Record salaries for top-level positions

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Incremental raises earned by many long-term care workers are being eroded by increases in their own healthcare costs and shrinking bonuses, according to the nation's largest annual survey of nursing homes.

Based on a survey of 2,467 private and non-profit nursing homes, the “2012-2013 Nursing Home Salary & Benefit Report” shows that many industry managers earned small raises in 2012. Nationally, administrators averaged a median salary of $94,785, up 1.92% from 2011, while nursing directors saw their median pay jump just 1.18% to $82,186.

The “Salary and Benefits Report” is published each year by Hospital & Healthcare Compensation Service (HCS) and LeadingAge, with support from the American Health Care Association. Close to 300 more facilities reported on their hiring and benefits practices than in 2011. This is the survey's 35th year.

Raises for the nation's assistant administrators led the way with that national median salary jumping 3.17%. That nearly restores it to the 2010 level after a 3.55% dip in 2011.  Meanwhile, assistant directors of nursing earned an average increase of 2.46% to bring their annual pay in line with assistant administrators at $65,000.

“I take it as a sign of optimism that there are small increases pretty much across the board,” says Rosanne Zabka, director of reports for HCS. “There aren't the benefits of years past, but there is at least the possibility of employees moving for a higher pay rate if they've had to stay because there was no other option.”

Bad news ahead?

Industry analysts, however, say hiring levels in many employee categories remain stagnant, which could be a sign that facilities are hedging their bets against future economic downturns after finally absorbing past losses.

“I believe organizations, particularly the not-for-profits, are expecting 2008 and 2009 to repeat themselves,” says Paul Gavejian, managing director of Total Compensation Solutions in Armonk, NY. “They were caught off guard by the recession before and they don't want that to happen again.”

When asked about their planned percentage increases for management employees next year — and factoring in facilities that planned no raises — respondents nationwide said they expected to give 1.95% for the period between April 2012 and March 2013. That's down from the 2.17% planned (and the 2.06% actually granted) between April 2011 and March 2012.

Not-for-profits, whose contributions collapsed along with the stock market four years ago, are being extra cautious now, says Gavejian, as important indicators like unemployment and job creation rates remain lackluster. Add in the looming threat of an election that could lead to more wide-sweeping changes in healthcare or Medicare, and industry leaders are hesitant to increase employee-related expenses.

“I don't think anybody knows what the future of healthcare is,” Gavejian says.

Hard work rewarded
In addition to planning smaller raises, employers are protecting themselves by making employees earn their raises and bonuses.

“Many employers now are not just giving an increase because you're sitting there,” says Zabka. “They're rewarding those who are working hard. If the individuals aren't working hard, then the home isn't improving. It's an all-around effort.”

While the percentage of survey respondents giving raises based on merit alone fell across all categories, those basing raises on merit and time-in-service increased significantly. Survey respondents awarded management employees merit raises 57.8% of the time, down sharply from 70.6% in 2011-12. But the portion of respondents using “other” criteria jumped from 3.6% to 11.1%.

Included in that “other” category, explains Zabka, are combined methods. Mixed-criteria raises are an increasingly important option for employers who want to keep pace with inflation but reign in costs. To earn their merit raises, employees usually have to meet organization-wide benchmarks or demonstrate exemplary performance.

Gavejian says some managers are giving all employees a lower base raise and putting part of the difference into a pool to be divided among employees who rise to the top. The overall payout is lower, creating a cost-savings for the facility.

The shift to pay-for-performance mirrors reform efforts that tie some facility's Medicare payments to patient-care goals. Analysts agree that an attitude shift may be influencing the way nursing homes pay individual employees.

“I think it's safe to say merit raises are the predominant way for nursing homes to give their increases now,”
Gavejian says. “Organizations like these understand they can leverage their base salary increases and drive behavior — positive behavior — by their employees.”

A similar effect may be reducing bonus payments. For the most part, routine bonuses were down for 2012-13. Nationally, administrators earned 14.95% of their salaries through bonuses, while directors of nursing earned 10.93%.

Gavejian attributes the marginal drop to cost-reduction measures. He adds that it may be getting harder for employees who earn their bonuses on an “all-or-nothing” basis. As an example, he refers to an employee expected to clean 10 rooms a day who can get to only eight. Without a sliding scale as a safety net, the employee will forfeit his bonus.

Those offering bonus programs for administrator positions and higher — which Anthony Perry, president of Executive Search Solutions, puts at 70% of nursing homes — are more likely to pay a partial bonus to ensure employee loyalty. Likewise, those offering a 20% maximum bonus last year are probably doing so again in 2012.

But echoing Gavejian, Perry says employers “might be making it harder for them to earn their full potential.”

Reality sets in
Raises reported by survey participants match the 1% to 2% raises seen over the last two years says Perry, whose California-based recruiting firm specializes in eldercare.

But for some long-term care employees, that's not enough to keep pace with reality. The effects of inflation on employees are being felt harder seasonally and regionally than the numbers might indicate, says Perry. The Bureau of Labor Statistics reported that inflation had dropped to 1.4% by July, but many Americans continued to face higher costs on the road, at the grocery store and in the benefits office.

The 2012-13 HCS report indicates that respondents are spending less for management employees' fringe benefits. In 2011-12, employers reported that benefits equated to 24.77% of base pay. In 2012-13, that dropped to 20.6%.

Gavejian says most of those cost-savings come from a switch to flex and cafeteria-style insurance plans.

Employers are also continuing the trend of shifting premium costs to employees. Gavejian said nursing homes had traditionally paid an average of 85% of premiums; the HCS survey places the contribution at 73% for the second year in a row.

Still, the employees Perry recruits have come to accept higher premiums and increasing co-pays “as part of annual bad news.”

“In some cases, people are actually earning less, but they're surprisingly accepting,” he says. “The long-term care base understands the reimbursement process. They know most firms have been squeezed [lately].”

Perry says potential candidates are also risk-averse in today's economy, turning down the opportunity to pursue better jobs because of personal financial obstacles. Moving to another region for a higher-paying position, even for a “dream job,” is not realistic for someone underwater on a home mortgage, he notes.

“Staying put in this type of environment is the right choice for most employees,” agrees Gavejian. “By making a change in jobs, you're putting yourself at risk. It's hard to know if your new employer is going to be around in a year.”

Those who do make a switch shouldn't expect employers to promise large raises from year-to-year. Instead, Perry says sought-after higher-level employees, including directors of nursing and administrators, are negotiating sign-on bonuses as high as $20,000. They can include relocation stipends and other one-time perks. “On-boarding offers” also might include the opportunity to earn first-year bonuses based on pre-determined metrics, such as increasing a facility's net income.

Turnover tactics
Even with the economy keeping some employees in jobs they don't love, turnover remains a problem industry-wide.

Nationally, the annual rate increased from 31.1% last year to 32.21% in this year's survey. The rate remains lowest for career-oriented department heads at 17.81%, but many employees providing direct patient care continued to leave their jobs — or the industry — in large numbers.

It's not always about the pay, says Nicholas Castle, a professor in the Department of Health Policy & Management at the University of Pittsburgh's Graduate School of Public Health. He believes the poor economy has pushed people who aren't necessarily suited to careers in healthcare into patient care, and many don't realize how difficult working in a nursing home can be.

After studying turnover for about 15 years, Castle has found that facilities can make changes that promote stability. Most important appears to be a good relationship with supervisors, who themselves show a commitment to their jobs.

On-the-job perks also can entice harried employees to stay the course in a stressful environment. In a study of unionized nursing homes in New York, Castle found that better benefits — including minimally higher pay, childcare or educational assistance — lowered turnover rates.

“I don't think we have a panacea or an individual factor (to address), but one thing that is critical is job satisfaction,” says Castle. “When you're making $11 an hour, even small things can make a difference.”

Slow hiring
Administrators who take longer to fill vacancies may also find that their employees remain in place longer.

In the 2012-13 HCS survey, employers reported that it took more than 50 days to fill therapy positions, nearly 40 days to hire department heads and 18 to 20 days to hire for dietary, environmental services, CNA and nurse aide positions.

Perry said some of the delay is a strategic move by employers. After the beginning of the recession started what he calls a “buyer's market” in 2008, employers were able to be more selective. Since then, he says they have recognized the benefits of performing deeper candidate assessments.

Today, the companies Perry hires for often ask for five candidates instead of three and may conduct twice as many interviews, which inevitably means placing the right candidate takes longer.

Careful consideration may be a good thing for the industry. Instead of taking the first “warm body” to walk through the door, Castle says more facilities are providing potential employees a chance to observe working conditions and complete more training.

Gavejian also has seen an increase in pre-employment testing to determine whether candidates have the capacity to make it long-term in the long-term care industry. But, he says, many facilities simply cannot delay hiring because they remain stretched thin. 

“Unfortunately, the places that already have high turnover can't afford to wait,” Castle agrees. “They are always playing catch-up.”