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3 Creative Ways to Cut Nurse Labor Costs

Karen Minich-Pourshadi, for HealthLeaders Media, January 17, 2012

Because nurses comprise a huge chunk of labor costs, they often fall under the financial microscope. Reducing these caregivers, however, can truly be detrimental to your hospital's quality of care and the patient's overall experience—two areas that CFOs should strive to bolster, not undercut. That puts nurse labor costs somewhat in limbo. Though financial leaders want to reduce costs, they grapple with how to do so without the negative ramifications.

Well, there are ways to control and potentially reduce your nurse labor costs without hurting patient quality—it just requires creative staff management. In the January edition of HealthLeaders magazine I examine how financial leaders can address nurse labor costs. Here are some excerpts and observations from that article:

Though there may be excess cost in your nursing line item, it doesn't always rest within the wage, says Mary Nash, PhD, RN, chief nurse executive for the 932-bed Ohio State University Medical Center in Columbus, OH. The total cost of a full-time registered nurse averages $98,000 per year, or approximately $45 per hour, according to the 2011 U.S. Hospital Nurse Labor Cost Study produced by KPMG Healthcare & Pharmaceutical Institute. But base wages account for only about 57% of the total before factoring in premium pay and benefits.   

My reporting turned up three main strategies for trimming the cost of nurse labor without gutting their ranks.

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1 comments on "3 Creative Ways to Cut Nurse Labor Costs"


Jackie Larson - Avantas (1/27/2012 at 11:20 AM)
Great article, Karen. Reducing overtime, using supplemental labor more effectively, and reducing turnover should be high on any hospital's to-do lists. Reducing overtime and effectively using supplemental labor (contingency staff) are both invariably tied to reducing turnover and the related issues of staff burnout, decreased morale, etc. We have found that there are no clear cut, across the board answers or strategies that can be applied to everyone. One example being the frequently quoted Workforce Planning goal of 85%. We've found no evidence that the 85% core staff number is an appropriate or financially responsible resource management model. That being said, tailored department and unit specific strategies are effective. The key to any effective change, i.e., changing your organization's culture, is getting buy-in across the entire spectrum of the organization. In order for any initiative to be effective you need managers and the C-Suite to enthusiastically be on the same page.