Higher Spending on Nursing Home Staff is Not Tied to Better Staffing Levels

Nursing homes with higher shares of Medicaid residents directed more revenue toward workers but had lower staffing levels, indicating that a minimum nursing staff expenditure regulation would not guarantee better staff levels, a Health Affairs study found.

Adequate staffing levels at nursing homes have been associated with better care quality for residents. However, federal regulations do not currently define minimum nursing staff ratios.

A National Academies of Sciences, Engineering, and Medicine report recommended that nursing homes designate a specific share of Medicare and Medicaid payments for direct-care services for residents, including nursing home staff.

Researchers used fiscal year (FY) 2019 data from Medicare Cost Reports and the Payroll-Based Journal to determine if the revenue spent on nursing staff was related to nursing staff levels. The study sample included cost reports for 12,030 nursing homes.

Nursing expenditures represented the total amount of money spent on nursing staff employed directly by the facility or via a staffing agency. Nursing staff levels were measured by hours per resident day.

For the median facility, 33.9 percent of revenues went toward nursing staff expenditures. When applying the median revenue of $8.6 million to this ratio, nursing homes spent around $2.9 million on staff in FY 2019.

The median staffing levels in nursing homes were 3.67 hours worked and 4.08 hours paid. The difference reflects the time that facilities paid for breaks, meal times, and time spent on other activities not devoted directly to resident care.

Nursing homes with a high government payer mix had lower staffing levels than the entire sample (3.46 hours worked), but the nursing staff expenditure ratios were similar to those of the full sample (33.9 percent).

On the other hand, nursing homes with a high Medicaid payer mix had the lowest median staffing levels of 3.32 hours worked but directed a higher share of revenues to nursing expenditures (35.6 percent). This may be attributed to lower Medicaid reimbursement, which nursing homes argue is below the cost of care.

“Because they have less total revenue, nursing homes that are highly reliant on Medicaid need to spend a greater share of revenues on nursing staff to achieve a given nursing staff level,” the study stated.

The researchers considered a minimum threshold for nursing staff expenditure ratios of 25 to 45 percent of revenues. The majority of nursing homes spent more than 25 percent of their revenues on nursing staff, but fewer than 20 percent of facilities spent more than 40 percent of revenues on staff.

The share of nursing homes with a high government payer mix that spent over each threshold was similar to the entire sample. However, the sample with a high Medicaid payer mix had a greater share of facilities spending above each threshold.

Regarding staffing levels, 90 percent of the entire sample had levels above 3 hours worked, while only around 25 percent of facilities had levels above 4.1 hours worked. In comparison, the sample with a high Medicaid payer mix had 79.1 percent of facilities staffed above 3 hours worked and 9.1 percent of facilities staffed above 4.1 hours worked.

“Our findings suggest that any specific threshold for nursing staff expenditures that regulators might consider would have a varying degree of effectiveness in ensuring that any given nursing home was adequately staffed,” researchers wrote.

“Although many nursing homes would need to increase staff spending to achieve any newly mandated nursing staff expenditure threshold within the range we examined, there is no guarantee that these nursing homes would achieve the intended result: higher nursing staff levels, as measured in nursing hours per resident day.”

Higher nursing staff expenditures could result from raising wages or paying more for benefits and may not necessarily lead to a change in staffing levels.

For a minimum nursing staff expenditure regulation to positively impact staffing, it would have to be paired with a minimum nursing staff requirement. Additionally, any potential regulation should consider the resource constraints that nursing homes face based on their payer mix, reimbursement rates, and workforce.