October 13, 2015 DOL Wage Rule Takes Effect, Provider Reaction Mixed
Federal overtime and minimum wage protections for home care workers officially took effect Tuesday, after a protracted and still ongoing legal battle between the Department of Labor and provider associations.
The DOL has said it will not enforce the provisions for 30 days, but as the effective date arrived, some home care providers voiced sharp concerns about how the rule will impact their business models and the industry as a whole, saying the regulation could compromise their ability to offer certain services and will increase costs for consumers. Yet, industry reaction has not been uniform. Other providers see the outlook as brighter, saying that while the sector as a whole is anxious, higher home care rates are sustainable, and well-prepared companies will gain at least a short-term competitive edge.
Meanwhile, groups that had advocated for the labor protections hailed the day as a historic moment and a triumph for workers, while pushing for state Medicaid programs to make needed adjustments for providers that rely on these reimbursements.
Live-in care doomed?
Live-in care is an area of particular concern to Lenny Verkhoglaz, CEO of New Jersey-based private duty company Executive Care. While it has varied by state, most live-in workers have been paid on a per-day basis, but provisions of the new regulation would change them to an hourly payment model. The impacts of the DOL regulation could be so severe that live-in home care might cease to exist within two years, Verkhoglaz told Home Health Care News.
“Even if we start live-in workers at minimum wage, because of so many hours worked during the week, the cost of paying them shoots up, and that simultaneously brings up the cost to the client,” he said. “I understand what the DOL is doing, they want to be sure workers are paid for what they do, but they have little understanding of what live-in care is all about.”
Typically, the price tag for live-in care—in which a worker sleeps and eats in the client’s residence—might range between $225 and $240 a day, Verkoglaz estimated. That would increase to about $500 a day under an hourly payment model for an around-the-clock home care worker presence, he said.
Other provisions, such as a mandate that live-in workers take their breaks off-premises, also do not make much sense and are putting the live-in model under strain, according to Verkhoglaz.
While live-in care is not prevalent in all states, Verkhoglaz said it is a notable part of the industry in the places where Executive Care has franchises—New Jersey, Connecticut, North Carolina, Florida and Texas. This is in part because these markets have significant immigrant populations, and immigrants are attracted to becoming live-in home care workers because it eliminates the need to rent an apartment or buy food, he said. So, disturbing this care model could have significant societal repercussions, he argued.
“I think the regulators need to look at the business model of the live-ins. Look at the typical day of live-in caregivers to understand they’re getting food, a roof over their head,” he said. “As a nation, we want to keep clients in their own homes. It’s less expensive for clients and society as a whole.”
As for how Executive Care is adapting to the regulation, it’s “trial-and-error” right now in terms of how to defray the costs associated with compliance, according to Verkhoglaz. He noted that some clients have agreed to pay higher rates but predicted that, ultimately, the increased costs would have negatively affect the industry. Some home care will go “underground” while other potential home care clients will opt for assisted living, he said. Online companies that purport to be home care providers but actually are matchmaking services between families and caregivers also will get a boost, he predicted, as people seek out patchwork care to keep costs down.
“It’s going to hurt legitimate home care companies,” he said. “It’s going to hurt the business and seniors, their families.”
Minimum wage, minimum worries
One thing that Verkhoglaz is not so concerned about is the minimum wage aspect of the DOL regulation. That’s because Executive Care has for many years been following New Jersey’s overtime laws, which have applied to home care workers. Other providers, such as Ohio-based FirstLight Home Care, also express little anxiety about the minimum wage components of the regulation.
FirstLight always has mandated that its franchisees pay overtime, CEO Bill McPherson told HHCN.
The writing has been on the wall for a long time about the extension of these wage and overtime protections, and shrewd providers have already baked in labor costs appropriately, McPherson said. For providers like FirstLight that have done so, the implementation of the regulations will not affect margins, he noted.
“Our management and our franchisees are actually very excited about what’s going on and the current ruling,” he said. “It’s the right thing to do. And [less prepared] competition is going to be affected adversely.”
Some particular home care agencies might be caught flat-footed and pay the price, but McPherson does not believe that the industry as a whole is likely to be set back by the DOL regulations. Families will be willing—and able—to pay some of the increased costs that providers will face, he said.
“For providing quality home care … we think whatever the rate is, more times than not the family is going to absorb it,” he said. “They want the right care for their parents, and the cost of a skilled care facility is five to six times higher. So what’s their option? It still costs more.”
Still, while McPherson and Verkhoglaz are in a good position in terms of minimum wage, they are not saying that they are necessarily representative of the home care industry as a whole. In fact, McPherson believes the “bulk” of the industry is nervous about having to pay the federal minimum wage to their workers, and Verkhoglaz says to keep a wary eye on how providers will be impacted in states where home care workers have not been under state-level minimum wage rules.
History in the making
The workers’ rights and other labor advocacy groups that have been pushing for the overtime and minimum wage protections were celebratory Tuesday, but also were working to disseminate information about the regulations to stakeholders in the industry and government.
“Today’s implementation of the federal home care rule marks an historic turning point for our nation’s home care workforce and everyone who will need home and community-based services and supports,” said Jodi M. Sturgeon, president of the Paraprofessional Healthcare Institute, in a prepared statement. “Extending federal labor protections to home care workers is a significant step toward building the quality, stable home care workforce our nation needs.”
PHI also released new policy guidance for implementing the new rule. It focused on how the state of New York’s Medicaid program should be preparing for coming changes, given that Medicaid is a notable payor for some of the providers affected by the DOL’s rule in that state and around the country. Among the steps that PHI is recommending are to collect current workforce data to accurately budget for new costs by mandating new data reporting requirements for managed care plans and licensed home care services agencies.
The state also should begin collecting data to evaluate whether a Medicaid reimbursement rate adjustment is called for, and to institute policies so that overtime hours can be granted as needed and appropriate.
Providers that rely heavily on Medicaid as a source of revenue might be facing especially difficult times ahead, Verkhoglaz told HHCN. Some providers now will be facing new costs—such as paying workers for travel time between clients—that Medicaid typically will not cover.
Yet, while Medicaid programs may make reimbursement rate adjustments and other changes driven by the DOL rule, even in the existing system there are examples of providers that have implemented the requirements while maintaining bottom-line success, PHI has emphasized. The organization has published a case study document that includes a look at how Addus HealthCare Inc. (Nasdaq: ADUS) has managed to pay aides for travel time.
The National Domestic Workers Alliance (NDWA) also issued a statement calling Tuesday “historic.” The organization encouraged workers to visit an NDWA website to access timesheets designed to help them track their hours and pay. It also linked to a document outlining some of the requirements and expected impacts of the regulation, and alerted workers and others to potentially illegal fallout—such as a state Medicaid program taking an overly restrictive approach, such as by putting strict caps on workers’ hours, in order to control costs.
Those hoping that the regulation might yet get overturned still have a chance of seeing that become a reality: The National Association for Home Care & Hospice (NAHC) has indicated that it might attempt to get the Supreme Court to take the case. But barring intervention from the high court, there is little chance that the rule will be revised in any way, even if a less labor-friendly administration takes the White House—at least, that’s Verkhoglaz’s opinion.
“Even if we get a Republican administration next year, it’s not a sensitive enough issue to get changed,” he said. “It’s going to get ingrained.”
Written by Tim Mullaney with reporting by Kourtney Liepelt