NUR 8250 Module 5 Budget and Staffing Economics Paper: Nurse Staffing, Turnover Costs and a Unit Budget Case Example

From Six Patients to Five: A Budget Case for Medical-Surgical Nurse Staffing at an Edison Hospital

Student Name

Doctor of Nursing Practice, Thomas Edison State University

NUR-8250: Health Economics and Finance

Mentor Name

Month Day, Year

From Six Patients to Five: A Budget Case for Medical-Surgical Nurse Staffing at an Edison Hospital

The Request

None of what follows names a real employer: the hospital is a 380-bed teaching hospital in Edison with six medical-surgical units of 32 beds each. Day and night shifts run at about six patients per registered nurse. Last year the units' registered nurse turnover reached 24 percent, overtime and agency spending exceeded budget by $2.9 million, and both injurious falls and pressure injuries acquired in the hospital went up. The DNP-prepared director of medical-surgical nursing is preparing a budget request to staff at five patients per nurse.

Staff tell the story behind the numbers. Nurses describe shifts that begin with six patients and end with seven after a call-out, skipped breaks and charting after the shift ends. Newly graduated nurses say they were placed on full assignments after a shortened orientation because the units were short. Exit interviews name workload as the main reason for leaving, ahead of pay. The director includes three anonymous comments from exit interviews in the budget request, because the finance committee rarely hears from bedside nurses directly.

What the Evidence Says About Staffing

Aiken et al. (2002) matched survey answers from 10,184 staff nurses at 168 Pennsylvania hospitals to what happened to 232,342 surgical patients. With patient and hospital differences held constant, each patient added to a nurse's load carried 7 percent higher odds of dying within 30 days, and the same rise in the odds of dying after a complication went unrescued. For the nurses themselves, every extra patient brought 23 percent higher odds of burnout and 15 percent higher odds of job dissatisfaction. The study was cross-sectional, but its findings have been echoed in later work.

Dall et al. (2009) synthesized research on the relationship between registered nurse staffing and outcomes and used national discharge data to estimate the economic value of higher staffing in acute care. As staffing increased, the risk of hospital-acquired complications and length of stay fell, producing medical cost savings, better national productivity and lives saved. The authors noted that only part of nurses' value can be counted in dollars, so their estimates understate it.

The Cost of Turnover

Jones (2008) presented a way to update a hospital's measured nurse turnover costs using the Consumer Price Index, so that executives can estimate current costs without a new study. Turnover costs include advertising and recruiting, vacancy coverage through overtime and agency nurses, hiring, orientation and training, lost productivity while new nurses learn, and termination. The hospital used this method to adjust its 2019 turnover cost study to current dollars, arriving at about $61,000 per registered nurse who leaves, which the paper labels an internal estimate.

With 24 percent turnover among 210 medical-surgical nurses, about 50 nurses left last year, at a cost of roughly $3.1 million.

The Budget Variance

The units' budget for last year assumed 210 full-time-equivalent registered nurses. Actual paid hours reached the equivalent of 228, because vacancies were filled by overtime paid at 1.5 times base pay and by agency nurses at about twice the employed rate.

Hours per patient day, the measure most budgets use, tells part of the same story. The units budgeted 9.2 nursing hours per patient day, including unlicensed staff, but registered nurse hours averaged only 5.6, and on nights fell to 5.0. The paper converts the proposed five-to-one ratio into hours per patient day, so the request uses the language the finance office already applies, and shows that the change adds about 0.9 registered nurse hours per patient day.

The variance shows that the hospital already spends more than a five-to-one staffing model would cost in salaries, but it spends it on overtime and agency nurses, which costs more per hour and feeds burnout and turnover.

The Proposal

Moving to five patients per nurse requires about 252 full-time-equivalent registered nurses, 42 more than budgeted. At an average salary and benefits of about $118,000, the added cost is roughly $5 million a year before offsets.

Offsets and Return

The paper estimates offsets conservatively. If turnover falls from 24 to 16 percent, about 17 fewer nurses leave, saving about $1 million. If overtime and agency use fall by two thirds as vacancies fill, about $3.5 million is saved compared with last year. If falls with injury and pressure injuries fall by a quarter, avoided costs of about $600,000 follow, using the hospital's own cost estimates for these events. Shorter length of stay, which Dall et al. (2009) linked to better staffing, frees beds but is not counted as cash.

The net effect is close to break-even, with a small saving, while patient safety and nurse retention improve.

Risks

Hiring 42 nurses takes time, so the change is phased by unit over a year. If turnover does not fall, the offsets shrink, so retention measures, including protected orientation and a nurse residency program, are part of the plan. The paper notes that the outcome evidence is largely observational.

The paper also considers alternatives the committee might suggest. Adding unlicensed assistive staff instead of nurses would cost less, but the outcome evidence links registered nurse staffing, not total staffing, with mortality and failure to rescue. Raising pay without changing ratios might reduce turnover but would not address workload, the main reason nurses give for leaving. A mixed approach, with some added nurses and a float pool to cover call-outs, is presented as a fallback if the full request cannot be funded.

Measures

The units will report staffing ratios by shift, turnover and vacancy, overtime and agency hours, injurious falls, pressure injuries, failure-to-rescue rates and burnout scores every quarter.

Conclusion

Each added patient per nurse has been linked with higher mortality and burnout, and economic modeling shows that better staffing reduces complications and length of stay. This hospital already overspends its nursing budget through overtime and agency nurses while turnover costs about $3.1 million a year. Moving to five patients per nurse costs about $5 million, but conservative offsets bring the net close to zero, making the case for safer staffing a sound budget decision as well as a safety one.

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

Dall, T. M., Chen, Y. J., Seifert, R. F., Maddox, P. J., & Hogan, P. F. (2009). The economic value of professional nursing. Medical Care, 47(1), 97-104. https://doi.org/10.1097/MLR.0b013e3181844da8

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