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Nursing homes are in trouble—but a new approach to staffing could help

Pay rates at nursing homes need to increase across the board or they will always be competing with hospitals that pay higher wages.

Nursing homes are in trouble—but a new approach to staffing could help
[InsideCreativeHouse / Adobe Stock]

The nursing home industry is at a breaking point.

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Most nursing homes are operating on razor-thin margins. Revenue loss is skyrocketing. According to a study commissioned by my company, in 2020 and 2021, facilities lost between $2,656 and $7,771 daily, with projected losses for 2022 ranging from $2,330 to $5,882.

Staffing challenges, a concern for decades, became unsustainable during COVID-19 and have continued in its aftermath. Pre-pandemic, long-term care (LTC) facilities were already seeing an annual turnover of 128%. Since Feb. 2020, a reported 420,000 LTC employees, many of them nursing assistants, have left the profession. More than half of the nation’s 140,000 nursing homes have to limit admissions as a result of staffing shortages.

President Biden, in his State of the Union address on March 1, called for increased staffing ratios for nursing homes. While everyone is in agreement that’s the right thing to do, there is little agreement on how to pay for it—which adds more stress to an already tense situation.

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The industry census average is now at 77%, instead of the preferred rate of 90% and above, but because the skilled nursing facilities don’t have the staffing, they can’t take on more people. The demand is there—hospitals across the country are creating new wings for people who should have been discharged and placed into a skilled nursing facility.

To solve this crisis, nursing homes must rethink how they manage staffing. Here are suggestions to get started.

Leverage technology to better understand trends and predict staffing needs.

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Advanced analytics based on data science and AI can help determine ways to balance supply and demand for nurses, optimal rates, and predictable client occupancy requests. Nursing homes can make money by increasing their census and save money with better revenue cycle planning, avoiding cost bursts when demand for staff increases. This type of planning will also help alleviate the burden of significant spikes in recruitment costs, which increased by more than 40% from 2019 to 2020, our study disclosed. The trend is expected to continue in the next few years, with recruitment costs anticipated to reach approximately $27,820 by 2028.

Rethink staffing composition to ensure needs are met.

The staffing construct in long-term care is 80 years old. Nursing homes are staffed by full-time employees, float pools where people move in from different facilities or assignments, contract workers, per diem workers, and travel nurses, who became quite prevalent—and costly—during COVID-19.

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To reduce costs, there is a big push by nursing facilities to reduce their payments to staffing agencies, which is how temporary staff are traditionally hired. Given typical staff-to-patient ratios, the average volume of unoccupied beds could be filled with relatively few additional employees, significantly improving the facilities’ financial performance. Without the extra staff, however, nurses and others must work more and longer shifts which, predictably, will cause them to burn out sooner. Burnout is a primary reason nurses are leaving long-term care.

Increase pay rates for staff to offer a competitive wage.

Pay rates at nursing homes need to increase across the board or they will always be competing with hospitals that pay higher wages—or with retail, fast food, and many other less demanding jobs. Nursing homes are not just competing for CNAs at other facilities, but also competing with a whole host of other work opportunities. Pre-pandemic, CNAs were making $12-$14 per hour, which is below Target’s starting wage of $15 per hour. The fact that wages aren’t keeping pace with the rest of the gig market creates a tempting alternative for CNAs. Our third-party survey found that 44% of CNAs in LTC are stressed because of their finances and inability to pay their bills.

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Ensure staffing consistency to secure high CMS star ratings.

The current staffing cycle doesn’t reduce agency cost in the long run but it does have the added effect of reducing the nursing home’s CMS star rating and, ultimately, its revenue. Facilities that don’t have high CMS ratings aren’t able to obtain new referrals to grow their revenue base. Beginning July 2022, CMS will also consider staffing turnover, so the stop-and-start of per diem nursing hires will further impact a nursing home’s quality rating. That said, a consistent cadence of per-diem staff can keep nursing homes in good standing with the CMS because they will be able to meet the federal government’s standard around staffing consistency and turnover.

Every nursing home wants staffing consistency and quality of care. While every facility has different financial goals, most should plan for temporary staff—whether travel, contract, or per diem—to be 10%-15% of their staffing. Planned intelligently with the benefit of data science and AI, nursing homes can fill those beds, drive up their CMS rating, and generate more revenue.

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As CRO, Matt is leading and scaling IntelyCare’s growth by ensuring the success of its nursing professionals and healthcare facilities.

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