Abstract
Since the COVID-19 pandemic, nurses and nurse leaders are increasingly vocal about chronic understaffing and the impact the staffing crisis continues to have on nurses’ well-being and patient outcomes. The American Nurses Association's Nurse Staffing Task Force addressed the importance of staffing standards as a critically needed step toward improving patient and population health outcomes. Against the backdrop of ongoing nursing shortages, hospital leaders have been hesitant to embrace staffing ratios, expressing concerns about their ability to hire and retain sufficient nursing staff, as operational revenue margins remain thin and nursing labor is costly. This article explicates structural issues within the current nursing reimbursement model that harms hospitals’ business case for investments in nurse staffing and work environments. We argue that nurses must advocate for nursing reimbursement reform to increase the nursing workforce and improve nurse staffing and work environments. Such reform is necessary to support sustained hospital investments, financial philosophies, and approaches to meaningfully address and improve nurse staffing.
Implications for Knowledge Translation
Since the onset of the COVID-19 pandemic, a less numerically stable nursing workforce is threatening the ability of the U.S. health-care system to provide the high-quality care that the nation relies on. Creating attractive, healthy working conditions may not only bring nurses back into direct care within the hospital setting but may also slow attrition of currently employed nurses. Nursing care provided in hospitals is billed as part of the room rate, invisible on the revenue side of the ledger; for many organizations, the cost appears too high to justify investments in nursing from a purely financial perspective. Nursing reimbursement reform making direct nursing care more visible and increasing the focus on nursing-sensitive patient outcomes metrics is needed to strengthen the business case for investing in the nursing workforce.
As the COVID-19 pandemic's grip on the U.S. health-care system has eased, hospitals are still operating with many vacancies among nursing staff. More than 100,000 nurses between the ages of 25 and 44 left the hospital workforce between 2020 and 2021 (Buerhaus et al., 2022). Compared to an 8% pre-pandemic nurse vacancy rate, the average U.S. hospital had a 17% nurse vacancy rate in 2022 which remained high at 16% in 2023. (Nursing Solutions Inc [NSI], 2022, 2023). Many experienced nurses left hospital employment, and more anticipate doing so in the near future (Ulrich et al., 2022). A less numerically stable nursing workforce is threatening the ability of the U.S. health-care system to provide the high-quality care that the nation needs and relies on (Aiken et al., 2023).
Better Staffing and Work Environments Can Stabilize the Nursing Workforce
Qualified, experienced nurses who left the hospital workforce during the pandemic are still out there, and many are looking for jobs. The rate of registered nurses actively seeking employment opportunities rose nearly 40% post-pandemic compared to pre-pandemic (Matta & Nicholas, 2022). What nurses are looking for is not a secret or unknown. Nearly three-quarters of nurses list improved work environment and compensation as the most important aspects of a job and the most common reason for accepting or leaving a job, followed by feeling appreciated and valued (American Nurses Foundation, 2022; McKinsey & Company, 2023; Senior, 2021; Spader, 2020). Creating attractive, healthy working conditions may not only bring nurses back into direct care within the hospital setting but may also slow attrition of currently employed nurses, thus alleviating the current critical shortage of nursing care in hospitals.
Responding to the need to address nursing shortages, a 2021 letter from the American Nurses Association (ANA) to the U.S. Department of Health and Human Services urged Secretary Bocera to declare a national nurse staffing crisis and to take immediate steps to develop and implement both short- and long-term solutions (Grant, 2021). In an attempt to address the staffing crisis, the ANA convened the Nurse Staffing Task Force comprising nursing and non-nursing stakeholders from the American Association of Critical Care Nurses, the American Organization of Nurse Leaders, the Health-care Financial Management Association, and the Institute for Health-care Improvement. This group's task was to develop and publish short-term (practice and institution level) and long-term (policy) recommendations (ANA, 2023a), including improvements to the nurse work environment, including a call for attention to minimum safe staffing levels; more flexibility in scheduling; alleviating nursing workload through innovative use of information technology; and designing transparent market-based compensation programs for nurses (ANA, 2023b).
Financial Barriers to Improving Nurse Staffing and Work Environments
Yet, few hospitals have embraced or endorsed the Nurse Staffing Task Force's recommendations to improve nursing work environments and make hospital employment more appealing to nurses. Instead, in a 2021 statement, the American Hospital Association ([AHA], 2022) called on the U.S. Senate to increase the pipeline of new nursing school graduates and ease immigration requirements for foreign-trained nurses. These steps are needed to expand and sustain a strong and viable nursing workforce; however, expanding the capacity of the U.S. nursing education system will take years, and adequately preparing new nurses for today's highly complex clinical practice takes longer than at any time in the past. In the meantime, the AHA's statement does not meet the overall need to strongly address the nursing crisis.
Why are hospitals hesitant to invest in improved nurse staffing and work environments? The answer could be an economic one. While hospitals aim to support their nursing staffs and enhance patient care quality, their capacity to do so in the U.S. market-based health-care economy is dependent on financial sustainability and reasonable operating margins. Currently, nursing care provided in hospitals is billed as part of the room rate, invisible on the revenue side of the organizational accounting ledger. Although high-quality nursing is foundational to good patient outcomes and, therefore, favorable metrics in hospital pay-for-performance programs, it is also costly; for many organizations, the cost may appear too high to justify investments in nursing from a purely financial perspective. As long as investments in nurse staffing and compensation increase costs without a commensurate stream of revenue and financial returns, hospitals and other health-care organizations will continue to struggle with justifying a business case for increasing the nursing budget.
One might think that lack of an organizational business case might be overcome by industry regulations and/or mandates requiring health-care facilities to meet specific nurse staffing guidelines, standards, or ratios. Yet, without an economic business case, staffing regulations or mandates may not achieve the improvements in nurse staffing levels and work environments that our public needs and nurses hope for. California's experience with mandated registered nurse staffing ratios demonstrated suboptimal sustained improvements in patient outcomes, despite achieving higher registered nurse staffing post-implementation compared to pre-implementation levels (Burnes Bolton et al., 2007; Dierkes et al., 2022; Donaldson et al., 2005). Some argued that hospitals cut nursing budgets in other ways, for example by hiring fewer licensed vocational nurses and unlicensed assistive personnel (California Healthcare Foundation, 2009).
Nursing Reimbursement Reform
Any health-care organization is only as strong as the nursing workforce that practices within it. How do we help the health-care industry—particularly hospitals that care for the sickest patients and struggle the most with nurse understaffing—to embrace staffing recommendations and dedicate appropriate resources to attract and retain nurses? We argue that the current hospital nursing reimbursement model can be modified to alleviate financial losses and improve financial rewards from investments in nursing services.
Focus on Nursing-Sensitive Patient Outcomes
Value-based hospital performance metrics and pay-for-performance penalties/rewards can be strengthened by increasing the focus on nursing-sensitive patient outcomes metrics (e.g., hospital-acquired conditions, patient satisfaction). Hospital performance metrics can also be expanded to include clinician workforce metrics known to be associated with patient outcomes, such as staffing, turnover, and job satisfaction; these workforce metrics can be made visible to consumers with potential financial incentive as well.
Separate Nursing Labor Costs from the Value-Based Cost-Efficiency Domain
We may also re-think the inclusion of nursing labor costs in the value-based cost-efficiency domain. While incentivizing efficient use of labor is paramount, simply minimizing the clinician labor budget does not necessarily improve efficiencies and may inadvertently contribute to staffing shortages.
Make the Cost of Nursing Services Visible
We must fully consider creating a separate, transparent mechanism for billing and reimbursement of nursing care (Yakusheva & Rambur, 2023). If organizations were reimbursed for the cost of nursing services, nursing care would become fiscally visible, and investments in the nursing workforce would be more financially attractive for hospitals. This would strengthen an organizational business case for growing and supporting the nursing staff: underinvestment in nursing care could translate into economic losses and competitive market disadvantages. Targeted reimbursement for nursing services could deliver a long-term market-based solution to nurse understaffing and missed nursing care.
Conclusion and Implications
Adequate nurse staffing levels are essential for a healthy nursing workforce and high-quality health outcomes for individuals and populations, and staffing guidelines are an important step in that direction. Yet our health-care payment system is currently not aligned with enabling nurses to deliver the high-quality patient care our public can rely on.
Nurses must advocate for reimbursement reform, with an eye to modifying existing hospital pay-for-performance programs and creating mechanisms for direct, visible payment for nursing care. Such reform would serve as a catalyst for meaningful and impactful staffing standards—a welcome seismic change that all stakeholders could embrace for a more promising future for nursing and health care.
Footnotes
Declaration of Conflicting Interests
The authors declared the following potential conflicts of interest with respect to the research, authorship, and/or publication of this article. Katie Boston-Leary is an employee of the American Nurses Association where she serves as Director of Nursing Programs overseeing Nursing Practice and Work Environment and Healthy Nurse Healthy Nation. Opinions expressed here are her own and may not represent the American Nurses Association or any of its affiliates. Olga Yakusheva is Professor of Public Health and Nursing at the University of Michigan. She currently serves as a member of the Research Council of the American Nurses Association Enterprise and an independent expert for American Nurses Credentialing Center. All views are her own and do not necessarily reflect any of her affiliations.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.
