One of the most pressing challenges currently facing the senior living and skilled healthcare industry is staffing. This nationwide problem of employee shortages is the talk of facilities around the country as 2024 begins.
The challenges of recruiting, hiring and retaining qualified staff members has grown more urgent in the last several years due to a shifting marketplace. With fewer new workers entering the workforce, high employee turnover and an aging population demanding more care, the senior living sector is feeling the pinch.
The issue has become so important that it probably will come up when companies seek loans for expansion. Mortgage brokers can prepare their clients for successful loan requests by addressing the issue up front when talking with lenders.
Silver tsunami
While the staffing problems for senior housing existed long before 2020, the COVID-19 pandemic and the events that followed only served to escalate the problem to crisis levels in many regions. Making the situation even worse is the effect of the “silver tsunami,” the large contingent of baby boomers reaching retirement age and needing services themselves.
The plight of the senior care sector cannot be ignored and is twofold. With approximately 10,000 baby boomers reaching retirement age every day until the year 2030, the senior housing workplace is losing workers faster than they can be replaced. At the same time, there is an increasing population of seniors who are going to require some level of care in the coming years.
Such demand is a two-edged sword for operators. It will allow them to expand their operations, but they also must find a way to hire workers to care for the growing number of residents. The problem of staffing, both skilled and unskilled, in senior living and skilled care facilities isn’t one that is going to solve itself anytime soon, and senior housing companies need a proactive and comprehensive strategy to meet the needs of this future growth.
Honest appraisal
When it comes to obtaining a loan, rather than ignoring the elephant in the room, operators should be direct and frank with lenders. Operators of senior-living facilities should tell lenders about the true picture of the current staffing situation at their facilities, as well as any historical barriers they have faced in recruiting or maintaining appropriate staffing levels.
A seasoned lender with industry-specific experience isn’t going to reject the loan simply because the operator faces staffing challenges. Instead, they should have insights, connections and workarounds in many cases that can help make obtaining funding feasible and affordable.
More specifically, operators should seek out a lending institution that specializes in the senior living and skilled care industry and will view the borrower-lender relationship as a mutually beneficial partnership rather than a business transaction. Borrowers should seek out lenders who believe that a partnership mentality puts an onus on both parties to brainstorm a scenario that addresses the needs of all sides and where they work together as equals with the same goal in mind: success and profitability.
Owners and operators of senior facilities need to work with industry-informed lenders who have the expertise to identify and understand their facility-specific staffing expense numbers. The lender should know what would be considered normalized labor expenses, and how to anticipate and prepare for future needs.
Not all nursing homes handle staffing the same, and some operators do it more efficiently and effectively. Those operators should be rewarded in policy underwriting. In turn, lenders should take the time to understand these expenses in more detail.
Common questions
A historical analysis of staffing costs is a major component of the loan underwriting process for lenders. Examining these expenses during the COVID-19 period (2020 through 2022) compared to current staffing costs and reconciling any differences is a necessary exercise.
The COVID-19 pandemic caused a new, unique and previously unknown set of staffing problems. Reflecting on those circumstances offers powerful insights into how to address future staffing needs and implement strategies, in both a typical and an emergent environment, such as a pandemic, natural disaster or other large-scale crisis.
Another major point to clarify is the effect of agency nursing, if any, on the project. A growing number of senior living and skilled care operators are reporting moderate to severe inflation in the cost of nursing wages as nurses leave care home jobs for higher pay at nursing agencies. Facilities are then forced into a position of hiring those same agencies to fill vacancies at a greater cost, a stop-gap measure that is not sustainable over the long run.
Innovative strategies
Lenders will want to know what plan has an operator used to overcome struggles to find nurses and fill staffing positions in the past. Together, lenders and borrowers should be able to identify historical barriers as well as examine any previous strategies that have yielded positive results. It also may be useful to study any past approaches that didn’t work well and figure out whether those efforts can be tweaked to make them more effective.
Lenders want to hear unique solutions to staffing issues that have been successful in the past, as well as creative ideas for future implementation. Some of these solutions may include same-day pay, retention bonuses, partnering with educational organizations to recruit nurses right out of school and accessing international labor pools.
It’s very important to find an industry-informed lender because they can be a tremendous resource when it comes to new strategies for operators who are feeling the crunch of skilled nursing shortages. They may have ideas that operators haven’t tapped into before.
The last issue that lenders will be interested in is recently implemented staffing requirements by the state (where applicable) and how they are or will affect staffing expenses. These mandates vary from state to state, so there is no one-size-fits-all solution to the staffing challenge.
Additionally, some states have increased staffing requirements in the wake of the COVID-19 pandemic to be more sufficiently prepared for the future. Industry-informed lenders will be very aware of local state requirements and able to project potential expenses related to staffing and how those expenses may continue to change in the years to come.
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By being candid with lenders about staffing issues and strategies, borrowers can identify what has been working well and where improvement might be beneficial or necessary. Addressing both current staffing issues as well as what may arise in the future can boost an operator’s chances of financial success in the long term. ●
