With federal and state Medicaid cuts looming, many in the long-term-care industry are holding their breath and hoping the cuts won't exacerbate labor market troubles caused by low wages, high stress and high turnover.
About 66% of nursing homes' revenue comes from Medicaid and labor accounts for around 70% of facility costs. "Hospitals aren't as vulnerable to Medicaid cuts as nursing homes or other long-term-care providers," says Robyn Stone, executive director of the not-for-profit policy research group Institute for the Future of Aging Services. "Any cuts (in nursing home reimbursement) will make workforce issues more problematic."
The American Health Care Association, a nursing-home trade group, says almost 96,000 full-time-equivalent nurses and other health workers are needed in nursing homes, a figure that is expected to balloon to several hundred thousand by 2012 as baby boomers age.
Stone says the lagging economy has deepened the worker pool for nursing homes because these low-wage jobs require a relatively short training period.
Much of the data on nursing-home staffing are anecdotal, but there is enough of it to indicate a short-term positive trend. For example, large nursing-home chains, such as HCR Manor Care and Genesis HealthCare Corp., said in their 2004 annual reports that they rely less on staffing agencies.
Genesis said it was paying $3.36 per patient day on agency labor through the six months ended March 31. That's down from $4.47 in fiscal 2004 and $6.18 in fiscal 2003.
Recently, stable government payments have helped ease some of the workforce constraints, helping improve quality of care at nursing homes, says Hal Daub, executive director of the AHCA. That stability, however, could be coming to an end with many states making or about to make large cuts in their Medicaid budgets, Daub says.
Daub says he hopes to lessen the effect that federal Medicaid cuts will have on nursing homes by working with the congressionally mandated commission that will examine how to slash $10 billion from the Medicaid budget over five years. Skilled-nursing facilities are also expecting to benefit from the CMS' so-called "75% rule," which is changing Medicare criteria for inpatient rehabilitation facilities (May 2, p. 14).
Larry Lane, vice president of government relations for Genesis, says there is a direct link between reimbursement and staffing. He says about 80% of the funds that Genesis has received from Medicare for cost-of-living adjustments in the past two years has gone into labor costs. If the staffing budget were to be affected, he says that Genesis would likely have to use fewer registered nurses and more nursing assistants.
Others in the industry say nursing homes have already had to ration scarce resources, and cuts to Medicaid have to result in fewer workers. "They will try to get by with fewer staff, which would be dangerous," says Debra Lipson, deputy director of Better Jobs Better Care, a not-for-profit group that researches long-term-care.
She adds that nursing homes will also delegate more tasks to nurse's aides and will try to create other operational efficiencies. But nursing homes said they've been grappling for years with efficiency because of low reimbursements.
An AHCA study finds that average nursing home Medicaid reimbursements in 2002 fell short of costs by $12.58 per patient day.
One problem that wouldn't get any better with Medicaid cuts is wages paid to nursing-home workers. A report Stone authored in May 2004 said that in 2002 median salaries of full-time, direct-care nursing-home workers ranged from $16,250 to $19,960; in the late 1990s, the percentage of nursing home aides under the federal poverty level was higher than the percentage of the general population that was in poverty.
Often nurses opt to work at hospitals, which offer higher salaries; that leads to high turnover rates at nursing homes. AHCA data shows a 49% annual turnover rate for nursing home RNs and 71% for certified nursing assistants. That translates into $4 billion a year in costs for the industry and government payers cover $2.5 billion of that, according to a report from Better Jobs Better Care released in October 2004.