Safe RN Staffing Legislation: A Good Return on Investment

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“The return on investment in nursing will be reflected both in cost savings and in improvements in the safety and quality of care provided.”

~ Health Care at the Crossroads: Strategies for Addressing the Evolving Nursing Crisis—Joint Commission on the Accreditation of Health Care Organization (JCAHO)

For more than a decade hospitals have reduced nursing staff, which has compromised patient safety and the quality of care.

Acclaimed medical journals report that this understaffing of registered nurses contributes to unnecessarily high costs related to high RN turnover, as well as extended lengths of stay, increased readmissions, increased medical errors and rates of infection, including hospital-acquired pneumonia, blood clots and other complications. Conversely, the research makes clear that improvements in staffing ratios can result in significant savings in these areas.

Safe RN Staffing Saves Money—What the Research Shows

A recent study supported by the Agency for Healthcare Research and Quality found that increased staffing of registered nurses (RNs) was cost-neutral—has no statistically significant impact on the hospitals bottom line/profit-operating margin. (“Nurse staffing, quality, and financial performance,” Journal of Health Care Finance, 2003)
A study on the costs of implementing ratios here in Massachusetts found that “more than half to three quarters of the hospital cost of higher staffing ratios will be offset by reduced hospital costs,” according to the study’s author, Thomas Granneman, Ph.D. of Andover Economics Evaluation.
Another study by an independent research firm in Michigan found the long term impact of safe staffing legislation could results in annual net savings totaling more than $10 million for a 200-bed hospital. (See chart on this page.)

Reducing RN Turnover Rates Saves Money

Poor Ratios Increase Nurse Turnover, Cost Money and Lower Profitability

Nurses, burned out with high patient loads, leave the bedside. Hospitals with a RN-to-patient ratio of 1:7 experience a turnover rate of 18 percent. Hospitals with a ratio of 1:4 have a turnover rate of just 9 percent. (Nursing Economics, 2003)

The cost for advertising, training and loss in productivity associated with recruiting new nurses to a facility is $37,000 per nurse at a minimum and can add as much as 5 percent to a hospital’s annual budget. (Healthcare Management Review, 2004)

This graph illustrates the additional costs and corresponding savings that are projected for a typical 200-bed model hospital over ten years. Taking into account both the estimated costs and estimated savings (from reductions in RN turnover and a number of complications related to poor staffing), the net savings realized by the hospital are estimated to increase from approximately $7.5 million in the first year after reducing the patient-nurse ratio to more than $11 million in Year 10. (The Model Case for Reducing Patient-Nurse Staffing Ratios in Michigan Hospital, Prepared by Public Policy Associates Inc.)

Safe Ratios Decrease Turnover and Save Millions of Dollars

For every $1 invested by hospitals in meeting minimum RN-to-patient ratios, there will be a $1.20 return in savings associated by reducing RN turnover and reducing reliance on agency nurses. (Nursing Economics, 2003)
A 100-bed hospital that reduces turnover from 18 percent to 9 percent will save nearly $2 million per year. (Journal of Nursing Research, 2003)
A study by the Voluntary Hospital Association found that hospitals with lower RN turnover were more profitable.

Safe Ratios Eliminate Unnecessary Complications, Medical Errors, and Associated Extended Length-of Stays

Poor RN staffing levels are the cause of 19 percent of medical errors. Massachusetts can save $32 million a year by reducing medical errors caused by unsafe staffing. (“Health Care at the Crossroads: Strategies for Addressing the Evolving Nursing Crisis”, Joint Commission on Accreditation of Health Care Organizations, 2002)
Safe RN-to-patient ratios are shown to reduce a number of patient complications. For example, hospital acquired pneumonia costs $22,390 to $28,505 to treat per incident. An increase of 1 hour worked by RNs per patient day was associated with an 8.9 percent decrease in odds of pneumonia. Massachusetts could save $23 million by reducing unnecessary hospital acquired pneumonia. (“The effects of nurse staffing on adverse events, morbidity, mortality, and medical costs”, Nursing Research, March 2003)
Preliminary financial analysis of a study on the relationship between RN staffing and patient outcomes estimates that about 75 percent of hospitals increased RN staffing costs, and perhaps more than 90 percent, would be offset by savings from reductions in patients’ length of stay and reduction in a number of common complications.