CareWork Looks at KPIs: Labor
This is the first in a series of articles exploring the importance of setting and monitoring key performance indicators (KPIs) in long-term care and senior living organizations. Throughout the series, we will explore KPIs specific to LTPAC in the areas of labor, census, finance, procurement, clinical, and quality and discuss how your operations can benefit from setting goals and using your data strategically. With this post, we’re looking at labor, the biggest regular expenditure for any SNF, and the one most likely to get out of hand if you don’t break down the key performance areas and proactively manage those KPIs.
Labor as a KPI Category for LTPAC: Why is it important?
In any business, labor is going to be one of the biggest expenses. But in long-term care and senior living, it’s especially crucial to keep a close eye on your labor costs. That’s because, in our industry, labor represents not only a large portion of our overall budget but is also a significant driver of quality.
There are many ways you can break down key performance areas for labor. We will cover just a few. Before we do, let’s look at a few reasons why labor KPIs are important.
It is your largest expense. We’ve already said this, but it bears repeating. You spend more on labor than any other line item in your budget.
It can get out of control quickly. Unless you are monitoring all the factors that affect labor in your facility or community, you don’t have a clear picture of your labor needs and that can lead to runaway costs.
In the case of SNFs, your facility can be penalized by CMS if you don’t have enough employees on duty, and the right type of employees in relation to your census.
Labor can impact quality. The care your residents receive is directly impacted by the number of staff you have on hand and the amount of time they can spend with each resident.
Staffing levels aren’t just a key performance area for SNFs, although the regulatory and care requirements are heavier. Assisted living and memory care organizations should also keep an eye on staffing and even PRD measurements (per-resident day). PPD (per-patient day), commonly used in SNF, and PRD for AL are the same measurement and can be a valuable format to use in tracking KPIs because they adjust based on the census and are simple to calculate, accurate, and efficient.
Staffing level KPIs can be used to manage labor budgets, adjust or flex budgets with the census, and manage direct care staffing level requirements.
Workforce shortages and increasing wages make managing labor budgets more important than ever. Staffing level KPIs can help you monitor and adjust to consistently stay within your labor budget. OnShift, a human capital management software provider in the LTPAC space, mentioned in a recent blog post that staffing to meet residents’ needs without overstaffing can drive significant cost savings and, with a tighter staffing level alignment of .1 hours per patient day (HPPD), a community can save $75,600 per year (based on a 100-bed community).
Setting staffing targets and frequently monitoring them against your labor budget will give you the KPIs you need to make proactive adjustments to hit budget targets.
SNFs need to manage additional staffing PPD KPIs for direct care and can have state staffing requirements in addition to federal staffing requirements. SNFs report staffing levels via the payroll-based journal (PBJ) process required by CMS. PBJ reporting is done at the direct care employee job (RN, LVN/LPN, CNA) and employee type (regular, temporary, contract, agency) levels. Direct care staffing PPDs affect the CMS 5-Star rating and can lead to survey tags or fines when not compliant. RN hours have a specific set of rules. CMS requires eight RN hours per day in an SNF however, the rule allows for director of nursing (DON) hours to be counted as direct care RN hours for a day if the average daily census (ADC) for that day is 60 or fewer residents. RN hours should specifically include this exception, when applicable, as you track your RN hour KPIs.
Setting direct care PPD targets at the company level and monitoring performance daily gives SNF teams a clear picture of staffing requirements and helps teams stay ahead of gaps in staffing that could affect state and federal direct care compliance.
In order to monitor direct care staffing PPDs, hours worked for all direct care titles for regular, temporary, contract, and agency staff must be tracked every day, and rules, like the RN / DON exception, should be applied. Regular employee hours are easy to track. Most SNFs have a time and attendance solution in place that automates that process. Agency and contract labor can be tricky. Most often, these hours are tracked manually using timesheets. Agency hours then need to be logged and tracked for PBJ purposes and applied to the PPD KPIs that are being monitored. Add in rules like the RN / DON exception that require ADC consideration and this process can become unmanageable when done manually.
While tracking KPIs for budgets and compliance manually is not impossible, it can be time-consuming and often set aside unless you have a KPI management tool with PBJ automation in place.
Here’s how CareWork can help. The CareWork platform ties together census and labor information from the systems you’re already using so all of the data sets needed to track labor budgets, staffing, and direct care KPIs are in one place. CareWork automates the PPD/PRD calculations. Things like the RN / DON rule are automatically applied. PBJ automation (coming soon) will allow you to verify PBJ submissions for accuracy and download the properly formatted PBJ file for easy submission.
Now you can track staffing level KPIs without manual effort.
Staff Turnover and Retention Rates
Staff turnover is a universal issue but, since the pandemic, the LTPAC industry has been hit particularly hard.
Turnover and retention are key performance areas that should be monitored and actively improved upon in skilled nursing and senior living organizations. We’ll talk about why KPIs should be in place for turnover and retention, then we will talk about how. It gets complicated.
The turnover rate in senior living is usually around 50%, but it has jumped to 70% in the past year, according to a recent study by the Paraprofessional Healthcare Institute (PHI). Nursing homes are seeing turnover rates closer to 94% for direct care workers alone.
These high turnover rates cause financial and operational problems that both skilled nursing and senior living companies share. Here are just a few.
Increased Labor Costs: Turnover is expensive. Leading age estimates the average cost of replacing any employee is 25% of the salary amount, and the estimated direct and indirect costs of replacing a direct care worker are about $4,500. In a 100 bed SNF with a 94% turnover rate, turnover costs for direct care workers alone could run close to $420,000 per year. At a 70% turnover rate for senior living, a 100-employee operator isn’t far off.
Burnout: When facilities and communities are understaffed, the remaining staff has to pick up the slack. This can lead to burnout which leads to more turnover.
Lack of Consistency of Care: Residents are more at ease when cared for by people they know. For residents, frequent staff turnover may be highly stressful.
While some challenges related to turnover are shared by SNF and AL organizations, SNFs have an additional burden.
CMS announced this year that it will begin posting new PBJ metrics to the Medicare.Gov Care Compare website, including staff turnover information. Not only that but turnover information will be used in the 5-star rating for SNFs starting in July 2022.
This poses a few problems for SNF operators (in addition to the worst labor crisis the industry has experienced) and means that SNF leadership teams need to start setting measurable goals around retention and tracking progress using KPIs.
CMS uses data submitted through PBJ for six consecutive quarters to determine 12-month turnover. This means that your July 2022 5-Star rating will be affected one way or the other using a baseline measurement from 2021. There’s no way to get ahead of it for now.
CMS does not collect information on employee termination dates. Instead, they identify turnover based on gaps in days worked. The six consecutive quarters are used this way:
6 Consecutive Quarters Breakdown
Data from the first three of the six consecutive quarters are used to identify eligible employees to be included in the turnover measure.
1. Baseline quarter – prior to the first quarter of the 12-month measure
2. Quarter one of the 12-month measure
3. Quarter two of the 12-month measure
Data from the sixth consecutive quarter is used to identify the gaps in days worked in the last 60 days of the fourth quarter used for the turnover measure.
4. Quarter three of the 12-month measure
5. Quarter four of the 12-month measure
6. 6th consecutive quarter
Because CMS measures turnover using this method (you can read all about it here) and the rest of the world calculates turnover rates using data sets that include termination dates, you can imagine that the results might not match.
Setting goals and managing KPIs around retention and turnover are important outside of just direct care. They should be monitored at the job title and department levels for SNF and senior living. KPI management in this area allows you to implement changes and recognition or incentive programs and really track the results. Managing to KPIs also gives you the information you need to know if a change isn’t working so you can pivot before wasting additional time, resources, and money.
Tracking turnover and retention rates can be labor-intensive, and for SNFs who have to track turnover two different ways (actual turnover rates using termination dates and the CMS measurement), it can be near impossible.
Here’s how CareWork helps. CareWork has turnover and retention calculations (they are different) built into the system. Because your labor data is integrated from the systems you already use, CareWork gives you the tools you need to run turnover and retention reports at the job title or department level for the period of time you want to view – all with the click of a button. PBJ automation (coming soon) will allow you to run turnover measures and trend results using the CMS methodology and real PBJ data so you can stay ahead of the turnover implications to your 5-Star rating.
Now you can track turnover and retention without manual effort.
Overtime and Percentages of Overtime
Even under normal circumstances, overtime is a challenge for skilled nursing and senior living. With the current labor crisis, it’s become an even bigger problem. In addition to being a strain on your budget, excessive overtime can lead to staff burnout and impact the quality of care your residents receive.
As we’ve mentioned before in other posts, schedulers can often become over-reliant on a handful of employees they know are always eager to take an extra shift. This strategy can often lead to overworked, exhausted employees who could become prone to make mistakes or commit errors that can endanger themselves or residents. Additionally, it could lead to overtime inequity, where the lion’s share of the overtime is being worked by a small group of employees.
Managing overtime KPIs may sound simple, but there is more to consider than looking at the number of overtime hours worked.
Percentages of overtime. Keeping an eye on percentages of overtime allows you to trend progress and determine whether the percentages can be improved or if they are justified. An example of a justified percentage of overtime would be a scenario in which the overtime costs are better than an alternative, like agency labor.
Understand the mix of overtime at the department and individual level.
Determine whether a small number of people are consistently working the bulk of the overtime.
Once you have a clear picture of the overtime landscape in your organization, you can put measures in place to help control overtime costs, avoid burnout, and reduce overtime inequity.
Scheduling manually and trying to manually keep up with the measures you put in place to control overtime is not recommended. It inevitably leads to every problem we just discussed in this section, with no real way to audit. If you haven’t already, look into scheduling platforms like Book Jane or OnShift. They pay for themselves. Another option is to talk to your time and attendance software vendor. Find out if they offer a scheduling automation solution. Once you have the scheduling data, you can use it to strategically manage overtime KPIs.
How can CareWork help? CareWork pulls your labor and scheduling data into a centralized KPI management view that provides automated, actionable insights on the measures that matter for overtime management in senior living and skilled nursing. With no manual effort, your teams can not only track overtime KPIs, but set targets and measure results.
Who We Are
CareWork is the first holistic operational platform for long-term and post-acute care providers. We connect the systems you already use, tie your data together, and give you a 360-degree view of all operational areas using combined information.
Now your management teams have exactly what they need to catch problems before they happen, work faster, and hit their targets—all in one place. Visit our website today and see how we can help you work smarter and more profitably.