Keeping Nurse Labor Costs Down – Nurse Recruiter

Keeping Nurse Labor Costs Down

This article in Health Leaders Media has an interesting perspective from hospitals regarding controlling nurse labor costs.

It lays out a three-pronged approach to reduce personnel costs for nurses; a new approach to nurse overtime, use of supplemental labor such as from nursing agencies or from an in-house nursing pool, and focusing on retention efforts rather than going through the time and expense of finding and hiring a replacement.

The “Effective use of Supplemental Labor” section discusses the need for nursing agencies, as well as how alternative supplemental labor sources can help with costs:

Many healthcare leaders routinely budget for traveling or per diem nurses, but much of that may be unnecessary, says Hunt. Although there are reasons to use supplemental nurse labor, daily census demands shouldn’t be one of them, she says. Supplemental labor is expensive, she adds, so these nurses should be used to address seasonal volume increases, medical leaves, or to fill in during large training initiatives such as ICD-10.

“I do believe there is a place for supplemental nurses; it’s how you use them. If there are usually four nurses on a shift and you need to use one to replace a member of the unit or add one to address an exceptionally high census, then they work well because you have enough of your core nurses there who know the workload and who know the organization to be able to support this external staff member,” she says.

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.

“There are good reasons to use supplemental staffing, but it’s also expensive. By establishing this pool when we have a staffing shortage, we can get the right nurse, at the right time, at the right price,” Nash says.

With the ongoing nursing shortage, Polly Davenport, RN, FACHE, CEO at Ochsner Medical Center-North Shore, a 165-bed acute care hospital on the north shore of Lake Pontchartrain in Slidell, LA, says using an in-house nursing pool can keep tenured, more experienced nurses with invaluable skill sets from leaving the facility altogether.

“Although these seasoned nurses want to slow down and retire, you don’t want to lose these experienced nurses; they have knowledge that the newer nurses can benefit from,” she says.

Many organizations will pay more to in-house pool nurses because of the experience and expertise they bring, says Davenport. These nurses are usually willing to cover multiple clinical areas in the hospital.

“They are typically very flexible individuals, flexible in the hours they work and the locations in the hospital they will cover. There is a price differential; agency nurses … do cost more than in-house pool, but you’re paying the RN rate plus the agency who has their own costs to cover,” she says.

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