News sites and social media continue to engage in lively discussions about the nursing shortage and the staffing crisis. Nurses are going on strike in the US, UK, and Australia demanding better working conditions and increased pay. States and professional organizations have convened multidisciplinary think tanks to brainstorm policies and solutions to address the multiple facets of the nursing shortage and the resulting staffing crisis. The think tank recommendations are “on target” with plans for addressing issues such as the education pipeline, healthy work environments, burnout, new care delivery models, compensation, diversity, equity, and inclusion. Unfortunately, they’ve missed the “bullseye” by overlooking key root causes of some of our staffing problems. This oversight could undermine the effectiveness of efforts to address the nursing shortage, improve nurse staffing and decrease burnout. Also, many of the think tank recommendations will take months to years to begin producing results. In this blog post, we’ll discuss the issues overlooked by the experts and explore three key concepts that nurse leaders can immediately leverage to start addressing staffing concerns and better understand their budget and staffing capacity.

Financial Management is an Integral Part of Nursing Care Delivery

The allocation of nursing resources through staffing and scheduling is an exercise in nursing financial management. Nursing leaders’ “use of approaches to address such issues as nurse scheduling and assignment, setting nurse-to-patient ratios, varying the staffing mix, implementing a particular model of care delivery, and using supplies all have cost implications.” ^[1] Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders. The effective allocation of nursing resources can positively impact various quality, safety, and financial metrics sensitive to staffing levels.^[2]Shin, S., Park, J.-H., & Bae, S.-H. (2018). Nurse staffing and nurse outcomes: A systematic review and meta-analysis. Nursing Outlook, 66(3), … Continue reading

While the literature on creating nursing FTE budgets is abundant, there is little information or education available to nursing leaders on operationalizing nursing budgets to develop safe and effective schedules. Many popular nurse manager workshops covering budgeting and finance give the topic little more than a basic overview by reviewing the FTE budget creation process. As discussed previously in this blog, some of these workshops present flawed and confusing approaches to nursing FTE budgets that can leave your unit short of the resources needed to meet your budget assumptions for patient care, time off, and education.

While waiting for the medium- and long-term plans for addressing the nursing shortage to begin producing results, nursing leaders need financial tools, data, and education to help them more effectively allocate the resources they have today. As additional resources find their way to the bedside, it is imperative that we effectively deploy them to support not just patient care but also time off and education. By analyzing and understanding the amount of time available for patient care, time off, and education, nurse leaders, will be better equipped to create safe and effective schedules and to communicate and collaborate with finance regarding resource needs and allocation.

Tunnel Vision: There’s More to Nurse Staffing than Just Staffing

Much of the nurse staffing crisis discussion focuses on the patient care element of nursing. What often gets overlooked in these discussions and the nursing literature is the importance of the non-patient care aspects of the nursing budget in supporting nursing care delivery.

There must be enough resources to allow employees to take time off to destress and recharge their batteries to avoid burnout.^[3]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger. Quite simply, this means that there must be more FTEs available than are needed for patient care.

Education and orientation time will also be critical components of stabilizing nursing. The increase in nursing turnover^[4]Nursing Solutions, Inc. (2022). 2022 NSI National Health Care Retention & RN Staffing Report. https://www.nsinursingsolutions.com/Documents/Library/NSI_National_Health_Care_Retention_Report.pdf has contributed to a significant decrease in nurse tenure at facilities.^[5]Johnston Thayer, Joe Zillmer, Neil Sandberg, Anna R. Miller, Paul Nagel, Alissa MacGibbon. (2022). ‘The New Nurse’ Is the New Normal. … Continue reading We must also consider that with the baby boomer nurses retiring, we will be losing “…more than 2 million years of nursing experience each year between 2020-2030.”^[6]Buerhaus, P. I. (2021). Current Nursing Shortages Could Have Long-Lasting Consequences: Time to Change Our Present Course. Nursing Economic$, 39(5), 247–250. … Continue reading We must recognize the importance of education and orientation and how it supports nursing care delivery by maintaining and improving the competency of our workforce. To provide orientation and education time, we must have more FTEs than are needed for patient care and time off.

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 via time off, and the education needed to ensure the competency of our workforce. We cannot solve the staffing crisis by focusing only on the patient care component of the problem.

Calculating Non-Productive FTEs Correctly

The nursing FTE budget is the foundation for nurse staffing and scheduling operations. A sound budget foundation is essential for effective workforce management and positive patient outcomes.

Nursing FTE budget planning considers the costs and resources needed to provide the desired level of patient care for a given (usually average) patient volume, the amount of time off employees are expected to take, & the time needed to cover educational activities for all employees.^[7] Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders.

After calculating the number of FTEs needed to provide the budgeted desired level of care, additional FTEs must be calculated to provide resources to cover when an employee is scheduled for a non-patient care shift, such as vacation time, leave, holidays, or professional development time.^[8] Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders.

There are multiple valid approaches to calculating non-productive FTEs.

One common method is dividing the total patient care hours worked for a previous period, such as a fiscal year or calendar year, by the total paid hours for the same period to determine the percentage of productive (patient care) hours.

You can then use this percentage to calculate the total FTEs needed to fulfill your budget assumptions for patient care, time off, and education.

Suppose you determined that your productive percentage was 85%. In that case, you can correctly calculate the FTEs needed such that your non-productive FTEs represent 15% of your total FTEs with one of the following methods:

• Multiply your hours per FTE (usually 2080) by your productive percentage (85%)to calculate the number of productive hours each FTE is expected to work. In this example, 2080 hours x .85 = 1768 productive hours per FTE, with each FTE expected to utilize 312 hours (15% of their FTE hours) per year for non-productive shifts. You can then calculate the total number of FTEs needed by dividing the total care hours estimated for the patient care portion of the budget by the productive hours per FTE.^[9] Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives (5th ed.). Saunders.
• Another approach is to add up all of the benefit and education hours that an FTE is expected to use yearly. By subtracting these hours from your hours per FTE, you obtain the productive hours per FTE. You would then perform the same calculations described in the previous bullet point.^[10]Rundio, A. (2022). The Nurse Manager’s Guide to Budgeting & Finance (3rd ed.). Sigma Theta Tau International Honor Society of Nursing.
• A third method for calculating total FTEs is to divide the productive FTEs by the productive percentage. If we calculated 42.5 FTEs were needed for patient care, and we wanted an 85%/15% split between productive and non-productive time, dividing 42.5 FTEs by .85 gives us 50 total FTEs. 7.5 non-productive FTEs divided by 50 total FTEs is 15% of our total FTEs.^[11]Ward, W. J., Jr. (2015). Health care budgeting and financial management, 2nd edition (2nd ed.). Praeger.
• One confusing but technically correct methodology for calculating non-productive FTEs is multiplying the productive FTEs by a non-productive to productive time ratio. This methodology divides the non-productive percentage or hours for a given timeframe by the productive percentage or hours. Assuming the same 85%/15% split as above, if we divide 15 by 85, we get 17.65%. Multiplying 42.5 FTEs from the example above by .1765 gives us 7.50 non-productive FTEs. You can also multiply 42.5 FTEs by 1.1765 to get 50 total FTEs. Both calculations result in non-productive FTEs representing 15% of your total FTEs. This exercise can also be performed by dividing non-productive hours by productive hours for a given timeframe, such as a fiscal year. While mathematically correct, multiplying productive FTEs by 17.65% to get to 15% non-productive FTEs is confusing and not intuitive.

Somewhere along the way, I believe that some leaders became confused by the methodology in the last bullet point and began multiplying productive FTEs by the ratio of non-productive hours to total hours. This is the flawed budget methodology described in my Flawed Nursing Budget Process Increases Understaffing Risk blog post. 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. Multiplying productive FTEs by the ratio of non-productive hours to total hours will produce a 2-6% shortfall in FTEs needed to meet the budget assumptions for patient care, time off, and education. The higher the non-productive percentage, the higher the shortfall will be.

Care-Centric Modeling for a Deeper Understanding of the Budget and Staffing Capacity

Simple care-centric modeling concepts can be beneficial for developing a more holistic view of the budget and understanding how resource variances impact staffing capacity. My A Care-Centric Approach to Nurse Scheduling blog post shows you how you can use the basic care-centric modeling formula to determine the amount of non-productive time you can schedule each month while reserving the resources needed for patient care.

Care-centric modeling can guide nursing leaders regarding how much non-productive time is available to schedule non-patient care shifts while preserving the hours needed to schedule for the desired budgeted level of care. Once nursing leaders understand the math behind care-centric modeling, understaffing when creating schedules becomes a more conscious decision.

Working through the calculations can give nursing leaders valuable insights into factors impacting their staffing capacity. For example, nursing leaders can determine if their understaffing is due to vacancies, orientation, overutilization of non-productive time, or a combination of these factors.

The data from this exercise can facilitate improved communication and collaboration between nursing and finance as called for by the 2020 joint report published by AONL, ANA, and HFMA titled The Business of Caring: Promoting Optimal Allocation of Nursing Resources.

Understanding the Impact of Vacancy Rate on Staffing Capacity

The care-centric modeling process also opens the door to a better understanding of the impact of vacancy rates on staffing capacity. Understanding how vacancies affect available resources is essential for allocating adequate time for patient care, time off, and education.

To provide the budgeted hours for time off and education, your unit would have to be fully hired, and we know that units rarely are fully hired, especially in today’s environment.

Vacancy hours, FTEs, and percentages can be deducted from budgeted non-productive hours, FTEs, and percentages for a quick evaluation of how vacancies impact staffing capacity.

Suppose your unit budgeted 15% of its total RN hours for time off & education. In that case, an RN vacancy rate of 7.5% wipes out half of the resources you allocated for time off and education, even before considering the impact of orientation and leave on resources available for patient care. NSI Nursing Solutions, Inc reported an average 17% RN vacancy rate earlier this year.^[12]NSI Nursing Solutions, Inc. (2021). 2021 NSI National Health Care Retention & RN Staffing Report. … Continue reading A unit that budgeted 15% of its total RN FTE hours for non-productive time but has a 17% RN vacancy rate will have no time for education or time off and will also be 2% short of the resources needed for patient care. Every non-patient care shift scheduled will create another unfilled shift at the bedside.

In my blog post on Nurse Understaffing and the Fallacy of Nursing Budgets, I cover the vacancy issue in much more detail.

The Optimal Allocation of Nursing Resources Must Be a Priority

We must find ways to improve financial literacy in our nursing leaders to effectively manage the nursing resources we have today.

Using the flawed nursing budget process, scheduling more non-productive time than you have resources to cover, and a lack of understanding of how vacancy rates impact staffing capacity are all root cause contributors to understaffing that are being overlooked when discussing solutions.

In The Business of Caring: Promoting Optimal Allocation of Nursing Resources, AONL, ANA, and HFMA called for pioneering creative nurse staffing approaches that “optimize staffing using evidence-based approaches to help make informed decisions, enhance workforce utilization, and improve outcomes.”^[13]Begley, R., Cipriano, P. F., & Nelson, T. (2020). Common ground: AONL, ANA, and HFMA Outcomes-Based Staffing Report Provides Guidance, Insights. Nurse Leader, 18(3), … Continue reading To achieve these goals will require that nursing leaders have a deeper understanding of finance, staffing, and scheduling data and how these three domains are linked. Nursing and finance leaders 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 via time off, and the education needed to ensure the competency of our workforce. The concepts discussed in this article are tools and knowledge that nursing leaders can use today to develop a deeper understanding of how nursing FTE budgets transform into care at the bedside.

We cannot solve our problems with the same thinking we used to create them. We cannot effectively evaluate and respond to the staffing crisis without accurate data on our resource needs for patient care, time off, and education. With accurate data, we can take a more data-driven, care-centric approach to evaluate staffing capacity at the unit, facility, and regional levels. While waiting for the longer-term initiatives to begin producing results, we can leverage data to manage our available resources more effectively. 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 want to learn more about how care-centric modeling can help your unit or facility combat understaffing and burnout, please email me at contact@informaticsnurse.com for a complimentary initial consultation.