Background: Nursing homes have long struggled with nursing staff shortages. These staffing gaps have caused nursing homes to increasingly rely on agency or contract labor hired through third-party agencies. While agency nursing labor may enable nursing homes to maintain resident care, they cost substantially more than permanent staff. These increased expenses can put downward pressure on nursing home financial performance. This study, rooted in Resource Dependency Theory (RDT) and Transaction Cost Economics (TCE), investigated the association between the use of agency nursing staff and nursing home financial performance.
Methods: This study utilized six secondary data sets: Payroll-based Journal (PBJ), Care Compare Five-Star Quality Rating System, Healthcare Cost Report Information System (HCRIS), LTCFocus.org and the Rural-urban commuting area (RUCA) for 2018-2022. The dependent variable was nursing home operating margin, a widely used financial measure which indicates the entity’s operating profitability. Independent variables included the proportion of agency nursing staff hours per resident day to total nurse proportions for registered nurses (RNs), licensed practical nurses (LPNs), and certified nursing assistants (CNAs). A multivariable linear regression model with two-way (facility and year) fixed effects was utilized to examine the relationship between agency nursing staff and nursing home financial performance. The final analytical sample was 79,398 unique nursing homes.
Results: Regression analysis indicated that greater reliance on agency nursing staff across all three categories RNs (ß = -0.325, P < 0.001), LPNs (ß = -0.345, P < 0.001) and LPNs (ß = -.037, P < 0.001) were all associated with lower operating margin.
Conclusions: The reality is that there is still a shortage of nursing staff. Recent changes to nursing home minimum staffing requirements may exacerbate this issue. Nursing homes should carefully consider the impact of agency nurse employment on total expenses. While policy makers need to consider the impact that agency nurse staff can have on resident quality and nursing homes financial performance.
