NUR 5820 Module 3 Staffing Change Cost Analysis Example

Pricing an 11-to-11 Mid-Shift: Staffing Cost, Overtime Offset, Productivity and Break-Even on a Telemetry Unit

Student Name

Master of Science in Nursing (MSN), Thomas Edison State University

NUR-5820: Financial Management in Nursing Practice

Mentor Name

Month Day, Year

Pricing an 11-to-11 Mid-Shift: Staffing Cost, Overtime Offset, Productivity and Break-Even on a Telemetry Unit

Telemetry admissions on our unit do not arrive evenly. Most come between early afternoon and late evening, after emergency department workups and cardiac catheterization recoveries, which is exactly when day nurses are finishing their shifts and night nurses have not yet arrived. The result is late admissions, missed breaks and, above all, overtime. This paper prices a proposed schedule change, a new registered nurse mid-shift from 11 a.m. to 11 p.m., seven days a week, against the overtime it should replace. It calculates the added cost, the expected offset, the net effect, the change in productivity measures and the break-even point, and considers benefits that do not appear in the calculation.

The Current Pattern

The unit's operating budget, built in the previous module, sets a standard of 9.6 direct-care hours for each of 9,855 patient days, or 94,608 productive direct-care hours. Over the last twelve months, RNs on the unit worked about 6,100 hours of overtime, most of it in two-to-four-hour blocks when day-shift nurses stayed past 7 p.m. to finish admissions or cover until an incoming nurse arrived. Overtime is paid at time and a half and attracts payroll taxes, so each overtime hour costs about $81.30, compared with about $65.45 for a regular hour including benefits. Annual overtime cost was roughly $496,000.

Overtime is not only expensive. Bae and Fabry (2014) reviewed studies of nurse work hours and found strong evidence that long hours and overtime are associated with adverse outcomes for nurses, including fatigue, injury and burnout, while the evidence for effects on patients was more limited and needed further study. Our own exit interviews mention end-of-shift admissions as a reason for leaving.

Pricing the Change

A 12-hour RN shift every day of the year requires 4,380 productive hours. Applying the unit's 12% nonproductive rate gives 4,977 paid hours, or 2.4 paid FTEs. At the direct-care RN rate of $47.50 an hour, with a 6% differential allowance and 30% benefits, the fully loaded cost is $65.45 an hour, or $325,787 a year.

The offset depends on how much overtime the mid-shift prevents. A review of timecards showed that about 55% of overtime hours fell between 3 p.m. and 11 p.m. and were linked to admissions or handoff delays. We assume the mid-shift eliminates that share, or 3,355 hours, worth $272,770. The net added cost is therefore about $53,000 a year. The break-even point, where avoided overtime would fully pay for the shift, is 4,007 hours, or about 66% of current overtime.

Before the change can be priced, the manager must confirm that the overtime is really tied to the afternoon peak. Timecard data for the last six months were sorted by the hour each overtime block began and matched with admission times from the bed board. Overtime clustered on the days with the most admissions after 2 p.m., and the pattern held across weekdays and weekends, which supports the timing of the proposed shift.

Productivity Measures

Productivity in nursing is usually reported as the ratio of target hours to actual worked hours. At present, actual worked hours are 94,608 budgeted plus 6,100 overtime, or 100,708 hours, so productivity against the 9.6 target is about 94%, and actual hours per patient day are 10.2. After the change, worked hours would be 94,608 plus 4,380 mid-shift hours plus the remaining 2,745 overtime hours, or 101,733, so hours per patient day would rise slightly to 10.3.

If the target is left at 9.6, productivity would appear to fall to 93%, and the unit would look less efficient on the monthly report. If the target is revised to include the mid-shift, at 10.04 hours per patient day, productivity would be about 97%. This is a reminder that productivity percentages depend on the target chosen; the manager must present the change as a deliberate revision of the staffing standard, not as a slide in performance.

Benefits Outside the Calculation

Several likely benefits are not counted. The first is retention. Jones (2008) showed that an older turnover cost study can be brought forward using the Consumer Price Index, so a manager can estimate the savings from retention when a new study is not practical; even preventing one or two resignations a year could cover the net cost of the mid-shift. The second is patient flow: admissions accepted promptly reduce boarding time in the emergency department. The third is safety. Rothberg et al. (2005) modeled patient-to-nurse ratios for general medical and surgical patients and found that improving ratios toward four patients per nurse was reasonably cost-effective as a safety intervention compared with other accepted interventions. The mid-shift would lower afternoon ratios during the busiest hours.

Risks and Recommendation

The main risk is that overtime does not fall as expected, for example if vacancies rise or sick calls are concentrated on nights. If only a third of overtime were avoided, the net cost would rise to about $160,000. The proposal should therefore be piloted for six months with monthly tracking of overtime hours, admission times, missed breaks and staff turnover. The recommendation is to proceed with the pilot, revise the hours per patient day target to 10.04 for the pilot period, and report results to the director of nursing and finance at three and six months.

The pilot also needs a clear owner. The nurse manager will lead it, the staffing office will build the mid-shift into the schedule as a posted position rather than an incentive shift, and finance will provide monthly overtime reports by hour of day. Staff will be invited to apply for the mid-shift first, since some nurses prefer an 11 a.m. start.

References

Bae, S.-H., & Fabry, D. (2014). Assessing the relationships between nurse work hours/overtime and nurse and patient outcomes: Systematic literature review. Nursing Outlook, 62(2), 138-156. https://doi.org/10.1016/j.outlook.2013.10.009

Jones, C. B. (2008). Revisiting nurse turnover costs: Adjusting for inflation. JONA: The Journal of Nursing Administration, 38(1), 11-18. https://doi.org/10.1097/01.nna.0000295636.03216.6f

Rothberg, M. B., Abraham, I., Lindenauer, P. K., & Rose, D. N. (2005). Improving nurse-to-patient staffing ratios as a cost-effective safety intervention. Medical Care, 43(8), 785-791. https://doi.org/10.1097/01.mlr.0000170408.35854.fa