10 minute read
When you become a nurse manager, your duties will include dealing with financial responsibilities. Here’s what you need to know to be a success.
BY MICHELE WOJCIECHOWSKI
You are good at your job, and you know it. You can supervise staff, keep up on supplies, and are a good leader. But the only finances you’ve worked with in the past have been your own. How can you transition to taking care of budgets, payroll, and other financial needs of your job?
Don’t worry. If you don’t have the skills, you can get them. Karen Albright, RN, BSN, nurse administrator at Riva Road Surgical Center, LLC, says that she trains nurses in administration as part of her job. “The nurses seem to have a much clearer understanding of the whole picture and a much longer tenure with the company. They don’t give up easily. Nurses are tenacious and refuse to fail,” says Albright.
In addition, know that your superior skills are what brought you to this position in the first place. “New nurse managers tend to be good clinicians with solid clinical, organizational, and personal management skills. It’s these traits and skills that got you noticed and qualified you for a management position,” says Al Kauffman, PhD, an associate professor of nursing and dean of the School of Nursing and Health Sciences at Spring Arbor University. “As a new nurse manager, you will be using all of these skills in addition to developing new ones. One of the most important skillsets you will learn is financial management. The success of your unit will be measured in part by its financial outcomes. Consequently, your success will be measured, in part, by your management of the financial aspects of your new position. By applying the same techniques you used to become a great clinician, you can become a great financial manager.”
Look to Others for Help
Whether you are learning on the job about finances or you are studying (see educational opportunities later in the article), it’s a good idea when you first start your position to meet with the budget analyst for your unit or clinic. “This will help you understand how the budget is developed,” suggests Jamesha Ross, MBA, BSN, RN, an occupational health manager for the City of Tulsa.
This person can also help you understand what you are responsible for exactly. “You will need to set a routine for monitoring your budget. This should be done monthly at a minimum. It is important to know what spending decisions you can make without approval and what the dollar threshold is. Usually organizations will implement a spending freeze if budget projections are not on target. Are you responsible for inventory control? If you are, make sure you understand the process of ordering and the
approved levels of supplies on hand. Some organizations have a department that controls inventory and supplies, and it is not a direct responsibility of the nurse manager.”
Marisha G. Grimley, DNP, MSN, PHN, director of nursing education services at Nightingale College, agrees. “One piece of crucial information I was given that has served me really well is to befriend the organization’s Chief Financial Officer (CFO) or accounting director,” she says. “A good partnership with these key leaders can really help move an organization forward. Having a CFO or accounting director as an ally can be beneficial to the entire organization.”
The Basics
As a new manager, you will need to know and understand some basic financial terminology. Kauffman suggests that these terms are a must: • Full-time Equivalent (FTE):
Units equivalent to an employee working fulltime, usually 30-40 hours per week. • Cost Center: A unit in an organization which costs are charged for. • Revenue Center: A unit in an organization responsible for producing revenue. • Budget: A summary of planned expenses and revenue for a period of time.
Types of budgets include operating, supplies and equipment, personnel, capital, and revenue. • Patient Classification
System: A system developed to determine workload requirements for a nursing unit including staffing needs and work hours. • Cost Accounting: The recording of costs incurred in a business unit. • Unit of Service: The unit of measurement uses for billing of therapy. • Expenses/Costs: The money required for something.
Types of costs include direct, indirect, fixed, variable, and sunk.
“Transitioning from a direct care nurse to nurse manager is a dynamic experience,” says Ross.
In addition to managing staff members, you need to recognize the part they play in your budget. “Understand the process of staffing is a subset of managing personnel,” says Kauffman.
“The responsibility of managing a unit or clinic is totally different than managing a team of patients. Finance will become your second language. In most hospital settings, the nurses are considered an expense. This makes the nurse manager focus more on controlling expenses to stay within budget.”
She suggests that nurse managers learn the following terms (some have already been suggested above, however, her reasons/definitions for including are somewhat different): • Budget: Money that is allotted for your unit or clinic operations. You need to find out which budgets support your unit or clinic. How many budgets do you have?
Understand how much it takes to operate your unit.
Do you have input on budget development? • Revenue: The amount of money that is charged for the unit’s services. • Costs: The amount of money spent on operating the unit. You will need to
know what it costs to provide your services. • Market Share: The amount of services or admissions that are provided by your organization compared to other organizations in a certain area or for a certain diagnosis. • Payor Mix: How the payors breakdown for your organization. • Staffing: How many nurses are needed for the patient census. Are staffing decisions made on patient census or acuity? • FTE: Full-time employee equivalent. What is the threshold for full-time employment for the positions that report to you? • Fiscal: The financial budget year. For example,
some organizations have a fiscal budget year of July 1 through June 30. • ROI: Return on investment.
This is usually used to measure effectives of programs that are offered by your unit or clinic. Understand the metrics being used. • Compensation: Employee compensation is more than salary or wages. Understand how much each position is being compensated (e.g., benefits, paid time off, retirement). • Cost Savings: The amount of money saved as the result of changes or planning. Your organization may have a policy that includes annual bids for services that are over a certain dollar amount.
Additional Foundational Concepts
“It’s important for all clinical leaders to understand the organization’s mission statement, as well as its strategic plan, which always includes the organization’s financial goals,” says Stephen “Jan” Grigsby, MHA, FHFMA, vice president and chief financial officer at Springhill Medical Center in Mobile, Alabama. He explains that clinical leaders should also learn about: • The overall financial and productivity goals set by management on an annual basis (Operating Margin,
Department of Labor
Productivity Standards,
Clinical Quality measures from the Federal
Government that carry financial implications). • Their own department/unit’s statistical measures and the relation to their budgeted financial expectations for the particular fiscal year.
• Their own department/ unit’s measure of Labor
Productivity standards, set annually with the vice president.
Grigsby also advises nurse managers to know the following so that they can create and stick to their annual budgets. He says that this is crucial for measuring operational as well as managerial performance: • Salary expense controls—
Labor productivity targets • Supply expense controls—
Maintain sufficient levels to meet budgeted statistical volumes and control costs to avoid excess expense. • Contract services—
Maintain working knowledge of any outside services contracted for your department (e.g. Dialysis,
Laundry, Agency Nursing). • Service contract—You may be asked to lead a department with several sophisticated pieces of equipment.
You must work with biomedical leadership to monitor maintenance and replacement needs for equipment.
Peter B. Longley, DNP, RN, a service line finance manager, explains that nurse managers need to understand that patient care centers are “cost centers,” which means that “the organization is focused on how the expenses are being managed for that area as compared with the published budget and the previous year for comparison,” he says. “There are two major categories within the cost center— salary and non-salary. Salary expenses pertain to staff working to care for the patients as well as their premiums, such as shift and weekend differentials and overtime. Non-salary expense items are medical and surgical supplies, linen, telephone, utilities, allocation, travel, conferences, and the like. Every institution will define them differently.”
Staffing
In addition to managing staff members, you need to recognize the part they play in your budget. “Understand
the process of staffing is a subset of managing personnel,” says Kauffman. “The personnel budget is usually a major expense in a nurse manager’s budget. New nurse managers will need to become familiar with the legal aspects and organizational policies related to all facets of managing personnel. Personnel management includes hiring, onboarding, employee compensation, mentoring, discipline, employee termination, and staff mix.”
In case of emergencies, like staff shortages or changes in patient volume, Grigsby says, “You will need to be aware of your annual staffing budget and full-time equivalent calculations. You will need to be trained on how to flex staff for changes in patient volume, sometimes at a moment’s notice. Finally, you will need to be aware of the organization’s PRN pool, if available. This resource can prove extremely valuable in times of volume increase, or staff shortages.”
Longley explains that nurse managers must understand their staffing resources in order to be able to manage their salary budget. He says they need to know the following: • Staffing grids: This is how you anticipate care being delivered and by whom. (Example follows.) How many staff members you need during different shifts will affect the salary part of your budget. » Day Shift—5 RNs, 2 patient care technicians » Evening Shift—4 RNs, 2 patient care technicians » Night Shift—3 RNs, 1 patient care technician • Payroll: The department responsible for compiling all of the timecards and paying staff correctly. • Timecards: You will need to verify and sign-off on every staff member’s timecard, so that Payroll releases the correct amount of money to the staff.
Getting the Education Needed
While some nurse managers do learn on the job, others choose to find ways to build their financial skillset.
Ross worked in her first managerial position before she had any business training. So she learned on the job. “I learned from the other unit nurse managers, and I set up meetings with the CFO, controller, and human resources director to get a more in-depth look at how my unit was performing so that I could optimize performance,” she says. “Mentors and coaching are also an option.”
“There are conferences for new managers on understanding budgeting and other financial aspects of managing nursing units. Many health care organizations provide training sessions for new managers. One effective way to learn financial management skills is to ask your manager. Allow your manager to mentor you in this area,” says Kauffman. “New nurse managers should be encouraged to meet the people in their organization working in accounting and the business office. Often, these employees are happy to communicate with and teach new managers. Of course, new managers can take formal classes in accounting and finance for managers in a university setting either as part of a degree-seeking program or individual classes.”
Grigsby says that classes or degree programs in Health Administration or Business Administration may include the financial information that nurse managers need. “Any Master’s of Science in Nursing Administration will have a health care finance course that will dive deeper,” says Longley. “There are also certifications you may earn, such as the Certified Nurse Manager and Leader (CNML) credential.
Believe in Yourself
Whether you know a lot or a little about financial terminology and foundations when you start your nurse management position, any answers or knowledge you need is out there. You just need to look for it.
“Just know that the collaboration between nursing and finance has improved considerably over the past decade in health care,” says Grigsby. “The more communication that takes place between the two areas, the better tools we all have to best take care of our patients, and therefore, our community.”
