In my previous blog post titled “Flawed Nursing Budget Process Increases Understaffing Risk,” I shed light on the issue of a flawed non-productive FTE budget calculation and its impact on staffing capacity in nursing. However, my research and recent discoveries indicate that this problem is not limited to a particular region or institution but is a global issue affecting the healthcare industry as a whole.

To my surprise, organizations like AORN use the flawed calculation method in their safe staffing guidelines, which healthcare leaders and nursing professionals widely use. This error has been prevalent in nursing for over 40 years, and its impact has gone unrecognized as contributing to the nursing shortage.

The adverse effects of this flawed budget process are far-reaching as the error has been identified in documents from several countries. It impacts hospital revenues, the health of working environments, patient outcomes, and various quality, safety, and financial metrics sensitive to staffing levels. Moreover, this issue contributes to health disparities, a critical concern in healthcare today.

In this blog post, I will delve deeper into the implications of the flawed non-productive FTE budget calculation issue for nursing, the healthcare industry, and society as a whole. I will also explore how informatics nurses can play a crucial role in addressing this issue by utilizing their nursing expertise and data and systems analysis skills to develop care-centric, data-driven approaches to staffing and workforce management.

Through their efforts to promote healthier working environments and enhance patient outcomes via improved staffing, informatics nurses can help to mitigate the impact of this flawed budget process on patients, caregivers, and the healthcare industry. With their unique skill set, they can help healthcare organizations adopt care-centric, data-driven solutions that enhance staffing capacity, reduce staff burnout, and ultimately improve patient care.

Understanding the Flawed Non-Productive FTE Calculation

Nursing budgets must accurately calculate full-time equivalents (FTEs) to meet the budget assumptions. While multiple valid mathematical approaches exist for nursing FTE budgets, a flawed methodology has become conventional wisdom. Professor William Ward, in his book Health Care Budgeting and Financial Management, highlights the impact of this error, cautioning against making “the mistake of saying, ‘Let’s add 15% for nonproductive time’” as “this approach is clearly incorrect and will always result in a budget that lacks sufficient staff.” ^[1]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger. The practice of adding FTEs by multiplying productive FTEs by the ratio of non-productive to total hours to determine non-productive FTEs generates a shortfall in FTEs needed to meet budget assumptions, leaving managers short-staffed before the fiscal year begins.

In some budget methodologies, total FTEs are unknown after calculating productive FTEs. Ward suggests using “old grade school ratio problems such as ’10 is to 20 as X is to 40, solve for X.’” to calculate total FTEs.^[2]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger. You can read about this approach in more detail in my Flawed Nursing Budget Process Increases Understaffing Risk article.

The impact of this error on nursing resources can be easily seen by examining the calculations in the AORN Position Statement on Perioperative Safe Staffing and On-Call Practices. In Step 6 – Calculate Benefit Relief FTEs on page 14 of the document, the example scenario states employees are expected to use 512 benefit (non-productive) hours per year.

512 benefit hours divided by 2080 hours per FTE yields a non-productive (relief) percentage of 24.6%

If we had 100 of these example FTEs, our budget would contain 75.4 productive FTEs and 24.6 non-productive FTEs.

Let’s pretend we only know we need 75.4 productive FTEs and apply the calculations outlined in the AORN document for determining relief FTEs:

75.4 FTEs x 512 / 2080 = 18.6 Relief FTEs

75.4 + 18.6 = 94 Total FTEs

18.6 / 94 = 19.8% of total FTEs, but only 18.6% of the 100 FTEs needed

Due to the calculation error, instead of the expected 24.6% of total FTEs, the 18.6 relief FTEs represent 19.8% of total calculated FTEs and only 18.6% of the 100 total FTEs actually needed.

In the formula above, the 512 / 2080 represents the ratio of non-productive hours to total hours for the FTE. This ratio can also be expressed as 24.6%. Since the ratio was calculated on a whole FTE, applying the ratio to only the productive FTEs results in a 6.0% shortfall. The higher the non-productive (relief) percentage, the higher the shortfall will be.

According to Ward, the correct way to determine total FTEs, in this case, would be to divide the productive FTEs by the productivity rate of 75.4%:

75.4 / .754 = 100 Total FTEs

One confusing but mathematically correct methodology for calculating non-productive FTEs by multiplication is using a ratio of non-productive time to productive time. Using the example above, we would instead multiply productive FTEs by benefit hours divided by productive hours:

75.4 x 512 / 1568 = 24.6 Relief FTEs

75.4 + 24.6 = 100 Total FTEs

This method can be confusing because, in this case, the ratio of non-productive to productive time is 32.7%. While mathematically correct, multiplying productive FTEs by 32.7% to give you 24.6% of our Total FTEs is confusing and not intuitive. It also obscures the actual percentage that non-productive FTEs represent in the budget.

Somewhere along the way, I believe some leaders became confused by this methodology and began multiplying productive FTEs by the ratio of non-productive hours to total hours.

The bottom line is if your budget process multiplies productive FTEs by a “replacement factor,” this is a red flag indicating that you should verify that you are calculating the correct number and percentage of non-productive FTEs.

It’s important to note that AORN is not to blame for the flawed calculation for non-productive FTEs, as it has been circulating for at least 40 years and, unfortunately, continues to persist today. I was first taught this incorrect methodology by a consultant in 2000^[3]Goddard Management Resources. (1998). Financial Planning, Staffing, and Budgeting for Health Care Leaders., and it wasn’t until I read Professor Ward’s book in 2017 that I recognized the problem. Despite its widespread use, realizing that this methodology is flawed and will result in inaccurate budget calculations is essential.

Furthermore, the literature on nursing FTE budgets over the past 40 years has primarily been a repetition of previous work, with few new contributions to the field. Many articles calculate productive and total FTEs without explicitly stating the number of non-productive FTEs. There is often little validation to ensure that the expected productive and non-productive percentages have been accurately calculated. This lack of attention to detail can lead to serious budgeting errors that negatively impact staffing, revenue, patient care, and staff morale. Therefore, we must move beyond conventional wisdom and take a more rigorous and evidence-based approach to nursing budgets.

The Evidence for the Prevalence

The flawed calculation in AORN’s materials has persisted for at least 18 years and can be traced back to AORN’s 2005 Guidance Statement on Perioperative Staffing.^[4]AORN Guidance Statement Perioperative Staffing. (2005). AORN Journal, 81(5), … Continue reading The mistake has also been included in AORN’s manual of Standards, recommended practices, and guidelines since at least 2007.^[5]AORN. (2007). Standards, recommended practices and guidelines 2007. Association of Operating Room Nurses. The New Zealand Nurses Organization utilizes the flawed calculation in their 2022 document on Safe Staffing in the Perioperative Setting, which relies on the AORN Guidance Statement from 2005.^[6]New Zealand Nurses Organization. (2022). SAFE STAFFING IN THE PERIOPERATIVE SETTING. … Continue reading Several organizations for procedural areas, such as the Association of Radiologic and Imaging Nursing^[7]ARIN. (2017). ARIN Position Statement Nurse Staffing in Interventional Radiology. … Continue reading, the Society of Gastroenterology Nurses and Associates^[8]SGNA. (2016). POSITION STATEMENT Minimum Registered Nurse Staffing for Patient Care in the Gastroenterology Setting. https://www.sgna.org/Portals/0/Minimum%20RN%20Staffing_FINAL.pdf, the American Society of Gastrointestinal Endoscopy^[9]Jamil, L. H., Naveed, M., Agrawal, D., Fujii-Lau, L. L., Al-Haddad, M., Buxbaum, J. L., Fishman, D. S., Jue, T. L., Law, J. K., Lee, J. K., Qumseya, B. J., Sawhney, M. S., Thosani, N., Storm, A. C., … Continue reading, and the Society of Interventional Radiology^[10]Baerlocher, M. O., Kennedy, S. A., Ward, T. J., Nikolic, B., Bakal, C. W., Lewis, C. A., Winick, A. B., Niedzwiecki, G. A., Haskal, Z. J., & Matsumoto, A. H. (2016). Society of interventional … Continue reading, also reference the AORN staffing guidelines. It is critical that surgical and procedural areas that have been utilizing the AORN staffing guidelines reevaluate their budget calculations to ensure that they are correctly calculating their non-productive resource needs.

In the UK, Dr. Keith Hurst’s work has played a significant role in workforce planning for the NHS. Hurst describes the Telford Methodology for calculating the resources for non-productive time, also known as “time-out,” in his paper Selecting and Applying Methods for Estimating the Size and Mix of Nursing Teams.^[11]Keith Hurst, Jackie Ford, Justin Keen, Susan Mottram, Michael Robinson. (2022). Selecting and Applying Methods for Estimating the Size and Mix of Nursing Teams. … Continue reading In the paper, “time-out” refers to all types of leave, including sickness, holiday, compassionate, uncertified, certified, maternity, study, etc. Hurst cites an earlier study that indicated the UK average for time-out was 22% and further clarifies that this means that “one nurse in five is away from the ward at any given time.”^[12]Keith Hurst, Jackie Ford, Justin Keen, Susan Mottram, Michael Robinson. (2022). Selecting and Applying Methods for Estimating the Size and Mix of Nursing Teams. … Continue reading This clarification plainly indicates that the 22% time-out value represents 22% of total worked time equivalent (WTE) hours. In an exercise demonstrating the Telford Method of calculating the hours needed to cover time out (non-productive time), the productive hours are multiplied by 1.22 to “add in” the time-out allowance. However, an analysis of Hurst’s Seven Day Ward Professional Judgement Staffing Formula example shows that the final total includes time-out hours of only 17.16% of the total required hours instead of the expected 22%.

The Telford methodology has also been identified in documents from Northern Ireland. The document Delivering Care: Nurse Staffing in Northern Ireland contains a “Telford Exercise” where the 24% planned and unplanned absence allowance is added to the productive hours rather than calculated as a percentage of total hours.^[13]Delivering Care: Nurse Staffing in Northern Ireland. (2014). Department of Health, Social Services, and Public Safety. … Continue reading If the intent is to calculate 24% of total hours for relief, the Telford Methodology produces a 5.76% WTE shortfall in this example.

In Staffing for Patients in the Perioperative Setting, published by the UK’s Association for Perioperative Practice, their calculations for staffing the surgical theater call for “adding 25%” to the calculated patient care WTEs.^[14]Association For Perioperative Practice. (2022). Staffing for Patients in the Perioperative Setting. The Association for Perioperative Practice. Given the presence of the Telford methodology in key UK workforce planning documents, the AFPP should clarify whether the calculation is intended to provide 25% of total hours to cover sickness and absence. Multiplying productive WTEs by 25% results in only 18.75% of total resources for time-out coverage, a 6.25% shortfall if the intention was to calculate 25% of total hours.

The intention of the Telford Methodology needs clarification. If the expectation is to calculate “time-out” hours and WTEs as a percentage of time-out hours to total hours, then the Telford approach would be incorrect, according to Ward. Given the higher non-productive percentages used in the UK, the shortfalls will range from 4% to 6% when applying the improper calculation.

In discussions with a nurse manager, I’ve confirmed that one of the largest US health systems uses the flawed non-productive FTE calculation. As a result, this health system has underestimated its RN and CNA needs by over 2,000 FTEs.

The 2006 Safe Staffing Saves Lives Information and Action Tool Kit^[15]Safe Staffing Saves Lives Information and Action Tool Kit. (2006). International Council of Nurses. https://silo.tips/download/safe-staffing-saves-lives published by the International Council of Nurses contains and references the flawed time-out (non-productive) formula from the Hurst article referenced above.^[16]Keith Hurst, Jackie Ford, Justin Keen, Susan Mottram, Michael Robinson. (2022). Selecting and Applying Methods for Estimating the Size and Mix of Nursing Teams. … Continue reading

Determining non-productive FTEs by multiplying productive FTEs by a replacement factor is taught in popular nurse manager workshops by AONL, HFMA, ANA, and Nursing Management Journal. In some courses, what was represented by the replacement factor was ambiguous, and in other classes, they were clearly using the flawed approach described by Ward.

I have identified more than 40 sources spanning 40 years that contain the flawed calculation described by Professor Ward. These sources include journal articles, textbooks, conference presentations, nurse manager workshops, and white papers, indicating that this error has been widely disseminated across various platforms.

I contacted the author of the first article in which I identified the error. I provided them with an explanation from Professor Ward’s book and a mathematical proof of the error. However, the author’s response was not encouraging. In a polite email, they stated that they had “always done it this way” and that three large consulting firms they had worked with did it that way as well. This indicates that the problem has been present in academia and professional practice, and we must correct this error to ensure accurate nursing resource planning.

The pervasive presence of this error in the literature for over 40 years, and its unrecognized impact as a contributing factor to the nursing shortage, is concerning. This miscalculation’s global prevalence and longevity strongly suggest that our assessment of the necessary nursing resources has been underestimated for decades.

Additional Impacts

This flawed nursing FTE budget process has far-reaching adverse effects that impact hospital revenues, staffing levels, working environments, and patient outcomes. Various quality, safety, and financial metrics sensitive to staffing levels are also affected. This issue is especially concerning as it also contributes to health disparities, a critical concern in healthcare today.

The FTE shortfalls due to the flawed budget calculation combined with current vacancy rates have wiped out the budgeted non-productive resources at many facilities that would normally be used to provide coverage for non-productive activities such as time off and education. Many facilities are in a “negative replacement” scenario where they have depleted their non-productive resources and are also short of the FTE hours needed to schedule their desired level of care. At this point, every non-patient care shift scheduled will create another unfilled shift at the bedside.

With surgical services typically being the largest revenue generator for hospitals^[17]Basham, L., COO, Surgical Directions, Besedick, M., Engagement Manager, & Surgical Directions. (n.d.). Nervous about your hospital’s financial viability? Turn to surgical services. … Continue reading, closing beds and canceling or delaying surgeries due to poor staffing^[18]Hignett, K. (2023, April 4). England’s hospitals cancel nearly 15,000 children’s operations amid bed crisis. Forbes. … Continue reading^[19]Rawlinson, C., ABC News, & Jewell, S. (2023, January 29). Staff shortages at leading Peter MacCallum Cancer Centre prompt surgery delays. ABC News. … Continue reading^[20]Glatter, R., & Papadakos, P. (2023, January 10). The coming collapse of the U.s. health care system. Time. https://time.com/6246045/collapse-us-health-care-system/ can negatively impact revenue.

Each facility using this flawed budget methodology will likely need dozens more FTEs to meet their budget assumptions, and health systems could need hundreds more FTEs. Suppose enough facilities in a city or region use the incorrect budget calculation. In that case, the aggregate need due to the error can have economic and job market impacts due to the number of positions needed to stabilize nursing in the area. In my blog post Nursing Budget Flaw Impact on Understaffing at the Hospital and Regional Levels, I explore the potential impact on nursing job markets in regions where multiple hospitals use the flawed formula.

The staffing shortage has increased the use of bounties, bonuses, and travel nurses to fill positions. Hospitals in rural and underserved communities have experienced an employee exodus due to higher pay elsewhere, forcing them to close beds and reduce or eliminate services.^[21]Sable-Smith, B. (2022, February 7). Bounties and bonuses leave small hospitals behind in staffing wars. Kaiser Health News. … Continue reading^[22]Chartis: Rural hospitals losing “arms race” for nurses amid major staffing crunch. (2022, August 17). Fiercehealthcare.com. … Continue reading Poor staffing has also contributed to the reduction in services and the closure of rural health facilities, which has contributed to health disparities in these communities.^[23]American Hospital Association. (2022). Rural Hospital Closures Threaten Access. https://www.aha.org/system/files/media/file/2022/09/rural-hospital-closures-threaten-access-report.pdf

Understaffing is a significant factor in unhealthy nursing work environments that “negatively affect the performance of nurses, patient care outcomes and patient safety and cause nurses to become alienated/distracted from their profession.”^[24]Er, F., & Sökmen, S. (2018). Investigation of the working conditions of nurses in public hospitals on the basis of nurse-friendly hospital criteria. International Journal of Nursing … Continue reading

Understaffing is also a significant contributing factor to burnout, PTSD, declining mental health, and moral injury among nursing staff, leading to over 40% of nurses considering leaving the profession.^[25]Intelycare Research Group. (2022). Beyond Burnout Nurses Suffer From PTSD as Spiraling Work Demands Force Them to Sacrifice Their Mental Well-Being. … Continue reading

The shortage of nurses can result in a higher incidence of errors and increased morbidity and mortality rates. When hospitals have high patient-to-nurse ratios, nurses tend to experience burnout and dissatisfaction. The patients have higher mortality rates and a greater likelihood of failure-to-rescue than facilities with lower patient-to-nurse ratios.^[26]Haddad LM, Annamaraju P, Toney-Butler TJ. Nursing Shortage. [Updated 2023 Feb 13]. In: StatPearls [Internet]. Treasure Island (FL): StatPearls Publishing; 2023 Jan-. Available from: … Continue reading

Further debate, discussion, and research are required on this budget flaw, including how the long-term underestimation of our nursing resources has impacted staffing, revenue, nursing practice, patient outcomes, and our communities.

Where do we go from here?

At first glance, discovering a more severe nursing shortage than anticipated may seem disheartening. However, this development presents an opportunity to gain new wisdom into the contributing factors to understaffing, burnout, and other issues in the nursing workforce.

AORN and the international nursing community now have new insights into one of the contributing factors to understaffing, burnout, increased overtime utilization, adverse events, and recruitment and retention issues in the nursing workforce.

Furthermore, healthcare facilities worldwide can assess the impact of the flawed calculation on their bottom line. The error can contribute to significant overtime, burnout, recruitment and retention costs and negatively impact revenue through canceled or postponed surgeries and the closure of beds due to insufficient staffing.

Despite the benefit of a greater understanding of a contributing factor to nurse staffing issues, some leaders have expressed reservations about utilizing this information, given the difficulty of filling nursing positions at many facilities.

However, the fact remains that numerous facilities and health systems will need to recruit dozens to hundreds more staff than previously estimated. Accurately gauging our resource needs will enable us to assess the efficacy of proposed solutions to bridge this gap.

Given the challenges in the nursing education pipeline, it will be incredibly difficult to create new nurses fast enough to fill our need.^[27]How to ease the nursing shortage in America. (2022, May 23). Center for American Progress. https://www.americanprogress.org/article/how-to-ease-the-nursing-shortage-in-america/ We will need a combination of people and technology in order to get enough eyes and hands on patients at the bedside while we rebuild the capacity needed to stabilize nursing and position it for the growth needed to replenish the system.

To get the needed caregivers at the bedside, we must look to alternative care delivery models such as team-based care approaches.

We must explore innovative approaches to nursing education and technologies, such as telehealth and virtual nursing, that can act as force multipliers for nursing care.

Funding the positions and salaries needed to bring nurses and CNAs back to the bedside under the nursing-as-a-cost model will be difficult. We must examine alternative solutions to reimbursement for nursing services that would allow nursing to self-fund the salaries and positions needed.

While there have been calls for increased communication and collaboration between nursing and finance to address workforce challenges^[28]Robyn Begley, Pamela F. Cipriano, Todd Nelson. (2020). The Business of Caring: Promoting Optimal Allocation of Nursing Resources. … Continue reading, nursing is at a significant disadvantage in these conversations as nursing has surrendered much of its financial expertise to finance. We must recognize that fiscal management is an integral part of nursing care delivery^[29]Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders. and reclaim that financial knowledge and expertise so that we can communicate with finance as peers rather than customers.

Facilitating a comprehensive understanding of the mathematics of nursing care delivery and how the budget transforms into care at the bedside offers significant opportunities for informatics nurses. These professionals, equipped with the appropriate tools, training, and data, can take charge of interdisciplinary effective workforce management teams. Such teams would include the informatics nurse, the nurse manager, and representatives from finance, HR, and quality improvement.

By employing care-centric modeling techniques, these teams can determine the resources available for patient care, time off, and education. This information can then be assessed within the context of productivity, financial, safety, and quality metrics, as well as HR metrics such as recruitment, retention, and employee satisfaction. The use of care-centric modeling tools and techniques can act as a Rosetta Stone for nursing and finance, enabling better communication by presenting data in hours and shifts, which are more intuitive to nursing, and in FTEs, which are preferred by finance.

The data from these teams can provide valuable insight to unit and executive leadership on not only the capacity for providing patient care but also the resources available to provide time off to prevent burnout and the ability to support orientation and education to support workforce competency and patient safety.

This approach represents an opportunity to optimize resource utilization while improving the quality of patient care and healthcare work environments. The informatics nurse can play a crucial role in leading these efforts, utilizing their expertise in systems and data analysis and their ability to bridge the gap between nursing and finance. By working collaboratively, the team can develop, recommend, implement, and evaluate strategies that improve staffing, recruitment and retention, reduce burnout, enhance patient outcomes, and improve the cost-effectiveness of nursing care delivery.

In Conclusion

In summary, the issue of the flawed non-productive FTE calculation in nursing budgets has been identified in several countries. This article shows that the error has been widely disseminated across various platforms and is present in academia and professional practice. The implications of this error are significant, as its prevalence and longevity suggest that our assessment of necessary nursing resources has been underestimated for decades.

To address this issue, it is crucial for leaders and professional organizations to facilitate more debate, discussion, and research on this issue—a better understanding of how widespread this flawed budget approach is necessary to determine true nursing resource needs. By accurately assessing the shortfall, we can determine the effectiveness of proposed solutions to close the resource gap.

Informatics nurses, with their expertise in nursing care and data and systems analysis, can play a crucial role in facilitating communication, collaboration, and education between nursing, finance, human resources, and quality improvement. They can also guide a more data-driven, care-centric, evidence-based approach to nursing finance and workforce management.

It is important to recognize that nursing possesses the expertise to solve this problem, and we can look to our roots for inspiration. Florence Nightingale’s groundbreaking use of data during the Crimean War was critical in establishing nursing as a scientific profession, saving innumerable lives, and transforming healthcare worldwide. To address the current challenge, we can follow in Nightingale’s footsteps by leveraging the power of data to gain a better understanding of our nursing workforce challenges, driving changes that lead to more effective workforce management. Additionally, we can provide data-driven tools and education to ensure the optimal allocation of nursing resources, resulting in high-quality patient care. By adopting this approach, we can drive positive changes in nursing finance and workforce management that improve healthcare for all.