Healthcare Staffing Report: April 2, 2015

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‘Modest use’ of temp nurses can save hospitals money, study says

Much to the chagrin of healthcare staffing firms, many hospitals have long contended that temporary RNs are more expensive than their permanent counterparts. Staffing providers have countered that hospitals don’t consider the “fully-loaded” expenses that comprise a temporary RN’s bill rate (such as benefits, recruiting costs and training), and that use of temporary RNs can actually make a hospital more efficient. That said, a recent study (published in December 2014 in the Journal of Nursing Care Quality) undertaken by the University of Rochester’s School of Nursing comparing the cost efficiency of using temporary RNs versus their permanent counterparts will likely help engage both sides in more meaningful conversations around the use of supplemental RNs. The study suggests “modest use” of temporary staff can lead to cost savings and efficiencies for hospitals, while “heavy reliance” on temporary workers to meet long-term staffing needs was not found to be cost effective.

Hospital systems are struggling to increase both the quality of their care and efficiency in delivering it, and considering that staffing expenses can consume a majority of a hospital’s operating revenue1, data on the cost efficiency of the various types of workers who make up their staff is quite valuable. While many studies have been performed examining the quality of temporary nurses and quality of patient outcomes associated with the use of temporary nurses (see here, here and here, for example), relatively few have examined the cost efficiency associated with using temporary nurses.

The study is unique in that it is, to our knowledge, the first longitudinal2 analysis comparing the cost efficiency of permanent nurse staff versus temporary nurse staff. The study examined the effect that different levels of use of supplemental (temporary) nurse staff had on total nursing personnel cost per patient day3 (a way of making costs comparable in different operating units that may have much different patient populations and temp/perm ratios) over a three-and-a-half year period (July 2003 – December 2006). The study was published December 2014, and although the data examined is several years old, the authors claim the findings are still relevant, as the differential costs between permanent and temporary nurses have not changed much over the past several years.

Although the wages of temporary RNs observed in the study were indeed found to be higher than their permanent counterparts (even when including benefits costs), the study found that modest use of temporary RNs (up to 2.8% of total RN hours per unit per quarter) actually decreased total nursing personnel cost per patient day. Higher use of temporary RNs (from 2.8% to 5.6% of total RN hours per unit per quarter) was not associated with any statistically significant difference in cost compared to hospitals that did not use such workers. However, use of supplemental nurse staff that exceeded 5.6% of total RN hours per unit per quarter increased total nursing personnel cost per patient day, by an amount that increased as hospitals utilized more temporary nurse staff. Thus, the study suggests strategic use of temporary nurses can make hospitals more efficient and flexible, while hospitals should be wary of over-utilizing supplemental staff for their core/long-term staffing needs.

The findings further suggest an opportunity for increased partnership between healthcare systems/hospitals and staffing firms, as the study itself noted some of the best cases for supplemental staff were situations which could alleviate hospital pain points: increased patient acuity, patient census fluctuations or temporary leave of permanent RNs. Used in this manner, the use of temporary nurses can actually improve a hospitals’ bottom line, not to mention increase its flexibility.

For client hospitals or health systems that believe the best and most efficient strategy for managing their workforce is absolutely no use of temporary RNs (especially those who may cite cost concerns as the driving factor for that belief), this study may be a starting point for a data driven conversation with decision makers about the value of increasing the use of contingent workers. On the other end of the spectrum, staffing firms that notice a higher than normal reliance on their temporary workers by hospitals may use it as an opportunity to proactively introduce some direct hire business or discuss a solution such as recruitment process outsourcing. By helping their clients to become more efficient, staffing firms can enhance their credibility and ensure they become better partners with the hospitals and health systems they serve.

Caveats and limitations:

  1. The study noted that it did not include data on recruiting and orientation costs when calculating the fully loaded costs of permanent RNs.
  2. The study was performed at one large academic medical center. It is possible that other hospitals with more efficient internal float pools or different productivity levels among their “permanent” staff may have produced different results.
  3. The researchers received funding from the American Staffing Association, a lobbying group to the staffing industry.

The study is available online.

Footnotes:

1. Source: http://www.beckershospitalreview.com/finance/10-statistics-on-hospital-labor-costs-as-a-percentage-of-operating-revenue.html

2. Longitudinal: A longitudinal study is one in which observations are made over a prolonged period of time, typically spanning several years or sometimes even decades

3. Patient day: A unit of time during which the inpatient facilities of a hospital or healthcare system are used by a patient. For example, 10 patients in a hospital for one day would represent 10 patient days. Five patients in a hospital for two days would also represent 10 patient days.