Administrator, DON salaries rise in 2009

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Administrator, DON salaries rise in 2009
Administrator, DON salaries rise in 2009

The economic tumult of the last year has wreaked havoc on the nation's workforce as a whole, but the long-term care industry generally appears to have weathered the overall downturn.

Nursing home management salaries rose at a healthy rate this year, despite the recessionary environment, according to the recently released “2009-2010 Nursing Home Salary & Benefits Report” from Hospital & Healthcare Compensation Service. The publication is created in association with the American Association of Homes and Services for the Aging, and the American Health Care Association, the nation's largest nursing home associations.
Numbers game

National median salaries for both nursing home administrators and assistant administrators rose by 4.8% in 2009, according to the HCS survey. Administrators' salaries climbed to $89,606, up from from $85,464 last year.

Their assistants saw a pay increase of roughly $3,000, raising them up to a national median of $65,000. This is a marked improvement over last year's

numbers, which revealed that assistant administrators' median salary fell 0.03%.

Nurse leaders, likewise, enjoyed an overall pay bump. Directors of Nursing matched last year's pay increase of 3.9%, putting the national median at $77,921. The assistant DON median rose by a slightly bigger margin–4%–putting it at $62,400 per annum.

Nearly 2,250 facilities responded to the salary and benefits survey. For the third year running, for-profit providers comprised more than 80% of the total respondents. The percentage of not-for-profit facilities participating in the survey dropped slightly to 17.7%.

Two views

The national median salary result takes into account every response from survey respondents at every size and type of facility, from tiny not-for-profit facilities to large, multisite for-profits. The median is the level at which half of all respondents are below and half are above.

Another helpful trend that HCS follows each year gauges the responses from facilities that participate in the salary survey in consecutive years.

“If you look at the all-facilities comparisons, the percents can sometimes jump drastically up or down,” explains Rosanne Zabka, director of reports at HCS. “A group that is high paying or low paying can drop out one year and cause a large shift in the numbers. The same-to-same chart is on more of an even keel.”

For example, in comparing the national trend data of the same participating facilities year-to-year, the percent increase for administrators in 2009 was 3.93%, while for DONs it was 3.75%. (That compares with the 4.8% and 3.9% national median increase for those respective positions)

This different analysis yields slightly different hard numbers, as well. Administrators' pay under this calculation now averages $89,408, or slightly less than the overall average calculation, with DONs averaging 78,405, or slightly more than the overall average.

“Both ways of looking at it are correct,” Zabka says, though she goes on to suggest that, given recent economic conditions, the increase of 3.93% could be more reflective of the times than the 4.8% increase.

It's the economy

The big news in every sector over the last 12 months has been the struggling economy. It seems as though no corner of the market was spared from the collapse of many of Wall Street's most revered financial institutions.

“Economic pressure has really dramatically affected a lot of different industries,” says Phillip B. Wilson, president of the Labor Relations Institute in Broken Arrow, OK. “People are experiencing layoffs, pay cuts, shortened work weeks—a lot of our clients in other industries are going through that.”

But when it comes to long-term care, Wilson just hasn't seen that same sort of activity.

“That's not to say that things are just rosy in long-term care,” he hedges, “but it's a little bit less sensitive to the overall economic conditions.”

As evidence, Wilson points to the nearly 5% rise in the median salary for nursing home administrators nationwide. Even in years when the market is strong, the Bureau of Labor Statistics estimates a healthy rate of salary increase for healthcare positions is approximately between 3.2% and 3.4%, with some experts putting the average year-to-year-increase closer to 4%.

“A 5% increase, it's not like it's dramatic. It's only dramatic in the sense that those wages are going up while most other people's wages are going down,” Wilson says.

The pinch

Paul Gavejian, managing director of Total Compensation Solutions in Armonk, NY, was a bit surprised by the pay rises.

“The whole spectrum, acute care to long-term care to assisted living, everybody is feeling the pinch,” he says.

What Gavejian has been noticing is that resident numbers are down and, particularly in the not-for-profit sector, fund-raising efforts are down as well. Still, administrators at not-for-profit facilities averaged an almost 7% pay rise over last year. (The 4.8% average is for administrators from the both for-profit and not-for-profit sectors.)

But perhaps the reasons behind this trend aren't so hard to understand. Most organizations right now feel like they have a good, solid, productive group in place, Gavejian reasons. So even though compensation is the biggest cost for most facilities, few have decided to freeze wages, opting instead to keep their employees happy and ahead of the economy.

The increases also could reflect the cost of hiring new management personnel.

“Nursing home administrator is a skilled position,” Wilson says. “Not just anybody can hop into that job.”

So when it comes to replacing an administrator, it makes sense to pay a bit more.

“If you want someone with similar experience, then you're going to pay the same amount of money or more to get that new person,” explains Gavejian.

Another likely reason for the seemingly large increases over last year could simply be the time it takes to collect data and information, compile it and put it out, Gavejian says. He suggests that the management increases that we're seeing right now are a lag from the previous year. Next year will probably reveal the full-on effects of what both the economy and the long-term care industry had been going through from 2008 to 2009.

But Gavejian, like Zabka, readily admits that there's no one right answer when it comes to analyzing such trends.

“As you look into it, particularly in healthcare, you always see that there's a primary reason and a secondary reason, and sometimes they play into one another,” Gavejian says.

Reform quandary

For those involved in healthcare, it's been virtually impossible to avoid the raucous debate raging around the reform issue.

“Don't you remember they used to say Social Security was the third rail of any political discussion?” Gavejian says. “I think the debate in the last 60 days has disproved that theory.”

But the big problem with the reform efforts at this point in the game is that no one is exactly certain what's going to wind up in the final bill. Propositions have been made, and individual congressional committees have drafted their own bits of legislation, but all those bills are bound to change when it comes time to reconcile the House and Senate versions of healthcare reform.

“I definitely do not have the answer to healthcare, and I'm not sure anybody does,” says Wilson. “But a lot of the things they're talking about in terms of cost control … could have a negative impact on reimbursements for long-term care.”

The House of Representatives, in its varied proposals, calls for the elimination of the annual market- basket update for nursing homes. And on Sept. 16, Senate Finance Committee Chairman Max Baucus (D-MT) released his plan. It also would likely reduce nursing homes' market-basket update, though not quite as harshly as the House bill would.

Whatever version of the bill passes, however, it will very likely mean cuts for healthcare and long-term care.

“That's going to mean, from an operational perspective, that [facilities] are either going to have to have fewer people, fewer caregivers in the facilities, or they're going to have to change the pay equation,” Gavejian speculates. “Maybe they'll have to freeze their salaries in order to make up for the lost reimbursements.”

But, as nursing home administrators well know, it all boils down to costs. The unsustainable trajectory of current healthcare spending is one of the big reasons healthcare reform is necessary, although it remains to be seen what will happen under a new plan.

“Long-term care has been under tons of cost pressures anyway under the current system,” Wilson says. “The only real question is, will that get better or worse under some sort of semi-nationalized healthcare system?”

Forgotten, but not gone

Between constant press coverage of the roller coaster economy and intense healthcare debates, it's easy to forget about some of the other issues nursing homes have to contend with. The Employee Free Choice Act, once the biggest hot-button issue facing providers, has fallen by the wayside in the legislative agenda.

Or has it?

“I think news of EFCA's death has been exaggerated a little bit,” Wilson says.

Indeed, the work on this bit of pro-union legislation continues, but the attention it receives pales in comparison to the other issues of the day.

The Employee Free Choice Act contains three major provisions that would help make it easier for unions to organize: a card-check provision, allowing a union to form if a majority of workers (50% plus one) sign a card in support of organizing; a mandatory arbitration clause that would impose a working contract on both the new union and management if those parties cannot agree with each other within 90 days; and a provision that would alter the rules governing union elections, reducing the amount of influence management can exert on union voters.

Conventional wisdom says that if EFCA passes, organizing in healthcare will go up, and with it, employee wages.
“The Service Employees International Union and the California Nurses Association are already coming after long-term care,” Wilson says. “They're going to come after them with a vengeance when the rules get changed to be more favorable.”

To control wage costs, nursing homes may have to do some bargaining.

“If [providers] can get the union concessions for the sake of keeping the doors open, I think that that's certainly an approach that management could use,” Gavejian says.

Wilson also has some advice, but his recommendations are a bit more Zenlike.

“What I teach people is, don't worry about what you can't control; you can't control what the Senate's going to do, you can't control what the National Labor Relations Board is going to do,” he says. “What matters is, do you have a good relationship with your employees?”

Be likeable

To avoid unionization and the cost increases that may come with it, Wilson says management should identify areas where they might have potential problems and make sure there is a good relationship between management and staff. Building a good rapport not only helps providers avoid unions, it also makes for better job satisfaction and, by extension, quality of care at a facility.

If workers approached for unionization like their boss and feel their employer treats them well, they will be more inclined to say “no” to a union.

“At that point it's over, no matter what version of the law there is,” Wilson says.

But it may still be awhile before lawmakers get around to reforming labor laws.

“I don't think anybody wants to stir the pot, neither from the union side nor the management side,” Gavejian says. “I think that management and labor have decided, ‘Let's get through this current storm and then we can renew our old phobias next year, when things might be better.'”

Reading the tea leaves

In a consumer-based economy, it takes consumer confidence to spur economic growth. But while the Consumer Confidence Index rose from 47.4 in July to 54.1 in August, indicating, as Lynn Franco, Director of The Conference Board Consumer Research Center says, that consumer confidence “appears to be back on the mend,” there's a distance yet to travel.

That distance could be measured by watching healthcare compensation.

“What goes on in healthcare, and particularly what goes on in compensation, is a reflection of what goes on in the economy as a whole,” Gavejian says.

As he suggests, it takes time for an accurate portrayal of economic conditions to come to light. What the current edition of the nursing home salary survey shows is a healthy up-tick in wages generally across the board.

But looking to the future through a blurry lens has many hedging their bets.

The healthcare discussion has perked up the ears of many long-term care accountants and various executives, who are struggling to prepare for possible Medicare reimbursement cuts and market basket eliminations.

When you consider that even small changes in a facility's payroll, especially in larger metropolitan facilities that employ thousands of workers, can add up to millions of dollars, payroll becomes “a very expensive proposition, and one you're going to watch like a hawk,” according to Gavejian.

“We're going to see a little bit more conservative treatment of pay rates through the balance of 2009 and into 2010,” he says. “Planned increases from the period of 2009 to 2010 are actually 2.4%. So nursing homes are playing it very, very conservative, and I think that that's an appropriate strategy.”