Once again, hospitals are in the throes of a national nurse shortage. But unlike previous such crises, which hit every decade or so, this one has a decidedly ominous twist.
The current shortage is less easily addressed than previous undersupplies, experts say, because hospitals are financially weaker than they've been in years. Hospitals also reduced their reliance on registered nurses after the last shortage in the mid-1980s, and have few places left to cut.
More significantly, hospitals perceive that the situation will worsen because of a steady decline in nursing school enrollment and predictions of growing demand for nursing services (See chart, p. 44). Even a rise in the national unemployment rate is unlikely to reduce the problem, experts say.
"We have seen this go in cycles before, but conventional wisdom is that this isn't going to get better anytime soon," says consultant Jean Galovich of William M. Mercer, a New York-based human resources consulting firm.
Hospitals are declaring a code blue. In November, the American Organization of Nurse Executives (AONE), a subsidiary of the American Hospital Association, issued a report predicting a "different kind of shortage" that will hit nursing by the year 2010.
The report, titled Perspectives on the Nursing Shortage: A Blueprint for Action, says the shortage will be demographic in nature, driven by a reduction in the nursing workforce just as demand for nurses increases as the population grows and ages. Among other remedies, the report calls for increased state and federal support of nursing education programs, clinical training programs and tuition assistance.
"One of the things we are focusing on is getting federal support for education," says AONE Executive Director Pamela Thompson.
Cutting services. Meanwhile, the shortage is forcing many hospitals to curtail services just as demand is booming.
At Johns Hopkins Hospital in Baltimore, six out of 228 surgical beds were idle last month, forcing some patients at the prestigious medical center to delay elective surgeries or go to other hospitals. The hospital can't attract enough nurses to fully staff its operations even though it pays the top salaries in the market and has dramatically increased its use of more-expensive temporary staffing services, says Karen Haller, the hospital's vice president of nursing and patient-care services.
During the last shortage in the 1980s, Johns Hopkins avoided closing beds by supplementing registered nurses with nurse's aides and technicians. But this time around, the number of registered nurses cannot be reduced without compromising care, Haller says.
"Anytime you shut a bed, everyone pays attention, from the surgeons to the top finance people. Everyone is looking for solutions; they're just not easy to come by," she says.
Boston's Brigham and Women's Hospital closed 15 of its 650 beds for about eight weeks this past summer, in part because of the nursing shortage, according to Nancy Kruger, vice president of patient-care services.
"The nursing shortage in the local market is fairly pervasive," she says.
Brigham and Women's response to the crisis has been to bolster its nurse-retention efforts, pumping resources into professional development and nurse-mentoring programs, as well as bumping up pay scales for its nurses.
In Southern California, where the nursing shortage is one of the most acute in the country, the few unit closures to date may be just a hint of what is to come. "If we were to have a major flu outbreak, that could push us past what the system can absorb where you would see a lot of closures for lack of staff," says Claudia Rosenfeld of the Healthcare Association of Southern California.
Hospital managers say they have the greatest difficulty in filling nursing positions in key specialty areas, such as critical-care units, operating rooms and emergency rooms.
Blow to the bottom line. The situation is delivering another financial wallop to an industry already absorbing the shocks of Medicare spending controls, managed-care pressures and failed business strategies. And experts say the situation may not improve even if the economy slows down and employment levels decrease.
Higher nursing costs, particularly unexpected fees paid to temporary employment agencies, even have factored into credit downgrades. Rating agencies Moody's Investors Service and Fitch say the nursing shortage is a key reason why they don't expect a quick turnaround for the not-for-profit hospital sector, which is grappling with Medicare funding cuts under the Balanced Budget Act of 1997, losses from failed business strategies, managed-care pressures and higher payroll and drug costs.
Hospitals are competing with medical groups, insurers and dot-coms for a shrinking pool of qualified nurses, notes Dennis Farrell, an analyst in public finance at Moody's Investors Service. "Looking on the horizon, it appears (the shortage) is going to get worse because of a lack of interest in nursing and nursing services," Farrell says.
Nursing salaries are hospitals' largest expense, constituting approximately 20% of the budget. That line item has begun increasing as hospitals boost compensation and increase their use of temporary staffing agencies.
To put it in perspective, relief legislation for the Balanced Budget Act pending in Congress, which would deliver an additional $12 billion to hospital coffers between now and 2005, would not cover the 20% increases some hospitals are reporting for nursing costs.
"Virtually every dime (of relief money) would be used for salary increases that have been provided already," says Andrew Wigglesworth, president of the Delaware Valley Healthcare Council, which represents Philadelphia-area hospitals.
Paying the price. Regardless of which strategies hospitals pick for dealing with the nursing shortage, nothing comes without a price tag. Baptist Health, a four-hospital system in Jacksonville, Fla., is spending $4 million this year on a program that focuses largely on increasing pay for current nurses.
Hospitals are finding themselves in bidding wars to lure nurses to their staffs. Galovich and fellow Mercer consultant Colleen McMurray estimate that as many as two-thirds of hospitals offer signing bonuses for nurses, which can be as high as $8,000.
"We are seeing an increased use in supplemental pay programs," says Galovich. "Hospitals have had to resort to more cash-up-front kinds of solutions."
Other recruitment tactics include referral bonuses, increasing wage levels and, at the extreme, promising concierge services such as lawn care and house cleaning for nurses coming on board, according to Galovich and McMurray.
The industry also is relying more on temporary staffing agencies to supplement their nursing staff. Cross Country TravCorp, one of the nation's largest medical staffing companies, says it is trying to fill more than 14,000 open positions, mostly registered nurses in acute-care hospitals around the country, more than double the openings it had a year ago.
"Where we didn't have positions before we do now because of the demand, and we are finding that more nurses are willing to work with us as a result of that," says Brian Hekman, spokesman for Cross Country, a privately held company that reported projected revenues of $370 million for 2000, compared with $307 million in 1999 and $263 million in 1998.
In response to the growing demand for nurses, Cross Country began upping the ante this fall, offering "a much more comprehensive benefit package" and higher pay to recruit nurses to a work life that typically involves traveling to a hospital in another city and working 13-week stints.
The hospital industry has a love-hate relationship with the agencies. Many providers speak of developing their own internal agencies or flexible staffing pools to wean themselves from dependency on the outside firms.
Baptist created a flexible staffing pool at the end of September to attract nurses seeking greater flexibility in their work schedules and to reduce the system's reliance on temporary agency nurses.
In addition to swallowing higher costs for bringing in agency nurses, several hospital executives say those nurses bring a quality risk simply because they are not as familiar with the particular hospital setting as their own staff nurses.
Finding solutions. State and regional efforts are under way to find long-term and short-term solutions.
In November, Maryland hospitals asked the state's rate-setting commission for a 2.5% increase, retroactive to July 1, to meet higher nursing costs. Maryland is the only state where hospital fees are regulated.
In Maryland, hospitals' overall nursing costs increased by nearly 12% in fiscal 2000, ended June 30, and are expected to increase another 10% in the current fiscal year, according to the Association of Maryland Hospitals.
"Hospitals currently estimate that it costs between $30,000 and $50,000 to fill each nursing vacancy," says Catherine Crowley, an assistant vice president who heads the association's nursing efforts. "These findings will inevitably push costs associated with the nursing shortage still higher since for each day a hospital can't fill a nursing vacancy it requires additional expenditures for overtime or to contract with an agency nurse," she says.
At the hospital association's urging, the state's General Assembly created the Maryland Commission on the Crisis in Nursing earlier this year to find ways to address the shortage.
"I think the challenge is to try to stem the bleeding while you are trying to take the longer view," says Mercer consultant Galovich.
Hospitals face the challenge of recruiting and retaining nurses for their immediate needs, while at the same time participating in a collective effort to increase the supply of nurses in the next decade.
In Georgia, where the hospital association reported a statewide registered nurse vacancy rate of 13% as of the end of 1999, the Georgia Hospital Association has requested more state money for nursing tuition and higher Medicaid reimbursements.
Galovich said one of the most effective long-term nurse recruitment strategies for her hospital clients is having relationships with local schools of nursing.
In San Diego, six hospital systems have agreed to spend $70,000 annually for three years to expand nursing enrollment at San Diego State University. In the same market, five hospitals have worked with California State University, Los Angeles, to create a program that certifies registered nurses for critical-care work in just two months.
Edward O'Neil, co-author of an upcoming study on the nursing workforce in California, says the real problem is that hospitals have become a lousy place to work, because of higher acuity and shorter lengths of stay. He says the nursing profession needs to take the lead in developing creative solutions, such as designating some nurses as supervisors of teams that include less-skilled workers.
"For 20 years we've had a model of practice that looked at the nurse as the direct deliverer of healthcare services. That may be a very fulfilling model, but it may not be the best model for healthcare delivery or even patient outcomes," says O'Neil, a professor at the Center for Health Professions at the University of California-San Francisco.
O'Neil adds that it might help attract young people to the profession if media images of nurses weren't limited to being "on strike or laid off or involved in a mercy killing."
"There are so many different aspects (to this shortage) that we can't look for just one answer," says the AONE's Thompson.