The Impact of Nurse Satisfaction on Your Bottom Line

Conventional business wisdom states that improving nurse satisfaction makes good business sense for at least two reasons: (1) Satisfied nurses will be less willing to leave their positions with the hospital, decreasing turnover, lost productivity, hiring costs, and training costs and (2) Nursing floors with less turnover will provide better service, resulting in higher patient satisfaction. Some skeptics still question the value of nurse satisfaction and its impact on the bottom-line of a hospital. In response to this, The Jackson Organization analyzed employee, patient and financial data from over 60 hospitals of various sizes around the United States. This Business Outcomes analysis included more than 8,000 nurses, 30,000 employees, and 100,000 annual patient visits from these hospitals.

The results of the analysis prove that hospitals with more satisfied nurses have a lower turnover rate. The bottom quartile of hospitals with the lowest nurse satisfaction (mean of 3.35 out of a possible 5) had the highest turnover rate of 13% while the top quartile of hospitals with the highest satisfaction (mean of 3.79) had the lowest turnover rate of 6%. The relation was strongest among hospitals with relatively lower nurse satisfaction.

So what is the bottom-line benefit of nurse retention? If we compare two mid-sized hospitals with 150 nurses from the Business Outcomes Analysis we can see the difference in the bottom line. With all other factors constant, a hospital that is at the bottom quartile for nurse satisfaction is likely to experience a nurse turnover rate of 13% annually. With 150 nurses on staff, close to 20 nurses will be expected to leave their position every year, resulting in an extra cost of $1 million. On the other hand, if the same hospital were to improve its nurse satisfaction to the top quartile, its turnover rate would drop to 6% and the associated costs would drop to $450,000, resulting in a net gain of over $500,000.

The other premise that The Jackson Organization investigated in its Business Outcomes Analysis is the relationship between nurse turnover and patient satisfaction. As we mentioned earlier, conventional wisdom says that treatment areas with less nurse turnover will be able to provide better service, resulting in patients who are significantly more satisfied. Hospitals with the lowest level of patient satisfaction (mean of 4.15) are the ones with the highest nurse turnover (21%), while hospitals with the highest level of patient satisfaction (mean of 4.41) are the ones with the lowest nurse turnover (10%). This analysis has proven that as nurse turnover decreases, patient satisfaction will improve at the hospital.

With the goal of identifying how patient satisfaction affects financial outcomes, The Jackson Organization looked at the operating margin of hospitals as part of its Business Outcomes Analysis. Operating margin, which is also referred to as the net profit margin, is a direct measure of profitability, calculated as a ratio of operating income over net sales. Our analysis has shown a strong correlation (lowest quartile with 2.5% operating margin versus the highest quartile with 5.8%) between patient satisfaction and operating margin where hospitals with the best patient satisfaction have the highest profitability.

These studies prove that patient satisfaction improves the financial performance of a hospital through a variety of channels. Higher patient satisfaction leads not only to higher repeat business from the patients but also to a better image that brings more referrals throughout the community. These factors, in tandem, improve the preference and ultimate market share of a hospital.

For more information on how the research and consulting from The Jackson Organization can increase your bottom line, visit their website at www.jacksonorganization.com. All HCNCA members receive a discount.