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Expense & staffing optimization for senior care & living operators

September 19, 2022 White Paper 12 min read
Patrick McCormick Scott McLellan Denise Leonard
Senior care and living providers have faced a twin pandemic, with the current staffing crisis compounding the effects of COVID-19. Understand new and forward-looking approaches to workforce management in our State of the Industry Report.

Nursing homes have been hit the worst of all healthcare sectors, as chronic Medicaid underfunding combined with overwhelming pandemic-related expenses have left them struggling to compete for qualified staff. Since the start of the pandemic, nursing homes have lost 15% of their total workforce — more than any other healthcare setting. As a result of this severe staffing shortage, providers are almost universally asking employees to work overtime, and the vast majority are backfilling shortages with temporary staffing. A January 2022 NIC Executive Survey showed 98% of respondents were paying overtime and 89% using agency or temp staff. In April 2020, just 85% of respondents were paying overtime and 36% were using agency or temp staff.

Chart depicting how senior housing providers are tackling staffing shortages.

The growing reliance on temporary staff has driven dramatic increases in agency costs. In hot markets, contract nurses can essentially name their price, particularly with the introduction of online platforms. One example is KARE, a platform that connects senior care and living providers with independent contractors, who set their own pay scale.

Competition for nurses is especially fierce. In 2021, registered nurse salaries increased about 4% to $81,376, according to a Wall Street Journal analysis of nearly 60,000 nurse salaries, excluding overtime and bonus pay. In 2020, nurse salaries increased 3.3% and in 2019, 2.6%.

Labor and contract disputes in a number of states are contributing to nationwide wage rate increases. In the face of possible strikes, a Connecticut health system settles on a $20-per-hour minimum for certified nursing assistants (CNAs) and $30 for licenses practical nurses (LPNs). A landmark contract case in Oregon resulted in wage increases of as much as 30%, pushing minimum rates for CNAs to $18 per hour.

In addition to competing with deep-pocketed hospitals and health systems — some of which are offering nurses double-digit increases — long-term care providers are increasingly seeing caregivers jump ship to join staffing agencies, where they can often earn higher hourly wages while meeting their needs for flexibility.

There have been some innovative approaches to help providers alleviate the staffing crisis, such as a Minnesota initiative to recruit at least 1,000 new CNAs. AHCA and LeadingAge are advocating for Care for Our Seniors Act, which includes provisions to recruit and retain more long-term caregivers, as well as to enhance quality of care, oversight, and safety of facilities.

But for struggling senior care providers, these reforms could come too late. Most providers are spending government stimulus dollars to cover compensation increases, but given the rigid constraints of Medicaid reimbursement rates, the long-term viability of these higher wage rates remains murky at best. Considering that, pre-pandemic, wages and benefits accounted for about two-thirds of the typical senior care provider’s cost structure, these sharply increasing labor expenses aren’t sustainable without an increase in Medicaid and Medicare reimbursement.

To keep reading and access seven ways to optimize your labor management strategies, download our State of the Industry Report. Explore solutions including a return to the staffing grid and forward-thinking approaches to benefits and insurance.

Download now

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