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Some operators are seeing day-to-day staffing agency usage cost them both financially and clinically, with pricing for certain positions soaring while inconsistent staff are impacting care quality.

Jay Moskowitz, CEO of Colorado-based Vivage Senior Living, said costs associated with certified nursing assistants (CNAs) via agency increased 41% between October 2020 and October 2021 for his facilities – the cost of licensed practical nurses (LPNs) and registered nurses ( RNs) increased 46% and 48%, respectively.

“I had to spend twice as much on labor. Where do I get that money? The state’s not going to give it to me, because in essence, they think that inflation and expenses will increase by a percentage, not by this rate of increase that we’re having,” Moskowitz said.

Recover-Care Healthcare has seen similar percentage increases in labor costs, Principal Nathan Treitel told Skilled Nursing News. The operator is spending almost $2 million a month on agency use in Colorado and $1.5 million in Kansas.

Kansas-based Recover-Care has 46 facilities across four states.

Agency use costs for Recover-Care’s Kansas facilities were about two percentage points higher compared to their Colorado facilities, he said.

“I’d actually say things have gotten worse the last couple of weeks,” said Treitel, referring to agency cost increases, while adding the “quality suffers tremendously” when CNAs aren’t in a building on a regular basis.

Talent tug-of-war

Operators are competing financially with each other, and with staffing agencies, to fill daily schedules, but inconsistent faces on the floor sometimes impedes quality of care, Treitel and Moskowitz said.

“Imagine having a preschool teacher and every single day the kids are given another teacher,” Treitel said. “There’s no continuity of care.”

There’s a lack of accountability as well when agency staff don’t have to answer to a facility, Treitel said – staff have called an hour to 15 minutes before a shift starts to say they took another shift for more money.

“They’re basically just going wherever the money is,” Treitel said.

Last-minute shift changes means longer days and more strain for permanent staff.

“I have administrators who are licensed as CNAs, and they’re basically pulling 24-hour, 36-hour shifts sometimes.”

A direct care staff tug-of-war ensues, Treitel explained, when the operator and agency reactively raise their prices in order to keep staff working on one side or the other. In other words, a CNA may be working for Recover-Care at $15 an hour, then switch to an agency to make $20 an hour, only to come back to work directly for the facility at $25-30 an hour, Treitel said.

“They are literally taking our staff and selling them back to us,” said Zish Margulies, also a principal at Recover-Care. “We get the exact same product at many, many times the price. Most of that cost has passed to the taxpayers of the state because ultimately it’s going to end up in the Medicaid rate, while at the same time making the entire model of caring for seniors untenable.”

“I’m all for nurses getting paid more, being paid a living wage, but we need Medicaid to step up,” Treitel added, likening the higher wages to letting “the genie out of the bottle.”

Treitel believes increased wages are going to be a reality long-term, and that state and federal financial support needs to recognize and match that reality.

A significant portion of reimbursements come from state Medicaid programs, Moskowitz added, suggesting higher wages need to be reflected in higher Medicaid rates.

Potential state action and the role of Medicaid

Vivage, which also owns and operates private pay assisted living facilities, said the company is able to raise resident rates to balance the cost of agency use.

That’s not something Moskowitz can do for his SNF properties.

“We can’t pass on the interest to Medicaid clients or for that matter, the state. We do have a solution, it’s just that we have to get the state agencies to agree to help nursing homes,” Moskowitz said.

If an operator is using state money for agency staff, the state has the right to dictate how that money is spent, Moskowitz said, leaving an opening for legislation to cap agency rates.

“So many of our nursing homes, particularly the homes that I represent, are very heavy Medicaid, state Medicaid users – that’s not really a free market,” said Michael Feeley, shareholder at Denver, Colo. law firm Brownstein Hyatt Farber Schreck. “[They] are dependent upon, for revenue, Medicaid departments … there are limited dollars to go around. We can’t, for example, charge what the market bears.”

Currently a handful of states are working on legislation to further regulate nursing home staffing agencies. Maryland is the furthest along with House Bill 800/Senate Bill 565 which would prevent companies from raising prices for “essential goods and services” by more than 10% while a public health emergency (PHE) is in effect, as well as three months after the PHE ends.

State legislators and public health departments have sought input from digital labor marketplace Kare while drafting such legislation.

Kare considers itself to be an alternative to the traditional agency staffing model – the tech-heavy company created a digital labor marketplace for workers and facilities to find each other.

The Maryland legislation is expected to reach the state Senate floor onFeb. 24. Other states are working on introducing similar legislation in the coming months, according to Kare CEO Charles Turner.

Who sets the prices?

At least for Kare, facility clients set pay rates. Facilities also decide who they want to come into their community and can hire someone they found on Kare for free, Turner said.

The platform’s membership rating increases the likelihood that a worker will get picked up for a shift, and if the facility gives that worker a high rating post-shift, they get paid the next business day.

Workers with a low membership rating on Kare get paid a week later.

“They’re highly incentivized to do a good job,” Turner said. “If a worker works for a staffing agency, they do just enough not to get fired.”

ShiftMed CEO Todd Walrath said its staffing rates have been consistent with market demand, with outside factors like minimum wage and inflation driving variability.

“The overall rates that frontline workers are being paid is clearly higher now than it was before the pandemic. I would say that makes up about 80% to 90% of the variability,” Walrath said. “Our customers are ultimately setting the price. They agree to a price and we put that price in the app. So it isn’t a price that we’re setting.”

ShiftMed has in some cases worked “on the opposite side of the ledger,” Walrath said, offering lower rates to its members as a trade off for guaranteed shifts – a program that was rolled out in Pennsylvania.

The agency also works with its facility clients on “overtime optimization,” communicating with facilities to determine if paying existing staff overtime, using agency staff to pick up extra hours, or a combination of the two solutions would work best for an operator.

“We want to be a good partner,” Walrath added. “We understand that this isn’t the primary way to get labor into the building, [facilities] want to do this as a contingency. Those are two of the things that we’ve done to kind of try to really be a true partner to facilities.”

A changing relationship and booming gig industry

Opportunistic staffing agencies that have popped up during the pandemic have changed the relationship between agency companies and skilled nursing facilities.

In 2018, there were 5,282 frontline health care staffing agencies in the nation, according to industry research firm IBISWorld. The $25.8 billion industry has grown 4.4% per year on average between 2017 and 2022, the firm said.

Turner feels there’s a “growing sense of animosity” between the two parties in part due to these new agencies that have “come out of the woodwork” to corner the market.

Some staffing agencies, especially those that had a relationship with nursing homes pre-pandemic, have also been pushing for or are at least receptive to more regulation in their space too, Treitel said.

“Good fences make good neighbors as they say,” Walrath said. “If providing some guidelines for the industry helps make the industry healthier, then we’d be supportive of that.”

Established agencies have had to raise their prices along with nursing homes in order to compete with all the new companies popping up in the space, Treitel said – they see the opportunity to be good partners at this point in the pandemic and workforce shortage.

“There’s 10 times the amount of agencies today than there were a year or two years ago. That’s the problem, everybody’s going into this because they see it’s a gold rush,” Treitel said.

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