Human Capital Management: Taking a cue from Wall Street

While the list of publicly traded long-term care (LTC) facilities is slightly more than a dozen, the industry should pay heed to recent Wall Street rumblings. The Wall Street Journal recently reported that a group called the Human Capital Management Coalition has filed a petition with the Securities and Exchange Commission (SEC) to gain visibility into companies’ management of their workforces.

The petition states: “There is broad consensus that human capital management is important to the bottom line, and a large body of empirical work has shown that skillful management of human capital is associated with better corporate performance, including better risk mitigation. We view effective human capital management as essential to long-term value creation and therefore material to evaluating a company’s prospects.”

This petition, which I have signed, points to the importance of human capital management, or workforce management, to business success. Investors are taking note of LTC facilities’ ratings on the Centers for Medicare & Medicaid (CMS) Nursing Home Compare web site. Facilities with poor ratings are likely to be looked upon as less-favorable investment risks.

Staffing, of course, is one aspect of these ratings. Investors take into account not only health inspections and quality measures but human capital as well.

In the case of Wall Street, it appears that the private sector is actually following the public sector’s lead. The investors behind the petition want access to company data on human capital management.

That’s exactly what Payroll-Based Journal (PBJ) reporting requires from long-term care facilities: data on staffing, work hours and wages. CMS officials have long realized that staffing directly impacts quality care. Investors are adding this data to their arsenal of information so they can make informed decisions on where to plunk down dollars.

Case in point, illustrating the intersection of public companies, investment and PBJ: In October, Sabra Healthcare REIT, Inc. (Nasdaq: SBRA) made its first major skilled nursing deal since merging with Care Capital Properties, buying 24 skilled nursing facilities (SNFs) for $430 million. The facilities had several marketable attributes, including CMS Five-Star Ratings at 21 of the 24 SNFs—a fact Sabra CEO Rick Matros mentioned when announcing the deal.

In the petition from the coalition, led by the UAW Retiree Medical Benefits Trust, the categories of information listed as fundamental to human capital analysis include:

• Turnover and internal hire rate
• Employee diversity and pay ratios
• Training and skills gaps
• How training aligns with strategy
• Employee engagement
• Return on cost of workforce

The workforce management issues listed above are certain to resonate with the long-term care industry, which has been grappling with many of them for some time now.

Let’s start with turnover. It’s no secret that the turnover rate for long-term care nurses is far higher than the national average.

And then there’s the issue of pay. Personal care aides and nursing assistants may be one of the fastest-growing job segments but, according to a report from the Institute of Medicine’s Committee on the Future Health Care Workforce for Older Americans, 90 percent of these workers make less than $30,000 a year.

The coalition, in its petition, states that employee engagement technology promotes a happier, more productive workforce. It does so, however, with a caveat—one that we at SmartLinx wholeheartedly agree with: Success in this arena may depend in large part upon a company’s culture.

In short, the petition correlates workforce management with competitive advantage. At SmartLinx, we understand the business value of human capital. That’s why we do what we do, and we couldn’t agree more.

Alex Gardner, SmartLinx Chief Financial Officer, has years of experience in building, leading and advising corporations through growth, restructuring, efficiency building, local and international expansion, capital market transactions, mergers, acquisitions and initial public offerings.

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