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Press Release · July 27, 2001

Minimum Nurse Staffing Requirements Could Cost California Hospitals Between $200,000 And $2.3 Million Annually, Review Says

At Least Half of State's Hospitals Will Be Affected By New Standards

SAN FRANCISCO, California, July 27, 2001 – Meeting state minimum staffing requirements for nurses could be an expensive and difficult proposition for many California hospitals, according to a Public Policy Institute of California analysis. The analysis is the first to examine the share of hospitals in the state that are likely to be affected by soon-to-be-announced state standards and to estimate the likely costs for state hospitals.

In 1999, California became the first state to pass a comprehensive minimum staffing bill, AB 394, which requires that the state Department of Health Services (DHS) establish minimum nurse-to-patient ratios for registered nurses (RNs) and licensed vocational nurses (LVNs). DHS is currently developing draft regulations that will be enacted next year. Because little is known about the financial and organizational effects of the different minimum staffing scenarios under consideration, PPIC economist Joanne Spetz analyzed the effects of proposals by three prominent organizations – the California Healthcare Association (CHA), the California Nurses Association (CNA), and the Services Employees International Union (SEIU).

The analysis, first published in the Journal of Nursing Administration (JONA, Vol. 31, No. 3), finds that many hospitals in California could see their expenditures for RNs increase between 5 percent and 41 percent, depending on the staffing ratios eventually adopted by the state. Not surprisingly, the proposal by CHA, which represents the interests of hospitals, recommends the lowest nurse-to-patient ratios and produces the smallest increase in costs, resulting in an estimated average annual increase of nearly $200,000 per hospital. The SEIU proposal – which was endorsed by Kaiser Permanente last week – calls for far higher nurse-to-patient ratios and could cost over $1.3 million per hospital annually. The CNA’s proposal could cost hospitals upwards of $2.3 million per year.

“Unfortunately, the DHS has little information to go on as they draw up these standards,” says PPIC research fellow Joanne Spetz. “Putting a price tag on various staffing options is a very important start, but we also need more information about the potential benefits of higher ratios on the quality of patient care. It’s important that we get this right: The rest of the nation is watching California closely.”

Spetz found that at least 50 percent of hospitals in California – and as many as 95 percent – will be affected by new minimum staffing regulations under the three scenarios she analyzed. All of the proposals affect the Los Angeles region more than other regions. Overall, large and medium-sized hospitals are likely to experience the largest increase in RN expenditures. Although small and rural hospitals will face smaller increases, Spetz points out that many rural hospitals are already struggling financially. “Policymakers may want to consider the potential effects of the minimum standards on financially troubled hospitals,” she says.

Spetz’s research was conducted with colleagues at the Center for the Health Professions at the University of California, San Francisco, with funding from the California HealthCare Foundation and the U.S. Bureau for the Health Professions. Spetz is a research fellow at PPIC and assistant adjunct professor at UCSF.

PPIC is a private, nonprofit organization dedicated to objective, nonpartisan research on economic, social, and political issues that affect the lives of Californians. The Institute was established in 1994 with an endowment from William R. Hewlett.