The interventions that VITAS Healthcare has implemented in response to the industry-wide labor shortage have generated some positive momentum that extends beyond the number of workers on the payroll.
VITAS is a subsidiary of Chemed Corp. (NYSE: CHE). Like many in the space, the hospice provider has been fighting an uphill battle against COVID headwinds to varying degrees since 2020, including a slower flow in their referral streams, falling lengths of stay, and a reduced average daily census during some quarters.
But the staffing issue is a linchpin that can complicate a company’s ability to fully address that larger range of concerns. Fewer staff means fewer patients, which impacts census, revenue and other key metrics.
“Six to eight months into the pandemic, there were reports that 20% to 25% of clinical health care workers had quit. I thought, ‘That’s impossible. Where are they going to go? Were they gonna take two months off?’ I didn’t understand it, but that’s what happened,” Chemed CEO Kevin McNamara said at the Credit Suisse Healthcare Conference. “We had excess clinical worker retirements, people beyond the normal retirement age … With those developments, we had burnout of the retained employees.”
Those struggles have continued through 2022, but developments in the second half of the year are showing signs of an upward trend. While this may not be the light at the end of the tunnel, results to date suggest that VITAS is not lost in the dark.
One of the company’s earlier actions was to increase employee vacation time by one week to boost morale and help stem the tide of pervasive burnout.
Starting in July, VITAS implemented a new retention bonus program using $44 million in unspent Provider Relief Funds, offering between $2,000 to $15,000 per licensed health care professional for 12-months of continuous employment. These one-time retention bonuses are designed to fortify the company’s clinical teams, including licensed nurses, nurse managers, home health aides and social workers.
A few months in, the initiative appears to be bearing fruit. The company hired 172 clinicians during Q3, coupled with significantly reduced turnover.
“[The bonus program] added fuel to the fire in terms of our ability, not only to continue retaining more of our clinicians, but attracting more to come into the workplace,” VITAS CEO Nick Westfall said at the conference. “It’s exciting because — not only does it continue to build back our clinical capacity — but with that inside of the hospice benefit, we’ve seen some encouraging signs on week-over-week sequential days-of-care growth that, frankly, we haven’t experienced since the start of the pandemic.”
The impact of these reinforcements will take some time to fully materialize. It can take four-to-six weeks to onboard and train clinicians and to help those who came from other settings acclimate to the hospice environment.
Bringing new employees up to speed also costs money, which in Q3 resulted in about $2 million in margin compression, according to Westfall.
The company’s revenues fell to $297 million in Q3, down 6.6% from the prior year’s quarter. In addition to the onboarding costs, VITAS had to absorb the reinstatement of 2% Medicare sequestration and geographically-adjusted reimbursement reductions in some markets.
But ultimately, more staff will likely mean more business and ultimately contribute to improved financial results.
For example, referrals from hospitals were down 23.4% in Q3, primarily due to staffing-related constraints in the company’s clinical capacity.
“We didn’t have the workforce to deal with the high-acuity needs of people coming directly from the hospital. We could have more business if we wanted to, we just didn’t have the wherewithal to service it,” McNamara said. “We’re some encouraging signs on week-over-week sequential [average daily census] growth that we haven’t seen since the start of the pandemic … We’re going to continue to bring on more patients, and the days of care contribution from those patients we would expect and anticipate continuing to expand.”
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