ECO 605 Assignment 7.1: Calculating Personnel Hours

Before attempting to complete your learning activities for this week, review the following learning materials:

Learning Materials

Read the following in your Financial and Business Management for the Doctor of Nursing Practice textbook:

Chapter 4, “Budgeting, Scheduling, and Daily Staffing for Acute Care Nursing Units” (pp. 69–85)

The chapter provides additional references to economic evaluation of health services.

In this slide, we’re going to give an overview of essential budget components. Three of the essential budget components are workload Units of Service or UOS, volume, and revenue projection. An effective budget cannot be plan without work load UOS or volume forecasts. A primary workload UOS is defined for every unit the workload.

The workload UOS for inpatient units is patient days, which are defined as follows, the sum of the census at midnight for the survey period. The metric to compare care delivery is worked labor Hours Per Patient Day or HPPD. HPPD can be grouped into four components, direct care HPPD, indirect care HPPD, total worked or productive HPPD, or total paid HPPD. As we go through subsequent slides, we will define each of these four components. And we’ll also go into greater detail in what they concern.

Another issue that comes up when you’re doing a central budget components is secondary workload or UOS may also be possible. Secondary UOS occurs when a cost center has bedded out outpatients who are not included in the census of inpatients. Some organizations will adjust the workload to give credit to these outpatients according to this formula. 24 observation hours equals one patient day.

In the last slide we introduced the concept of workload units of service, which is a measure of volume of work on your unit. Workload UOS variations should be identified for budget planning purposes. Workload UOS or volumes can be viewed in the following ranges with volume decreasing as we go down the following terms.

Peak volume is the capacity of your unit. Possible volume is the workload between the most frequent and peak UOS or capacity of the unit. Probable volume, this includes the most frequent workload, actual average daily workload, and actual average daily workload by weekday and weekend.

The fourth is certain or most common, the most common workload that rarely drops below this volume. In the terminology used above, notice we use the term most frequent workload UOS or volume. This is the volume that occurs for 50% or more of the survey period.

Defining most frequent workload UOS or volume helps leadership know their range of staff and elasticity for their direct care staff, which can accommodate changes in workload volumes that occur due to admissions, discharges, and transfers. These latter three terms are usually abbreviated ADTs. Volume forecasts are a basic element in estimating workload and unit revenue.

In this slide we are going to identify different measures of unit intensity. Unit intensity measures how busy a unit is or the level of churning within a particular unit. Here are the measurements that can be used.

One is the midnight census. This is simply the number of inpatients within a particular unit. The second is inverse of length of stay, which is just 1 over LOS. And LOS is just the abbreviation for length of stay.

The third is Admissions, Discharge, and Transfer, Work Intensity Index or sometimes is just called the ADT Work Intensity Index. This is found by taking total admissions adding discharge—discharges adding transfers in 24 hours and then dividing this the sum of these three items by the midnight census. Studies indicate the ADT work intensity index is the most accurate measure of unit intensity or busyness. And its use resulted in an increase in calculated nurse staffing requirements.

ADT activity should be measured by time of day to see when it’s at its highest. And staffing should be adjusted to accommodate this pattern of activity within a unit. In the last few slides we’ve used the term unit when talking about budgeting. Here we’re going to be more specific about what we mean.

And by unit, we can also call it the cost center or the cost unit. The cost center or costs unit is the financial unit or code from which wages are paid and costs identified. It is controlled by a specific nurse leader.

Financial accountability demands that costs be separated into cost units or cost centers. Accounting practice assigns all labor costs to their home cost center a unit and allocates hours worked to the proper cost center or unit. To correctly account for work hours and their accompanying costs, employees from a particular cost center must use the correct code that identifies the cost center that they are associated with. In addition, work hours use for orientation and education must be differentiated from the usual unit inpatient work hours.

In the first slide for this lesson, we defined HPPD. Recall that HPPD is worked labor hours per patient day. When you use HPPD, it is the general standard for comparing levels of care between cost hours.

Now, recall that HPPD includes worked labor hours per patient day. These worked labor hours can be divided into different classifications. And so here we are going to talk about the terms that are used to classify these hours within HPPD.

The first is just hours classification. This is the concept of classification of hours itself hours of classification is a distinct grouping to classify hours with classifications, including direct hours, indirect hours, total worked or productive hours, non-productive hours, and non-productive hours include benefit, education, meetings, and orientation hours. And finally, the last classification is called total paid or annual hours.

And now, we are going to go through each of these different classifications within hours separately. The first of these is direct work hours. This is the number of hours of direct labor used in providing a service or making a product. In acute care situations, these hours would be the hours of all staff providing hands on care to patients.

The next classification is in direct care or fixed work hours. These are hours worked by staff providing service to the unit, but not working directly with patients or taking a patient assignment. Most hospitals include worked in paid hours for education, meetings, and orientation under the indirect care category of hours. And also hours for education, meetings, and orientation are usually abbreviated EMO.

The fourth term here is total worked or productive hours. If the hospital does not separate direct care hours from indirect hours, then direct and total worked hours will be the same. Total work hours also includes the hours of float personnel, agency, and traveler nurses.

The fifth term here is EMO hours. Remember, this stands for education, meeting, and orientation. These are total work hours devoted to those last three items I’ve mentioned. As noted earlier, many hospitals put these EMO hours under indirect care hours.

Some organizations, on the other hand, put EMO hours in the category of unproductive hours, in this case, employees absent for EMO activities will be replaced. And these replacement hours may be included under direct or indirect care hours.

The six classification is indirect labor hours. This is time paid by a cost center that is not included in the variable staffing plan, which is abbreviated VSP. Indirect labor hours include such thing as manager, clerk, educator, or case manage time. The seventh category here is non-productive hours.

This is a term used for all hours the hospital defines as unproductive. The category always includes benefit time and paid time off. It also may include EMO time, although the employee is paid for the EMO time and is working during those hours.

The last classification is total paid or annual hours. These are all hours paid from the cost center, including total worked or productive hours and non-productive hours. Total paid hours may also be called total annual hours or just simply total hours.

In this slide, we are going to look at some basic formulas for calculating total worked hours and total paid hours per patient. Hospitals need to determine how many worked or productive hours and how many paid hours are being devoted on average to each patient under their care. Many hospitals plan a budgeted number of direct hours for each patient or UOS between the minimum and maximum patient volume.

Nurse leaders are then held accountable for delivering care at the budgeted number of hours per UOS or per patient. This approach is called variable or flex budgeting. So now below, we are now going to calculate total worked hours per patient or total paid hours per patient.

The first three are in terms of total hours and are not calculated per patient yet. So the first is total worked or productive hours. This is equal to total direct hours plus total indirect hours. This figure measures total numbers devoted to actual patient care.

The second item here is total non-productive hours. This is equal to time paid, but not worked. This figure includes hours paid for benefit time, paid time off, and it possibly could include EMO hours. The third item here is total paid hours.

This is equal to total worked or productive hours of work plus non-productive hours. Remember, non-productive hours are those are hours where the time was paid, but not worked. Total paid hours represents all paid hours for a unit, whether the hours were devoted to patient care or not.

In this slide we’re going to continue our exercise of doing calculations. And specifically, we’re going to do the different hours per patient. The first of these is total direct hours or variable hours worked per UOS or HPPD.

And these are equal to total direct hours divided by UOS or HPPD. This number gives us the number of hours of direct patient care devoted per patient. The next is total indirect or fixed worked hours per UOS or HPPD.

This is equal to total indirect or fixed work hours divided by UOS or HPPD. This figure gives us the number of hours of indirect patient care devoted per patient. Recall these hours are hours devoted to a unit, but not for direct patient care.

The next is total worked productive hours per UOS or HPPD. This is equal to total worked or productive hours divided by UOS or HPPD. These are the actual hours of care devoted to patients on a per patient basis.

The next figure is total paid hours per UOS or HPPD. This is the total worked productive hours plus total non-productive hours. And both of these are then divided by the US, UOS, or HPPD.

These are paid hours devoted to each patient, but it also includes hours not actually devoted to patient care. And it is also calculated on a per patient basis. The last figure is average daily UOS or UOS days in a UOS divided by days in a survey period. This figure indicates the average number of patients being cared for per day during the survey period.

Another issue that comes up in terms of budget staffing is the concept of full-time equivalents or FTE. FTE is defined as the number of full-time employees needed or worked. And this could be hours or shifts during a specified time period. And the specified time period could be the week pay period or year.

FTE is the term used for comparison of personnel employed by hospitals. FTE per occupied bed is often used. And occupied bed is defined as the number of beds that are licensed, physically available, staffed, and occupied by a patient.

FTEs are often reported in the following ways, direct FTEs, indirect FTEs, total worked or productive FTEs, which is productive is the combination of direct and indirect work hours, total non-productive FTEs, and total paid or annual FTEs. All these terms, direct, indirect, total work, total non-productive, total paid, or annual, all of these we have defined in earlier slides. Full-time equivalents or FTEs can be calculated on the basis of different time periods.

So here we are calculating FTEs for some common time periods. First is FTE per week, where you just take the total worked hours in a particular department and divide it by 40 hours, the usual workweek. The second is FTE per two weeks. This is total work hours divided by 80 hours, which is 80 hours is the usual number of hours in two weeks worked.

Two weeks is used here, because many times that’s a typical pay period. There’s FTEs per 8 hour shift. This is total hours worked divided by 8 hours. And usually 8 hours is a common shift.

FTEs per 12 hour shift, this is total work hours in a department divided by 12 hours. And again, 12 hours is a common shift, especially in hospitals. When referring to staff required for a given time periods, the term FTE should be used. This is true even though many of the staff may not be full-time employees and may be part-time PT and per diem, or casual, or contingent employees.

Here we are going to talk about total worked or productive dollars per patient day. Total worked or productive dollars per patient day is a key measure of financial accountability. This figure is then compared to the budgeted amount for a cost per patient day.

If actual cost per patient is greater than the budgeted amount of time, but HPPD or hours worked is what in the budget, this indicates overtime and other pay premiums are being used. Other pay premiums could be, for example, the pay to agency or traveling nurses. Studies indicate that overtime in excess of 5%, a decrease in court staff below 85%, or an increase in non-unit supplemental staff above 5% may cause adverse patient outcomes.

On the other hand, if actual cost per patient is less than the budget or amount, but HPPD or hours work is within budget, this indicates more staff hours are being allocated to lower costs staff, such as LPNs, LVNs, and NAs. Holding patient acuity constant, studies indicate there may be adverse patient outcomes if direct care hour RN hours fall below 50% of direct care hours. Thus, if actual patient cost per patient differs from the budgeted amount it is important to see if this outcome is affecting patient well-being.

In an earlier slide, we introduce the concept of non-productive hours. These non-productive hours can be aggregated into what is called the non-productive budget. The non-productive portion of the personnel budget includes hours paid but not worked.

These hours include planned time off, such as vacations and holidays and unplanned time off, such as sick time and emergency absences. Some hospitals include EMO hours in the nonproductive budget. Remember, EMO stands for education, meetings, and orientation.

There is another concept called deficit demands. These are all the reasons paid and unpaid that schedule employees are not working and their hours need to be replaced. Deficit demands and their budgetary impact become more important as average paid time off has doubled since 1975.

The non-productive budget also called benefit replacement must be managed separately from the productive or work budget. Here are some reasons for separating the total worked or productive budget from the non-productive budget. First, either budget, but not necessary both may require change. Secondly, total worked or productive hours reflect UOS.

Non-productive hours correspond to employee paid absences and EMO hours if they are included in the non-productive hours. Thirdly, the nurse manager controls total worked productive hours. The policies of the organization determine employee benefits and EMO amounts or in other words, the non-productive hours in a budget. To project the non-productive budget, nurse managers can use non-productive hours from previous years and determine how changes to EMO time and benefits will affect the current non-productive budget.

In the last slide of the lesson, we will address the topic of accrued versus budgeted non-productive and carry over time. Most finance departments budget the non-productive hours for a year based on the actual number of non-productive hours used in the previous year. Finance departments do not budget based on the actual non-productive hours accrued by employees in a year.

Accrued hours are based on the hospital’s policies for earned benefit time for employees. An earned benefit time is based on the policies for vacations, holidays, sick time, and so on. At many organizations, employees can carry over their accrued benefit time to the following year or years or receive cash for their accrued benefit time.

However, most organizations put limits on how much benefit time can be carried over or cashed out in subsequent years. Nurse managers need to be aware that projected budgets do not account for benefit time carried over from previous years to be used later or cashed in later. Because of this, actual non-productive hours and their costs may go over budget for a fiscal year if employees use their carry over time from previous years in the current fiscal year. Thus, nurse managers need to be able to account for these budget overruns by knowing that they are the results of this carryover effect.

Assignment Rubric
Criteria	Ratings	Pts
Responses view longer description	5 to >4 pts Meets Expectations Answers to all questions are correct. Graphs are all properly labeled and axes all properly identified. All graphs are properly drawn. (If applicable.) 4 to >2 pts Nearly Meets Expectations Answers to most questions are correct. Graphs are mainly labeled correctly and axes are usually properly identified. (If applicable.) 2 to >0 pts Does Not Meet Expectations Answers to most questions are incorrect. Graphs are not labeled or axes are not properly identified. Graphs are not drawn properly. (If applicable.)	/ 5 pts
Explanations view longer description	5 to >4 pts Meets Expectations Provides thorough explanation of rationales and skillfully applies course materials to develop conclusions. There is always a close and strong connection between the explanations provided and the material from the lessons. 4 to >2 pts Nearly Meets Expectations Provides adequate explanation of rationales, but conclusions could be supported more strongly using course materials. There is a connection between explanations and concepts from the lessons but this connection is not always strong or clear. 2 to >0 pts Does Not Meet Expectations Neither provides adequate explanation of rationales nor uses available resources to substantiate conclusions. There is no close connection between the explanations provided and the concepts given in the lessons.	/ 5 pts
Structure and Mechanics view longer description	5 to >4 pts Meets Expectations Contains one or two errors in grammar, spelling, and/or APA format. 4 to >2 pts Nearly Meets Expectations Contains several errors in grammar, spelling, and/or APA format. 2 to >0 pts Does Not Meet Expectations Contains many errors in grammar, spelling, and APA format.	/ 5 pts
Total Points: 0