Recent reports and studies have continued to raise the alarm about the escalating nurse understaffing crisis, its impact on the mental health and well-being of nurses, and the adverse effects understaffing is having on patient care and patient outcomes.^[1]Trusted Health. (2022). 2022 Frontline Nurse Mental Health & Well-Being Survey. … Continue reading^[2]Ulrich, B., Cassidy, L., Barden, C., Varn-Davis, N., & Delgado, S. A. (2022). National nurse work environments – October 2021: A status report. Critical Care Nurse, e1–e18. … Continue reading

In this blog article, we’ll explore how nurse vacancy rates impact staffing capacity on both a model unit and a model healthcare facility to demonstrate the severity of the current nursing shortage. By evaluating the historical vacancy rates reported by Nursing Solutions, Inc. (NSI) on our models, we can better understand the extent of the current staffing crisis.

We will also discuss how the analysis of budget data and vacancy rates can provide insights that can empower nursing leaders to more effectively manage their workforce while providing data that can help to facilitate communication and collaboration between nursing and finance regarding resource needs.

Finally, I propose that a more holistic understanding of the nursing budget can open the door to evidence-based management and the knowledge of how management decisions can impact care delivery and patient outcomes.

Nursing Budget Basics

The nursing budget is the foundation for nurse staffing. The budget determines the resources needed to provide the desired level of patient care, allow employees time off to recharge, and cover for education required to support patient care. Information is abundant in journals, books, and workshops on how to create a nursing budget. Still, I’ve found little to nothing that educates nurse managers on operationalizing budgets to develop safe and effective schedules.

A nursing budget is a plan for determining the employee hours needed to deliver the desired level of patient care, such as a nurse-to-patient ratio or nursing hours per patient day (NHPPD) target, for a given volume of patients, often defined by an expected average daily census. The employee hours in the budget are typically expressed in full-time equivalents (FTEs), where 1.0 FTE represents an employee working 40 hours a week for 52 weeks for 2080 hours a year.^[3]Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders.

Productive time is the time spent by staff participating in patient care.

Non-productive time is time paid to staff for benefits such as sick, vacation, and holiday time as well as time for education.

You’re likely familiar with these terms if you’ve worked with nursing budgets or financial and productivity reports.

Now, I’m asking you to set aside your knowledge about productive and non-productive time. The care-centric model for evaluating budget and staffing data is not a productivity model. It is a resource allocation model.

Care-Centric Nursing Resource Allocation Modeling

When scheduling employees, they can be assigned to one of two states: Participating in patient care or not participating in patient care.

We will refer to hours participating in patient care as direct care resources for this discussion. Replacement will refer to the additional resources required to provide coverage for patient care when an employee is not participating in patient care.

“Non-productive” is also a poor descriptor of non-patient care time as the activities in this category often provide support to patient care. Employees scheduled for non-patient care shifts usually take time off, which supports employee mental health and decreases burnout risk, or attend educational or training activities essential to maintaining a competent workforce.^[4]Begley, R., et al. (2020). The Business of Caring: Promoting Optimal Allocation of Nursing Resources: 23. Under the care-centric resource allocation model, “replacement” describes the function of replacing direct care hours and FTEs in the model to maintain the desired level of care when an employee is scheduled for a non-patient care shift.

In the literature, authors spend a lot of time explaining how to calculate the productive or direct care budget and total FTEs. I have been unable to find any substantive discussion about non-productive (replacement) time and its importance in staffing and workforce management. In the discussion below, we will explore some examples that should highlight the importance of a holistic understanding of both direct care and replacement time and how understanding and managing available replacement resources are essential for the optimal allocation of nursing resources.

When evaluating budget, staffing, and scheduling data, care-centric modeling assumes that we will attempt to assign resources to fill our patient care needs first. Once we have allocated the resources needed for patient care, we can calculate the available replacement resources for non-patient care shifts.

Nursing Budget Calculations Review

Your nursing budget should contain the following information:

• Direct Care FTEs: The FTEs needed to provide direct patient care.
• Replacement FTEs: The FTEs needed for all non-patient care activities.
• Total FTEs: The sum of your direct care and replacement FTEs.
• Direct Care Percentage: Direct Care FTEs divided by Total FTEs. A number around 85% is a good starting point for many budgets.^[5]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.
• Replacement Percentage: Replacement FTEs divided by Total FTEs. Allocating 85% of FTEs for direct care leaves 15% for replacement.

Determining direct care FTEs is pretty straightforward. By mapping out the resources needed to deliver the desired level of patient care for a given volume, we can easily calculate the resources required to accomplish this.

We will use the TNIB Medical Center Mock Stepdown Unit from my Nursing Budget Flaw Impact on Understaffing at the Hospital and Regional Levels blog post.

Direct Care FTEs / Direct Care % = Total FTEs

42.50 / .85 = 50.00 Total FTEs

Total FTEs – Direct Care FTEs = Replacement FTEs

50.00 – 42.50 = 7.50 Replacement FTEs

When we divide the 7.50 Replacement FTEs by 50.00 Total FTEs, we get the desired 15% of Total FTEs as Replacement FTEs.

Replacement FTEs / Total FTEs = Replacement FTE Percentage

7.50 / 50.00 = 15.00%

Replacement FTEs x 40 = Replacement Hours per week

7.5 x 40 = 300

300 / 12 = 25 12-hour replacement shifts per week

Nursing Budget Fallacies

When you receive the budget above, finance may tell you that your budget contains 50 total FTEs and a 15% replacement rate.

There are multiple valid approaches to determining a unit’s replacement time. All methods consider the time required to provide employees with additional training and education to support patient care and the resources needed to give employees adequate time off to recharge. Be sure you are not using the flawed method for calculating replacement time, as it will only calculate 13% replacement resources in the above example instead of the desired 15%.

In the budget above, we have 300 hours or 25 12-hour shifts per week that we can spend on replacement shifts. That sounds like a lot of time!

Unfortunately, this is where the fallacy of nursing budgets lies.

Your budget represents the best-case scenario where your unit is fully hired with no one on leave or orientation. Having a fully hired unit was a rare and fleeting event before the pandemic, and now, having a fully hired unit has been relegated to a fantasy world for nearly everyone. Despite diligently planning your replacement time, you will likely not have enough resources to provide your budgeted level of patient care and the desired amount of time needed for education, leave, and time off.

In my blog post, A Care-Centric Approach to Nurse Scheduling, we explored the impact of vacancies, orientation, and leave on staffing capacity and our ability to provide time off to staff. We demonstrated how to use a simple formula to determine the available replacement resources when creating a schedule. We further showed how scheduling more non-patient care shifts than could be provided by the available replacement resources would require removing shifts from patient care.

Next, we’ll examine care-centric modeling within the context of historical nurse vacancy rates.

Impact of Vacancy Rates on Available Nursing Resource Allocation

By taking our mock stepdown unit and applying care-centric modeling, we can better examine the impact of historical vacancy rates to understand the effects on the nursing workforce.

Nursing Solutions, Inc. (NSI) has published its annual National Health Care Retention and RN Staffing Report for many years, analyzing “healthcare turnover, retention initiatives, vacancy rates, recruitment metrics and staffing strategies.” ^[6]Nursing Solutions, Inc. (2022). 2022 NSI National Health Care Retention & RN Staffing Report. … Continue reading

From the 2022 NSI National Health Care Retention & RN Staffing Report, NSI had the following to say about nursing workforce vacancies in 2022:

Hospitals are experiencing a dramatically higher RN vacancy rate in 2022. Currently, this stands at 17%, up 7.1 points from last year, with over eighty percent (81.3%) reporting a vacancy rate in excess of ten percent. The RN Recruitment Difficulty Index remains elevated at 87 days on average, regardless of specialty. In essence, it takes 3 months to recruit an experienced RN.

Let’s apply the average annual vacancy rates from 2014 through 2022 to our mock step-down unit and evaluate the results:

Of note is that NSI collects the data for these reports in January of the reporting year.

Notice that even with modest vacancy rates of around 7% in 2014 and 2015, our mock unit has lost nearly half of its available replacement FTEs.

2016 through 2019 saw the available replacement resources drop below 50%.

The 2020 report shows the impact of the pandemic in 2019 – a drop to only 40% of our budgeted replacement resources. 3.00 FTEs translates into only 120 hours per week to cover your sick calls, time off, vacation, orientation, education, and leave at your budgeted patient volume. Using more than 120 hours for non-patient care shifts will require pulling resources off direct care shifts, utilizing unbudgeted resources such as float, agency, and travelers, or leaving the shifts unfilled. A higher-than-budgeted patient volume will also further deplete resources.

The 2021 vacancy rate of 9.90% drops the available replacement resources to only 102 hours per week.

The 2022 vacancy rate of 17.00% should be cause for alarm for everyone. With -1.00 available replacement FTEs, our unit is 40 hours short of the resources needed each week for patient care, even before our first call-in, scheduled day off, orientation day, or leave day.

If we duplicate our model unit so that we have a mock mid-sized medical center that needs 500 RN FTEs to deliver the desired level of care, we can get a sense of the actual impact that vacancy rates can have on facilities:

For our mock facility, -10 available replacement FTEs translates into a shortfall of 33 12-hour shifts per week or 133 12-hour shifts needed over the 4-week scheduling period to meet the budgeted patient care needs. And again, this is before you consider call-ins, scheduled days off, orientation days, or leave days. Budgets are typically calculated on average expected volume, so if your census is higher than budgeted, your shortfall will be even more significant.

Furthermore, suppose our mock facility uses the flawed nursing budget calculation that increases understaffing risk detailed in an earlier blog post. In that case, the 17.00% vacancy rate becomes 19.25% after factoring in the effects of the incorrect replacement calculation. The calculation error inflates the scheduling period shortfall for our mock facility to over 280 12-hour shifts over a 4-week scheduling period. That’s a 10-shift shortfall for our facility every day of the 28-day scheduling period before taking into account higher than budgeted patient volume, call-ins, scheduled days off, orientation days, or leave days.

With the above modeling, multiple mock facilities in a region would result in dozens to hundreds of FTEs needed to fill the hundreds to thousands of shifts required in the aggregate.

Even with a more “modest” 8-9% vacancy rate, it’s easy to see how a unit or facility would quickly run out of resources if they experienced a patient census much higher than they had budgeted.

Reviewing the impact of vacancy rates on the above models makes it easier to visualize the depth of the staffing crisis and why many facilities are struggling with understaffing and burnout.

The effects of a 17% vacancy rate on nurse staffing and nursing work environments are unsustainable. In the conclusion of National nurse work environments – October 2021: A status report, Ulrich et al. stated the following regarding staffing and its impact on healthy work environments:

These results serve as a clarion call to all members of the health care team, health care leaders, government officials, community leaders, and patients. The exodus of nurses from the health care system poses a very real threat to the health of the nation because a hospital without appropriate nurse staffing cannot provide safe, high-quality care.^[7]Ulrich, B., Cassidy, L., Barden, C., Varn-Davis, N., & Delgado, S. A. (2022). National nurse work environments – October 2021: A status report. Critical Care Nurse, … Continue reading

We must thoughtfully and urgently brainstorm bold and innovative ideas to stabilize nursing in the short term and position nursing for the growth required to replenish our healthcare system.

So what can we do with this information?

If You Can’t Measure It, You Can’t Manage It

First and foremost, we need an accurate accounting of our resource needs. As nursing students and new nurses, it is impressed upon us the importance of correct medication calculations.^[8]Turner, Laureen, “Improving Medication Calculation Competence in Nursing Students through Schema-Based Dimensional Analysis Instruction” (2018). Doctoral Dissertations. 433. … Continue reading

An incorrect dosage calculation can cause harm or even death to a patient. The same holds true for budget calculations that ultimately determine staffing levels. Patient harm and other adverse effects of severe understaffing continue to be well documented in the literature^[9]Ubbink, D. (2011). Nurse staffing and inpatient hospital mortality1): Needleman J, Buerhaus P, Pankratz VS, Leibson CL, Stevens SR, Harris M. Nederlands tijdschrift voor evidence based … Continue reading^[10]Lasater, K. B., Aiken, L. H., Sloane, D. M., French, R., Martin, B., Reneau, K., Alexander, M., & McHugh, M. D. (2021). Chronic hospital nurse understaffing meets COVID-19: an observational … Continue reading^[11]Galanis, P., Vraka, I., Fragkou, D., Bilali, A., & Kaitelidou, D. (2021). Nurses’ burnout and associated risk factors during the COVID-19 pandemic: A systematic review and … Continue reading and the media^[12]Chatterjee, R. (2022, March 31). A nurse’s death raises the alarm about the profession’s mental health crisis. NPR. … Continue reading^[13]Bowie, D. (2022, July 25). 75% of nurses are burned out. How their mental health crisis affects an “already fragile” healthcare industry. Fortune. … Continue reading.

We must ensure that facilities are not using the identified flawed nursing budget process. My research indicates that this budget methodology is common and has worked its way into nursing’s conventional wisdom. So far, I’ve identified the budget calculation error in over 30 sources spanning 39 years. One can find these errors in journal articles, conference presentations, textbooks, consultant materials, white papers, and nurse manager workshops. I’ve also confirmed that one of the largest health systems in the US is using this broken budget process and struggling with its staffing. As a result, based on their budget assumptions, this health system needs hundreds more nurses than they realize.

Many facilities and health systems have nursing positions they cannot fill even before they learn that they need more positions than initially thought. For this reason, we must leverage data to manage our scarce available resources more efficiently and determine more realistic budget goals.

We need a more holistic view of the nursing budget process and a greater understanding of the importance of replacement time and how it supports nursing care delivery, the mental health of our caregivers, and the education needed to ensure the competency of our workforce.

Care-centric modeling can provide valuable information to all stakeholders in the budgeting, scheduling, and staffing processes. Nurse managers could advise employees of the staffing capacity of their unit. This information may help to encourage discussions and negotiations with staff regarding overtime, absenteeism, and requested time off. For nurse managers, understaffing would become a more conscious decision as they would better understand how allocating their resources on a schedule would affect patient care and non-patient care activities. This process would also provide valuable information and data that the nurse manager could use to facilitate communication and collaboration between nursing and finance regarding resource needs. Modeling each unit and its specific parameters and aggregating this information could be helpful for nursing and finance executives. This information would allow leaders to evaluate better the level of resources needed to deliver a safe level of patient care while providing adequate replacement to support care delivery.

Understanding the mathematical links between the budget, scheduling, and staffing information structures could open the door for more evidence-based management^[14]Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders. in nursing. By understanding how management decisions and resource variances impact care delivery, we should be able to link management decisions that ultimately impact staffing to patient care outcomes and a variety of quality, safety, and financial metrics sensitive to staffing levels.

In Conclusion

Despite clear warnings for decades, the nursing shortage has continued to grow. The literature has overlooked the importance of replacement time and its impact on nursing care delivery. Four decades of literature promoting a flawed budget calculation, which we could have easily identified if we had checked our math, is an impressive testament to the dangers of “we’ve always done it this way” thinking. I learned this incorrect budget methodology in 1999 when working with a management consultant hired to improve the nursing budget process at my facility. I also fell into the trap of “we’ve always done it this way.” It wasn’t until I read William Ward’s Health care budgeting and financial management, 2nd edition, where he explicitly explained the error on pages 129 and 130, that I paused and reevaluated the calculations myself.

We cannot solve our problems with the same thinking we used to create them, and we cannot effectively assess the staffing crisis without accurate data on our resource needs. With accurate data, we can take a more data-driven, care-centric approach to evaluate staffing capacity at the unit, facility, and regional levels. With a deeper understanding of how budgets transform into nursing care, the collection, analysis, and reporting of nursing finance and workforce data can help to drive knowledge and wisdom in financial and nursing care delivery decisions that can enormously impact patient care and nursing practice.

If you’re a nursing informatics professional that is involved with nursing budgets or staffing and scheduling operations, let’s connect and chat! If you’re someone interested in brainstorming solutions for addressing the nursing shortage, understaffing, and burnout, I’d love to hear from you, too. If you’re struggling with understaffing at your hospital, I may be able to help you and your leadership understand better the root causes of your staffing issues.

You can find me on Twitter at @In4maticsNurse and on LinkedIn.

9/2/2022: Traffic on this blog article has exploded in the past couple of days. I’d love it if some of you would post a comment below on where you found this shared.