Added Value vs. Overhead Cost

That’s the question Karen B. Lasater, BSN RN, tries to answer in her 2013 analysis Invisible Economics of Nursing: Analysis of a Hospital Bill through a Foucauldian Perspective. The Doctoral Fellow at the School of Nursing, University of Pennsylvania points out that “Nursing care services are the most intensely used hospital services by acute hospital inpatients yet are poorly economically measured.”

Hospital Nursing as Revenue-Generating Services 

Added Value of Nursing ServicesA typical hospital bill, Lasater argues, is broken down by revenue-generating line items such as physician and specialist charges invoiced at their respective rates. But nursing services are embedded into the line item for room and board regardless of the actual care provided to each patient. This lack of visibility has caused many hospital executives to view nursing staff as hospital overhead rather than the value-added, revenue-generating service they are actually. And because nurses are viewed as hospital overhead, downsizing temporary travel nurses and then permanent staff becomes the natural reaction to manage costs.

Recent studies reveal, however, that cutting nursing staff adversely affects patient outcomes. They show that a lower nurse: patient ratio results in better patient outcomes which in turn reflects an enhanced brand reputation in the marketplace and improved future revenue streams. Lasater contends that nursing services should be viewed in the same manner as physician services when it comes to value-added, revenue-generating services due to their considerable impact on patient outcomes.

In a June 2014 study by the Agency for Healthcare Research and Quality, Grant Martsolf identified that more nurses per patient were “associated with a reduction in adverse events, a reduction in length of stay, and no significant changes in hospitalization costs. Thus, nurses contribute to value by improving patient outcomes while containing care costs.” Martsolf contends that as reimbursements move towards a value-based framework due to healthcare reform, nursing costs will need to be looked at from a value-added perspective rather than as a hospital overhead cost.

Study: Impact of Travel Nurses on Permanent Staff

The issue of value-added healthcare services arose in regards to temporary and travel nurses. According to study author Linda H. Aiken, PhD, RN, there are unfounded beliefs among hospital executives that patient outcomes may suffer because temporary staff isn’t familiar enough with hospital protocol. What Aiken found however, was the complete opposite. Patient outcomes actually improved due to the lower nurse: patient ratio.

The University of Pennsylvania 2012 study examined 1.3 million patient outcomes and 40,000 nurses at more than 600 hospitals in the United States.

“What we found is that most hospitals use travel nurses at one time or another, and 95% of America’s top hospitals use agency nurses,” Aiken said. “We looked at whether hospitals that used a substantial proportion of agency nurses have worse outcomes and the answer to that was, ‘no.’”

Not only did they find that travel nurses helped reduce patient mortality, there were additional benefits as well such as:

  • Lower stress levels and reduced cases of nurse “burnout” among permanent nursing staff
  • Agency nurses have a higher job satisfaction rate
  • Permanent nurses report higher job satisfaction because travel nurses ease the workload
  • Travel nurses are equally qualified as permanent staff with many having national certification
  • 50% of travel nurses hold a BSN

The above demonstrates that having an optimal nursing staff facilitates improved patient outcomes and that utilizing travel nurses helps to achieve those objectives. The results-based reimbursement framework that is being implemented through healthcare reform is challenging executives to look at the value that nurses provide and to move from an overhead-based approach to a revenue-based one.

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