No Easy Answers on Hospice Turnover Costs

Some hospice providers are walking a tightrope as they decide how to invest in recruitment and retention.

Hospices have been pouring financial resources into efforts to bolster their workforce and are seeking ways to balance the costs associated with recruitment that differ from retention expenses. However, the process of calculating and comparing those costs can be more complex than it may sound.

As hospices choose which buckets to fill, the cost of retention may be a little harder to quantify than the cost of recruitment, according to Cooper Linton, associate vice president of North Carolina-based Duke HomeCare and Hospice.

“The costs of recruiting and retention is so baked into our operational and financial cultures that it gets difficult to tease out,” Linton told Hospice News. “Sign-on bonuses, those are very clear recruitment expenses. But giving raises to retain staff, is that a true retention expense or simply a market adjustment around inflation and the cost of living? How long do you spend training, orienting and replacing staff?”

Providers’ highest labor expenses

Labor costs, including employee compensation, can become a hospice’s largest type of expenditure.

With the labor shortage extending throughout the health care continuum, hospices have to compete with much larger providers, including well-capitalized health systems. This can put them at a disadvantage as they contend for jobseekers. For example, health systems are often able to offer higher wages than many community-based hospices.

At Duke HomeCare and Hospice, labor, including recruitment, accounts for roughly 60% to 70% of the organization’s overall expenses.

Retention, on the other hand, can be challenging to separate from “every operational dollar” spent, according to Linton. Retention costs are harder to pinpoint.

While things like salary adjustments and hiring bonuses are more visible in a company’s financial statement, factors such as patient volumes, reimbursement, and clinical and back-office staff also drive retention overhead, he added.

Though harder to narrow down, retention costs pale in comparison to recruitment expenses, according to Stephanie Johnston, president and CEO of Transcend Strategy Group, an Ohio-based senior care research and consulting firm.

Providers have seen costs to acquire staff soar north of $65,000 per registered nurse and $20,000 per certified nursing assistant, according to data Transcend shared with Hospice News.

Costs to retain are usually “quite small” in comparison, said Johnston. Companies have reported spending in a few hundred dollars per employee tied to improving systems, processes, talent development and compensation models, she stated.

“Few hospice organizations have a good handle on their complete cost to acquire new talent,” Johnston told Hospice News in an email. “Calculating a true cost should include time existing staff spend on recruitment, third-party recruiter costs, advertising costs, platform expenses, temporary staff, lost productivity, training costs, any unused vacation time and signing bonuses.”

Because providers are often recruiting for several roles at once, per role costs are seldom seen clearly, added Johnston.

Researchers have tried to paint a clearer picture of turnover costs.

Hiring and training a replacement for a single health care employee earning less than $30,000 per year costs roughly 16% (or $2,600) their salary, according to a study from the Center for American Progress.

Turnover costs for caregivers and direct care workers were similar, an Institute for the Future of Aging Services (IFAS) study found. The direct costs include dollars spent on advertising, candidate search and agency fees, staff time spent on hiring processes, applicant screening (such as physicals, drug testing, background verification, etc.), travel or relocation expenses, and sign-on bonuses.

The hidden costs of turnover

Turnover also brings indirect costs, such as lost productivity, potential quality issues, and capacity constraints, according to the IFAS study.

Lost revenue from reduced capacity can also be difficult to gauge, according to Linton.

Other hidden costs also start to add up. Workflows may become less efficient while new staff up to speed, for example.The associated dollar amounts are often much higher than most providers calculate, Linton added.

“Organizations typically underestimate the impact culturally and financially of turnover,” said Linton. “When we actually come face to face with the true cost of turnover, it’s vastly, greatly understated. That loss cost doesn’t take into account the burden that turnover creates on other employees when one leaves, as well as the expense of more overtime as others pitch in. The impact on work culture is that some might leave with that burden.”

Money isn’t everything

Compensation plays a huge role in an employee’s decision to stay with a company, but other considerations may be equally important.

If workers are miserable at their jobs, throwing money at the issue won’t be enough, said Linton. Employers need to create an organizational culture that keeps staff invested in their work and reinforces the importance of their services, he added.

Flexible payroll and schedules, along with career development programs, can generate savings on staff retention, according to Sonnie Linebarger, founder and CEO of strategic operational and financial analysis firm Evoke Greatness. Linebarger previously served as COO and executive vice president of Bristol Hospice.

“People might end up going to the lower-paying company because of the opportunities to really develop their skills and see more career paths,” said Linebarger at the National Association for Home Care & Hospice Financial Management Conference in Las Vegas. “[Also,] people are paying more attention to their mental health and work life balance now. You’re going to lose people when you don’t introduce a sense of community and connectedness — that’s huge.”

Providers are competing in “an employee-centric market,” according to Linebarger. Wage and benefit expenses are rising for many hospices nationwide.

This means that hospices have to adapt with changing compensation models, while gaining an understanding of what matters most to employees, she continued.

“It’s touching base and figuring out what money is a driver for them from a retention perspective, and [having] non-monetary compensation packages that reward them with flexible benefits,” said Linebarger during the conference. “You may be looking at increased retirement and 401K matching [plans] and paid time off offerings. It could be a wellness program, a child care stipend, tuition reimbursement, mental health care, increased employee paid portion of their health benefits, etc. It’s about listening to what people actually say they’d rather get than an increase in pay.”