The economics of nursing

(Nurse) Since the federal budget sequester became a reality on April 1, there has not been an immediate effect on nursing and healthcare organizations. No hospitals or long-term care facilities reported nursing layoffs directly related to the cuts, according to state and national industry organizations.

But sequestration, which cuts about 5% from the U.S. Department of Health and Human Services’ budget and 2% from Medicare reimbursements to healthcare providers in an effort to reduce the federal budget deficit, comes on top of a recent recession and a spate of state and federal belt-tightening. It represents one more chip in a long-term erosion of government funding for research and nursing programs, said Bobbie Berkowitz, RN, PhD, FAAN, dean and professor at Columbia University School of Nursing and senior vice president at Columbia University Medical Center in New York City. And while they generally agree healthcare spending can’t be maintained at its current level, nurse executives and hospital administrators fear additional unexpected state and federal deficit reductions could strain even those facilities that are working to provide more efficient care.

“What do these cuts really mean to people?” Berkowitz said. “It’s not like you can say 50% of the nursing staff is going to be laid off. For some sectors, it’s more of what they’ve been experiencing all along.”

Healthcare organizations and providers say they will do their best to shield the public, nursing students and staff nurses from the effects of government budget reductions by finding creative ways to absorb the cuts, including alternative funding sources, more grant proposals and more efficient ways of providing care.

But resources can be stretched only so much and future reductions in government healthcare spending will most certainly affect nursing education, research, the nursing workforce. Each of these ultimately could have an effect on patient care, warn nurse executives, educators and researchers.


Within nursing, education takes the most direct hit from sequester cuts, said Jan Towers, PhD, NP-C, CRNP, FAANP, FAAN, senior policy advisor advisor for the American Association of Nurse Practitioners.

The six nursing programs under HHS’s Health Resources and Services Administration, including those designed to encourage diversity, faculty growth and service to underserved areas, will likely lose about 5% of their funding, said Suzanne Miyamoto, RN, PhD, AACN, director of government affairs for the American Association of Colleges of Nursing in Washington. D.C.

Though funding for nursing education programs increased in recent years — from about $160 million in 2008 to $231 million before sequestration took effect — these increases have not come close to keeping pace with inflation, Miyamoto said. If programs were funded at 1970s levels and adjusted for inflation, they would be receiving about $1 billion for the current fiscal year, she said.

Fewer nurses will have financial support to become faculty members, and students will have fewer funding opportunities, Miyamoto said, which could mean fewer RNs and advanced practice nurses to care for patients during a time when many nurses are expected to retire, an aging population will need more care and newly insured people through ACA provisions will be seeking healthcare.

Teri A. Murray, RN, PhD, APHN-BC, FAAN, dean of the Saint Louis University School of Nursing, said there will be greater competition among nursing schools and other educational programs for funding like the HRSA’s grant that helps fund the school’s program to recruit and graduate more minority nursing students. Luckily, she said, the program is in its third year of funding and won’t be immediately affected, but the cuts could affect its chances for renewal. “It’s a four-year nursing program, so if the funds were cut for those in their junior year, it could really present a hardship to the students,” she said.

Donna Meyer, RN, MSN, dean of health sciences at Lewis and Clark Community College in Godfrey, Ill., and director of the Lewis and Clark Family Health Clinic, is in a similar situation. Her clinic, based at the southern Illinois school, did not get funded last year after six years of receiving grants though the HRSA nurse practice and retention program. The clinic is almost self-sufficient and has enough money to continue through next year, she said, but if the grant is denied again she will have to scramble for funds to make up the difference, as states, schools and foundations face their own budget woes.

5.1% cut to Nursing Workforce Development programs estimated results

* 2,538 fewer nurses and nursing students supported through all of the Title VIII Nursing Workforce Development programs

* 629 fewer participants in the Title VIII Advanced Education Nursing and Nurse Anesthetist Traineeship programs
* 249 fewer health professionals and students supported by the Title VIII Comprehensive Geriatric Education program and deliver care to the elderly, disabled, and chronically ill
* 542 fewer underrepresented and disadvantaged nursing students supported through the Title VIII Nursing Workforce Diversity Program
* 303 fewer K-12 students supported through the Title VIII Nursing Workforce Diversity Program
* 401 fewer training opportunities for nurses pursuing graduate-level education through the Title VIII Advanced Nursing Education program
* 248 fewer participants in the Title VIII Nurse Education, Practice, Quality, and Retention program
* 79 fewer faculty members through the Title VIII Nurse Faculty Loan Program
* 67 fewer nurses participating in the Title VIII Nursing Education Loan Repayment program
* 5% fewer students receiving assistance through the Title VIII Nursing Scholarship program

Source: American Association of Colleges of Nursing


The sequester’s 5% decrease in money for the National Institutes of Health, which includes the National Institute of Nursing Research, comes on top of 10 years of flat funding for that research organization, said its director, Francis S. Collins, MD, PhD. The NIH, which used to accept one in three grants, now funds about one in six, a figure which is likely to go even lower as a result of sequester cuts, said Collins.

“When you cut funding to the NIH, benefits to people slow down,” he said. “You don’t want the public to feel an impact, but we know in research, in the long-term, they do.”

Nurse researchers will face more competition for grants to study issues specifically related to nursing and patient care, Berkowitz said, such as access to care, prevention of chronic illness, hospice care and patient-centered outcomes.

“Only a small fraction of grant proposals deemed meritorious by peer review were being funded before the sequester,” said nurse researcher Linda H. Aiken, RN, PhD, FRCN, FAAN, director of the Center for Health Outcomes and Policy Research at the University of Pennsylvania. “Any further reduction in newly funded research will have a devastating impact on advances in improving healthcare outcomes.”

Because grant proposals often take months and sometimes years to write, and because the process of getting them approved takes so long, researchers will not know the full effect of sequester cuts until they find out which grants are funded. Even then, they may not know if they were turned down because of lack of funding or for some other reason, Berkowitz said.

Nurse researchers already are looking at other sources of money for their proposals, Berkowitz said, including healthcare and education foundations and government programs not affected by sequester, such as the new Patient-Centered Outcomes Research Institute created through the ACA.


Though Elizabeth Lietz, a spokeswoman for the American Hospital Association, said her organization has heard anecdotal information that some hospitals have cut staff and services in the wake of the sequester, several representatives from state and national hospital groups said they do not know whether these are attributable to budget cuts, the recession or other factors. At this point, healthcare administrators seem to be avoiding laying off clinical staff, partly to prepare for an expected influx of patients after more people get insurance coverage under the ACA, said Jan Emerson-Shea, vice president of external affairs for the California Hospital Association.

However, there is anticipated cost-cutting under healthcare reform, including reductions in safety-net funds, financial penalties from Medicare for readmissions and hospital-acquired infections, and lower provider reimbursements in exchange for more newly insured patients.

“The landscape is very unsettled right now,” Emerson-Shea said. “It’s not fully clear what the delivery system will be like in five years.”

Because of the 2% sequester cuts to Medicare, Day Kimball Healthcare, a community healthcare center in Northeast Connecticut, must find an extra $1 million over two years to cover the reduction in its budget, said Donald St. Onge, RN, MSW, senior vice president, COO and CNO. Day Kimball has been working to increase efficiency, including creating patient-centered medical homes and looking at ways to provide continuous care in a variety of settings, he said. “Overall healthcare needs to be more efficient,” he said. “[But] if these cuts continue, we cannot sustain our status as an independent community hospital.”

Long-term care providers are also facing challenges from cumulative Medicaid and Medicare reductions, including sequester cuts, said Irene Fleshner, RN, MHA, FACHE, senior vice president of strategic nursing initiatives for Genesis HealthCare, one of the largest skilled nursing and rehabilitation therapy providers in the country.

Many long-term care organizations, including Pennsylvania-based Genesis, are looking at ways to be more efficient, she said, including staffing according to patient census by using more part-time and float positions, which acute care facilities have been doing for some time. Administrators also are looking at how they use staff, such as making sure RNs focus on assessments, admissions and care planning. “RNs will be doing only what they are trained to do and what they like to do. I think that can be portrayed as a good thing.”

Though they will continue to lobby for funds, including an end to sequestration — which will continue if lawmakers cannot produce a budget for the coming year — nursing and healthcare representatives said they are bracing for a difficult scramble for a shrinking pool of funds.

“The whole thing is changing dramatically and it will continue to change,” Fleshner said. “We have to be agile and adapt to that change. Budget cuts are going to be part of life and we have to figure out how to manage them.”

Potential results of sequester’s 2% Medicare cut

Based on analysis of the Congressional Budget Office Medicare baseline, the Medicare cuts that will occur from this sequester will grow from an estimated $10.7 billion in 2013 to $16.4 billion in 2021.

This model estimates that, during the first year of this sequester, more than 496,000 jobs will be lost. This includes those workers directly employed by the healthcare sector, as well as other jobs supported by the purchases of healthcare organizations and their employees. This number will swell to 766,000 fewer jobs by 2021. The health care sector represents nearly 18% of the U.S. economy. Counting only those jobs directly paid by the recipients of the funding dollars such as nurses and other caregivers, the funding cuts will cause 211,756 jobs to be lost in 2013, increasing to 330,127 jobs by 2021.

Estimated job losses from sequestration
Year Direct Total
2013 211,756 496,431
2014 224,529 524,667
2015 233,455 544,109
2016 248,228 579,162
2017 258,260 601,913
2018 271,916 631,702
2019 290,555 675,899
2020 308,560 717,505
2021 330,127 766,808

Top 10 employers to lose jobs to Medicare cuts in 2013
Hospitals 92,984
Offices of physicians, dentists, and other health practitioners 40,220
Nursing and residential care facilities 38,115
Medical and diagnostic labs and outpatient and other ambulatory care services 38,350
Home healthcare services 25,547
Real estate establishments 22,705
Food services and drinking places 21,865
Employment services 15,356
Wholesale trade businesses 8,424
Insurance carriers 7,472

Top 10 employers to lose jobs to Medicare cuts in 2021
Hospitals 144,006
Nursing and residential care facilities 63,946
Offices of physicians, dentists, and other health practitioners 61,809
Medical and diagnostic labs and outpatient and other ambulatory care services 56,527
Home health care services 39,143
Real estate establishments 35,040
Food services and drinking places 33,612
Employment services 23,498
Wholesale trade businesses 12,965
Retail Stores – Health and personal care 11,444

Estimated job losses to Medicare cuts by state
Rank State 2013 2021
20 Alabama 9,010 13,917
51 Alaska 691 1,067
18 Arizona 9,863 15,234
30 Arkansas 5,672 8,761
1 California 50,785 78,444
26 Colorado 6,671 10,305
29 Connecticut 6,033 9,319
45 Delaware 1,596 2,466
50 District of Columbia 833 1,287
2 Florida 35,827 55,340
11 Georgia 13,271 20,499
42 Hawaii 2,219 3,427
40 Idaho 2,456 3,794
7 Illinois 19,593 30,265
15 Indiana 10,718 16,556
31 Iowa 5,491 8,482
33 Kansas 4,605 7,113
24 Kentucky 8,113 12,531
25 Louisiana 7,319 11,306
39 Maine 2,821 4,358
21 Maryland 8,390 12,959
13 Massachusetts 11,284 17,429
8 Michigan 17,639 27,245
22 Minnesota 8,364 12,919
32 Mississippi 5,295 8,179
16 Missouri 10,667 16,477
44 Montana 1,812 2,799
38 Nebraska 2,963 4,577
35 Nevada 3,803 5,875
41 New Hampshire 2,337 3,610
10 New Jersey 14,126 21,820
36 New Mexico 3,349 5,173
4 New York 31,801 49,121
9 North Carolina 15,912 24,578
48 North Dakota 1,150 1,777
6 Ohio 20,175 31,163
28 Oklahoma 6,418 9,914
27 Oregon 6,610 10,210
5 Pennsylvania 24,201 37,382
43 Rhode Island 1,938 2,994
23 South Carolina 8,283 12,794
46 South Dakota 1,451 2,241
14 Tennessee 11,279 17,423
3 Texas 32,172 49,695
37 Utah 3,029 4,678
47 Vermont 1,192 1,841
12 Virginia 12,208 18,857
17 Washington 10,388 16,046
34 West Virginia 4,047 6,251
19 Wisconsin 9,703 14,988
49 Wyoming 856 1,322
Total: 496,429 766,808

Source: Tripp Umback, September 2012