NURS 834 Week 2 Staffing and Budget Exercise on Efficiency and Patient Safety Example

Forty-Five FTEs, $3.9 Million and a Night Shift That Runs on Agency Nurses: A Staffing and Budget Exercise for a 32-Bed Medical-Surgical Unit

Introduction

Our hospital's 32-bed medical-surgical unit, which I will call 4 North, ran an average daily census of 28 patients last fiscal year, an occupancy of 87.5%. Its personnel costs ended the year $412,000 over budget, nearly all of it in overtime and agency nurses on night shift, while the unit's fall rate and severe hypoglycemia rate both rose. Our chief nursing officer wants to know whether the unit is understaffed, overstaffed or simply staffed inefficiently. This paper answers the three questions of the assignment by calculating the unit's staffing need, building and analyzing its personnel budget and proposing changes that improve efficiency and patient safety together.

Question 1: Determining Staffing

The Calculation

Staffing begins with demand. Waxman (2018) describes hours per patient day as the standard productivity measure for inpatient units: the total nursing hours worked divided by the number of patient days. The hospital has set 4 North's target at 8.0 combined hours of RN and assistant time for each patient day.

The productive FTEs are the people actually working; the nonproductive allowance covers paid time away, which must be budgeted or it reappears as overtime. On a typical day, 224 productive hours equal about nineteen twelve-hour shifts, or roughly six or seven RNs and three nursing assistants on each of the day and night shifts, with the charge nurse included in the count.

Acuity and Skill Mix

A single hours-per-patient-day target assumes that patients are similar from day to day, which they are not. 4 North receives many older adults with heart failure, pneumonia and diabetes, and a growing number of patients awaiting placement in skilled nursing facilities, whose needs are lower. An acuity system that scores each patient's care needs at the start of every shift would allow the charge nurse to adjust assignments within the same total hours, giving the nurse with a new insulin drip and a confused patient fewer patients than the nurse caring for stable patients awaiting discharge. The 70 to 30 split between registered nurses and nursing assistants reflects the unit's need for assessment, medication administration and patient teaching; shifting more hours to assistants would lower the budget but remove the clinical judgment that prevents falls and hypoglycemia from becoming emergencies.

Is the Unit Understaffed?

Last year 4 North employed 41.2 FTEs, 3.5 fewer than the calculation requires, and filled the gap with overtime and agency nurses. The positions were budgeted but vacant: the unit lost seven nurses during the year, five from night shift. The problem is therefore not the staffing target but the inability to fill it, which raises cost and, as the evidence below shows, risk.

Question 2: Building and Managing the Personnel Budget

The Budget

The budget follows the steps Waxman (2018) lays out for an operating budget: estimate volume, convert volume to staff, apply wage and benefit rates and then adjust for expected vacancies. The vacancy assumption reflects the hospital's recent history; budgeting as if every position will be filled overstates cost, while budgeting too much vacancy savings guarantees overtime.

Assumptions and Sensitivity

Each assumption moves the total. If census rises from 28 to 30, the unit needs about 3.2 more FTEs and roughly $300,000 more. A 3% wage increase adds about $100,000 in salaries and benefits. Reducing the vacancy assumption from 8% to 4%, which the recommendations below aim to make realistic, raises the budgeted cost by about $170,000 but should reduce overtime and agency spending by more. Presenting these sensitivities to the finance committee shows that the budget is a set of choices rather than a fixed number, and it lets leaders see which assumption carries the most risk. For 4 North, the vacancy assumption is the one that has proven least reliable.

The Variance

Last year's actual personnel cost was $4,313,586 against a budget of $3,901,586, an unfavorable variance of $412,000. Separating its causes is more useful than its size. Volume explained little: census was within 1% of budget. Wage rates explained some, because a mid-year market adjustment raised RN pay by 3%. The pattern by month made the cause clearer: overtime and agency hours spiked in the three months after each night-shift resignation and fell when a replacement finished orientation. Most of the variance was efficiency: 6,900 overtime hours at time and a half and 4,100 agency hours at roughly double the employed rate. Every vacant night position was effectively being filled at 1.5 to 2 times its budgeted cost. The unit was not over budget because it had too many nurses; it was over budget because it had too few of its own.

Question 3: Improving Efficiency and Patient Safety

What the Evidence Says About Staffing and Outcomes

Efficiency in nursing cannot be measured by labor cost alone, because workload affects outcomes that carry their own costs. Across 87 Illinois hospitals, a heavier medical-surgical workload of one more patient per nurse raised each patient's odds of dying within 30 days by about a sixth and of staying longer by a twentieth, and staffing at four patients per nurse was projected to save more than $117 million through shorter stays (Lasater et al., 2021). Pennsylvania data from 132 hospitals told the same story: heavier workloads went with greater odds of death, readmission and longer stays and with nurse burnout and intent to leave, and the authors projected that savings from better outcomes and retention would offset the cost of additional nurses (Muir et al., 2026). A Japanese study of 82 wards added that understaffing relative to a ward's own usual level, even for a single day or day shift, was associated with higher mortality and longer stays (Morioka et al., 2026). For 4 North, the implication is that vacancies filled late or not at all are not savings; they are deferred costs.

Recommendation 1: An Internal Float Pool

Replacing agency hours with an internal float pool of six RN FTEs, shared across three medical-surgical units, would cost about $675,000 a year in salary, differentials and benefits but eliminate roughly $520,000 in agency and premium overtime across the units and provide nurses familiar with the hospital's systems. The net cost of about $155,000 is offset by retention, since the Pennsylvania data link heavy workload to intent to leave (Muir et al., 2026), and every nurse retained avoids recruitment and orientation costs.

Recommendation 2: Self-Scheduling and a Night Retention Premium

Five of seven departures were from nights. A self-scheduling system and a modest night retention premium of $3 per hour for nurses who commit to six months of nights would cost about $95,000 a year across the unit's roughly 32,000 night RN hours and is intended to reduce turnover and overtime together.

Recommendation 3: An NP-Led Glycemic Team

Severe hypoglycemia rose on 4 North and across the hospital. Inpatient diabetes management teams are associated with shorter stays, fewer readmissions and less hypoglycemia, with resulting cost savings (Haque et al., 2021). A nurse practitioner-led glycemic team would reduce a high-risk source of rapid response calls and extended stays and would relieve bedside nurses of time spent managing unstable glucose. This recommendation becomes the practice initiative developed in the coming weeks.

Implementation and Stakeholders

None of these changes can be made by the unit alone. The float pool requires agreement among three nurse managers and the staffing office about how nurses are assigned and how their costs are allocated. The night premium requires human resources and finance approval and should be piloted on 4 North before it spreads. The glycemic team requires medical staff support, because nurse practitioners will be managing insulin orders on patients admitted by hospitalists. I plan to present the staffing and budget analysis first to the 4 North manager and staff, whose experience of short nights gives the numbers their meaning, and then to the chief nursing officer and the finance director with the sensitivity analysis attached. Including the bedside nurses early also addresses a common fear that efficiency means fewer staff; the proposal is explicitly about replacing expensive temporary labor with the unit's own nurses.

Measuring the Result

The unit will track hours per patient day, overtime and agency hours, vacancy and turnover rates, falls, severe hypoglycemia and length of stay monthly. Success means personnel cost within 2% of budget with agency hours below 1,000 a year, no increase in hours per patient day and stable or improved safety measures. Results will be reported to the unit's staff each month on the same board that displays falls and hypoglycemia, so that nurses see the link between staffing and outcomes that this paper argues for.

A Christian Perspective on Counting the Cost

Jesus asked who would build a tower without first sitting down to count the cost (English Standard Version Bible, 2001/2016, Luke 14:28). Budgeting is that kind of counting, and for a Christian nurse leader it is an act of stewardship over resources entrusted by the community the hospital serves. Stewardship also includes the nurses themselves: a budget that balances by overworking them is not faithful use of what has been entrusted. Counting the full cost, including the cost of harm and turnover, is how a leader honors both. It also requires honesty in the numbers themselves. A budget that hides a known vacancy problem behind optimistic assumptions may pass a committee meeting, but it misleads the people who rely on it and sets the unit's nurses up for another year of short nights.

Conclusion

4 North needs about 44.7 budgeted FTEs to meet its 8.0 hours per patient day target and has been operating with 3.5 fewer, paying for the gap through overtime and agency nurses that produced a $412,000 variance. Evidence links nurse workload to mortality, length of stay and turnover, so filling those positions with the unit's own nurses is both safer and, over time, cheaper. An internal float pool, night retention measures and an NP-led glycemic team address the variance and the safety problems together.

References

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Haque, W. Z., Demidowich, A. P., Sidhaye, A., Golden, S. H., & Zilbermint, M. (2021). The financial impact of an inpatient diabetes management service. Current Diabetes Reports, 21(2), Article 5. https://doi.org/10.1007/s11892-020-01374-0

Lasater, K. B., Aiken, L. H., Sloane, D., French, R., Martin, B., Alexander, M., & McHugh, M. D. (2021). Patient outcomes and cost savings associated with hospital safe nurse staffing legislation: An observational study. BMJ Open, 11(12), Article e052899. https://doi.org/10.1136/bmjopen-2021-052899

Morioka, N., Moriwaki, M., Miyawaki, A., Saville, C., Fushimi, K., & Griffiths, P. (2026). Hospital nurse understaffing and patient mortality, readmission, and length of stay. JAMA Network Open, 9(2), Article e2558235. https://doi.org/10.1001/jamanetworkopen.2025.58235

Muir, K. J., Aiken, L. H., Brom, H., Hovsepian, V., Lasater, K. B., & McHugh, M. D. (2026). Safe minimum nurse staffing requirements for hospitals: Evidence from Pennsylvania. Medical Care, 64(7), 447-455. https://doi.org/10.1097/MLR.0000000000002332

Waxman, K. T. (2018). Financial and business management for the doctor of nursing practice (2nd ed.). Springer Publishing.