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Journal of Nursing Administration:
doi: 10.1097/NNA.0b013e31827f2208
Articles

Business Case for Magnet® in a Small Hospital

Higdon, Karen DNP, RN; Clickner, Deborah DNP, RN, NE-BC; Gray, Frances DNP, RN; Woody, Gina DNP, RN; Shirey, Maria PhD, MBA, RN, NEA-BC, FACHE, FAAN

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Author Information

Author Affiliations: Vice President, Patient Care Services/Chief Nursing Officer (Dr Higdon), Baptist Hospital Northeast, La Grange, Kentucky; Associate Director, Patient Care/Nurse Executive (Dr Clickner), Providence Veterans Administration Medical Center, Rhode Island; Nurse Case Manager, Warrior Transition Unit (Dr Gray), McDonald Army Health Center, FT Eustis, Virginia; Clinical Assistant Professor (Dr Woody), East Carolina University College of Nursing, Greenville, North Carolina; Associate Professor (Dr Shirey), DNP Program, University of Southern Indiana, Evansville.

The authors declare no conflict of interest.

Correspondence: Dr Higdon, Baptist Hospital Northeast, Hospital Administration, 1025 New Moody Lane, La Grange, KY 40031 ( khigdon2@bhsi.com).

Supplemental digital content is available for this article. Direct URL citations appear in the printed text and are provided in the HTML and PDF versions of this article on the journal’s web site (www.jonajournal.com).

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Abstract

There is minimal evidence related to Magnet® designation and the benefits in small hospitals. A business strategy for small hospitals (<100 beds) to achieve Magnet designation is presented, including a cost-benefit analysis, outcome measures, and financial impact data.

In today’s competitive healthcare environment, emphasis is placed on the cost of providing care, patient safety, quality, service, patient satisfaction, potential growth, and reimbursement. Expectations for improvement in patient outcomes and reduction in costs are the same for all organizations regardless of size and geographic location.1 To address patient outcomes and cost reduction, many organizations pursue Magnet® designation. The Magnet journey and subsequent designation have benefits in cost, quality, and safety as well as associated nurse satisfaction, occupational injury reduction, and patient safety.1,2 Magnet facilities also demonstrate decreased lengths of stay and mortality rates, better patient outcomes, and higher patient satisfaction and nurse job satisfaction.3

Although there is extensive research extolling the attributes of Magnet designation in large facilities, there is little evidence of the benefits in small hospitals with fewer than 100 beds. Raso4 reports that there are 24 designated organizations with a licensed bed range of 0 to 100 that have achieved Magnet designation. This number represents 6% of the current 381 Magnet-designated organizations.4

Resource constraints among small hospitals elevate the importance of developing a business case for Magnet. When discussing clinical expenditures without a direct financial return, “a well-developed business case can provide strategic rationale for change, generate robust comparative data for analysis, and mobilize support for innovation.”5(p291) The decision to pursue Magnet recognition demands a substantial financial commitment from the organization in addition to other resources. It is prudent for nurse executives in hospitals with fewer than 100 beds to develop and evaluate a business case before making the decision to move forward in the journey.4

Nurse leaders in smaller organizations must be creative to meet the intent of the sources of evidence.1 The Madison Veterans Administration Medical Center (MVAMC) in Madison, Wisconsin, is an example of a hospital with fewer than 100 beds that has achieved Magnet recognition. Magnet priorities at MVAMC focused on developing relationships to co-opt interdisciplinary and nursing leadership endorsement and prioritizing and aligning human resources and talent to manage the Magnet journey with limited funding (R. Kordahl, personal communication, February 8, 2011). To enhance efficiency, the Magnet project coordinator position also was assigned additional leadership and programmatic responsibilities. Leaders at MVAMC estimate that the journey to attain Magnet designation resulted in $61,245 of expenses to the organization, including the direct cost of the site visit and 2 years of preparation before the visit (R. Kordahl, personal communication, February 8, 2011). To evaluate the actual resource expenditure, the benefits of the process must also be considered as leaders evaluate available options.

This article presents a business strategy that could be applied by small hospitals (<100 beds) to evaluate the cost and benefit of Magnet recognition and the journey to designation.

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Literature Review

A gap in knowledge exists related to the benefits of Magnet designation in small hospitals (<100 beds). Overall, evidence demonstrates better nurse care environments associated with Magnet designation, resulting in better patient outcomes.6 Designation in smaller facilities thus would be expected to support nurse retention and satisfaction, organizational culture, and patient safety as reported by Magnet organizations globally.6 Financial benefits supporting a business case for Magnet designation in a smaller organization can be projected through estimations of proportional scale.

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Nurse Retention and Satisfaction

Lacey et al1 and Ulrich et al7 report that when an organization achieves Magnet status, nurses benefit from the support systems developed during the process and from the overall satisfaction with nursing as a career. Brady-Schwartz8 reports that Magnet designation has positive effects on staff nurse job satisfaction and retention.

Ritter9 indicates that nurses in Magnet hospitals report having productive work environments resulting in best practices and retention. Drenkard2 concluded that reducing the nurse turnover rate is a positive attribute of Magnet-designated organizations, saving an estimated replacement cost of between 0.75 and 2.0 times the salary of the departing nurse. For smaller organizations, the challenges of recruiting to smaller hospital environments include (a) overcoming the perceived lack of peer support, (b) unfavorable perception of workloads, and (c) diminished nurse job satisfaction.1 For a hospital of fewer than 100 beds, savings in nurse retention and avoidable turnover can represent a significant portion of operating revenue and should be considered a benefit of Magnet designation.

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Organizational Culture

The Magnet Recognition Program® is seen as a hallmark by which nursing excellence is gauged.10 In a case study, Poduska3 demonstrated that Magnet designation created a culture of teamwork, empowerment, respect, integrity, and caring among nursing staff. Disch et al11 emphasized that senior organizational leaders have a responsibility to invest in ensuring safe, quality patient care. Although the culture in a smaller organization may be one of resistance to change, nurse managers who involve the staff in changing the practice environment can cultivate support regarding the importance of Magnet recognition and the benefits to the work environment.9

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Patient Safety

Armstrong and Laschinger12 indicate that Magnet hospital environments encourage a patient-centered approach that supports strong patient safety. In addition, Armstrong et al13 report that there are links between Magnet hospital characteristics and patient safety, and when all members of the healthcare team work to identify patient safety risks, errors are reduced and patient safety is increased. In an effort to promote a patient-centered approach to care, smaller organizations must be creative by collaborating with or benchmarking similar units, departments, and practice settings.4 Scarcity of educational resources often present in smaller organizations may lead to less exposure to evidence to support cutting-edge strategy development in moving toward a patient-centered environment.6

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Financial Benefits

Tuazon14 emphasizes that although the Magnet journey takes time, planning, patience, and a well-developed budget, there is a potential for an increase in operating margins of 4% to 16% to the organization. Drenkard makes a business case focusing on several indicators: (a) positive effect of reducing nurse turnover, (b) 10.3% lower fall rates, (c) 2.5 fewer cases of pressure ulcers per hospital case at a cost of $5,177 per case, (d) decreased need for agency shifts ($40-$60/h) or per diem staffing, (e) a one-third reduction in needlestick injuries ($405 per injury), and (f) a significant reduction in occupational injuries (musculoskeletal) representing a potential savings of $50,000 to $100,000 per injured nurse.2 Although exact figures are not available for smaller (<100 beds) hospitals, the authors estimate that cost savings would be proportional. On the basis of these data, the authors developed a business strategy and related cost-benefit analysis to build the case for a Magnet journey in hospitals with fewer than 100 beds.

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The Business Case for Magnet

The proposed business case provides hospitals with fewer than 100 beds a comprehensive and detailed plan for the successful pursuit of Magnet designation. The quantitative component of the business plan should focus on the evaluation of data collected contrasted to selected Magnet benchmarks. It is recommended that smaller hospitals initially focus on patient and nursing-centric indicators in the development of a cost benefit to the organization.

In developing the assumptions for the proposed business case in this article, 2 patient indicators were selected. The 1st indicator is patient safety. Drenkard2 reported that Magnet facilities experience a 10.3% decrease in fall rates and a 5% decrease in decubitus ulcer rates. Aiken et al6 indicate that Magnet facilities demonstrate superior nurse and patient outcomes and better care environments, leading to a 14% lower likelihood of patients dying within 30 days of admission.

The 2nd suggested indicator is nursing retention. Wolf and Greenhouse15 suggested that because nurses represent the largest segment of the healthcare workforce, attention should be focused on nurse retention in support of patient safety. This may be even more significant where there are fewer nurses and nursing resources available such as in a hospital with fewer than 100 beds. Research thus demonstrates that Magnet designation is associated with improvement in nurse retention, patient safety, and decreased occupational injury.1,2

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Cost-Benefit Analysis

The decision to pursue Magnet recognition may require an overall financial commitment ranging from $46,000 to $251,000.2 To report cost benefits regarding patient and nurse safety for a small facility, assumptions will be prorated from existing evidence predominately from hospitals with more than 500 beds, where the largest proportion of data is reported.2,15 Magnet facilities report reductions in nurse turnover, vacancy rate, needlestick injury, falls, and pressure ulcers.1,2,16 Cost savings can be demonstrated using 2 patient indicators (falls and pressure ulcers) and 2 nurse indicators (nurse turnover and needlestick injury).

Table 1 demonstrates assumptions related to nurse and patient outcome indicators as well as cost-benefit estimates. Pressure ulcers in the status quo (non-Magnet) facility were 10.3 cases per year compared with 9.8 in the Magnet facility, representing a cost savings of $22,237. Patient falls were 7.6 cases per year for the status quo facility and 6.8 cases per year for the Magnet facility, equating to a savings of $2,064. The reported average annual nursing vacancy rate ranges from 8.1% to 16% in the status quo hospital compared with 3.64% in Magnet hospitals. This represents a minimum reduced vacancy rate of 4.46% and results in projected savings of $850,000. By reducing needlestick injuries from 30 annually in the status quo facility to 21 per year in the Magnet facility, a savings of $3,645.00 is realized.

Table 1
Table 1
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An expenditure of $169,525 for Magnet preparation is factored into the analysis, with the final savings for the Magnet facility of $708,421. Magnet preparation includes a Magnet Application Manual,17 50 copies of The Magnet Model Components and Sources of Evidence17 and The Business Case for Magnet a CNO Toolkit,17 registration fees and travel expenditures for 5 employees to attend the Annual Magnet conference, Magnet application fee, appraisal fee, document review fee, site visit fee and travel costs of appraisers, document preparation fee, National Database Nursing Quality Indicators membership, Magnet coordinator salary and benefits package, and consultant fee for gap analysis and preparing the final document. Status quo hospital cost expenditures for Magnet preparation is zero. Preparation expenses for the Magnet hospital are $169,525 per year based on $678,100 for a 4-year designation period. Analysis of this data (Table 1) supports a positive business case for the pursuit of Magnet designation.

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Outcome Measures and Financial Impact

Limited financial and staffing resources in smaller hospitals necessitate an efficient and evidence-based approach for successful goals and outcome measure attainment. A strategy map and balanced scorecard approach could be used as tools to closely align outcome measures to the projected benefit and expenditures associated with the Magnet journey. The use of the Kaplan and Norton18 strategy map demonstrates the alignment of objectives, measurements, targets, initiatives, and budgets with the organization’s vision and strategy (Figure 1). The graphic representation of the cause and effect relationships in the strategy map translates the vision and goals of Magnet designation into effective daily activities.18 The strategy map (Figure 1) addresses 4 key perspectives: learning and growth, internal business processes, customer, and financial.

Figure 1
Figure 1
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As demonstrated in the strategy map, enhancing nurse’s learning and growth by increasing the number of certified nurses and nurses with higher degrees could lead to providing higher quality care and result in a decrease in patient falls, pressure ulcers, and nursing needlestick injuries.2,6 These quality indicators represent internal business processes, which can effectively lead to positive customer perceptions.2,19 The customer perspective focuses on patient and nurse satisfaction rates. Higher rates of nursing and patient satisfaction positively affect the financial perspective or nurse retention rate and overall market share.1,16 Patient satisfaction is linked to positive shifts in market share and support the assumption that as patient satisfaction increases, utilization of hospital services will increase.20

Other benefits associated with Magnet designation are important to consider, such as increasing numbers in nursing certification. Wade21 demonstrated that increasing the number of certified nurses is positively correlated with patient satisfaction. The intrinsic, nontangible value of nurse certification includes enhanced feeling of personal accomplishment, personal satisfaction, validation of knowledge, professional growth and attainment of a goal, and practice standards.21 Nurse certification empowers the nurse, and empowerment results in increased job satisfaction and nurse retention.21 Charmel and Frampton20 substantiate that a positive relationship exists between employee satisfaction and patient satisfaction. Increasing nurse satisfaction and retention as long-term strategies to gain a competitive advantage in an organization’s market share is crucial to ensure future viability and return on investment.20 Nurse retention is positively correlated with decreased patient errors and increased quality of care.16,21 Ulrich et al7 reported that specialty certification has lower levels of support in non-Magnet organizations, which in turn may adversely impact patient outcomes.7

The nurse executive should monitor the progress of the organization on the Magnet journey and track the associated internal business processes and external outcomes in real time. The Magnet designation dashboard template (see Table, Supplemental Digital Content 1, http://links.lww.com/JONA/A179) is provided to record quarterly progress toward goals and objectives identified in the balanced scorecard (Figure 1).18

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Communication of Outcome Measures

The Magnet journey begins with the chief nursing officer (CNO) presenting a compelling business case to the hospital’s board of directors2,19 outlining the projected outcomes. Objectives for the Magnet initiative should be aligned to the organization’s mission and vision. The support of financial and quality indicators already identified in the organization helps to strengthen the need for action.14

To ensure continued support for the Magnet journey, the CNO should present regular updates to the board of directors, connecting components of the Magnet journey with the hospital’s financial and business plans.22 Updates should address progress in executing the program plan using established timelines, resources, and benchmarks. Updates should include achievement of targeted strategic goals; outcomes for the financial, customer, and internal business processes; and learning and growth perspectives.22 Consistent evaluation allows for needed midcourse adjustments to meet both short- and long-term goals.22

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Conclusion

Budgetary constraints and the allocation of resources are under intense scrutiny in all healthcare settings.23 Because of the lack of validating evidence, the expenditures and resources involved in pursuing Magnet designation may appear unattainable for smaller hospitals. Kordahl reflects regarding her organization’s culture post-Magnet designation, “We now have the rhythm and are continuously collecting stories, examining the data and developing action plans at the unit level, with all unit minutes posted into a share point. The processes are just considered part and parcel for what we do. We want to show the benefit of the largest cost of any healthcare organization which is nursing care” (personal communication February 8, 2011).

This article has provided an evidence-based business case and suggestions for a cost-benefit analysis and a strategy map for hospitals with fewer than 100 beds. Patients and staff from smaller organizations will also benefit from enhancing the practice and work environment through the Magnet journey. The challenge for hospital nursing leaders in smaller hospitals is to demonstrate a compelling case for the need for resources and the anticipated rewards based on evidence and data.

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Acknowledgments

The authors thank Rebecca Kordahl, RN, MBA, NEA-BC, associate director of patient care services at MVAMC in Madison, Wisconsin, and Carol Conroy, DNPc, MBA, RN, CNOR, CNO of Southwestern Vermont Medical Center in Bennington, Vermont, for sharing detailed information in telephone interviews regarding the successful Magnet journey in their small hospitals.

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References

1. Lacey SR, Cox KS, Lorfing KC, Teasley SL, Carroll CA, Sexton K. Nursing support, workload, and intent to stay in Magnet, Magnet aspiring, and non-Magnet hospitals. J Nurs Adm. 2007; 37: 199–205.

2. Drenkard K. The business case for Magnet. J Nurs Adm. 2010; 40: 263–271.

3. Poduska DD. Magnet designation in a community hospital. Nurs Adm Q. 2005; 29: 223–227.

4. Raso R. Coping with downsizing; Deciding to pursue Magnet designation. Nurs Manag. 2011; 56: 1.

5. Shirey MR. Use of a business case model for organizational change. J Nurs Adm. 2011; 41 (7/8): 291–293.

6. Aiken LH, Clarke SP, Sloane DM, Lake ET, Cheney T. Effects of hospital care environment on patient mortality and nurse outcomes. J Nurs Outcomes. 2008; 38: 223–229.

7. Ulrich BT, Buerhaus PT, Donelan K, Norman L, Dittus R. Magnet status and registered nurse views of the work environment and nursing as a career. J Nurs Adm. 2007; 37 (5): 212–220.

8. Brady-Schwartz DC. Further evidence on the Magnet Recognition Program. J Nurs Adm. 2005; 35: 397–403.

9. Ritter D. The relationship between healthy work environments and retention of nurses in a hospital setting. J Nurs Manag. 2011; 19: 27–32.

10. Jenkins M, Fields B. Pursuing Magnet designation as a system or as individual entities. J Nurs Adm. 2011; 41 (4): 172–178.

11. Disch J, Dreher M, Davidson P, Sinioris M, Wainio JA. The role of the chief nurse officer in ensuring patient safety and quality. J Nurs Adm. 2011; 41 (4): 179–185.

12. Armstrong KJ, Laschinger H. Structural empowerment, Magnet hospital characteristics and patient safety culture. J Nurs Care Qual. 2009; 21 (2): 124–132.

13. Armstrong KJ, Laschinger H, Wong C. Workplace empowerment and Magnet work characteristics as predictors of patient safety climate. J Nurs Qual. 2009; 24: 55–62.

14. Tuazon N. Is Magnet a money-maker? Nurs Manag. 2007; 36 (2): 24–31.

15. Wolf GA, Greenhouse PK. A road map for creating a Magnet work environment. J Nurs Adm. 2006; 36: 458–462.

16. Jones C, Gates M. The costs and benefits of nurse turnover: a business case for nurse retention. http://www.nursingworld.org/MainMenuCategories/ANA.Marketplace/ANAPeriodicals/OJIN/TableofContents/Volume122007/No3Sept07/NurseRetension.aspx. Accessed February 1, 2012.

17. ANCC. The Business Case for Magnet®: A CNO Toolkit. Silver Spring, MD: American Nursing Credentialing Center; 2010.

18. Kaplan RS, Norton DP. How strategy maps frame an organization’s objectives. Financ Exec Int. 2004; 20 (2): 40–45.

19. Ulrich BT, Woods D, Hart KT, Lavandero R, Leggett J, Taylor D. Critical care nurses’ work environments value of excellence in beacon units and Magnet organizations. Crit Care Nurs. 2007; 27: 68–77.

20. Charmel PA, Frampton SB. Building the business case for patient-centered care. Healthc Financ Manage. 2008; 62 (3): 80.

21. Wade CH. Perceived effects of specialty nurse certification: a review of the literature. AORN J. 2009; 89: 183–192.

22. Kaplan RS, Norton DP. Using the balanced scorecard as a strategic management system. Harv Bus Rev. 1996; 76: 75–85.

23. VHA Inc. The business case for workforce stability. www.healthleadersmedia.com/pdf/white%5fpapers/wp%5fvha%5f120103.pdf. Accessed March 16, 2012.

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© 2013 Lippincott Williams & Wilkins, Inc.

 

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