We have all seen the headlines about what is going on in the nursing labor market. It is absolute turmoil! Nurses are quitting the bedside due to moral injury, burnout, and the increased availability of alternative employment (e.g., telemedicine and virtual care). The current model for a bedside nurse is not working well for greater than a third of the 1.7 million nurses that work in hospitals.
With an aging population, this is really coming to a head. More and more patients will require hospitalization across the country each year and the only way, and, perhaps the best way, at the moment, to provide safe, effective care is via a registered nurse (RN) carefully monitoring, treating, and physically caring for the patient.
We live in a capitalist, semi-free market society (i.e., healthcare is half funded by the government and highly regulated hence the “semi”). Nurses are highly educated, well-trained professionals who are willing and able to seek employment in other areas of healthcare and in entirely different industries when the workplace is not safe or providing satisfaction. When a large part of a profession is dissatisfied, we can point fingers and assign blame, but, most often, there is a market inefficiency that is occurring. Covid-19 exposed significant market inefficiencies in the nursing labor market and we are now living in a period of transition. In this case, we can clearly identify one of the structural market drivers of the issues we are seeing in the nursing market—more on that later.
These issues are not new. The nursing profession and hospitals have tried innovative interventions to solve this problem for decades. Solutions tried have included pizza parties, music therapist pilot programs, subscriptions to the Calm app, awards like the Daisy Award, and nurse appreciation week. These are all well and good, but many are not scalable and most have questionable effectiveness when it comes to solving burnout and moral injury. These interventions are not going to stem the outflow of nurses from our Nation’s hospitals.
But, the truth is that there is a structural problem that underlies these issues. What do we do for jobs that are more dangerous, difficult, or that require higher levels of skill than other jobs? We pay those that elect to do these jobs more money to attract people. Unfortunately, given the concentration of hospital employment power (e.g., monopsony, duopsony, and “triopsony” power) in most geographies; wages for nurses have grown at rates far lower than inflation over the past two decades. In short, hospitals have artificially deflated the market rate for a nurse given the realities of the job due to their wage-setting power as the largest employer of nurses. Demand for nurse labor has gone up, but wages have not followed to provide a market signal that creates an inflow of supply. Indeed, hospital consolidation has continued at a rapid pace over the past few decades with very little interference from the FTC.
But, nurses will tell you that it is not really about the money for them. While they acknowledge that they want to get paid well for their expertise, they also cite unsafe staffing levels and a lack of “mission orientation” from management at hospital facilities as a driver of “moral injury.” Essentially, many nurses feel like they cannot provide safe, effective care to their patients in hospitals. Patients that they care about, deeply. They know that hospitals and hospital administrators really care about the money—though, the old adage goes, for hospital administrators, “no money, no mission.” This is true but there needs to be a clear balance. Nurses feel like it is all money and no mission.
That brings me to my point, which follows:
Did you know that our healthcare system does not pay for nursing services despite the fact that nurses are the largest workforce of healthcare professionals? Did you know that nurses in hospitals are not a service line, but rather a complete cost center? Nurses are to hospitals as housekeeping staff are to hotels.
Most people are shocked to hear that nurses do not get paid for their professional services by health insurance companies, Medicare, or Medicaid safety net programs. There are very few situations where nurses can be reimbursed directly for care provided to patients and all of them are in the outpatient setting and are usually done under the billing capabilities of a physician.
Physicians get paid by insurance via a time-based visit model where each 15 minutes of time equates to a dollar value (e.g., E/M CPT Codes). Whereas nurses, despite many years of clinical education and experience, a well-regulated licensing process, and state nursing practice laws, cannot in most circumstances be paid by a patient's insurance.
Instead, most nurses (>50%) are employed by hospitals who get paid for each day the patient is admitted to a room via a complex formula called a Diagnostic Related Grouping (DRG) that does not factor in the intensity of nursing services required for a particular patient. Nurses are employed by the hospital as a cost center instead of as a revenue center or service line--like physicians. Hypothetically, hospitals would get paid for a hospital full of patients even if nurses were not there to care for patients 24/7 (one caveat is some degree of regulation around the necessity of nursing services or staffing ratios in certain states). In short, hospitals get paid for patients in beds, but not for providing nursing services. Naturally, a good hospital manager seeks to increase profit margins, so nursing services are always sought to be minimized within a certain “acceptable range.” This acceptable range is a hotly debated topic with certain municipalities ensuring minimum nurse-to-patient staffing ratios. Within a given facility, it may vary based on management culture and the level of acceptance of safe staffing ratios (i.e., “What is the actual ratio we agree with here?”)
This disincentive and inherent lack of a market-based "valuation" of nursing services in the healthcare market has led to significant friction in the nurse labor market. You may have seen some of the headlines that suggest as many as a third of nurses plan to leave their roles in the next 12 months. As mentioned above, nurses attribute their desire to leave to burn-out and other factors, but they also cite moral injury due to inadequate and unsafe staffing levels in facilities. Essentially, many nurses report that the decisions of management related to staffing levels are unsafe for their patients and thus refuse to continue working in hospital settings. In fact, recent related legislation in Minnesota was killed at the last minute by threats to pull investment from the state made by The Mayo Clinic. Essentially, the legislation did not mandate certain staffing ratios but only required that hospitals maintain committees with nurse representation to discuss safe staffing ratios—despite this seemingly innocuous and reasonable law, Mayo Clinic took a hard stance threatening to cancel 2 billion dollars worth of investment in the state.
Naturally, these unsafe staffing levels are a direct result of the incentives in the system (i.e., hospital administrators seek to profit maximize and therefore understaff to increase profitability). It is well-known in some nursing academic circles that the lack of a true market for nursing services is a major driver of the trends seen and may be the ultimate root cause of many of these issues.
This has become a more acute problem due to the stresses placed on nurses resulting from Covid-19, but even before the pandemic, the average patient admitted to the hospital is much sicker than they were even 10 years ago. So, some of the “safe staffing ratios” that are set or advocated for may actually be too limited. For example, the 1 to 4 nurse-to-patient ratio on a standard floor unit may actually need to be 1 to 3 (this is a conceptual example) due to the increased complexity and severity of the patient’s condition today.
So, what can we do about this? Let’s create a functioning market! There is a current movement led by the Commission for Nurse Reimbursement and, to a lesser extent, the American Nurses Association (ANA) to convince policymakers to create a reimbursement system for nursing services in acute care facilities. By uncoupling nursing care from the “DRG Room Rate” and turning nursing into a revenue center, many believe we can incentivize more optimized staffing ratios and stabilize the nursing market.
Better staffing ratios and more nurses returning to the bedside is a good thing for American patients. We know that adequate staffing can help prevent adverse events, complications, and accidents in hospitals and may decrease the risk of patient readmissions. I think we will all be glad to have a functioning nurse labor market so when we show up at the emergency room we know we will have the attention and care we need.
Great article!
It's not just a nursing crisis...our healthcare system is broken : (
We wrote an article about the crippled state of the Canadian healthcare system:
https://klarityvipwriters.substack.com/p/waiting-for-healthcare-in-canada
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