A leader’s experience, knowledge, and wisdom are essential to successfully guiding their followers during a crisis. But what do you do when the advice or direction from your leader is wrong and is making it more difficult for you to navigate the situation?

In my post, Flawed Nursing Budget Process Increases Understaffing Risk, I detailed how the Association of Nurse Leaders (AONL) and the Healthcare Financial Management Association (HFMA) have been teaching nurse managers a budget process with an incorrect formula. This flawed formula results in a shortfall of expected FTEs that increases the risks of understaffing and burnout.

Unfortunately, we will also have to add the Nursing Management journal’s New Nurse Manager Workshop to that list as well.

This post explores content from the workshop, the history of the nursing shortage, and how conventional wisdom around the budget issue has missed the mark.

When Conventional Wisdom Misses The Mark

What is “conventional wisdom”?

Merriam-Webster defines “conventional wisdom” as “the generally accepted belief, opinion, judgment, or prediction about a particular matter.”

It has also been described as “commonly held and widely accepted ideas and beliefs. It can encompass ideas that are generally held by the majority of people as well as long-accepted expert opinions within a field or institution”.[1]Cherry, K. (n.d.). What is conventional wisdom? Verywell Mind. Retrieved February 17, 2022, from https://www.verywellmind.com/what-is-conventional-wisdom-5179789

There are pros and cons to conventional wisdom. When it is based on sound information and is generally accepted by the majority, it helps to build consensus so that decisions can be made more quickly.

However, “[b]ecause conventional wisdom usually goes unquestioned, it can create problems when incorrect ideas gain wide acceptance. This can make exploring new ideas much more difficult.”[2]Cherry, K. (n.d.). What is conventional wisdom? Verywell Mind. Retrieved February 17, 2022, from https://www.verywellmind.com/what-is-conventional-wisdom-5179789

Based on my research, it appears that the flawed nursing budget methodology with the incorrect replacement (non-productive) FTE calculation became part of the “conventional wisdom” at least 30 years ago.

While not intentional, the experts propagating this broken budget process are making it harder for nurse managers to staff their units effectively. When the error is replicated across a facility, the impact on staffing capacity can negatively affect various quality, safety, financial, and productivity metrics.[3]Shin, S., Park, J.-H., & Bae, S.-H. (2018). Nurse staffing and nurse outcomes: A systematic review and meta-analysis. Nursing Outlook, 66(3), 273–282. … Continue reading

New Nurse Manager Workshop

The Nursing Management journal recently kicked off an 8-session workshop for new nurse managers.

The leadership behaviors content has been excellent. The sessions were engaging and provided thought-provoking scenarios and suggestions for new nurse managers.

The first two of the four finance sessions had some excellent content but contained the fatal flaw of relying on the incorrect budget calculation when determining replacement (non-productive) FTEs.

Developing A Flawed Nurse Staffing Plan

The staffing plan session had some great information on the impact of COVID on healthcare delivery, workforce issues impacting nurse staffing, and future workforce projections and opportunities.

The approaches used to determine the patient care FTEs and the replacement (non-productive) percentage were valid. The replacement (non-productive) percentage was calculated based on total replacement hours for 12 months.

This session stumbles in the calculation of the additional replacement (non-productive) FTEs needed to provide coverage when an employee is scheduled for a non-patient care shift. Instead of calculating the replacement FTEs as a percentage of total desired FTEs, the FTEs were calculated as a percentage of only the patient care FTEs.

In the book Healthcare Budgeting and Financial Management, 2nd edition, author William J Ward, Jr., professor of Health Policy and Management at Johns Hopkins University, cautions that we should:

Avoid the mistake of merely adding 15% of non-productive [replacement] time back to the productive [direct care] FTEs… doing so will short-change the FTE count and leave a manager short-staffed even before the fiscal year begins.[4]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.

Professor Ward goes on to state:

…15% of nonproductive [or replacement] time is not 15% of productive [direct care] FTEs, but rather 15% of [total FTEs]. [Total FTEs] is not a known value at the start of the calculations. It must be determined by division using the productivity [or Direct Care] rate. This is reminiscent of the old grade school ratio problems such as “10 is to 20 as X is to 40, solve for X.” Even those skilled in budget calculations often make the mistake of saying, “Let’s add 15% for non-productive [replacement] time.” But this approach is clearly incorrect and will always result in a budget that lacks sufficient staff.[5]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.

One of the slides for developing a staffing plan specifically says “Add % for non-produtive time.” We can verify that the incorrect formula is being used by simply doing the math.

The replacement (non-productive) percentage for this example was 14%. The total productive patient-care FTEs were 15.6 and the total FTEs were 17.8 after calculating the replacement (non-productive) FTEs.

Productive FTEs x Replacement % = Replacement (Non-Productive) FTEs

15.6 x .14 = 2.2 Replacement FTEs

Productive FTEs + Replacement FTEs = Total FTEs

15.6 + 2.2 = 17.8 Total FTEs

Replacement FTEs / Total FTEs = Replacement %

2.2 / 17.8 = 12.4%

In reviewing the calculations, we can confirm that the incorrect formula has been used and that the actual calculated replacement percentage of 12.4% does not match the expected replacement percentage of 14%.

Since the productive FTEs represent 86% of our Total FTEs, approaching the problem from the correct perspective of a proportional ratio with Total FTEs as the unknown value results in a Total FTE value of 18.1 and a replacement percentage of 13.8%. When compared to the previous results of 17.8 Total FTEs and only 12.4% replacement when 14% was desired, we can see that the incorrect formula results in a 0.3 FTE shortfall.

Finding the Missing Value in Equivalent Ratios
Finding the Missing Value in Equivalent Ratios

One of the more concerning aspects of the workshop was the distribution of Excel files for the nurse managers to take back to their facility to help them calculate their FTEs. These spreadsheets also contain the incorrect formula. Below is an example from one of the sample files distributed in the class. My additional comments, calculations, and expansion of rounded values are included in the boxes with the red borders. When we calculate the actual percentage of replacement (non-productive) FTEs, we get 11.9% instead of the expected 14%. Please be aware that these numbers are different from the example above.

Developing A Flawed Nurse Staffing Plan
Developing A Flawed Nurse Staffing Plan

My Nursing Budget Flaw Impact on Understaffing at the Hospital and Regional Levels article details the impact of implementing budgets with this flawed formula across an entire facility.

We’ve Always Done It This Way

There are multiple valid mathematical approaches to calculating FTEs. However, the approach above is an incorrect methodology for calculating FTEs. In the above example, we can see that they’re using the same logic flaw of calculating the replacement percentage on Total PTO hours and Total FTEs but only applying the percentage to the patient care FTEs instead of the total desired FTEs. Calculating the replacement (non-productive) percentage of 14% (rounded up from 13.57%) based on total FTEs, but multiplying the productive FTEs by the replacement rate of 14% results in a loss of approximately 1.5-2% of the desired replacement FTEs depending on rounding.

When I submitted a comment questioning the formula and citing professor Ward’s comments regarding the flawed formula, the instructor had the following responses:

One of the participants on a Wednesday was asking about this particular formula. So this is the formula, if you remember, from our first session about calculating FTE loss and non-productive hours. What I had presented was taking the average number of hours lost and dividing it by the total of the FTE.

One of our participants actually was asking about another method to do this and this is in William Ward‘s book This book is actually on your reference list for the first presentation, so if you refer back to that reference list, Mr Ward’s book is on there.

He actually proposes a different method…

Mr. Ward’s difference is he believes that we shouldn’t use the full 2080 hours because that’s if the FTE works the entire time. He believes we should use the productivity in the formula.

Two years ago when [someone] asked me about this I went and I actually bought Mr. Ward‘s book. I got into it and I read and understood that formula and then I took it to the finance director that I worked with at the time and the CFO. And here’s my thought around this: the method that that is in the book to calculate percentage of non-productive time based on productivity instead of based on FTE is mathematically correct. When I took it to the finance department they said, “No that that’s not gonna fly.” So in this example this is 14% and if you do the math the way that the book that the ward book asks you to do it or suggests that you do it it’s at 14.4%. it’s not a huge difference but it is a difference and I needed to say that

There are two different ways to calculate this and here’s what from a leadership perspective here’s my thoughts is that even though I may as a leader think that the second way is better if finance isn’t going to accept that then I’m probably going to do more damage than good by arguing for that .4%.

So When I responded to the gentleman a couple years ago, I had that email so I pulled it up, and I said you know the reason I’m concerned is that it is about industry acceptance. Is that nurse leaders we want we want to yes fully understand the need for correct methodology and be able to articulate non-productive replacement and do so in a way that’s standard across the industry but as stated in the article, not many organizations currently allow staffing for a non-productive time and it’s important for the nurse leader to know the gap in order to hopefully negotiate some backfill and remain and to explain overtime in the PRN hour justifications.

So, again, that resource is on your reference page and it is another methodology, kind of another philosophy for non-productive calculations. I invite you to look at that and you can make a determination if you want to run it by your finance department if they will accept that it does give you a little bit more FTE of lost percentage, percentage of loss of but it is an amount that is not significant enough if it’s going to cause the finance department to think you’re trying to cook the numbers so to speak.

That is essentially a long-winded way of saying “we’ve always done it this way!”

The instructor incorrectly assumes that you must hire the missing FTEs.

This is a classic “garbage in, garbage out” scenario where the quality of the input determines the quality of the output. Instead of saying you get 15% non-productive FTEs that are really only 13% non-productive FTES, calculate it correctly as 13% and go from there!

The instructor also misrepresents professor Ward’s approach. Instead of calculating the non-productive rate, Ward calculates the productivity rate using the full 2080 hour FTE for a department that needs 17 productive FTEs:

[A]ssume each worker is given 20 vacation days a year and 10 holidays and uses 9 sick days – a total of 39 days or 312 hours off with pay. The balance of the time is, 1,768 hours (2080-312), the worker is expected to be on the job… This results in a payroll productivity rate of 85% (1,768 / 2080). By dividing the 17 FTEs by the productivity rate, it can be determined that 20 FTEs should be hired (17 / 85% = 20). In this way, if the 20 FTEs are each given their time off, a sufficient number of workers will be present to get the work done.

Avoid the mistake of merely adding 15% of nonproductive time back to the 17 workers. As demonstrated in Table 6.14 [on page 130], doing so will short-change the FTE count and leave a manager short-staffed even before the fiscal year begins.

The reason for calculating the productivity rate is that it is needed to determine the correct number of Total FTEs required for the desired replacement (non-productive) percentage.

I was shocked when the instructor implied that finance would perceive arguing for additional FTEs based on correct calculations may “do more damage than good” and that professor Ward’s approach is akin to “cook[ing] the numbers.”

I later asked the instructor “How do you determine how much time off you can give per month?”

The instructor replied:

I’m thinking what you’re saying is how many people can I give off.. can I let have vacation at once.. That is a question that is determined by, number 1, what’s your resources to backfill those positions, #2, do you have extra team members. How tight are you staffed #3 do you have team members that are willing to pick up. So there’s no formula for that, believe it or not. And if they have benefit time, so they’ve earned and accrued PTO time. They have to schedule it with you. You can’t let the majority of your people or even a quarter of your people off at the same time. But there’s no hard and fast rule around, financially, around how many people can take their paid benefit at one time.

Readers of the blog know that the statement about there being no formula for calculating how much time a manager can grant off each month is not true. My Care-Centric Approach to Nurse Scheduling is a mathematically sound methodology that allows nurse managers to calculate how much time is available to schedule for non-patient care shifts while preserving the resources needed for patient care.

For centuries, people believed that the world was flat. It wasn’t until compelling and credible mathematical evidence was produced that the concept of a round Earth moved from a heretical idea to scientific fact. It is time to objectively examine the validity of the current conventional wisdom on budgeting and staffing and not fall into the logical fallacy trap of argumentum ad antiquitam by saying “we’ve always done it this way.”

The Nursing Shortage AKA Groundhog Day

The COVID crisis has brought the nursing shortage back into focus, but the reality is that the nursing shortage has been around for over 75 years.

Many nurses have left the profession because of being underpaid for strenuous overtime labor and always with the same story of being short of help; thereby having to do more work than a human can possibly stand.[6]United States Department of Labor. (1947). The Economic Status of Registered Professional Nurses 1946-47. https://fraser.stlouisfed.org/files/docs/publications/bls/bls_0931_1948.pdf

Those who have been following recent news about nurse understaffing, burnout, and moral injury may have thought this quote came from a recent report.

The quote is from a report titled The Economic Status of Registered Professional Nurses published in 1947.

Nearly 50 years later, in 1995, Laura Gasparis Vonfrolio led thousands of nurses to march on Washington, DC, protesting layoffs and other cost-cutting measures hospitals were implementing during the managed care revolution of the 1990s[7]Managed care: What went wrong? Can it be fixed? (n.d.). Stanford Graduate School of Business. Retrieved February 17, 2022, from … Continue reading.

Sadly, not much has improved with the nursing shortage since the march on Washington 27 years ago.

A new report was just released indicating that 32% of surveyed nurses are considering leaving their positions within the next year.[8]Feintzeig, R., & Photographs by Brandon Thibodeaux for The Wall Street Journal. (2022, January 10). Stressed nurses wonder: How to quit a job when it’s your calling? Wall Street … Continue reading That’s an increase from 22% in February of 2021. The New England Journal of Medicine also recently reported that they “have observed substantial deterioration on multiple patient-safety metrics since the beginning of the pandemic, despite decades of attention to complications of care.”[9]Fleisher, L. A., Schreiber, M., Cardo, D., & Srinivasan, A. (2022). Health care safety during the pandemic and beyond – building a system that ensures resilience. The New England … Continue reading Nurses are once again planning to march on Washington, DC. Over 190,000 people have joined the Facebook group National Nurses March. The group’s goals state they are marching for the “peaceful lifting of our collective nurse voice in an effort to be heard on the subjects of:

  • Nurse to patient ratios
  • Fair and realistic wages for nurses; including standing against any proposed cap to nursing pay
  • Racism against healthcare workers
  • Violence against healthcare workers”

In a letter to the Arizona legislature, 13 CNOs asked for support in passing a bill aimed at “[increasing] the capacity of nursing education programs…” and “[creating] programs to expand the capacity of preceptor training for new nurse graduates, advanced practice registered nurses, and physicians.” They stated the following in support of the request:

We’ve long experienced a nursing workforce shortage, but it has never been as great as we are experiencing. Currently, Arizona ranks in the top 5 states for the greatest shortage of nurses. Over the past three years, staff vacancy rates have more than tripled. Post-recession population growth increased the demand for nursing staff and currently, COVID-19 burnout has led to significant increases in retirements and nurses leaving the profession. Our current workforce challenges are impacting both rural and urban communities as well as all types of healthcare facilities. we are unfortunately at a point where the current trajectory is not sustainable and puts all of Arizonans’ health care delivery at risk.

A review of the news and social media reveals very similar stories in many other states.

Where Do We Go From Here?

There has been little substantive progress in addressing the nursing shortage over the past 75 years. With the threat of COVID still looming and its ongoing impact on staffing, it is time to have a national conversation on nurse staffing.

We must identify the facilities using the flawed nursing budget methodology and give them the tools and education that will allow them to calculate their FTE needs accurately.

We must leverage data, technology, and education to model, quantify, and forecast staffing and scheduling capacity.

All stakeholders in the nurse staffing and scheduling process should demand accuracy and transparency of budget information and how resource variances impact staffing capacity.

We need an evidence-based, data-driven, care-centric approach to staffing that allows us to maximize staffing effectiveness with the resources available while providing enough time off for employees to avoid burnout.

We must address the educational pipeline issues for nurses, including low faculty salaries, the limited number of nursing instructors, and the need for additional preceptors and clinical sites.

We need to revisit the role and value of ADNs and LPNs in the healthcare system due to the immediate need for caregivers at the bedside.

If we want to bring nurses and other healthcare workers back to the bedside, we must improve working conditions and wages. While my posts have been focused mainly on RNs, we cannot ignore the value and contribution of other healthcare workers.

We need to explore direct billing for nursing services and move nursing out of the “cost” of the room rate in hospitals.

And, finally, we must thoughtfully and methodically question conventional wisdom and brainstorm bold and innovative ideas to stabilize nursing in the short term and position nursing for the growth required to replenish our healthcare system.

References

References
1 Cherry, K. (n.d.). What is conventional wisdom? Verywell Mind. Retrieved February 17, 2022, from https://www.verywellmind.com/what-is-conventional-wisdom-5179789
2 Cherry, K. (n.d.). What is conventional wisdom? Verywell Mind. Retrieved February 17, 2022, from https://www.verywellmind.com/what-is-conventional-wisdom-5179789
3 Shin, S., Park, J.-H., & Bae, S.-H. (2018). Nurse staffing and nurse outcomes: A systematic review and meta-analysis. Nursing Outlook66(3), 273–282. https://doi.org/10.1016/j.outlook.2017.12.002
4 Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.
5 Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.
6 United States Department of Labor. (1947). The Economic Status of Registered Professional Nurses 1946-47. https://fraser.stlouisfed.org/files/docs/publications/bls/bls_0931_1948.pdf
7 Managed care: What went wrong? Can it be fixed? (n.d.). Stanford Graduate School of Business. Retrieved February 17, 2022, from https://www.gsb.stanford.edu/insights/managed-care-what-went-wrong-can-it-be-fixed
8 Feintzeig, R., & Photographs by Brandon Thibodeaux for The Wall Street Journal. (2022, January 10). Stressed nurses wonder: How to quit a job when it’s your calling? Wall Street Journal (Eastern Ed.). https://www.wsj.com/articles/when-youre-burned-out-at-your-job-but-its-also-your-calling-11641790863
9 Fleisher, L. A., Schreiber, M., Cardo, D., & Srinivasan, A. (2022). Health care safety during the pandemic and beyond – building a system that ensures resilience. The New England Journal of Medicine. https://doi.org/10.1056/NEJMp2118285

1 Comment

  1. Linda

    This is information our healthcare leaders need to grasp NOW! I worry they aren’t listening. Your explanation of the problem AND the solution is easy to follow and understand! Keep up the great work!! 👍🏻

    Reply

Leave a Reply

ajax-loader
%d bloggers like this: