Following freeze, wages are starting to thaw

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Following freeze, wages are starting to thaw
Following freeze, wages are starting to thaw
Another slow year for the nation's economy has yielded small salary increases in the long-term care sector, according to the “2011-2012 Nursing Home Salary & Benefits Report.”

Facilities responding to this year's survey indicated that, while there may be signs of hope on the horizon, most employee averages saw either modest gains or moderate losses. Still, some financial managers, facility administrators and nursing directors received salary increases nearly in line with years past.

The “Salary & Benefits Report” is issued each year by Hospital & Healthcare Compensation Service (HCS), in association with LeadingAge. It is also supported by the American Health Care Association.

The bottom line
The national median salary for nursing home administrators rose to an even $93,000 in 2011, up roughly 2.1% from the previous year. Though much lower than in many years, the increase is an improvement over 2010's rise of just 1.67%.

The assistant administrator national median did not fare as well. It dropped more than 3.5% from the previous year to settle at $63,000, according to HCS findings.

This loss could be due to relatively low cumulative salaries reported by facilities participating in the HCS survey for the first time. Among facilities that were already participating in the survey, average assistant administrator salaries actually increased slightly (0.37%).

Directors of nursing, meanwhile, experienced an overall bump in their salaries, climbing past the $80,000 mark for the first time. National median salaries rose 2.5% from $79,169, to end up at $81,224.

After no change in national  median salary levels in 2010, assistant directors of nursing saw just a 1.6% increase this year. Their median salary rose from $62,400 to $63,440.

HCS sent roughly 13,500 surveys to nursing homes around the country; 2,243 facilities responded, resulting in a response rate of 17%. Of these facilities, 18% were nonprofits, and 82% were for-profits.

Slow and cautious
Each year, HCS asks facilities to report their “planned percent increases” for management, non-management and clinical staff for the following year. In 2010, the average facility had planned a 1.96% increase for management, and a 2.04% increase for non-management positions.

“By analyzing the actual [increases] and planned increases … from the 2010 and 2011 reports, one can see numbers are going slightly upward,” observed Rosanne Zabka, director of reports at HCS. “That is good news, but it is a slow and cautious increase.”

Indeed, the actual percent increases that occurred in 2011 were 2.09% for management and 2.1% for non-management.

Delving further into the actual and planned percentage increases in this year's report, Zabka sees even more positive signs. In 2010, HCS began tracking the number of facilities that provided a “zero-percent” actual salary increase.

“In looking at all 2010 actual percent increase categories [management, non-management, RNs, LPNs, and CNAs], 27.4% of respondents reported a zero-percent increase,” according to Zabka.

This year, that number was just 10.6%. For planned percent increases, 13.6% of facilities reported a zero-percent planned increase in 2010, while 11.6% reported a zero-percent planned increase in 2011.

“This is very good news,” according to Paul Gavejian, managing director of Total Compensation Solutions in Armonk, NY. “What that says is that facilities are dropping their salary freezes. I think that employers have decided that they can't freeze salaries anymore. It's not an acceptable strategy because the employees can't keep up with the cost of living.”

Proving their worth

These slow and cautious increases, however, may not be enough to keep long-term care employees ahead of rising inflation.

The “WorldatWork 2011-2012 Salary Budget Survey,” which samples data from roughly 2,400 employers, representing 15 million employees in a variety of industries, has found that for the first time since 1980, the rising cost of living has outpaced salary budget increases.

During the 12-month period from April 2010 to April 2011, inflation as measured by the Consumer Price Index was 3.2%, according to the WorldatWork survey. Total salary budget increases during that same period topped out at 2.8%.

“Successful organizations will not pay more than necessary for any expenditure, and with low risk of losing employees to other organizations, higher increases are not justified at this time,” according to Don Lindner, CCP, senior compensation practice leader for WorldatWork.

And when it comes to salary increases in long-term care, many organizations are no longer simply granting their workers automatic cost-of-living raises. When asked what criteria are used for granting increases, a significant number of facilities reported that increases were given based on merit, rather than a cost of living adjustment or step increase.

“I think companies have caught on to the fact that you can make the employee earn their increases,” Gavejian says.
Among management positions, more than 70% of facilities said salary increases were given based on merit, compared with just over 25% for cost of living. This compares with 65% and 30%, respectively, in 2010.

For non-management positions, the percentage of facilities reporting merit increases rose even more sharply, from 50.7% in 2010 to 63.9% this year.

“When companies and nursing homes and hospitals are being evaluated on their performance, it makes sense that we get away from a cost of living [increase],” notes Gavejian. “You have to earn increases through some special recognition, through evaluation by your supervisor. They want to recognize that.”

Converging pressures
Long-term care is experiencing a “weird confluence” of economic pressures, says Phil Wilson, president of the Labor Relations Institute in Broken Arrow, OK. Medicare and Medicaid payment cuts, both real and threatened, are hammering long-term care and acute care facilities alike.

“One of the ways the acute care people deal with that is by pouring all the people out of hospitals and into nursing homes,” Wilson says.

That means long-term care facilities are experiencing revenue cuts at the same time that the demand for higher skilled, more capable people is higher.

“I think it's going to be interesting to see how that plays out for the skilled nursing and management positions,” Wilson says. “You'll see wage pressure … and it's only going to increase as new people become insured under the healthcare plan and more and more elderly people are coming into the system.”

Bearing the brunt
“It's not strange that long-term care facilities are doing everything that they can to keep and retain those highly skilled people because they're hard to replace and they're so vital,” Wilson says.

Vacancy rates for department heads, therapy staff and RNs have fallen slightly since last year, according to HCS findings.

Among RNs, the improvement was slight, with vacancy falling from 19.6% to 18.8%. For department heads, the change was more noticeable, dropping from 14.7% to 12.1%. Therapy staff saw the biggest improvement, however, with average vacancy rates sinking to 12.4%, down from 16.5% in 2010.

Lower-paid workers, most notably dietary staff and CNAs, were not so lucky.

Vacancy rates for dietary staff rose markedly, from 13.3% in 2010 to 19.1% in 2011. CNAs were hit even harder, with rates climbing from 17.3% to 23.4%.

“Over long stretches of economic downturn, it's unfortunate to say, but the lower level jobs seem to be the first ones to go,” Gavejian observes, “particularly in an academic or clinical environment where your bread and butter are your clinicians.”

Regulatory action
Washington's usual style of heated debate reached a fever pitch recently over proposals to raise the national debt ceiling. Congress's approval rating sank to a new low of 14%, according to a CNN poll released Aug. 2, just as politicians were approving the big debt compromise deal.

Add a presidential election campaign cycle to this already contentious climate and it's easy to imagine Congress remaining gridlocked for the next year, Wilson speculates.

“The presidential campaign is basically in full gear  –  Iowa's going to do their caucus and it won't be long until the New Hampshire primaries. We're going to be in full-blown presidential campaign mode and nothing's going to get done in Washington,” he believes.

With legislators tied up in electoral politics, all the big actions affecting long-term care over the coming year are likely to come from the regulatory agencies. The healthcare reform law included a major increase in funding for Medicare and Medicaid fraud detection and prevention initiatives, and regulators are sure to be looking at long-term care facilities with a microscope, Wilson says.

But the future is still very uncertain for the healthcare reform law. The 2010 elections brought a wave of young Tea Party politicians into Congress, many of whom vowed to overturn the new reforms.

“The political environment is just so volatile and it's likely to become more so,” says Wilson. “It'll be interesting to see what ends up happening.”

In the meantime, providers are still trying to sift through the regulations to discover just what they mean, according to Gavejian.

“Healthcare reform is still brand new,” he says. “We're still trying to figure it out. I think next year, we'll know more about what healthcare reform means to the nursing home industry.”

2012 prophecies
Despite all the tension and economic pressures that seem to be conspiring against long-term care, both Wilson and Gavejian see small but steady improvements on the distant horizon.  “Everything is going to just creep up slowly,” Gavejian says. “With respect to salaries, I expect that we're going to see marginally higher salary budgets for 2013.”

But for 2012, it's unlikely there will be any large salary budget expansions, he says.

“If you look at next year,” Wilson says, “you're going to see brutal political campaigns, possibly a second recession but certainly not any dramatic [economic] growth, long-term care will stay under the same pressures it's been under, and more and more people are going to be in nursing homes.”

But while Wilson expects to see stagnant wages just about everywhere in the coming year, he wouldn't be surprised if skilled nursing staff's and administrators' salaries improve.

“You have to pay money to recruit those folks and to keep them, because there's a lot of opportunity around,” he says.

But there is a shrinking cost base in the healthcare industry, Gavejian notes, and if the Centers for Medicare & Medicaid Services continue to try to cut Medicare and Medicaid reimbursement rates, it's all going to be up in the air. An average 11.1% reimbursement reduction from CMS kicks in Oct. 1.

“It's an interesting area because we're all going to be in the nursing home at some point in our lives,” Gavejian says. “It's sort of an inevitability, and the health of that industry is an important thing for all of us to be aware of.”