UNC Kenan-Flagler Business School

ROI: RESEARCH INSIGHTS FROM KENAN-FLAGLER


Checking the pulse on health-care staffing

4/10/2017

checking pulseWorking long hours takes a toll. It also can be counterproductive and is commonly linked to more stress and errors.

For health-care institutions, these side effects ultimately have an impact on the quality of care and life experienced by patients.

The friction between increased work hours and job performance at health-care institutions doesn’t end there. In the last decade, nurse overtime specifically has received more public attention because of reports associating overtime-induced nurse fatigue with increased medication errors and even nurse injuries.

Policymakers started stepping in during the 2000s to help improve working conditions for nurses – and also treatment for patients. Since then, more than a dozen U.S. states have passed laws that prohibit employers from mandating overtime for nurses.

But these well-intentioned laws might have unintended consequences on patients’ service quality, according to research by Lauren Lu, an operations professor at UNC Kenan-Flagler Business School, and Susan Lu of Purdue University. They share their findings in “Do Mandatory Overtime Laws Improve Quality? Staffing Decisions and Operational Flexibility of Nursing Homes.”

The laws’ effect on nursing home quality

Sixteen states currently carry laws prohibiting mandatory overtime at U.S. health-care institutions. Some cover both nursing homes and hospitals while others cover only hospitals. Despite the growing reach of these regulations, there has been no research assessing the effects of these laws on the service quality of health-care institutions until Lu’s study.

Lu focused specifically on the service quality impact of the laws on nursing homes, which have been empirically shown to use significantly more nurse overtime than other health-care institutions.

To measure service quality, the researchers analyzed deficiency citations – records of safety violations at nursing homes – from a pool of nationwide data that included both states with and without the mandatory overtime laws. To compare service quality, they paired up 15 control states with five states that have enacted the laws or regulations for nursing homes: Alaska, New Hampshire, New York, Pennsylvania and Missouri.

And contrary to what lawmakers intuitively expected from the laws, Lu found surprisingly strong evidence that service quality actually went down in states with the overtime laws. Deficiency citations increased by more than 21.7 percent in these states, and it was violations specifically associated with the quality of care and administration that saw the increase.

She also found that nursing homes with a higher enrollment of Medicare residents were more likely to experience a larger decline in service quality when overtime regulation was imposed.

How could this well-intentioned labor policy have such unexpected adverse effects on service quality?

The unexpected culprit, she found, lies in operational adjustments necessary to comply with the law. Lu and her co-author paid special attention to how nurse staffing is affected by the mandatory overtime laws because nursing homes rely heavily on their nurses to conduct day-to-day operations and deliver care to residents.

Connecting regulations to nurse staffing

Uncertainty about demand greatly influences operational decisions for nursing homes, especially with regards to staffing. The number of nurses needed depends heavily on the patients – everything from how many are being treated to just how much care they need based on their current conditions. And these factors change constantly.

“Because of these circumstances, nurse staffing is a key determinant of quality for nursing homes, and that’s why analyzing the staffing decisions allows for a good assessment of the impact on service quality,” Lu says.

With these relatively new labor regulations shaking up their nurse-staffing capabilities, nursing homes in the affected states had to adjust, which meant hiring more contract nurses to pick up the overtime hours that permanent nurses were no longer required to work.

Lu used a classic operations staffing model to fit the nursing home scenario, taking the uncertainty of demand in staffing needs into special consideration.

The staffing model revealed that when a law prohibits mandatory overtime in a state, nursing homes would reduce the total hours of permanent nurses but increase the total hours of contract nurses. This change in the composition of nurse staffing provides a plausible explanation to how the regulation caused the service quality decrease.

Lu used the nursing home staffing data to show that for a nursing home with 100 residents, which is the average size in the U.S., the mandatory overtime law decreased the total hours of permanent nurses by 85 hours per month and increased the total hours of contract nurses by 15 hours per month.


Empirical evidence has shown that when the use of permanent nurses is decreased or when the use of contract nurses is increased, service quality goes down. Intuitively, it makes sense. Contract nurses aren’t as familiar as permanent nurses with the residents, their conditions, habits or even their names. In the handover of patient-related documents, that lack of information loss can become a serious issue.

The expediency of contract nurses also comes at a price. Contract nurses, in terms of hourly wages, are significantly more expensive than permanent nurses – not because the nurses themselves are making more money, but because nurse agency markups increase the cost for the nursing home. And as a result, nursing homes facing budget constraints must reduce their level of permanent nurses.

Maintaining efficiency in a regulatory environment

Managers of nursing homes who are in states that have passed the overtime laws should carefully monitor service quality to avert any potential decline in patients’ quality of care. In states where similar laws are on the horizon, managers should think ahead about how to make nurses more efficient while understanding that using overtime to fill staffing shortages is not sustainable.

In particular, nursing homes that experience high fluctuation in patient enrollment should pay careful attention to the importance of maintaining flexible staffing levels that stay within their staffing budget. Some nursing homes have reported improved workforce efficiency by using “flex pools” of nurses to deal with fluctuating staffing needs. These nurses have flexible schedules that allow them to cover daily and shift-to-shift schedule changes.

For policymakers, Lu’s research suggests that it’s important to consider firm-level responses when developing any new staffing-related regulations in order to assess the possibility of unintended consequences. With regards to nursing homes, this means understanding that the prevalent use of overtime stems from the need to fill staffing shortages derived from constant uncertainty of demand.

“Nursing homes have an inherent need for flexible staffing, and while the long-term effects of the laws have yet to be seen, if the overtime option is taken away in the short run, managers must quickly adapt,” Lu says.