The Centers for Medicare and Medicaid Services (CMS) issued a proposal in September 2023 calling for higher minimum staffing requirements for hospitals and nursing homes. The proposal requires facilities to provide 0.55 registered nurse and 2.45 nurse aide hours per resident per day, as well as one RN on staff at all times.
CMS Three-Step Outline
The CMS offers a three-step outline with implementation deadlines:
- The first step requires facilities to consult with residents and develop a compliant staffing strategy within 60 days of the rule’s publication.
- The second step enforces the RN staffing requirement and takes effect two years after publication in urban facilities and three years in rural areas.
- The last step requires facilities to meet the proposed hours per resident per day thresholds in the same two-to-three-year window.
CMS believes this proposal is necessary to improve the quality of care, but many believe this could cause financial concerns for healthcare entities aiming to meet staffing requirements.
CLA Report: $6.8B National Impact vs. $4B Estimate in Meeting Labor Costs
A report released by professional services firm, CliftonLarsonAllen (CLA), quantifies the discrepancy between current labor costs and the costs necessary to meet the proposal. The report indicates a national impact of $6.8 billion compared to the government’s $4 billion estimate. Mark Parkinson, President and CEO of the American Health Care Association and the National Center for Assisted Living, said, “Even at the administration’s number of $4 billion—that’s almost $400,000 per nursing facility, and nursing facilities just don’t have that money. They will not be able to implement this proposal.” CLA also reports that 94 percent of nursing homes are currently not compliant with at least one of the proposed staffing requirements and 36 percent are not compliant with all three. This proposal is more burdensome for facilities due to issues in the labor market.
An AHCA and NCAL survey of nearly 1,200 long-term care providers reveals that almost all nursing homes and assisted living facilities face some degree of staffing shortages, with 59 percent of nursing homes and 30 percent of assisted living homes labeling their deficiencies as severe. These respondents indicate they are experiencing hiring difficulties for several reasons, the most prominent being fewer qualified candidates, unemployment benefits, rising labor costs, and vaccination requirements. These shortages result in many healthcare providers turning to temporary agencies and reducing admissions into their facilities. The CMS recognizes these concerns and is offering hardship exemptions to qualified facilities.
To qualify for this exemption, facilities must be at least 20 miles from the next closest nursing facility or in an area where the provider-to-population ratio is at least 20 percent lower than the national average. They must report the total money spent on direct care staff and demonstrate efforts to address staffing concerns through hiring and retention practices. There is a corresponding national initiative offering $75 million in scholarships and tuition reimbursement for staff beginning their careers in nursing homes.
There is some reason for optimism due to positive trends in the labor market over the past few months. Fitch Ratings released a report highlighting declining job openings and increasing staff retention rates, which has reduced contract utilization and pay rates and decelerated year-over-year hourly earnings growth. Parkinson and other industry leaders are having productive conversations with CMS and members of Congress with hopes of reaching an agreement on staffing requirements that are more economically feasible for the industry.
Author: Anthony Whelan | [email protected]
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Contact Withum’s Healthcare Services Team for any assistance with revenue recovery including claims review and cash flow solutions to ensure your facility is prepared to implement the recent proposal.
