Problem Analysis And Budget Impact Essay Samples

Type of paper: Essay

Topic: Nursing, Health, Human Resource Management, Health Care, Cost, Medicine, Workplace, Breastfeeding

Pages: 2

Words: 550

Published: 2020/10/19


This work addresses the impact of budget cuts on health service provision in United States. It reviews the documented effect of cost cutting measures on staff performance, employee job satisfaction, retention and quality of care. High turnover of health staff has substantial indirect costs besides adversely impacting on staff morale, team spirit, institutional capacity and quality of care. Based on the literature review, some action points are suggested in order to reconcile with the budgetary constraints.


Despite the highest per capita expenditure on health, the United States health care system is criticized for being too costly, unsustainable and inaccessible to a large proportion of the population. The Affordable Care Act (ACA) represents a major health care reform initiative that aims, among other things, to bring about system-wide cost efficiency and to leverage maximum value for each dollar spent on healthcare. (Jeffers & Astroth, 2013) In order to promote equity and sustainability of health services, ACA envisages institutionalization of cost cutting measures like rationalization of budget allocation, revised decision tools for patient triage (gatekeeping function) and revision`of staffing norms. This has inevitably led to drastic fiscal and managerial measures such as staff layoffs, downgrading of staffing levels, and pay cuts, etc. (Shortt, 2014) (Everhart, et al. 2013) A direct fallout of such contingency measures is the increased staff work load, deterioration in service conditions, low job satisfaction and consequently a high rate of attrition among nurses. (Aiken, 2008)

Cost curtailment in health care

Notwithstanding the short term cost savings, sub optimal staffing runs the risk of higher indirect costs in the medium term. Evidence suggests that such cost cutting measures often contribute to poor treatment outcomes (e.g., longer duration of hospitalization), may disrupt the continuity of care and create wide gaps in service delivery. (Everhart, et al. 2013)
Besides the high cost of turnover, the loss of human capital affects all aspects of service provision including ancillary support, nursing care, budget control and hospital management. There is often a lack of involvement of nurses in the management decisions, which may prevent a realistic assessment of the tangible (economic) and intangible (non-economic) consequences of such a move. As a business decision, the economic value of nursing needs to be put into perspective by careful evaluation of the associated costs and benefits. (Unruh, 2008) (Everhart, et al. 2013)
As a coping strategy, organizations often resort to ad-hoc measures such as hiring lesser skilled or inexperienced personnel on temporary basis, task shifting, inappropriate delegation and curtailment of recurrent expenses such as drugs, protective equipment and medical supplies.
The hazards inherent in such practices often compromise patient safety, besides harming the institution’s reputation as well as the business potential. A vicious cycle of deterioration of quality of care and financial losses further aggravate the staffing constraints.
Several studies have documented efficacy of measures to deal with budgetary and human resource constraints. A comprehensive assessment of the situation needs to be done in a participatory manner involving nurses, support staff, budget controller and administration. Some of the remedial steps, both budgetary and managerial, are proposed below:
Change management: Participatory involvement of staff in management decisions is likely to result in decisions that are consistent with the needs. This is an invaluable input for promoting team work, fostering innovative solutions and creativity in the work place.
Simplification of hospital processes to improve output and save time. Many gains could accrue from minimizing work duplication and avoiding unnecessary process complexities (For example at the time of admission, transition of care, reimbursements or other administrative formalities. (Wick, 2014) The cost savings thus achieved may be diverted to other budget heads. Under ACA, cost reimbursements are contingent on performance standards and attainment of benchmarks. Process efficiency, thus, is an ongoing imperative for health institutions for financial sustenance. (Jeffers, 2013)
Hospitals should take recourse to all possible alternatives prior to the decision to reduce nursing staff, as these cost-cutting measures may be inefficient and negatively affect the organization’s bottom line. A study by Everhart, et al. (2013) in acute care settings showed that in competitive markets, decision to reduce nursing staff in favor of lesser skilled workforce may harm the organization’s competitive advantage and profits.
McCue, et al. (2003) demonstrated that higher number of nursing staff does not necessarily translate into reduced income. In their study covering more than four hundred hospitals, retention of adequate no. of nurses did not affect the volume of profit, despite the increase in operating costs.
A review by Unruh, et al. (2008) also concluded that adequate staffing is key to standardize quality of care and thereby improve patient outcomes. In place of budgeting for additional hires, the option for overtime work by existing staff should be considered. This will require reallocation of funds to appropriate budget lines.
Monitoring and supervision activities are key to maintain a minimum standard of patient care. This is especially relevant in resource constrained settings. Expenditure for training as well as monitoring should be accounted for in the budget.

Efficient procurement and storage of hospital supplies helps prevent pilferage and/or damage to hospitals assets and inventory.

In an era of economic recession and rising costs of health care, financial cost cutting is an ongoing imperative in health care settings. Several managerial and fiscal provisions of the ACA are aimed at achieving this objective by improving cost efficiency of health care expenditure. Hospitals often resort to reduction in staffing levels as a cost curtailment measure. Such a practice often turns out to be more costly in the medium term. Taking a holistic view of the issue, this review provides suggestions keeping in view the perspectives of nurse managers, hospital administrators and nurses themselves. By realigning the budget heads and prioritizing certain actions, it is possible to minimize the impact of financial constraints on health care.


Aiken, L. H. (2008). Economics of Nursing. Policy, Politics & Nursing Practice, 9(2), 73–79. doi:10.1177/1527154408318253,
Everhart D, Neff D, Al-Amin M, Nogle J, Weech-Maldonado R (2013).The effects of nurse staffing on hospital financial performance: Competitive versus less competitive markets. Health Care Management review; 38 (2): pp 146-55.
Naranjo-Gil D (2009). Strategic performance in hospitals: The use of the balanced scorecard by nurse managers. Health Care Management Review; 34 (2):1 pp 61-70.
Flynn M, McKeown M (2009). Nurse staffing levels revisited: a consideration of key issues in nurse staffing levels and skill mix research. Journal of Nursing Management; 17 (6): pp 759-66.
Unruh L (2008). Nurse staffing and patient, nurse, and financial outcomes. American Journal of Nursing; 108 (1): 62-71.
McCue M, Mark BA, Harless DW (2003). Nurse staffing, quality, and financial performance. Journal of Health Care Finance; 29 (4): pp 54-76.
Jeffers BR, Astroth KS (2013). The clinical nurse leader: Prepared for an era of healthcare reform. Nursing Forum; 48 (3): pp 223-9.
Affordable Care Act, Health Care Law. (n.d.). Retrieved January 15, 2015, from
Dall TM, Chen YJ, Seifert RF, Maddox PJ & Hogan PF (2009). The economic value of professional nursing. Medical Care; 47 (1): pp 97-104.
Wick JY (2014). Implementing change: Involving employees to improve outcomes. Consultant Pharmacist; 29 (11): pp 716-21.
Shortt J (2014). A historical perspective of the effect of the great recession on hospitals. AORN Journal; 100 (2):177-87.

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