While nursing homes have traditionally been better able to compete for and keep workers in an economic downturn, a possible recession coming on the heels of COVID-19 will test conventional wisdom.

Consumers typically cut back on discretionary spending during a recession, but economic and healthcare staffing experts speaking during last week’s McKnight’s Online Forum noted that spending on nursing homes remains fairly consistent. Skilled nursing providers have historically been able to maintain census within 1 to 2 percentage points, they noted.

That’s good news for providers still struggling to recapture census that was lost as patients and referring partners turned away from nursing homes early in the pandemic. But many nursing homes have also had to limit admissions — and by extension, their own regrowth — due to staffing shortages.

In past recessions, many providers have found hiring and retaining staff gets easier because employees are more concerned with stability than advancement. That’s helped by consumer-driven businesses cutting back on hiring.

“Less competition in the labor market is a good thing,” said Ben Tengelsen, PhD, an economist and vice president of data science at staffing firm IntelyCare. “Job mobility during a recession decreases a lot. There are fewer people quitting their jobs; there are fewer people switching jobs; there’s less on-the-job searching for other jobs…. Your nursing assistants are not lured away by jobs at Target or other retailers.”

In SNFs’ favor

Already, there are signs that job-switching is slowing down across the US economy.

The Federal Reserve’s Center for Microeconomic Data reported last week that the rate at which workers are transitioning to different employers dropped to 4.1% last month from 5.9% in July 2021.

The Fed noted the decline was most pronounced for women and for respondents with annual household incomes of less than $60,000 — a description fitting many frontline nursing home staff.

That shift of leverage in the SNF employer’s favor is good for human resources staff, the bottom line, and care quality.

Nursing homes “have better quality when unemployment rates increase,” found a 2019 analysis of nearly 4,000 studies by economist John Bowblis, PhD, professor and Research Fellow of the Scripps Gerontology Center at Miami University, and Sean Shenghsiu Huang, PhD, of Georgetown University.

“Higher unemployment rates are associated with fewer deficiencies and lower deficiency scores,” they reported. “This countercyclical relationship is also found among other quality measures….Improvement in staffing is likely contributing to better quality during recessions. Interestingly, these effects predominantly occur in for-profit NHs for deficiencies and staffing levels.”

The pair calculated that a 5.6 percentage point increase in the unemployment rate ( a level seen during the Great Recession of 2007-2009), would lower the number of deficiencies, deficiency scores, facility-acquired pressure ulcers, the use of physical restraints and resident weight loss.

That led Tengelsen to conclude during the Thursday webinar that nursing homes are typically recession proof, “and then some.”

“They stand to benefit from the labor market fluctuations,” he said.

‘Weird’ economic indicators in play

Nursing homes are down about 224,000 workers since the start of the pandemic, and gains have been limited to a few thousand a month while the unemployment rate hovers just above 4%.

But whether the nation is really headed for a recession, and how the workforce will respond this time around, is still up in the air.

Healthcare experts are watching economic indicators closely for signs of a recession, and about one in five economists already thinks the nation is in one, Tengelsen said.

“Things are officially getting weird in that some economic indicators are indicative of a shrinking economy or a recession and other economic indicators are indicating that we’re doing great or even improving,” he noted. 

Gross domestic product, a popular measure of goods and services provided, has declined for the past two quarters. But unemployment is at near-record lows, and unemployment usually jumps in a true recession.

Meanwhile, an 8.5% inflation rate has sent costs soaring, with providers pointing to staffing and supply costs as eating into their bottom line.

“Inflation is impacting nearly every input into operations: supply costs, insurance premiums, and wage adjustments, just to name a few,” CliftonLarsonAllen Principal Stephen Taylor told McKnight’s last week. “We are seeing that increases in operating expenses, chiefly driven by inflation, are outpacing increases in net revenues, which is challenging margins for operators.”

Getting staffing costs under control and reducing turnover would bring much-needed relief to the sector. But expectations and reactions may be different if and when the US slides into a recession.

Will flexibility needs keep workers home?

“It could be different this time around because COVID changed everything,” Tengelsen notes, adding that the rise of the gig economy in general and healthcare staffing in particular could influence behavior.

Across all sectors historically, as unemployment increases, the percentage of workers employed by staffing firms decreases. That’s also good for nursing homes because there’s an expectation of less agency staff in buildings, and they’re “in a better position” to be fully staffed by dedicated workers, Tengelsen said.

But questions about workers’ tolerance for a return to more structured work leaves some uncertainty about what lies ahead. IntelyCare surveys found the share of long-term care staff seeking flexibility soared from 18% pre-pandemic to 40% in 2022.

“That complicates things quite a bit,” said David Coppins, co-founder and CEO of IntelyCare. “People that prefer flexibility but don’t absolutely need flexibility, they’d be willing to take on schedules … but from everything we’ve seen so far, that number is not going to shrink back to 18%.”

Tengelsen said even if providers see less job-hopping for things like 50-cents more pay per hour, their hiring strategies should remain nuanced in anticipation of workers’ changed attitudes about work-life balance. That may be the best way to capture the same positive effects of past recessions.

The free McKnight’s webinar titled, “Will the recession be good medicine for your staffing ills?” is available on-demand and reveals more about current economic indicators and possible workforce solutions.