17NURSING ECONOMIC$January-February 2008Vol. 26No. 1M

17NURSING ECONOMIC$/January-February 2008/Vol. 26/No.
1
M
AGNET® STATUS IS AWARDED
by the American Nurses’
Credentialing Center
(ANCC) to hospitals that
satisfy a set of criteria designed to
measure the strength and quality
of their professional nursing prac-
tice. Designation as a Magnet hos-
pital originated in the 1980s. It was
awarded to hospitals that were
successful in recruiting and retain-
ing nurses during the nursing
shortage of that time (Gleason,
Sochalski, & Aikin, 1999). It is pur-
ported that nurses in Magnet-des-
ignated hospitals deliver excellent
patient outcomes (The Center for
Nursing Advocacy, 2006). When a
health care organization receives
Magnet designation, it is recogni-
tion of a facility’s attainment of
excellence (ANCC, 2006a).
“The Magnet Recognition Pro-
gram® identifies and defines the
‘Forces of Magnetism’ as the char-
acteristics displayed by health care

organizations that develop and
maintain a professional practice
environment that helps recruit and
retain nurses” (ANCC, 2004). To
date, over 200 hospitals in the
United States and one in Australia
are recognized with Magnet desig-
nation (ANCC, 2006b). For a
health care organization to receive
Magnet designation, the environ-
ment must be provided where
nursing care promotes attainment
of the highest achievable patient
outcomes (ANCC, 2004). Evalu-
ation of patient outcomes is an
important topic because of the
concern about the quality of
healthcare.
One of the 14 Forces of
Magnetism requires a health care
organization to have a professional
model of care. The eligibility
requirements stipulate that this
model must be utilized throughout
the health care system and that the
same philosophy must be used
throughout the system. The model
of care is to “give nurses the
responsibility and authority for the
provision of direct care.” Further,
“the models of care provide for the
continuity of care across the con-
tinuum.” The models take into
consideration patients’ unique

EXECUTIVE SUMMARY
One of the 14 Forces of Mag-
netism requires a health care
organization to have a profes-
sional model of care.
The eligibility requirements stip-
ulate that this model must be
utilized throughout the health
care system and that the same
philosophy must be used
throughout the system.
The American Association of
Critical-Care Nurses Synergy
Model for Patient Care de-
scribes nursing practice based
on eight patient characteristics,
and also describes eight nurse
competencies.
The core concept of the model
is that the needs or characteris-
tics of patients and families
influence and drive the charac-
teristics or competencies of
nurses.
Synergy results when the
needs and characteristics of a
patient, clinical unit, or system
are matched with a nurse’s
competencies.
The synergy model is an excel-
lent framework to organize the
work of patient care throughout
the health care system.
It can be used and applied in
various ways and provides a

comprehensive framework for
assuring success in building a
philosophy that supports the
Forces of Magnetism.
Roberta Kaplow
Kevin D. Reed
The AACN Synergy Model for
Patient Care: A Nursing
Model as a Force of Magnetism
ROBERTA KAPLOW, PhD, RN, AOCNS,
CCNS, CCRN, is a Clinical Nurse Educator,
Innovex, Inc., Parsippany, NJ. She is an
immediate past member of the AACN
Board of Directors and former Director of
the AACN Certification Corporation. She is
also co-editor of Synergy for Clinical
Excellence. The AACN Synergy Model for
Patient Care and Critical Care Nursing.
Synergy for Optimal Outcomes.
KEVIN D. REED, MSN, RN, CNA, BC, is the
Director of Adult Critical Care Services/
Neurosciences, Clarian Health Partners,
Indianapolis, IN, which uses the AACN
Synergy Model for Patient Care as the
model for nursing practice. He is also the
Chair of the AACN Certification Corpora-
tion.
NURSING ECONOMIC$/January-February 2008/Vol. 26/No.

118
needs and provide skilled nurses
and adequate resources to accom-
plish desired outcomes” (ANCC,
2005).
Related Practice Models
While use of a nursing model
to guide care has the potential to
affect patient outcomes, use has
been the subject of criticism. The
primary source of this criticism
has been on their value and pur-
pose in nursing practice. Their
importance in nursing science has
also been doubted (Tierney, 1998;
Wimpenny, 2002).
Despite the questionable value
of nursing models, data from other
multidisciplinary research has
supported a relationship between
use of models and attainment of
patient outcomes, including mor-
tality and patient satisfaction
(Gleason et al., 1999). The data,
however, are variable in their
results.
Earley and colleagues (2006)
compared outcomes of patients who
underwent an appendectomy using
an acute care surgery model with
those using a traditional home-call

attending surgeon model. In this
study, patients with acute appen-
dicitis who were cared for by an
in-house acute care surgeon had
significantly decreased the time to
operation, rupture rate, complica-
tion rate, and hospital length of
stay as compared with the tradi-
tional home-call attending surgeon
model.
Parley (2001) studied persons
with learning disabilities. Data
from this study suggest that out-
comes are improved when a per-
son-centered care model was used.
When this model was used, staff
were being more respectful to
clients and there were improved
opportunities for clients to make
everyday choices. The researcher
concluded that in order for this
model to be effective, a multidisci-
plinary approach to care is essen-
tial.
Siminerio, Zgibor, and Solano
(2004) described use of a chronic
care model to improve diabetes
care processes and outcomes in
clinical settings. Aspects of the
model included decision support,
clinical information systems, self-
management education, and deliv-
ery system design. Improved pa-

tient outcomes were reported with
use of this model.
Mark, Salyer, and Wan (2003)
evaluated the impact of profes-
sional nursing practice on organi-
zational and patient outcomes.
Their results suggest a positive
relationship between professional
nursing practice and nursing satis-
faction but only partial effect on
other organizational or patient out-
comes. Patient outcomes in this
study included patient satisfac-
tion; collaboration among physi-
cians, nurses, and other staff; and
satisfaction with pain relief and
level of comfort sharing concerns
with nurses. Organizational out-
comes included nurses’ work satis-
faction, nursing turnover, and
length of patient stay. In this study,
professional nursing practice was
defined as “a system that supports
registered nurse control over the
delivery of nursing care and the
environment in which care is
delivered” (p. 224).
Results from other studies sug-
gest a relationship between profes-
sional nursing practice and im-
proved patient outcomes. A signifi-
cant inverse relationship has been
reported between professional nurs-
ing practice and mortality rates

(Aiken, Smith, & Lake, 1994; Aiken,
Sloan, Lake, Sochalski, & Weber,
1999). Other researchers revealed a
significant inverse relationship be-
tween professional nursing practice
and needlestick injuries (Aiken,
Sloan, & Klocinski, 1997). Units
with professional nursing practice
reportedly have safer work environ-
ments (Institute of Medicine, 1983).
Burnes-Bolton and colleagues
(1990) reported an increase in
patient satisfaction on a medical/
surgical unit using the cost con-
tainment model of Cedars-Sinai
Medical Center. The authors attrib-
uted the increased patient satisfac-
tion scores based on the percep-
tion that nurses were spending
more time with patients and fami-
lies. Similar findings were report-
ed by Lamb and Huggins (1990),
who reported increased patient
satisfaction and decreased length
of stay in two diagnostic groups.
The model used in this latter study
was the St. Mary’s Professional
Nursing Network.
Daly, Rudy, and Thompson
(1991) evaluated outcomes of
chronically critically ill patients.
They reported increased patient
and family satisfaction in patients

in a special care unit for chronical-
ly critically ill patients as com-
pared with patients in a traditional
intensive care unit.
While some positive relation-
ships between nursing models and
patient outcomes have been
reported, these studies are dated
and a number of methodologic
issues have been reported on these
same studies. These issues relate
to how and why the outcomes
were selected for each of the stud-
ies, sampling issues, lack of ran-
domization, lack of a theoretical
link between the nursing model
and patient outcomes selected,
and timing of the studies
(Weisman, 2006).
Patient Care
In the 1990s, the American
Association of Critical-Care Nurses
(AACN) assembled a think tank to
discuss an envisioned new para-
digm for nursing practice and cre-
ate a conceptual framework for
certified practice. The think tank
members agreed that certified
practice should be based on meet-
ing patient needs and optimizing
outcomes rather than delineating a
set of skills performed by nurses

caring for acute and critically ill
patients (Hardin, 2005).
From the original work of the
think tank came a description of
characteristics a patient brings to a
health care setting and a set of
competencies that a nurse brings
to the bedside. Those original lists
were later modified by a group of
1
Table 1.
Characteristics of Patients, Clinical Units, and
Systems of Concern to Nurses
subject matter experts to the eight
patient characteristics and eight
nurse competencies of the AACN
Synergy Model of Patient Care
(Hardin, 2005).
Patient Care describes nursing
practice based on the eight patient
characteristics. These characteris-
tics span the health-illness contin-
uum (AACN, 2006). The patient
characteristics are resiliency, vul-
nerability, stability, complexity,
resource availability, participation

in care, participation in decision
making, and predictability.
The synergy model also de-
scribes eight nurse competencies.
These competencies consist of
clinical judgment, advocacy and
moral agency, caring practices, col-
laboration, systems thinking,
response to diversity, facilitation
of learning, and clinical inquiry.
According to the synergy model,
“nursing care reflects an integra-
tion of knowledge, skills, experi-
ence, and attitudes needed to meet
the needs of patients and families.
Thus, continuums are derived
from patient needs” (AACN,
2006). The continuum ranges from
1 to 5, where 1 = competent; 5 =
expert (AACN, 2006). Each of the
patient characteristics and nurse
competencies are described in
Tables 1 and 2, respectively.
The core concept of the model
is that the needs or characteristics
of patients and families influence
and drive the characteristics or
competencies of nurses. Synergy
results when the needs and charac-
teristics of a patient, clinical unit, or
system are matched with a nurse’s
competencies (AACN, 2006).
The underlying tenets of the

synergy model are: (a) patients’
characteristics are of concern to
nurses; (b) nurses’ competencies
are important to patients; (c) pa-
tients’ characteristics drive nurses’
competencies; and (d) when pa-
tients’ characteristics and nurses’
competencies match and syner-
gize, outcomes for the patient are
optimal (Hardin & Kaplow, 2005).
The assumptions guiding the
RESILIENCY: The capacity to return to a restorative level of
functioning using
compensatory/coping mechanisms; the ability to bounce back
quickly after an insult.
Level 1
Minimally resilient. Unable
to mount a response; fail-
ure of compensatory/cop-
ing mechanisms; minimal
reserves; brittle.
Level 3
Moderately resilient. Able to
mount a moderate response;
able to initiate some degree
of compensation; moderate
reserves.
Level 5
Highly resilient. Able to
mount and maintain a
response; intact compensa-

tory/coping mechanisms;
strong reserves; endurance.
VULNERABILITY: Susceptibility to actual or potential
stressors that may adversely affect
patient outcomes.
Level 1
Highly vulnerable.
Susceptible; unprotected,
fragile.
Level 3
Moderately vulnerable.
Somewhat susceptible; some-
what protected.
Level 5
Minimally vulnerable. Safe;
out of the woods; protected,
not fragile.
STABILITY: The ability to maintain a steady-state equilibrium.
Level 1
Minimally stable. Labile;
unstable; unresponsive to
therapies; high risk of
death.
Level 3
Moderately stable. Able to
maintain steady state for limit-
ed period of time; some
responsiveness to therapies.

Level 5
Highly stable. Constant;
responsive to therapies; low
risk of death.
COMPLEXITY: The intricate entanglement of two or more
systems (e.g., body, family, therapies).
Level 1
Highly complex. Intricate;
complex patient/ family
dynamics;
ambiguous/vague; atypical
presentation.
Level 3
Moderately complex.
Moderately involved
patient/family dynamics.
Level 5
Minimally complex.
Straightforward; routine
patient/family dynamics; sim-
ple/clear cut; typical presenta-
tion.
RESOURCE AVAILABILITY: Extent of resources (e.g.,
technical, fiscal, personal, psychological,
and social) the patient/family/ community bring to the situation.
Level 1
Few resources. Necessary
knowledge and skills not
available; necessary finan-
cial support not available;

minimal personal/psycho-
logical supportive
resources; few social sys-
tems resources.
Level 3
Moderate resources. Limited
knowledge and skills available;
limited financial support avail-
able; limited personal/psycho-
logical supportive resources;
limited social systems
resources.
Level 5
Many resources. Extensive
knowledge and skills available
and accessible; financial
resources readily available;
strong personal/ psychologi-
cal supportive resources;
strong social systems
resources.
PARTICIPATION IN CARE: Extent to which patient/family
engages in aspects of care.
Level 1
No participation. Patient
and family unable or unwill-
ing to participate in care.
Level 3
Moderate level of participa-
tion. Patient and family need
assistance in care.

Level 5
Full participation. Patient and
family fully able to participate
in care.
Table continues on next page
120
Table 2.
Nurse Competencies of Concern to Patients,
Clinical Units, and Systems
CLINICAL JUDGMENT: Clinical reasoning, which includes
clinical decision making, critical think-
ing, and a global grasp of the situation, coupled with nursing
skills acquired through a process
of integrating formal and informal experiential knowledge and
evidence-based guidelines.
Level 1
Collects basic-level data; fol-
lows algorithms, decision
trees, and protocols with all
populations and is uncom-
fortable deviating from them;
matches formal knowledge
with clinical events to make
decisions; questions the lim-
its of one’s ability to make
clinical decisions and dele-

gates the decision making to
other clinicians; includes
extraneous detail.
Level 3
Collects and interprets com-
plex patient data; makes clini-
cal judgments based on an
immediate grasp of the whole
picture for common or rou-
tine patient populations; rec-
ognizes patterns and trends
that may predict the direction
of illness; recognizes limits
and seeks appropriate help;
focuses on key elements of
case, while shorting out
extraneous details.
Level 5
Synthesizes and interprets
multiple, sometimes conflict-
ing, sources of data; makes
judgment based on an imme-
diate grasp of the whole pic-
ture, unless working with
new patient populations; uses
past experiences to anticipate
problems; helps patient and
family see the “big picture;”
recognizes the limits of clini-
cal judgment and seeks mul-
tidisciplinary collaboration
and consultation with com-
fort; recognizes and responds
to the dynamic situation.

Table 1. (continued)
Characteristics of Patients, Clinical Units, and
Systems of Concern to Nurses
PARTICIPATION IN DECISION MAKING: Extent to which
patient/family engages in decision
making.
Level 1
No participation. Patient
and family have no capacity
for decision making;
requires surrogacy.
Level 3
Moderate level of participa-
tion. Patient and family have
limited capacity; seeks input/
advice from others in decision
making.
Level 5
Full participation. Patient and
family have capacity, and
makes decision for self.
PREDICTABILITY: A characteristic that allows one to expect a
certain course of events or
course of illness.
Level 1
Not predictable. Uncertain;
uncommon patient
population/illness; unusual

or unexpected course; does
not follow critical pathway,
or no critical pathway
developed.
Level 3
Moderately predictable.
Wavering; occasionally noted
patient population/illness.
Level 5
Highly predictable. Certain;
common patient population/
illness; usual and expected
course; follows critical path-
way.
SOURCE: American Association of Critical Care Nurses
Certification Corporation.
http://www.aacn.org/DesktopModules/Certifications/pages/Certi
fications/general/synmodel.aspx
#Patient
AACN Synergy Model for Patient
Care are:
• Patients are biological, psycho-
logical, social, and spiritual
entities who present at a partic-
ular developmental stage. The
whole patient (body, mind,
and spirit) must be consid-
ered.
• The patient, family, and com-
munity all contribute to pro-

viding a context for the nurse-
patient relationship.
• Patients can be described by a
number of characteristics. All
characteristics are connected
and contribute to each other.
Characteristics cannot be
looked at in isolation.
• Similarly, nurses can be de-
scribed on a number of dimen-
sions. The interrelated dimen-
sions paint a profile of the
nurse.
• A goal of nursing is to restore a
patient to an optimal level of
wellness as defined by the
patient. Death can be an
acceptable outcome, in which
the goal of nursing care is to
move a patient toward a peace-
ful death (AACN, 2006).
Since its inception in the
1990s, the synergy model has been
used in a variety of clinical and
academic settings. Reed, Cline,
and Kerfoot (2007) from Clarian
Health Partners, Indianapolis, IN,
which has Magnet designation,
describe how the synergy model
has been implemented in their
facilities. Other facilities nation-
wide are in various phases of

implementing the model. Pope
(2002) suggests considering imple-
menting the synergy model to opti-
mize patient outcomes. Several
clinical anecdotes and case studies
of how the synergy model was
implemented and optimized pa-
tient outcomes in the clinical prac-
tice setting are available on the
AACN Web site at www.certcorp.
org/certcorp/certcorp.nsf/edcfc72
ba47aaa708825666b0064bdcf/53b
a8a716a70373d882567f700046eb4
?OpenDocument.
1
The Synergy Model as a
Professional Model of Care
Conceptual models are impor-
tant because they illuminate what
is essential or relevant to a disci-
pline (Curley, 2004). The evidence
that has been presented supports
the idea that models for profes-
sional nursing practice lead to
improved patient outcomes. When
utilized as a professional model of
care, the synergy model provides a
framework that defines the nurse’s

relationship with the patient, other
nurses, and the health care system.
The model can also facilitate the
evolution of a common language
for nurses in identifying and com-
municating the needs of patients.
It provides a viable means for
delineating the role of professional
nurses in directly impacting the
outcomes of patients and ultimate-
ly the overall success of health
care organizations (Reed et al.,
2007).
The synergy model is an excel-
lent framework to organize the
work of patient care throughout
the health care system (Kerfoot,
2004). It can be used and applied
in various ways and provides a
comprehensive framework for
assuring success in building a phi-
losophy that supports the Forces of
Magnetism. The three components
of the model (patient characteris-
tics, nurse competencies, and the
health care environment) are all
integral parts that interact hyper-
dynamically to form a professional
model of practice.
The patient side of the model
provides a means of describing
patients and their families in a way
that resonates with nurses and
other caregivers. It provides the

opportunity to build a common
language for caregivers as they de-
scribe patient needs. More impor-
tantly, it emphasizes patient cen-
trality and the need to know the
patient. Further, the patient side of
the model facilitates the develop-
ment of nursing practice that is
grounded in the nurse-to-patient
relationship.
ADVOCACY AND MORAL AGENCY: Working on another’s
behalf and representing the concerns
of the patient/family and nursing staff; serving as a moral agent
in identifying and helping to
resolve ethical and clinical concerns within and outside the
clinical setting.
Level 1
Works on behalf of patient;
self-assesses personal val-
ues; aware of ethical con-
flicts/issues that may sur-
face in clinical setting;
makes ethical/moral deci-
sions based on rules; rep-
resents patient when
patient cannot represent
self; aware of patients’

rights.
Level 3
Works on behalf of patient
and family; considers patient
values and incorporates in
care, even when differing
from personal values; sup-
ports colleagues in ethical
and clinical issues; moral
decision making can deviate
from rules; demonstrates give
and take with patient’s family,
allowing them to speak/repre-
sent themselves when possi-
ble; aware of patient and fam-
ily rights.
Level 5
Works on behalf of patient,
family, and community; advo-
cates from patient/family per-
spective, whether similar to or
different from personal val-
ues; advocates ethical conflict
and issues from patient/family
perspective; suspends rules;
patient and family drive moral
decision making; empowers
the patient and family to
speak for/represent them-
selves; achieves mutuality
within patient/professional
relationships.
CARING PRACTICES: Nursing activities that create a

compassionate, supportive, and therapeu-
tic environment for patients and staff, with the aim of
promoting comfort and healing and pre-
venting unnecessary suffering. Includes, but is not limited to,
vigilance, engagement, and
responsiveness of caregivers, including family and health care
personnel.
Level 1
Focuses on the usual and
customary needs of the
patient; no anticipation of
future needs; bases care on
standards and protocols;
maintains a safe physical
environment; acknowledges
death as a potential out-
come.
Level 3
Responds to subtle patient
and family changes; engages
with the patient as a unique
patient in a compassionate
manner; recognizes and tai-
lors caring practices to the
individuality of patient and
family; domesticates the
patient’s and family’s environ-
ment; recognizes that death
may be an acceptable out-
come.
Level 5
Has astute awareness and
anticipates patient and family

changes and needs; fully
engaged with and sensing
how to stand alongside the
patient, family, and communi-
ty; caring practices follow the
patient and family lead; antici-
pates hazards and avoids
them, and promotes safety
throughout patient’s and fami-
ly’s transitions along the
health care continuum;
orchestrates the process that
ensures patient’s/family’s
comfort and concerns sur-
rounding issues of death and
dying are met.
Utilizing the eight characteris-
tics of patients embedded in the
AACN Synergy Model, patient
needs can be identified along a
continuum of illness utilizing the
assessment parameters of vulnera-
bility, resiliency, stability, com-
plexity, predictability, resource
availability, participation in deci-
sion making, and participation in
care (Reed et al., 2007). As out-
lined in the eligibility require-
ments for Magnet designation, the
model provides a means for identi-
fying and discussing patients’
needs in an organized and struc-
tured way, addressing their
uniqueness and providing for care

continuity throughout the episode
of illness. The characteristics out-
122
lined by the patient side of the
model can then be utilized to
develop nurse communication via
nurse-to-nurse report, documenta-
tion systems, and the articulation
of patient acuity. The information
collected by assessing the patients’
needs assists in the development
of an individualized plan of care
and helps to identify the nurse
competencies required to meet
those needs.
The nurse characteristics out-
lined by the synergy model pro-
vide a comprehensive and contem-
porary view of the work of nurses
(Curley, 1998). The eight compe-
tencies included in the nurse side
of the model, including clinical
judgment, caring practices, advo-
cacy/moral agency, response to
diversity, clinical inquiry, facilita-
tor of learning, collaboration, and
systems thinking provide a frame-
work to articulate the work of
nurses and enables the ability to
differentiate various levels of

expertise. They can serve as a basis
for nurse job descriptions that dis-
tinguish various levels of nursing
practice for the purpose of skill
enhancement, professional devel-
opment, and career advancement.
The nurse side of the model
delineating the eight characteristics
of nurses can be utilized to differ-
entiate practice and assure that the
competencies of the nurse match
the needs of the patient. It can
serve as a trajectory for career
development, including leadership
skills, that spans the continuum
from novice to expert practitioner.
The environment side of the model
addresses the context in which
patient needs and nurse competen-
cies come together. Without an
environment that supports these
two sides of the model, the synergy
will be less than optimal and the
realization of the best outcomes
will not occur.
The development of job de-
scriptions based on the nurse char-
acteristics of the synergy model
serves as a blueprint for defining
nursing practice and competencies
that link to the needs of patients

COLLABORATION: Working with others (e.g., patients,
families, health care providers) in a way
that promotes/encourages each person’s contributions toward
achieving optimal/realistic
patient/family goals. Involves intra and inter-disciplinary work
with colleagues and community.
Level 1
Willing to be taught,
coached, and/or mentored;
participates in team meet-
ings and discussions
regarding patient care
and/or practice issues;
open to various team
members’ contributions.
Level 3
Seeks opportunities to be
taught, coached, and/or men-
tored; elicits others’ advice and
perspectives; initiates and par-
ticipates in team meetings and
discussions regarding patient
care and/or practice issues;
recognizes and suggests
various team members’
participation.
Level 5
Seeks opportunities to teach,

coach, and mentor and to be
taught, coached, and men-
tored; facilitates active involve-
ment and complementary con-
tributions of others in team
meetings and discussions
regarding patient care and/or
practice issues;
involves/recruits diverse
resources when appropriate to
optimize patient outcomes.
SYSTEMS THINKING: Body of knowledge and tools that allow
the nurse to manage whatever
environmental and system resources exist for the patient/family
and staff, within or across
health care and non-health care systems.
Level 1
Uses a limited array of
strategies; limited outlook
– sees the pieces or com-
ponents; does not recog-
nize negotiation as an alter-
native; sees patient and
family within the isolated
environment of the unit;
sees self as key resource.
Level 3
Develops strategies based on
needs and strengths of
patient/family; able to make
connections within compo-
nents; sees opportunity to
negotiate but may not have

strategies; developing a view
of the patient/family transition
process; recognizes how to
obtain resources beyond self.
Level 5
Develops, integrates, and
applies a variety of strategies
that are driven by the needs
and strengths of the patient/
family; global or holistic out-
look – sees the whole rather
than the pieces; knows when
and how to negotiate and navi-
gate through the system on
behalf of patients and families;
anticipates needs of patients
and families as they move
through the health care system;
utilizes untapped and alterna-
tive resources as necessary.
RESPONSE TO DIVERSITY: The sensitivity to recognize,
appreciate, and incorporate differences
into the provision of care. Differences may include, but are not
limited to, cultural differences,
spiritual beliefs, gender, race, ethnicity, lifestyle,
socioeconomic status, age, and values.
Level 1
Assesses cultural diversity;
provides care based on
own belief system; learns
the culture of the health
care environment.

Level 3
Inquires about cultural differ-
ences and considers their
impact on care; accommo-
dates personal and profession-
al differences in the plan of
care; helps patient/family
understand the culture of the
health care system.
Level 5
Responds to, anticipates, and
integrates cultural differences
into patient/family care; appre-
ciates and incorporates differ-
ences, including alternative
therapies, into care; tailors
health care culture, to the
extent possible, to meet the
diverse needs and strengths of
the patient/family.
1
and their families (Hardin &
Kaplow, 2005). Each of the eight
nurse characteristics of the model
allows for the categorization of
essential elements of nursing prac-
tice that span the continuum of
novice to expert. Performance
standards designed to enhance
patient, nurse, and system out-

comes can then be leveled to form
the framework for a career
advancement program. Movement
along the career advancement con-
tinuum includes progressive de-
grees of autonomy and authority
that evolve through formal and
experiential learning. Defined as
the expectation of independent
nursing judgment, autonomy has
been reported by Magnet hospital
staff nurses as an essential compo-
nent of Magnetism and is one of
the 14 Forces outlined by ANCC
for Magnet hospitals (Kramer &
Schmalenberg, 2004).
Differentiated practice and the
support of professional develop-
ment require ongoing competency-
based educational programming
characterized by judgment, intel-
lect, leadership, and contribution
(Paccini, 2005). Creating this type
of programming to support the use
of the synergy model promotes
higher levels of independent nurs-
ing judgment where autonomy and
accountability are enhanced. Cur-
ricula designed to enhance the
competencies outlined by the
nurse characteristics of the model
can also support movement
toward Magnet status by demon-
strating support and value for per-
sonal and professional growth and

development.
The context of the health care
environment provides the back-
drop for the synergy model and
determines the successful interac-
tion between the nurse and patient
characteristics. This side of the
model includes the gestalt of orga-
nizational values that support, rec-
ognize, reward and, value the con-
tribution of nurses. These qualities
are inherent in the core values of
the Magnet Recognition Program
and include shared decision mak-
ing, competitive salaries, adequate
resources, professional develop-
ment opportunities, and positive
interdisciplinary relationships. It
includes the organizational ele-
ments of excellence in nursing
care that is referred to as the Forces
of Magnetism.
When all three sides of the
synergy model are in place, it can
provide the framework for a pro-
fessional model of care that sup-
ports excellence in nursing care
and satisfies the criteria outlined
in the Magnet designation pro-
gram. When fully developed, it
optimizes the ability to opera-
tionalize all of the Forces of

FACILITATION OF LEARNING: The ability to facilitate
learning for patients/families, nursing
staff, other members of the health care team, and community.
Includes both formal and infor-
mal facilitation of learning.
Level 1
Follows planned education-
al programs; sees
patient/family education as
a separate task from deliv-
ery of care; provides data
without seeking to assess
patient’s readiness or
understanding; has limited
knowledge of the totality of
the educational needs;
focuses on a nurse’s per-
spective; sees the patient
as a passive recipient.
Level 3
Adapts planned educational
programs; begins to recognize
and integrate different ways of
teaching into delivery of care;
incorporates patient’s under-
standing into practice; sees
the overlapping of educational
plans from different health

care providers’ perspectives;
begins to see the patient as
having input into goals; begins
to see individualism.
Level 5
Creatively modifies or devel-
ops patient/family education
programs; integrates
patient/family education
throughout delivery of care;
evaluates patient’s understand-
ing by observing behavior
changes related to learning; is
able to collaborate and incor-
porate all health care
providers’ and educational
plans into the patient/family
educational program; sets
patient-driven goals for educa-
tion; sees patient/family as
having choices and conse-
quences that are negotiated in
relation to education.
CLINICAL INQUIRY: The ongoing process of questioning and
evaluating practice and provid-
ing informed practice. Creating practice changes through
research utilization and experiential
learning.
Level 1
Follows standards and
guidelines; implements
clinical changes and
research-based practices

developed by others; rec-
ognizes the need for fur-
ther learning to improve
patient care; recognizes
obvious changing patient
situation (e.g., deteriora-
tion, crisis); needs and
seeks help to identify
patient problem.
Level 3
Questions appropriateness of
policies and guidelines; ques-
tions current practice; seeks
advice, resources, or informa-
tion to improve patient care;
begins to compare and con-
trast possible alternatives.
Level 5
Improves, deviates from, or
individualizes standards and
guidelines for particular patient
situations or populations;
questions and/or evaluates
current practice based on
patients’ responses, review of
the literature, research and
education/learning; acquires
knowledge and skills needed
to address questions arising in
practice and improve patient
care. (The domains of clinical
judgment and clinical inquiry
converge at the expert level;
they cannot be separated.)

SOURCE: American Association of Critical Care Nurses
Certification Corporation.
http://www.aacn.org/DesktopModules/Certifications/pages/Certi
fications/general/synmodel.
aspx#Nurse
124
Magnetism. It provides a
common philosophy to
clearly set the direction
for what is often referred
to as the “Magnet jour-
ney” by defining the work
of patient care, the profes-
sional development of
nurses, and ultimately
continuous improvement
of patient, nurse, and sys-
tem outcomes.
The synergy model is congru-
ent with the Nursing Care Report
Card for Acute Care Settings frame-
work for outcome analysis (Curley,
1998). When evaluating the use of
the model as a basis for nursing
care delivery, three levels of out-
comes can be delineated; those
derived from the patient, the nurse,
and the health care system. Out-
comes, including nurse-sensitive

indicators that help to distinguish
nursing’s unique contribution to
patients and their families, can be
considered for measurement.
These include such things as
patient satisfaction, complication
rates, failure to rescue, and cost.
Although clear and distinct link-
ages between the use of the model
and outcomes are difficult to infer,
several anecdotal reports illustrat-
ing the results of the use of the syn-
ergy model appear in the literature.
The model has been used in an
array of clinical settings. Descrip-
tive reports and case studies exem-
plify how the model guided clini-
cal care of acute and critically ill
patients (Hardin & Hussey, 2003;
Smith, 2006), and helped to attain
optimal patient outcomes (Annis,
2002; Ecklund & Stamps, 2002;
Hartigan, 2000; Hayes, 2000;
Markey, 2001; Rohde & Moloney-
Harmon, 2001). Additionally, the
model has served as a framework
for conducting nursing rounds
(Mullen, 2002) and in use with
interdisciplinary planning (Annis,
2002; Small & Moynihan, 1999).
The synergy model has also
been implemented by educators
both in the academic setting as the
conceptual framework for clinical

nurse specialist curricula (Cox &
Galante, 2003; Zungolo, 2004) and
in the clinical arena (Kaplow, 2002).
Reports further exemplify how
the synergy model has been used
by advanced practice nurses to pro-
mote optimal patient outcomes.
The model provides a framework
to assist APNs to identify levels of
patient characteristics and match
the needs of the patient and family
with the competencies of the nurse
providing care (Collopy, 1999;
Moloney-Harmon, 1999).
Nurse leaders have utilized
the synergy model in a number of
ways. These include helping de-
termine adequate staffing ratios
(Hartigan, 2000), as a framework
for nurse job descriptions, peer
review evaluations, and develop-
ing a clinical advancement pro-
gram. The developers of this latter
program reported using outcomes
measurements, including financial
indicators, as components of the
program (Czerwinski, Blastic, &
Rice, 1999). Other outcomes re-
ported to be achieved through the
development of a clinical ad-
vancement program using the
model include improvement in
Leapfrog quality and safety meas-

ures, patient satisfaction, nursing
turnover, and the use of contracted
labor (Cox, Reed, & Cline, 2007).$
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07&ContentID=56394

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fifth edition
Managerial
economics
A P R o B L e m s o LV i n G A P P Ro Ac h
luke M. Froeb
Vanderbilt University

Mikhael Shor
University of Connecticut
Brian T. McCann
Vanderbilt University
Michael r. Ward
University of Texas, Arlington
06665_fm_ptg01_i-xvi.indd 1 8/9/17 8:56 PM
WCN 02-200-203
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WCN 02-200-203
WCN 02-200-203
v
Preface: Teaching Students to Solve Problems xiii
SECTION I Problem Solving and Decision Making 1
1 Introduction: What This Book Is About 3
2 The One Lesson of Business 15
3 Benefits, Costs, and Decisions 25
4 Extent (How Much) Decisions 37
5 Investment Decisions: Look Ahead and Reason Back 49
SECTION II Pricing, Costs, and Profits 65
6 Simple Pricing 67

7 Economies of Scale and Scope 83
8 Understanding Markets and Industry Changes 95
9 Market Structure and Long-Run Equilibrium 113
10 Strategy: The Quest to Keep Profit from Eroding 125
11 Foreign Exchange, Trade, and Bubbles 137
SECTION III Pricing for Greater Profit 151
12 More Realistic and Complex Pricing 153
13 Direct Price Discrimination 163
14 Indirect Price Discrimination 171
SECTION IV Strategic Decision Making 183
15 Strategic Games 185
16 Bargaining 205
SECTION V Uncertainty 215
17 Making Decisions with Uncertainty 217
18 Auctions 233
19 The Problem of Adverse Selection 243
20 The Problem of Moral Hazard 255
BrieF COnTenTS

WCN 02-200-203
vi BRIEF CONTENTS
SECTION VI Organizational Design 267
21 Getting Employees to Work in the Firm’s Best Interests 269
22 Getting Divisions to Work in the Firm’s Best Interests 283
23 Managing Vertical Relationships 295
SECTION VII Wrapping Up 307
24 Test Yourself 309
Epilogue: Can Those Who Teach, Do? 315
Glossary 317
Index 325

WCN 02-200-203
vii
Preface: Teaching Students to Solve Problems xiii
SECTION I Problem Solving and Decision Making 1
CHAPTER 1 INTRODUCTION: WHAT THIS BOOk IS ABOUT
3
1.1 Using Economics to Solve Problems 3
1.2 Problem-Solving Principles 4
1.3 Test Yourself 6
1.4 Ethics and Economics 7
1.5 Economics in Job Interviews 9
Summary & Homework Problems 11
End Notes 13
CHAPTER 2 THE ONE LESSON Of BUSINESS 15
2.1 Capitalism and Wealth 16
2.2 Does the Government Create Wealth? 17
2.3 How Economics Is Useful to Business 18

2.4 Wealth Creation in Organizations 21
End Notes 23
CHAPTER 3 BENEfITS, COSTS, AND DECISIONS 25
3.1 Background: Variable, Fixed, and Total Costs 26
3.2 Background: Accounting versus Economic Profit 27
3.3 Costs Are What You Give Up 29
3.4 Sunk-Cost Fallacy 30
3.5 Hidden-Cost Fallacy 32
3.6 A Final Warning 32
End Notes 36
CHAPTER 4 ExTENT (HOW MUCH) DECISIONS 37
4.1 Fixed Costs Are Irrelevant to an Extent Decision 38
4.2 Marginal Analysis 39
4.3 Deciding between Two Alternatives 40
COnTenTS

WCN 02-200-203
CONTENTSviii
4.4 Incentive Pay 43
4.5 Tie Pay to Performance Measures That Reflect Effort 44
4.6 Is Incentive Pay Unfair? 45
End Notes 48
CHAPTER 5 INVESTMENT DECISIONS: LOOk AHEAD AND
REASON BACk 49
5.1 Compounding and Discounting 49
5.2 How to Determine Whether Investments Are Profitable 51
5.3 Break-Even Analysis 53
5.4 Choosing the Right Manufacturing Technology 55
5.5 Shut-Down Decisions and Break-Even Prices 56
5.6 Sunk Costs and Post-Investment Hold-Up 57
End Notes 62
SECTION II Pricing, Costs, and Profits 65

CHAPTER 6 SIMPLE PRICING 67
6.1 Background: Consumer Values and Demand Curves 68
6.2 Marginal Analysis of Pricing 70
6.3 Price Elasticity and Marginal Revenue 72
6.4 What Makes Demand More Elastic? 75
6.5 Forecasting Demand Using Elasticity 76
6.6 Stay-Even Analysis, Pricing, and Elasticity 77
6.7 Cost-Based Pricing 78
End Notes 81
CHAPTER 7 ECONOMIES Of SCALE AND SCOPE 83
7.1 Increasing Marginal Cost 84
7.2 Economies of Scale 86
7.3 Learning Curves 87
7.4 Economies of Scope 89
7.5 Diseconomies of Scope 90
End Notes 94
CHAPTER 8 UNDERSTANDING MARkETS AND INDUSTRy
CHANGES 95
8.1 Which Industry or Market? 95
8.2 Shifts in Demand 96
8.3 Shifts in Supply 98

8.4 Market Equilibrium 99
8.5 Predicting Industry Changes Using Supply and Demand 100
8.6 Explaining Industry Changes Using Supply and Demand
103
8.7 Prices Convey Valuable Information 104
8.8 Market Making 106
WCN 02-200-203
CONTENTS ix
End Notes 111
CHAPTER 9 MARkET STRUCTURE AND LONG-RUN
EqUILIBRIUM 113
9.1 Competitive Industries 114
9.2 The Indifference Principle 116
9.3 Monopoly 120

End Notes 123
CHAPTER 10 STRATEGy: THE qUEST TO kEEP PROfIT
fROM ERODING 125
10.1 A Simple View of Strategy 126
10.2 Sources of Economic Profit 128
10.3 The Three Basic Strategies 132
End Notes 136
CHAPTER 11 fOREIGN ExCHANGE, TRADE, AND BUBBLES
137
11.1 The Market for Foreign Exchange 138
11.2 The Effects of a Currency Devaluation 140
11.3 Bubbles 142
11.4 How Can We Recognize Bubbles? 144
11.5 Purchasing Power Parity 146
End Notes 149
SECTION III Pricing for Greater Profit 151
CHAPTER 12 MORE REALISTIC AND COMPLEx PRICING
153

12.1 Pricing Commonly Owned Products 154
12.2 Revenue or Yield Management 155
12.3 Advertising and Promotional Pricing 157
12.4 Psychological Pricing 158
End Notes 162
CHAPTER 13 DIRECT PRICE DISCRIMINATION 163
13.1 Why (Price) Discriminate? 164
13.2 Direct Price Discrimination 166
13.3 Robinson-Patman Act 167
13.4 Implementing Price Discrimination 168
13.5 Only Schmucks Pay Retail 169
End Notes 170
WCN 02-200-203
CONTENTSx

CHAPTER 14 INDIRECT PRICE DISCRIMINATION 171
14.1 Indirect Price Discrimination 172
14.2 Volume Discounts as Discrimination 176
14.3 Bundling Different Goods Together 177
End Notes 181
SECTION IV Strategic Decision Making 183
CHAPTER 15 STRATEGIC GAMES 185
15.1 Sequential-Move Games 186
15.2 Simultaneous-Move Games 188
15.3 Prisoners’ Dilemma 190
15.4 Other Games 195
End Notes 202
CHAPTER 16 BARGAINING 205
16.1 Strategic View of Bargaining 206
16.2 Nonstrategic View of Bargaining 208
16.3 Conclusion 210
End Note 214

SECTION V Uncertainty 215
CHAPTER 17 MAkING DECISIONS WITH UNCERTAINTy
217
17.1 Random Variables and Probability 218
17.2 Uncertainty in Pricing 222
17.3 Data-Driven Decision Making 223
17.4 Minimizing Expected Error Costs 226
17.5 Risk versus Uncertainty 227
End Notes 231
CHAPTER 18 AUCTIONS 233
18.1 Oral Auctions 234
18.2 Second-Price Auctions 235
18.3 First-Price Auctions 236
18.4 Bid Rigging 236
18.5 Common-Value Auctions 238
End Notes 242
CHAPTER 19 THE PROBLEM Of ADVERSE SELECTION 243
19.1 Insurance and Risk 243
19.2 Anticipating Adverse Selection 244

WCN 02-200-203
CONTENTS xi
19.3 Screening 246
19.4 Signaling 249
19.5 Adverse Selection and Internet Sales 250
End Notes 253
CHAPTER 20 THE PRoblEm of moRAl HAzARd 255
20.1 Introduction 255
20.2 Insurance 256
20.3 Moral Hazard versus Adverse Selection 257
20.4 Shirking 258
20.5 Moral Hazard in Lending 260
20.6 Moral Hazard and the 2008 Financial Crisis 261
End Notes 265

SECTIoN VI organizational design 267
CHAPTER 21 GETTING EmPloyEES To WoRk IN THE fIRm’S
bEST INTERESTS 269
21.1 Principal–Agent Relationships 270
21.2 Controlling Incentive Conflict 271
21.3 Marketing versus Sales 273
21.4 Franchising 274
21.5 A Framework for Diagnosing and Solving Problems 275
End Notes 281
CHAPTER 22 GETTING dIVISIoNS To WoRk IN THE fIRm’S
bEST INTERESTS 283
22.1 Incentive Conflict between Divisions 283
22.2 Transfer Pricing 285
22.3 Organizational Alternatives 287
22.4 Budget Games: Paying People to Lie 289
End Notes 294
CHAPTER 23 mANAGING VERTICAl RElATIoNSHIPS 295
23.1 How Vertical Relationships Increase Profit 296
23.2 Double Marginalization 297

23.3 Incentive Conflicts between Retailers and Manufacturers
297
23.4 Price Discrimination 299
23.5 Antitrust Risks 300
23.6 Do Buy a Customer or Supplier Simply Because It Is
Profitable 301
End Notes 304
WCN 02-200-203
CONTENTSxii
SECTION VII Wrapping Up 307
CHAPTER 24 TEST yOURSELf 309
24.1 Should You Keep Frequent Flyer Points for Yourself? 309
24.2 Should You Lay Off Employees in Need? 310
24.3 Manufacturer Hiring 310

24.4 American Airlines 311
24.5 Law Firm Pricing 311
24.6 Should You Give Rejected Food to Hungry Servers? 312
24.7 Managing Interest-Rate Risk at Banks 313
24.8 What You Should Have Learned 313
Epilogue: Can Those Who Teach, Do? 315
Glossary 317
Index 325
WCN 02-200-203
xiii
teaching students to solve Problems1
by Luke Froeb

When I started teaching MBA students, I taught economics as I
had learned
it, using models and public policy applications. My students
complained so
much that the dean took me out to the proverbial woodshed and
gave me
an ultimatum, “improve customer satisfaction or else.” With the
help of some
disgruntled students who later became teaching assistants, I was
able to turn
the course around.
The problem I faced can be easily described using the language
of eco-
nomics: the supply of business education (professors are trained
to provide
abstract theory) is not closely matched to demand (students
want practical
knowledge). This mismatch is found throughout academia, but it
is perhaps
most acute in a business school. Business students expect a
return on a fairly
sizable investment and want to learn material with immediate
and obvious
value.

One implication of the mismatch is that teaching economics in
the usual
way—with models and public policy applications—is not likely
to satisfy stu-
dent demand. In this book, we use what we call a “problem-
solving pedagogy”
to teach microeconomic principles to business students. We
begin each chapter
with a business problem, like the fixed-cost fallacy, and then
give students just
enough analytic structure to understand the cause of the
problem and how to
fix it.
Teaching students to solve real business problems, rather than
learn models,
satisfies student demand in an obvious way. Our approach also
allows stu-
dents to absorb the lessons of economics without as much of the
analytical
“overhead” as a model-based pedagogy. This is an advantage,
especially in a
terminal or stand-alone course, like those typically taught in a
business school.

To see this, ask yourself which of the following ideas is more
likely to stay
with a student after the class is over: the fixed-cost fallacy or
that the partial
derivative of profit with respect to price is independent of fixed
costs.
eleMenTS OF a PrOBleM-SOlving PedagOgy
Our problem-solving pedagogy has three elements.
PreFaCe
WCN 02-200-203
xiv PREFaCE
1. Begin with a Business Problem
Beginning with a real-world business problem puts the
particular ahead of the

abstract and motivates the material in a straightforward way.
We use narrow,
focused problems whose solutions require students to use the
analytical tools
of interest.
2. Teach Students to view inefficiency as an Opportunity
The second element of our pedagogy turns the traditional focus
of benefit–
cost analysis on its head. Instead of teaching students to spot
and eliminate
inefficiency, for example, by changing public policy, we teach
them to view
each underemployed asset as a money-making opportunity.
3. Use economics to implement

17NURSING ECONOMIC$January-February 2008Vol. 26No. 1M

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