in five are obese. As a group they are generally in worse medical condition than Americans born a decade earlier when they were that same age. Because of demographic and other trends, healthcare spending continues to climb, rising 7% in 2005 to nearly $2 trillion following 8% growth in the previous year.

Along with an aging population, the population of working registered nurses (RNs) is aging and the nurse education system is constrained by an aging faculty and a lack of teaching facilities.

There are currently around 2.9 million licensed RNs in the United States, according to the Health Resources and Services Administration. A shortage of RNs began in the United States in 1998 and resulted in 126,000 unfilled hospital positions by 2001. In 2007, the nursing shortage is entering its tenth year. This shortage is forecast to worsen in the coming decade due to demographic trends and an aging RN workforce reaching retirement age. By 2020, experts estimate RN demand will exceed supply by 340,000.

Hospitals and other healthcare facilities are utilizing outsourced nurse staffing to supplement their own recruitment and retention efforts. Rates vary throughout the country, but in general a staffing company may charge a hospital $70 or more an hour for the services of an RN, who will pocket roughly half that amount.

Spending on healthcare staffing services is forecast to rise from $10.5 billion in 2006 to $11.2 billion in 2007 and continue to climb as hospital administrators address rising demand for RNs and limited capacity.

Publicly traded healthcare staffing services companies benefiting from these industry trends include Cross Country Healthcare, Inc. (Nasdaq: CCRN) and AMN Healthcare Services, Inc. (Nasdaq: AHS). 

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