Cheryl Bland Jones, RN, PhD, FAAN
Michael Gates, RN, PhD
Nurse turnover is a recurring problem for health care organizations. Nurse retention focuses on preventing nurse turnover and keeping nurses in an organization’s employment. However, decisions about nurse turnover and retention are often made without the support of full and complete knowledge of their associated costs and benefits. This article identifies common nurse turnover and retention costs and benefits, discusses the use of benefit-cost and cost-effectiveness analysis relevant to nurse turnover and retention, and calls for the construction of a business case for nurse retention. It also provides a foundation for including the costs and benefits of nurse turnover and retention in estimating the economic value of nursing.
Citation: Jones, C., Gates, M., (September 30, 2007) "The Costs and Benefits of Nurse Turnover: A Business Case for Nurse Retention" OJIN: The Online Journal of Issues in Nursing. Vol. 12 No. 3, Manuscript 4.
Key words: benefits; business case, costs, nurse turnover, nurse retention
Concerns about registered nurse (RN) turnover become heightened during times of nurse shortages. These concerns originate from both non-economic and economic sources. On the non-economic side, there are concerns about the practicalities: retaining adequate numbers of RNs to appropriately provide safe care to patients; over-burdening existing staff with increased workloads and demands that may bring about more staff turnovers; and recruiting and attracting quality RNs to fill vacancies. On the economic side, there are concerns about the costs of turnover, the loss of nursing human capital, and the potential effects on quality of care. These concerns currently are being voiced by a wide array of individuals, from bedside nurses to nurse managers and executives, and from hospital executives to health care economists.
There is fairly substantial evidence to support the position that nurse turnover is costly (Advisory Board, 1999; Jones, 2005; OBrien-Pallas et al., 2006; Waldman, Kelly, Sanjeev, & Smith, 2004). Yet ...we know very little about the actual costs of nurse retention or the economic benefits of nurse retention and turnover. we know very little about the actual costs of nurse retention or the economic benefits of nurse retention and turnover. There are widely held beliefs that the costs of nurse turnover far outweigh its benefits, and that the benefits of nurse retention far exceed its costs. However, until the missing pieces of the turnover-retention relationship can be quantified, we lack the evidence upon which policy makers and administrators can construct well-informed decisions and strategies. In this article, we attempt to discern the costs and benefits of nurse turnover and nurse retention in an effort to lay the foundation for estimating the economic value of nursing (i.e., that relationship between the costs of RNs relative to the quality gains derived from their employment). In turn, we hope to fuel interest in developing a business case for nurse retention and call upon nurses, nurse leaders, and health care executives to join in this effort.
The Costs and Benefits of RN Turnover
Recent studies of the costs of nurse turnover have reported results ranging from about $22,000 to over $64,000 (U.S.) per nurse turnover (Advisory Board, 1999; Jones, 2005; OBrien-Pallas et al., 2006; Stone et al., 2003; Waldman et al., 2004). The reasons for this variability can be attributed to a variety of factors, but principally emanate from conceptual differences, such as defining nurse turnover cost categories, as well as methodological differences, such as study designs and samples. Two of the studies cited above that reported the highest costs (Advisory Board; Jones) defined and measured more extensive turnover-related productivity losses (e.g., pre-turnover productivity of the departing nurse), while the other studies acknowledged but did not capture these productivity losses at the same level of detail. Turnover costs, in general, have been estimated to range between 0.75 to 2.0 times the salary of the departing individual (McConnell, 1999), while nurse turnover costs have been estimated at 1.3 times the salary of a departing nurse (Jones). However, these estimates may vary depending upon the human capital, e.g., the education, experience, and tenure of the nurse who leaves; the era during which the nurse departs, e.g., at the beginning versus the height of a nurse shortage; and other organizational and environmental factors, such as the local labor market and whether the organization is in a rural or urban location.
The definition of nurse turnover costs (and benefits) can be especially problematic. For example, several turnover cost classifications have been proposed: direct or indirect (Buchan & Seccombe, 1991; Jones, 1990; OBrien-Pallas et al., 2006; Stone et al., 2003), visible or invisible (Advisory Board, 1999), and pre-hire and post-hire (Jones, 2004). These classifications define broad categories within which subcategories are conceptualized, such as advertising and recruiting costs, or orientation and training costs (Table 1). These varying conceptualizations may, in part, explain the variability in turnover costs reported.
Table 1. Nurse Turnover Cost
- Advertising and recruitment
- Vacancy costs (e.g., paying for agency nurses, overtime, closed beds, hospital diversions, etc.)
- Orientation and training
- Decreased productivity
- Potential patient errors, compromised quality of care
- Poor work environment and culture, dissatisfaction, distrust
- Loss of organizational knowledge
- Additional turnover
In economic terms, direct costs are generally considered to be those costs that are clearly and readily attributable to a particular activity. Examples of direct costs of nurse turnover include advertising costs and those costs incurred by health care organizations (HCOs) to market nursing positions in an attempt to recruit and hire nurses to fill turnover vacancies. While direct costs are those costs that are more obvious or tangible, indirect costs are those that cannot be readily assigned to a specific activity and/or that may be hidden or inappreciable, such as productivity losses and loss of organizational knowledge. However, it is not always easy to separate costs into these two categories of direct and indirect costs. To overcome this classification challenge, Jones (2004) recommended classifying costs based on the timing of cost accrual, i.e., before or after a new nurse is hired.
The quantification of nurse turnover benefits, on the other hand, has been a largely ignored activity. This may have occurred for several reasons: ...leaders in HCOs are more focused on quelling nurse turnover than quantifying its benefits...leaders in HCOs are more focused on quelling nurse turnover than quantifying its benefits; the costs of turnover are presumed to be more costly than the benefits; or calculating turnover benefits is perceived to be too difficult. Some aspects of turnover benefits (table 2) are readily quantifiable, such as the differences in salaries and benefits for nurses who leave an HCO and those who enter. Less easy to quantify, however, is the influx of new ideas brought by nurses who enter an organization or the potential gains in productivity the organization experiences when disgruntled employees leave.
Table 2. Nurse Turnover Benefits
- Reductions in salaries and benefits for newly hired nurses vs. departing nurses
- Savings from bonuses not paid to outgoing nurses
- Replacement nurses bring new ideas, creativity, and innovations as well as knowledge of competitors
- Elimination of poor performers
The Costs and Benefits of RN Retention
Several benefits of retention (table 3) have been identified in the literature, Through the successful implementation of...retention strategies, HCOs may...incur certain downstream benefits of retention, such as becoming a nursing employer of choice.such as patient safety and quality of care, patient satisfaction, nurse satisfaction, and nurse safety (Page, 2004). Toward this end, several strategies have been suggested to improve nurse retention. These strategies include: transforming the work environment by providing strong, top-level nursing leadership and supportive nursing supervision throughout the organization; involving nurses in decision making related to patient care delivery and practice; re-designing nurses work spaces to be more ergonomic and less physically demanding; creating a culture of safety; limiting nurses work hours; ensuring safe staffing levels; offering flexible work schedules and employment opportunities such as job sharing; and improving nurses wages (AHA Commission on Workforce for Hospitals and Health Systems, 2002; Buerhaus, Staiger, & Auerbach, 2004; JCAHO, 2002; Kimball & ONeil, 2002; Page, Spetz & Given, 2003). Through the successful implementation of such retention strategies, HCOs may, in turn, incur certain downstream benefits of retention, such as becoming a nursing employer of choice.
Table 3. Nurse Retention Benefits
- Reduction in advertisement and recruitment costs
- Fewer vacancies and reduction in vacancy costs
- Fewer new hires and reduction in hiring costs
- Fewer orientees and reduced orientation and training costs
- Maintained or increased productivity
- Fewer terminations and reduction in termination costs
- Decreased patient errors and increased quality of care
- Improved work environment and culture, increased satisfaction, increased trust and accountability
- Preserve organizational knowledge
- Easier nurse recruitment
The costs of retention are obviously related to the specific organizational strategies implemented. These strategies might include improvement of nurse work environment, re-design of nurse work space, and/or increase of nurse wages (table 4). Because organizations generally choose a combination of strategies that meet their unique needs and budget constraints, the retention costs incurred will vary from organization to organization. Some strategies, such as increasing nurse staffing (Needleman, Buerhaus, Stewart, Zelevinsky, & Mattke, 2006), may be rather challenging to assess. Yet the costs of other strategies may be relatively easy to quantify, such as specific program costs associated with a new graduate residency program or limiting nurses work hours. Additionally, certain costs associated with the same program, such as the costs of forgone investments, may be more difficult to quantify than other costs related to that program. Costs of the more global strategies, such as improving nurses work environment, involving nurses in organizational decision making, establishing a culture of safety, or providing strong, top-level nursing leadership and supportive nursing supervision throughout the organization are more diffuse and difficult to quantify.
Table 4. Nurse Retention Costs
- Specific program costs (e.g., nurse residency or mentoring program)
- Benefit improvements and salary increases
- Rewards and recognition events
- Ongoing education, learning and career advancement opportunities; tuition reimbursement
- Dedication of organizational leaders and staff focusing on nurse retention and building/maintaining relationships
- Bonus programs, stock options, and/or cash awards
- Mechanisms for communication and voicing concerns (e.g., providing anonymous suggestions, ongoing surveys, 360 degree feedback)
- Promotion and career advancement opportunities
- Creative staffing and scheduling options
- Adequate nurse staffing
While some researchers have worked to assess generic nurse-retention benefits and costs, others have attempted to identify costs and benefits associated with an organization-specific program designed to retain nurses. For example, Beecroft, Kunzman, and Krozek (2001) and Pine and Tart (2007) have described the costs and benefits of implementing residency programs aimed at retaining new RN graduates. Unfortunately, to date, there have been no systematic efforts to quantify the costs and benefits of nurse retention more broadly or in economic terms. This lack of studies focused on valuing the costs and benefits of retention is likely attributed to several factors. First, HCOs typically implement a variety of nurse retention strategies rather than one single strategy. They may also implement the strategies in a variety of different ways, and/or implement several retention initiatives simultaneously. Short of designing a true experimental study, it is difficult to sufficiently control for...factors, so as to quantify the costs and benefits of specific retention programs.Short of designing a true experimental study, it is difficult to sufficiently control for both external and internal factors, as well as program and individual factors, so as to quantify the costs and benefits of specific retention programs.Although the more descriptive or naturalistic research designs allow one to identify nurse retention initiatives underway and assess some of the costs and benefits, it remains difficult to isolate the economic impacts of any particular program.
Turnover and retention are distinct concepts; however, the costs and benefits of both are interrelated, and in some cases it may be appropriate to assume that the benefits of retention are the costs of nurse turnover avoided. One can also argue that the opportunity cost of nurse retention, or the most costly foregone alternative to retention when an organization invests in a retention program, is nurse turnover. One can also argue that one benefit of turnover is retention costs avoided. Unfortunately, costs avoided (or cost savings) are not known prior to the time the costs are incurred, which opens this approach to criticism.
While these assumptions may point toward gross costs and benefits, retention and turnover are conceptually distinct concepts, requiring different methods and approaches of quantification. Consider that there are benefits of retention, such as the preservation of knowledge specific to the organization, trade secrets, and benefits of turnover, such as the departure of poor performers. Yet there are also costs of retention, such as the expenses related to increasing nursing wages, and costs of turnover, such as the loss of organizational knowledge that is incurred when a highly experienced and valued nurse leaves. The totality of these benefits and costs is generally not captured in most cost studies of nurse turnover.
RN Turnover, Retention, and Quality of Care
Although it is logical to expect that turnover would adversely affect patient care, ...in reality, we know very little about nurse turnover and retention in terms of quality of care and patient safety.in reality, we know very little about nurse turnover and retention in terms of quality of care and patient safety. There is a substantial body of research documenting the effects of nurse staffing on patient outcomes and quality of care (Kane, Shamliyan, Mueller, Duval, & Wilt, 2007; Lankshear, Sheldon, & Maynard, 2005). Further, some studies even suggest a relationship between nurse turnover and factors that are related to quality of care (Aiken, Clarke, Sloane, Sochalski, & Silber, 2002; Shortell et al., 1994) or intent to quit and quality-related measures (Leiter, Harvie, & Frizzel, 1998). Yet there are very few reported studies that have examined the specific relationships between nurse turnover or retention and quality of care, or that have attempted to quantify the quality of care and patient safety costs related to nurse turnover and retention. One commonly cited study did report that organizations with low turnover rates (ranging between 4% and 12%) had lower risk-adjusted mortality and lower patient lengths of stay than did organizations with moderate (12% to 22%) or high (22% to 44%) turnover rates (VHA, 2002). A Canadian study reported negative effects associated with nurse turnover and communications, medications management, compromised follow-up, client disengagement, illness exacerbation, and added burdens of caregiving for families (Minore et al., 2005). Further studies are needed to investigate these relationships, and to document the causal mechanisms through which turnover and/or retention may affect quality of care and patient safety.
Caveats About Quantifying Costs and Benefits: Benefit-Cost and Cost Effectiveness Analysis
While quantifying the costs and benefits of nurse turnover and retention is an extremely valuable and important activity, the difficulty in doing so is not trivial and should not be underestimated. For example, conducting a formal benefit-cost analysis (BCA) requires the quantification and comparison of all costs and all benefits related to a particular program. A program investment is generally considered if the benefits outweigh the costs. When several programs are being considered, the program with the greatest net benefit should be selected. However, many organizations fail to accurately quantify all of the costs and benefits associated with specific programs because they often focus only on the more easily captured organizational costs and benefits. The more easily captured costs and benefits are those direct or visible costs that are attributable to nurse turnover or retention investments (e.g., advertising to replace nurses who have left and some retention program costs), while the less easily captured costs and benefits are those indirect costs that are relatively invisible (e.g., productivity losses or gains that result from turnover or retention programs, respectively). In some cases, the indirect or invisible costs will exceed the direct or visible costs.
Economists acknowledge that the specific valuation of costs and benefits pertaining to health and health care-related activities is a formidable task, especially determining those costs and benefits that accrue to third parties (Folland, Goodman, & Stano, 2006). Third party benefits and costs, known as externalities, are those that accrue to individuals or groups beyond the individual or organization making the investment. In the case of nurse retention, for example, third parties that could be expected to benefit from a nurse retention program implemented at one HCO are the individual nurses who work at the organization, or an employer by whom a nurse or group of nurses might become employed in the future. Patients and society at large also might be expected to benefit by having nurses who are experienced and/or familiar with organizational policies and practices care for them .
Other issues to be considered when conducting a benefit-cost analysis include the discount rate selected for use in calculations and the many ramifications of a particular decision. Commonly, the discount rate selected reflects the foregone earnings of alternate investments (Folland et al., 2006). Steps also can be taken to avoid counting some costs as benefits, or double-counting certain benefits (Folland et al.). For example, it is easy to envision that the implementation of certain strategies will retain nurses, yet it is also easy to fail to consider the wages and benefits paid to nurses who are retained, which can be expected to escalate in the future. An examination of the costs of nurse retention, similarly, should account for the amount nursing wages would need to increase in order to reduce turnover. Even if costs and benefits can be quantified in monetary terms, policy makers may choose to bring in other more subjective criteria to aid in decision making (Folland et al.). For example, if a HCO needs to focus retention activities on specific groups such as Hispanic and/or male nurses, projects that appeal to these groups may be weighed more heavily than other program choices.
Because of the inherent difficulty in estimating costs and benefits, cost-effectiveness analysis (CEA) is an alternate cost analysis process which examines costs relative to qualitative benefits. CEA is a more modest approach that assumes the benefits of a program are desirable, yet assigning a dollar amount on those benefits is impossible or undesirable (Folland et al., 2006). The advantage of this approach is that while, for example, the costs of a retention program must still be determined, the benefits may be quantified in terms of a more qualitative outcome, such as quality of work life or nurse satisfaction. This then allows one to estimate retention program costs per quality of work life, or retention program costs per level of nurse satisfaction. As is done in a benefit-cost analysis, a program is considered based on its cost per benefit (or outcome), relative to all program options being considered.
Should the challenges associated with quantifying the costs and benefits of nurse turnover and retention deter us from attempting such activities? Obviously not. However, knowledge of the challenges such an activity presents should be acknowledged at the outset. In addition, steps should be taken to quantify as many of the costs and benefits as accurately as possible, to acknowledge costs and/or benefits that are estimated and the costs and benefits that are impossible to quantify, and to recognize any estimations or omissions likely contribute to an over- or under-calculation of certain costs and benefits.
Should the challenges associated with quantifying the costs and benefits of nurse turnover and retention deter us from attempting such activities? Another caveat specific to calculating the costs and benefits of nurse turnover or retention is that all nurse turnover is not equal (Sullivan, 2007). However, most studies of nurse turnover costs assume that it is. For example, the turnover of one nurse may be welcomed and may actually bring about gains in productivity and performance, while the turnover of another nurse may reflect a significant loss to the organization that is above the amount, that general nurse turnover cost estimates might suggest. In the second case, the departing nurses' human capital is likely high in that he or she has requisite education, experience, expertise, knowledge, and/or skills that are essential to the HCOs performance and productivity. In other words, this nurse and his or her human capital are organizational assets.
Finally, the costs of internal nurse turnover (i.e., nurses who take another job or position within the organization) and external nurse turnover (nurses who leave the organization altogether) may not be the same; yet they are largely undistinguished in nurse turnover cost studies. When a nurse takes another job or position within a HCO, it suggests that advancement opportunities are available for nurses within the organization and perhaps reflects a benefit to both the individual and organization; internal turnover will create other vacancies within the organization unless positions are eliminated. We know very little about the costs and benefits of internal turnover for a HCO.
For these reasons, nursing and health care leaders must consider additional aspects of nurse turnover and retention that are not typically captured in most cost estimates. Considering organizational gains and losses associated with nurse turnover and retention from a variety of perspectives will result in more informed decision making, and will better position the HCO to address aspects of nurse turnover and retention beyond those that are typically included in general cost estimates.
Call to Arms: Building a Business Case for Nurse Retention
A business case provides information about the worth of a project or investment, based on a systematic process of project valuation (Finkler, Kovner, & Jones, 2007). In the case of nurse retention, a business case needs established by examining financial indicators, such as rates of return on nurse retention investments; break-even points, (i.e., the points in time when the expenses equal the revenues gained from retaining nurses); and calculations of the cost-benefit or cost-effectiveness of retaining nurses (Jones, 2005). However, a successful business case for nurse retention cannot be based solely on financial markers. It must also recognize that retention is not a short-term problem, but like quality, an enduring concern within health care that needs to be continually updated and evaluated as the demands of the health care industry and society change. It is important that relevant data are gathered pertaining to the costs and benefits of all parties involved in nurse retention so that innovative strategies can be developed, changed, and implemented. More importantly, ...HCOs must make their business case and financial analyses available to other HCOs... HCOs must make their business case and financial analyses available to other HCOs and the field so that the industry, in general, can learn from and advance our knowledge concerning nurse retention.
Two fairly high-profile articles have reported business cases in the health care literature that can aid in the development of a business case for nurse retention. The first by Leatherman and colleagues (2003) examined the business case of four specific, health care-related programs and offered the following conclusions: (a) our health care system does not reward quality, yet it incurs the costs of defects; (b) consumers have difficulty distinguishing quality and determining value; (c) returns may not accrue immediately, but rather may accrue well into the future; (d) returns may not accrue to the party making the investment; (e) our third-party-payment system disconnects consumers from the services they receive, and, in turn, the costs they incur and how they make decisions about services received; and (f) there is information inequity between consumers and clinicians (and HCOs). Leatherman and colleagues determined that the costs and benefits of any health care investment can accrue to different groups: the organization making the investment, the care providers, the purchaser or employer, individual patients, and society. It is possible, however, that the majority of the benefits of an investment may not accrue to the entity making the investment.
The second business case reported recently was by Needleman and colleagues (2006), who determined that there was an unequivocal business case for increasing the proportion of RN staffing if the overall number of hours of care provided did not increase. Interestingly, these authors recognize that their estimates of staffing benefits and costs are conservative because they did not include the cost savings of reducing nurse turnover that would result from improved nurse staffing.
These points made by the business cases described above are particularly poignant when considered relative to nurse turnover and retention. Although many HCOs and health care leaders today acknowledge the importance of nurse retention and are investing in nurse retention programs, we still have a long way to go. That is, many HCOs still make an organizational decision to incur the costs of nurse turnover rather than incur the costs of implementing nurse retention programs, when they do nothing to prevent nurse turnover. Additionally, ...consumers are largely unaware of nurse turnover within organizations and...cannot take this information into account when they are making decisions about where to receive care.consumers are largely unaware of nurse turnover within organizations and, in turn, cannot take this information into account when they are making decisions about where to receive care. Because the benefits of nurse retention (or turnover) may not always accrue until sometime in the future, health care leaders and consumers may either fail to consider these costs and benefits, or they may assume that the benefits and costs simply do not exist. Finally, the benefits and costs of nurse turnover and retention may accrue beyond the organization which made the investment decision to patients, nurses, and/or society. In this way, the costs and benefits of nurse turnover and retention have potentially far-reaching effects on quality of care, societal well-being, and the health of our health care system all of which are well beyond a particular organizational entity making an investment decision.
Do Nurse Turnover and Retention Contribute to the Value of Nursing?
Nurse turnover and retention costs and benefits may affect organizational initiatives, as suggested by Needleman et al. (2006) who noted that nurse turnover and its associated costs could be reduced by increased nurse staffing. Conceptualized in such a way, one can argue that nurse turnover and retention are elements of a larger phenomenon, namely the value of nursing.
Patterson (1992) identified three levels of purchasers that are relevant in determining the economic value of nursing: the patient and family, the institutions or agencies that provide nursing care, and businesses that purchase health care for their employees. Because her approach focused specifically on the economic value of nursing from the perspective of those who purchase nursing care, insurers and payers are omitted. Patterson viewed groups such as insurers and payers as intermediary purchasers of nursing care, or one step removed from the actual purchase of nursing care. This approach is in contrast to the elements involved in the development of a business case identified by Leatherman et al. (2003) and Needleman et al. (2006), primarily because the perspective in the development of a business case is the entity (e.g., the health care organization) making the initial investment in a program, versus the entity actually purchasing a service. Although this fact complicates the interpretation of a business case and the investment decision, the entities to which costs and benefits accrue should be considered. It may be that, for example, a health care organization would be willing to invest in a nursing retention program if adequate benefits accrued to society (i.e., improved quality of care and lower costs), even if the program cost more than the expected benefits to the organization. The organization could justify the decision if it expects to be perceived favorably by the community because of its contributions to improving the welfare of citizens.
Any efforts to value nursing that do not take into account the costs and benefits of nurse turnover and retention must be interpreted with caution. Having said that, however, the short comings identified in this paper should not be taken lightly. Determining the economic value of nursing requires that all possible costs and benefits associated with nursing and nursing care, including the costs of nurse turnover and retention, are quantified for patients and their families, institutions and organizations, and corporations who purchase nursing care. It also requires that limitations of the cost and benefit included in the valuation are acknowledged.
Given the widely recognized nursing shortage and the sheer numbers of nurses that are projected to be needed in the future, discussions of the costs and benefits of turnover and retention are generally focused on staff nurses and rightly so. We would be remiss, however, not to point out that similar issues exist for nurses in all types of positions. Although there may be fewer nurses in other types of positions, and the aggregate costs (and benefits) for these types may not be as great as those for staff nurses, these costs and benefits contribute to our health care system in ways that are not generally recognized.
One such position, which has received recent emphasis by the American Organization of Nurse Executives (AONE), is that of the nurse manager. Quantifying the costs of nurse faculty turnover (or retention) may be difficult, but it would be no surprise if the aggregate costs of nurse faculty turnover and vacancies were substantial. The AONE nurse manager orientation, institute, and fellowship programs (AONE, 2005) suggest that turnover and retention of this group of nurses is of concern, and that associated costs and benefits are important. We know that nurse managers provide an important leadership role and that nurse managers are closely linked to nurse satisfaction and retention (Bratt, Broome, Kelber, & Lostocco, 2000; Kleinman, 2004; Leveck & Jones, 1996). As a result, the costs of nurse manager turnover (or retention) might be more than one might estimate on the surface. The same argument can be made for chief nursing officers, who provide a pivotal leadership role both for nurses and health care organizations at large.
Finally, the largely overlooked position of nursing faculty is now being recognized in the public media and in the nursing and health care literature as a critical barrier to increasing the pipeline of nurses. We know so very little about turnover and retention in this group, or the associated costs and benefits. Here again, this may be a case where the effects of turnover and retention have far-reaching societal effects, ranging from the future supply of nurses, to the quality of our future nursing workforce, to patients' ability to access nursing care, to health care organizations' pool of nurses from which to recruit and staff to meet patient care needs, to corporations' ability to provide care to their employees. These far reaching effects are rarely considered, but knowledge of the costs and benefits of nurse faculty turnover and retention are extremely important. Quantifying the costs of nurse faculty turnover (or retention) may be difficult, but it would be no surprise if the aggregate costs of nurse faculty turnover and vacancies were substantial.
Future efforts are needed to quantify the costs and benefits of nurse turnover and retention across different types of nurses, so as to determine the societal effects of nurse turnover and retention. Efforts are also needed to determine the mechanisms through which nurse turnover and retention contribute to the overall value of nursing. Unfortunately, none of these efforts will be easy. They will require discipline and the systematic development of related knowledge that contributes to these economic valuations.
Given that we have some knowledge of nurse turnover costs, one might think that a next step would be the quantification of turnover benefits. However, in the bigger picture, one has to ask about the economic value of such an activity. In other words, is it critical to quantify nurse turnover benefits in a constrained nurse labor market, when organizations are not promoting nurse turnover but rather nurse retention? This is not to say that determining the benefits of nurse turnover is not an important activity. In fact, in the long-run, this activity is necessary to conduct a benefit-cost analysis of nurse turnover.
A more immediate need, however, is the quantification of nurse retention costs and benefits. These efforts should include human capital and productivity costs and benefits that relate to retention. The determination of nurse retention costs and benefits is necessary to calculate a benefit-cost analysis of nurse retention. More importantly, though, it is a necessary step in the development of a business case for nurse retention, an initiative that would highlight organizational returns on nurse retention investments.
The most challenging task of all will be determining the economic value of nursing. Only by determining the economic value of nursing to patients, health care organizations, and/or corporations, will the profession be able to capitalize on its contribution to health care quality and the overall health and well-being of society. However, this is an exercise that would view nurses as important assets in health care delivery, taking them out of their relative obscurity in the health care economic equation, obscurity resulting from the practice of including nursing services in patient room charges, rather than charging separately and treating nurses as an income source. Determining the economic value of nursing requires consideration of market prices, rates of return for various nursing investments, nursings contributions to cost savings or profits, and opportunity costs (Patterson, 1992). Findings from studies such as the one by Needleman and colleagues on nurse staffing, and those studies cited earlier in this article that considered nurse turnover costs can help us understand how the various economic aspects of nursing contribute to the overall value of nursing. Only by determining the economic value of nursing to patients, health care organizations, and/or corporations, will the profession be able to capitalize on its contribution to health care quality and the overall health and well-being of society. Fortunately, given the growing prevalence of the pay-for-performance movement, time may finally be on our side for making this important determination.
Cheryl Bland Jones, RN, PhD, FAAN
Cheryl Bland Jones is an Associate Professor in the School of Nursing, and an Investigator at the Southeast Regional Health Workforce Center at the University of North Carolina at Chapel Hill. Cheryl has devoted her career to understanding nursing workforce issues so as to improve the nursing work environment, nurse executive practice, and the cost and quality of care. One of her important contributions has been the development, testing, and refinement of a model to measure nursing turnover costs. This work is cited frequently and has caught the attention of the media, practicing nurses, health care administrators, interdisciplinary researchers, and policymakers. Dr. Jones also serves on national research review and expert panels, and has consulted with health care organizations, professional groups, and the federal government on matters related to health care delivery and the health care workforce. Dr. Jones has taught health economics, policy, administration and management at the undergraduate and graduate levels, and she is a co-author with Steven Finkler and Christine Kovner of the recently published 3rd edition of Financial Management for Nurse Managers and Executives.
Michael Gates, RN, PhD
Michael Gates has a doctorate in nursing from the University of North Carolina-Chapel Hill. He began his nursing career at the University of Tennessee in Memphis after two years as a research assistant with the health policy group at the Urban Institute in Washington, D.C. and after receiving his B.S. in applied mathematics/economics from Brown University. He is currently an Assistant Professor in the Hahn School of Nursing and Health Sciences at the University of San Diego. His teaching responsibilities include serving as lead faculty for the following courses: Healthcare Finance, Health Information Management, Health Policy and Contemporary Health Issues, and Medical-Surgical Nursing. His research interests include diversity, technology, and the nursing workforce. He is particularly interested in the link between the health care workforce and outcomes of care, as well as making technology work effectively and efficiently in research and clinical arenas. His current work examines nurse labor market behaviors, migration, and employment trends.
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© 2007 OJIN: The Online Journal of Issues in Nursing
Article published September 30, 2007
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