Why Nurse Leaders Need to Become Financially Savvy

Sharper financial acumen gives nurse leaders a greater chance of getting what they need, CNO says.

When Vickie Swanson, MSN-HCSM, RN CENP, CNOR, was in nursing school studying for her associate degree in the early 1980s, she realized that her chosen profession would require more than instruction in patient care.

"I could see that healthcare was a business and that nursing didn't have some of the tools that it needed to actively come to the table and be heard amongst other business professionals who were non-clinical," says Swanson, chief nursing officer (CNO) of Olympic Medical Center in Port Angeles, Washington.

She realized as a student that those at the top making decisions were primarily men with a finance background.

"If I'm going to speak their language and get what I need for my team or the care of my patients, I have to at least communicate with them in a language that they understand and know," she says.

Indeed, Swanson relies on her strong financial knowledge that she's accumulated over the years to manage a large portion of the hospital's budget.

Nurses make up about 30% of a hospital's staffing, according to the U.S. Bureau of Labor Statistics, so a chief nursing officer's (CNO) financial acumen—good or bad—can play a critical role in an organization's financial health, writes Kathy Douglas, MHA, RN, in the frequently referenced article, Taking Action to Close the Nursing-Finance Gap: Learning from Success.

"Nurse leaders control the largest part of a hospital labor budget, in some cases the largest part of the overall budget," Douglas writes. "The effectiveness of overseeing this responsibility can mean the difference between an organization’s financial stability and financial turmoil."

'A totally different ballgame'

The nurse leader's role has evolved to require a greater hand in financial and business skills.

"I came into nursing about the time that DRGs (diagnosis-related groups) arrived on the scene," Swanson says. "Prior to that, I don't think [nurse leaders] were really as worried about finances."

"Today, we're at a totally different ballgame," she says, "and if you're not financially savvy, it's really hard to create the business case for attaining what you need, whether it’s the resources for staffing [or] whether it's the resources of equipment to be more efficient."

But the industry isn't keeping up with the need, she says.

"I don't think nursing has ever had a strong understanding of finances and the financial impact of their unit or the cost of healthcare and how that all plays into the role for an organization and caring for a patient," she says.

"I don't think there's a strong understanding because nurses tend to be a personality that is compassionate and caregiving, which is wonderful, and the patient needs to be the center of our focus; however, if we don't keep our eyes on finances and how we're performing financially, the doors are not going to be open for us to be there to care for patients."

Learning on the job

When Swanson was placed in her first managerial position—running an operating room—she possessed a minimum of understanding of the financial workings of running a department within a facility, she says.

Previously, she had done some clinical documentation improvement consulting, where she gained an understanding of DRGs and limitations placed on hospitals and reimbursement.

But productivity was new to her, so she asked a lot of questions of the chief financial officer [CFO] and relied on another manager who mentored her on management.

Her next opportunity took her to Deloitte & Touche, a worldwide consulting company.

"In working with their team members and PPMDs [partner, principle, or managing director], I actually expanded beyond the DRG world more to CDM work [charge description master] and to pricing work, and that really helped give me an understanding of revenue cycle."

Nurses who want to gain financial acumen must pursue it themselves, Swanson says.

"At this point in time and with things that are happening in nursing today, nursing curriculums do not include, until you reach your master's level and then depending on which track you're taking in your master's level, it's not always present," she says. "There is no education and there is no direction to help nurses unless they seek it outside of nursing curriculum for this type of education."

"It is becoming such a part of who and what nursing is that there is a disservice that is happening to continue to do things the way we've always done, rather than preparing people for a healthcare industry that is completely different than it was."

Swanson suggests nurse leaders and those who plan to become nurse leaders find books, sign up for classes, and seek a mentor to teach them about finances.

Other resources include:

• American Organization for Nursing Leadership (AONL), which offers instruction on building a budget, reimbursement models, and general accounting principles.
• American Nurses Association (ANA), which provides a webinar on basic budgeting as it relates to nursing/hospital settings, value-based purchasing and how to maximize resources, and how budgeting affects staffing.

Mentoring her nurses

Swanson helps her team gain financial acumen by mentoring and providing opportunities to learn.

"When we go into budget, I sit there with different part of my team, or as a whole, and we go over things like our operational budget … and other operations and dig down into it and I try to share my knowledge and history and some of the pain points that I've learned," she says.

Her surgical services team, for example, had self-identified areas where they felt like they needed assistance, so Swanson would conduct weekly or biweekly meetings to address such subjects as financials and staffing.

In those meetings, they would review general ledger (GL) accounts to determine why and where they were running over in certain GL accounts, she says.

"That was a way for me to try to mentor and help them grow that awareness."

She also instructs her team on how to negotiate contracts based upon performance by reviewing data, pulling numbers, and forecasting volumes.

"That has helped in being able to go into those negotiations for services and come out with a strong understanding of the numbers and [whether] we are making the best decision for the organization," she says.

Acquisition of capital equipment is one process that Swanson makes sure her nurse leaders understand by looking at reimbursement rates, return on investment, how quickly it will be paid off, and the true need for the equipment.

"When an organization is bringing on new services, or new equipment that they've never had before to provide a new service, you look at things like that," she says. "You try to make a more-informed decision versus is it something the provider wants today—is it the flavor of the month or the flavor of the year for the provider of the specialty?"

Increasing her team's financial acumen will give them a greater chance of getting what they need, Swanson says.

"You're able to walk into a meeting and be heard, as well as you have a greater ability to understand where other individuals may be coming from," she says, "so you're actively taking that initiative to bridge that communication gap, particularly if you're walking into a room with people who are financially driven."