Return on Investment: Benefits and Challenges of a Baccalaureate Nurse Residency Program

Rosemary Pine, MSN, RN, CDE; Kathryn Tart, EdD, RN, CNE


Nurs Econ. 2007;21(5):13-18, 39. 

In This Article

Strategies for Implementation

To obtain buy-in from all levels of nursing, senior executive endorsement was obtained and communicated with nursing staff. The chief nurse executive provided full support for residency participation in the program. Salary commitment for the residents to attend class, replacement coverage, and funding for program were given. The program was a consistent agenda item at leadership level meetings. An advisory board (an interdisciplinary committee) made up of health care team members met quarterly with the UHC coordinator and facilitators to advise, inform, and recommend processes to maintain the success of the residency program.

Calculating residency program costs. Questions arose on whether the program could produce a strong return on investment. An analysis of the cost and benefits was performed at the end of the first year of the program. Return on investment (ROI) compares the cost in dollars of the program to the net benefits of the program. The following cost factors were considered when reviewing program viability: (a) facility, meeting, refreshment, and material costs; (b) facilitator costs; (c) UT faculty fee; (d) UHC training fees; (e) UHC program cost; and (f) replacement costs for unit-based coverage for the graduate nurse to attend the program post orientation.

The resident's salary was considered after orientation was completed. Salary for 48 residents was based on average orientation completion rate of 3 months. The coordinator's, secretary's, and facilitators' salaries were considered in-kind support (see Table 2 ).

According to Beecroft, Kunzman, and Krozek (2001), the cost of replacing an RN is between 75% to 125% of the RN's annual salary. These figures take into account costs related to recruitment, replacement through overtime, employee orientation, lost productivity, and customer satisfaction. The ROI was calculated with this information based on comparing the traditional method of bringing new graduates to the facility and having a 50% turnover rate and the UHC participation, or the current method and having a 13% turnover rate. A 100% of annual salary was used for calculating the savings related to hiring and replacement costs. Given the standard of replacing 50% of positions, from the traditional method the cost would be $1,372,800 and with the current method the cost would be $274,560. The difference is $1,098,240. The formula used for ROI is shown in Figure 3.

The ROI was calculated based on the net program benefits of $823,680 and program costs of $93,100. The net program benefits divided by program costs furnishes a 8.847 ROI or ROI (%) of 884.75. These benefits provide a conservative estimate.


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