Hospices Call for Higher Payment to Offset Minimum Wage Hikes Amid Staff Shortage

While hospices have been focusing efforts to recruit, retain and rebuild their ranks during a financially choppy time, some providers are furrowing their brows over minimum wage increases in the absence of a corresponding raise to Medicare reimbursement. 

While federal efforts to boost the minimum wage have stagnated for the time being, action is underway at the state and municipal level. The proposed federal Raise the Wage Act of 2021 died in committee earlier this year, and an executive order from President Biden raising the wage to $15 only applies to government contractors.

Meanwhile, as of 2021 the minimum wage went up in 19 states, though most did not reach the $15 threshold that many proponents of these hikes have called for, according to the National Council for State Legislatures (NCSL). At least 34 states are mulling bills that would increase the minimum wage. Among those, 29 states are proposing an incremental increase to $15 an hour or more, NCSL reported.

Effective July 1, the City of Chicago raised its minimum wage to $15. This caused some consternation at the post-acute provider Addus Homecare (NASDAQ: ADUS), which has extensive operations in the Windy City. The state government in Illinois proposed an increase in reimbursement to offset some of those costs, and is currently waiting for federal approval.

“We anticipate our gross margin to be negatively impacted by approximately 40 basis points in the third quarter by the last scheduled increase in Chicago minimum wage that was effective on July 1, with the offsetting state reimbursement increase currently scheduled for January 1, 2022,” said Brian Poff, Addus vice president and CFO, in an earnings call.

The wage increase comes at a time when staffing shortages that have long-plagued the hospice industry reach a new height against demographic tailwinds driving up demand. Hospice providers are competing in smaller pools for increasingly limited resources, with the wage increase potentially having different threads of both negative and positive impacts on their ability to fill and grow their ranks.

The country’s supply of hospice and palliative care specialists numbers at 13.35 for every 100,000 adults 65 and older, according to an April 2018 study. The research projected that by 2040 patients in need of this care will range between 8,100 and 19,000, while supply of specialists will tip between roughly 10,640 and 24,000 specialists. Hospices also continue to see shortages in other disciplines, such as nurses, case managers and direct care workers.

However, hospices remain concerned at competing for staffing amid potential financial strain of higher costs.

“A healthy margin will be essential to compete for staff and [for providers] to maintain a competitive compensation package,” Kristen Yntema, president and CEO of North Carolina-based AuthoraCare Collective, told Hospice News. “We’re benchmarking our compensation on a market basis, and that we’re paying attention to the dynamics of the competitive landscape that is essential.”

Hospices will need to be strategic in their recruitment and retention efforts and how they set themselves apart from competing agencies while maintaining competitive employee wages, according to Stephanie Johnston, president and CEO of Transcend Strategy Group. The consulting company works with senior care organizations nationwide, including hospices.

“A smaller workforce naturally means wages are going to rise as competition for limited talent continues to grow,” Johnston told Hospice News. “The real challenge for providers here is to retain your best talent by building a values-driven culture to use systems and technology to reduce administrative workloads, improve efficiency and drive accountability. Differentiation, cultivated competitive advantage and strategic partnerships are going to be essential hospices to evolve and thrive.”

The coronavirus pandemic has further shrunk staffing pools as more than 20% of health care workers have considered leaving the field citing stress brought on by the pandemic, according to a recent study published in JAMA Network Open. Roughly 30% have considered reducing their hours, the study found.

Hospices have been financially burdened by the balancing act of retaining staff in the face of pandemic-related headwinds, including rising supply costs, increased paid leave and reduced patient length of stay.

In some cases the staffing shortage has seriously impeded hospices’ ability to provide care. North Carolina’s Dare County Board of Commissioners in June approved the sale of its local home health and hospice agency to BrightSpring Health Services for $2.9 million, attributing the decision to an inability to recruit or retain enough staff to meet the community’s needs, according to county officials. Also that month Oregon-based Grande Ronde Hospital and Clinics completely shut down its community-based hospice program due to staffing shortages.

“We’ll need to enlist our national associations to ensure wage indexes and reimbursement rates are evolving more quickly and more in tune with real market conditions,” said Johnston. “Acquisition is going to be the only viable path for some, but others can use this moment to ignite a new vision for the future.”

A growing number of hospices have prioritized focus on diversity, equity and inclusion in their staff recruitment and retention efforts, revamping organizational policies, education and hiring processes.

Other providers have joined forces in collaborations, mergers or acquisitions in an effort to sustain and grow their employee base. Companies of all walks such as LHC Group (NASDAQ: LHCG), Amedisys (NASDAQ: AMED), and Houston Hospice are stepping up staff education, training and recruitment outreach. Hospices doubling down their staffing efforts have looked beyond compensation to shift workplace policies and culture.

While compensation is important, organizations cannot overlook that careers in the hospice industry are often driven by an individual’s service to a mission, according to Yntema.

“Compensation will always be important, however, staff are drawn to this work for many reasons,” said Yntema. “Hospice providers will need to listen closely to understand the benefits that keep their teams motivated and sustained. Fundamentally, people want to be heard.”

An organization’s work environment and culture play essential parts in its ability to sustain a healthy workforce. A hospice with strong staffing relationships and clear communication will be able to demonstrate its commitment to a safe and healthy workforce, according to Yntema.

“Stated ‘values’ will only be meaningful when those values are authentically honored in the day to day celebrations of the company,” Yntema said. “A company’s culture is reflected in what it ‘celebrates.’ You can tell a lot about an organization by the way it celebrates its people and where it puts the spotlight. ”

While many providers are concerned about the rising labor costs, industry stakeholders have generally not opposed these measures, citing the importance of direct care workers in particular and the difficulty of their work. However, they have argued that these increases must come with a compensatory raise in reimbursement to keep their operations sustainable.

“The issues of wages are absolutely affecting the availability of staff on personal care services,” National Association of Home Care & Hospice (NAHC) President Bill Dombi said at NAHC’s Financial Management Conference in Chicago. “It’s a really hard job, deserving of not only better respect, but also better compensation as well — but the payers have to pay it.”