Senior living operators are in 2024 finding ways to increasingly cut down on labor expenses. With agency staffing use trending downward, reducing overtime is a big focus..
To some in the industry, it’s a “stubborn sliver”.” To others, it’s a “mild headache” compared to the cost of agency staffing. But the bottom line is that overtime represents a current and significant front in the fight to regain margins, especially as certain key community-level positions remain difficult to fill.
The transition to overtime spending over agency staff is changing the nature of the existing senior living employment landscape. Improving overtime, reducing agency and improving retention are all obstacles operators face near the midpoint of 2024.
“There’s still a strong talent pool out there that needs to hear the opportunity we can offer for career growth,” said LCS Vice President of Human Resources Donna Boetger. “At the end of the day, we need more people to fill all of the open roles that we have—and will have—available in the future. There is so much opportunity for all.”
Overtime a ‘stubborn sliver’
Senior living operators including Discovery Senior Living, Priority Life Care and 12 Oaks Senior Living have made progress in removing agency staffing at communities in the last four years, focusing on employee retention, recruitment, and boosted wages.
Bonita Springs, Florida-based Discovery has seen rapid growth since 2022, spanning the launch of regional senior living brands, the acquisition of Integral Senior Living, and the establishment of the Discovery Management Group in April as the company’s restructuring effort nears completion, according to CEO Richard Hutchinson.
Given that fast pace of growth, the company has had to lean on use of overtime and agency staffing to keep up with demand, according to COO Bill Sciortino told SHN. Having added 108 communities in 2023, Sciortino said Discovery teams were encountering “an atmosphere of acceptance” regarding agency staffing in recently acquired communities in certain markets.
Sciortino said agency staffing represents 2% of gross payroll costs in the last two years.In 2024, overtime accounted for 5% of staffing costs compared to total payroll costs.
Sciortino noted overtime use was concentrated among Midwestern states that have historically seen slower recovery in the last four years.
He added the company’s acquisitions came in highly competitive or regulated hiring environments in California and the greater West Coast. To combat overtime, Discovery increased staff amenities, pay, and benefits in recent years to remove overtime spending from a community’s staffing journey.
“Overtime is like a stubborn sliver,” Sciortino said.
Fort Wayne, Indiana-based Priority Life Care’s overtime accounted for 3.6% of 2024 staffing expenses at its 60 communities nationwide, according to CEO Sevy Petras.
“Overtime is a mild headache at times, but I would gladly take that headache over agency staffing,” Petras told SHN.
In the next 12 to 18 months, Petras estimated Priority Life Care could reduce overtime to 2.5% of staffing costs.
“I would look for overtime to continue to slowly trend downward,” Petras said.
On the West Coast, higher acuity senior living provider Anthem Memory Care reported overtime costs accounting for 4.2% of total staffing payrolls, according to COO Lewis McCoy.
“Agency isn’t the first issue we’re trying to tackle,” McCoy said. “Staffing has been a significant challenge and overtime has received less attention in the last four years.”
While costing more than agency staffing, overtime helps operators maintain care quality with in-house staffers.
“We have an opportunity now to look at the unauthorized overtime and ensure that there isn’t anything that is just sort of being swept under the carpet—that those dollars add up,” McCoy added.
Southeastern senior living providers The Sage Oak, 12 Oaks Senior Living, and Pegasus Senior Living also told SHN of similar overtime staffing costs.
The Sage Oak CEO Loe Hornbuckle said overtime costs averaged 7% to 9% of staffing costs this year, but is still more affordable than paying agency staffing rates.
In the first quarter of this year, Pegasus reported an average overtime cost of nearly 4.3% of staff expenses, according to Pegasus Senior Vice President of People and Culture Katheryn Pigott. Pegasus has spent the last two years creating an analytics-based staffing model to support recruitment and identify future leaders.
Pegasus corporate leaders have urged regional teams to be “mindful” of staff burnout while removing agency staffing from communities. That also comes after the Dallas, Texas-based operator reviewed employee wages in relation to overtime use.
“We didn’t want to pin our employees into a situation where their overtime became their livable wage,” Pigott said. “We just wanted to be thoughtful in that respect.”
That follows a 2023 effort on staffing that saw Pegasus communities remain under 5% of staffing costs used on overtime on a quarterly basis, Pigott added.
12 Oaks President Greg Puklicz said the company’s success in reducing overtime usage across its 40 communities came from ease in filling vacant positions while eliminating agency use. Agency staffing costs in the first quarter of this year registered at $243,000. Based on that level of spending, the company is on a better track than in 2023, when it spent $2.1 million on agency staffing overall.
“We have open positions, but we don’t have acute shortages,” Puklicz said. “Overtime is filling the gap as needed mostly for call-outs.”
Retention takes center stage
Senior living operators have seen improvement in hiring new team members compared to the last four years as of late, as applicant pools have deepened and leadership development efforts take root.
With 90% of positions filled, Puklicz said 12 Oak’s focus on hiring has helped sustain recent growth. But a new challenge has emerged in retaining staff.
Improving employee turnover and retention has been an issue for operators, but it became even more acute during the pandemic. Even as communities are succeeding in the pace of hiring new staff, the so-called process of “closing the back door” remains a challenge.
LCS has focused recent growth around improving operations through optimizing data, hiring a data science team to identify key performance metrics for frontline leadership, along with sales and marketing staff. Des Moines, Iowa-based LCS operates and manages approximately 140 communities across the country.
On turnover, 12 Oaks saw a 49% employee loss rate within the first 90 days of hiring. Operators that spoke with SHN noted three periods of time crucial for improving employee retention: 90 days, 120 days, and two years post-hire.
“Staffing is the number one issue,” Puklicz said. “It’s been very impactful to take agency out of the budget that way… The first 90 days are the tipping point.”
That resulted in 12 Oaks working with ownership groups to increase employee pay and provide additional resources to support frontline community leadership, Puklicz added.
“That’s our most dangerous time,” Sciortino said of that 90-day hiring window. “It’s a risky period.”
But there’s been improvement in the quality and competencies of recent hires compared to the rapid pace of hiring between 2020 and 2022. To improve retention, Sciortino said corporate leaders have connected with community leadership to mentor new hires across key positions in a new program launched in February known internally as “Leadership Education and Development.”
The program is part of a DePaul University partnership for leadership development, wherein nearly 200 staffers will undergo leadership training at the university’s Driehaus College of Business in Chicago.
“We have to give future paths to our department leaders and raise them up,” Sciortino added. “We’re trying to teach them.”
To improve retention, LCS revamped its onboarding process to make connections with new staff, providing more insight into job specifics at hire,” Boetger said.
“We are also doing more to understand our workforce and why our good employees stay. We are using and capitalizing on those stories with our new employees and as we recruit for new roles,” Boetger said.
Hornbuckle compared an operator’s role in supporting staff to farming rather than hunting. In other words, quality staffers should be cultivated over time, not just found in the wider job market.
“We want to identify people in our markets and maintain those relationships and identify who could be a team member down the road,” Hornbuckle said.
