The COVID Staffing Crisis Persists

Although we are in the post COVID-19 pandemic era, the labor market for senior living and long-term care providers is still in a crisis and looks bleak for the next few years. The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) conducted an analysis of the Bureau of Labor Statistics (BLS) data which revealed that nursing homes have lost 210,000 jobs from February 2020 to December 2022. In addition, job growth slowed more than previously projected over the past nine months, meaning the labor market for nursing homes will not return to pre-pandemic levels until 2027.[1] Many providers will rely on contract labor to fill their gaps in staffing, and with the increases in wages and bonuses to attract and retain quality help, labor costs will continue to impact profitability for providers. Although they are being more creative in how they recruit and retain staff, it will be a long road to recovery; therefore, managing labor expenses will be of utmost importance in the coming years.

According to our calculations based on CMS 2021 Cost Reports, skilled nursing providers’ labor expenses were 52.4 percent of all expenses, with approximately $42 billion spent on salaries and $8 billion spent on benefits.[2]

For direct nursing care only, expenses went up 8 percent from 2019 to 2021. Contract labor increased from $2.2 billion in 2020 to $3.6 billion in 2021 for an increase of 64 percent. Wage growth in this category more than doubled, going from 4 percent in 2018 to 8.1 percent in 2021.[3]

Strategic Approach to Managing Labor Costs

One key in providers having the ability to sustain operations through this staffing storm is to implement a strategic approach to managing labor costs.

The steps of a strategic approach may include:

  • Ensure the staffing coordinator understands hours per patient day (HPPD), is well versed in how to schedule, and manages overtime while possessing an assertive but respectful demeanor.
  • Establish predictable schedules to guarantee adequate coverage for all shifts.
  • Embrace technology. Scheduling software, if fully implemented, will assist in overall labor management. (If you are using handwritten notes for scheduling, STOP IMMEDIATELY!)
  • Conduct daily meetings to compare staffing levels to PPD and to adjust staffing levels based on projected census fluctuations.
  • Manage overtime—make sure overtime policies are in place. Monitor the following types of overtime: scheduled overtime, which is a result of staffing shortages; incremental overtime, which is a result of punching in early or punching out late; frictional overtime, which is due to staffing emergencies such as call-offs, no shows, or terminations. Lastly, ensure historical trends in overtime are reviewed.
  • Focus on retention. For an hourly employee, the cost of turnover is an estimated $1500 per employee; therefore, a facility with 100 employees and a turnover rate between 50% to 90% could cost $75K to $135K per year.

The Bottomline

Labor management is a major part of doing business. With the workforce shortage, increased wage pressures, and dependency on contract labor, providers who manage their labor costs can achieve positive financial results, along with other positive outcomes, such as reducing burnout, decreasing turnover, and improving care for the residents.

For More Information

Health Dimensions Group (HDG) has experts who can help you better understand strategic approaches to labor management. If you would like to learn more about how HDG can assist you, don’t hesitate to get in touch with us at 763.537.5700 or and visit our website.



[3] 37th SNF Cost Comparison and Industry Trends Report AN INDUSTRY AT A CROSSROADS By: Stephen Taylor, Matthew Wocken, and Seth Wilson