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Hospitals that increase their number of registered nurses increase their operating costs but do not decrease profits

Nursing personnel comprise about 30 to 40 percent of overall hospital full-time-equivalent (FTE) personnel and about 30 percent of a hospital's budget. It's not surprising that reducing nursing staff has been one approach used by financially strapped hospitals to improve financial performance. Yet a new study finds that increased staffing of registered nurses (RNs) does not significantly decrease a hospital's profit, even though it boosts the hospital's operating costs.

In the study supported by the Agency for Healthcare Research and Quality (HS10153), Barbara A. Mark, Ph.D., R.N. F.A.A.N., at the School of Nursing, University of North Carolina at Chapel Hill, and her colleagues analyzed data for the years 1990 through 1995 from the Healthcare Cost and Utilization Project (HCUP) National Inpatient Sample (NIS) on 422 hospitals in 11 States. They also used data from several other sources, including the Centers for Medicare & Medicaid Services and the American Hospital Association. They used these data to develop a model to explore the impact of hospital operation and structural measures, market and population factors, hospital staffing, and quality of care, on hospital operating margin (profit) and operating expense.

A 1 percent increase in RN FTEs increased operating expenses by about 0.25 percent. However, there was no statistically significant effect of RN staffing on profit margins. At a minimum, these results call into question the idea that a route to greater profitability is through cuts in RN staffing. It may be that in hospitals with fewer RN FTEs, turnover is high, and overtime use is extensive—costs that are reduced when there are more RN FTEs. Hospitals located in markets with greater HMO penetration had decreased operating profits. Changes in quality of care had no significant effect on either costs or profits.

More details are in "Nurse staffing, quality, and financial performance," by Michael McCue, D.B.A., Dr. Mark, and David W. Harless, Ph.D., in the Summer 2003 Journal of Health Care Finance 29(4), pp. 54-76.

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