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Demystifying finance in perioperative nursing By Nadine Rosenthal, DNP, RN, CCRN, NEA-BC and Deborah Stilgenbauer, MA, RN, NEA-BC

Tcare environment, it is now necessary to conduct rolling budget reviews. Nurse leaders need to address unexpected changes, such as patient volume, acuity changes, and new technology requirements.1

Increased emphasis on efficiency and effective-ness in recent years has led to greater interest in evaluating the nursing workload of patient care and resource allocation.2 Prediction and justifica-tion of perioperative nurse staffing requirements, along with equipment and supply allocation to accurately provide sufficient patient care, are challenges. Given the evolving body of academic literature tying patient outcomes to specific nurs-ing variables (for example, ratios, education, and experience), ORs and postanesthesia care units (PACUs) are tasked with balancing ideal invest-ments in care quality with current nurse labor and supply constraints.3

As a large workforce, nurses make up the high-est labor costs, and therefore, a large proportion of the hospital’s budget.3 When staff and manag-ers request more nursing capacity and additional supplies and equipment, they must be able to document and articulate the underlying increase in total nursing care workload as well as the added value and return on investment. OR nurses, PACU nurses, and nurse leaders need to understand patient needs, financial incen-tives, regulatory requirements, quality manage-ment, patient flow, census, and fluctuations to build sound budgets and effectively manage labor costs. In other words, perioperative nurse managers must learn how to speak the language of finance.

Throughout the United States, perioperative nurses and nurse leaders are being asked to pro-vide more and better care with fewer resources. Building an annual budget with periodic moni-toring is no longer sufficient. In today’s health-

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What is a budget? The annual budget is a plan for procuring and allocat-ing resources for the following year based on known and unknown factors. These factors or key metrics vary by department. There are several models for budget development, including zero-based budgeting, incremental budgeting, and forecasting budgeting. Zero-based budgets are built each year; everything in the budget is carefully reviewed for the value it con-tributes. Incremental budgeting assumes a percentage increase across the board for the coming year.

Forecasting budget planning focuses on the future and is built on expectation of revenues and volume. The projections can be based on historical or nonhis-torical data (for example, a new surgeon joining or leaving the hospital staff).4

Organizations can either use one model for cre-ating a budget or a combination of elements from several models. No matter which method is used, the consideration of key metrics is essential. Key indicators used by perioperative services for bud-get development include volume and case type, turnaround time, first case start times, case duration accuracy, and physician scheduling preferences.

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Clear understanding of workload analysis, season-ality, and quantitative data must be considered to create and manage the perioperative budget.5

There are three types of budgets: salary, supply, and capital. Typically, the salary budget has the high-est dollar value; however, in perioperative services, supplies and equipment are very important as well. Capital budgets are dollars set aside for major equip-ment maintenance/replacement, major equipment purchases, or upgrades. Surgeons must have the necessary materials to perform procedures. In addi-tion, hospitals must keep pace with innovation and provide state-of-the-art equipment to match surgical innovation.

Once a budget is developed and approved, the hard work begins. Managing productivity, salaries, and supply expenses requires consistent monitoring. Nurse leaders need reports that provide real-time data. There are two barriers nurse leaders face when trying to successfully manage expenses and justify

variances: delays in receiving the finance reports and tracking metrics.

Barriers The first barrier is the delay in receiving reports. Normally, reports related to expenses are distrib-uted 10 to 14 days after the end of the month. This delay gives the finance department an oppor-tunity to be sure all expenditures are accounted for in the expense reports. Although this delay works in favor of the finance department, it can be a detriment for nurse leaders who need to justify unfavorable variances 4 to 6 weeks later. The delay requires nurse leaders to recreate (weeks later) why there was a need for overtime, per diem hours, or to use expensive equipment.

The second barrier is nurse leaders identifying and collecting the necessary metrics to support any additional expenses. Nurse leaders need to be able to review metrics that affect salary expense either March OR Nurse 2015 11

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weekly or biweekly. Important metrics that influ-ence salary expense include the following: produc-tive and nonproductive hours; vacancy rates and volume; late start times; prolonged room turn-around times; underutilization of OR time; and availability of PACU and inpatient beds.

Staffing plan Developing a staffing plan that starts with creating a balanced schedule/appropriate scheduling of ben-efit time or paid time off throughout the year is a basic tool for operationalizing budgeted full-time equivalents. Reviewing on-call schedules and flexing staff schedules to reduce the number of on-call hours can result in potential cost savings. Vacancies and sick calls may appear to be uncontrollable fac-tors; however, active recruiting to fill vacancies and monitoring staff adherence to time and attendance polices can minimize their effect.6

Volume, off-hour surgeries, same-day cancella-tions, delays, and holding patients in PACUs will also have an effect on salary expense. Nurse leaders need to develop a system or “dashboard” to track these unexpected situations and be astute to the effect on expense. Investing time for nurse leaders to become familiar with the basics of Excel/financial software will facilitate tracking and monitoring of hours or supply costs. In addition, clerical staff can be taught to use Excel/financial software and sup-port the nurse leader in information gathering.7

Most automated scheduling programs provide reports that can be useful for weekly or biweekly-monitoring. Productive and nonproductive hours, overtime, agency utilization, sick time, and leaves of absences are some of the metrics to review. Frequent monitoring enables the nurse leader to identify trends and notice when further investiga-tion is required. Developing and monitoring pro-ductivity measures are crucial and can be used to explain variances (for example, cost per case and PACU overnight stays).

Being ahead of the monthly finance reports is key to justifying unfavorable variances. In the absence of an automated scheduling system, leaders need to develop a method or system of collecting information that supports their ability to under-stand and explain variances. Nurse leaders need to understand that ongoing tracking and monitoring of expenses are essential elements of staying on bud-get or justifying expense. Learning how to articulate

reasons for unfavorable variances, as well as taking the time to track activity that causes the variance, are both important skills to develop. Finally, engag-ing staff through education and providing financial updates at staff meetings help cultivate a sense of partnership and awareness.

The relationship between the nursing and finance departments is essential. Building this relationship starts with an acknowledgement of mutual goals and targets followed by strategies and timelines to achieve these goals and targets. In order to understand each other’s point of view, work needs to occur on both sides.

Translating conditions Nurse leaders need to learn and be comfortable with the terms the finance department uses in order to cal-culate and make decisions. In addition, nurse leaders have to be able to translate their clinical and opera-tional conditions into data and words that the finance department can use, such as OR volume (number of cases), first case on time start (within 5 minutes), OR room turnaround time, PACU length of stay, PACU overnight stays, and cost per case. Similarly, estimated growth or decrease in volume associated with the introduction of new equipment and technology, throughput (movement of patients through the hospi-tal continuum) associated with renovations or sched-uling, and the effect of patient satisfaction scores are other indicators nurse leaders need to include in their conversations with the finance department.

The finance department, on the other hand, has to see and feel the impact of patient acuity and throughput and understand how their decisions affect the patient and efficiency of the depart-ment. Monthly meetings with nursing to review vari-ances, opportunities for improvement (for example, reduction in flow barriers), and supply standardiza-tion are important. It is crucial to have open dialogue and be transparent around current needs, deficien-cies, and how that impacts performance. An approach that has worked is joint department leader rounding.8 Leader rounding builds relationships and connects teams to purposeful and worthwhile work. Rounding provides time not only to build relation-ships, assess unit needs, and acknowledge accom-plishments, but also to identify and remove barriers.

A picture is worth a thousand words. For exam-ple, when the finance department wants to under-stand why nursing overtime is so high, finance department leaders should be taken on a tour of the

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overcrowded PACU late in the afternoon and first thing in the morning to show overnight patients and the overcrowded admitting intake area. It should be described to finance leaders how this impacts and delays cases for the morning. Finance leaders need to see the impact of acuity and need to be made aware that critically ill patients, who are waiting for a bed in the ICU, are being monitored in the PACU on mechanical ventilation, invasive hemodynamic monitoring, and are receiving multiple vasopressor drips. Nurse leaders need to meet with finance lead-ers monthly to review and discuss details that are important and affect both departments.

Partnering with finance Healthcare reform, value-based purchasing, and market share are external forces that incentivize hospitals to increase quality and reduce spending. Nurse leaders are the linchpin to affecting both qual-ity and expense. Monitoring quality metrics has been

a focus for nursing for many years. Nurses and nurse leaders are able to articulate clinical findings and quantify the rates and trends for clinical outcomes. Now is the time for nurse leaders to be able to articulate conditions and metrics that have financial implications. In the past, nurse leaders have had to be self-taught, learning from experience about fac-tors that affected financial performance.

Today, courses in finance are part of the curricu-lum in graduate programs. How does a new leader take the basics learned and apply that information to budget development and ongoing monitoring? Nurse leaders need to be able to track metrics and quantify them (volume, delays, turnaround time, and PACU overnights). Over time, a baseline and trends will emerge. Once nurse leaders identify a baseline, it becomes apparent when the metric exceeds or falls below the norm. Depending upon the metric and the relationship with the baseline, staffing plans can be adjusted. Metrics can be used to validate the need March OR Nurse 2015 13

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for additional staffing and approval of overtime, per diem, or supplemental staff.

Conversely, flexing schedules and approving additional nonproductive time can offset decreases in workload. Approving additional benefit time during decreased workload periods support budget management because staff utilize benefit time when it is advantageous to the hospital, thus, decreasing accrued time to be taken at a later date during peak vacation and high volume periods. Managing vacancy rates can also be an effective strategy, especially if there are seasonality fluctua-tions in volume and case type. OR


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Nadine Rosenthal is the director of nursing, Medicine Services, and Deborah Stilgenbauer is the director of nursing, Finance, at New York-Presbyterian/Weill Cornell Medical Center, New York, N.Y.

The authors have disclosed the following financial relationships: Dr. Nadine Rosenthal is a legal nurse consultant with Wolpe Leibowitz Alvarez and Fernandez LLP.

The authors would like to acknowledge: Beryl Muniz, RN, MAS, Vice President, Perioperative Services, New York-Presbyterian/Weill Cornell Medical Center, New York, N.Y. and Suzanne M. Boyle, RN, DNSc Vice President, Patient Care Services/Nursing New York-Presbyterian/Weill Cornell Medical Center, New York, N.Y.


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