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Controlling Nurse Labor Costs

Karen Minich-Pourshadi, for HealthLeaders Media, January 19, 2012
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Hunt explains that hospitals and health systems that rely on supplemental nurses may be overlooking a greater issue—miscalculated productivity that is masking a full-time staff shortage.

Hunt says nurse managers will staff according to a core number to meet the average daily census. "What some nurse leaders are experiencing is that they feel short-staffed, though the productivity level looks to be at 100%," she says. However, the productivity level fails to account for the quantity of overtime nurses may have to work to accommodate patient volume that is your average daily census, or the use of supplemental nurses. Using overtime and agency nurses comes at a premium rate to the hospital and drives up cost, she explains.

"What it comes down to is nurses are highly skilled at care, but they haven't been taught the language of finance. Many nurse managers don't have the level of understanding needed to watch for this type of disconnect," says Hunt.

For instance, Hunt points to a unit she recently worked with in which the nurse manager's unit was demonstrating 100% productivity. This unit had 12.5 FTEs on the roster, but routinely required 16.4 FTE to meet the target number of worked hours. By comparing the actual number of FTEs to the number needed as exhibited by the productivity target, the case to increase the number of staff on the roster becomes apparent. This plan will decrease the use of overtime and higher-dollar temporary labor.

"In the short-term, there will be extra cost to hire additional staff due to orientation costs; but in the long-run, it will be labor at an hourly rate, not a premium one. Plus, it provides a safer environment for the patients because the unit has a stable team," she explains.

In addition to ensuring each unit has enough full-time nurses to meet the daily patient demand, Nash's Ohio facility found another way to bypass supplemental labor when the need called for more nurses. The organization created a nurse labor pool by making a network of part-time staff, full-time staff, and cross-trained nurses.

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5 comments on "Controlling Nurse Labor Costs"


Bill (2/10/2012 at 1:22 PM)
The key to this ability to pull together granular data often from multiple sources in away that nursing managers can easily understand what is going on without the need to be technical or spending hours a week in Excel. Our client NYU won a Smithsonian award for building exactly this kind of nursing productivity tool. http://www.informationbuilders.com/applications/nyu_honor

Mary K Freel (2/2/2012 at 1:16 PM)
"A nurse is a nurse is a nurse" no longer works in this day of advanced technologies and care. You cannot expect a pediatric nurse to take care of cardiac patients or an OB nurse to handle the ER. When a nurse is pulled[INVALID]like the author suggests hospitals do[INVALID]to an unfamiliar floor she is expected to work as though she always worked there[INVALID]often taking a team. I would like to see a study of errors with particular attention to whether that was the nurse's usual floor. I bet the rate of errors goes up dramatically with the rate of pulls. Even with orientation to specific floors pulling is a dangerous practice because your skill sets for each floor are entirely different and often the medicines used are entirely different.

Linda Kozak (1/22/2012 at 1:33 PM)
Well, this is no startling revelation to this 45+ years of nursing service and commitment " old nurse" I have made this statement more than once in my career about using agencies for all the incorrect reasons. and have lost jobs over having an educated opinion. You need a nurse with knowledge and experience to save a life and teach the newbies. Sincerely, Linda K