Wages hold steady, but labor costs volatile

Share this content:
More than 65% of Medicaid now is managed care, long-term care programs to expand, PricewaterhouseCoo
More than 65% of Medicaid now is managed care, long-term care programs to expand, PricewaterhouseCoo

As the Great Recession continues to reverberate, underwhelming economists and analysts with a lackluster recovery, the long-term care industry appears to have achieved a sort of tentative stability. For the third year in a row, the “Nursing Home Salary & Benefits Report” from Hospital & Healthcare Compensation Service (HCS) has found modest overall growth in the sector, particularly among management positions. 

This is the 37th year for the industry analysis, which is endorsed by LeadingAge and published in cooperation with the American Health Care Association/National Center for Assisted Living. 

Roughly 12,500 facilities were surveyed for the report. With a response rate of 16%, more than 2,000 facilities provided information regarding salary and benefits packages.  

Directors, admins see gains

The top line numbers from the 2014-2015 report represent every facility that responded to the survey. This could include facilities participating in the survey for the first time, or those that have participated in the past but haven't submitted a response in recent years. 

Looking at just these numbers, figures indicate that salaries for nursing home administrators dropped a fraction of a percent, from $95,200 in 2013 to $95,178 this year. But those few lost dollars aren't the whole story.

The top line numbers provide a good snapshot of the industry in a given year, but a more accurate picture of trends in long-term care can be painted with the data collected from facilities that respond year after year, according to Rosanne Zabka, director of reports with HCS. 

Using that metric, nursing home administrators actually saw a salary increase of 2.65% over last year, taking average annual compensation from $104,191 to $106,953. Similarly, assistant administrators saw a 2.32% bump, climbing from an average of $84,577 to $86,536.

On the clinical side, directors of nursing at facilities participating in the survey year-to-year saw an overall rise of 2.74% (from $84,448 to $86,766). Their assistants, meanwhile, enjoyed a slightly more modest 2.24% increase (from $68,536 to $70,069). 

“The good news is, increases are remaining solid,” Zabka says, “This is an indication the economy is remaining stable for healthcare jobs.”

Fortunately for nursing home managers and staff, this stability appears likely to carry into future years, as well. Among facilities that are planning to give salary increases next year, the average for all positions — management, nonmanagement, RN, LPN and CNA — is about 2.3%. 

“I think the industry is comfortable with a 2% to 2.5% increase, and it's going to lock in there for a while,” says Paul Gavejian, managing director of Total Compensation Solutions in Armonk, NY.

Quality long-term care executives are constantly in demand, according to Sean De Vore, owner and president of De Vore Recruiting in Sherman Oaks, CA. That could be one reason for the consistency in administrator and DON compensation. 

“We find for those candidates that pay is fairly competitive,” he says. “There are opportunities and it's a great job market.”

New focus in some facilities

For many years, long-term care leaders, healthcare advocates, policymakers and others have been getting ready to deal with a rapidly aging U.S. population and the imminent rise in dementia rates across the country. One way nursing homes have prepared is by adding more dementia managers to their staffs.

According to the HCS salaries report, the number of people in this position has doubled in the last year. Whether this reflects new hires or that facilities are transferring current employees from therapy areas, Gavejian says it's a reflection of the aging population and increased understanding of dementia as a potentially treatable condition. 

“That's the changing nature of healthcare,” he says. “It's the recognition that you have to work with different types of conditions.”

Balancing turnover

There is also another strong indicator of a stable healthcare sector, according to Zabka.

“Turnover rates for most areas have declined,” she says.

This is perhaps most noticeable among RNs, LPNs and CNAs, Gavejian notes.

Two years ago, turnover among these workers was incredibly high, topping 38%, 30% and 43%, respectively. The 2014 survey shows a sharp decline from those lofty numbers, with turnover among RNs falling to roughly 27%, LPNs to 25% and CNAs to just over 30%.

“There seems to be a feeling that either everyone's staying put, or the institutions are doing the kinds of things they need to do to slow down turnover,” Gavejian says. “If they're not putting money into actual cash compensation, maybe they're putting it into work-life programs, making it easier to get to work, additional personal days, flex time — doing the kinds of things that employees like to see.”

These kinds of fringe benefits don't typically cost very much for companies to provide, he explains, but they add a lot to productivity and overall satisfaction. 

It's the economy …

Improved work-life balance is one possible explanation for the lower turnover rates, but there's another, larger factor at play, according to Anthony Perry, president of Executive Search Solutions. Prevailing wisdom says that during a down economy, when jobs are scarce and jobseekers are plentiful, nursing home hiring tends to benefit.

“People who have left the industry to pursue other interests tend to come back,” he explains. “Or when there are fewer jobs in hospitality, travel or retail, it forces lower-income workers into nursing home employment.”

Conversely, an improving job market may lead to employees leaving the long-term care industry. But despite incremental gains in the economy over the past six years and a national unemployment rate of 6.2% as of press time, Perry isn't seeing enough improvement to negatively affect these trends.

“You have individual markets that might improve — for example, you might see Portland, Oregon, improving, but you might find that statewide you haven't seen much impact.”

Modest annual salary increases coupled with low turnover rates are exactly what the nursing home industry wants to see all the time but traditionally has been unable to maintain during periods of strong economic growth or recovery. 

Economists have a number of possible explanations for the slow U.S. recovery, ranging from turmoil in European markets to cuts in government spending to particularly bad weather this last winter. Whatever the cause, Gavejian says one thing is for sure: “This recovery will be very different than any recovery we've seen in the past.”

The fast-food conundrum

For nearly two years, fast-food employees at major chains such as McDonald's and Burger King have been holding protests over low wages. Their goal has been a $15 per hour wage. The protests have spread across the country, and many in other industries have taken up the cause. The powerful Service Employees International Union, long-term care's most prominent union, has lent its support to the cause.

In response to the protests, President Obama in February ordered that federal contractors pay a minimum wage of $10.10 per hour to their employees. He has also called on Congress to raise the federal minimum wage to $10.10 per hour. On a local level, the response in some areas has been more dramatic. 

The City Council of Seattle voted in June to raise the minimum hourly wage in that city to $15. For certain larger companies, the new regulation would be phased in over three years, and smaller businesses would have seven years to make the change. Meanwhile, aldermen in Chicago have recently started laying the groundwork for a vote on a $15 minimum wage. 

The HCA report finds that the majority of hourly positions in skilled nursing facilities top the proposed $10.10 per hour, but a number of them fall below the $15 rate that is being discussed in some areas that may soon bear the brunt of significantly increased labor costs. 

Low-income considerations

The median rate for certified nurse aides, according to the HCS report, is $11.86 per hour. Non-certified nurse aides come in at $9.57 per hour, while certified physical and occupational therapy aides make $13.56 and $13.69, respectively. 

One way some businesses deal with increases in the minimum wage, according to a February 2014 report from the Congressional Budget Office, is to hire fewer low-wage employees in favor of more productive, higher-paid staff members. Unfortunately, this might not be an option for long-term care facilities, according to Perry.

“To receive a five-star rating [from the Centers for Medicare & Medicaid Services], one of the components is a level of staffing,” he notes. “[Skilled nursing facilities] have to staff above the legal minimums to increase their star ratings, so now we have to have more staff than the law requires, and now we have to compensate them more.” 

Now, Gavejian says, the most significant single budget item for most nursing homes is going through the roof. 

“They're going to have to cut expenses somewhere and the most logical area is in full-time equivalent head count,” he says.