Long Term Care Labor Costs

Without a doubt a business’s biggest internal stakeholders are their employees. This, of course, does not change in the healthcare industry. However, healthcare leaders must be able to continually compete with increasing labor costs while being able to hire high-quality, cost-effective labor force. In an industry that deals with continually rising costs, this can be challenging. Many factors can impact the labor force costs. This article will identify three key drivers of labor costs in the skilled nursing care sector of healthcare. A further discussion will be had that will evaluate current industry solutions and predict future changes that may exacerbate or accelerate the solutions.

Key Drivers of Labor Costs in Skilled Nursing Care

Work Shortages

As U.S. Immigration policies change and uncertainty around these policies continue, it is projected that work shortages in the long-term care sector of healthcare will be an increasing issue that will affect the workforce and increase the cost of labor. Take for example the number of immigrants working in long-term care facilities. In 2017, it was reported that 23.5% of formal and non-formal workers made up this sector with 30% of immigrants working in housekeeping and maintenance (Zallman, L., Finnegan, K. E., & Himmelstein, D. U., 2019). This work shortage also increases the amount of overtime as other staff must work double to meet the needs of the organization.

Increase in Overtime Pay

With a work shortage comes an increase in overtime pay. This direct result can be detrimental to organizations if not contained and managed properly. An article from McKnights (2018), indicated that a study in 2017 showed an increase of overtime by 60% over a span of 3-years. This trend, however, can be managed and solutions can help mitigate the labor costs that result from an overuse of overtime.

Increase in Hourly Wages

Over the years we have seen hourly wages increase. This increase is a direct result of government rulings, which in turn, increase turnover rates because of the competitive nature of hourly rates within the long-term care workforce. We already know that the demand for direct-care workers will increase, so finding workers to continue to fill these jobs will be a continuing challenge. This challenge will force long-term care organizations to find different ways to attract and hire candidates.

Solutions

Long-term care leadership must work with stakeholders towards a common measurable goal to keep a pulse on progress towards improving the workforce while remaining cost effective. It is recommended to track long-term care labor shortages, modernize the image of long-term care facilities, and “target long-term care career information towards post-secondary education and professional schooling” (LeadingAge, 2007). Additionally, improving employee benefits by providing financial incentives to further education and/or certification show workers that they have opportunities for advancement. An increase of State funding to increase Medicaid reimbursement rates can also help. With this increase, long-term care facilities can use additional funds to improve work conditions, facility repairs, and increase benefits.

Future Changes and Closing

It is projected that the concern over workforce shortages will continue and by 2030, there is a projected need of about 3.5 million healthcare workers according to the Institute of Medicine (2008). I predict that funding and policy changes may further exacerbate the solutions to the key drivers listed. However, with the growing number of the aging population, public support to provide more funding to this healthcare sector will be crucial to accelerate solutions. All in all, it will take a shared goal from all stakeholders’ to preemptively develop strategies and solutions that will tackle the rising costs of labor.