Senior Care Needs a Business Model Overhaul

by Jeff Shaw

The need for change goes far beyond wages and staffing ratios.

By Nate Hamme, Ceca Foundation

In his State of the Union address on March 1, President Joe Biden announced new reforms intended to improve resident safety in nursing homes. Skilled nursing facilities (SNFs) would see changes to reimbursements from the Centers for Medicare & Medicaid Services (CMS) under the value-based purchasing model, requiring minimum staffing ratios and additional oversight of providers.

The move comes as the industry faces unprecedented challenges in retaining and supporting workers. The pandemic has undoubtedly exacerbated safety issues and put the industry under a powerful microscope. 

We can’t ignore that almost a quarter of COVID-19 deaths during the pandemic are residents and staff of long-term care facilities. However, it’s important to recognize the unyielding issues that provide additional context, and urgency, for this push.

How we got here

By 2030, every baby boomer will be age 65 or older. Many of them aren’t in need of nursing care — yet. While many would prefer to “age in place with a familiar face,” there are fewer potential family caregivers available than in previous generations. 

Then there are regulatory and structural issues at play. The battle over healthcare delivery has led to antiquated models of care and lagging government reimbursement rates to providers. Medicaid reimbursement is determined at the state level and generally pays less than Medicare. 

Additionally, many SNFs receive rehab patient referrals through hospitals, which were forced to cancel or postpone elective surgeries during the pandemic. This constrains the ability of organizations to make additional investments in their employees and has led to many facilities having dangerously low staffing levels.

Currently, CMS does not have any minimum staffing requirements. Enter the age-long motivational debate about the carrot or the stick — better reimbursement levels for better performance, or more “civil monetary penalties” through enhanced oversight?

A rising wage tide

Businesses are also grappling with a shift in social attitudes to fair compensation and a living wage. The federal wage floor has remained at $7.25 per hour since 2009. Even paltry certified nursing assistant (CNA) wages ranging from $13 to $17 per hour have been at least mildly attractive to workers, compared with minimum-wage positions in other industries.

But that trend has turned. According to the National Employment Law Project (NELP), 44 cities and counties will surpass a minimum wage of $15 per hour in 2022. Positions in other industries, such as food service or retail, are becoming more attractive with potentially better hours and less stress than healthcare positions.

Turnover and staffing shortages

SNFs have seen almost incomprehensible attrition across teams and departments. A Health Affairs article from March 2021 shows median annual turnover rates for total nursing staff were 94 percent, and individual operators have reported numbers as high as 300 percent.

To fill the gaps, nurse staffing agencies have been able to charge extremely high rates to companies that are struggling to maintain a safe environment for residents. 

The endgame is that agency brokers take a slice of the pie, traveling caregivers receive higher hourly rates and increased flexibility, and organizations see employees walk out the door one day and return the next as contractors making double or even triple what they made previously. It’s a recipe for disaster, and residents and families lose the continuity of care and relationship-building they had with a more stable workforce.

While hiring additional nurses and nursing assistants would undoubtedly benefit care, the industry is already in dire financial straits. Nursing home occupancy declined by 16.5 percent to 68.5 percent from 2020 to 2021, and the long-term care industry is projected to lose $94 billion due to the pandemic, declining revenues and increasing costs.

The well-being of the healthcare workforce is undoubtedly in jeopardy, and the need to attract new caregivers and younger generations into the field is pressing. This will take time, and state and federal assistance will prove key to overcoming the challenge. 

But this is not a new issue. Even prior to the pandemic, more than half of nursing homes had staffing levels below those recommended by experts, and a quarter of them were “dangerously low.”

What can be done now?

In many ways, the long-term care business model is broken. Organizations need to act now, and act aggressively. Somewhat buried, and often misunderstood, in the Biden administration’s statement was incentivizing “the resident experience, as well as how well facilities retain staff.” With this guidance, there are more immediate strategies operators can implement to improve their situations.

For example: the only variable that has been shown to impact patient mortality more than staffing ratios? Nurse engagement levels. The author of a study on the topic notes, “Many people make the mistake of confusing ’employee engagement’ with trying to make workers satisfied, or even happy. This confusion causes healthcare leaders to underinvest their time and money in engagement initiatives, thinking engagement is nice to have rather than an enabler of their most important goals.”

Employee engagement also positively impacts retention, and retention improves consistency in exceptional experience for residents.

Both Gallup and Harvard Business Review have noted the outsized impact of employee recognition on employee engagement, particularly in the healthcare field. Recognition is a key way to create a positive organizational culture, tie an organization’s purpose to everyday actions and celebrate achievements that keep people connected to why they do their work. Given the timely desire for a systemic overhaul, the time is right to convene a national commission to discuss workable solutions to our nation’s skilled nursing problem. We have no time to waste with the surge of baby boomers reaching their later years. 

Safe, quality care for the sick, elderly and disabled is an essential service that can’t become a casualty of narrow-mindedness, shortsightedness or limited scope in reform. With the expertise of providers, experience of care workers, agency of legislators and passion of residents and their advocates, we can identify impactful solutions that don’t just cut around the edges, but transform our communities for the better.

On a final note, the United Million Nurses March is scheduled to hit Washington, D.C. on May 12, in large part to help spread awareness to the hardships faced by nurses throughout the healthcare system. 

Unfortunately, our society has swung from calling our healthcare workers “heroes” and banging pots for them outside our windows, to questioning their motives, taking their efforts for granted and even threatening or physically assaulting them. Is it any wonder burnout and turnover are through the roof? 

America needs to come out in full support of healthcare workers and find opportunities to support them mentally, emotionally and financially, while reminding ourselves that they are the ones responsible for providing the level of safety and security that we expect for our family members.

Nate Hamme is president of the Washington, D.C.-based Ceca Foundation, a 501(c)(3) nonprofit that offers employee recognition programming to hospitals, senior living, home care organizations and healthcare communities nationwide.

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