RIBN Business Case Analysis and Economic Impact Study March 2013

1. Foundation for Nursing Excellence RIBN Business Case Analysis and Economic Impact StudyMarch 2013 Professor Nicholas Didow Kenan Institute Faculty Fellow Kenan-Flagler Business School University of North Carolina Chapel Hill, NC 27599-3490 919.962.3189 nick_didow@unc.edu David Bridges, CPA Kenan-Flagler Business School University of North Carolina Chapel Hill, NC 27599-3490 828.773.9858 | David_Bridges@unc.edu

2. What is the economic impact of RIBN on its key stakeholders? • The Key Question of this project is -- What is the economic impact of RIBN on its key stakeholders? • The key stakeholders for RIBN are: • Nursing students • Community Colleges • Universities • Hospitals and other “practice provider” employers • This project also tests the two hypotheses that 1) RIBN will be cost neutral for the university and community colleges to participate, and 2) RIBN will result in cost savings and other benefits for RIBN BSN employers also known as practice providers. - 2 -

3. Data came from many secondary and primary sources Major primary data sources: Mary P. “Polly” Johnson, CEO, FFNE Dean Sylvia Brown, ECU SON Dr. Josie Bowman Dean Lenora Campbell, WSSU SON Dean Judy Neubrander, WCU SON Brenda Causey, A-B Tech Community College Jennifer Haygood, CFO, NC Community College System Sharon Morrissey, NC Community College System Renee Batts, NC Community College System Jonathan Pruitt, Office of the President, UNC GA Tremonteo Crawford, CNO, Randolph Hospital Mary Ellen Bonczek, CNO, New Hanover Regional Medical Center Mary Lou Powell, CNO, Rex Health Mary Ann Wilcox, Executive Nurse, Carolinas Health System Linda Hofler, CNO, Vidant Health Virginia Eads, HR, UNC Health Care Amanda Johannessen, HR, Mission Hospital Jean Rienert, HR, Cone Hospital Major secondary data sources: FFNE RIBN Academic Progression in Nursing proposal to Robert Wood Johnson Foundation Investing in Nurse Education: Is There a Business Case for Health Care Employers? Patricia Pittman, Katie Horton, Alex Keeton, and Carolina Herrera, The George Washington University, RWJF Grant 68816, April 11, 2012 http://degreedirectory.org/articles/How_Much_More_Can_I_Earn_by_Completing_a_RN_to_BSN_Program.html http://www.nursingprograms.com/what-is-the-salary-for-a-bsn http://www.bls.gov/ooh/ http://www.cfnc.org/FELS U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), Fall 2010, Institutional Characteristics component and Spring 2011, Student Financial Aid component. U.S. Department of Health and Human Services http://www.ncbon.com/LicensureStats/LicStat-RNWSTAT.asp Carnevale, Anthony P.; Cheach, Ban; Strohl, Jeff; College Majors, Unemployment and Earnings, Not All College Degrees are Created Equal; Center on Education and the Workforce; 2011 Strachota, Ellen, et al.; Reasons Registered Nurses Leave or Change Employment Status; Journal of Nurse Administration; Volume 33, Number 2 p111-117; 2003 Broome, Sarah J.; 2011 NCHA State of the State Report; North Carolina Hospital Association; January 2012 Broome, Sarah J.; 2010 NCHA Workforce Report; North Carolina Hospital Association; May 2010 - 3 -

4. Overview of RIBN Program and Implementation Plan - 4 -

5. RIBN is NOT an RN to BSN completion program, but rather it is a NEW educational track to BSN; will be fully developed by 2020-2021 • Curriculum blends the best of both ADN and BSN • Years 1-3 -- Home-based at community college • Take one university course per semester to maintain admission status and earn credits toward BSN • Most university courses online • Year 1 – General education/ nursing pre-requisites • Years 2 & 3 – Complete ADN program; eligible for RN licensure • Year 4 – Complete BSN degree at university while being eligible to work as RN • Utilizes resources of both the university and the community or private college • Offers lower overall cost for students enrolled in RIBN than traditional BSN A-B Tech CC WCU Source: FFNE/ RIBN - 5 -

6. Current regional RIBN partnerships of community colleges and universities already cover much of the state - 6 -

7. All of the data charts included in this presentation are accessible and will allow you to enter your specific organization’s information. To do this on most of the graphs, click on the graph and then select Design at the top ribbon and then Edit Data.  This does not work for the graphs on pages 8 and 14. For both of these slides, double clicked the graph and then at the bottom left notice that the option to select Sheet 1becomes available. Select this option and you will be able to view the data. - 4 -

8. RIBN student “dual enrollment” growth in community colleges will precede enrollment in universities, as will any incremental costs associated with RIBN Fully developed steady state ongoing student dual enrollments by 2020-2021 will be 763 in community colleges and 175 in universities Source: FFNE/ RIBN RWJF narrative 2012 - 9 -

9. 767 RIBN students will have graduated and entered the workforce by 2021, and an additional 175 RIBN students will graduate and enter the workforce every year thereafter Sources: FFNE/ RIBN RWJF narrative 2012; NC Board of Nursing Licensure Statistics 2012 - 10 -

10. Business Case Analysis and Economic Impact by Stakeholder ADN versus RIBN BSN versus BSN Student Perspective - 11 -

11. Standard parameters and assumptions were factored into Net Present Value calculations to compare ADN, BSN, and RIBN BSN lifetime career earnings • Parameters: • The individual is a North Carolina resident for tuition and student loan purposes. • The calculation was made assuming the student was making the decision in the summer of 2012. • Initial results were calculated assuming that the individual does not obtain a graduate degree or a significant career promotion. • The individual student finances their tuition and living expenses through loans and savings, respectively. • A RIBN student would earn the same starting salary as a BSN student. • Assumptions: • The tuition amount used is an average of all the 4-year and 2-year public institutions in NC. • An individual graduating with a BSN will work for 30 years before retirement. This individual will begin working full-time after their 3rd year of education. • An individual seeking an ADN will work 2 years more than a BSN who spends those 2 years in education instead. • Average inflation is 3.3%. • Student loan interest rates will not significantly change in the next five years. - 12 -

12. Key input values for the analyses used NC statewide tuition cost data and salary averages for the Raleigh metropolitan area ADN Model 2 year education at community college Total tuition cost $3,795.53 Education loans forgiven under FELS RN licensure after 2 years Work for practice provider after 2 year ADN Average ADN starting salary $43,209 Experienced ADN RN salary $60,890 RIBN BSN Model 3 year education at community college, 4th year at university Total tuition cost $10,649.66 Education loans forgiven under FELS RN licensure after 3 years Work for practice provider after 4 year RIBN BSN Average BSN starting salary $45,495 Experienced BSN RN salary $66,316 BSN Model 4 year education at university Total tuition cost $19,825.50 Education loans forgiven under FELS Total tuition exceeds loans forgiven under FELS RN licensure after 4 years Work for practice provider after 4 year BSN Average BSN starting salary $45,495 Experienced BSN RN salary $66,316 Salary sources: www.payscale.com and US Department of Health and Human Services - 13 -

13. Without regard to further career and educational opportunities, personal career earnings from RIBN BSN dominate both other career paths; BSN exceeds ADN after the 30th year • The net present value for a 30-year career RN is approximately $1.95 million. • The career lifetime earnings difference in choosing among these three alternative programs of study ranges from $6,000 to $56,000. • Financially the RIBN program is worth $56,000 more than an ADN program over a 30-year career lifetime. 30-year Career - 14 -

14. Business Case Analysis and Economic Impact by Stakeholder NC Community Colleges and University System - 15 -

15. The financial impact of implementing the RIBN program is significant for both community colleges and for universities • To determine the economic impact of implementing the RIBN plan we estimated the budget and cost effects on both the University and Community College systems. • University: • RIBN students take university distance learning classes in years 1-3 while they attend community college and spend the fourth year of the RIBN program at the university as additional nursing students in the SON. • Tuition revenues for the University will increase as the number of student credit hours increase. • Each University will have to separately identify how this influx of additional students will impact its staffing requirements and operating budget, as well as determining how incremental tuition revenues will be allocated within the university. • Community College: • RIBN students are additional CC enrollments during year 1 as they take prerequisites and general education courses • RIBN student enrollments replace ADN student enrollments in years 2 and 3. • RIBN students take university distance learning classes during years 1-3 in addition to their community college curriculum. • The community colleges will be the primary managers of the RIBN program and will need new Student Success Advocates (SSAs) to recruit students into the RIBN program and manage their progress. • Community colleges will bear the major costs of the additional SSAs. - 16 -

16. Parameters and assumptions in the budget and cost calculations • Parameters: • RIBN student enrollment by academic year was modeled using the FFNE RIBN RWJF narrative dated 2012. • The number of institutions participating in RIBN was modeled using the FFNE RIBN RWJF narrative. • Calculations used the student credit hour model from the WCU / AB-Tech pilot curriculum. • All students are assumed to be NC residents. • Assumptions: • All of the classes taken at the university would be Category IV nursing classes. • The cost for each SSA is $48,000 and each SSA is expected to work part-time at two or more community colleges. • The total enrollment of nursing students will remain constant at the community colleges. • The retention rate for students across all four years of the RIBN program will be 73%. • Universities will hire 1.5 additional faculty per RIBN class size of 20 students plus an additional advisor/staff support person for every 40 RIBN students. • The cost for a university SON faculty is $75,000 and the cost for an advisor/staff support person is $45,000. • The university receives incremental additional annual tuition revenue averaging $5,714 per 4th year RIBN student and the community college receives additional annual tuition revenue averaging $1,645 per 1st year RIBN student. - 17 -

17. When fully developed in 2020, RIBN will cost the community colleges an additional $1,104,000 each year for 23 shared SSA support staff, less $493,500 in incremental tuition YEAR From 2020 forward 23 shared SSA support staff at $48,000 each, 55 participating community colleges. - 18 -

18. Actual incremental annual costs to the community colleges for RIBN after $493,500 in additional annual tuition revenue will stabilize at $610,500 per year after 2020 YEAR From 2020 forward 23 shared SSA support staff at $48,000 each, 55 participating community colleges. - 19 -

19. Actual incremental annual costs to the university for RIBN are expected to be about $1.2M each year from 2020-2021 forward, less $1M in incremental tuition revenue YEAR WCU, WSSU, and ECU SON RIBN planning budgets: 1.5 additional university faculty per 20 RIBN students plus one additional advisor/staff support person per 40 RIBN students; $75,000 per faculty member; $45,000 per advisor/staff support person - 20 -

20. Actual incremental annual costs to the university for RIBN after about $1M in additional annual tuition revenue will stabilize at about $155,050 per year after 2020 YEAR Assumes additional university tuition receipts per RIBN student for 18 online credit hours during years 1-3 and 24 credit hours in year 4 averaging $5,714 per 4th year RIBN student - 21 -

21. The actual expected net total costs for community colleges and universities to develop the RIBN program will stabilize at $765,550 a year from 2020 forward, assuming all incremental tuition revenue is applied to offset incremental direct costs TOTAL ANNUAL COSTS FOR COMMUNITY COLLEGES AND UNIVERSITIES TO OFFER RIBN NET 100% INCREMENTAL TUITION YEAR - 22 -

22. Business Case Analysis and Economic Impact by Stakeholder Practice Provider Perspective - 23 -

23. Cost savings from hiring RIBN graduatesvs ADNs will come primarily from reduced tuition reimbursements and lower RN turnover and RN replacement costs • Monetized savings: • Reduced tuition reimbursements • Lower RN turnover and reduced RN recruitment and “replacement” costs • Additional savings not monetized or included in the current model: • Reduction in costs for shifting physician tasks to more educated nurses • Increased revenues from Pay for Performance payments by Medicare and Medicaid • Model Assumptions and Parameters: • Average maximum annual tuition reimbursement $3,120 (Sources: Vidant Health, UNC Health Care, and Mission Hospital) • Three to five years for ADN to obtain bachelors degree while working full time • Average total tuition reimbursement and other financial support of $9,000 per employee for full time ADN RN to obtain bachelors degree (Sources: Randolph Hospital, Vidant Health) • Annual nurse turnover rate 14% (2010 NCHA Workforce Report, Clinical RNs, page 11) • Target nurse turnover rate 10% • Cost of replacing a nurse $42,000 - 24 -

24. Cost savings for practice providers come from reduced employee turnover expenses andreduced tuition reimbursement expenses for new ADN RNs to obtain bachelors degrees ANNUAL SAVINGS (Tuition reimbursement savings at $9,000 per employee) YEAR - 25 -

25. Annual cost savings for practice providers total $3M+ by 2022 with half of these savings coming from reduced tuition reimbursement expenses for new ADN RNs to obtain bachelors degrees ANNUAL SAVINGS YEAR - 26 -

26. Summary - 27 -

27. What would the average annual costs look like for a fully developed RIBN partnership of four community colleges and one university at two levels of RIBN student enrollment? High volume RIBN partnership: Low volume RIBN partnership: - 28 -

28. Summary of total annual costs for community colleges and universities to offer RIBN (net 100% incremental tuition) and annual savings for practice providers to hire RIBN RNs TOTAL ANNUAL COSTS FOR COMMUNITY COLLEGES AND UNIVERSITIES TO OFFER RIBN NET 100% INCREMENTAL TUITION - 29 -

29. The actual expected costs for community colleges and universities to develop the RIBN program stabilize at $765,550 a year from 2020 forward, while the annual savings for practice providers hiring RIBN students continues to grow year after year Savings for practice providers from reduced tuition reimbursement and reduced employee turnover Costs for CCs & Universities to offer RIBN net 100% incremental tuition YEAR The annual savings for practice providers from reduced employee tuition reimbursement expense alone exceeds the total annual net cost of RIBN for community colleges and universities after 2016 - 30 -

30. So what is the economic impact of RIBN on its key stakeholders? • For nursing students choosing between a two year ADN, a four year BSN, or a RIBN BSN education, the RIBN BSN is more financially worthwhile over a lifetime career than either an ADN or a BSN. RIBN also makes one more eligible than the ADN to be fully engaged in the nursing profession, including leadership, case management, and career ladders. • RIBN is not cost neutral for community colleges, and the current RIBN plan represents an additional annual cost of $610,500 for community colleges from 2020 forward, after applying 100% of additional year 1 RIBN tuition revenue to the direct costs of RIBN. • RIBN is not cost neutral for universities as the current RIBN plan is expected to add an additional $155,050 in annual costs for universities from 2020 forward, after subtracting 100% of additional tuition revenues from increased student enrollment to direct costs of RIBN. • Hiring RIBN BSN graduates rather than ADN nurses saves hospitals and other practice providers in reduced tuition reimbursement costs for new ADN RNs to obtain their bachelors degrees and in lower RN turnover and reduced RN recruitment and “onboarding” replacement expenses. This annual cost savings is estimated to be $3M by 2022 and will grow to almost $4M in annual cost savings by 2030. • The annual cost savings for practice providers solely from reduced employee tuition reimbursement expenses for new ADN RNs to obtain their bachelors degrees exceeds the total annual net cost for community colleges and universities to offer RIBN. - 31 -

31. Hospitals and other practice providers that will benefit from hiring RIBN graduates should fund the additional costs and expenses for community colleges and universities to offer RIBN Recommendation The Foundation for Nursing Excellence, community colleges, and universities working to develop RIBN should engage in discussions with hospitals and other practice providers who will benefit from hiring RIBN graduates to explore the possibility of hospitals and other practice providers funding the additional costs for community colleges and universities to offer RIBN. It is estimated that the annual tuition reimbursement cost savings alone for practice providers will be $1,575,000 a year by 2020, far in excess of the estimated annual net cost of $765,550 for community colleges and universities to offer RIBN at the planned enrollment levels and staffing configurations and assuming 100% of incremental tuition revenue will be allocated against the direct costs to offer RIBN. ADDITIONAL COSTS AND EXPENSES COST SAVINGS AND REVENUE INCREASES COMMUNITY COLLEGES AND UNIVERSITIES THAT DEVELOP AND OFFER RIBN HOSPITALS AND OTHER PRACTICE PROVIDERS THAT BENEFIT FROM HIRING RIBN GRADUATES - 32 -