This is an interesting study conducted in 2011…..

All-in hourly cost of full-time RN is 176% of base hourly wage and averages $98,000/year

June 8, 2011, Los Angeles, CA – As the economy begins to show signs of recovery and pressure returns on nurse wages, attrition, and labor availability, hospital executives face the challenge of managing labor costs and scarce clinical personnel while managing patient care.

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 the United States, provides labor cost benchmarks useful in labor model analysis. The KPMG study was commissioned by the National Association of Travel Healthcare Organizations (NATHO).

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 Mark Stagen, 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 $98,000/year ($45/hour), of which only $55,739 is base wages ($25.84/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.

“Hidden” Costs of Full-Time Nursing Labor

There are also significant additional “hidden” nursing labor costs, which are mainly the result of non-productive labor hours and associated opportunity costs, as well as attrition and time required to fill a permanent direct care RN position, the KPMG study reports. Non-productive labor hours on average represent 13% of total hours, according to respondents.

Optimum Staffing Levels and Quality Override Cost as Decision Factors

Two-thirds of the hospital executives responding to the survey say they are currently using travel or per diem nurses. The key reasons for using traveling nurses were supply and demand, and quality of these nurses. These appear to be even more important decision factors than cost. Some of the reasons given, which enable some hospitals not to use traveling staff, include the use of extra full-time staff, part-time employed staff, incentives to limit turnover and to encourage working overtime, as well as the current economic downturn leading to limited turnover. Many of these factors may be of a temporary nature, and increase costs and turnover over the long term. Respondents also stated that the ideal balance is 90% permanent staff and 10% supplemental labor.

About the Survey

The 2011 U.S. Hospital Nursing Labor Costs Study, conducted by KPMG LLP, looks at the current condition of United States hospital labor costs and explores issues that could shape a hospital’s labor strategy in the coming years. To see the entire survey, go to KPMG’s website by clicking here.