An Estimate Of The Tradeoff Between Permanent and Temporary Nursing Staff

A majority of hospitals in the United States rely on temporary nursing contracts to augment their permanent staff. Previous work, however, has shown that workers gain “organization-specific knowledge” that does not transfer between hospitals and is orthogonal to clinical experience. While there has been some clinical literature considering the effects of temporary staff on patient outcomes, this work is hampered by the endogeneity of the decision to take on a temporary contract. Using data from the Military Health System, where military Nurses of varying experience levels are plausibly exogenously moved between hospitals and “loaned” between wards, we are able to identify the effects of temporary nursing staff. Initial results show that for each one full time equivalent (FTE calculated as 168 hours of labor per month) increase in temporary staff, there is a .3% increase in workload in the next period – roughly equivalent to 10 additional hours of labor per month on average. We then build a dynamic model in which hospitals tradeoff the lost productivity of temporary employees with the cost of hiring permanent workers. With data on hospital’s hiring decisions, the dynamic framework will help us understand: (1) the hospital’s PERCEIVED cost of hiring a permanent or temporary employee; (2) what is the optimal hiring mix as a function of demand; (3) how the hiring-mix might change if hiring costs and/or productivity changes.