Turnover Cost Eldercare Providers Over
$4 Billion Per Year

Copyright 2005

A recent press release from the Institute for the Future of Aging Services (IFAS) points out the impact of turnover on long-term care providers in the U.S. Based on conservative estimates of 45 percent turnover and $3,500 per hire, the annual nationwide cost of high staff turnover in this industry is nearly $4.1 billion!

The price tag of high staff turnover among nursing and home health aides is starkly presented in a new Better Jobs Better Care practice and policy report, “The Cost of Frontline Turnover in Long-Term Care.” The report, authored by labor economist Dorie Seavey, highlights how increased retention in long-term care can reduce costs and improve quality.

“In addition to facilities paying a high price, turnover costs are also borne by workers, payers and especially the consumers or residents themselves. Workers pay a price through greater stress and risk of injury when turnover results in short staffing. Public payers – Medicare and Medicaid – could get more for their money if they didn’t have to implicitly pay for high turnover rates and costs. Elders pay the heaviest cost of all, in quality of care they receive from too few, too new or temporary staff.”

Using data from numerous studies in long-term care facilities, the report combines direct and indirect costs of replacing direct care employees, who provide the majority of hands-on personal care to older disabled adults. Direct costs, which can total about $2,500 per loss for each worker, include hiring temporary staff or paying overtime wages to current staff until replacements come on board; advertising, interviewing and background checks; and orientation and training of new employees. Indirect costs, which can add another additional $1,000 to the cost of replacing an employee, include lower productivity of temporary and new staff, reduced service due to staff shortages, and low morale owing to high turnover.

Some studies reviewed in the report found direct costs can run as high as $5,200 when human resource staff time is taken into account.

The report recommends long-term care providers calculate the cost of turnover in their own organizations to understand how investments in retaining employees are helping or hurting their financial situation. It also urges policymakers to make turnover costs more visible to all groups with a stake in improving the quality of long-term care.

While this report did not offer solutions to the turnover challenge, it seems likely that systematic use of honesty-integrity assessments and job fit assessments could provide substantial and cost-effective reductions in the long-term care sector, as it has in other health care settings. Using the Step One Survey II, Warm Hearth Village, a Blacksburg, Virginia based continuing care facility combining independent and assisted living units with a 60-bed nursing home, accomplished a 10 percent decrease in their annual turnover in the first year of use. Combining assessments with other initiatives, the facility expects further improvements in 2005.