Survey Identifies Top Challenges Facing Healthcare Executives in 2006

After inadequate reimbursement, top concerns relate to managing productivity and employment-related costs

• February 21, 2006
• Arlington, Texas

Nursefinders, Inc. today announced the fourth-quarter findings of its Quarterly Nurse Staffing Survey. The survey uncovers the top ten challenges facing healthcare executives in 2006, with inadequate reimbursement topping the list as the most challenging issue. Not surprisingly, the next overarching concern according to the survey panel of leading healthcare executives, is how best to manage productivity and employment-related costs in order to provide quality patient care while faced with the growing uninsured and lower reimbursements from payers. These are just a few of the major findings resulting from the survey.

Top Challenges Facing Healthcare Executives
The following issues were rated on a scale of 1 to 5 (1 being least challenging, 5 being most challenging) by a panel of healthcare executives and are based on highest average rating on the scale.

Top Challenges Facing Healthcare Executives in 2006

Issue	Average rating on 1 to 5 scale
1. Inadequate reimbursement	4.31
2. Productivity management	3.70
3. Rising insurance costs (workers comp, etc)	3.36
4. Severe staffing shortages	3.23
5. Patient satisfaction	3.13
6. Capacity	3.05
7. Quality compliance/patient safety	3.00
8. Managing premium internal labor costs	2.94
9. Revenue enhancement	2.72
10. Governmental regulations and mandates	2.08

Effectively Managing Productivity and Employment-Related Costs (Insurance, Staff Shortage, Internal Labor Costs) Top List
Productivity management, defined in the survey as effectively managing fluctuations in census, patient acuity, and appropriate staffing levels, ranked second most challenging issue for healthcare executives in 2006, followed closely by rising insurance costs such as workers compensation, benefits, etc.

A recent study published by Health Affairs underscores the importance of managing appropriate staffing levels. The study indicates that if hospitals invest more in registered nurse staffing increased RN staffing and hours of nursing care per patient, they could avoid more than 6,700 patient deaths and 4 million days of care in hospitals each year.

However, according to the Nursefinders study, nearly one-third of facilities (32%) are currently lacking more than 30,000 nursing hours a year in order to be at sufficient staffing levels and more than one-tenth of facilities estimate a shortage of 60,000 nursing hours annually. Additionally, 29% of facilities feel it is somewhat or very unlikely they will meet sufficient staffing levels in the upcoming quarter.

Bob Livonius, CEO of Nursefinders, commented, “More and more research-based evidence has surfaced to prove what many organizations have already found. That is, increasing staffing levels undoubtedly improves patient care and productivity, and ultimately increases patient satisfaction. The task of maintaining appropriate staffing levels is a top challenge for healthcare executives today, and will only become more vital over the next several years.”

Severe Staffing Shortage is Fourth Most Challenging Issue for Healthcare Executives
Turnover of nurse staff continues to plague leading healthcare facilities across the country. According to the Nursefinders study, 40% of facilities report a minimum of 5 to 15 nurses resigned in 4Q last year. In addition, approximately 13% of facilities stated more than 35 nurses resigned or terminated employment in 4Q.

While nurse turnover and vacancies remain serious challenges for healthcare executives, the Nursefinders’ study found that the average turnover and vacancy rates for users of supplemental agency staffing are better than estimated national averages. According to a March 2005 poll by Bernard Hodes Group, the average RN turnover rate was 13.9% and the average vacancy rate was 16.1%. The Nursefinders study, primarily comprised of large users of agency staffing, found that among its respondents the average turnover rate is 5% and average vacancy rate is 7%.

“We were pleasantly surprised to find our respondents enjoying better than average turnover and vacancy rates,” said Livonius. “It is our belief that this is a result of their innovative and sophisticated approach to workforce management, including the use of a wide range of supplemental staffing solutions.”

Managing Premium Internal Labor Costs Also Key Challenge for Healthcare Executives in 2006
Managing premium internal labor costs, defined in the survey as float pool management, overtime, and bonuses, received an average rating of 2.94 on the scale of 1 to 5 (5 being most challenging). Additional data from the Nursefinders survey indicates many facilities are entering 2006 with conservative estimates on internal labor expenditures in hopes of better managing one of its largest expenses.

Respondents forecast a general stabilization of hourly wage, referral and sign-on bonus expenditures for 1Q2006 – 56% of facilities foresee stable hourly wage expenditures, while 74% and 73% anticipate stable referral and sign-on bonus expenditures respectively. Also, 28% of facilities forecast a decrease in overtime expenditures for 1Q06, compared to only 18% in 3Q2005.

“While reducing expenses such as bonuses, overtime, and agency costs, is often the first approach to managing internal labor costs, facilities should not ignore the potential impact of managed staffing partnerships on reducing labor costs,” commented Livonius. “For example, one West coast healthcare organization with 25+ acute care hospitals that entered into such a partnership, achieved a 24% reduction in costs the first year alone. Healthcare facilities that have experienced long-term struggles with managing internal labor costs should consider alternative approaches that may finally make some progress towards managing and decreasing this line item.”

The Nursefinders, Inc. Quarterly Nurse Staffing Survey is conducted with a panel of healthcare executives (75 on average), each representing unique healthcare facilities which vary in revenue size and number of beds, including hospitals, long-term acute care and others, from across the country.