Nurse Staffing in Hospitals: Is There a Business Case for Quality?

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In the Literature

In the face of preventable deaths, costly inefficiency, and a rapidly aging population, U.S. hospitals are eager to establish a viable business case to improve quality of care and patient safety. New research published in Health Affairs finds that increasing the use of registered nurses (RNs)—without increasing total nursing hours—could reduce costs and improve patient care by avoiding unnecessary deaths and reducing days of hospital care.

The Commonwealth Fund-supported study, "Nurse Staffing in Hospitals: Is There A Business Case for Quality?" (Health Affairs, January/February 2006), explores different approaches to nurse staffing in hospitals that involve strategies like changing the mix of RNs and licensed practical/vocational nurses (LPNs) or increasing the total number of licensed nursing hours per patient. Based on these models, the study finds that increasing the use of RNs and hours of nursing care per patient could help to avoid more than 6,700 patient deaths and 4 million days of care each year. Doing so can also help avoid negative outcomes, like urinary tract infections, cardiac arrest, or hospital-acquired pneumonia.

Strategies for Increasing Nurse Staffing
Together with his colleagues, lead author Jack Needleman, Ph.D., of the School of Public Health at the University of California, Los Angeles, analyzed data from 799 acute care general hospitals in 11 states. The study simulated the effect of three options to increase nurse staffing: 1) raising the proportion of RNs relative to LPNs, without changing the total number of hours of care, to the same level as in the top 25 percent of hospitals; 2) increasing the number of licensed nursing hours per day, without changing the proportion of RNs and LPNs, to the same level in the top 25 percent of hospitals; and 3) raising proportions of RNs and the level of licensed nursing hours per day to that of the top 25 percent of hospitals.

More RN Staff Helps Avoid Patient Deaths and Medical Complications
Option 1—raising the proportion of RNs—would require hospitals below the 25 percent level to replace more than 37,000 LPNs with RNs, at an estimated cost of $811 million, according to the study. However, this approach would benefit both hospitals and patients alike, resulting in nearly 5,000 fewer patient deaths per year and net savings of $242 million over the short term and $1.8 billion over time, assuming that fixed hospital costs are fully recovered. Savings would be generated from shorter hospital stays, fewer patient deaths, and decreased rates of complications. "There is an unequivocal business case for hospitals to improve nurse staffing under one option we examined: raising the proportion of RNs without changing licensed hours," the authors say.

Although options 2 (increasing the number of licensed nursing hours) and 3 (raising the proportion of RNs and the level of licensed nursing hours) are also associated with substantial savings, they would not be enough to offset the costs of the increased staffing, resulting in short-term net costs of $5.8 billion and $5.7 billion, respectively. These cost increases, while large, would only represent about 1.5 percent of hospitals' annual expenditures, say the authors. In time, as hospitals adjusted to the fewer days of care, the expenses would lessen, representing 0.8 percent and 0.4 percent of expenditures, respectively.

Policy Implications
Researchers warn that, depending on reimbursement systems in use, hospitals may be required to share cost savings with insurance carriers and other payers. These policies create a strong disincentive for hospitals and may impede their ability to justify quality improvements. But for patients, the benefits are clear. "From a patient's perspective, however, using standard measures of value, the additional costs to increase nurse staffing appear justified," say the authors.

Policymakers, as well as public and private payers, should focus on ways to reconcile these issues. For example, when Medicare was introduced in 1965 and hospitals faced significant nursing shortages, Congress made extra payments to help hospitals raise wages and increase staffing. Could a similar policy be adopted now to help bridge the gap between patients' and hospitals' needs?

Ultimately, the authors say, policymakers, insurance carriers, hospital administrators, and other players will have to face serious questions regarding the importance of improving patient safety, the feasibility of increasing nursing staffing, and how to make funds available to help hospitals realize their goals.

Facts and Figures

  • In 2002, U.S. short-term acute general hospitals employed 942,000 full-time equivalent RNs and 120,000 full-time equivalent LPNs.
  • The researchers estimate that more than 6,700 in-hospital deaths could be avoided by increasing nurse staffing.
  • The net short-term costs associated with options 2 (increasing the number of licensed nursing hours per day) and 3 (increasing the proportion of RNs and the number of licensed nursing hours per day) would be $5.8 billion and $5.7 billion, respectively.
  • More than 90 percent of projected cost-savings are generated from decreases in length-of-stay associated with higher nurse staffing.

Avoided Hospital Days, Costs, and Deaths if Proportion of Registered Nurses (RNs) or Number of Licensed Nursing Hours Were Increased to the 75th Percentile of Hospitals Studied, National Estimates Updated to 2002

 Option 1. raise proportion of RNs from 75th percentile without changing number of licensed hoursOption 2. Raise number of licensed hours to 75th percentile without changing proportion of RNsOption 3. Raise both proportion of RNs and number of licensed hours to 75th percentile

Hospital days avoided1,507,4932,598,3394,106,315

Cost impacts
Net cost of increasing nursing (in millions)-$242$5,819$5,716
Net cost as percent of hospital expenses-0.1%1.5%1.4%

Cost savings assuming that fixed hospital costs are recovered
Net cost of increasing nursing (in millions)-$1,821$3,240$1,558
Net cost as percent of hospital expenses-0.5%0.8%0.4%
Avoided deaths4,9971,8016,754

Notes: Cost savings of avoided days are initially reduced by 60 percent based on research that only 40 percent of hospital costs are variable in the short run. Over time, fixed costs should be reduced to reflect changed volume. Estimates based on recovery of 40 percent of average costs and all average costs are presented. Net cost of increasing nurse staffing was calculated by subtracting total estimated cost savings due to avoided outcomes and days from cost of increasing nurse staffing.
Source: Adapted from J. Needleman et al., "Nurse Staffing in Hospitals: Is There a Business Case for Quality?" Health Affairs, Jan./Feb. 2006 25(1):204–211. Authors' estimates using data from J. Needleman et al., "Nurse-Staffing Levels and Quality of Care in Hospitals," New England Journal of Medicine, May 30, 2002 346(22):1715–22, updated to 2002 based on 1997 and 2002 American Hospital Association annual survey data and on wage data for nurses employed in hospitals from the Current Population Survey.

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Publication Details

Publication Date:
January 1, 2006
Authors:
Jack Needleman, Peter I. Buerhaus, Ph.D., R.N., Maureen Stewart, et al.
Citation:

J. Needleman, P. I. Buerhaus, M. Stewart et al., Nurse Staffing in Hospitals: Is There a Business Case for Quality?, Health Affairs, January/February 2006 25(1):204–11