Nurselife

Financial Management for Nurse Managers


When you first start nursing, you probably do not consider learning about budgeting and finances to be a priority. Over your career, however, you may find that these skills become increasingly important.

Whilst the benefits of humanistic and commitment-based management are significant, it cannot be denied that having an understanding of finances and budgets is an important healthcare manager skill.

What Does a Nurse Manager Do?

The Department of Education’s website, Job Outlook’s (n. d.) description of a nurse manager states they are responsible for overseeing resources such as nurses and finances. A nurse manager’s aim: to promote safety, facilitate cost-efficient care, and ‘monitor quality, clinical standards and professional development of nurses.’

Nurse management tasks may include:

  • Policy development, implementation and evaluation
  • Human resource management
  • Staff recruitment
  • Budgeting
  • Performance monitoring and evaluation of nursing staff and assistant staff members
  • Leadership
  • Research/study the cost-efficiency of the workplace/unit
  • Developing positive relationships or networks with collaborative partners such as education groups
  • Quality improvement
  • Risk management

(Job Outlook n.d.)

How To Measure Efficiency

Iacocca (2017) claims that there are four forms of efficiency:

  1. Technical
  2. Production
  3. Allocative
  4. Opportunity cost and trade-off

Technical efficiency is created when outputs (e.g. services) exceeds inputs (e.g. resources) (Iacocca, 2017). Production efficiency occurs when output costs are minimal, or outputs are increased for the same/given cost (Iacocca, 2017). Allocative efficiency means that input costs are limited and output benefits are increased; or like in production efficiency, outputs of maximum value are created from the same/given cost (Iacocca, 2017). Finally, opportunity cost and trade-off is generated from taking a successful risk at acquiring one benefit for the sacrifice of another benefit (Iacocca, 2017).

On a basic level, efficiency can be interpreted as being achieved when there are less inputs than outputs. This does not make it hard to see that this can, unfortunately, lead to issues such as insufficient staffing and over-working of nurses. Furthermore, this may lead to skills mix issues in which cheaper staff members are rostered onto shifts to save money instead of putting on more expensive staff members such as registered nurses.

These issues raise concerns that if managers are focused on short-term economics as opposed to long-term vision fulfilment or humanistic management, the organisation may have short-term profits but long-term crises. The suggested crises could involve, for example, the nursing staff feeling burnt-out, multiple staff resigning at once, and/or the fall of accountable cultures leading to dissatisfied stakeholders and limited client business.

Nurses as a Resource

Penner (2017) expresses that health professionals face great challenges regarding the provision of excellent care at reasonable costs.

The literature regarding efficiency (Iacocca, 2017) makes it clear that the best financial resource a nurse manager can have is a high quality nurse. Evidently, a competent and productive nurse appears to be more cost-efficient than an incompetent, procrastinating one. Likewise, it can be predicted that a nursing team that works collaboratively may be more efficient than a team that is dysfunctional and non-collaborative.

Furthermore, from the literature in this article, it would be believed that it is cost-efficient to recruit nursing graduates and staff members that: have excellent performance evidence; desire to be future leaders; and, express commitment to staying with the organisation and specific workplace that they are applying to work with.

Succession Planning for the Future

Titzer et al. (2014) highlight the importance of nurse managers also having effective succession planning in place. They convey that succession planning is lacking in nursing, despite there being clear benefits for this practice. Resources (such as financial) must be allocated to develop a pipeline of future nursing leaders and ‘develop internal human capital’ (2014). This human capital may decrease management turnover rates and replacement costs, thus improving the financial management of the workplace.

Iacocca (2017) states that in the United States, for example, healthcare is expected to become the key employment sector by 2024. The ageing population and retirement of health professionals can be linked to healthcare industry expectations for growth (Iacocca, 2017). As nurses are the key employees of the health sectors in the US (Iacocca 2017) and Australia (AIHW 2017), it is clear to see that nursing is highly influential upon costs and savings of healthcare. Therefore, this also exemplifies that nurse managers must treat nurses as their most valuable human resource. This can involve applying a humanistic management style to improve the commitment, productivity, quality of care, and job satisfaction of nurses.

Ways to Increase Efficiency

Investing in CPD and Training

It can also be considered that continuous professional development is worthy of resources. This is due to the trade-off that staff nurses may increase their cost-efficiency (e.g. better clinical decision-making, fewer errors, improved collaboration, and skill mastery leading to time-efficiency). The AIHW, (2017) reports the following in relation to Australian nurses: ‘305,000 were employed in nursing or midwifery, working an average of 33.5 hours per week.’ It can be imagined that further developing the nursing workforce could dramatically increase cost-efficiency.

Research and Innovation

Cosgrove et al. (2012) report that ‘At Intermountain, an evidence-based approach to labour and delivery resulted in $50 million in savings and a twenty-six-percentage-point drop in inappropriate elective inductions of labour since 2001’. Cosgrove et al. (2012) also state that shared decision making can improve cost-efficiency via, for example, reducing hospital length-of-stay, improved communication and nursing productivity.

It is also essential to look at the potential trade-off of implementing innovations. In ten years the Connected Cardiac Care Program saved $10 million and dropped hospital readmissions for clients with heart failure by 51% (Cosgrove et al. 2012). Finally, Cosgrove et al. (2012) acknowledge that cost-efficiency stems from delivering care that matches the needs of the community, and the individual client.

Show References

References

  • Australian Institute of Health and Welfare 2017, Health Workforce, AIHW, Australian Government, Canberra, ACT, viewed 14 December 2017, https://www.aihw.gov.au/reports-statistics/health-welfare-services/workforce/about
  • Cosgrove, DM, Fisher, M, Gabow, P, Gottlieb, G, Halvorson, GC, James, BC, Kaplan, GS, Perlin, JB, Petzel, R, Steele, GD & Toussaint, JS 2013, ‘Ten Strategies To Lower Costs, Improve Quality, And Engage Patients: The View From Leading Health System CEOs’, Health Affairs (Project Hope), vol. 32, no. 2, pp. 321-7, viewed 14 December 2017, https://www.ncbi.nlm.nih.gov/pubmed/23381525
  • Iacocca, L 2017, ‘Chapter 1: Economics of Healthcare’, in Penner, SJ 2017, Economics and Financial Management for Nurses and Nurse Leaders, Third edn, Springer Publishing Company: New York, NY.
  • Job Outlook (n. d.), Nurse managers, Department of Employment, Australian Government, Canberra, ACT, viewed 14 December 2017, http://joboutlook.gov.au/occupation.aspx?code=2543
  • Penner, SJ 2017, Economics and Financial Management for Nurses and Nurse Leaders, Third edn, Springer Publishing Company: New York, NY.
  • Titzer J, Phillips T, Tooley S, Hall, N & Shirey, M 2013, ’Nurse manager succession planning: synthesis of the evidence’, Journal of Nursing Management, vol. 21, no. 7, pp.  971–9, viewed 14 December 2017, http://onlinelibrary.wiley.com/doi/10.1111/jonm.12179/full

Hide References

Document this CPD

Comments

Nurselife
Transcultural Nursing in Australia
Nurselife
The Performance Appraisal
Nurselife
The Nurse as Patient Advocate