Consulting firms in the skilled nursing space are getting a better snapshot of the labor market as data continues to pour in, and the outlook remains bleak – dwindling workforce numbers are running up against increased average cost of labor and overall inflation.
While the SNF workforce lost approximately 238,500 staff during the pandemic, an 11.8% decrease for nursing and residential care facilities, average wage rates doubled at all levels in 2021, according to professional services firm CliftonLarsonAllen (CLA).
Registered nurses (RNs), licensed practical nurses (LPNs), and certified nursing assistants (CNAs) saw 7%, 7.7% and 9.7% growth rate increases in average wage per compensated hour, respectively, for 2021. These positions only saw 2.8%, 3.6% and 4.4% wage increases in 2020.
“We’re not only being challenged with finding the appropriate workforce to come into our facilities, we’re also challenged with being able to pay them at competitive rates,” said Deb Emerson, CLA principal and senior living/care reimbursement leader. “The skilled nursing industry is so heavily reliant upon permanent funding sources. ”
The agency staff cost trend increased two-to-three times historical levels, according to CLA data. Total contracted nursing cost per hour jumped from 3.4% between 2017 and 2019 to 9.2% post-Covid, or 2020 to 2021.
The data is consistent with many industry operator’s experiences as leadership has fought to recruit and retain staff and reduce agency usage.
Operators have had to get creative, Emerson said, in bumping up employed staff rather than relying on agency, while making sure they are meeting staffing hours per patient day needed to provide quality care.
This is all while the Biden administration is attempting to implement a federal minimum staffing ratio and placing emphasis on adequate staffing through the five-star rating system and surveys.
Another report published by CLA predicted 4.1 hours per resident per day would cost the industry $10 billion.
“That’s going to put a challenge on the occupancy as well as the financial margins that we’re seeing at facilities,” added Emerson on the federal initiatives.
The median operating margin remains at -4.8% according to CLA data. The firm initially predicted this operating margin in a March report in partnership with the American Health Care Association/National Center for Assisted Living (AHCA/NCAL).
That’s assuming all state public health emergency (PHE) funding is retained and there is no budget neutrality adjustment to the Patient Driven Payment Plan (PDPM).
“It’s not pretty,” said Emerson. “All of these things are creating a lot of noise in the industry and some challenges that facilities are having to work through.”
The 2021 data really showed how “onerous and persistent” a lot of these challenges were in the SNF space, Emerson said. It wasn’t just operating margins and revenue that were driving statistics, but also the increasing cost of care.
Inflation trends, for one, are significantly higher than historical pre-Covid numbers – 6.9% in 2020 and 2021 versus 3.5% between August 2017 and 2019. Outside of costs specific to skilled nursing labor, CLA is seeing a 9.1% rise in inflation overall.
“It’s not just the labor market. Everything that you can think of from a goods and services perspective is being impacted,” explained Emerson. “Facilities are not only having to deal with some of these other challenges they’re now having to deal with the overall inflation.”
Occupancy recovery, which includes staffing, and inflation trends, along with state PHE funding and a looming 4.6% cut to neutralize what the Centers for Medicare & Medicaid Services (CMS) considers overspending from introducing the PDPM model, are all key financial performance drivers in the sector, Emerson said.
“The public health emergency being extended, there’s still some opportunity for that enhanced Medicaid eligibility to be out there but that is going to go away when the public health emergency is finally ended. That will have a significant impact on the number of individuals that are on the Medicaid program, as well as the mix of Medicare as well,” noted Emerson.
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