- Email: [email protected]
Connecting the Dots: Responding to the Challenges of Budget and Finance Education for Nurse Leaders
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Connecting the Dots: Responding to the Challenges of Budget and Finance Education for Nurse Leaders Teresa W. Golden, MSN, RN, CNA-BC
I
n the good old days, the best nurses on the unit were promoted to head nurses or nurse managers. In that day, the head nurse focused exclusively on the unit’s clinical services and patient care aspects. The role
was critically important then, and it continues to be vitally important in today’s models for health care delivery.
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The role of head nurse and the practice of promoting the best nurse with often only basic academic preparation assured that the head nurse assumed the role with little involvement and minimal to no preparation for tackling the required business aspects of the position. In a simple fee-for-service environment, this practice worked; however, in a complex resource-intensive, reimbursement-exhausted environment, it does not.
THE CHALLENGES TODAY Today’s complicated reimbursement system and flattened organizational structure requires a frontline leader with education and skills beyond clinical competence.1,2 Additionally, the evolution of the clinical nurse leader (CNL) role shines a light on the fact that the traditional head nurse is often not prepared to meet the heightened expectations of clinical expert or frontline leader role.3 Graduate nursing programs are charged with preparing novice leaders for administrative roles that now include clinical operations; staff selection, development, and management; environmental and general business management; professional practice leadership; and fiscal management. This compacted curriculum often leaves minimal time for significant learning through application. Despite recent graduate preparation, novice and seasoned leaders tend to gravitate toward what they do best and rarely does that include fiscal responsibilities. Additionally, senior leaders struggle to identify efficient and cost-effective strategies for bridging the gap for current leaders lacking this preparation or experience.1,2 This article will begin first with the identification of core competencies and related evidence and then provide strategies that can be used to bridge the development gap. Successes achieved at a large not-for-profit health care system will also be included.
NEED FOR BUDGET AND FINANCE CORE COMPETENCIES: THE EVIDENCE According to Mathena,4 respondents involved in a study of nurse manager competencies identified financial management as a critical success factor and believed development efforts in that area would bring value to the nurse manager role. Similarly, leader and self-assessments conducted at this organization confirmed the need to build on current performance. AONE has developed an inventory for assessing nurse manager competencies.5 Five of the competencies listed under the financial management section formed the basis of a workshop this organization used for development: • Creating a budget • Monitoring a budget • Analyzing a budget • Reporting a variance • Interpreting financial information Course objectives for the finance workshop are outlined in Table 1. The workshop will be described in greater detail in the discussion to follow. June 2008
SELF EVALUATION, OR “THEY DON’T KNOW WHAT THEY DON’T KNOW” Finance and budget competencies can be validated in many of the same ways nurses validate clinical competencies. Examples include self-assessment, group discussion, case studies, observation, and presentations. In addition to self-assessment and observation, this organization used a pretest and posttest for financial competency validation of their clinical leaders. Figure 1 shows the improvement in the scores of workshop attendees from the disappointing pretest to the respectable posttest scores (21% to 81%). Strategies used to improve the scores will be further described below.
IDENTIFYING THE BARRIERS The head nurse model creates a scenario where a nurse speaks the language of clinician to an accountant who responds in the language of finance. Recent articles highlight a tendency for nurse leaders to feel intimidated by finance. These language barriers (financial versus clinical terminology), differences in personalities, and ingrained math phobias are likely contributors to these communication issues and feelings of intimidation.2,6 Another potential area for conflict is related to differences in educational preparation. A critical step in identifying the barriers includes an accurate assessment of the learner and the determination of the potential competency gap (communication, terminology etc.) on both sides of the financial-clinical relationship. A wise nurse executive once said, “It’s like nursing and finance are driving in opposite directions around a racetrack. We both have the same finish line: providing the best, safest care to our communities. We’re just approaching the finish line from opposite directions.”6 Consequently, much of the course content focused not only on a better understanding of our finance colleagues but also on capitalizing on these differences. For example, nurses use a generally intuitive approach to relationships and often know what resources they need to achieve the outcomes they desire. On the other hand, finance prefers a quantitative approach to their work. They use objective measurements to allocate resources and monitor outcomes in the organization. Based on this knowledge, an effective front-line leader might schedule an appointment with the CFO to talk about the link between patient outcomes and RN staffing levels.7 The conversation might include a citation such as the Needleman et al study8 that found length of stay and complications (urinary tract infections, upper gastrointestinal bleeding, shock, cardiac arrest, and hospital-acquired pneumonia) were associated with RN hours per patient day and the percentage of total hours supplied by RNs. The leader would also be prepared to support the evidence with data from their organization. CFOs are likely to respond positively when presented with a wellarticulated business case for appropriate staffing.
Nurse Leader 43
Learner Objectives
Content
Table 1. Finance Course Objectives Hours
Teaching Method
Time 1 Discuss Finance / Nursing communication issues.
a Lecture using common examples of barriers. b Case study using Preceptor Bonus Program. c 5’ brainstorm session at table followed by round robin-style sharing.
1.0
2 Review basic financial terms, cost, and reimbursement.
a Define common financial terms (see list). a Lecture with illustrations. b Discuss differences between charges and b Provide an illustration of both “good” and reimbursement. “bad” census. c Identify flow of revenue cycle in our organization. c Review revenue cycle diagram
3 Identify the steps required to develop a staffing budget.
Break
8:00 9:00
0.75
1.0
1.0
4 List the budget tools/resources a available to leaders. b c d
Lunch 5 Identify cost-controlling strategies leaders can use.
Staffing Grids Productivity Report Monthly Statement of Operations Staffing Tool
a Review tool and explain the link to budget and reasons for variances. b Review tool and explain the link to budget and reasons for variances. c Explain difference between this tool and Productivity and variances. d Provide examples of how the tool could be used.
De-Briefing session using panel consisting of table facilitators.
1.5
a Review calculations for fixed hours on budget a Complete fixed section of budget worksheet. worksheets. b Review calculations for variable hours section of b Complete variable section of budget worksheet. worksheets. c Review the Vacancy and Gap Summary Report. c Identify linkage of budgeted FTEs to vacancy report.
a Discuss reasons for “language barriers”. b Discuss the effect of a positive nursing / finance relationship. c Discuss strategies for improving communication. d Outline approach to educational session.
9:00 9:45
9:45 10:00 10:00 11:00
11:00 12:00
12:001:00 1:00 2:30
6 Debriefing Session - nursing / finance recommendations.
Post-test assessment of ability to integrate content into daily practice.
Work in groups with facilitator to develop a list of options along with the best recommendation to a realistic operational issue that includes both nursing and finance’s perspective.
1.0
7 Integrate knowledge into daily a Provide post-test to demonstrate content mastery. practice.
a Creative staffing alternatives. b Orientation planning (outliers and PRNs). c Incremental overtime.
2:45 3:45
1.0
Break
3:30 4:30
7.3
2:302:45
Total
June 2008
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Figure 1. Pre and Post Test Results Pre and Post Test Results 100% 80% 60% 40% 20% 0% Pre-Test Post-Test
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Total
65% 100%
44% 92%
4% 55%
42% 95%
10% 75%
8% 75%
8% 82%
17% 94%
13% 95%
2% 43%
21% 81%
ADDRESSING THE BARRIERS AND MAKING THE CONNECTION Senior leaders at this large not-for-profit health care system addressed this leader development need with an all-day finance workshop entitled “Interpreting Finance for Nursing…Translating Nursing for Finance…” As outlined in the course objectives (Table 1), barriers to financial competency were addressed through multiple methods such as presentation, group-work, and facilitated discussions describing professional experiences and challenges. The early morning session of the workshop was devoted to general education about health care economics and basic financial terminology as well as the rationale for developing financial competency. The late morning session focused on staffing budgets and leader accountability for keeping their cost center’s budget on target. Case studies and illustrations were used during the early afternoon session to make a connection between the leader’s actions at the cost center level and the organizational outcomes. The last session of the day was devoted to application and leader evaluation. Workshop content will be described in greater detail in the sections to follow. One of the outcome strategies for the workshop was to leverage the greater skill sets of the midlevel directors and assure their partnering and mentoring of their respective front-line nurse managers, as well as foster and establish a framework for postworkshop continued competency development. Assigning the midlevel directors to facilitate small group work provided an opportunity to assess this leader’s coaching skills as well as lay the groundwork for continued more intensive postworkshop application. The groups were given the assignment of identifying potential barriers to communication and developing a comprehensive list of strategies to address them. When the table leaders presented their work with the rest of the attendees, the facilitator shared an observation. Nurses were quick to identify multiple strategies finance could employ to improve the relationship, but they often overlooked strategies for nursing. The list was then expanded to include both perspectives. June 2008
As part of the facilitated discussion segment, the program presenter described professional experiences, challenges and the history of implementing two organizational programs (LPN Resource Team and the Preceptor Bonus Program). Presentations to Human Resources and Finance included evidence to support the clinical need, the identified solution, the return on the investment, and proposed measures to track the success of the programs. As a result, Finance and Human Resources endorsed both programs. Another director described the preparation, lessons-learned, and experience of developing the case for opening a specialty unit and presenting it to the CFO. This director emphasized the importance of anticipating CFO-type questions. The director was successful with the proposal and credited success to the time taken to include a consultation with a knowledgeable colleague as part of preparation.
FINANCIAL TERMS One of the most critical ingredients of an effective relationship between nursing and finance is a mutual understanding of relevant clinical and finance terminology. Taking the time to learn another’s language communicates respect and forms the basis for a healthy professional relationship. In addition to the extensive glossary, the workshop presentation included important terminology and practical illustrations. Clinicians were encouraged to educate finance colleagues about clinical issues as well.
DEVELOPING A STAFFING BUDGET The frontline leader’s understanding of the staffing budget is critical given the fact that approximately 60% of the facility’s operating cost is salary related. Once the terms are mastered, the leader needs a good understanding of the four major building blocks of the budget (volume, skill mix, and fixed and variable hours). The organization’s budget worksheet was used to demonstrate the calculation and the significance of each of the building blocks (Figure 2).
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Figure 2. Budget Worksheets demonstrate the “building blocks” of the staffing budget - Volume, Fixed and Variable hours, and Skill Mix and calcuation 16000 - Any Med-Surg Unit
Indirect hrs Cal Day
Any Facility Facility Clinical Dir. Any Clinical Director Any CNO VP/CNO
Clin. Dir. Unit Secy PCC RN
Var
Hrly
FTEs
5.1 0.22 24.0 1.03
0.89 4.21
29.1 1.249
5.11
Hours
Comments
1862 8760 Earns one US around the clock.
LPN # of Beds
24
% Occupied 97%
UAP Log Asst. Unit Mgr Telemetry Total Fixed
ADC
10622
23.2
8505 2006 Med-Surg Standard
Pt Day Proj Mix PCC RN LPN UAP
0% 56% 12% 32%
Total 100%
HPPD
D
0.00 4.48 0.96 2.56
0% 34% 45% 34% All 8.00 9.25
E
N
0% 0% 33% 33% 33% 22% 33% 33% Repl 10.6
365 Total Earned 0% PCC 100% RN 100% LPN 100% UAP Indirect Total
Hours
2080
Proj. Direct Worked FTEs
FTEs FTEs 0.00 PCC 18.32 RN 3.93 LPN 10.47 UAP
0 38100 8164 21772 10622 5.11 78658 37.82 Total
AVAILABLE TOOLS AND RESOURCES Often leaders struggle to understand how decisions at the cost center level affect organizational outcomes. Therefore, attention was focused on explaining the connection between the staffing budget and the related operational tools (staffing grid, productivity report, and position control). For example, the staffing grid is a tool used to calculate the number of staff the budget allows for a specific number of patients. Consequently, leaders making the decision to round the number of RNs up each shift (eg, from 3.4 to 4) will find themselves over budget. Often they do not recognize this as one of the potential reasons for the variance on their monthly reports (productivity or salary dollars). Specific examples demonstrated that adhering to the staffing grid will keep the staffing on target with the productivity report and closer to salary dollars. When acuity is high, how to justify an appropriate variance in productivity was explained. Lastly, leaders learned the importance of matching the FTEs on the position control with the earned FTEs on the budget worksheet and the consequences of a mismatch. A significant discrepancy between the FTEs listed on the worksheet and the position control can result in an over hire (or short-staffing) situation depending on the location of the error.
COST-CONTROLLING ILLUSTRATIONS The afternoon session focused on strategies designed to drive home the importance of fiscal responsibility through cost-control measures. One strategy was the use of very simple, but powerful illustrations to help the leader make that connection. For example, senior leader46 Nurse Leader
D
E
N
0.0 6.2 1.8 3.6
0.0 6.0 1.3 3.5
0.0 6.0 0.9 3.5
11.6 10.8 10.4
YTD Actual Proj.
Other
Total
Total Worked HPPD FTEs I. Fixed Wk'd 0.0 PCC 0.00 18.3 RN 3.57 14.6 18.32 3.9 LPN 1.21 4.9 3.93 10.5 UAP 2.59 10.6 10.47 Indirect 1.05 4.3 5.106 5.11 32.7 Total 8.42 30.1 5.106 37.82 Mix 48%
Repl
Core
1.15
85%
0.00 21.06 4.51 12.04 5.87 43.49
0.00 15.57 3.34 8.90 4.34 32.14
ship and finance have belabored on the importance of reducing incremental overtime for years with little improvement to show for their effort. Incremental overtime is the official term describing unapproved overtime that is often the result of milking the clock by clocking in (or out) a little earlier (or later) than previously scheduled. To illustrate the effect of this seemingly harmless staff habit, the nurse managers were asked to calculate the annual cost of 1 hour of RN overtime per day for each cost center for the organization. Using an average RN overtime rate of $41.25, the calculation for the nonprofit organization is as follows: $41.25 ⫻ 113 cost centers ⫻ 365 days = $1.7 million Another example was used to illustrate the effect of length of stay on the system’s finances. In a quarterly business review, the CFO communicated that a decrease in one hospital’s length of stay from 6.8 to 6.0 would result in a savings of $6 million in operating expenses, 28 beds, and 50 nurses. For most, it is difficult to comprehend how decreasing the length of stay by less than 1 day could have such a dramatic effect. To illustrate this point, the program leader used a chart to show the effect of a fictitious reimbursement amount on a protracted patient stay (see Table 2). Although the figure only shows one patient, it is easy to see that it would not take long for those $1500 losses to add up to the cost the CFO described. Sharing this example with the unit staff would help the nurses make the connection between their discharge planning efforts and the length of stay.
APPLY THE LEARNING Nurse managers are generally very conscientious about following up on budget variances. They often invest a June 2008
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Table 2. Reimbursement Example LOS 1 2 3 4 5 6 7 8 9 10
Cost $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Actual vs reimbursement
10
$2,000
$500
-$1,500
Target vs reimbursement
2
$400
$500
$100
Allowable LOS
Actual LOS
Reimbursement $250 $250 $0 $0 $0 $0 $0 $0 $0 $0
Variance
Assumes reimbursement = $500 for 2-day stay (result = $100 profit). A 10-day stay costing $2000 (result = $1500 loss).
Figure 3. Orientation Calculator Tool shows the leader’s decision to extend these four orientations results in an additional cost of $35,666. for Orient Track 8h days 8h days OrienteeTrack 40 Mary A 400 10 Susan A 400 10 Sam A 400 10 Sandy A 400 10
Total
1600
40
Orient Expected Actual Actual Over / Length Under Orientee Sched. Start End Date End Date 8 hr shift Date # Weeks # Wks Rate/Hr Orient Hrs. 6/4/07 8/13/07 8/31/07 13 2.6 $ 20.50 503 5/29/07 8/7/07 9/1/07 14 3.6 $ 20.50 543 6/11/07 8/20/07 8/31/07 12 1.6 $ 20.50 463 5/21/07 7/30/07 8/18/07 13 2.7 $ 20.50 509
50
great deal of time tracking down inaccurate charges to their cost center. Unfortunately, recognizing the impact of decisions they make in their staffing every day is not as apparent to them. For example, a nurse manager may leave a nurse in orientation a few days longer than needed with the idea that they are giving the staff a little break. Using a tool to illustrate the point, the leaders were able to see the cost when these variables were changed (Figure 3). By calculating the cost of the orientee and the back-fill cost of the agency nurse extension required, the nurse manager is able to see the true cost and the impact of that decision on the organization. The tool will be available to the leaders to track the cost of orientation on their units and to make an informed decision about orientation extensions. A group application activity rounded out the day. Leaders were to assume they needed to open an overflow unit quickly with no RNs on staff. There were to identify five potential options for staffing the unit. Then prioritize the options along with the rationale for the order of priority. Lastly, using predefined cost assumpJune 2008
10.4
2017
Back-fill PL for Traveler @ Orientee 65 $ 10,309 $ 32,686 $ 11,129 $ 35,286 $ 9,489 $ 30,086 $ 10,426 $ 33,057
Actual Cost of Orientation $ 42,994 $ 46,414 $ 39,574 $ 43,483
Add'l Cost of Extension $ 8,794 $ 12,214 $ 5,374 $ 9,283
$ 41,351
$ 172,466
$ 35,666
$ 131,114
tions, they were to calculate the cost of their top options. The facilitator for each table participated in a panel discussion of the options they listed, the option they selected, as well as the rationale for their decision. The final learning activity was the completion of a posttest to evaluate the leaders’ grasp of the course content. Review of the posttest allowed for further concept discussion and clarification and amplification of material and examples covered, as well as reinforced the importance of the workshop’s program objectives. When compared with the pretest, posttest scores showed significant improvement (Figure 1).
CONCLUSION Developing front-line leaders on the competency of financial stewardship requires helping them to connect on common, inconsistent leader performance and the need for an in-depth understanding of financial concepts. Continued on page 52
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Connecting the Dots Continued from page 47 According to Dunham-Taylor and Pinczuk, “Every management decision has financial implications; every financial decision has management implications.”9 The workshop provided an in-depth review and presentation of what most leaders consider intimidating content. Using simple illustrations to explain complicated concepts and involving the leaders in developing effective communication strategies with our finance colleagues mitigates the intimidation factor. It also helps leaders make the vital connection between what they do at the cost center level and the effect on the organization’s outcomes. Finally, validating the leaders’ knowledge of the tools in place to help them manage their resources wisely and effectively provides a framework for leader accountability. References 1. Kleinman C. Leadership Roles, Competencies, and Education. J Nurs Admin 2003; 33(9):451-455. 2. Waxman KT. Creating a Culture of Financially Savvy Nurse Leaders. Nurse Leader 2005;3(1):31-35. 3. American Association of Colleges of Nursing. White Paper on the Education and Role of the Clinical Nurse Leader. February, 2007. Available at: http://www.aacn.nche.edu/Publications/ WhitePapers/ClinicalNurseLeader07.pdf. Accessed October 30, 2007. 4. Mathena K. Nursing Management: Leadership Skills. J Nurs Admin 2003;32(3):136-142. 5. AONE. AONE Nurse Manager Leadership Collaborative Inventory Assessment. 2004. Available at: http://www.aone.org/aone/resource/NMLC/InventoryAssessment030807.pdf. Accessed Octber 30, 2007. 6. Clarke R. Finance and Nursing—the Business of Caring. HealtLhcare Fin Manage 2006;60(1):50-57. 7. Lankshear A, Sheldon T, Maynard A. Nurse Staffing and Healthcare Outcomes. Adv Nurs Sci 2005;28(2):163-174. 8. Needleman J, Buerhaus P, Mattke S, Stewart M, Zelevinsky K. Nurse-staffing levels and the quality of care in hospitals. N Engl J Med 2002;346(22):1715-1723. 9. Dunham-Taylor J, Pinczuk, J. Health Care Financial Management for Nurse Managers. Sudbury, MA: Jones and Bartlett; 2006.
Teresa W. Golden, MSN, RN, CNA-BC, is corporate director of clinical business affairs at Methodist Le Bonheur Healthcare in Memphis, Tennessee. She can be reached at goldent@ methodisthealth.org. 1541-4612/2008/ $ See front matter Copyright 2008 by Mosby Inc. All rights reserved. doi:10.1016/j.mnl.2008.04.003
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Connecting the Dots: Responding to the Challenges of Budget and Finance Education for Nurse Leaders Teresa W. Golden, MSN, RN, CNA-BC
I
n the good old days, the best nurses on the unit were promoted to head nurses or nurse managers. In that day, the head nurse focused exclusively on the unit’s clinical services and patient care aspects. The role
was critically important then, and it continues to be vitally important in today’s models for health care delivery.
42 Nurse Leader
June 2008
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The role of head nurse and the practice of promoting the best nurse with often only basic academic preparation assured that the head nurse assumed the role with little involvement and minimal to no preparation for tackling the required business aspects of the position. In a simple fee-for-service environment, this practice worked; however, in a complex resource-intensive, reimbursement-exhausted environment, it does not.
THE CHALLENGES TODAY Today’s complicated reimbursement system and flattened organizational structure requires a frontline leader with education and skills beyond clinical competence.1,2 Additionally, the evolution of the clinical nurse leader (CNL) role shines a light on the fact that the traditional head nurse is often not prepared to meet the heightened expectations of clinical expert or frontline leader role.3 Graduate nursing programs are charged with preparing novice leaders for administrative roles that now include clinical operations; staff selection, development, and management; environmental and general business management; professional practice leadership; and fiscal management. This compacted curriculum often leaves minimal time for significant learning through application. Despite recent graduate preparation, novice and seasoned leaders tend to gravitate toward what they do best and rarely does that include fiscal responsibilities. Additionally, senior leaders struggle to identify efficient and cost-effective strategies for bridging the gap for current leaders lacking this preparation or experience.1,2 This article will begin first with the identification of core competencies and related evidence and then provide strategies that can be used to bridge the development gap. Successes achieved at a large not-for-profit health care system will also be included.
NEED FOR BUDGET AND FINANCE CORE COMPETENCIES: THE EVIDENCE According to Mathena,4 respondents involved in a study of nurse manager competencies identified financial management as a critical success factor and believed development efforts in that area would bring value to the nurse manager role. Similarly, leader and self-assessments conducted at this organization confirmed the need to build on current performance. AONE has developed an inventory for assessing nurse manager competencies.5 Five of the competencies listed under the financial management section formed the basis of a workshop this organization used for development: • Creating a budget • Monitoring a budget • Analyzing a budget • Reporting a variance • Interpreting financial information Course objectives for the finance workshop are outlined in Table 1. The workshop will be described in greater detail in the discussion to follow. June 2008
SELF EVALUATION, OR “THEY DON’T KNOW WHAT THEY DON’T KNOW” Finance and budget competencies can be validated in many of the same ways nurses validate clinical competencies. Examples include self-assessment, group discussion, case studies, observation, and presentations. In addition to self-assessment and observation, this organization used a pretest and posttest for financial competency validation of their clinical leaders. Figure 1 shows the improvement in the scores of workshop attendees from the disappointing pretest to the respectable posttest scores (21% to 81%). Strategies used to improve the scores will be further described below.
IDENTIFYING THE BARRIERS The head nurse model creates a scenario where a nurse speaks the language of clinician to an accountant who responds in the language of finance. Recent articles highlight a tendency for nurse leaders to feel intimidated by finance. These language barriers (financial versus clinical terminology), differences in personalities, and ingrained math phobias are likely contributors to these communication issues and feelings of intimidation.2,6 Another potential area for conflict is related to differences in educational preparation. A critical step in identifying the barriers includes an accurate assessment of the learner and the determination of the potential competency gap (communication, terminology etc.) on both sides of the financial-clinical relationship. A wise nurse executive once said, “It’s like nursing and finance are driving in opposite directions around a racetrack. We both have the same finish line: providing the best, safest care to our communities. We’re just approaching the finish line from opposite directions.”6 Consequently, much of the course content focused not only on a better understanding of our finance colleagues but also on capitalizing on these differences. For example, nurses use a generally intuitive approach to relationships and often know what resources they need to achieve the outcomes they desire. On the other hand, finance prefers a quantitative approach to their work. They use objective measurements to allocate resources and monitor outcomes in the organization. Based on this knowledge, an effective front-line leader might schedule an appointment with the CFO to talk about the link between patient outcomes and RN staffing levels.7 The conversation might include a citation such as the Needleman et al study8 that found length of stay and complications (urinary tract infections, upper gastrointestinal bleeding, shock, cardiac arrest, and hospital-acquired pneumonia) were associated with RN hours per patient day and the percentage of total hours supplied by RNs. The leader would also be prepared to support the evidence with data from their organization. CFOs are likely to respond positively when presented with a wellarticulated business case for appropriate staffing.
Nurse Leader 43
Learner Objectives
Content
Table 1. Finance Course Objectives Hours
Teaching Method
Time 1 Discuss Finance / Nursing communication issues.
a Lecture using common examples of barriers. b Case study using Preceptor Bonus Program. c 5’ brainstorm session at table followed by round robin-style sharing.
1.0
2 Review basic financial terms, cost, and reimbursement.
a Define common financial terms (see list). a Lecture with illustrations. b Discuss differences between charges and b Provide an illustration of both “good” and reimbursement. “bad” census. c Identify flow of revenue cycle in our organization. c Review revenue cycle diagram
3 Identify the steps required to develop a staffing budget.
Break
8:00 9:00
0.75
1.0
1.0
4 List the budget tools/resources a available to leaders. b c d
Lunch 5 Identify cost-controlling strategies leaders can use.
Staffing Grids Productivity Report Monthly Statement of Operations Staffing Tool
a Review tool and explain the link to budget and reasons for variances. b Review tool and explain the link to budget and reasons for variances. c Explain difference between this tool and Productivity and variances. d Provide examples of how the tool could be used.
De-Briefing session using panel consisting of table facilitators.
1.5
a Review calculations for fixed hours on budget a Complete fixed section of budget worksheet. worksheets. b Review calculations for variable hours section of b Complete variable section of budget worksheet. worksheets. c Review the Vacancy and Gap Summary Report. c Identify linkage of budgeted FTEs to vacancy report.
a Discuss reasons for “language barriers”. b Discuss the effect of a positive nursing / finance relationship. c Discuss strategies for improving communication. d Outline approach to educational session.
9:00 9:45
9:45 10:00 10:00 11:00
11:00 12:00
12:001:00 1:00 2:30
6 Debriefing Session - nursing / finance recommendations.
Post-test assessment of ability to integrate content into daily practice.
Work in groups with facilitator to develop a list of options along with the best recommendation to a realistic operational issue that includes both nursing and finance’s perspective.
1.0
7 Integrate knowledge into daily a Provide post-test to demonstrate content mastery. practice.
a Creative staffing alternatives. b Orientation planning (outliers and PRNs). c Incremental overtime.
2:45 3:45
1.0
Break
3:30 4:30
7.3
2:302:45
Total
June 2008
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Figure 1. Pre and Post Test Results Pre and Post Test Results 100% 80% 60% 40% 20% 0% Pre-Test Post-Test
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Total
65% 100%
44% 92%
4% 55%
42% 95%
10% 75%
8% 75%
8% 82%
17% 94%
13% 95%
2% 43%
21% 81%
ADDRESSING THE BARRIERS AND MAKING THE CONNECTION Senior leaders at this large not-for-profit health care system addressed this leader development need with an all-day finance workshop entitled “Interpreting Finance for Nursing…Translating Nursing for Finance…” As outlined in the course objectives (Table 1), barriers to financial competency were addressed through multiple methods such as presentation, group-work, and facilitated discussions describing professional experiences and challenges. The early morning session of the workshop was devoted to general education about health care economics and basic financial terminology as well as the rationale for developing financial competency. The late morning session focused on staffing budgets and leader accountability for keeping their cost center’s budget on target. Case studies and illustrations were used during the early afternoon session to make a connection between the leader’s actions at the cost center level and the organizational outcomes. The last session of the day was devoted to application and leader evaluation. Workshop content will be described in greater detail in the sections to follow. One of the outcome strategies for the workshop was to leverage the greater skill sets of the midlevel directors and assure their partnering and mentoring of their respective front-line nurse managers, as well as foster and establish a framework for postworkshop continued competency development. Assigning the midlevel directors to facilitate small group work provided an opportunity to assess this leader’s coaching skills as well as lay the groundwork for continued more intensive postworkshop application. The groups were given the assignment of identifying potential barriers to communication and developing a comprehensive list of strategies to address them. When the table leaders presented their work with the rest of the attendees, the facilitator shared an observation. Nurses were quick to identify multiple strategies finance could employ to improve the relationship, but they often overlooked strategies for nursing. The list was then expanded to include both perspectives. June 2008
As part of the facilitated discussion segment, the program presenter described professional experiences, challenges and the history of implementing two organizational programs (LPN Resource Team and the Preceptor Bonus Program). Presentations to Human Resources and Finance included evidence to support the clinical need, the identified solution, the return on the investment, and proposed measures to track the success of the programs. As a result, Finance and Human Resources endorsed both programs. Another director described the preparation, lessons-learned, and experience of developing the case for opening a specialty unit and presenting it to the CFO. This director emphasized the importance of anticipating CFO-type questions. The director was successful with the proposal and credited success to the time taken to include a consultation with a knowledgeable colleague as part of preparation.
FINANCIAL TERMS One of the most critical ingredients of an effective relationship between nursing and finance is a mutual understanding of relevant clinical and finance terminology. Taking the time to learn another’s language communicates respect and forms the basis for a healthy professional relationship. In addition to the extensive glossary, the workshop presentation included important terminology and practical illustrations. Clinicians were encouraged to educate finance colleagues about clinical issues as well.
DEVELOPING A STAFFING BUDGET The frontline leader’s understanding of the staffing budget is critical given the fact that approximately 60% of the facility’s operating cost is salary related. Once the terms are mastered, the leader needs a good understanding of the four major building blocks of the budget (volume, skill mix, and fixed and variable hours). The organization’s budget worksheet was used to demonstrate the calculation and the significance of each of the building blocks (Figure 2).
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Figure 2. Budget Worksheets demonstrate the “building blocks” of the staffing budget - Volume, Fixed and Variable hours, and Skill Mix and calcuation 16000 - Any Med-Surg Unit
Indirect hrs Cal Day
Any Facility Facility Clinical Dir. Any Clinical Director Any CNO VP/CNO
Clin. Dir. Unit Secy PCC RN
Var
Hrly
FTEs
5.1 0.22 24.0 1.03
0.89 4.21
29.1 1.249
5.11
Hours
Comments
1862 8760 Earns one US around the clock.
LPN # of Beds
24
% Occupied 97%
UAP Log Asst. Unit Mgr Telemetry Total Fixed
ADC
10622
23.2
8505 2006 Med-Surg Standard
Pt Day Proj Mix PCC RN LPN UAP
0% 56% 12% 32%
Total 100%
HPPD
D
0.00 4.48 0.96 2.56
0% 34% 45% 34% All 8.00 9.25
E
N
0% 0% 33% 33% 33% 22% 33% 33% Repl 10.6
365 Total Earned 0% PCC 100% RN 100% LPN 100% UAP Indirect Total
Hours
2080
Proj. Direct Worked FTEs
FTEs FTEs 0.00 PCC 18.32 RN 3.93 LPN 10.47 UAP
0 38100 8164 21772 10622 5.11 78658 37.82 Total
AVAILABLE TOOLS AND RESOURCES Often leaders struggle to understand how decisions at the cost center level affect organizational outcomes. Therefore, attention was focused on explaining the connection between the staffing budget and the related operational tools (staffing grid, productivity report, and position control). For example, the staffing grid is a tool used to calculate the number of staff the budget allows for a specific number of patients. Consequently, leaders making the decision to round the number of RNs up each shift (eg, from 3.4 to 4) will find themselves over budget. Often they do not recognize this as one of the potential reasons for the variance on their monthly reports (productivity or salary dollars). Specific examples demonstrated that adhering to the staffing grid will keep the staffing on target with the productivity report and closer to salary dollars. When acuity is high, how to justify an appropriate variance in productivity was explained. Lastly, leaders learned the importance of matching the FTEs on the position control with the earned FTEs on the budget worksheet and the consequences of a mismatch. A significant discrepancy between the FTEs listed on the worksheet and the position control can result in an over hire (or short-staffing) situation depending on the location of the error.
COST-CONTROLLING ILLUSTRATIONS The afternoon session focused on strategies designed to drive home the importance of fiscal responsibility through cost-control measures. One strategy was the use of very simple, but powerful illustrations to help the leader make that connection. For example, senior leader46 Nurse Leader
D
E
N
0.0 6.2 1.8 3.6
0.0 6.0 1.3 3.5
0.0 6.0 0.9 3.5
11.6 10.8 10.4
YTD Actual Proj.
Other
Total
Total Worked HPPD FTEs I. Fixed Wk'd 0.0 PCC 0.00 18.3 RN 3.57 14.6 18.32 3.9 LPN 1.21 4.9 3.93 10.5 UAP 2.59 10.6 10.47 Indirect 1.05 4.3 5.106 5.11 32.7 Total 8.42 30.1 5.106 37.82 Mix 48%
Repl
Core
1.15
85%
0.00 21.06 4.51 12.04 5.87 43.49
0.00 15.57 3.34 8.90 4.34 32.14
ship and finance have belabored on the importance of reducing incremental overtime for years with little improvement to show for their effort. Incremental overtime is the official term describing unapproved overtime that is often the result of milking the clock by clocking in (or out) a little earlier (or later) than previously scheduled. To illustrate the effect of this seemingly harmless staff habit, the nurse managers were asked to calculate the annual cost of 1 hour of RN overtime per day for each cost center for the organization. Using an average RN overtime rate of $41.25, the calculation for the nonprofit organization is as follows: $41.25 ⫻ 113 cost centers ⫻ 365 days = $1.7 million Another example was used to illustrate the effect of length of stay on the system’s finances. In a quarterly business review, the CFO communicated that a decrease in one hospital’s length of stay from 6.8 to 6.0 would result in a savings of $6 million in operating expenses, 28 beds, and 50 nurses. For most, it is difficult to comprehend how decreasing the length of stay by less than 1 day could have such a dramatic effect. To illustrate this point, the program leader used a chart to show the effect of a fictitious reimbursement amount on a protracted patient stay (see Table 2). Although the figure only shows one patient, it is easy to see that it would not take long for those $1500 losses to add up to the cost the CFO described. Sharing this example with the unit staff would help the nurses make the connection between their discharge planning efforts and the length of stay.
APPLY THE LEARNING Nurse managers are generally very conscientious about following up on budget variances. They often invest a June 2008
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Table 2. Reimbursement Example LOS 1 2 3 4 5 6 7 8 9 10
Cost $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Actual vs reimbursement
10
$2,000
$500
-$1,500
Target vs reimbursement
2
$400
$500
$100
Allowable LOS
Actual LOS
Reimbursement $250 $250 $0 $0 $0 $0 $0 $0 $0 $0
Variance
Assumes reimbursement = $500 for 2-day stay (result = $100 profit). A 10-day stay costing $2000 (result = $1500 loss).
Figure 3. Orientation Calculator Tool shows the leader’s decision to extend these four orientations results in an additional cost of $35,666. for Orient Track 8h days 8h days OrienteeTrack 40 Mary A 400 10 Susan A 400 10 Sam A 400 10 Sandy A 400 10
Total
1600
40
Orient Expected Actual Actual Over / Length Under Orientee Sched. Start End Date End Date 8 hr shift Date # Weeks # Wks Rate/Hr Orient Hrs. 6/4/07 8/13/07 8/31/07 13 2.6 $ 20.50 503 5/29/07 8/7/07 9/1/07 14 3.6 $ 20.50 543 6/11/07 8/20/07 8/31/07 12 1.6 $ 20.50 463 5/21/07 7/30/07 8/18/07 13 2.7 $ 20.50 509
50
great deal of time tracking down inaccurate charges to their cost center. Unfortunately, recognizing the impact of decisions they make in their staffing every day is not as apparent to them. For example, a nurse manager may leave a nurse in orientation a few days longer than needed with the idea that they are giving the staff a little break. Using a tool to illustrate the point, the leaders were able to see the cost when these variables were changed (Figure 3). By calculating the cost of the orientee and the back-fill cost of the agency nurse extension required, the nurse manager is able to see the true cost and the impact of that decision on the organization. The tool will be available to the leaders to track the cost of orientation on their units and to make an informed decision about orientation extensions. A group application activity rounded out the day. Leaders were to assume they needed to open an overflow unit quickly with no RNs on staff. There were to identify five potential options for staffing the unit. Then prioritize the options along with the rationale for the order of priority. Lastly, using predefined cost assumpJune 2008
10.4
2017
Back-fill PL for Traveler @ Orientee 65 $ 10,309 $ 32,686 $ 11,129 $ 35,286 $ 9,489 $ 30,086 $ 10,426 $ 33,057
Actual Cost of Orientation $ 42,994 $ 46,414 $ 39,574 $ 43,483
Add'l Cost of Extension $ 8,794 $ 12,214 $ 5,374 $ 9,283
$ 41,351
$ 172,466
$ 35,666
$ 131,114
tions, they were to calculate the cost of their top options. The facilitator for each table participated in a panel discussion of the options they listed, the option they selected, as well as the rationale for their decision. The final learning activity was the completion of a posttest to evaluate the leaders’ grasp of the course content. Review of the posttest allowed for further concept discussion and clarification and amplification of material and examples covered, as well as reinforced the importance of the workshop’s program objectives. When compared with the pretest, posttest scores showed significant improvement (Figure 1).
CONCLUSION Developing front-line leaders on the competency of financial stewardship requires helping them to connect on common, inconsistent leader performance and the need for an in-depth understanding of financial concepts. Continued on page 52
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Connecting the Dots Continued from page 47 According to Dunham-Taylor and Pinczuk, “Every management decision has financial implications; every financial decision has management implications.”9 The workshop provided an in-depth review and presentation of what most leaders consider intimidating content. Using simple illustrations to explain complicated concepts and involving the leaders in developing effective communication strategies with our finance colleagues mitigates the intimidation factor. It also helps leaders make the vital connection between what they do at the cost center level and the effect on the organization’s outcomes. Finally, validating the leaders’ knowledge of the tools in place to help them manage their resources wisely and effectively provides a framework for leader accountability. References 1. Kleinman C. Leadership Roles, Competencies, and Education. J Nurs Admin 2003; 33(9):451-455. 2. Waxman KT. Creating a Culture of Financially Savvy Nurse Leaders. Nurse Leader 2005;3(1):31-35. 3. American Association of Colleges of Nursing. White Paper on the Education and Role of the Clinical Nurse Leader. February, 2007. Available at: http://www.aacn.nche.edu/Publications/ WhitePapers/ClinicalNurseLeader07.pdf. Accessed October 30, 2007. 4. Mathena K. Nursing Management: Leadership Skills. J Nurs Admin 2003;32(3):136-142. 5. AONE. AONE Nurse Manager Leadership Collaborative Inventory Assessment. 2004. Available at: http://www.aone.org/aone/resource/NMLC/InventoryAssessment030807.pdf. Accessed Octber 30, 2007. 6. Clarke R. Finance and Nursing—the Business of Caring. HealtLhcare Fin Manage 2006;60(1):50-57. 7. Lankshear A, Sheldon T, Maynard A. Nurse Staffing and Healthcare Outcomes. Adv Nurs Sci 2005;28(2):163-174. 8. Needleman J, Buerhaus P, Mattke S, Stewart M, Zelevinsky K. Nurse-staffing levels and the quality of care in hospitals. N Engl J Med 2002;346(22):1715-1723. 9. Dunham-Taylor J, Pinczuk, J. Health Care Financial Management for Nurse Managers. Sudbury, MA: Jones and Bartlett; 2006.
Teresa W. Golden, MSN, RN, CNA-BC, is corporate director of clinical business affairs at Methodist Le Bonheur Healthcare in Memphis, Tennessee. She can be reached at goldent@ methodisthealth.org. 1541-4612/2008/ $ See front matter Copyright 2008 by Mosby Inc. All rights reserved. doi:10.1016/j.mnl.2008.04.003
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