Cutting back on staff may seem like a viable solution to financial difficulties—until the costs of understaffing nurses begin to emerge. Understaffing in nursing can lead to penalties and reduced funding from federal programs. It can also have other non-monetary costs, such as compromised patient safety and healthcare outcomes.
Learn the causes of understaffing in facilities and the top five hidden costs of understaffing.
What causes facilities to be so understaffed?
Nursing shortages. Increasing rates of burnout and turnover. Unpredictable staffing needs.
Understaffing is clearly a multifaceted and complex issue with many possible causes. Let’s take a closer look at some of the factors that cause facilities to be understaffed:
Nursing shortage
The country’s aging population and nursing workforce significantly contribute to the ongoing nurse staffing shortage.
The aging baby boomer and gen x populations need more healthcare services, increasing the demand for nurses. However, the nursing workforce is also aging, resulting in many nurses in the later stages of their careers retiring. At the same time, growing the next generations of nurses has its own challenges. Enrollment in nursing programs is limited due to a shortage of faculty, clinical placements, and preceptors.
These factors lead to competition among facilities for skilled nurses.
Nurse burnout and turnover
Since nursing shortages cause healthcare facilities to be understaffed, many nurses in turn experience burnout from high patient loads and unsafe conditions.
High burnout rates lead to high turnover rates, which further exacerbate understaffing. Some nurses even leave the profession entirely, further aggravating the nursing shortage. Combine these trends with severe burnout caused by the COVID-19 pandemic and it comes as no surprise that medical facilities struggle to fully staff their units with qualified clinicians.
Unpredictable staffing needs
In healthcare, staffing needs are highly unpredictable. Facilities typically plan their staffing needs based on data from previous years.
However, the patient census can fluctuate significantly from one year to the next, and demand can unexpectedly spike due to natural disasters, pandemics, etc.
5 hidden costs of understaffing nurses
Since 2019, total hospital expenses have risen by nearly 20 percent on a per-adjusted discharge basis. At the same time, operating margins have decreased by approximately 4 percent.
Over half of hospitals’ total expenses are spent on labor. However, paying staff is not the only financial challenge facilities face. Understaffing has led many hospitals to temporarily shut down specific procedures or units and even turn away patients.
Understand five hidden costs associated with understaffing nurses below:
1. Worsened safety and patient care outcomes
Not all costs of understaffing are financial.
Inadequate staffing negatively impacts nurse and patient safety and wellbeing outcomes, such as nurse burnout, adverse patient outcomes, and patient satisfaction.
Burnout itself has harmful consequences for patient care and safety, including the following:
- Decreased time spent between provider and patient
- Delays in care and diagnosis
- Increased medical errors
- Increased disparities
- Lower quality of care
- Hospital-acquired infections among patients
Approximately 50 percent of adverse medical events are preventable, making medical errors a leading cause of death and injury.
How are medical errors related to understaffing?
Understaffing typically leads to fewer nurses taking on more tasks. Nurses often cope with this challenge by taking safety‐related shortcuts to bypass obstacles and get work done quickly. These safety shortcuts or workarounds occur frequently among nursing staff because of the heavy workloads and time pressures associated with the industry. In fact, nurses may perceive these shortcuts as inevitable, just part of the job.
Skipping or circumventing safety policies and practices renders them ineffective and can result in medical errors and injuries.
Do patient care outcomes also have a financial impact?
Low HCAHPS scores can also result in reduced funding from federal programs.
HCAHPS stands for Hospital Consumer Assessment of Healthcare Providers and Systems. Since 2007, acute care hospitals have had a financial incentive to participate in HCAHPS.
Hospitals that must comply with the Inpatient Prospective Payment System (IPPS) annual payment update provisions are required to collect and submit HCAHPS data to receive their full IPPS yearly payment update. IPPS hospitals that do not publicly report the required quality measures, including the HCAHPS survey, may receive a lower annual payment update.
Furthermore, the Patient Protection and Affordable Care Act of 2010 included HCAHPS as one of the measures to calculate value-based incentive payments in the Hospital Value-Based Purchasing program.
2. Penalties for violation of staffing minimums
As of June 21, 2024, the Centers for Medicare & Medicaid Services’ (CMS’s) Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting regulations are effective.
The CMS staffing mandate establishes minimum staffing standards for long-term care facilities.
Facilities that are not in substantial compliance with these federal participation requirements may face the following enforcement actions or penalties:
- Termination of the provider agreement
- Denial of payment for new admissions
- Civil money penalties
3. Premium costs of staffing agencies and overtime work
High demand and low supply of nurses allow staffing agencies to charge exorbitant prices.
- Pay rates for hospital contract nurses have more than doubled compared to pre-pandemic levels.
- Prolucent Health reported a 67 percent increase in the advertised pay rate for travel nurses from January 2020 to January 2022.
- Additionally, hospitals must pay staffing firms 28-32 percent on top of those pay rates.
- In some areas, pay rates for travel nurses have surpassed $240 per hour.
These high staffing agency rates have contributed to the significant increase in hospitals’ labor costs.
Despite high costs, approximately 95 percent of healthcare facilities hire staff from contract labor firms. Contract nurse volume more than doubled from 2019 to 2023 alone.
4. Inflated recruiting and training costs
Has your facility ever dismissed retention strategies due to perceived elevated costs?
Understanding turnover and recruitment costs can help put retention investments into perspective.
- A recent report noted that the mean cost of turnover in the United States for a bedside registered nurse (RN) is $52,350.
- Consequently, the average hospital loses between $6.6 million and $10.5 million annually due to nurse turnover.
- Reducing RN turnover by only 1 percent can save the average hospital $380,600 annually.
How prevalent is nurse turnover?
- A recent study indicates that the nurse turnover rate in hospitals is 18.7 percent.
- Additionally, 35.8 percent of hospitals report nurse vacancy rates of greater than 10 percent.
- The remaining two-thirds of hospitals have a nurse vacancy rate of 7.5 percent or more.
High nurse turnover is one of the main problems healthcare systems face because it negatively impacts efficiency, cost-effectiveness, quality of care, and patient safety. The following outcomes are associated with high nurse turnover:
- Increased patient complications
- Higher readmission and mortality rates
- Nursing shortages
The nursing shortages that result from nurse turnover lead to medical errors, patient dissatisfaction, stress, and heavy workloads for the nurses receiving new staff who require orientation and training. Nurse turnover is part of a self-reinforcing cycle that leads to more turnover.
Faced with high vacancy rates, hospitals often have to pay high overtime rates to the remaining staff.
Due to these factors, many hospitals are in unsustainable financial situations that threaten their ability to function and provide care for the patients and communities they serve.
5. Lengthened stays and readmissions
Understaffing can lead to extended patient stays and higher readmission rates, which can be penalized.
The Hospital Readmissions Reduction Program (HRRP) penalizes hospitals for avoidable readmissions in an effort to reduce these rates. The program incentivizes hospitals to better engage patients and caregivers in discharge plans by improving communication and care coordination.
Readmissions that may be penalized include the following:
- Unplanned readmissions occurring within 30 days of hospital discharge
- Patients who are readmitted to an applicable acute care hospital, regardless of the principal diagnosis (excluding some planned readmissions)
Strategies to address understaffing in healthcare facilities
To successfully address understaffing, healthcare facilities should consider the following strategies:
Shared governance with nursing teams
Give nurses a seat at the table. Share your facility’s challenges and ask for their opinions and suggestions. Get nurses’ feedback on the steps that could most reduce burnout and turnover and improve job satisfaction and retention.
Flexible scheduling and per diem staffing solutions
Since the pandemic, nurses have prioritized flexibility and work-life balance. Therefore, facilities can proactively address understaffing by allowing nurses to choose when to work.
Nursa is a per diem nursing app offering cost-effective and flexible healthcare staffing options. Facilities can post PRN shifts on the platform to find reliable nurses at the lowest cost. The app is also a cost-effective alternative to recruiting through staffing agencies since it does not charge hire-away fees.
Investment in nurse retention
Nurse retention strategies may initially seem expensive and unsustainable. However, facilities should compare these expenses to turnover and recruitment costs. Again, involving nurses in the conversation could help facilities find innovative and effective retention strategies.
Address nurse understaffing with Nursa
Understaffing in nursing does not solve financial difficulties. On the contrary, it exacerbates them.
Therefore, workforce management should address nurse staffing issues proactively by prioritizing adequate staffing levels, incorporating innovative solutions, and involving nurses in decision-making.
One way to involve nurses in decision-making is to provide flexible nurse scheduling, allowing nurses to choose when to work. Learn how Brookfield Health eliminated staffing gaps and reduced costs after switching to our app.
Would you like to know more? Learn more about the advantages of staffing clinicians at your facility with the Nursa platform.
Sources:
- National Library of Medicine: Safety implications of different forms of understaffing among nurses during the COVID‐19 pandemic
- Federal Register: Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting
- American Hospital Association: Data Brief: Workforce Issues Remain at the Forefront of Pandemic-related Challenges for Hospitals
- Wiley Online Library: Retention of newly graduated registered nurses in the hospital setting: A systematic review
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