Analysis: Salaries hit the brakes for LTC management

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Administrator, DON salaries rise in 2009
Administrator, DON salaries rise in 2009
After appearing to largely dodge the disastrous economic collapse of 2008 and 2009, the long-term care industry appeared to finally experience the impact of the lackluster economy.

Surveys collected for the “2010-2011 Nursing Home Salary & Benefit Report” show that many positions in long-term care management received smaller salary increases than in years past, while some just barely broke even.

The “Salary & Benefits Report” is issued each year by Hospital & Healthcare Compensation Service (HCS), in association with the American Association of Homes and Services for the Aging and supported by the American Health Care Association.

Admin and DON salaries

Nursing home administrator wages managed to sneak past the $90,000 mark this year, despite a national median pay rise of just 1.67%. Median salaries climbed to $91,106 from last year's level of $89,606.

Assistant administrators saw an even more dismal gain of 0.49%, bringing them just $321 more than last year's national median level of $65,000.

On the clinical side, directors of nursing saw a similar rise to their administrative counterparts, with a 1.6% increase over last year. This increased median salaries to $79,169 from $77,921 in 2009.

Unfortunately for assistant directors of nursing, their median rise was non-existent. After a 4% rise last year, assistant DON pay  stayed flat at $62,400 in 2010.

Registered nurses under the title “head nurse” took the biggest hit this year, losing 10.6% from their national median salary. The median fell to $50,511 from $56,497.  

There were slightly fewer respondents to this year's salary survey compared to last year. 2,131 facilities returned information this year, compared with 2,250 in 2009, a drop of 0.5%. For-profit facilities once again responded in much greater numbers than not-for-profits: for-profits comprised roughly 79% of this year's sample, while not-for-profits represented 21%.

Marginal erosion

There is empirical evidence in a couple of instances that the healthcare industry has endured, like the rest of the economy, a slowdown on jobs and salary growth, says Paul Gavejian, managing director of Total Compensation Solutions in Armonk, NY.

“The actual percentage of [salary] increase between April '09 and March 2010 has actually eroded marginally,” Gavejian says, noting that two-tenths of a percent can constitute marginal erosion. “It does reflect the fact that, overall, the economy is doing poorly.”

As such, it's no surprise that nursing home managers saw smaller increases over last year, says Rosanne Zabka, director of reports for HCS. She points out that, in 2009, there was an overall increase of 3% to 4% for management jobs, while this year it was between 1% and 2%.

“The interesting part of the 2010 increase trend was that the [chief financial officer] received the highest increase of the management jobs—3.31 percent,” says Zabka.

For facilities that participated in both the 2009 and 2010 surveys, salaries for CFOs rose to $108,962 from $105,466 in 2009.

Zabka also notes the slightly smaller increases granted to RNs and licensed practical nurses this year. RNs increased 1.57% in 2009 compared with 1.36% in 2010, and LPNs increased 2.07% in 2009 compared with 1.94% in 2010, exemplifying the marginal erosion Gavejian has seen.

Any company faced with such dire economic conditions is going to start considering ways to reduce their costs, and in healthcare the biggest cost issue is labor, Gavejian says. So these marginal erosions are generally to be expected.

“It becomes earth shattering when a healthcare institution freezes its salaries across the board,” he says.

Accounting for zero

In some facilities across the country, however, that's exactly what happened. On the whole, Assistant DONs saw a 0% salary increase over last year, and a great deal of facilities said they had no plans to increase salaries over the coming year.

So many facilities reported a 0% actual or planned increase, in fact, that Zabka and her team included separate calculations in this year's report: one excluding zeroes, and one including zeroes.

“The tables excluding zeroes give the picture of what the average is of those that were able to provide increases,” Zabka says.

Based on this calculation, the actual planned management increase for 2010 was 2.32%, not far off from the planned 2.49% in 2009.

“When you include those with zero,” Zabka continues, “the average was 1.96%. The tables show that the increases continue to hover in the 2% range, compared with the 3% to 4% increases of prior years.”

So which calculation should providers look at? In order to stay competitive, Gavejian says look at the calculation that doesn't include the zeroes.

“[A zero-percent increase] is, I think, a catastrophic action,” Gavejian says. “That's something you do when you're under significantly tighter cost constraints.”

While some facilities are definitely still feeling the pinch, most are probably in good enough shape to offer something instead of zero, he says. So, when putting together salary budgets or considering salary increases, providers should take into account the market-based calculation in order to stay competitive.

“Because, who are you keeping up with?” Gavejian asks. “Are you keeping up with the people who provided no increase, or are you keeping up with the people that provided the increase? I think it's the latter.”

Stepping up …

Since the start of the recession, workers in almost every field have been taking on more hours and more shifts trying to keep ahead of the economic collapse. A 2009 survey from AMN Healthcare found that as many as 58% of nurses are working more than they had before as the recession continues.

“If your spouse is unemployed, you're willing to pick up extra work doing stuff you wouldn't normally do just to make sure you've still got a job,” says Philip Wilson, president of the Labor Relations Institute in Broken Arrow, OK.

Accordingly, annual turnover rates for nurse and nurse aide positions have fallen since last year, according to the 2010 Salary & Benefits  Report. RN and LPN turnover rates were 35% and 33%, respectively, in 2009, but those rates fell to 29.82% and 27.83% this year. CNA rates, too, fell from 43.66% in 2009 to 36.44% in 2010.

… and burning out

But while existing workers seem willing to take on more responsibilities in order to both make ends meet and make sure they keep their positions, managers still seem reluctant to take on new staff, Gavejian says.

“I think there's just an attitude right now that, ‘The staff that got me through the first two quarters of 2010 will get me through the second two quarters of 2010, and in January 2011, I'll reconsider whether I want to hire,'” he says.

On August 10, the U.S. Department of Labor's Bureau of Labor Statistics announced that nonfarm worker productivity had dropped for the first time in more than a year. This did not surprise Wilson, who sees a few reasons for the U.S.'s slight slide in productivity. The first, and probably most obvious, reason is that people are just getting tired of working so much.

“People can do that for a while, but eventually they get sick of it,” Wilson says.

Also, technology improvements in healthcare, which can increase worker productivity, tend to get put on hold during an economic slump.

The downside of reform

The big news impacting the entire healthcare industry in 2010 was the passage of the Patient Protection and Affordable Care Act. This sweeping healthcare reform legislation will be implemented in stages over the next few years, which could lead to a lot of stress and uncertainty, according to Wilson.

“As stressful as working in long-term is care now, [healthcare reform is] probably going to make it worse,” Wilson says.

The new law will provide roughly 30 million people with healthcare coverage who didn't have it before, and that's going to ramp up demand for healthcare, he says. But while he concedes that those 30 million might not make that big of an impact on long-term care at first, there's likely to be a spillover effect.

“If there's a huge demand for nurses in acute care, they'll poach them out of long-term care,” Wilson reasons.

As an expert in all things labor, Wilson sees healthcare reform and the rough economy as a possible boon to union organizing.

“People organize when things are really frustrating,” Wilson says. “So things like not replacing people who've lost their jobs and making everyone else work harder, that's the type of thing that would upset people.

“What unions sell is that they can get certainty. Everything's going to be in a contract. Whether you like it or not, there's going to be certainty of what's going to be there.”

CLASS Act impact

Though often described in the media as an “overlooked” provision of the healthcare reform package, the Community Living Assistance Services and Supports (CLASS) Act has been on the minds of those in long-term care since its inception.

The voluntary government long-term care insurance program would, in the event of a disability, pay out about $50 per day to help defray the cost of long-term care. Many have pointed out that the cost of nursing home care is drastically higher than $50 per day, and from an outsider's perspective, it looks as though the CLASS Act would help other industry sectors, particularly home health care services, as opposed to skilled nursing care, Gavejian says.

“But I think that the nursing home industry … will sort this out much like the emergency rooms have dealt with critical care units,” he notes.

Emergency rooms in the past would typically balk when critical care units were put in close proximity because they provide a competing line of service, he says.

“But when they find that it's more efficacious to have patients go there when they have a headache or scrape or bruise, they finally come along.”

Gavejian speculates that the same thing will happen in this situation: “I think the various industry sectors along this continuum—from acute all the way up to long-term care—once they sort out what it means, they'll be in favor of more home health.”

Everything that happens over the next year will depend on whether or not the U.S. can avoid a “double-dip” recession, both Wilson and Gavejian believe.

“I think you're going to see continued pressure on the healthcare industry, in particular the nursing home industry, for more extreme cost containment,” according to Gavejian.

But even so, he sees the possibility for salary increases in 2011, as well.

Marginal growth

“It won't be increasing by a significant amount: again, it'll be marginal to maybe 2.4 percent to 2.5 percent because that'll reflect continuing cost containment. And I think you're going to see [salary freezes] disappear—if we do not have a double-dip recession.”

But he's skeptical: “I have to tell you, I'm not convinced we're going to avoid it.”

Wilson sees more of the same for 2011. Without dramatic improvement in the economy, he speculates that wages and some of the other staff hiring issues are probably not going to change. But that improvement isn't likely, he says.

“I don't think the economy's going to improve over the next six months. It may start to improve in the middle of next year, but at this point, I don't see it improving,” Wilson says.

Long-term view

“We're in a tough place right now,” Gavejian says. “The thing that will help most is something that creates jobs, and creates real jobs.”

Healthcare reform will probably provide some good guidance for those in the healthcare industry, but not for three or four years down the road, when more of its provisions start taking effect, he says. Wilson, too, takes a somewhat more positive long-term view of healthcare.

“After the healthcare reform bill [is implemented], the healthcare system is going to be under a lot more strain, there's going to be a lot more demand, and jobs are going to be harder,” he says. “But because of that demand, there's probably going to be more dollars chasing talent.

“So long term, healthcare's probably a good place to be—so long as you don't mind stress.”