1. Welton, John M. PhD, RN

Article Content

On March 23, 2010, the President of the United States signed the Patient Protection and Affordable Care Act. This legislation will have profound effects on the delivery of healthcare in the coming decades by placing increasing emphasis on value-based care. The primary assumption embedded in this policy initiative is that healthcare cost and quality should be viewed together as a complete whole and not as separate entities. The imperative for nurses is to (1) articulate both the nursing product and a price for the provided services related to the quality and safety of care and (2) determine the economic value of nursing care in the healthcare system. The second but equally important issue is how to maintain and enhance the intangible value nurses bring to patient care such as nursing intuition, caring, and trust.1


Recommendations for Change

This article is an extension of the discussion begun at the 2010 American Organization of Nurse Executives annual conference to better identify and understand how nursing care is expended for patients to achieve best value. Optimum nursing care represents a balance between the intensity and quality of the delivered nursing care, including its costs, the safety, and outcomes of that care. The compelling question is how to articulate a value framework for future nursing care delivery models consistent with the intent of healthcare reform? The following strategies are suggested:


* Define and price the nursing "product" separate from room and board and develop alternative accounting and billing models that allocate nursing as a variable cost and intensity to each patient, each day of stay for inpatient settings, or comparable metrics to identify nurses' contribution to care in other settings within the billing and payment system.


* Directly link nurses to patients within operational and clinical databases then use those data to identify the optimum mix of skill, experience, and academic preparation of nurses that provides the best value of nursing care.


* Educate nursing students, staff nurses, nurse managers, and executives on basic business and economic concepts and integrate these concepts throughout all nursing school curricula.


* Work within the research parameters of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (P.L. 111-148) to include nursing costs and intensity within innovative payment and delivery models that will be funded by the Centers for Medicare and Medicaid Services (CMS) Innovation.


* Include specific requirements for the collection of nursing data and participation of nurses within the Independence at Home Demonstration Program for Medicare beneficiaries and the Medicaid Demonstration Project to Evaluate Integrated Care Around Hospitalization that will begin in January of 2011. Include the same nursing data collection requirements for the National Pilot Program on Payment Bundling slated to begin in January of 2013.


* Integrate nurses into the new accountable care organization (ACO) payment structure2 and explicate the nursing roles, resources, and best practices within the ACOs that achieve best outcomes of nursing care.


* Provide greater financial autonomy for nurses, such as developing separate nursing revenue centers within organizations, align nurse costing and billing practices with payment mechanisms, and allow nurses greater control over nursing revenue to achieve the best value of care.



Roadmap to a National Model

Perhaps the greatest challenge in meeting these goals is the current lack of data about nursing care. For example, to achieve better costing models, nursing time and resources need to be allocated to each patient. Hospitals and other healthcare institutions will need to create separate cost centers for nursing care and then specify a billing scheme that is based on actual nursing services provided to each patient. These new accounting practices will allow calculation of a cost-to-charge ratio specific to nursing that can be used in both CMS Diagnosis Related Group (DRG) prospective payment system and other third party reimbursement. Although these are not trivial administrative changes, the data already exist in the form of the nurse to patient assignment and can be incorporated into existing accounting, billing, and financial systems.3


The call for greater control and autonomy over the revenue generated by nurses is provocative and is based on a number of assumptions. The first is that nurses are in the best position to allocate scarce nursing resources to each patient based on need, unit, and facility characteristics, as well as the capabilities and expertise of available nurses. The second assumption is that new and emerging electronic nurse staffing, scheduling, and assignment systems can eliminate much of the burden to collect nursing cost and intensity data.4 Lastly, nurses have continually been acknowledged in an annual Gallup poll as the profession with the highest honesty and ethical standards.5 This raises an intriguing question whether nurses would be better stewards of the nation's healthcare dollars? If business concepts were directly incorporated into all nursing school curricula from prelicensure programs through doctoral education, nurses would have the business skills for making positive disruptive changes to the healthcare system.


Nursing Economic Value

How do we know a patient is getting excellent nursing care and should hospitals or other healthcare institutions receive financial benefit for better outcomes of nursing care? The business case for a value-based nursing care model is to produce better outcomes of care and reduce harmful effects such as infections, pressure ulcers, falls, and others, yet minimize the overall costs of healthcare. This is more than a staffing level or nurse-to-patient ratio discussion.


The dilemma is how to craft a new direction for the profession that focuses on the value of nursing care, its economic component, and the intangible worth that nurses bring to the bedside. The ideal healthcare payment system would reimburse for optimum nursing care, not too much, not too little, based on the actual nursing care needs of patients. Because nursing care represents such a major portion of healthcare expenditures, it is prudent to consider alternative ways to recognize nursing care within existing accounting, billing, and reimbursement structures.



Have the Conversation With Your Chief Executive Officer/Chief Financial Officer

Chief nursing executives should have a conversation with their respective C suite partners, in particular, chief executive officers and chief financial officers, on improving nurse department costing and billing models. The advantage to hospitals and other healthcare organizations it to produce better data about how nursing resources are expended by patient and case mix. Such information could provide a competitive advantage for institutions willing to make changes to their accounting and billing systems by linking nursing costs with payment for various services.


Start Billing for Nursing Services

There are existing revenue codes that can be used to bill for nursing intensity for each patient and each day. There are no reasons why hospitals and other healthcare settings cannot begin to bill directly for nursing care. This would improve transparency by identifying the nursing component of billed services. This is one of the stated goals of healthcare reform and supports the position of the American Hospital Association for greater billing transparency.


Separate Nursing Cost/Revenue Centers

Allocating direct nursing costs and intensity to each patient will allow hospitals and other institutions to better understand true nursing costs and potentially improve reimbursement by identifying billable nursing care. Identifying nursing as a separate revenue center does entail some risk. In particular, who would control the money and how would it be disbursed within an institution? Would nursing specific revenue be used to offset other departments operating at a loss? Could a nursing revenue sharing plan be used as an incentive to improve salaries that may improve recruitment and retention of nurses?


Establish Metrics Linking Nursing Costs and Quality

The ability to identify best nursing practices as well as the optimum level of nursing care will be an important factor in achieving better value within the healthcare system as ACOs are implemented. Physicians and hospitals will have increasing accountability to improve outcomes of care and share costs. Unfortunately, nursing is missing from this discussion, and it is difficult to support bundled payment schemes when nursing costs and intensity are unknown. Adding new nursing specific data linked to individual patients within the costing and billing system will also allow improved analysis of nursing care consistent with the new ACO framework.


Move Focus From Staffing to Assignment

If hospitals and other healthcare institutions add the nurse-patient assignment to electronic operational databases, this would allow identification of which nurses cared for which patients. In the new value-based payment model, reimbursement will be based on not only the resources expended for patient care but also the quality and outcomes of that care. If the nursing profession moves from a staffing perspective to one where individual nursing care is recognized, this could significantly change how we view nursing performance.


Would nurses in general be willing to accept increasing responsibility and accountability if this is tied to monetary or other incentives? This may be a moot point because healthcare reform is already headed in this direction. The remaining question is to what degree does the nursing profession want to engage or perhaps even recommend strategies to realize these national health policy goals from a nursing perspective?



Refocusing on nursing value raises some intriguing questions. Nurses have been a victim of an accounting system developed in the 1930s that treats nursing care as room and board. Many, if not most, of the compelling issues the profession currently face such as appropriate staffing, workload, and the environment which nurses provide care can be tied to the invisibility of nursing within the healthcare finance system. The best way forward is to recognize the opportunity presented by healthcare reform to realize the worth and economic value of nursing care. These efforts will require treating nursing care in a more businesslike manner consistent with emerging ideas about ACOs and value-based purchasing.




1. Rutherford MM. The valuation of nursing begins with identifying value drivers. J Nurs Adm. 2010;40(3):115-120. [Context Link]


2. Fisher ES, Staiger DO, Bynum JP, Gottlieb DJ. Creating accountable care organizations: the extended hospital medical staff. Health Aff (Millwood). 2007;26(1):w44-w57. [Context Link]


3. Welton JM, Zone-Smith L, Bandyopadhyay D. Estimating nursing intensity and direct cost using the nurse-patient assignment. J Nurs Adm. 2009;39(6):276-284. [Context Link]


4. Pickard B, Warner M. Demand management: a methodology for outcomes-driven staffing and patient flow management. Nurse Leader. 2007;5(2):30-34. [Context Link]


5. Saad L. Nurses shine, bankers slump in ethics ratings. November 24, 2008. Available at Accessed May 19, 2010. [Context Link]