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Cost of Hiring New Nurses

In this tight economy, does it pay for hospitals to invest in graduate nurses?

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The general public believes there is a shortage of registered nurses.

That is an accurate statement when referring to experienced registered nurses. Recruiting for graduate nurses and experienced registered nurses has changed dramatically over the past 5 years on Long Island.

In the 2011 market, there are many more graduate nurses than there are jobs.

Today, a nursing recruiter has the pick of the top graduates from associate degree programs and baccalaureate-prepared nurses. Graduate registered nurses from the classes of May 2011 are still submitting rèsumès seeking employment. The job market is bleak for these individuals.

The general labor costs to hire a graduate nurse are similar from hospital to hospital and depend, in part, on pre-employment requirements. Time devoted to orientation of graduate nurses can vary greatly   depending on what each orientation offers, and in which areas of competency the nurses are being trained.

All job seekers are interested in salary and benefits: "What is the hospital going to pay me?"  The flip side to that question (which is rarely considered), is how much does it cost the hospital to employ me? 

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Facts & Figures

The true cost of labor for the graduate nurse is much more than salary and benefits, and that the cost is rising.

According to the U.S. Bureau of Labor Statistics, the average benefits package costs an employer 30 percent of the annual payroll costs. What does it cost the hospital to offer an orientation/competency package for a graduate nurse?

The approximate starting salary for a graduate nurse in the New York City and Long Island is between $65,000 and $75,000 annually.

The benefit package, including healthcare coverage and paid time off which consists of vacation days, sick days, and personal days costs the hospital approximately $20,000 per year for each graduate nurse.

Nursing leadership in hospitals who are on the Magnet journey is now opting to hire only baccalaureate-prepared nurses. The bar has been raised on the educational requirement for a variety of reasons.

According to the American Association of Colleges of Nursing:

"A growing body of research clearly links baccalaureate-prepared nurses to lower mortality and failure-to-rescue rates. The latest studies published in the journals Health Services Research in August 2008 and the Journal of Nursing Administration in May 2008 confirm the findings of several previous studies which link education level and patient outcomes. Efforts to address the nursing shortage must focus on preparing more baccalaureate-prepared nurses in order to ensure access to high quality, safe patient care."1

Graduate nurses at a community hospital in eastern Long Island who hold a BSN degree receive an additional $1,542 per year. This is a small price to pay for improved patient care outcomes.

Investment of New Nurses

The selection and hiring process at a this hospital on Long Island  begins with an interview; first, with the nurse recruiter, followed by a subsequent group interview with four nurse educators and two nurse managers. 

Labor Costs for a Graduate Nurse in 2011

Pre-employment Costs:

Interviews/paperwork: $450
Drug Testing and Criminal Background Test: $300
Physical Assessment, Lab: $1,000


1 Week - Mandatory Review: $5,000

1 Month - Classroom and Skills,
Four Nursing Educators Salary and Benefits: $13,500

5 Months - Patient Care with Preceptor
  • GN Salary and Benefits (1 GN):$27,000
  • Preceptor (Experienced RN) Salary and Benefits: $32,000
  • 1 Nursing Educator @ 1 Hour/Day/New Graduate: $7,000
  • Indirect costs - 12% (percentage of overall operating cost of hospital): $10,345
Competency: $96,595

Other hospitals require drug testing and a criminal background check. Some candidates for employment do not make it past this stage of the pre-employment requirements.

Nonetheless, the hospital pays for this evaluation. This money is well spent to screen out a drug user or a criminal, or someone who displays a lack of integrity by not telling the truth on the application. The pre-employment tally up to this point is already $1,750, before the person even steps in the hospital door to begin employment.

The date of hire is considered the first day of employment. The classroom nursing orientation lasts for 6 days, which includes one full day of hospital orientation.

During this week, the hospital pays the salaries of the graduate nurse (GN) and their nursing instructors. Additionally, various other paid employees teach mandatory classes, such as infection control and fire safety, and the GN gets an official welcome from the CEO.

Following the classroom orientation is one full month of classroom instruction, before the nurse arrives on the patient care unit. This month of one-on-one instruction to review basic nursing skills again incurs the cost of not only the graduate nurse's salary, but the salaries of nursing educators.

Subsequently, assignments are made for the graduate nurse to follow a preceptor for the next 4 to 6 months, depending on how quickly the nurse achieves competency in each area. Each GN moves through this phase individually. Most of the baccalaureate-prepared nurses have had more than 160 hours of a clinical experience in a capstone course.

The GNs who have had a capstone course can shorten the orientation/competency process by almost 3 months. This phase of the training process costs the hospital the graduate nurse's salary and the preceptor's salary. 

In addition, the clinical nursing instructor, who follows the nurse through completion of orientation to eventual competency, is also paid for the duration of the process. The additional time it takes to teach is another consideration when adding up cost, a cost to which it is difficult to assign a dollar value. 

Ideally, the preceptor will allow extra time to teach the new nurse the processes involved when caring for a patient. Also, adequate time must be devoted to the new nurse to socialize him/her into the hospital culture.

Other non-specific cost considerations include the cost of provision of space required for the education of new staff. Included in this category would be building utilities, engineering staff that support the operation, housekeeping costs, and administration costs in general, associated with the procurement of new graduate nurses.

The overhead cost is calculated at 12 percent of the direct and indirect costs, according to Joseph J. Wisnoski, senior vice president/chief financial officer, John T. Mather Memorial Hospital.

Overhead calculation methodology is uniform amongst providers. However, the result will vary based on the provider's size and complexity.

Money Well Spent?

It may seem counterintuitive to hire more nurses when a healthcare provider already is struggling with tight budgets in a bad economy. But some experts say increased staffing can yield significant patient safety improvements which will more than pay for the personnel costs. The key, they say, is to look beyond the initial expenditure to the savings that accrue downstream.


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The American Association of Colleges of Nurses reports an increase in RNs contributes to a decrease in hospital-related mortality and reduced lengths of patients stays, whereas inadequate staffing is known to compromise patient safety.2

The expense of hiring graduate nurses may also be viewed as a long-term investment toward avoiding the predicted nursing shortage. The U.S. nursing shortage is projected to grow to 260,000 registered nurses by 2025.3

Orientation of a nurse who has been out of hospital-based acute care for years is extended and more costly than the orientation of the graduate nurse. But if new grads are not hired and allowed to gain experience soon after graduation, they will become unemployable after a few years due to lack of current experience.

High quality, motivated, registered nurses in this circumstance might leave the profession for an alternate career. Preventing this outcome may be the single most important reason for investing in graduate nurses.

Is it worth the cost? You bet it is!

As Robert Kane, MD, professor and Minnesota chair in long-term care and aging at the University Of Minnesota School Of Public Health, says:

"Research has shown if hospitals add just one more full-time registered nurse on staff to care for patients, the number of hospital-related deaths could decrease significantly." 2

References for this article can be accessed here.

Jean W. Arnold is director of nursing recruitment at John T. Mather Memorial Hospital, Port Jefferson, NY.

Articles Archives

I'm Not sure why Hospitals tend to think that training new grad nurses is a expense rather than an investment! Even a Starbucks Barista has a full week of training previously than brewing your coffee, and why is that.. Simple They want to be know for their outstanding quality and customer service. Why can't hospitals understand something that simple?

Claudia A,  BSN, RN MBAOctober 17, 2012

The issue of entry level into a professional nursing career has been debated for over 50 years now. It is past time for a bachaelor's degree to be the standard requirement. The world of healthcare has only become more complex in this timeframe. It certainly should come as no surprise to review the results documenting improved mortality rates with the use of BSN prepared nurses.
Other professions have required a bachaelor's degree for years . . i.e. teachers. Many professions are now using a Master's degree as the standard educational preparation.
The BSN educational process needs to have a continued emphasis on the clinical component of the core curriculum. Critical thinking skills must have priority.
Hospitals and their staff invest a lot into new employees. Unfortunately it seems there is a wide gap between what the educational field deems important for a nurse to be knowledgable about and what the employers and physicians they work with deem crucial.

Lynn Followell,  Advance Practice Nurse,  St. Mary's Good Samaritan HospitalFebruary 28, 2012
Mt. Vernon, IL

This article sparked my interest for two reasons. First of all, I am just barely shedding the title as a new graduate nurse; I graduated in May of 2010. Secondly, in the short amount of time that I have been employed in the nursing field, I have seen the inner workings of the hosipital as it pertains to nurse staffing-it is a scary thing.
As I was reading through the article, I was expecting the author's opinion to be against the hiring of new graduate nurses. I was pleasantly surprised to find the opposite statement as her conclusion. I understand the cost of hiring a new nurse can be extreme, however it does not nearly come close to the cost of having the care and safety of patients jeopardized by the understaffing of nurses. As stated in the article, "The American Association of Colleges of Nurses reports an increase in RNs contributes to a decrease in hospital-related mortality and reduced lengths of patients stays, whereas inadequate staffing is known to compromise patient safety." It is a proven fact that hiring enough nurses to maintain safe nurse-to-patient ratios is the better choice.
As the article went through an example of exactly how one such facility goes about training a new hire, I was very much pleased. Indeed, every facility should provide every bit of training and education required in order for the nurse to perform the job to the best of her/his ability. This should be so no matter what the cost. Unfortunately, I experienced a lack of training upon my first RN job. Throughout my two years of nursing school, I worked as a technician in an endoscopy department of a hospital. Upon graduation, I took an open position as an RN in the very same department. Because the nurse manager felt that I was "seasoned and knowledgable" in this area of expertise, my training was slighted, to say the least. This situation was not fair to anyone, including myself or the patients that I was caring for. I don't feel that it was safe. This sort of situation should not occur to any nursing professional; we are caring for the health and wellbeing of others, and this is not something to be played around with.
With all that healthcare is becoming, it was like a breath of fresh air to see an article like this one. Nobody knows better than nurses how important this topic is. I can only hope that the healthcare system will improve over time, despite all of the issues we are faced with.

Randi ,  RNFebruary 12, 2012
Carver, MA

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