What Are Non-productive Costs In Nursing

KPMG Releases 2011 U.S. Hospital Labor Costs Study

KPMG LLP recently conducted a study that explores how hospital executives view their use of full-time and supplemental labor in the current economy.  The study addresses hospitals' views on quality of patient care, direct employee labor costs, and temporary nurse usage.  KPMG's 2011 U.S. Hospital Nursing Labor Costs Study, which is based on a survey of 120 senior hospital executives throughout , provides labor cost benchmarks useful in labor model analysis.  

The National Association of Travel Healthcare Organizations (NATHO) believes this survey discusses important issues and will help hospitals better understand the all-in cost of their permanent RNs as well as the benefits of utilizing temporary travel RNs to augment their staff.  NATHO is a non-profit association of travel healthcare staffing organizations founded in 2008 to create and enforce standards of practice, ethics, and dispute resolution.

"The study offers an unbiased view of the comprehensive costs associated with full-time, direct care nurses and the financial impact of utilizing direct care staff to manage a hospital's fluctuating demand for clinicians," said , NATHO President.  "Findings are drawn from the responses of those at the heart of the industry, offering valuable insight on current trends and future opportunities.  The study also seems to confirm what many of our members have said all along that the cost of a permanent RN isn't that different than the cost of a travel nurse."  

Labor Cost for a Full-Time Registered Nurse

According to the survey, the all-in cost of a full-time direct care hospital registered nurse (RN) is on average /hour). Fully-loaded payroll, which includes base wages, employer taxes and paid time off represents 76-78% of the total cost of the RN labor force at facilities.  The balance comes from non-productivity costs (12-13%), insurance costs (8-9%), recruiting costs (1-2%), and other costs (1%).  In other words, the actual cost per hour for a full time nurse is on average 176% of their base hourly wage. These are important factors in evaluating whether to add staff, increase overtime or use contingent nurses to meet patient needs.

KPMG: High cost could reduce full-time RN staff

These data are "important because many healthcare executives distill their decision criteria down to a simple comparison of hourly wages without contemplating the total cost of employment,” said Ralph Henderson , president of the nurse and allied division of AMN Healthcare in San Diego. “Other studies have shown the quality and patient outcomes using contingent RNs are similar to those of full-time RNs. Now, this KPMG study shows cost to be comparable as well, which calls into question whether full-time hiring is the best way to staff-up as demand for healthcare services rebounds along with the economy.” Statistics indicated that the average base wage of a full-time RN is $56,000 per year, according to KPMG. That figure is slightly lower than the U.S. average estimated by the Bureau of Labor Statistics (BLS), at $67,000 per year. The firm noted that the difference might be attributable to older BLS data, margin of error, sample size or location and the length of work week used to calculate wages. On top of base wages—which made up 57 percent of the all-in cost—respondents said that other payroll costs, insurance costs , recruiting costs, non-productivity, and other costs made up the additional 43 percent of the total price of retaining an RN. On average, full-time direct care registered nurses worked 41 hours per week, according to the KPMG survey, however, hours fluctuated from week to week and from nurse to nurse. A total of 78 percent of respondents stated that overtime for nurses was between one and 10 hours per week, according to the firm, but on an average week nurses worked four overtime hours. Among the “hidden costs” of nursing labor, 93 percent of respondents believed that up to 20 hours of labor were “non-productive” hours for RNs. Time spent on training, education or personal internet use was considered to be “non-productive hours." The survey also reported that 65 percent of respondents currently make use of traveling or per diem nurses. Reasons included part-time employed staff, incentives to limit turnover and encourage working overtime, among other factors, according to the report. Of those surveyed, 41 percent stated they expected a future increase in the use of traveling or per diem nurses, while 59 percent expected no change at all. None of the respondents, however, expected a decrease in the use of traveling or per diem nurses.

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