Winter 2017/2018 • vol 64 • num 2
The Nursing Edition
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Finance Education is Critical for Nurse Leaders and the Fiscal Health of their Institutions by Jane Kaye
Synopsis This article explores how senior nurse leaders acquire financial skills through an examination of the experiences of four chief nursing officers, and recommends strategies for providing targeted finance training to all levels of nursing leadership. The following nurses were interviewed: Mary Ann Anderson, MSN, RN, NEA-BC, is the former vice president and chief nursing officer at a general medical and surgical hospital within a multi-hospital health system. Linda Geisler, DBA, MNEd, BSN, is the vice president of patient care services at a community hospital. Lisa Brez MSN, RN, is the senior vice president and chief nursing officer within a large multi-hospital health system. Helene Burns, MSN, RN, NEA-BC, is the corporate chief nurse executive responsible for all patient care services and nursing operations at a multi-hospital system. Background Excellent nursing care is central to the physical and emotional health of patients. Hospital nurses work on the front lines of healthcare, ensuring that patients receive appropriate and safe care. Nursing schools prepare students for this responsibility by focusing on anatomy, physiology, biology, chemistry, and the culture of care. In addition, however, nurses are central to the fiscal health of healthcare systems. For example: • Nursing is the single largest division in hospitals, and represents the greatest number of full-time equivalent positions and the largest salary spend. • Nursing controls a sizable portion of a hospital’s supply budget through its management of perioperative services and other supply-intensive departments. • Nursing performance influences millions of dollars of revenue through Medicare’s Value-Based Purchasing pro-
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gram, which makes nursing performance a key component of hospital revenue management. It would be reasonable to assume that nurse leaders have a full command of finance given their influence in fiscal affairs. The reality, however, is that financial education for nurses is inconsistent at best and inadequate at worst. Nursing school curriculums do not include finance education, and few hospitals provide adequate finance training for their managers. As a result, nurse leaders are left to struggle with acquiring financial skills on their own. Typically, they do this through a network of informal relationships and ad hoc learning that may or may not prepare them to meet their fiscal responsibilities. Clearly, nursing and finance must work together to close this knowledge deficit and positively influence financial outcomes. Newly Promoted Nursing Managers Are Rarely Trained in Finance Interviews with four successful leaders illustrate how rarely new nurse managers are trained in their finance responsibilities, with serious fiscal consequences: • Mary Ann Anderson observes: “We promote someone because they’re clinically excellent, but they may not have finance skills, and they may not even like finance.” • Linda Geisler concurs: “If you’re a good nurse they promote you based on your nursing skills.” Absent formal training, nursing leaders create their own solutions, with varying results: • Linda Geisler’s hospital provided limited finance education, so Linda “found someone in finance to teach me about budgeting.”
Winter 2 0 1 7 • Lisa Breza acquired her finance skills on the job, and used an informal network of contacts within finance to augment her knowledge. • Helene Burns was the only CNO interviewed for this article who received financial education through the promotion process, a rarity. Notwithstanding their lack of fiscal training, nurse managers are responsible for more than half of a hospital’s salary budget. This can have significant influence on the hospital’s overall financial performance, yet little formal training is provided to ensure managers can execute on this responsibility. Newly promoted nursing managers are equally ill-informed about other aspects of their financial responsibilities, such as budgeting and analyzing budget variances. This knowledge deficit only grows larger when nurse managers are promoted to the director level. Training for new nurse managers should focus on topics such as: • Staffing grids • Flexing strategies in response to volume • Impact of flexing on salary expense • FTE calculations • Overtime management • Expense variance analysis basics Providing timely and targeted financial education for new nurse managers is essential, and fiscally prudent. Newly Promoted Nursing Directors Must Shoulder Greater Financial Responsibilities, Without Training When nurse managers are promoted to the director level they assume responsibility for multiple departments. In addition to expanding the number of departments they manage, nursing directors are likely to move beyond inpatient services to include responsibility for outpatient services as well. According to Lisa Breza and Helene Burns, this expanded scope of responsibility can include departments as varied as cardiology, occupational and corporate health, outpatient infusion, alcohol and drug rehab. Each of these clinical areas has a unique set of metrics and financial benchmarks. Managing diverse clinical departments - along with more staff, larger salary budgets, and significant supply spend - requires more sophisticated financial management skills that go beyond salary and FTE management. The required skills include an in-depth knowledge of: • • • •
Volume Statistics Case Mix Index Capital Budgets
• • • •
Business Planning Supply Chain Inventory Control Expense Variance Analysis
Unfortunately, and despite their ad hoc attempts at selftraining, nursing directors often lack the skills to manage the extensive resources within their expanded scope of responsibility. And similar to the manager level, this lack of financial knowledge can significantly and negatively impact hospital fiscal performance. Director-level finance training should address this deficit to ensure that nursing directors have the financial sophistication to perform all the duties within their scope. Clearly, detailed financial training should become a mandatory component of the promotion process. Senior Nursing Leaders Acquire Advanced Education, But Not in Finance Senior nursing leadership positions require advanced degrees, but the four chief nursing officers interviewed for this article confirmed that advanced degrees alone do not guarantee an understanding of finance. The master’s level curriculum may not even include classes in healthcare finance. • Linda Geisler received a Master’s in Nursing Education. Her curriculum did not include a single class in finance. According to Linda, “Most programs do not offer this type of fiscal education for nurse leaders.” • Lisa Breza’s master’s program included one introductory financial management survey course. Although the class covered a wide range of topics, Lisa explains that “The course provided a good overview of each topic, but not an in-depth review of any single one.” • According to Helene Burns, “Critical thinking skills and an expansive way of thinking” are key outcomes from a master’s programs, but this expansive view does not always include the finance education needed to support a successful career progression into a CNO position. • Indeed, Linda Geisler pursued a Doctorate in Business Administration to increase her financial acumen. Linda observes, “I knew nursing, but I needed formal education in business to become more knowledgeable in dealing with boards and administration.” Higher education for nurse leaders does not address their need for fiscal knowledge. It is risky and inefficient for healthcare institutions to continue to expect that CNOs forge their own pathway to finance education. Expanded Scope of Influence: Nurses in the Boardroom The Nurses on Boards Coalition has established the goal of placing 10,000 nurses on boards and other influential bodies by 2020. The initiative echoes the Institute of Medicine’s recommendation that nurses play a more pivotal role as decision makers on boards and commissions. continued on page 8
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Winter 2 0 1 7 continued from page 7 Nurses who aspire to board participation need financial literacy, and the number of nurses on boards will continue to increase, thereby increasing the demand for board-level financial education. Finance education at this highest level should focus on the board-level financial analysis: • Financial statement review and interpretation • Legal structure of entities within the health system • Bond covenant calculations and impact on financial decision making • Board fiduciary responsibility According to J. Lynne Cannon, a former hospital board chair, “It is essential that nursing leaders have a command of finance.” This sentiment is echoed by Helene Burns, who observes, “As a chief nurse you need to be on a level playing field with your senior team and the board, so you have to be as knowledgeable as everyone else.”
IN HEALTHCARE SERVICES At WithumSmith+Brown, PC, our client-focused philosophy and goal-oriented approach delivers expertise, efficiency and innovation to meet the unique needs of the healthcare industry. Scott J. Mariani, JD, Partner Practice Leader, Healthcare Services Group withum.com
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Large health systems and nursing professional associations should address the knowledge gap by providing regular education focused on the CNO and board-level responsibilities. Conclusion Hospital financial performance requires a close collaboration between finance and nursing, and this collaboration begins with educating nursing on hospital finance. All levels of nursing management must be knowledgeable about finance to properly execute their financial responsibilities. The fiscal well-being of the hospital depends on it. About the Author: Jane Kaye is the founder and President of HealthCare Finance Advisors. Jane also teaches healthcare finance for undergraduate and graduate students at the Bloustein School of Planning and Public Finance at Rutgers, The State University of New Jersey. Jane can be reached at jane@hcfadvisors.com.