HCM 3070 Module 4 Turnover Cost Analysis Example

Reducing Registered Nurse Turnover on Two Medical Surgical Floors at a 214 Bed Nonprofit Hospital

Student Name

Thomas Edison State University

HCM-3070: Principles of Healthcare Management

Module 4 Written Assignment

Mentor Name

April 21, 2026

The Management Problem in Figures

Cedar Ridge Regional Medical Center is a composite 214 bed nonprofit hospital serving a mid sized metropolitan area. The problem sits on its two medical surgical floors, 5 East and 5 West, which together carry 96 budgeted staff registered nurse positions and averaged 84 filled positions across the year. Those floors recorded 26 registered nurse separations in the fiscal year just closed, which against the average filled count gives an annual turnover rate of 31.0 percent. The hospital wide registered nurse rate over the same twelve months was 19.8 percent. Stating the denominator and the window before the rate matters here, because turnover figures quoted without them are not comparable across departments or against published benchmarks (Kovner et al., 2014).

Two costs follow from that rate. The first is replacement. Finance computed a per separation cost of $48,200, built from $4,100 in recruiting and onboarding, $27,160 in orientation and preceptor overlap hours, $9,600 in reduced productivity across a new hire's first 90 days, and $7,340 in overtime backfill. Twenty six separations therefore carried about $1,253,200. The second is coverage. The two floors consumed 18,400 agency registered nurse hours at a contracted $102 an hour against a fully loaded staff rate of $58, a premium of $44 an hour and $809,600 for the year. Together the two lines come to roughly $2,062,800.

That figure has to be read against the hospital's size rather than in isolation. Cedar Ridge reported net patient revenue of $198 million and an operating margin of 2.1 percent, which is about $4.16 million of operating income, so the turnover and agency lines together consume close to half of what the hospital earned from operations. The pattern inside the 26 separations points at where to intervene. Fourteen of the 26 had less than 24 months of service and nine left within twelve months of hire. Of the 21 completed exit interviews, assignment load on night shift and lack of support during the first year were the two most frequently named reasons, with pay ranked third.

Options Considered

Four options were costed. Holding the current approach means continuing to cover vacancies with agency staff, which carries the $809,600 premium every year it persists and does nothing about the reason nurses are leaving. It is included in the comparison because doing nothing is a decision with a price, and naming that price is what keeps it from looking free (Ginter et al., 2018). An across the board base increase of 6 percent for all 84 filled positions is the second option. At an average base of $78,000 and a 28 percent benefits load, it costs about $503,000 a year, permanently, and it aims at the reason ranked third in the exit interviews rather than the two ranked above it.

The third option raises the sign on bonus from $8,000 to $15,000. At roughly 30 hires a year the increment costs $210,000, and it buys arrivals rather than stays; nine of last year's separations occurred inside the first twelve months, so a larger bonus would have been paid to several nurses who left before the position was stable. It also creates an equity problem with the nurses already on the floors, who receive nothing. The fourth option is a structured retention package: a twelve month residency for new graduate and first year hires, a paid preceptor differential, leadership development for charge nurses, and a market adjustment aimed only at the two to five year experience band.

The package costs $321,200 in its first year: $112,000 for a residency coordinator position at loaded rate, $26,000 for curriculum and licensing, $35,000 for a preceptor differential of $2.50 an hour across about 14,000 precepted hours, $38,400 for development of twelve charge nurses, and $109,800 for the targeted adjustment covering 22 nurses in the two to five year band. Set against a per separation cost of $48,200, the package pays for itself if it prevents seven separations a year. Seven fewer separations moves the rate from 31.0 percent to 22.6 percent, which is inside the range national retention surveys report for staff registered nurses (NSI Nursing Solutions, 2024).

The Recommended Option

The recommendation is the fourth option, funded in full for two years and reviewed at twelve months. It is chosen over the across the board increase because it costs about two thirds as much in year one and less than half as much on a recurring basis, and because it is aimed at the two reasons nurses actually gave for leaving rather than the third. It is chosen over the bonus escalation because the separations are concentrated in the first two years of service, which is the period a residency and a funded preceptor are designed to hold, and a bonus paid at hire has already been spent by the time that period begins.

Two bodies of evidence support the choice. Work environment and staffing conditions are repeatedly associated with burnout and stated intent to leave among hospital nurses, which is what the exit interviews here describe in local terms (Aiken et al., 2002). Structured twelve month residencies are the established response for the first year exits specifically, and are documented as a retention mechanism by the professional body that accredits them (American Association of Colleges of Nursing, 2023). Two risks belong in the recommendation. The targeted adjustment will draw questions from nurses outside the two to five year band, and the residency will not show a full year of retention data until month twelve, so the board should expect the leading measures rather than the outcome measure at the first review.

How Success Would Be Judged

Success is judged on four measures with named targets and named owners. The primary measure is rolling twelve month registered nurse turnover on the two floors, computed as separations divided by average filled positions, with a target of 22.0 percent or lower by month twelve and 18.0 percent by month 24 against the 31.0 percent baseline. The second is retention at twelve months among nurses entering the residency, with a target of 90 percent. The third is monthly agency registered nurse hours, with a baseline of about 1,533 a month and a target below 900 by month twelve. Each is reported monthly to the chief nursing officer and quarterly to the board.

The fourth measure is financial and is reported quarterly: replacement cost avoided and agency premium avoided, set against the $321,200 spent, with the break even stated in advance as seven separations prevented (Gapenski & Reiter, 2016). Two balancing measures guard against improving the headline number by shifting the burden elsewhere. Overtime hours per worked full time equivalent must not rise above the current baseline, since turnover can be masked by working the remaining staff harder. Patient falls per 1,000 patient days and the nurse communication score on the patient experience survey must hold or improve, because a retention gain bought at the cost of care quality is not a gain the hospital can keep.

Outcome measures on a twelve month cycle are too slow to steer by, so three leading indicators are read at 90 days: the share of new hires with a named preceptor for their scheduled shifts, residency session attendance, and the share of charge nurses who have completed the first development block. If two of the three sit below 80 percent at 90 days, the package is failing on delivery rather than on design, and the fix is operational. If delivery holds but turnover has not moved by month twelve, the assumption that first year support drives these exits is wrong, and the money should be redirected to the pay option rather than spent for a second year on the same reasoning.

References

Aiken, L. H., Clarke, S. P., Sloane, D. M., Sochalski, J., & Silber, J. H. (2002). Hospital nurse staffing and patient mortality, nurse burnout, and job dissatisfaction. JAMA, 288(16), 1987-1993. https://doi.org/10.1001/jama.288.16.1987

American Association of Colleges of Nursing. (2023). Nurse residency program. https://www.aacnnursing.org/our-initiatives/education-practice/nurse-residency-program

Gapenski, L. C., & Reiter, K. L. (2016). Healthcare finance: An introduction to accounting and financial management (6th ed.). Health Administration Press.

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2018). The strategic management of health care organizations (8th ed.). Jossey-Bass.

Kovner, C. T., Brewer, C. S., Fatehi, F., & Jun, J. (2014). What does nurse turnover rate mean and what is the rate? Policy, Politics, & Nursing Practice, 15(3-4), 64-71.

NSI Nursing Solutions. (2024). 2024 NSI national health care retention and RN staffing report. https://www.nsinursingsolutions.com/Documents/Library/NSI_National_Health_Care_Retention_Report.pdf