The Cost of Healthcare

New staffing legislation would require Medicare-participating hospitals to establish committees consisting of staff nurses who will make decisions regarding unit staffing needs. According to Rothberg, Abraham, Lindenauer and Rose (2005) many states have introduced legislation that would limit the ratio of patients to nurses, meaning that most hospitals would be required to staff more nurses—and as Rothberg et al. (2005) point out, “increased staffing places a considerable financial burden on hospitals” (p. 785). Their study showed that by limiting the number of patients to nurses at 4 to 1, the average cost per life saved was approximately $450,000 and that “as a patient safety intervention, patient-to-nurse ratios of 4:1 are reasonably cost-effective and in the range of other commonly accepted interventions” (Rothberg et al., 2005, p. 785). Everhart, Neff, Al-Amin, Nogle and Weech-Maldonado (2013) found that nursing staff levels impact financial performance in markets where there is a great deal of competition—but not in markets where competition is minimal.
The policy of staffing is funded as part of the hospital’s overall budget, as nurse salaries and benefits make up a substantial part of the hospital’s cost. Reiter, Harless, Pink & Mark (2012) find that “direct costs of nursing, 80 percent of which are salaries and benefits, have been shown to comprise approximately 44 percent of the total direct costs of inpatient care and 30 percent of all hospital expenditures” (p. 1031) and that estimates of cost per hospital for complying with the staffing legislation are between $200,000 and $2.3 million (Retier et al., 2012). Thus, the annual cost of complying with the staffing legislation averages out to about $1.25 million.
Financial and budgetary efforts developed to contain costs focus on identifying the average number of patients and the number of nurses needed to meet the legislated ratio. However, there is also the issue of paying attention to turnover rates as reducing these would help to offset increased staffing costs. Cost-containment strategies focus on reducing turnover and reducing medical errors and also to implement greater use of telehealth as this can reduce the number of in-patients while keeping care quality high. Regulations of a patient to nurse ratio of 4:1 mean that the hospital must always be staffing twice as many nurses today as in the past (Reiter et al., 2012).
The financing of this policy impacts health outcomes in a positive way, as Everhart et al. (2013) note, so long as the health care market is competitive because it is in the competitive market that skilled nurses are hardest to acquire and retain. By funding an increase in staffing in hospitals to meet the legislation, facilities can improve patient outcomes by ensuring better patient care, continuity of care, and patient safety, as there are more nurses on any given shift who can provide more rounding and more one-on-one time to ease patient worries and give patients the attention they require. Improving patient satisfaction by boosting the quality of care provided can also help to reduce nurse turnover, as patient satisfaction has been linked to nurse job satisfaction and retention intentions (Laschinger & Fida, 2015).
The financing of this policy also impacts the role of the nurse by illustrating how important the nurse is to the success of the hospital. Without the nurse, proper care and safety cannot legally be provided. In other words, the funding of the policy implicitly acknowledges that the role of the nurse is fundamental to the successful implementation of the mission of the hospital. The funding of this policy clearly indicates that nurses are vital in patient care.

References
Everhart, D., Neff, D., Al-Amin, M., Nogle, J., & Weech-Maldonado, R. (2013). The
effects of nurse staffing on hospital financial performance: Competitive versus less competitive markets. Health Care Management Review, 38(2), 146.
Laschinger, H. K. S., & Fida, R. (2015). Linking nurses’ perceptions of patient care
quality to job satisfaction: the role of authentic leadership and empowering professional practice environments. Journal of Nursing Administration, 45(5), 276-283.
Reiter, K. L., Harless, D. W., Pink, G. H., & Mark, B. A. (2012). Minimum Nurse
Staffing Legislation and the Financial Performance of C alifornia Hospitals. Health Services Research, 47(3pt1), 1030-1050.
Rothberg, M. B., Abraham, I., Lindenauer, P. K., & Rose, D. N. (2005). Improving
nurse-to-patient staffing ratios as a cost-effective safety intervention. Medical Care, 43(8), 785-791.