Summary

The Minnesota nurses strike of 2010 demanded primarily  greater nurse:patient ratios to cost-effectively improve patient safety and quality  of care in hospitals. The hospitals maintained that they  cannot afford fixed staffing levels and that nurses are paid adequately.  This article substantiates the nurses’ case with objective data: That Twin City hospitals are large, corporate chains,exhibiting monopolistic behavior, very profitable, with large amounts of assets and cash, and their “non-profit”  tax-exemptions do not justify the minimal amount of uncompensated care they are required to provide. The hospitals can afford greater nurse:patient ratios which available data show can improve safety and patient outcomes. The nursing shortage is caused more by excess capacity (too many hospitals, duplication of technology) than by  a shortage in the supply of nurses. Excess insurance administration squeezes operating (day-to-day care) budgets. Fixed nurse:patient ratios would be a good first step toward fundamental health care system change.

Hospital Safety and Quality  of Care

 Minnesota nurses strikes of both 2001 and 2010 articulated the need for greater  nurse:patient ratios in order to improve patient safety , quality of care, and help lower hospital mortality rates. The need for fixed ratios is borne out by a growing body of data. Fifty studies are posted on the MN Nurses Association website, but

There are over 90 studies.

According to a 1999  Institute of Medicine landmark report, system errors in hospitals kill up to 98,000 people each year, making systemic medical errors the 8 th leading cause of death in the U.S. These safety errors include “surgery on the wrong body part” , “object left in the surgery patient”, ” serious bedsores”, and falls, to name a few. These “never events” occur all too commonly under current hospital working conditions both in Minnesota and nationally.

Contrary to hospital claims, there is much need for improvement in Minnesota hospital mortality rates, the most important quality measure. The Minneapolis Veterans Administration has lower mortality  rates for congestive heart failure, and heart attacks, compared to three top Minnesota hospitals involved in the contract negotiations —  Allina’s Abbott Northwest, Park Nicollet’s Methodist, and HealthEasts’ St Johns. (Note that these hospitals’ data are for Medicare patients only, and don’t include people in Medicare Advantage Plans (like an HMO or PPO) or people who don’t have Medicare, in which cases the outcomes would likely be worse) . Several studies show the V.A., largest hospital system in the U.S.,  and government-run, outperforms all other hospitals on these and most other quality indicators.

Most people are already aware of overcrowded emergency rooms. The average time that hospital emergency room patients wait just to see a doctor has increased to an hour, from 38 minutes a decade ago, according to a recent report by the U.S. Centers for Disease Control and Prevention. After seeing a doctor, inpatient admission typically takes several more hours.

Nurse shortage: too few nurses or excess capacity  ?

A key point in the demands and debate between the nurses and hospitals was: are hospital costs labor or capital driven ? That is, are inadequate nurse:patient ratios due to a shortage in the supply of  registered nurses, or to excess capital spending  to build more hospitals,  and duplication of high technology  ? The latter appears to be the case. Minnesota has more hospital beds than the national average in high profit specialties such as cardiac care, orthopedics and cancer. Minnesota hospitals have 28 percent more cardiac intensive care beds than the national average, and only 60 percent of the national average for psychiatric care beds. Minnesota hospitals have greater than the national averages for most specialty care, and only 85 percent of the national average for general medical and surgical care hospital beds.

Researchers at Dartmouth University and others have shown that such excess capacity leads to overutilization of health care and worse outcomes, at higher cost. It also heightens demand for registered nurses, particularly tertiary care nurses. Yet the amount we spend on registered nurses, technology, etc should be based on NEED not a medical technology arms race. Thus, hospital operating budgets (day-to-day  care)  get squeezed as funding is diverted to capital expenditures to stoke the medical arms race. Even within hospital operating budgets, administrative cost of dealing with a myriad of insurers also squeezes the clinical, day-to-day care budget.

The nurse shortage is also due, albeit to a much smaller extent, to a shortfall in the supply of registered nurses, according to a 2002 health care workforce study by  the MN Dept of Health: “the shortage is aggravated by  (italics mine) a decrease in nursing program enrollment, high turnover and vacancy rates, and an aging work force.”

For Minnesota, according to U.S. Health Resources and Services Administration estimates, the projected supply of FTE RNs is expected to decrease between 2010 to 2020 as follows: 41,800 in 2010, 41,200 in 2015, and 39,700 in 2020, yet the projected demand for FTE RNs increases substantially: 46,200 in 2010;50,400 in 2015; and 55,300 by 2020. These same trends hold nationally.

Labor costs cannot be blamed

Hospitals claim the average full-time registered nurse makes $79,000. Yet most nurses don’t work full time given the labor intensity, with average income at $62,600. Compare that to the grossly excessive compensation for the following hospital CEOs in 2008: Allina’s Richard Pettingill, $1,738,237; Fairview’s Mark Eustis $1,102,008; Park Nicollet David Wessner, $995,280; and HealthEast’s Timothy Hanson, $1,122,793. Nurses AND other non-physician health care practitioner labor costs are estimated by the MN Dept of Health at 3% of total Minnesota health care spending.

Hospitals also claim that labor costs, including salary and benefits, account for 61% of a hospital’s operating budget. This omits the role of the hospital’s capital expenditures budget leading to excess capacity. In 2007, Minnesota’s hospitals reported $1.1 billion in major capital expenditure commitments. In 2008, when the recession hit, this sum was still substantial totalling $458.3 million. The hospitals claims that fixed ratios to pay for more nurses would render hospitals insolvent is fallacy, and has not been the case in California where such ratios have been implemented. Hospitals can cut back on their capital spending.

Monopolistic hospitals and insurers

Because hospitals buy-up other hospitals and clinics, the Twin Cities is left with only three major hospital chains, each owning 5 to 15 hospitals and up to 40-50 clinics, accounting for the vast majority of market share of patient admissions. Allina also owned the large insurer Medica, until the attorney  general ordered it split off several years ago. Children’s hospitals too, have almost all consolidated.

Consolidation occurred substantially in response to the takeover of health care in Minnesota by a few large monopolistic HMO insurers in 1993.

Such consolidation gave hospitals better bargaining power in relation to insurers, ability to overcharge uninsured patients, and to cost shift to insured patients. The lack of price competition prompted state legislation in 2005 mandating that hospitals post their prices on their websites to induce greater transparency and promote competition.

Yet from 1995 to the present, the net income of Minnesota hospitals has averaged about $500 million per year or 6% of total revenues.  By comparison, the average profit rate for the median Fortune 500 , the largest U.S. companies, is 4.9 % of revenues. This profitability holds for the hospitals within the metro area.

Does tax-exempt status justify  paltry uncompensated care ?

All but five of Minnesota’s 140 hospitals are incorporated as private non-profits. In 2005, the MN Health Dept valued the total tax exemptions for Minnesota’s non-profit hospitals (including property, sales, Federal,State,tax-exempt debt, and tax deductibility of contributions) at $482 million, 5% of operating expenses, yet the required community benefit provided by  hospitals as a condition of non-profit status only amounted to $191.2 million in uncompensated care (charity care and bad debt),  just 2% of operating expenses. A substantial share of uncompensated care is provided by a few safety net hospitals like Hennepin County Medical Center.  (A good benchmark for hospital provided uncompensated care would be between 5-8% of operating expenses).

In response to hospital overcharging, and aggressive billing and collections practices, in 2005, the uninsured filed federal class-action law suits.  The tax-exempt status of hospitals were challenged, and two congressional committees, Ways  and Means, and Senate Finance held hearings to determine whether the tax-exempt non-profit status of private hospitals justifies the minimal amounts of uncompensated care hospitals  provide, while overcharging other patients.

Administrative costs

Economists estimate hospital administrative costs at 30% of total

revenues. An indication of the magnitude of hospital administrative costs is revealed by the numbers of employees hired to do billing and marketing versus the hiring of nurses and doctors. Between 1970 and 2009, according to Bureau of Labor Statistics data, while growth in the number of registered nurses and physicians has stayed relatively  flat or decreased somewhat given population growth, the number of  hospital  and other health care administrative positions who do insurance billing, insurance precertification for admission, prior authorizations and the like, has increased by  3000% !

Cost Spikes Cause Labor Strikes

The 12,000 Minnesota nurses courageously opened public debate by  exposing how hospitals operate financially,  the lack of safety, quality of care, and participatory decision-making. The 2001 and 2010 nurses strikes were two of a long line of labor union strikes over the last 10 years primarily concerning health care, and symptomatic of the overall health care crisis which needs to be fundamentally  resolved, yet doing so at the bargaining table appears unlikely. Others  include hospital service employees, transit workers, three schoolteacher strikes in Red Wing, International Falls, and Crosby-Ironton, clerical workers at the U of MN, state employees, hotel and restaurant employees, pepsi workers, janitors, airline workers and many  more.

Ultimately, a one payer, government-funded system to streamline administration and expand capacity for the practitioner workforce, with separate global budgets for day-to-day operating expenses and for big ticket item capitol expenditures, both based on need, will solve the health care crisis. But fixed nurse:patient ratios ,as has already been implemented in other states, would be an excellent first step in getting there.