Controlling Nurse Labor Costs

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.