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Cost Analysis: Measuring Nursing Costs
Corine K Domingo
School of Nursing, Liberty University
NURS 523: Finance and Recourse Management for Nurse Leaders
Dr. Turner
September 3, 2020
Over the last few decades healthcare organizations (HCOs) and facility leaders have been
forced to adapt to economic changes and organization’s financial atmosphere. Cost control has
become a topic of great importance to clinical nurse leaders and must have a great understanding
of controlling costs of their units and services (Jones et al., 2018, p. 145). Over the years it has
been determined that nursing costs are measured as an average cost across the board with an
assumption that all patients receive the same level of care, consume the same amount of nursing
services and interventions (Welton et al., 2018, p. 46). Jones et al. (2018) stated, that
organizations involved in costing out nursing services face two challenges, one is to divide the
total annual nursing care costs by the number of patients treated annually to determine an
estimate cost per patient. The second being that the organization could hire a data collector to
shadow each nurse to determine exactly how much time is being spent with each patient; this
approach and detail to data collection is called micro-costing (p. 170).
Due to the lack of information about costs and utilization of nursing services, researchers
Welton et al. in 2018 conducted a study on micro-costing methods and proposed a new approach
to costing nursing care in acute care hospitals in the article, A Micro-Costing or “Bottom-Up”
Approach to Measuring Nursing Cost Using Data from Electronic Health Records. The authors
of the study mentioned above all have nursing backgrounds, ranging from Health Systems
Research Scientist to Assistant Professors with reputable affiliations s like University of
Colorado. The title, A Micro-Costing or “Bottom-Up” Approach to Measuring Nursing Cost
Using Data from Electronic Health Records, gives the reader a brief overview of what the article
is focusing on, while the executive summary or abstract highlights the key points of the article by
outlining the issue at hand and then advising readers of the new approach to measure care and
labor. The authors conducted extensive research for this study. They reviewed a total of 23
journal articles from various publications, out of which seven (7) articles were within the 10-year
mark, five (5) articles within the five (5) year mark, moreover, three (3) articles used as reference
were from the year 1983, 1984, and 1987 sequentially, which indicated that the identified
problem of nursing care costs at hand can be traced back to the early 90s.
The authors were able to skillfully critique the reviewed literature and point out different
methodologies and challenges. For example, Welton et al., noted how a study conducted in 2009
by Frick, had identified the most common ways to collect data in a micro-costing study, some of
which include: “administrative datasets, claims data, forms and time-logs, surveys, patient charts
and direct observations” (Welton et al., 2018, p. 47). Another example is seen where Welton et al.
discuss the time-based activity driven (TBAD) micro-costing method was originated by Kaplan
and Anderson in 2004. When applied to care, TBAD measures “activity- based costing, meaning
“a dollar per-minute capacity cost rate for each resource is estimated for all clinical resources
involved in the care cycle” (Welton et al., 2018, p. 47).
Welton et al., analyzed and discussed a new approach to costing out nursing care using
Electronic Health Records (EHR). “Micro-costing methods using EHR can provide accurate data
by utilizing individual nursing care time without additional data collection burden on nurses.
EHR data can also provide further statistics on patients, nurses, nursing skill sets, cost of nursing
care by diagnosis and different care levels” (Welton et al., 2018, p. 46). The authors highlight
how this method links nurses directly to patients and allocate actual worked hours and wage data
in order to present a unique patient-level metric of nursing care; as stated in the article this
bottom-up micro-costing approach gives a “accurate reflection of the clinical care being provided
and allows greater transparency of nursing intensity and cost” (Welton et al., 2018, p. 48).
Welton et al. were able to effectively evaluate the approaches to costing nursing care and
outline various micro-costing models. The authors were able to connect the reviewed literature
and voice any limitations to their own findings and methodology all while giving the readers an
extensive overview on fiscal management and resource management. As nursing leaders and
administrators, it is essential to understand cost analysis and the financial background of our
organization to identify patterns in nursing care levels and operational outcomes. Sunrise, the
company I am employed by recognized the urgency and introduced a similar micro-costing
concept, Care Labor Management (CLM) in Spring of 2020. Out of the 435 facilities owned,
CML piloted in 50 facilities across the United States, one of which was my community. With the
implementation of CLM, Sunrise is slowly changing the way we staff; by creating schedules
based on actual worked hours and documentation. The goal of CLM is to align staffing
expectations to the reality of daily facility life and share the workload equitably; all while
benefiting operational plans for better team member and resident experiences with labor savings.
By utilizing CLM on a daily basis, I have been able to staff nurses and nursing assistants
appropriately among different shifts and according to care level acuity. Our team-members are
educated on how to accurately document in real time as that effects our data collection and can
affect how staffing is impacted for the following week. Proverbs 1:5 says, “a wise man will hear
and increase leaning, and a man of understanding will attain wise counsel.” Through this
implementation I have gained tremendous experience about resource management and ways to
allocate labor and costs in accordance to severity of illness, workload, and direct nursing care
time per patient.
References
Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial management for nurse
managers and executives - E-book (5th ed.). Elsevier Health Sciences.
Welton, J. M., Jenkins, P., & Perraillon, M. C. (2018). A Micro-Costing or "Bottom-Up"
Approach to Measuring Nursing Cost Using Data from Electronic Health
Records. Nursing Economics, 36(1), 46-51.
