Nursing Homes Pay ‘Exorbitant’ Agency Costs to Comply With Staffing Minimums

State staffing minimum laws are colliding with spiking agency costs, with some facilities forced to continue or increase the use of expensive temporary staff to meet state requirements.

The dissonance is especially felt in states like New York, which has the largest Medicaid reimbursement shortfall in the nation, according to Stephen Hanse, president and CEO of the New York State Health Facilities Association (NYSHFA).

“The costs are exorbitant,” Hanse said. “That low reimbursement rate directly impacts the ability of providers to recruit and retain a workforce, or in the absence of that to really seek agency.”


Hanse said the average cost for a Medicaid resident is $265 per day, but the average reimbursement in New York is $211 per day. Meanwhile, Hanse said agencies in some cases are charging SNFs in the state up to $70 an hour for certified nursing assistants (CNAs).

The state of New York’s staffing requirements were originally supposed to go into effect in January of this year, but were postponed until April by Gov. Kathy Hochul.

While other industries face similar issues, Hanse said, the nursing home industry is a direct care industry which needs a “strong, vibrant workforce” that simply isn’t there.


Facilities in New Jersey have seen “explosive” agency use since state implementation of its own staffing minimum requirement, according to Andrew Aronson, president and CEO of the Health Care Association of New Jersey (HCANJ).

The state requires one CNA per eight residents during day shifts, one direct caregiver for every 10 residents in the evening, and one for every 14 during overnight shifts.

“These facilities have to have their minimum number of CNAs working when they’re surveyed,” added Aronson. “In order to get that number of bodies in, they’re reliant on agencies to do it.”

Such state mandates come at a time when the Biden administration has set its sights on a federal nursing home staffing minimum.

The Centers for Medicare & Medicaid Services (CMS) is expected to conduct a study to determine the level and type of staffing needed, and propose a new standard within one year.

Compliance pushes SNFs to continue agency use

New York’s two-fold staffing law requires 3.5 hours of care per resident per day by a CNA, LPN or RN. Nursing homes in the state must also spend at least 70% of revenue on direct patient care, and 40% of that on resident staffing efforts.

Of the 3.5 hours, no less than 2.2 hours of care must be provided by a certified nursing assistant (CNA) or nurse aide. At least 1.1 hours of care must be given by a registered nurse (RN) or licensed practical nurse (LPN).

Conservatively, the state’s staffing minimum law would cost the industry about $800 million based on 2020 cost report data, Hanse added, and 7,500 workers would have needed to show up on April 1 across all positions.

The state set aside $64 million this year for its staffing minimum efforts but it’s not clear how those funds will be allocated, Hanse said. Funding “doesn’t come close” to helping the industry offset those costs, he noted.

Hanse said the 70/40 rule is especially brutal given a provision allowing agency use to be discounted in the eyes of the state. In other words, if a staffing agency charges a facility $100 an hour for a clinician, the facility can only say that agency member cost them $85 an hour.

Facilities aren’t able to recoup total agency costs under this rule.

The law also states that nursing home operators in the state are required to return all profits in excess of 5% to the state, regardless of the quality of care or whether the operator sustained losses in prior years.

The state’s nursing home reform legislation was first introduced by former Gov. Andrew Cuomo in 2021 as a way to improve nursing home transparency and hold bad actors accountable.

“The staff aren’t there. [There has been] years of disinvestment in long-term care,” said Hanse. “The prior administration cut about $1.5 billion dollars from long-term care and that is directly impacting the ability of providers to to compete in the marketplace.”

On a national level, about 15.2% of the nursing home workforce have left since the start of the pandemic. In March alone, the sector lost 2,500 jobs, according to a report published by the U.S. Bureau of Labor Statistics.

Operators have yet to see how the laws will be implemented, Hanse said. Further guidance has not been issued by the state despite the law going into effect on April 1.

“These laws that were implemented don’t reflect the post-pandemic workforce realities of New York,” Hanse said. “The efforts of providers, incentives to encourage the recruitment of new employees, it’s a struggle. They’re not out there.”

Of the 614 nursing homes in the state, about two-thirds can’t meet the minimum, Hanse said. NYSHFA and its members believe it’s going to take “a lot more” than a law on the books – it will take an invested effort to recruit and retain workers.

Flexible staffing standards versus unsustainable minimums

In New Jersey, nursing homes have been dealing with state-mandated staffing minimums since February 2021. Gov. Phil Murphy signed the bill into law October 2020.

At the same time, New Jersey has a fixed Medicaid payment system – as costs go up, whether it be for agency CNAs or to hire more CNAs to meet the staffing ratio, the Medicaid rate needs to be adjusted by the legislature, Aronson said.

The state did pass a 10% increase to Medicaid rates after the staffing minimum was passed, Aronson noted, while the rates for direct care staffing has increased close to 30% between 2020 and 2021.

A change in policy means agency might be sticking around longer than industry leaders would like, Marquette University professor Lisa Grabert told SNN.

“Some people thought that we might see less use of staffing agencies sort of as the pandemic wanes down. Now that policy is changing, we may not see it taper off as much as I think many people thought it would,” she added.

Marquette University’s College of Nursing this month published a debate-style article about legislation to regulate nurse staffing agencies amid opportunistic companies charging – at times – triple what staff are paid.

“It does seem that some states have been slightly more aggressive than where CMS initially wants to start out with this,” Grabert said of staffing ratios in New Jersey and New York.

Aronson sees the federal reform as potentially more “flexible” compared to its own state mandate tying hours to a specific role – the certified nursing assistant (CNA).

With more flexibility, providers would be able to meet resident needs by hiring specialized staff that would account for comorbidities among a specific community or population, Aronson added.

“If I have a nursing home that is a very specialized facility, with a lot of acute needs, let’s say a [ventilation] unit, I can staff that with physicians or physician assistants (PAs), a pulmonologist or specially trained nurses,” Aronson said.

Aronson believes that at a federal level, CMS isn’t only looking at CNAs – they’re looking at direct care staff overall. New Jersey, in only focusing on CNAs, has a staffing minimum requirement that has not improved quality of care, he said.

“Many of the Biden proposals have already been either acted upon or looked at in New Jersey … the federal staffing ideas that they’re looking at are much more flexible than the New Jersey CNA staffing ratio,” Aronson said.

Nursing homes with a less acute population could be staffed with more CNAs, less specialized staff, he said.

“By giving providers that flexibility you’re allowing them to decide what they need to meet the needs of their own residents,” added Aronson.

Florida recently passed a modification to its staffing minimum law doing just this – opening its staffing ratio up to more positions beyond the typical LPNs, CNAs and RNs.

“In New Jersey, it’s hard to argue that a CNA staffing ratio is going to improve the quality of care when you’re talking about buildings [that house] residents with high acuity. The CNAs are not the ones that drive quality in those buildings,” Aronson said.

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