The Virginia State Budget and the Rising Costs of Registered Nurses

by James C. Sherlock

I was asked yesterday by a reader about the relationship between nursing homes, rising registered nurse salaries and the new Virginia budget agreement.

Good questions. Virginia’s workforce includes nearly 70,000 registered nurses.

The state pays its workers, but it also pays its Medicaid share for private sector nurses. Pay for private sector workers is based upon market conditions. The market wage for registered nurses nationwide increased dramatically during COVID.

Perhaps the only good thing to come out of that mess was that registered nurses, of whom Virginia has 11% fewer than demand calculated by the federal Health Resources and Services Administration, got very large pay and bonus raises, and the new wage points appear to have stuck.

If the laws of economics work here, that will over time increase the number of nurses if we can educate and train them in the required numbers.

The latest figures from the Bureau of Labor Statistics for all states show that the median wage for an RN in Virginia was $79,700 a year. In Northern Virginia portion of the D.C. metro area, the median was $92,800.  The underlying data are a couple of years old.

Wages and bonuses can vary a lot among Virginia hospitals, nursing homes, home health agencies, nursing school staff and government employees, and are higher or lower depending on specialty. The private sector offers $10,000 to  $20,000 signing bonuses paid out after the first year.

Employers of course must pay payroll taxes and other expenses related to employees, and thus their costs will generally exceed $100,000 per RN.

Virginia RNs are still underpaid compared to national figures. The mean annual wage for America’s 3 million registered nurses in May was $89,010 compared to Virginia’s $79,900.

The federal Centers for Medicare/Medicaid Services, aware of some of the questionable business models of bad actors in the nursing home industry, published last week a proposed rule to both increase the minimum number of RNs in nursing facilities and to require all nursing facilities to reveal every year how much of the Medicare and Medicaid payouts go to salaries and related expenses.

So, Medicare and Medicaid costs will go up yet again.

State RN employees. For the state, which employs a lot of registered nurses on its headquarters staffs, in its hospitals and its behavioral health facilities, it means that state pay for nurses must rise to be competitive.

The RN hiring range today, September 4th, on the Commonwealth’s job page for positions in Roanoke and Montgomery counties with the Virginia Department of Behavioral Health and Developmental Services is $74,297 to $102,530. For those positions, psychiatric, mental health, or long-term care experience is listed as preferred.

I do not know whether the budget agreement provides sufficient funding and guidance language for the state’s own staffing needs at those higher costs.

Virginia Department of Health Office of Licensure and Certification. The Virginia budget has for long underfunded OLC staffing. OLC is run, and largely staffed, by RNs.

The last time I looked at it in detail, state funding for OLC was based upon a 40+ years-old user fee that had not been increased for inflation. We all wish we were paying 1980 prices.

42 United States Code, Sections 1395aa and 1396 make state survey agencies like OLC responsible for determining whether institutions and agencies meet requirements for participation in the State ‘s Medicare and Medicaid programs. The federal government pays for those services.

OLC is also responsible for state licensure inspections for all medical facilities and home nursing organizations.

Without the federal funding, OLC would not be able to operate at all.

The good news, as I have written earlier, is that with federal funding comes federal authorities and responsibilities. Which are far more protective of patients than are their state counterparts.

Very vulnerable patients utterly depend upon those inspections and surveys being done on time and well. OLC is good at that but understaffed to meet the full requirement.

Bottom line. The state budget agreement must accommodate the market wage changes for its own RN employees and in its Medicaid budget. And it urgently needs to fully fund OLC staff requirements.

Soon Virginia will inevitably have to increase its budget yet again for Medicaid to accommodate the costs of the new CMS staffing minimums for nursing homes.

Again, I do not know at this point whether or how far the budget agreement takes the necessary steps in those converging paths.

I hope it does. The special session meets Tuesday.