High Turnover in Hospices Correlates to Lower Margins

Elevated turnover rates are nibbling at hospices’ profit margins.

A recent, nationwide BerryDunn survey of home health and hospice providers found that those who have experienced high turnover rates also sustained significant blows to their bottom lines. Providers with a turnover rate of 10% or less among staff reported seeing margins rise on average by 18.94%. Meanwhile, those with turnover rates ranging from 21% to 30% saw margins drop by about 1%.

Out of 1,000 providers polled, 249 were hospice agencies. The data were part of BerryDunn’s National Healthcare at Home Best Practices and Future Insights Study.

The financial impacts of turnover could be falling harder on hospices than others, according to Lindsay Doak, senior manager of the home health and hospice team at New England-based accounting and consulting firm BerryDunn.

“We see from the study a higher overall turnover rate for all positions within hospice versus home health,” Doak told Hospice News in an email. “Agencies with turnover rates above 15% have an average 11% to 20% of their registered nurse positions unfilled, with an average 56% of respondents stating that they’ve had to turn away for referrals. [The] cost to replace staff combined with turning away referrals is the main reason for the lower profit margins.”

Rising turnover during the pandemic has led some hospice providers to temporarily halt, completely shutdown or sell off their operations due to an inability to recruit or retain a sufficient number of employees to provide care.

The ties between turnover volume and margin volatility are a top labor concern for hospices and other health care providers, according to Doak.

Around 86% of hospice respondents indicated that clinician shortages have had a negative impact on their organizations, and 8% stated the impact has been “extremely negative,” Doak said. The high cost of replacing health care professionals is a contributing factor, with providers doling out an average of 2.5x salary increases to new hires, she added.

Hospice worker wage and salary increases have ranged from 3% to 6% during the last two years. Admission liaisons, nurses, aides and information technology (IT) staff saw the largest increases, according to the National Association for Home Care & Hospice (NAHC).

Hospices have called on payers to raise reimbursement rates in order to offset wage hikes, inflation, and other headwinds.

The minimum wage went up in 19 states last year, though most did not reach the $15 threshold that many proponents have called for, according to the National Council for State Legislatures (NCSL).

Hospice leadership turnover also correlates directly with other staff leaving an organization, according to Doak.

BerryDunn’s findings showed that a lack of formal, strategic leadership succession planning can “definitely lead to increased employee turnover” as a result of poor transitioning, she said.

Hospice participants were “much less likely” to have a formalized structure in place than home health providers, Doak added.

In addition to the margin impact, staffing turnover rates can hurt a hospice’s quality scores.

BerryDunn researchers calculated a composite of hospice study participants’ Consumer Assessment of Healthcare Providers and Systems (CAHPS) family satisfaction outcomes. Hospices that reported turnover rates higher than 21% saw “a significant decline” in their CAHPS scores, according to Doak.

Hospice respondents with turnover rates of 10% or less had composite scores around 83.4. These scores trended around 76.5 for providers with turnover that exceeded 30%. 

It will be “critical” for hospices to monitor their publicly reported quality ratings, said Doak. These began appearing on the U.S. Centers for Medicare & Medicaid Services (CMS) Care Compare website last month.