Salary Tally: Administrators $72, 761, DONs $62, 500

11/29/04
By: James M. Berklan, McKnightsonline.com

Nursing home administrators’ median annual salary rose 3.94% this year, the biggest leap in three years and the fifth straight increase of 2.95% or higher. The uptick raised administrators’ national median to $72,761, according to the 2004-2005 Nursing Home Salary and Benefits Report.

Salaries for directors of nursing, meanwhile, jumped nearly as much -- 3.61% -- to hit a new national median high of $62,500.

The median is the point where half of all respondents are below and half are above.

In addition, there were more reports of bonuses paid, said Roseanne Cioffe, director of reports for Hospital and Healthcare Compensation Service, Oakland, NJ. Her firm conducted the salary survey in conjunction with the American Association of Homes and Services for the Aging. More than 2,100 facilities -- 60% of them for-profits -- took part.

"Since there's been a continued upswing for administrators, and an increase in bonuses, that's a very good reason for optimism," Cioffe said. "That 3.94% was an overall increase in base salaries."

Cioffe said the mere fact that more respondents – nearly 1 in 4 -- were acknowledging receiving bonuses was a good sign for administrators. Bonuses are offered in many forms, the most popular being as a percentage of base salary. When a bonus was given, it averaged 13.59% of salary for administrators and 13.20% for DONs, Cioffe said.

"All over in salary compensation we're seeing a lot more of performance-tied issues," she explained. "A person has to be actively contributing and helping the bottom line of the organization."

Geography continues to influence salary figures greatly. Median salaries for administrators ranged from $84,000 in Region 9 (states touching the Pacific Ocean) to $59,015 in Region 6 (the Dakotas and Minnesota down to Missouri and Kansas). DONs were also highest in Region 9 ($76,360) and lowest in Region 6 ($50,612).

"Universally, Region 1 has Massachusetts and that takes things higher, while Region 2, with New York and New Jersey, and No. 9, with California, are also always at the top. Sometimes, Region 4, with Illinois, is next," Cioffe noted. "It's the cost of living."

Other major factors influencing compensation levels are the revenue levels of a facility and its ownership status: for profit or nonprofit.

"The interesting thing with revenues is, there's about a 20.9% difference in for-profit salaries being higher than nonprofit at the lower levels," Cioffe said. "But once you get in the $5 million and over range, the disparity really becomes minute, down to 2.56%.

"If you look at the largest places, at over $20 million in revenues, it doesn't really matter whether you're for-profit or nonprofit, or located in California or Iowa – it's the overall size of your responsibilities that matters. We've never really looked at it like that before."

In general, it appears that non-profits are changing their mindset when it comes to compensation, said Paul Dorf, managing director of Compensation Resources, Upper Saddle River, NJ.

"For a long time, the nonprofits thought they were immune from paying at the compensation levels of the for-profit sector," Dorf said. "That might have been OK in Florence Nightingale days, but I think people want to feel comfortable, and do what they can to make a living."

In an effort to play "catch-up," many nonprofits are starting to add incentive plans tied to financial results, Dorf said. He stressed that an active, savvy governing board is critical for nonprofits wanting to set reasonable levels of compensation.

"I've been at board meetings where members have said they can't have profit-sharing programs because they don't make profits. That's not true," Dorf said.

He said that basic laws of supply and demand will help set future compensation levels. A shortage of nurses, for example, will help keep their demand – and presumably relative pay levels – high.

"If there are fewer people in the marketplace to do that, that automatically ups the ante and raises rates," Dorf said. "Somebody who has deeper pockets will be able to afford that."

He said government sources are going to have to "put more money in the pot" since they hold such strong influence over the economics of the sector.

Cioffe predicted salaries would continue rising at about the same rate next year.

"I don't really think we'll go over 4% this year for an increase," she said. "I think we'll hover where we are at this point, just because of the way the economy is now."

NOTE: For more information, please see complete article published in November 24, 2004, McKnight's Long-Term Care News.

Source: 2004-2005 AAHSA Nursing Home Salary & Benefits Report, published by the Hospital & Healthcare Compensation Service and the American Association of Homes and Services for the Aging.