DOI: 10.1097/NNA.0b013e31819b71d7

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PMID: 19359883

Issn Print: 0002-0443

Publication Date: 2009/04/01


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Using Nursing Intensity for Medicare Billing and Value-Based Purchasing

Carol A. Watson

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Author Information: President, 2008 American Organization of Nurse Executives, Washington, District of Columbia; and Professor-Clinical, College of Nursing, The University of Iowa, Iowa City.

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Excerpt

As healthcare leaders strive to advance patient safety and focus reimbursement on the quality of care provided, the role of nursing and care provided by nurses has taken on critical importance. It is the view of the American Organization of Nurse Executives (AONE) board of directors that understanding and measuring nursing intensity will improve overall payment accuracy, lead to a better understanding of how nursing care hours and costs are allocated to individual patients by diagnosis-related groups (DRGs) in and across hospitals, identify performance measures for inpatient nursing care, and inform policy makers on the contribution of inpatient nursing care to patient safety and quality.
In 2006, the Centers for Medicare and Medicaid Services (CMS) introduced sweeping changes to the inpatient prospective payment system (IPPS), moving from a charge-based to cost-based reimbursement methodology. This approach was in response to a growing concern that hospital charges, which are the basis for the DRG cost weights, bear little relationship to the true costs of care.1
This policy shift corrects an imbalance in the existing CMS payment system by creating new cost centers that address the differential markup of ancillary charges (Table 1). Unfortunately, the new payment formula leaves the other major cost centers, routine and intensive care (usually referred to as "room and board"), essentially unchanged. Most of the direct nursing costs are contained in these 2 cost centers, and patients are billed at a daily room rate and not for the actual hours of nursing care delivered to each patient. Routine and intensive care charges (room and board) have relatively compressed markups that go back to the early 1970s, when the policy of holding room and board low to contain costs began.2 However, increases in ancillary services were allowed to increase more substantially to accommodate new medical treatments.
The problem with this strategy is that ancillary charges tend to dominate reimbursement, influence hospital strategies for establishing charges, and minimize the valuation of nursing for inpatient care.3 The traditional use of a fixed per diem rate to account for room and board, including nursing labor costs, creates the assumption that all patients receive the same amount of nursing care and the medical diagnosis represented by the DRG wholly explains all nursing care during hospitalization. The lack of nursing-specific data in the administrative and billing abstracts makes nursing "invisible" at the policy making and financing levels of healthcare, even though evidence exists that nursing care time, known as nursing intensity, varies substantially for individual patients.
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