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Why hospitals must educate nurses about healthcare costs

May 14th, 2015

by Susan J. Penner

Every day hospitals waste money, and the non-personnel expenses for a medical-surgical nursing unit at a typical hospital in America are thousands of dollars over budget. The nurse manager might investigate and find that one reason for the rise in costs is poor handling and labeling of lab tests, leading to repeat testing that is usually not reimbursed. Another potential reason is that nurses are taking far more supplies than are needed to patient rooms, often forgetting to charge for these items. The supplies cannot be used for other patients once they are removed from the storage room, and the hospital loses reimbursement, as charges are not reported.

This story is not unusual. Nurses are often completely unaware of the costs of care in their inpatient or outpatient settings. Few staff nurses have any background or education in healthcare finance, and often resist the idea that they need to think about the cost of nursing care. However, in these times of rapid change and ever more scarce resources, it's time for nurses to realize that their performance affects not only their patients' health but the financial health of their institution.


I teach a course in financial resource management in the Masters of Science in Nursing Program at the University of San Francisco. Some of my students are entry-level, completely new to the nursing profession and seeking a registered nurse (RN) license upon graduation. Other students are licensed and experienced RNs. No matter the level of experience, most of these students are skeptical about the need to learn financial concepts as they enter the course. By the end of the course, these students have a basic understanding of the importance of healthcare financing, and they are able to make a business case to acquire funding to improve patient care.

A fundamental concept I teach in this course is that healthcare budgets have an impact on nursing care, and nurses have an impact on healthcare budgets. One strategy in the course is to assign students to review California hospital chargemaster documents and report the charges for a selected item. When students find that a complete blood count (CBC) can cost as much as $200, they realize that mishandled or mislabeled lab specimens are going to cost the institution or payer a lot of money. When students find that gauze dressing charges can be $20 or more per package, they think about the costs of hoarding and wasting supplies, which allows them to teach themselves about the relationship between their nursing performance and hospital costs.

Hospital administrators and nurse managers are beginning to realize that sharing information and supporting staff input can help balance the nursing unit budget. This approach fits well with the American Nurses Credentialing Center Magnet Model for recognizing Magnet hospitals. The Magnet Model components of Transformational Leadership and of Structural Empowerment support a hospital administration that values staff input and includes staff in decision-making. However, a hospital doesn't have to have Magnet status to start educating its nurses about the cost of care, the impact of accurate charges on hospital revenue and the value of staff ideas that help save the institution money. Forward-thinking nurse managers and administrators can implement these approaches right now.

Educating staff nurses about costs and revenues goes beyond the management of supplies and lab specimens. In today's healthcare environment, nurses need to understand that patient flow and preventable readmissions are also important performance issues. One strategy is to prepare and employ clinical nurse leaders (CNLs), who are equipped with teambuilding tools and an understanding of healthcare finance and systems. CNLs are able to help the nurse manager educate staff about performance and costs and to make a business case to improve patient care.

Accountable care organizations (ACOs) are a new and rapidly growing model for healthcare delivery and financing that requires high performance and close coordination among all levels of care. Nearly 7 in 10 Americans live in an area served by an ACO, and 44 percent live an area served by at least two. ACOs require the integration of hospitals, home health, skilled nursing and rehab and other settings that employ nurses. Successful implementation of the ACO model therefore relies on cost-aware nurses who understand the link between their performance, the quality of care and the institution's bottom line.

I believe these are all compelling reasons for educating staff nurses about healthcare costs and financing. As an experienced nurse educator, I know that nurses can "get it" if we step up and help them learn about budgets and the business side of healthcare. I'm also convinced that if we're going to manage costs and quality on into the future, we must engage our largest sector of the healthcare workforce--our nurses.

Susan J. Penner is an adjunct faculty member of the University of San Francisco's School of Nursing and Health Professions, and author of the book "Economics and Financial Management for Nurses and Nurse Leaders."


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