Good afternoon, ladies and gentlemen, and welcome to the Cross Country Healthcare Earnings Conference Call for the Third Quarter of 2020. A replay of this call will also be available through November 19th, 2020, and can be accessed either on the company's website or by dialing 800-391-9847 for domestic calls and 402-220-3093 for international calls and entering the passcode 2020. At the conclusion of the prepared remarks, I will open the line for questions. I will now turn the call over to Bill Burns, Cross Country Healthcare's Chief Financial Officer. Please go ahead, sir.

Thank you, and good afternoon, everyone. I'm joined today by our Co-Founder and Chief Executive Officer, Kevin Clark; as well as Buffy White, Group President of Workforce Solutions and Services; and Steve Saville, Executive Vice President of Operations. Today's call will include a discussion of financial results for the third quarter of 2020, and our outlook for the fourth quarter. A copy of our earnings press release is available on our website at crosscountryhealthcare.com. Before we begin, we need to remind everyone that certain statements made on this call may constitute forward-looking statements. As noted in our press release, forward-looking statements can vary materially from actual results and are subject to known and unknown risks, uncertainties and other factors, including those contained in the company's 2019 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company undertakes no obligation to update any of its forward-looking statements. Also, comments made during this teleconference reference, non-GAAP financial measures, such as adjusted EBITDA or adjusted earnings per share. Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to financial measures calculated in accordance with U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. With that, I will now turn the call over to our Co-Founder and Chief Executive Officer, Kevin Clark.

Thanks, Bill. And thank you to everyone for joining us this afternoon. Our performance in the third quarter is a testament to the resiliency of our company to manage through challenging times and deliver across many fronts. Following an unprecedented fall in demand in the second quarter, we have continued to stabilize and rebuild our business allowing us to once again exceed guidance all our delivering on one of the most important IT projects this company has undertaken in more than 30 years. I'll go into some more details about our IT strategy in a moment but I'm thrilled to report that this project replace the applicant tracking system for our travel nurse business was completed on time and under budget. Just as important, feedback from our recruiters has been extremely positive and thus far we are performing in line with our expectations. In addition, we completed the actions to achieve annual savings of more than $20 million through headcount reductions and the closing of more than 30 offices. As demand rebounded late in the second quarter and has continued to remain strong throughout the third quarter, we were successful and building back a significant portion of our nurse and allied business which was impacted by COVID. And though not back to pre-COVID levels, weekly headcount increased 17% for travel nurse and 16% for our branch business as compared to the start of the third quarter. Also, contributing in the third quarter was our support of a labor disruption at one of our managed service program clients which generated approximately $8 million in incremental revenue. Though we do not retain the staff labor disruptions, we believe it is important to support our clients when they request our help especially in the midst of a pandemic and national clinical labor shortage.…

Thanks, Kevin. Results for the third quarter reflected solid execution as both revenue and adjusted EBITDA exceeded our guidance. Consolidated revenue was a $194 million representing a 7% decline over the prior year and a 10% sequential decline from early and lower volumes across the business due to the impacts from COVID-19. Turning to nurse and allied. Revenue was $175.2 million down 12% sequentially and 5% over the prior year. As expected the number of COVID assignments and the respective bill rates declined for the third quarter. With the decline in COVID travel assignments, travel nurse was down approximately 20% sequentially. However, it was flat relative to the prior year. On a year-over-year basis, the decline in billable headcount was offset by favorable bill rates and mix. Our local branch based business was up 14% sequentially and down just 2% relative to the prior year due primarily to the labor disruption start in the third quarter as well as a sequential decline -- sorry, sequentially weekly improvement throughout the quarter. As expected, education was down 30% compared to the prior year due to the virtual start of the school year in most markets. We continue to generate revenue through our tele service model which has allowed weekly revenue to continue to expand and recover. We're actively working with schools to assist them with reopening safely and hope to see that trend continue into the fourth quarter. At this point though we are unable to predict when or which of the schools we serve may reopen the school year. Bill rates for nurse and allied were higher across all lines of business due primarily to the impact on COVID as well as the labor disruption. Additionally, we have seen a favorable impact from mix from higher bill rates specialties and the…

Thank you. [Operator Instructions] Our first question comes from A.J. Rice with Credit Suisse. Your line is open.

Hi everybody, thanks for the question. First of all I got to ask I appreciate our nurses have stepped up and as you highlighted in that prepared remarks. I'm just curious now that we've been into the pandemic for a while. Are you still seeing that healthy number of applicants for physicians maybe what's the trend in your unfilled orders look like at this point or are you having a little more trouble getting nurses to step up. Just any thoughts on that.

Yes, hey A.J., great question. Look it's a supply constrained market place. And our -- from the demand perspective, our orders are up three times more than where they were at the beginning of the quarter of Q3. So, we have a lot of unfilled jobs like the rest of the industry as COVID is searched again. What we have done is dug in we have over the past two years as part of our digital transformation, it's been a fair amount of time in capital et cetera to put together a digital strategy around programmatic advertising and social media and a lot of other improvements to the company. So, I feel like the company is in a very good position to continue to nurture and engage and develop the community of nurses that we pull our applicants from. So, it's the number one thing that we focus on is this constraints supply but I think we're doing a very good job at it through the quarter.

Okay. I think if I'm reading here and Bills comments' right. So, your pricing gain that you showed in the quarter, there was an underlying bill rate, I'm assuming that's X labor disruption and ex-COVIE of plus 3%. How much did the others can, others the labor disruption in the COVID? How much did those contribute to what we saw on the pricing side particularly with the nurse and allied?

Yes, well, what we called, as we called out, price overall is up significantly 20% year-over-year, but it's down from the second quarter. But Bill, you might want to go into a little more detail. I mean, if you ex-COVID, bill rates are up, low single-digits. But Bill, you might want to provide some more color.

Yes. Hi, A.J., it's Bill. So, as Kevin said, we did look at the overall impact of bill rates from both COVID and from the labor disruption. And when we took that part out of our business to look and see what were average bill rates doing, we could clearly see rates are up about 3%, it gets a little bit trickier to start to separate between COVID and non-COVID because clients are starting to get desperate in certain locations and geographies. And so we're seeing a little bit of a spike in prices rates here and there. So it's not always flagged as particularly in a COVID order. So it's a little bit harder to answer your question about exactly how much COVID drove, but I'd say if again, if you look at the average bill rate or the average revenue per FTE about a 3% of the increase would have been on the underlying big business and the rest was driven by the mix of the orders from the high bill rate specialties. We've seen a lot of demand in particularly in ICU in several states throughout the country, that is spiked as part of the second surge, and I'm sure Buffy can give you some color on that. But, I think again, we were encouraged to see that the bill rates were still trending up, despite or after removing the impact that we could identify from COVID.

Okay, it sounds like in your remarks that maybe the COVID related placements? I don't know if that's easy to distinguish how much is -- what are specific COVID related placements versus non -COVID? But it sounds like that step down a little bit from second to third quarter. Is there any way to sort of parse out order of magnitude of how many of your assignments right now are you would attribute to the COVID crisis specifically?

Yes, I mean, I would say, I'll let Buffy provide some additional color, but we have seen an improvement in overall med surge and OR. We still see elective surgeries depressed; we're seeing an uneven demand as you've probably seen on TV and so forth. COVID has spiked, especially in Midwest and the Southwest states like Oklahoma and Nebraska and Wisconsin. But Buffy, you want to provide a little more insight there.

Certainly, I don't think that we're seeing facilities parse out their orders the way that they did during the first COVID surge, arguably into kind of what I like to call 1.5 of the COVID surge. But they at this point are adjusting you see winter orders coming in I think they're probably trying to prepare to capture supply. The difference now too is some systems are isolating their COVID patients into specific facilities or units. That being said, you can work in any facility and be exposed to COVID. So they're not necessarily parsing them out that way, plus, they're trying to adjust to the marketplace and raise their bill rates as required in order to capture. But now that we're seeing this duality of COVID plus winter, we are seeing crisis rates prior to them necessarily calling them COVID. So it is a little difficult to parse out. I will say that we are looking at the dynamics from what geographies, we are seeing the COVID increases in and speaking with our healthcare facilities to understand the COVID census, and there are running in some of the same markets as they did last time. Arizona, California, Florida, Texas, as you can imagine, now we're starting to see some other states spike as you have seen.

Okay, last question. Bill, you made some comments about the DSOs being up sequentially. And I think one of it was just the timing of revenues. But you also said something about a couple of customers that you're working with or whatever. And is there concern that that some of those might be at risk or is there any way to talk a little more about what you're dealing with there?

Yes, sure A.J. They look at the DSO bridge that a big chunk of it was due to the timing of revenue and how much came in September relative to the quarter in particular that the labor disruption that Kevin called out for the $8 million represents about four days of the improvement the increase in DSO, the impact from schools restarting just there's the billing begins, but you don't collect for some period of time, and that added about another day to the DSO and so when you consider that we were historically low, coming into Q2 a more normalized level for us is somewhere in that 56-day to 58-day range. So I can ascribe probably five days just to those two items I just mentioned. And then as I look at across the other increase, it's to a smaller degree. The clients I was calling out. But it's more about timing. I don't have concerns. It's not an impending write-up that we're foreseeing. It's really about timing for collections with them. And it happens periodically. I will say, as we get into third and fourth quarter, we do tend to see some slowdowns that happened last year as well. And so, I don't think it has anything other than just industry normal cyclicality on the payment stream payment side.

Okay, thanks a lot.

Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

Thanks so much. You talked a bit about some of the spikes you're seeing, I think in the Midwest and Southwest? I'm assuming that in terms of nursing demand, I'm just curious. Are you seeing the reverse trends for physician demand in those areas?

Yes, hey, Jeff, how are you? Physician demand is still soft. We've seen growth in our Cross Country Locums Division in our advanced practice division. So nurse practitioners and physician assistants lots of demand, demand is up, I think 16% year-over-year for the quarter. But physician is still soft. If you recall, in our top four specialties are anesthesiology, emergency, primary care and hospitalist. And of those only the emergency department physician staffing is up year-over-year. So we're seeing, it's still soft, we're encouraged that we look at these hospital volumes that are now at the beginning of the quarter, they were upwards of 90% to 95% of pre-COVID levels. Now, most of the reports that we're seeing and hearing from clients, it's more like 95% to 97%. So, we're encouraged by what we're seeing. And I think a lot of hospitals are thinking about their enterprise, how they do kind of parse COVID patients in one part of the enterprise, and still also provide elective surgery and create operating rooms, I noticed in Georgia, there was a effort to try to get the State of Georgia to keep the fields hospitals in place for operating rooms for surgery. While the acute care hospitals manage the patients there. So that's kind of what we're seeing on a broad base. I don't know, Steve, if you had some more color you wanted to add to that to Jeff's question?

Kevin, you've covered pretty much everything. The only thing I would add, Jeff, would be that although the hospital admissions are gaining on their pre-COVID levels, and as Kevin pointed out, it's about 95%, pre-COVID. What we're not seeing is that increase being perfectly correlated with new orders. As we exited the quarter, the trend was seeing a growth in our order count. And that's continuing. But we have some significant work ahead of us to get back to pre -COVID levels.

Okay, that actually is a good, just segue to my next question. I know you're not talking beyond the current quarter, but can you give us some sort of insight into how orders are doing into early 2021?

In terms of the overall business or physician, Jeff?

I'm actually more interested in nurse and allied. But if you want to comment on physician, that'll be great as well.

Well, look as I commented earlier, I mean, the overall number of job openings that we have, for nursing allied is up significantly from the beginning of the quarter to the end of the quarter. And candidly, we really just don't see any end in-sight in terms of demand diminishing. We think we're going to be operating in this type of pandemic environment well into 2021. And, I think we'll see the movement of spikes and surges move from region-to-region. So, what does that mean? It means that these hospitals most importantly need critical care nurses ICU and telemetry and also med surge. What it means is, as we've called out earlier, the advanced practice areas, nurse practitioners and PAs are going to be in high demand and on the physician side, principally around emergency. So, there were, I think we're going to also be in a supply constrained marketplace for a lot of other reasons. One just of course, the large number of open orders. But there's just such stress and burnout and fatigue among nursing and allied health and physician all of the different specialties right now. And I think that's going to have impact people are getting burned out. But maybe I'll also ask my team, Buffy, maybe to comment as well. And tell Jeff, what you're seeing as well.

No, Kevin, this is nothing I would completely agree with that. I think that what is interesting is healthcare facilities are seeking longer term assignments, even booking assignments well into Q1 so that they could make sure that they have the supply. I would agree at this point, we're seeing such fatigue, we also see the impact of health care professionals having to care for their family. So that is also impacting supply, and supply right now, healthcare professionals need a little bit more flexibility. So we see healthcare facilities wanting to book longer assignments and booking into Q1. That being said, supply went from flexibility. So we're seeing a little bit of a compression in the duration of assignments, but so that people have coverage over the seasonality and well into the holidays and winter, we are seeing the orders continue on and I agree note no end in-sight.

Okay, that’s helpful. I am sorry.

And I'll just Jeff just add to, I think there's this, we talked about it internally as a pandemic, because the seasonal flu is here. And we are seeing and hearing about patients that come into the ER that have both COVID and normal flu. So that will probably also create an even greater spike in probably the January, February, March timeframe.

Okay, helpful. You had talked about some of the progress in your cost management, I think you'd said you, you've realized about $7 million year-to-date, if I remember correctly targeted about $10 million to $12 million, by the end of the year on your way to $20 million. Is that still accurate?

Yes. Hi, this is Bill. Yes, that's exactly right. So with the 7 realize today, we have called out 10 to 12 to be realized. And in my prepared remarks, I mentioned there been no incremental savings coming in the fourth quarter. But that just meant what we got in the third quarter would be carried forward. So it's an additional $5 million recognized or realize in the fourth are expected to be realized in the fourth quarter. And that'll get better today 12 realized this year.

Got it. Okay, thanks so much.

Our next question comes from Kevin Fischbeck with Bank of America. Your line is open.

Great thanks. I just want to try to reconcile some of the comments that you're making, you are talking about your demand being up triacs, from the beginning of the quarter to the end of the quarter, going up and talk about orders kind of lagging return volume growth. And so just trying to understand kind of where we actually are as far as a kind of percent of demand, normal, right now and whether there's something to think about as far as a hospital volume number to reach to get all the way back to that kind of normal demand.

Yes, hey, Kevin, how you doing? Good question. I mean, look we started the year and really going back to everything for me, started in January 2019, when I rejoined the company as CEO, and throughout 2019, the demand side was improving each and every quarter. In the first part of the COVID spike, we saw our orders rise more than 20% as the pandemic unfolded. And then, as we reported, it fell sharply by almost 80%, as hospitals really experienced much, much lower census, and then order started to rebound at the engine. And we saw states such as California and Texas, and Florida, and Georgia and Tennessee, seeing the biggest increases, and then through the third quarter, these Midwest states like Oklahoma and Idaho and Nebraska, etcetera. And, it's been unprecedented; we have more orders today at the end of the third quarter than we had when the COVID pandemic spike occurred. So we're at a very, very high level. And then, looking into those orders, as we've talked about, we are seeing with volumes coming back in more broad based demand in places like the OR or pediatrics or L&D and some of the other specialties that we cover and we think that it's going to continue to be spiking potentially even higher as we get through this seasonal flu. So I'm not sure if I answered your question, but that's how we kind of think about demand right now. But it's at a level now higher than what we saw in the first quarter.

Again why isn't that kind of converting into a higher revenue number, then as we head into Q4, and again, are you talking about sequential improvement if you exclude the disruption, but it feels like you're talking about a demand number that's incredibly high, but a revenue number that feels a little bit of conservative?

Well, we also called out that we expect as the broad market increases, bill rates to moderate to also subside somewhat. And I'll just say from the perspective of this management team, we've met or exceeded our guidance, almost on all measures for the past couple of years. So we are typically tended to be careful and conservative in terms of our expectations around the business. When you get to the fourth quarter, you do have the seasonal drop-off. When the holidays occur, a lot of nurses want to go home, and especially this year, we think there'll be a seasonal drop-off with some of the things I mentioned earlier, burnout and fatigue. And as Buffy mentioned, I think, folks wanting to be with their family, because we've got health care professionals that are working a lot more hours than they typically work.

And Kevin, this is Bill, just one quick comment on the sequential guidance, if you think about it. So last quarter, we called out that we started off with lower headcount, as a result of that sharp fall in demand in the middle of the second quarter. We have been rebuilding headcount all throughout the third quarter. And as you look into the fourth quarter implied is that we will continue to re-grow headcount. But what you have to take into account from Q3 to Q4 is the impact from labor disruptions. So if you were to look at that, without the $1 million on a normalized basis to the fourth quarter, we would show roughly flat to about a 5% or 6% increase in revenue sequentially. And that, again, is not the norm as you would imagine and locums usually take a step backwards no seasonality in some parts of our business. But, we're still expecting that to be the trend that we are looking forward?

And, and let me just add one other comment to that, I think is interesting is, as this COVID pandemic is unfolded, we're seeing hospitals request, shorter term travel nurse assignments for example. So typically, about 10% of our travel nurse business is less than 13 weeks, which is the industry standard for travel, work assignments. And in this environment, we're seeing 25%, so we're seeing shorter assignments in terms of the orders that we're getting. And that also makes us cautious.

Okay. So just that demand is coming in on orders and maybe the hours are not quite up as much as the orders are?

Well hours, if you are looking at it, some kind of we like to think of the typical travel nurse assignment is 13 weeks, which is a full schedule for 13 weeks, and about a quarter of those orders that we're getting for 13 weeks assignment are actually not 13 weeks, they're shorter, they're four weeks or two weeks or six weeks, and, and that's bringing down our average work assignment in this environment. And that's also part of our analysis around our forecast.

Does that changes all the economics on a per day basis for you if it's shorter or longer or that the same kind of margin.

Go ahead Bill.

See it’s not a question of margin. Yes, no, I was going to say, it's not a question of margin on the orders. I mean, that's probably holding up consistent with what we see on the 13-week orders. It's a question of having to refill that business, right. So if something was going to go three months, and you're going to add to it, you're looking out now and the assignment could end is short of eight weeks or six weeks, as Kevin mentioned. And so it's just, you've got to refill that that headcount a little faster than otherwise might have. So it's, I guess it would be a change in the recruiter productivity in terms of like the number of headcount that they'll have to refill and staff over that quarter.

Okay and that make sense. And then I guess you guys have been closing physical branches. I was wondering if there's any data that you guys have right now about whether that has, in any way impacted the growth of those branches versus branches that capture physical presence or is there any change in the growth between those two cohorts at all?

Yes, it's a very interesting question that work in the hospital and or on the grounds are adjacent to it, and they're in the meetings of our clients on a daily basis ensuring that we can help resolve their issues. I'd also say that again, another comment about cross country, having scale and being one of the larger players, we have a terrific supplier panel that hundreds of suppliers were very pro competitive. But we have a very strong group of suppliers over a long period of time that we have been able to measure their quality and bring that to the doorstep of our clients. So, we feel very passionately about the MSP model, I think some systems from time-to-time will adopt a vendor neutral model, and then they will come back to an MSP model. And, there was always that type of movement. And Buffy if you wanted to add to that.

No, I agree with all of that. I mean, I think, we definitely have strong cash flow, but we rely very heavily on our strategic supplier partners. I think the other avenue of having a staffing firm as the MSP that truly excels in the MSP spaces, we also have direct line to supply, unlike some of the vendor management solutions that you'll see. And we can offer those insights and true market demand and supply insights to our customers. Because we're closer to it, we live it. And we work with a supply panel, but we live it through our divisions. I think the other thing is the clinical expertise, really, and we partner with the healthcare facilities to truly manage the outcomes through the actual supply and how the supply can contribute to it. So I think by being a part of the supply world, in addition to MSP world, is a differentiator for them.

Thanks. Last question for me is maybe to get you to comment on your physical footprint reduction in the IT kind of unification in upgrade that you're undertaking. Kevin, do you think that you could have kind of hit the long-term margin goal of the company without these efforts? Are these are these two initiatives kind of integral on a scale of 1 to 10? Are these 10 must do to kind of get to an 8% EBITDA margin overtime?

Yes, Bill and I may have different opinions on this. But I would say yes, definitely its 10. And I'm very proud of the fact that our digital transformation or infrastructure upgrade, we put together a three-year plan, we are exactly where we want it to be at this point in time. We just rolled out to the biggest division in our company, our new ATF; it's been in place for five weeks. And the recruiters love it. I'll let Buffy comment in a minute about what the team is feeling about this new technology. But to your question, creating a unified tech stack in the company and having an efficient and automated way to manage our business. And creating a wonderful candidate experience through our marketplace technology, which is the first proprietary technology that company has launched in 25 years, is really important to #1, making sure all of our employees have the productivity tools they need to manage their businesses faster more efficiently. We like to think about, we get a job orders from our clients and there's like a basketball shot clock. It's ticking and we need to fill those orders as quickly as possible because patient care is at stake. So having good tools for recruiters and our account managers and all of our revenue producing employees is a material assistance to get to this 8% which we reaffirm, we feel confident, the last couple quarters, you can see greater profitability coming from cross country that we're on a successful path. And we feel confident we can get there in two years. And so, we're not done, we have a lot more technology to bring into the enterprise over the next year and a half. In particular, we're going to be automating our put the new business next year in terms of the tools our employees are using, we're already automating the candidate experience and customer experience through an interface there. And then beyond that, we are moving, as I mentioned in my early comments, we need to automate our middle office. And, creating a single unified text stack is very important to us. But I don't know, Buff if you want to maybe give some insight, because we're quite excited about our improvements.

Yes, very excited and very, very proud of our organization. This was a major change for us. And we've had incredibly strong adoption. Certainly, we had a very well executed change management plan. But I'm very pleased with the production levels within only the very first few short weeks that we've been live on new systems. And I think that it certainly helps in processing faster, it improves, but ultimately, it really, because it improves productivity and processing and gives the control to the recruiters. It's improved our culture. And overall, it makes the work more enjoyable for our recruiters, frankly. So it helps with the efficiencies. But then our recruiters now can really focus on what's really important, as well as the candidate experience and helping them with their career aspirations, walking them through what the work environment will be, like giving them support through their on-boarding process and 24/7 access and support through clinical services. So I think that we've seen great adoption, and I think it's only excellent from there and we're already heading on to our next phase.

Thank you.

Our next question comes from Brian Tanquilut with Jefferies. Your line is open.

Hi, good afternoon, guys. Just a question again, on the guidance, obviously, COVID demand is strong across the board, and I get the moving parts with the one-time labor disruption placement in Q3. But is the revenue guide, the sequential increase to the midpoint of about $4 million? Is that just conservatism at this point and lack of visibility into recruitment? Or is there anything else we should be thinking about?

Bill you want to take that?

Yes, sure. I'd say I don't think the guidance is set to be conservative. I mean, obviously, we strive to set that we believe we can meet or exceed. But I think at this point, as we talked to, we called out a lot of the issues that we're seeing coming into the fourth quarter in the sequential step back from the labor disruption, the impact of the holidays, as we get into the end of the fourth quarter starts to impact our branch business in particularly as well as our travel business. So, start to begin to push out from December starts and the January starts. So you don't get as many starts in the last couple of weeks of the year. So those impacts into it. And, as I think about just the sequential nature of the business, locums obviously, has a normal seasonal downtrend from Q3 to Q4. And given a quiz, I'll say the week 30-week demand that we're experiencing, we're not expecting to buck that trend going into the fourth quarter. So Yes, I mean, we're not looking at this as an EDP guidance target. But I think it's something that we certainly feel our confidence in meeting or doing our best thing to beat it, of course, I would not say it's something to be viewed as ultra conservative guidance.

Now, I appreciate that. And then, just on the gross margin guidance, I guess, as I think about the one-time labor disruption, placement, revenue from Q3, you don't mind to share with us, kind of like, what margin profile that has? And how are you thinking about the sequential margin being flat, given the margin profile of that sort of one-time revenue recognized during the quarter?

Yes, it's not again, its $8 billion in revenue. So the margin wasn't all that much higher than our normal business. So it's not as I called it out, it was a 25 basis point improvement to the margin for the quarter overall, just when you look at it with and without the impact and the labor disruption. So, as we move into now fourth quarter, I think, we're seeing favorable trends in certain of our cost items that run through cost of goods sold, whether it's health insurance, and alike, workers comp, there's some areas that have been trending more favorably of late. Earlier in the year, we had higher percentage of folks that had to go on quarantine or might have been on assignments that we have to continue to have payroll costs for, so we're seeing some favorable experience. And that's kind of offsetting some of the impact of the loss from the labor disruption that will experience going into fourth quarter. And then the last piece I'll leave you with is the education business as it does ramp back up and it will not be up to full year-over-year level of performance. It'll still be down double-digits, but it will be considerably more revenue in the fourth quarter and that typically has a gross margin higher than the average of closer to 30%. So there's an element of mix as well.

That makes sense. And then Kevin, I guess, last question for me, on the physician staffing side, as I think about ED or ER doctors and anesthesiologist facing 8% to 9% rate cut next year and also, obviously, ERs are still trending significantly below pre-COVID levels. What are the conversations like with hospitals in terms of staffing levels, and then the rates that they're thinking about, given the rate headwind that they're seeing into next year?

Yes, well, I'll start that and I'll let Steve answer as well. Look, the conversations are bill rates are down, demand is down due to the softness in the market specifically right now, and there are spikes around physicians for emergency management in some of these key areas. So, it's also very spotty in terms of where the biggest needs are, as I mentioned earlier that's the one specialty that we're seeing is up year-over-year of our biggest four specialties. But, like hospitals have had a challenging year, there's a lot of financial stress in the marketplace. One of the things that we did back in March, when COVID hit, we were very careful to publicly and then with our clients state that we're here as your consultative partner, we're here to help you provide the health care professionals that you need at the bedside to take care of your patients and to take care of the sick Americans. And so we've done everything we can through this COVID experience to kind of be a good partner with our customers and make sure that we're being sensitive to their financial constraints. But Steve, do you might want to add to that Brian's question.

Thanks, Kevin. Hi, Brian. The only thing I'd really like to add is we've faced cost pressures, in all segments of physician staffing over the years, as CMS has reevaluated what the measure of payment might look like for particular services. Ultimately, as Kevin was speaking about, we are a consultative partner with all of our clients. We look to provide solutions that meet their financial operating and clinical requirements. And we do so with their best intention and our ability to meet that intention in mind. And so while we recognize that there are continuing headwinds that could affect demand in those categories, we also recognize that those tend to resolve themselves as the hospitals begin to work through the payment system, and we begin to provide -- continue to provide services to them.

Awesome, thank you.

Our final question comes from Kevin Steinke with Barrington Research. Your line is open.

Hi, you had mentioned investment in revenue producers I believe in the fourth quarter; can you just maybe characterize that in terms of the magnitude in terms of either no cost or headcount?

Yes, well, we don't typically want to disclose how many recruiters or revenue producing employees that we have. But I will say that we given the order flow given our ability to aggregate supply, one of our constraints is, our own number of revenue producing employees in particular recruiters. So, we look for opportunistic hiring, one of the opportunities we have, as a business today is, we think beyond branches, and buildings and brick-and-mortar. So, we're more creative in terms of looking for talent. But, what we're finding is that a lot of talent seeks us out now. Given our turnaround, given the digital transformation, given the momentum that we have in the marketplace, with our customers, reputation only, I'm very proud of cross country and how we stand within amongst our peers. So, we actually have a steady flow of candidates with people that are experienced that want to come work at our business as well. But, as we said in our comments, we are determined to be a growth company, and in all lines of business and before the pandemic hit, we were growing in all lines of business for the first time in several years. And, we think the opportunity is to get that growth moving across all segments, and we're going to continue to invest in the human capital side of it.

Okay, thanks. And then lastly, I was just curious. How much of the revenue headwind in education have you been able to offset with your tele-services offering?

Yes, it’s a great question. I can tell you that it is, and by the way, when I answered the question before, around our digital transformation, we talked about our new ATF and our infrastructure a lot. And we talked about our marketplace app. But the other thing that we did in 2020, was launched the company's first tele-services effort in our education business. And, our approach has been to partner with the very best, Telehealth or Teledelivery companies in the marketplace. And, and we've signed multiple partnerships. And we're very encouraged by that. One of our vendors has helped us on the education front, and it's been a key driver. I mean, I think without our tele-service around our cross country education business where we provide virtual school nurses, and other healthcare, but also education professionals. Our numbers would be of a lot worse than 30%. One final point I'll make is, we're very excited about Telehealth I mean it's up 1,000%. It's changing the way health care is delivered in this country. And Telehealth enables cross country health care to do what we do best and that's supply clinicians. So, we are embracing Telehealth as a huge opportunity for our company, and really our industry.

Okay, thanks for taking the questions.

Thank you.

Thank you. Ladies and gentlemen, this does conclude the question and answer period. I'll not turn it back over to Kevin Clark for closing remarks.

Yes, well, thank you, everybody. We look forward to updating with our progress through the rest of the year, in the next quarter, and we hope everybody stays safe and healthy out there. Thank you for joining us tonight.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.