After publishing my articles Flawed Nursing Budget Process Increases Understaffing Risk and A Care-Centric Approach to Nurse Scheduling, a nurse manager contacted me regarding an odd discovery they had made about their nursing FTE budget process.

Their facility not only used the flawed non-productive FTE calculation, but they also introduced a second logic flaw into their budgeting process that further increased their risk of understaffing.

In this article, I’ll explain what I learned about this nurse manager’s budget process and how two separate budget errors contributed to the significant understaffing, overtime, and staff burnout that they were experiencing.

A Quick Review of a Nursing FTE Budget

We’ll use the FTEs from the unit described in A Care-Centric Approach to Nurse Scheduling and the assumption of an 85% Direct Care (Productive) vs. 15% Replacement (Non-productive) split. The size of our sample unit and its Productive/Non-Productive split are similar to that of the unit managed by the nurse manager that reached out to me. Also, we will be using unrounded values in the calculations to avoid any confusion related to the rounding artifacts.

Nursing FTE Budget - Direct Care FTEs - Mock Unit
Nursing FTE Budget – Direct Care FTEs – Mock Unit

Dividing the 25.20 Direct Care FTEs by the Direct Care percentage of 85% gives us Total FTEs. Subtracting the 25.20 Direct Care FTEs from the 29.65 Total FTEs gives us 4.45 Replacement FTEs.[1]Ward, W. J., Jr. (2015)Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.

Direct Care FTEs / Direct Care % = Total FTEs

25.20 / .85 = 29.65 Total FTEs

Total FTEs – Direct Care FTEs = Replacement FTEs

29.65 – 25.20 = 4.45 Replacement FTEs

4.45 Replacement FTEs * 40 Hours/Week = 178 Replacement Hours / Week (best-case scenario)

178 / 12 hours per shift = 14.8 Available Replacement Shifts / Week (best-case scenario)

When we divide the 4.45 Replacement FTEs by 29.65 Total FTEs, we get the desired 15% Replacement FTEs.

Replacement FTEs / Total FTEs = Replacement FTE Percentage

4.45 / 29.65 = 15.00%

The best-case scenario for Available Replacement Hours in this scenario is 178 hours or 14.8 12-hour shifts per week, assuming the unit is fully hired and has no employees on orientation, leave, or temporarily assigned to another unit.

Doubling Down on Nursing FTE Budget Errors

In addition to using the flawed nursing budget process, this nurse manager’s facility also reallocated 25% of their calculated replacement (non-productive) FTEs to their float pool. We’ll first look at the impact of these combined errors on the available replacement time calculations and then discuss the resulting operational effects.

The incorrect method for calculating replacement (non-productive) FTEs multiplies the 25.20 Direct Care (productive) FTEs by the Replacement (non-productive) percentage of 15%.[2]Ward, W. J., Jr. (2015)Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.

Direct Care FTEs * Replacement % = Replacement FTEs

25.20 / .15 = 3.79 Replacement FTEs

Direct Care FTEs + Replacement FTEs = Total FTEs

25.20 + 3.79 = 28.98 Replacement FTEs

3.79 Replacement FTEs * 40 Hours/Week = 151.6 Replacement Hours / Week (best-case scenario)

151.6 / 12 hours per shift = 12.6 Replacement Shifts / Week (best-case scenario)

The flawed replacement FTE formula introduces a -0.67 FTE shortfall into the budget.

The replacement FTE calculation error reduces the Replacement Hours Per Week from 178 to 151.6.

When we calculate the replacement percentage by dividing the 3.79 Replacement FTEs by 28.98 Total FTEs, we get 13.1% replacement instead of the desired 15%.

Furthermore, the 3.79 replacement FTEs represent a replacement percentage of only 12.8% when calculated against the correct Total FTEs of 29.65.

Robbing the Unit to Fund the Float Pool

Let’s now look at how reallocating 25% of the improperly calculated Replacement FTEs to the float pool impacts the Available Replacement Hours for the unit.

Under this methodology, the unit gets to keep only 75% of their calculated Replacement FTEs.

3.79 * 0.75 = 2.84 Replacement FTEs

25.20 + 2.84 = 28.04 Total FTEs

If we subtract the resulting 2.84 Replacement FTEs above from the correct Replacement FTE Value of 4.45, these two budgeting mistakes have created a 1.61 FTE shortfall in our budget. This shortfall translates into 64.4 hours lost per week that could be scheduled for non-patient care shifts while leaving enough resources to schedule for patient care shifts.

The best-case scenario for replacement hours has now dropped from 178 to 113 hours per week with the two budget errors.

The 2.84 Replacement FTEs represent a best-case replacement percentage of only 9.58% – not the desired 15% – when calculated against the correct Total FTEs of 29.65.

A Recipe for Understaffing, Overtime, and Burnout

The nurse manager I spoke with indicated that, despite using less than their budgeted replacement (non-productive) percentage, they had significant problems with unfilled shifts, understaffing, and overtime. Most other units at their facility struggled with staffing and overtime, likely because leadership and finance had used the flawed budget process described above for all inpatient nursing units.

The nurse manager indicated they had four 0.9 FTE RN vacant positions, two 0.9 FTE RNs on orientation, and one 0.9 FTE RN on leave. Let’s look at what the care-centric nurse scheduling formula calculates as available replacement hours for our sample unit with this information.

In A Care-Centric Approach to Nurse Scheduling, we discussed the care-centric scheduling formula, which looks like this:

Filled FTEs – Budgeted Direct Care (Productive) FTEs – Orientation FTEs – Leave FTEs – Reallocated FTEs = Available Replacement (Non-Productive) FTEs

Let’s review each element in the formula:

  • Filled FTEs: This is your Total Budgeted FTEs – Vacant FTEs
  • Budgeted Direct Care (Productive) FTEs: These are your budgeted patient care FTEs
  • Orientation FTEs: These are the FTEs for employees that are on orientation and are not fully productive and, therefore, cannot replace a fully productive employee for a shift.
  • Leave FTEs: These are FTEs on medical leave, military leave, or other leave supported by your institution.
  • Reallocated FTEs: FTEs temporarily assigned to work all of their shifts on another unit, such as a COVID unit.

And the values that we’ll use in the formula:

  • Filled FTEs: 29.65 – 3.6 = 26.05
  • Budgeted Direct Care (Productive) FTEs: 25.20
  • Orientation FTEs: 1.8
  • Leave FTEs: 0.9
  • Reallocated FTEs: 0.0

Filled FTEs – Budgeted Direct Care (Productive) FTEs – Orientation FTEs – Leave FTEs – Reallocated FTEs = Available Replacement (Non-Productive) FTEs

26.05 – 25.20 – 1.8 – 0.9 – 0.0 = -1.85

Available Replacement (Non-Productive) FTEs x 40 hours/FTE = Available Replacement (Non-Productive) Hours

-1.85 FTEs x 40 hours/FTE/week = -74 hours / week

Using the formula above, we can see that this unit has a negative replacement (non-productive) time scenario. Even if the nurse manager approved no time off and there were no call-ins for unscheduled time off, this unit would still be short of their core staffing on the schedule by approximately six 12-hour shifts every week.

Operational Impacts of Two Budget Errors

Float pools became popular in the 1980s as a way for hospitals to mitigate staffing deficiencies without having to resort to expensive resources such as overtime and per-diem agency nurses.[3]Straw, C. (2018). Engagement and retention in float pools. Nursing Management (Springhouse), 49 (10), 30-36. doi: 10.1097/01.NUMA.0000546201.01962.0d. Float pools are often additional FTEs hired above the FTEs needed for baseline staffing for the facility. Float pools allow a facility to better respond to patient volumes and acuity greater than budgeted levels by having internal resources available for staffing.

By reallocating a portion of each unit’s replacement (non-productive) FTEs to fund the float pool, this facility has embedded its float pool in its baseline staffing. The facility effectively has no additional nursing resources available to assist with staffing above the baseline budgeted census and levels of care.

Under this budget methodology, all units would have to be fully hired and have no employees on orientation or leave to realize the best-case replacement percentage of approximately 9.5% on the units.

Based on feedback from the nurse manager regarding the state of their facility’s recruitment and retention issues, it sounds like many of their units were operating with replacement (non-productive) percentages in the low single-digit to negative replacement rates. Since FTE hours are a finite resource, when replacement is utilized at a higher rate than is available, those hours will be pulled from the patient care shifts, resulting in understaffing.

With the facility’s recruitment and retention problems, FTE vacancies and employees on orientation significantly reduce their available replacement (non-productive) FTEs for scheduling.

Due to these two budget errors, this facility does not have enough staff for its budgeted baseline staffing. When the census increases above the budgeted baseline volumes, the facility has no additional capacity that they can call up. Their staff is already working significant amounts of overtime in an effort to achieve their baseline staffing numbers. The facility has had to utilize overtime and travel RNs in an unsuccessful attempt to achieve its baseline budgeted staffing numbers.

The nurse manager said their facility struggled with significant chronic understaffing, unfilled shifts, absenteeism, and overtime. The resulting burnout of their staff was causing problems with their recruitment and retention, and they were also seeing negative impacts on quality and safety metrics. Leadership developed multiple financial incentive programs to entice their already overworked staff to pick up more overtime shifts. They eventually had to resort to hiring travel RNs to stabilize their operations but had done little to correct the foundational issues in their workforce.

Their budget process has set their inpatient nursing operations up for failure and increased the facility’s risk for adverse patient events.[4]Glette, M.K., K. and Wiig, S. (2017) Aase, The Relationship between Understaffing of Nurses and Patient Safety in Hospitals—A Literature Review with Thematic Analysis. Open Journal of Nursing, 7, … Continue reading

This facility is also at risk for lower reimbursements due to the CMS Hospital-Acquired Condition Reduction Program.

Understanding Replacement is the Key to Safe and Effective Staffing and Scheduling

Understanding how variations in filled FTEs impact the available replacement resources is the key to creating safe and effective schedules.

A nursing unit’s budget defines a finite number of hours that the nurse manager can use before using unbudgeted resources such as overtime, per diem staff, float staff, and travel staff. The nurse manager assigns staff to patient care shifts or non-patient care shifts when making a schedule. The number of patient care hours needed to schedule for the desired budgeted volume and level of care is fixed and should not change unless the budget changes. If the required budgeted hours for patient care are fixed, then variances in FTE hours should be deducted from the replacement resources (in orange below) to preserve the hours needed for patient care.

Impact of dual nursing budget errors on available replacement (non-productive) time
Nursing FTE Budget Model

In A Care-Centric Approach to Nurse Scheduling, I demonstrated how nurse managers could use a simple formula to determine the amount of time available to schedule non-patient care shifts while reserving the hours needed for the desired budgeted level of care.

The formula provides the nurse manager with a valuable assessment of their scheduling capacity. Nurse managers can use this information to help facilitate conversations between them, their leadership, and finance regarding resource needs and allocation.

While there have been a lot of discussions lately in the industry about mandatory nursing ratios, acuity systems, and improved use of information technology to address nursing workforce issues, the reality is that these solutions are likely years from widespread acceptance and implementation. The care-centric approach to nurse scheduling is something that nurse managers can begin using today to understand better their budget and how to manage their scarce nursing resources more effectively.

References

References
1 Ward, W. J., Jr. (2015)Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.
2 Ward, W. J., Jr. (2015)Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.
3 Straw, C. (2018). Engagement and retention in float pools. Nursing Management (Springhouse), 49 (10), 30-36. doi: 10.1097/01.NUMA.0000546201.01962.0d.
4 Glette, M.K., K. and Wiig, S. (2017) Aase, The Relationship between Understaffing of Nurses and Patient Safety in Hospitals—A Literature Review with Thematic Analysis. Open Journal of Nursing, 7, 1387-1429. https://doi.org/10.4236/ojn.2017.712100

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