When my family started Silver Medical Staffing in 2019, our only clients were skilled nursing facilities. Our first contract was a block from our house, and I passed the building every day on my walk to our small office in Chula Vista’s downtown area.
Skilled nursing turned out to be a good place to start because, due to constant need, sales required little effort and we could focus on recruiting, which was hard but possible.
Sales is still easy, and recruiting is even harder. Much else has changed since 2019.
Like many of you, I read October’s LeadingAge letter to the FTC with interest and mixed agreement. Katie Smith Sloan, President and CEO of LeadingAge, articulates the challenge that the hiring crisis has presented to skilled nursing facilities. One of her primary concerns was alleged price gouging by agencies.
I agree that the challenge of providing high-quality care to an aging population is tough, and I also agree that staffing agencies billing greater than a 200% pay markup is unreasonable. However, I think the challenge of rising labor costs is not solely due to staffing agencies.
In fact, some agencies (like mine) have struggled in similar ways to the healthcare facilities we serve.
I can’t directly speak to the concerns of price gouging made by LeadingAge and others as I haven’t been in a position to observe it. I have been, however, in a position to observe other factors affecting rates among agencies in California. Three of those are:
- Aggressive 1099 agencies pushing up market pay
- Increased pay expectations due to high pay rates for COVID work
- A constricted candidate pipeline due to delayed graduations
Since the cost structure of CNA staffing agencies may not be common knowledge, allow me to share ours. Agencies must set up bill rates to accommodate 1) the payroll burden that we absorb as a W2 employer, including workers comp, social security, unemployment and disability and 2) an $8+ in gross profit per CNA staffing hour to cover agency costs including staff, recruiting, credentialing, insurance, and 24/7 on-call capabilities.
At these rates, my agency breaks even after staffing 30 half-time CNAs every week. The resulting 600 weekly staffing hours are significantly labor-intensive. Lots of hiring, credentialing, and middle-of-the-night phone calls. I share this to give perspective on why fees can approach a 2x multiple of temporary staff pay rates.
These are factors that have placed pressure on our pay (and therefore bill) rates in the last year:
Aggressive 1099 agencies
In 2020, CNA candidates began turning down our job offers as they claimed to be earning up to $25 an hour with national agencies that flooded the San Diego market. Those agencies accomplished this by highly automating hiring, credentialing and scheduling processes and by classifying their CNAs as 1099 contractors. Both these come at a community cost. The automation has caused these agencies (perhaps accidentally) to hire away from their own clients. And being classified as contractors deprives CNAs from protections and many benefits they would receive as W2 employees.
Regardless, these agencies have quickly contracted with providers all over San Diego County. Our efforts to educate candidates about 1099/W2 issues have not been effective. For Silver Medical Staffing to meet a $25/hr rate, we have to bill $35+/hr just to cover expenses. We have begun to incrementally raise pay rates (and therefore bill rates) to compete.
Increased pay expectations
Employees hate returning to base pay, despite knowing that temporary pay increases aren’t forever. COVID hazard pay has increased healthcare workers’ salary expectations. Additionally, COVID vaccination and testing clinics paid very well for nurses (I saw $50 hourly for LVNs and $100 hourly for RNs). This created an environment where RN wages of $40 to $50 an hour in a skilled nursing facility were less attractive.
Not enough new nurses graduating
A constricted labor supply is causing rates to rise. Anecdotally, Silver Medical Staffing employed several students (CNAs studying to become LVNs) whose graduation dates were pushed back by six months to a year in 2020. We regularly give short talks at CNA schools in San Diego to let them know about the opportunities to work with us. As of November 2021, we are still unable to physically do these talks and some of the CNA schools in operation do not seem to have the same enrollment demand that they did in 2019.
Agencies like mine must respond to the above challenges and make changes to ensure survival. However, if, as agencies, we are using these challenges as an excuse to expand profit margins beyond reasonable markups, then I do not support that. Vendors working with healthcare facilities have a civic duty to act as conscientious partners — profitability has an important place but needs to be at reasonable multiples. I am not interested in sucking maximum value out of skilled nursing facilities, which are, more often than not, struggling.
There really are numerous opportunities for small businesses like mine out there, and I’m not afraid to say that I hope for a day when skilled nursing facilities no longer need us quite so much.
Dan Silver is the owner of Silver Medical Staffing, a 2 ½-year-old nurse staffing agency in Chula Vista, CA, that serves San Diego County. Next month, he’ll share how care providers might improve their staffing situations, optimize use of agencies, and become less dependent on them.
The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.