How Staffing Agencies Can Be More Than a ‘Necessary Evil’ for Operators

The post-acute care market is in crisis.

The average facility is losing anywhere from $2,300 to nearly $5,900 per day, depending on location, due to staffing challenges, a study conducted by global management consultant Oliver Wyman shows.

There are simply not enough nurses and nursing assistants available to fully staff post-acute settings to the level needed.

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In fact, lower occupancy rates due to understaffing – down 14% since 2020 – could lead to an estimated $19.5 billion in unrealized revenue by the end of 2022 for skilled nursing facilities, according to the report.

Oliver Wyman partnered with IntelyCare, a leading provider of contract labor in the post-acute care space, to look at the shifting labor dynamics and costs in the space by developing a methodology to determine the total volume of missed revenue due to staffing shortages.

Unrealized revenue refers to the potential revenue that was lost due to operating at a non-optimal occupancy rate due to staffing shortages and increased Centers for Medicare & Medicaid Services (CMS) scrutiny on minimum staffing ratios. Revenue loss was calculated using the number of unoccupied beds in a facility relative to optimal occupancy and the revenue a facility could expect to receive from a single incremental occupied bed.

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As persistent staffing challenges continue to prevent nursing facilities from reaching full census, despite referrals returning to pre-pandemic levels in some areas, Oliver Wyman Partner Deidre Baggot argued that the average volume of unoccupied beds – ranging from 4 to 13 per facility in 2022 – could be filled by using relatively few incremental employees.

“Facilities lost between $2,656 and $7,771 a day in 2020 and 2021 and are estimated to lose between $2,330 to $5,882 this year,” she said in a news release. “To increase admissions, it’s imperative that post-acute care facilities rethink how they manage their workforce and start to spend more strategically on staffing.”

As nursing student enrollment continues to drop and more health care workers are leaving the sector than ever before, some operators have started relying on agency staff to fill open positions but even that comes with its own challenges. In several states, including Maryland, Idaho, Indiana, Kansas, New York and Pennsylvania, bills were introduced to discourage price gouging from staffing agencies. Iowa recently passed legislation to prohibit the use of noncompete agreements or other finder’s fees in staffing contracts.

Oliver Wyman research shows that agency staff may provide the best stopgap for a sector that is projected to lose more than 400,000 workers by 2030 due to RN shortages, down 82,000 workers, LPN shortages, down 34,000 workers, and CNA shortages, and down 280,000 workers.

“Post-acute care facilities have to view contingent nursing labor, or ‘agency staff,’ not as a necessary evil, but rather a strategic, cost-effective resource that positively impacts their entire workforce and bottom line,” David Coppins, CEO and co-founder of IntelyCare, said in the news release. “Recruiting and retaining full-time nurses has become an expensive uphill battle in today’s market.”

The research shows that finding a full-time nurse can cost a facility up to 33% more on an hourly basis than an equivalent contingent worker.

Coppins argued that by allocating 15% to 20% of their workforce to contingent labor, operators can operate at full census and maximize their revenue, relieving some of the pressures that are causing burnout among full-time staff.

The case for agency labor

Staff agencies have faced immense criticism from the health care sector over the course of Covid, particularly from post-acute care operators, with some New York SNFs reporting paying up to $70 an hour for a CNA to cover a shift.

Part of the problem is that nursing facilities have nowhere else to turn to. In Q3 2021 agency use was five times what it was in 2019, on a per-patient-day basis, for one of the nation’s largest owners of skilled nursing facilities, Omega Healthcare Investors (NYSE: OHI).

“It used to be that nursing homes and assisted living facilities would rely on agency staffing as a last resort, but now they are finding that their only option is to reach out to agencies,” Christopher Laxton, Society for Post-Acute and Long-Term Care Medicine (AMDA) executive director, recently told SNN.

While some see the “premium” costs operators have been forced to pay for agency labor as further exacerbating a growing staffing crisis, Oliver Wyman researchers argue that comparing hourly wages across agency and full-time labor can be misleading.

In fact, traditional staffing agencies can cover everything from payroll taxes, recruitment and credentialing costs, retention bonuses and other expenses that health care facilities are responsible for with full-time staffers.

Backed by industry data from global asset management and HR consulting firm Mercer the study found that on an hourly basis a full-time employee costs a facility around twice as much as their hourly rate and because of the aforementioned additional expenses a full-time registered nurse was shown to cost up to 33% higher than an agency filler.

For nursing assistants the cost is 26% higher. Health benefits and recruitment expenses can also be extremely costly to operators.

Furthermore, staff burnout continues to be a problem for operators over two years into a global pandemic as nearly 60% of the nursing professionals who left their jobs cited insufficient staffing as the reason for their departure, Oliver Wyman research shows.

Hours worked increased by up to 15% across the nursing workforce due to understaffing with nurses working more than the typical 36 hours per week pre-pandemic norm and nursing assistants working nearly 52 hours per week on average.

As the United States population continues to age with more older adults requiring skilled nursing services, demand for staffed beds will only increase and every bed left unstaffed is not only a source of revenue unrealized for facility providers, but also the potential for a patient to be left untreated.

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