A headshot photo of Ashvin Gandhi

Nearly two years after skilled nursing providers first took their concerns about massive nursing agency price hikes to federal regulators, they’re again warning of overreliance on temporary workers due to a federal staffing mandate that could lower quality and raise costs substantially.

The cause of this new concern is the proposed federal staffing minimum for nursing homes, which calls for 2.45 hours per patient day of certified nurse aide coverage and 0.55 hours per patient day of registered nurse coverage. While providers have typically relied heavily on temporary workers to fill their CNA ranks, a new requirement to have RNs on hand 24 hours a day also could drive more agency use.

“It is not hard to imagine that just as the industry seems to be weaning themselves off of agency, this could very easily force them to reverse course,” Fred Bentley, managing director of consulting firm ATI Advisory, told McKnight’s Long-Term Care News. “How else are nursing home operators going to meet the requirements? I don’t see this massive infusion of more RNs or CNAs coming online.”

By the Centers for Medicare & Medicaid Services’ own estimate, 75% of nursing homes will have to hire staff to meet the minimum requirements. The problem, warn providers and advocates, is that in many places, there simply aren’t enough bodies to fill the roles.

Many facilities said they will be forced to bring in agency staff to comply, ultimately paying more to fill the same jobs. They expect agencies to continue ratcheting up pay to attract even more temporary staff, then pass those increases right back to nursing homes that rely on taxpayer funding.

“What’s it to them?” asked Brendan Williams, president and CEO of the New Hampshire Health Care Association. “The mandate would completely tilt an uneven playing field in their direction.”

Already providers are raising similar concerns in comments to CMS, which just opened with the proposed rule’s official publication in the Federal Register on Wednesday.

An operator in Kemmerer, WY, population 2,400, for example, said the staffing mandate would be “detrimental” to a 24-bed nursing facility there.

“If the proposed minimum staffing standards were enforced, the facility may require increased travel nurses and CNAs, which would result in higher costs for the facility and could result in financial losses that would not allow the facility to remain open,” one building leader there warned.

Creating shortages

Ever since mandate details dropped Sept. 1, industry observers and academics have predicted rises in both the use of agency staff and the costs billed by agencies for those workers.

John R. Bowblis is an economics professor who frequently studies nursing home trends as a fellow with the Scripps Gerontology Center. He’s charted agency use among nursing homes since before the pandemic. He’s observed that the share of facilities using agency workers to provide direct care soared from about 22.5% in 2018-2019 to a new baseline of 49% in 2022.

A Provider magazine review of PBJ data published last week by the American Health Care Association also illustrates how much care delivered by agency nurses has increased. The figure for agency CNA, LPN and RN care as a share of total nursing hours has risen from 3% at the end of 2019 to 11% at the end of 2022.

Bowblis told McKnight’s that data also supports providers’ contention that with this increased use comes exorbitant cost increases. Including wages and benefits, median CNA costs were 37% higher for agency staff in 2022 than for similar aides directly employed. For RNs, for which nursing homes have traditionally had less need, median costs were 23% higher for agency nurses than direct employees. The proposed rule mandates a tripling of minimum RN nurse coverage per facility day.

“If you’re going to create a shortage of RNs by requiring this mandate, essentially what is going to happen is you’re going to have to pay either existing workers more to retain and attract them or you’re going to have to rely on agency staff,” he said. “The same thing is going to happen with CNAs.”

He said arguments that providers have enough money to cover those costs are short-sighted.

“Nursing homes are facing a different landscape post-pandemic vs. pre-pandemic,” Bowblis explained.

“A lot of the people saying there’s enough money are primarily focused on a different environment. We’re in an environment now where inflation is very high. Labor costs are going up. What’s happening is that these are facilities where revenues are set by government agencies, and if the government agencies are not increasing revenues in line with the underlying cost of the facility, or the fact that these nursing homes are now relying on the more expensive agency staff to provide care, then what happens is these facilities will lose money.”

It’s also important to note that operators’ higher labor costs were significantly offset by provider relief funds during the pandemic, adds Bentley; there’s no similar “pay-for” now.

Timing could tamp down demand

Bentley predicts providers will pay an extra premium to get RNs in the door.

“It’s kind of Economics 101, in terms of you are setting mandates that are now going to increase the demand for staff, and when demand goes up, prices go up,” he said.

“But whereas the pandemic was an acute shock to the system, this is going to play out over a longer period,” he added. “So I don’t know that you’re going to see wage rates and labor costs soaring right as soon as this is implemented. It will take a few years. Still, all of the pressure is on rates going up.”

It’s unclear how much demand will spike, or exactly how it will affect prices.

Ashvin Gandhi (pictured), an assistant professor of economics at UCLA, studies nursing home staffing and turnover. He predicted the rule’s slow implementation starting two to three years after it is finalized (and longer for rural operators) provides some cushion. 

“The substantial advance notice that CMS is providing should reduce the extent to which facilities need to look to agency staffing to meet the standard,” he told McKnight’s.

CMS has promised $75 million in scholarships and other funding to help build a stronger LTC nursing pipeline. But sector insiders say that’s not nearly enough — and RN training in particular takes too long and won’t necessarily help providers compete with higher paying hospitals.

“You put all these things together, at least to meet requirements in the early going before they build up the pipeline and recruit and retain the RNs in particular, they will have to lean on agency,” Bentley said, also urging providers to stay creative about their own permanent staff. “It won’t be as intense or as dire because these [requirements] are going to be phased in, but there will [need to] be some of the same tactics and ways to meet these requirements.”

Still, given known concerns about agency use’s link to lower quality metrics, most experts told McKnight’s that the rule made CMS appear to be working at cross purposes.

In a staffing study conducted on behalf of CMS, Abt Associates reported that current frontline staff in nursing homes “raised concerns about agency staff brought in to provide direct care, noting they were transient and less familiar with the residents.” Increased reliance on those outsiders could also be seen as detrimental to morale and retention efforts, Abt found.

“Staff working in facilities with higher levels of agency staffing felt undervalued because agency staff have ‘more power’ in being able to make their own schedules and earn significantly higher pay than employed staff,” the study said. “Families and residents also expressed concerns with agency staffing, speaking to a lack of person-centered care as well as a lack of care continuity.”

Defenseless providers?

While a few states have enacted caps on agency staffing since the pandemic’s start, most have moved only to better regulate their business practices. And the Federal Trade Commission never publicly acknowledged any investigation into the sector’s prior price-gouging accusations, nor did it propose rules to bring the crisis under control.

In New Hampshire, Williams’ association recently won some concessions, such as a rule against agencies poaching permanent staff, but no rate control. With unemployment in the state currently at 1.7%, he expects agencies will use demand to ratchet up prices even more.

Already, his members are reporting cost differentials of $10 to $25 an hour for agency RNs versus agency LPNs, which are currently more in demand by nursing homes. 

“But that’s now, before they really have us hostage,” Williams said. “It’s criminal that the profiteering off misery of staffing agencies hasn’t been more broadly checked by the federal government, leaving each state to fend for itself.”