A Comment on Mercy Hospital’s Online Bidding for RN Overtime Staffing

A central tenet of economics is that firms with lower costs are better able to meet their operating objectives, whether the goal be profit maximization or, in the case of non-profits, the provision of community service. Thus, any method that may achieve this goal is eagerly received. In health care, attention has recently been paid to the impact that nursing “shortages” have on the costs of health care providers, particularly in terms of overtime pay and/or agency nursing, which often force hospitals to incur labor-related expenses that far exceed the regular nursing wage. Reducing staffing costs while retaining the current quality and quantity of services would be a step in the right direction. One solution may exist in having workers bid for overtime shifts. Historically, the costs of developing and maintaining a bidding system for nurse staffing far outweighed the potential benefits. However, thanks to the Internet, hospitals have an almost costless way of running a bidding system for overtime. Mercy Hospital in Pittsburgh, PA recently implemented such a system and has found evidence that it has been successful in reducing labor expenses. But before other hospitals and health providers start doing the same, it is important to examine Mercy’s bidding system to see if it can be improved to further reduce costs. In this paper, we utilize some illustrative examples from game theory to demonstrate that Mercy Hospital’s new auction system for R.N. overtime shifts may not maximize the hospital’s interests. Our goal in this paper is not to conclusively prove that the system is flawed, but rather to demonstrate the possibility that the system may be sub-optimal. As such, the hospital may want to change the existing system to better achieve