Don't be a slave to wages.

A contributing writer to Contemporary Long Term Care, Jim Moore is president of Moore Diversified Services, a Fort Worth-based senior housing and health care consulting firm, and author of Assisted Living 2000.

To control labor costs, focus on direct-care staffing

ASSISTED LIVING OPERATORS FREQUENTLY ASK, "HOW DO I KNOW if my labor costs are in line?" Good question, deserving a detailed answer. Consider these sobering facts: Staffing represents 65 to 70 percent of operating expenses for most assisted living communities. For a community with typical operating expenses of $45 per resident day, that adds up to about $30. Approximately 70 percent of a community's full-time equivalent employees (FTEs) are paid between $6.50 and $9 per hour, according to my company's database. This doesn't leave much room to reduce hourly rates. Yet the overall average cost per employee for all positions- loaded for payroll taxes and fringe benefits at 22 to 25 percent-is approximately $24,000 a year, or $11.50 per hour.

Many forces pull labor costs upward. The need to provide increasing assistance with the activities of daily living can result in operating cost creep. The tight labor market makes it hard to keep labor costs down. Meanwhile, labor unions are eyeing senior housing and long term care as one of their few remaining membership growth opportunities. (For details on these forces, see the October 1997 "Workforce Wars" feature.)

Your three key departments are dietary, with typical operating expenses of approximately $8 to $12 per resident day; direct resident care, at $8to $11 a day; and administration, at $6.50 to $8 a day. Except for direct care and dietary, you can expect your core staff positions (typically administration, security, activities, marketing, maintenance, and transportation) to remain relatively stable in number with moderate turnover rates.

To control your labor costs, therefore, you must concentrate on your direct-care staff. Bearing in mind that staffing patterns must be customized to fit a community's situation and resident profile, you'll probably need about .45 to .50 FTEs per occupied unit. That works out to approximately 40 FTEs, of which 14 are direct-care workers, for an 80-unit assisted living community at 93 percent occupancy. Special care units for people with Alzheimer's and related dementias require more caregivers per resident (see chart). These five strategies can help you control staffing costs:

* Zero-base your core staffing. Define your staffing needs from the ground up, as if you had no workers in place. Write a job description for every position. Include specific goals and objectives and-most importantly-tangible expected outcomes. Then look at each position you have created and ask yourself: "Can this person do more?"

* Avoid cost creep. Many sponsors report that frailer residents need more direct care than the 45-minute minimum covered by a standard monthly fee. Just 20 additional minutes per day translates to an additional operating cost of approximately $280 a month. Adopt a pricing strategy that accounts for these additional ADL needs. (For details, see the February 1999 Assisted Living column).

* Minimize employee turnover. To reduce costly employee turnover, you may need to increase your hourly rates or upgrade your fringe benefit package. Remember, you're competing not just with other senior living communities but with other employers vying for the same type of workers.

* Maximize your use of staff time through creative scheduling. You can reduce your total FTEs, and hence the number of benefit packages you must provide, by using part-time employees or paying staff for overtime. However, this may make it hard to deliver high-quality, consistent services.

Some providers advocate the "universal worker" approach, in which one employee provides a combination of direct care, housekeeping, and meal service. But hard evidence of staff reductions and tangible cost savings through this method has proven elusive, and employees tend to resist doing more than one job for just one (low) paycheck.

Others optimize labor productivity and minimize downtime by carefully planning mealtimes, sequencing cooking, assembly, and prep tasks and scheduling eight-hour shifts that span both lunch and dinner.

* Exploit available economies of scale. If you are a multi-facility operator, try to shift some non-direct care core staff expenses, such as marketing or activities planning, to the central office, spreading these fixed costs across more than one community. If you operate just one or two facilities, you face significant challenges that will only intensify as industry consolidation continues. With a laser focus on operations, you can remain viable, but you may have to accept slightly lower profit margins than the bigger players.

                        Direct-care staffing ratios
          Typical ratios between direct-care FTEs and residents.

                    Ratio per shift                           Direct-care
Type of facility          1st           2nd          3rd         FTEs
80-unit              1:17 to 1:20   1:20 to 1:25 1:40 to 1:50  11:6-14.6
assisted living [*]
24-unit Alzheimer's   1:7 to 1:9    1:9 to 1:11  1:15 to 1:20   8.6-10.8
special care


(*.)at 93% occupancy
Source: Moore Diversified Services