Accounting for nursing care

Although nursing care has always been one of the larger single expenses in acute-care hospitals, some experts have never been satisfied with how nurses' services have been lumped into the same overall “room and board” charges as routine hospital costs.

All the way back in 1935, when the American Hospital Association published its first industrywide financial and statistics guide of U.S. hospitals, the authors recommended that nursing costs be determined separately from room and board to clarify the accounting of what it costs to treat hospital patients.

But it was not to be. Instead, the cost of nursing was “buried along with brooms, breakfast, and the building mortgage,” hurting the visibility of nursing contributions to healthcare for the better part of a century, nursing scholars John Devereaux Thompson and Donna Diers wrote in the now out-of-print textbook Managing Hospital Resources in 1991.

Longtime nursing researcher John Welton has not given up the fight. He says hospitals could not only improve their operations, but some could even benefit their bottom lines if his ideas about linking nursing intensity to medical billing came to fruition.

Welton—named dean of the School of Nursing and Health Sciences at Florida Southern College, Lakeland, this year—has been studying what could be different if the more than $200 billion cost of hospital nursing was not lumped into the undifferentiated “blob” of room-and-board costs. The study could wrap up next year, depending on the demands on his academic role, he says.

“We've created a system where we've hidden the true cost of nursing care,” Welton says. “The argument I make is, we need to identify the cost of nursing intensity on a per-patient basis. The old assumptions that the hospital accounting system was based on, which was based in 1930s, don't hold any longer. But we're still stuck in them.”

Observers say one of the biggest weaknesses of the current billing system, which relies on patient diagnosis codes, is that ancillary factors such as drugs and laboratory testing that are easy to account for end up driving the cost of care, even though they may have less impact on what hospitals actually spend on care than the difficult-to-quantify measure of nursing intensity.

Nursing intensity is the widely debated metric describing exactly how many minutes of care a nurse provides to a given patient. Researchers say understanding variations in nursing intensity, both between classifications of patients and among the patients in a given category, is a key in setting up accounting, staffing and billing models that accurately record the true cost of the care that hospitals provide.

Catholic Health Initiatives—a 59-hospital health system based in Denver—is one of several systems contributing nursing-intensity data to the study, although Kathy Sanford, the system's senior vice president and chief nursing officer, says the academic goals are not her primary reason for implementing a new digital system to track intensity. “We're putting this in as a way to understand what patients need,” Sanford says. “As a nurse, I understand that certain patients need more care. This will tell us who those patients are.”

For example, two patients can come in to the hospital for identical reasons, but if one of them has diabetes, their nursing intensity is likely to be different than a patient without the chronic condition.

“This will help us figure out how to more effectively assign our nursing resources,” she says. “It's important to us that we provide the highest quality care possible, and we believe that to do that we have to assign the right nurse so that they're providing the right care to the right patient.”

Joyce Batcheller—a senior vice president and chief nursing officer for the Austin, Texas-based Seton Family of Hospitals, part of Ascension Health—has nurses in 10 hospitals taking part in a nursing intensity project.

The goal is to find out exactly how the allocation of nurses compares to key nursing-sensitive indicators such as patient falls, pressure ulcers and central-line infections. Eventually, the data could be used to, among other things, more accurately tell payers how sick patients in the hospital are and how much nursing labor their treatments require, Batcheller says.

While a nursing-intensity adjustment in billing might not necessarily lead to greater total reimbursement, it will allow hospital officials to talk with specificity about changes in patient acuity and to make the best decisions about allocation of nursing resources as patient loads increase with the aging of the baby boomer population.

“As things start to heat up with more battles about mandated ratios and the cost of healthcare, how do we make sure we're spending money on the right things? I think the timing is good,” Batcheller says.

An official in the hospital and ambulatory policy group at the CMS, who could not speak for attribution for this article, says any implementation of a nursing-intensity factor in CMS billing would not result in larger or smaller reimbursements for the industry, but rather in more accurate payments. In other words, any redistribution of payments among hospitals for more accurate billing would not increase the total amount of payments to the industry.

A study of the issue that the CMS commissioned in 2008 by consulting firm RTI International concluded that although this compression of nursing costs within the billing system was a “critical” problem in the inpatient prospective payment system, there was no feasible way to apply patient-level nursing intensity data unless hospitals agreed to implement a more elaborate billing-code system for inpatient nursing care per diem charges.

Although modern accounting and clinical data systems are producing ever-more information to show that nursing time is not correctly billed for, the systems are usually proprietary and not widely adopted enough to incorporate those nursing intensity measures into standard Medicare billing, according to the RTI report. Observers note that more and more data are becoming available.

Still, Welton is hopeful the idea will take hold at the CMS, and could even help the federal government determine if hospitals are devoting enough nursing care to patients of particular intensity.

“They could say, there's a line in the sand and once you step below that line, you are no longer providing the care to our beneficiaries that you agreed to,” he says. “The data are there, it's just a matter of the political will and the industry will to move these ideas forward.”