Minimum nurse staffing legislation and the financial performance of California hospitals

To estimate the effect of minimum nurse staffing ratios on California acute care hospitals' financial performance.

Secondary data from Medicare cost reports, the American Hospital Association's (AHA) Annual Survey, and the California Office of Statewide Health Planning and Development (OSHPD) are combined from 2000 to 2006 for 203 hospitals in California and 407 hospitals in 12 comparison states.

The study employs a difference-in-difference analytical approach. Hospitals are grouped into quartiles based on pre-regulation nurse staffing levels in adult medical-surgical and pediatric units (quartile 1=lowest staffing). Differences in operating margin, operating expenses per day, and inpatient operating expenses per discharge for California hospitals within a staffing quartile during the period of regulation are compared to differences at hospitals in comparison states during the same period.

Hospital data from Medicare cost reports are merged with nurse staffing measures obtained from AHA and from OSPHD.

Relative to hospitals in comparison states, operating margins declined significantly for California hospitals in quartiles 2 and 3. Operating expenses increased significantly in quartiles 1, 2, and 3.

Implementation of minimum nurse staffing legislation in California put substantial financial pressure on some hospitals.