1. Drenkard, Karen PhD, RN, NEA-BC, FAAN


The author describes the role of the chief nurse executive in delivering a business case for the Journey to Magnet Excellence(TM). Calculating a return on investment provides clear measurement of benefits of the credential and can be used to evaluate upfront resources that result in a longer-term gain. The range of cost savings that can possibly be achieved for a typical 500-bed hospital is presented. Although not every hospital will achieve the level of performance implied by the national assumptions, securing only a modicum of the potential level of cost improvement will ensure a multifold return on the investment required.


Article Content

One of the important responsibilities of a chief nurse executive (CNE) is to share information with the rest of the executive team about programs and efforts that are beneficial to the delivery of patient care. This includes securing the support of the chief executive officer and others at the executive level. When a financial investment is required, stating a strong and convincing case is a key strategy for engaging the executive decision makers, including the chief financial officer. In the case of a decision to pursue Magnet(R) status, the support of the entire executive team is a necessity. In 2008, a new Magnet model was developed based on scholarly review and statistical analysis.1


The new Magnet model offers a framework for organizing a nursing services division (Figure 1). Magnet status is not a prize or an award; it is a credential of organizational recognition of nursing excellence. The process requires organizations to develop, disseminate, and enculturate evidence-based criteria that result in a positive work environment for nurses and, by extension, all employees. It is a multiyear commitment and requires the full support of the leadership team, the hospital health care organization's administration, and the board of directors.

Figure 1 - Click to enlarge in new windowFigure 1. The Magnet model.

History of Magnet Recognition Program(R)

During the nursing shortage of the 1980s, a group of insightful nurse researchers took a unique approach to understanding the shortage of that decade. They led a nationwide research study, commissioned by the American Academy of Nursing, that investigated what was right with the hospital workplaces that had low RN vacancy and turnover rates, rather than spend time chronicling reasons why RNs left their jobs. This groundbreaking research was described in 1983 in the book, Magnet Hospitals: Attraction and Retention of Professional Nurses,2 and identified themes that were later called the forces of magnetism. This research base served as the foundation of the creation of the Magnet Recognition Program(R), a program of the American Nurses Credentialing Center. To date (2010), more than 370 domestic and international hospitals and healthcare organizations have met the sources of evidence for nursing excellence and are recognized as Magnet hospitals.


Why Consider Magnet as a Framework for Nursing Services?

The Magnet Recognition Program is used by many CNEs as a road map for excellence in nursing services and can serve as a framework for organizing a hospital nursing delivery system. This article articulates the steps for development of a business case for Magnet recognition to obtain organizational support. The article also presents the research and financial evidence to build and present the "case" for embarking on the Magnet journey.


What Is a Business Case?

The business case is a proposal that can assist an organization or executive in presenting the reasoning for beginning a change project or group of tasks. The evaluative nature of a business case assists in the decision to "go or not to go" with a specific initiative, as well as evaluation of one decision or project against others. In the case of seeking Magnet recognition, the CNE can present organizational change, business, and financial implications and benefits in a formal presentation that all members of the executive team can understand. This helps to begin the process of acquiring support and serves as a milestone in the Magnet process for approval and sponsorship of the executive team and the board of directors.


Weaver and Sorrell-Jones3 describe the business case as a strategic tool for change and encourage the development of the business case as a key tactic in determining choices among multiple options, especially in tough economic times. They describe 5 key information areas that need to be covered in the business plan including degree of strategic fit, program objectives, review of options, affordability, and achievability.3(p415) Measurements for addressing key milestones as a way to measure progress should be developed and included. In addition, the business case should answer the question: "How will this effort solve the issues we face?"


The business case includes the reason for the project, the expected business results and benefits, and the costs and the risks. The case serves as a way to capture knowledge, functions as a basis for receiving funding and approval, helps prioritize the project against other competing initiatives that might also require funding, and secures a consistent message to all key stakeholders in the process.4,5 Formal business cases can ensure that the investment has value and importance, that the project will be properly managed, that there is capability to deliver, that the program or project is adequately resourced, and that the project has the long-term support required for success.6,7


Building the Business Case for Magnet

The business case should include the purpose statement and the value added of embarking on the initiative. In this case, why would your hospital commit to the Journey to Magnet Excellence? Linking the purpose of the initiative to the mission of the organization is an effective way to align the decision to pursue Magnet with the needs of the patients and community. Within the framework of the organizations' strategic plan and the nursing services strategic plan, determining the degree of fit is critical. The CNE needs to strategically align the priorities of the organization with the framework for nursing excellence. Viewing nursing's contribution to the organization as a strategic differentiator of high-quality care is one perspective that the Magnet journey fully supports.


With nursing as the primary service that is provided in hospitals, having the recognition that your hospital's nursing services is in the top 5% to 10% of the nation's hospitals is a mark of excellence that has a strong value proposition for key stakeholders, including physicians and consumers. A growing body of research indicates that Magnet hospitals have higher percentages of satisfied RNs, lower RN turnover and vacancy, improved clinical outcomes, excellent nurse autonomy and decision-making capabilities, and improved patient satisfaction.8-20


Return-on-Investment Opportunities

Table 1 presents evidence related to return-on-investment opportunities. It displays some literature-based quality, service, cost, and human resource measures that are worth evaluating in organizations to determine if the Journey to Magnet Excellence could be a strategic driver toward improvement. Although costs and return on investment are important, they are not the only reason for deciding to pursue Magnet recognition. Often, having the multiyear framework for quality improvement efforts and a mechanism for engaging staff in decision making is a helpful tool for a new a helpful tool for a new CNE or CNEs looking for a way to energize and motivate their team. Team building, collaborating across disciplines, and building staff engagement are harder to quantify but are often results of the Magnet journey.

Table 1 - Click to enlarge in new windowTable 1. Return-on-Investment Opportunities: The Evidence.

When building the business case, it is important to identify critical factors that will maximize success in reaching the end goal of obtaining Magnet status. Completing a Magnet gap analysis is a helpful first step and should be completed before the business case is presented to the board. Once the gap analysis has been analyzed, the CNE is in a better position to completely identify what resources and support will be needed to meet the Magnet program sources of evidence. In addition, the gap analysis will guide the timeline for completion of any areas that need strengthening. Critical success factors also inform a discussion of strategic risks that need to be shared with the executive team.


What, if any, are the downsides of pursuing Magnet status? How can the risk of failure be minimized? These will be different for each organization but include the willingness of the organization to engage in the Magnet journey as a peer-reviewed credentialing process with some degree of risk in the event that not all of the criteria are met. The achievement of Magnet status is a high bar, and the support of the entire executive team and the board is necessary.28,29 The executive leadership has a responsibility to ensure that Magnet status can be sustained over time. The business case should also include a high-level timeline, assigned accountability for the executive ownership of the work plan, and an implementation, communication, and evaluation plan for the monitoring of the progress toward achieving Magnet recognition.


The Literature Base of Evidence for Quality, Service, and Cost

One good way to build the case for pursuing Magnet designation is to provide the evidence base to the executive leadership. This selected review of the literature pertaining to Magnet status benefits gives CNEs an array of choices that can be linked to the needs of their organization. In addition, opportunities for cost savings can be identified by understanding the basis for improvement opportunities.



Increasingly, nursing is being recognized as having a major contribution to quality and safety in patient care.50,52,54 Decreased pressure ulcers and decreased falls have been linked to Magnet hospitals.40-42 Results of a cross-sectional design of hospitalized patients with hip fractures led to conclusions that, including Medicare beneficiaries, those who had received care for a hip fracture were less likely to develop a decubitus ulcer in a Magnet hospital.43 Other studies support the advantages of Magnet hospitals compared with non-Magnet hospitals related to skin integrity and the cost-saving opportunities of $43,180 per case.42,55,56


Another nurse-sensitive indicator that has been demonstrated as having lower rates in Magnet hospitals is patient falls. Multiple studies report fall rates in Magnet hospitals being 10.3% lower than in non-Magnet hospitals.49 Compared with the reported rates in general44,46-48,57 of 3.38 to 4.44 per 1,000 patient-days, savings can be determined based on the reduced frequency of patient falls in Magnet hospitals.


Patient Safety

Recent studies have evaluated the linkages between the work environment for nurses and the patient safety climate.50-54 In these studies, overall Magnet hospital characteristics were significantly and positively related to a patient safety climate in the work setting. The combined effect of increased access to empowerment structures and Magnet hospital characteristics was significantly related to higher perceived safety climate.


Decreased Mortality

The 2 compelling studies from the original Magnet research were conducted by nurse scientist Dr Linda Aiken. For the Medicare mortality study,38,39,58-65 characteristics of a Magnet environment were measured and associated with significantly better outcomes for mortality 30 days from admission. In addition, a significantly better outcome was determined for nurse safety, job burnout, and patient satisfaction.



Nurse Satisfaction and Patient Satisfaction

Magnet hospitals have a long history of positive nurse and work satisfaction linked to increased autonomy in practice, structural empowerment, participation in decision-making opportunities, and a positive work environment.34,36,37,66-69 Ulrich et al70 evaluated areas of work and the professional practice environment in a study of 735 RNs in Magnet and non-Magnet facilities. Their findings revealed that RNs in Magnet organizations reported higher satisfaction with their present job (85% very or somewhat satisfied) than did RNs who work in non-Magnet organizations (p < 0.05).


Cost Opportunities for Magnet Hospitals


Early work by Kramer and Schmalenberg71-73 found that outcomes were better in 2 areas in Magnet hospitals. These were high nurse job satisfaction as measured by "being a good place to work" and high-quality care as measured by being a "good place to practice nursing." In addition, the ability of these hospitals to recruit and retain nurses led to lower vacancy and turnover rates.


The study of Lacey et al18 examined the difference between nurses' scores (n = 3,337) on organizational support, workload, satisfaction, and intent to stay among Magnet, Magnet-aspiring, and non-Magnet hospitals. Magnet hospitals had better scores than non-Magnet hospitals, with an implication that Magnet hospital nurses were more likely to be retained than nurses working in non-Magnet hospitals.


Costs and benefits of reducing nurse turnover were identified by Jones and Gates21 in an attempt to develop a business case for nurse retention. The Advisory Board74 reports turnover costs of 1 RN at $42,000 to $64,000, depending on specialty area, because of costs of orientation and lost productivity. Turnover costs have been estimated to range between 0.75 and 2.0 times the salary of the departing RN22 and generally accepted at one times the costs of an RN salary.21 Nurse retention benefits identified by Jones and Gates21 and others75,76 include reduction in recruitment costs, reduction in orientation costs, productivity gains, decreased patient errors and improved quality of care, increased levels of trust and accountability, and deep organizational knowledge.


Vacancy Rate

Historically, during economic downturns, the vacancy rates for RNs have traditionally dropped, but soon return to pre-recession levels once the economy returns. This is due to a "false impression that the shortage may be over, generating complacency in the industry."77 The Magnet recognition sources of evidence and structures and processes for nursing services support a positive work environment that historically contributes to lower RN vacancy rates. The current vacancy rate at Magnet hospitals as of October 2009 is 3.64%, with reported national vacancy averages in 2007 at 8.1% to 16%, depending on the specialty and the region of the country.78


Agency Use

Upenieks24 identified a cost-benefit equation based on the costs of Magnet designation and the offsetting costs of decreased nursing turnover. The decrease in agency utilization was calculated on a sample cost-benefit ratio of several 300-bed acute-care hospitals. With an assumption of the reduction of a range of 5 to 20 agency shifts per day at $40 to $60 per hour differential costs per day, the potential for cost savings was calculated at several million dollars in a 300-bed hospital.


Occupational Health Injuries: Needlestick Injuries, Musculoskeletal Injuries, and Blood and Body Fluid Exposures

Multiple studies9,25,27 report up to a one-third reduction in needlestick injuries in Magnet facilities at a cost of $405 per event. In testimony to the House Subcommittee on Workforce Protections Committee on Education and the Workforce, Dr Linda Rosenstock testified that a working ratio is 30 needlestick injuries per 100 hospital beds. The CDC reports 385,000 needlestick injuries per year,79 which equals an average of 67.5 per hospital. Occupational health injuries for musculoskeletal injuries and blood and body fluid exposures are also lower in hospitals with Magnet status.80,81 Costs per musculoskeletal injury ranged from $50,000 to $100,000 per injury per nurse. By determining the needlestick injury rates and musculoskeletal injuries before or while on the Magnet journey and tracking rates, a cost-benefit can be determined for the hospital based on lower rates in Magnet hospitals.


Patient Falls

There is growing evidence that Magnet hospitals have lower rates of patient falls than non-Magnet hospitals.44-49 Hines and Yu55 described a cost per hospitalization for patient falls of $33,894. They described the number of preventable injuries in the United States for fiscal year 2007 of 193,566 falls. Unruh82 estimates costs per fall at a range of $1,019 to $4,235 per case, with a rate of 3.73 falls per 1,000 patient-days. Magnet hospitals have a reported 10.3% lower fall rates.


Pressure Ulcers

Several studies have linked Magnet hospitals to decreased pressure ulcer rates.41-43 Mills83 also reported lower decubitus ulcer rates among adult, medical-surgical patients in Magnet versus non-Magnet hospitals in a 2008 study. Hines and Yu55 report that the number of cases of pressure ulcer stages 3 and 4 in the United States is at 257,412 annually. This would average 51.5 cases per hospital. Magnet hospitals have an improved rate of 5%, which would equal an average of 2.5 fewer cases. A daily cost for medical and surgical patients was estimated at $5,177.84


Marketing Return on Investment

An identified benefit of having Magnet status is the marketing opportunities that come to Magnet facilities with publications, presentations, and other opportunities for exposure at the national level. This replaces the costs of advertisements that might otherwise need to be bought at market rates. In a business case analysis completed by the James A. Haley Veteran's Hospital in 2004,85 the page rate was calculated at $10,000 per advertisement.


Other Benefits

In addition to the research-based evidence, there are anecdotal and qualitative benefits to having Magnet status that may not be included in a cost-benefit analysis but do impact the overall health of an organization. Bond ratings and risk management assessments have included Magnet designation in their criteria, and US News and World Report added Magnet designation to its criteria for national best hospitals as a measure of quality and nursing excellence.86 There are reputational benefits of holding Magnet designation, too.


The Magnet Sources of Evidence

In addition to requirements that nurse satisfaction, patient satisfaction, and clinical outcome measures are above the midpoint of the benchmarking data points, there are Magnet sources of evidence that will capture improvements in quality and cost. There are at least 3 sources of evidence that encourage nurses to work on cost improvement. These are demonstrated in Table 2. A review of the actual examples of sources of evidence submitted to the Magnet Recognition Program from June 2009 to December 2009 reveals costs savings and improvements of $5,000 to $20,000 for each nurse-driven improvement project per year.

Table 2 - Click to enlarge in new windowTable 2. Sources of Evidence That Support Cost Improvements

Overall Financial Return

There has been agreement in the literature that there is an overall financial return of Magnet designation.21,49,85,87-90 DeSilets and Pinkerton87 document the financial return on investment including improved retention and decreased turnover, improved satisfaction, improved quality and safety, increased customer attraction for hospital selection, and superior business results with a climb in operating margin from 4% to 16% due to investment in nursing services rather than cutting expenses of salaries and staffing levels. The ability to engage the staff in business and operational review of business outcomes resulted in the staff participating greatly in improved efficiency and effectiveness at the unit levels.91


Each project that results in cost savings, cost avoidance, or increased revenue should be well documented by the CNE and monitored and evaluated during the Magnet journey.92 The value of professional nursing was quantified by Dall et al84 and provided an economic value and monetary assessment of that value of nurse staffing that impacts patient care quality. Their evaluation concluded that adding RNs to the patient bedside would decrease hospital days and result in medical savings. The findings "strengthen the economic case for hospital investment in nursing."84(p104)


Determining the Return on Investment: Developing Your Business Case

Calculating a return on investment provides clear measurement of benefits of a program and can be used to evaluate programs that require upfront resources that result in a longer-term gain. It is an important part of a business case and can add information to the decision-making process.93 For the purposes of this exercise, a case-study approach is taken. Assumptions are made based on the evidence for quality, service, and cost returns. The case assumes a "typical" 500-bed hospital and compares average Magnet hospital characteristics and outcomes to national averages.


The Investment

There are direct costs associated with the process of obtaining Magnet recognition status. For the purposes of this business case, the costs should be those that are over and above the normal costs for running a nursing care service within a hospital. These costs include Magnet application fees, appraiser fees, site visit costs, and document preparation. These direct costs range from $46,000 to $251,000, depending on bed size and resource decisions made by the organization. Each organization needs to determine what its resource needs are during the Magnet journey and determine total costs.


The Return on Investment

Table 3 provides assumptions of the difference between a 500-bed Magnet and non-Magnet hospital. Table 4 demonstrates potential capture of cost improvements in the areas of quality, service, and costs. Based on the literature of improvements in Magnet hospitals and using the data assumptions of a typical 500-bed hospital, cost opportunities and a potential return on investment can be determined for a hospital. The range of cost savings that can possibly be achieved for a typical 500-bed hospital is estimated between $2,308,350 and $2,323,350. Based on estimates of direct costs associated with achieving Magnet, which range from $46,00 to $251,000, the potential resulting return on investment is compelling. Although not every hospital will achieve the level of performance implied by the national assumptions, securing only a modicum of this level of improvement will ensure a multifold return on the investment required.

Table 3 - Click to enlarge in new windowTable 3. Assumptions About 500-Bed Magnet and Non-Magnet Hospitals
Table 4 - Click to enlarge in new windowTable 4. Benefits of Magnet Status

Presenting the Case: Summary

Weaver and Sorrell-Jones3 advocate preparing the business case to both present and persuade key leadership in the organization. This requires establishing the credibility of the CNE as a presenter, finding common ground about the goals that are being achieved by the organization, displaying compelling evidence, and connecting with the audience_ in this case, the executive team.3(p418)


Studies are increasingly adding to the evidence that link nursing care and nursing levels to the ability to improve patient care outcomes and decrease staff turnover.89 Understanding the data and being able to articulate the potential for a strong nursing service that results in decreased costs, improved productivity, and improved healthcare outcomes can influence the level of support for the process of participating in the Magnet Recognition Program. The CNE needs to develop and sharpen skills to speak directly to the business community and encourage its support in investing in nursing as a way to improve safety and quality in patient care.89


The CNE's responsibilities include articulating the value of nursing services within a context of excellence in patient care, safety and quality, and the professional development of staff. Magnet recognition is a framework and a model that has proven results in improving costs through increasing nursing satisfaction, patient satisfaction, and clinical outcomes.




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