California raises minimum wage for healthcare workers

New law SB 525 increases healthcare minimum wage, may prove to be a financial hardship for employers

(bongkarn on AdobeStock)
Darren Fraser
Published December 19, 2023  • 
12:30 pm

SACRAMENTO – Beginning June 1, 2024, California covered healthcare workers across the board will see an increase in their hourly minimum wage pay. Although this is good news for workers, it could prove difficult for owners and operators of healthcare facilities to maintain current staffing levels or even to meet payroll.

On Oct. 13, Governor Newsom approved Senate Bill (SB) 525. SB 525 establishes five separate wage schedules for healthcare employees depending on where they work, with the lowest minimum wage increasing to $21 per hour. Physicians, nurses and other licensed professionals earn substantially more per hour.

Under SB 525, the definition of covered healthcare workers covers a large employee population, including janitors, groundskeepers, housekeepers, guards, clerical workers, food service workers, laundry workers, warehouse workers, appointment schedulers, medical coders and gift shop workers.

One of SB 525’s wage schedules applies to nursing homes. Beginning June 1, workers in these facilities will earn $21 per hour. This rate increases to $23 per hour June 1, 2026. Beginning June 1, 2028, the rate increases to $25 per hour.

For local communities, this bill will impact local healthcare facilities in a variety of ways, according to Ro Linscheid, the CEO of Sierra View Homes Retirement Community, which is located in Reedley. Linscheid has been CEO since 2020 and has been with the company for 17 years.

For reference, the community of Reedley is home to 15 healthcare facilities that will be impacted by SB 525. These facilities include community clinics, dialysis clinics, rural healthcare clinics, an acute care hospital and nursing homes.

Sierra View is licensed for 59 residents; they currently have 53. The facility has 84 full-time employees. According to Linscheid, Sierra View’s non-nursing staff currently earn between $16 to $18 per hour; and the proposed wage increase is cause for concern.

“I am very concerned, since (MediCal) reimbursement is very low,” she said. She went on to explain that MediCal bases its reimbursement percentage on Sierra View’s costs from two years ago. “We have not received the reimbursement as we should have.” She added that current reimbursement levels are insufficient to counter the wage increases.

“We are not getting enough reimbursement to support this pay raise,” Linscheid said.

She added that many residents selected HMOs for their health insurance. These companies actively strive to keep down costs. As a result, they have delegated caseloads to third party insurance companies that are not contracted with nursing homes.

“They deny payment,” Linscheid said of these third party entities. “We have to be careful about admissions.”

A LIVING WAGE

Proponents of SB 525 argue that the wage increases are necessary due to the demands placed on healthcare workers and also to stay current with the state’s high cost of living. Linscheid said she does not disagree.

“I don’t deny people need a living wage,” she said. “I believe we need to pay well, but we have to be able to stay in business. Insurances are expensive. Utilities are expensive. Equipment is expensive. And the list goes on.”

Linscheid said she may have to decrease staffing to stay afloat.

“There are staffing mandates regarding nursing assistants,” she said. “We may have to decrease the number of ancillary staff we use.”

Linscheid also said SB 525 is unfair because it removed distinctions among workers in skilled nursing.

“Now there will be no wage distinction between the Certified Nursing Assistant, who has to have education and continuing education hours to do their job, and a housekeeper or dietary aid,” she said. “There was always a way to work your way up. Now why bother?”

SB 525 also eliminates the seniority pay accorded to long-term employees.

“We will be lucky if we can meet payroll with the barest differential,” she said.

SB 525 WAGE SCHEDULES

In addition to nursing homes, the bill defines wage schedules for four other healthcare environments.

Facilities that fall under the first wage schedule listed in the bill are a diverse set. These facilities include conglomerates such as Adventist Health and Kaiser – employers with 10,000 or full-time employees. This wage schedule also includes dialysis clinics of any size as well as county owned or operated facilities, provided the county has a population of 5 million or more as of Jan. 1, 2023.

Currently, the minimum wage for healthcare workers in the state averages between $18 to $25 per hour. Beginning June 1, the starting minimum wage for full-time employees in the above facilities will be $23 per hour. Beginning June 1, 2025, this increases to $24 per hour and goes up to $25 per hour June 1, 2026.

SB 525’s second wage schedule includes hospitals with a high governmental payor mix – that is, 90% of cost is picked up by Medi-Cal or Medicare. This wage schedule also covers employees who work in independent hospitals that receive government assistance. Employees who work in rural healthcare facilities or employees in county owned or operated facilities, provided the county has a population of less than 250,000, are also covered under this wage schedule.

Beginning June 1, the minimum wage for workers in these facilities increases to $18 per hour. This rate remains fixed until 2033, when it goes up to $25 per hour effective June 1.

The next wage schedules apply to specified clinics and other healthcare facilities. Beginning June 1, workers in these locations will earn $21 per hour. For employees in specified clinics, this increases to $23 per hour beginning June 1, 2026; $22 per hour for workers in other healthcare facilities. These employees are slated to earn $25 per hour, with the only difference being that for clinic workers, this rate kicks in June 1, 2027; for healthcare workers, the higher rate begins June 1, 2028.

Darren Fraser
Reporter