Factors Slowing Home Health Care’s Labor Arbitrage

Changing industry dynamics might be slowing home health care’s labor arbitrage.

Prior to 2020, a major workforce priority for several home health providers was making sure their clinicians were “operating at the top of their license.” Generally, the belief was that operators could stretch staffing capacity and reduce visit costs by shifting certain duties from upper-level clinicians to lower-level ones, when safe to do so.

In some cases, for example, that meant handing off the duties of a registered nurse (RN) to a licensed practical nurse (LPN). In others, it meant sending a physical therapist assistant (PTA) into a patient’s home instead of a physical therapist (PT).

I first picked up on this trend in 2018 after speaking with Humana Inc.’s (NYSE: HUM) former CMO, Roy A. Beveridge, who now serves as a managing partner at Avalere Health.

“Let’s get everybody working at the top of their license, which is going to improve care, reduce cost and improve outcomes,” Beveridge explained.

Over the past 12 months, however, I’ve heard home health leaders speaking much less frequently about clinicians working at the top of their licenses. In fact, I struggle to recall a single instance where a provider executive touched on the topic.

The reason for that is twofold, I believe.

Despite an ongoing need to stretch clinical capacity, home health patients are becoming more medically complex, meaning there may be fewer opportunities to leverage an LPN in lieu of an RN. At the same time, there’s simply a dwindling pool of LPNs, PTAs and similar positions.

I explore these and other labor trends as part of this week’s exclusive, members-only HHCN+ Update.

Patient characteristics

Compared to the overall Medicare population, individuals who use home health are older, sicker and slightly more rural, according to the 2021 Home Health Chartbook 2021. The “typical” home health patient also tends to have a higher number of chronic conditions, with 43.1% of users having at least five or more.

While their characteristics are complex, these patients have always been the bread and butter of home health providers. That was certainly true when everyone – including the CEOs of some of the largest providers in the country – was talking about clinicians operating at the top of their license.

“We want to employ more LPNs, and for specific types of work, we want everyone to practice at the top of their license,” Paul Kusserow, the former CEO of Amedisys Inc. (Nasdaq: AMED), said in January 2020. “You might see a little increase this year in terms of RNs and PTs, but you will see increases in LPNs and PTAs. So, we’re looking to drive that.”

So what changed to make workforce optimization less of a talking point? COVID-19.

Throughout the first and second year of the public health emergency, patients’ average length of stay at hospitals increased, along with their various acuity index values, health care technology company WellSky explained in a recent report. That, in turn, suggests patients were being discharged from hospitals to post-acute settings sicker than they were in years prior.

The proliferation of hospital-at-home programs and similar initiatives designed around providing higher-acuity care in the home during the pandemic likewise contributed to home health patients becoming even more medically complex.

“We’ve proven throughout the pandemic that we’re now able to treat significantly higher-acuity patients in their homes at a fraction of the cost of in-patient care,” Josh Proffitt, president and COO of LHC Group Inc. (Nasdaq: LHCG), told me in January. “That’s a force for not just 2022, but for the foreseeable future.”

Area Agencies on Aging aren’t home health organizations, but they often operate in concert with providers to care for seniors. In a recent survey of nearly 200 Area Agencies on Aging, over 95% of respondents reported seeing an increase in medical complexity.

A separate report from CarePort, a WellSky company, directly found that patients discharged to home health providers in 2022 have more complex conditions than in 2019. Specifically, the report documented an 11% increase in patients’ average comorbidity scores, with common co-morbidities being congestive heart failure, COPD, hypertension, neurological disorders and diabetes.

Clinician demand

Employment of licensed practical and licensed vocational nurses is projected to grow 6% from 2021 to 2031, according to the U.S. Bureau of Labor Statistics (BLS). About 58,800 openings for licensed practical and licensed vocational nurses are projected each year, on average, over the next decade.

Meanwhile, overall employment of PTAs and aides is projected to grow 24% from 2021 to 2031, much faster than the average for all occupations. About 25,500 openings for physical therapist assistants and aides are projected each year, on average, over the next decade.

As demand for LPNs, PTAs and similar-level positions rises, so does compensation. Compared to 2021, for instance, the median salary for an LPN was up $3,000, according to the 2022 Nurse Salary Research Report.

Yet even with demand-driven pay bumps, LPNs, PTAs and others are exiting the field at an alarming rate. Out of all nursing-related professions, female LPNs or licensed vocational nurses are among the most likely to consider leaving their jobs, according to the salary report.

At least for LPN roles, a leading factor in job stability is their direct supervisor. Often, LPNs are more likely to stay in a role if their interactions with overseeing RNs or other managers are positive.

“Providing a positive environment with collaborative opportunities, such as two-way feedback, can be highly effective in motivating LPNs/LVNs to stay with an organization,” Felicia Sadler, a partner in Relias’ acute solutions division, noted in the report.

These trends and the demand for such roles, I believe, help explain why home health providers are using the “top-of-license” line less frequently.

Other considerations

Another, more subjective reason why some home health operators may be pressing pause on labor arbitrage: It’s a form of clinical brain-drain. Sachin H. Jain, a physician by training and the leader of SCAN Group, wrote about this very topic in a recent op-ed.

“Significant differences in training length and intensity are casually being washed away,” wrote Jain, who pointed out “labor arbitrage” was happening throughout health care.

To some, it also looks like putting profits ahead of clinical quality – however fair or unfair that perception actually is.

“Patient care is being moved around to individuals with different levels of professional training without any clearly defined architecture delineating where and how patients are best served (other than cost),” he continued.

For context, one home health CFO previously explained that on “the LPN/RN [front], for every 1% moved there, it’s roughly half a million dollars of EBITDA improvement.”

To avoid clinical brain-drain, Jain urges health care organizations to set clear boundaries delineating what level and type of care is appropriate for an individual to provide depending on their level of training.

Significant differences in training length and intensity are casually being washed away.

– Sachin H. Jain, president and CEO of SCAN Group and Health Plan

My colleague, Hospice News editor Jim Parker, recently spoke with Jain for a separate story. During that conversation, he asked Jain to elaborate on his op-ed and the downsides of handing off clinical responsibilities.

“The worst kinds of clinical organizations treat people like they’re interchangeable parts – as if expertise, experience and training don’t matter,” Jain told Hospice News. “And I think the people who suffer the most from this are the patients, because they’re looking for people who are skilled at taking care of a wide range of problems and situations. And what they’re instead getting is a level of experience that doesn’t necessarily match what they need.”

Furthermore, while providers partly see labor arbitrage as a way to stretch clinical capacity amid staffing shortages, it may actually be having an opposite effect, he said. Clinicians want to be seen as experts and highly trained professionals. When they’re instead viewed as “interchangeable parts,” they leave their posts and search for other opportunities.

“That’s at the heart of why people are leaving the clinical workforce,” Jain said.

Looking ahead

It’s tough to quantitatively pinpoint just how much home health labor arbitrage has cooled off. But again, at least from my view, you rarely hear executives talking about clinicians operating at the top of their license these days.

But that may soon change. If the U.S. Centers for Medicare & Medicaid Services (CMS) moves forward with Medicare cuts in home health next year, providers will be forced to consider all options for getting leaner – and doing more with less.