7 Ways that Nurse Staffing Impacts Profitability

By Marcia Faller, PhD, RN, chief nursing officer, AMN Healthcare

Because quality is increasingly linked to a hospital’s financial health, adverse outcomes related to inadequate staffing will have a growing impact on a hospital’s bottom line. The most direct example of the quality–finance link can be seen in the Center for Medicare & Medicaid Services’ (CMS) 2008 Inpatient Prospective Payment System rules, which state that hospitals will no longer be reimbursed for any patient care needed as a result of a hospital-acquired condition, such as certain mistakes called “never events.” Many of these events can be directly tied to or influenced by nursing care. A study, done by the American Nurses Association in 2000, showed that hospital-acquired events like postoperative infections, urinary tract infections, pneumonia and pressure ulcers were preventable conditions that could be reduced with increased nurse staffing.

Solutions to the challenges in areas where nurses have an impact on a hospital’s profitability revolve around three key areas:

1. Fixing process problems
2. Improving technology
3. Maintaining an adequate number of qualified staff

While all of these solutions are within the control of hospital administrators, the latter may be the area in which leaders face the biggest challenge, since they must gain support for increasing the already substantial nursing budget covering permanent and temporary staff. There is mounting evidence that links nurse staffing to several key challenges or factors that impact their profitability. The following discussion summarizes seven of these areas and provides support for developing strategies that result in never “staffing short.”

Challenge 1 — Costly patient errors 
Supporting Evidence — A study published in Nursing Research found that all adverse events studied including pneumonia, pressure ulcers, infections, patient falls/injuries, sepsis and adverse drug events were associated with increased costs; as an example, a 2003 study showed the cost of care for patients who developed pneumonia in the hospital rose by 84 percent. Adequate nurse staffing has been shown to reduce these events as is evidenced in the following research: (1) A 2007 Agency for Health Research and Quality study found “Higher registered nurse staffing was associated with less hospital-related mortality, failure to rescue, cardiac arrest, hospital acquired pneumonia, and other adverse events.”  (2) A 2006 study in Health Affairs found that increases in nurse staffing resulted in decreases in adverse outcomes, hospital days, number of patient deaths and cost. (3) A 2002 study in JAMA found for every patient over four that a nurse takes in a patient care assignment, the mortality rate increases by 7 percent.

Challenge 2 — Restricted bed capacity and long waiting times related to ineffective patient flow 
Supporting Evidence — Having enough nurses to properly manage patient flow affects hospital “turn” rates, patient satisfaction and quality outcomes. Nurses can help get patients admitted, transferred to other departments and discharged at the right times, which helps maximize capacity and improve patient care. Evidence shows that patient flow is a growing problem. A 2008 Health Affairs article reported the results of a Harvard Medical School study that found emergency department wait times increased 36 percent from 1997 to 2004.

Challenge 3 — Individual patient choices; “repeat business” and referrals based on satisfaction 
Supporting Evidence —  “Nursing is the single most important factor involved in patient satisfaction in every part of the hospital, ” according to Linda H. Aiken, Ph.D., RN, FAAN, FRCN, director of the Center for Health Outcomes and Policy Research at the University of Pennsylvania School of Nursing, who presented her team’s recent research project, “Nursing: A Key to Patient Satisfaction,” at a June 2009 Health Affairs forum and later spoke with AMN (see related article). Nurses spend the most time with patients, and patient satisfaction levels tend to revolve around how safe and well-cared for they feel. If nurse staffing is adequate and nursing care is rated as high during their hospital stay, chances are that their overall satisfaction will also be high, and they will be more likely to choose that facility in the future. Patients also have a strong influence on the healthcare choices of their family and friends. 

Challenge 4 — Public disclosure of patient satisfaction metrics 
Supporting Evidence — CMS’s initiative to disclose the results of patient satisfaction surveys ― the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS) ― can influence potential patients in their selection of a hospital provider. This information was added to the Dept. of Health & Human Services’ “Hospital Compare” online tool in 2008 that is available to the public. The web site also offers comparison of numerous disease-state quality metrics.  New consumer-based hospital comparison tools, like the one launched in 2009 by Consumer Reports, add to the wide-spread influence of these nursing-influenced satisfaction metrics. 

Challenge 5 — Reimbursement 
Supporting Evidence — Pay-for-performance programs that focus on clinical quality and patient satisfaction mean that nurses have a significant impact on the key metrics that drive reimbursement rates. Again, CMS’s 2008 Inpatient Prospective Payment System which will not reimburse facilities for any care associated with hospital-acquired infections or errors is a prime example of this; with 28 “never events” having reimbursement penalties―many of them nursing sensitive measures. 

Challenge 6 — Staff turnover costs 
Supporting Evidence — In a 2004 study, researchers estimated that costs can approach $70,000 per nurse turned, considering personnel expenses and the impact on productivity and quality. A 2007 PricewaterhouseCoopers Health Research Institute study also found that hospitals that perform poorly in nurse retention spend an average of $3.6 million more per year than those with high retention rates.

Challenge 7 — Changes in patient population (planned or unplanned)
Supporting Evidence
— When hospitals experience fluctuations in patient census or undergo a unit expansion or computer conversion, temporary nurse staffing can be a cost-effective solution to augment staffing levels for the duration of the project. A 2007 AMN Healthcare case study of economic staffing models showed how temporary nurse staffing could provide savings by helping hospitals avoid the costs of understaffing during peak periods (which can lead to diverted patients and increased errors), overstaffing during the rest of the year and excessive overtime, which can overburden staff nurses and lower the quality of patient care. 

This list is excerpted and adapted from the white paper, Travel Nurse Staffing: Quality Staff Equals Quality Outcomes, by Marcia Faller, RN, MSN, executive vice president and chief clinical officer, AMN Healthcare.  

© 2012. AMN Healthcare, Inc. All Rights Reserved.