Financial Management for Nurse Managers
Published: 07 January 2018
Published: 07 January 2018
Whilst the benefits of humanistic and commitment-based management are significant, it cannot be denied that having an understanding of finances and budgets is an important healthcare manager skill.
The Department of Education’s website, Job Outlook’s (n. d.) description of a nurse manager states they are responsible for overseeing resources such as nurses and finances. A nurse manager’s aim: to promote safety, facilitate cost-efficient care, and ‘monitor quality, clinical standards and professional development of nurses.’
(Job Outlook n.d.)
Iacocca (2017) claims that there are four forms of efficiency:
Technical efficiency is created when outputs (e.g. services) exceeds inputs (e.g. resources) (Iacocca, 2017). Production efficiency occurs when output costs are minimal, or outputs are increased for the same/given cost (Iacocca, 2017). Allocative efficiency means that input costs are limited and output benefits are increased; or like in production efficiency, outputs of maximum value are created from the same/given cost (Iacocca, 2017). Finally, opportunity cost and trade-off is generated from taking a successful risk at acquiring one benefit for the sacrifice of another benefit (Iacocca, 2017).
On a basic level, efficiency can be interpreted as being achieved when there are less inputs than outputs. This does not make it hard to see that this can, unfortunately, lead to issues such as insufficient staffing and over-working of nurses. Furthermore, this may lead to skills mix issues in which cheaper staff members are rostered onto shifts to save money instead of putting on more expensive staff members such as registered nurses.
These issues raise concerns that if managers are focused on short-term economics as opposed to long-term vision fulfilment or humanistic management, the organisation may have short-term profits but long-term crises. The suggested crises could involve, for example, the nursing staff feeling burnt-out, multiple staff resigning at once, and/or the fall of accountable cultures leading to dissatisfied stakeholders and limited client business.
Penner (2017) expresses that health professionals face great challenges regarding the provision of excellent care at reasonable costs.
The literature regarding efficiency (Iacocca, 2017) makes it clear that the best financial resource a nurse manager can have is a high quality nurse. Evidently, a competent and productive nurse appears to be more cost-efficient than an incompetent, procrastinating one. Likewise, it can be predicted that a nursing team that works collaboratively may be more efficient than a team that is dysfunctional and non-collaborative.
Furthermore, from the literature in this article, it would be believed that it is cost-efficient to recruit nursing graduates and staff members that: have excellent performance evidence; desire to be future leaders; and, express commitment to staying with the organisation and specific workplace that they are applying to work with.
Titzer et al. (2014) highlight the importance of nurse managers also having effective succession planning in place. They convey that succession planning is lacking in nursing, despite there being clear benefits for this practice. Resources (such as financial) must be allocated to develop a pipeline of future nursing leaders and ‘develop internal human capital’ (2014). This human capital may decrease management turnover rates and replacement costs, thus improving the financial management of the workplace.
Iacocca (2017) states that in the United States, for example, healthcare is expected to become the key employment sector by 2024. The ageing population and retirement of health professionals can be linked to healthcare industry expectations for growth (Iacocca, 2017). As nurses are the key employees of the health sectors in the US (Iacocca 2017) and Australia (AIHW 2017), it is clear to see that nursing is highly influential upon costs and savings of healthcare. Therefore, this also exemplifies that nurse managers must treat nurses as their most valuable human resource. This can involve applying a humanistic management style to improve the commitment, productivity, quality of care, and job satisfaction of nurses.
It can also be considered that continuous professional development is worthy of resources. This is due to the trade-off that staff nurses may increase their cost-efficiency (e.g. better clinical decision-making, fewer errors, improved collaboration, and skill mastery leading to time-efficiency). The AIHW, (2017) reports the following in relation to Australian nurses: ‘305,000 were employed in nursing or midwifery, working an average of 33.5 hours per week.’ It can be imagined that further developing the nursing workforce could dramatically increase cost-efficiency.
Cosgrove et al. (2012) report that ‘At Intermountain, an evidence-based approach to labour and delivery resulted in $50 million in savings and a twenty-six-percentage-point drop in inappropriate elective inductions of labour since 2001’. Cosgrove et al. (2012) also state that shared decision making can improve cost-efficiency via, for example, reducing hospital length-of-stay, improved communication and nursing productivity.
It is also essential to look at the potential trade-off of implementing innovations. In ten years the Connected Cardiac Care Program saved $10 million and dropped hospital readmissions for clients with heart failure by 51% (Cosgrove et al. 2012). Finally, Cosgrove et al. (2012) acknowledge that cost-efficiency stems from delivering care that matches the needs of the community, and the individual client.
Madeline Gilkes focused the research project for her master's of healthcare leadership on health coaching for long-term weight loss in obese adults. Madeline is also a qualified weight management practitioner and Registered Nurse. Her vision is to prevent lifestyle diseases, obesogenic environments, dementia, and metabolic syndrome. She has a master of healthcare leadership, a graduate certificate in aged care, and a bachelor of nursing. Madeline works as an academic and has spent the past years in the role of clinical facilitator and clinical nurse specialist (gerontology & education). She is due to complete her Graduate Certificate in Adult and Vocational Education at CSU before November 2018. See Educator Profile