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Mandatory hospital nurse staffing ratios are under consideration in a number of states without strong empirical evidence of the optimal ratio.To determine whether increases in medical-surgical licensed nurse staffing levels are associated with improvements in patient outcomes for hospitals having different baseline staffing levels.Cross-sectional and fixed-effects regression analyses using a 1993–2001 panel of patient and hospital data from California. Splines define 4 staffing ratios.Adult acute myocardial infarction (AMI) (n = 348,720) and surgical failure to rescue (FTR) (n = 109,066) patients discharged between 1993 and 2001 from 343 California acute care general hospitals.Patient outcomes are 30-day AMI mortality and surgical FTR; 4 baseline staffing levels—4 to 7 patients per licensed nurse [registered nurses (RN) and licensed vocational nurses (LVN)].Significant cross-sectional associations between higher nurse staffing and AMI mortality are reduced in the fixed-effects analyses. Improvements in outcomes were smaller in hospitals with higher baseline staffing: for each RN and RN + LVN increase, respectively, AMI mortality declined by 0.71 (P < 0.05) and by 2.75 percentage points for hospitals with more than 7 patients per nurse compared with 0.19 (P = NS) and 0.28 percentage points (P < 0.05) in hospitals with more than 4 patients per nurse. Significant cross-sectional associations between higher nurse staffing and FTR were not found in the fixed-effects analyses.Strong diminishing returns to nurse staffing improvements and lack of significant evidence that staffing uniformly increases improve outcomes raise questions about the likely cost-effectiveness of implementing state-wide mandatory nurse staffing ratios.