1. Welton, John M. PhD, RN
  2. Harris, Kathy RN, MS, CHE

Article Content

During the late 19th century and the early part of the 20th century, nurses provided care primarily in patients' homes. Families found nurses through lists or registries that were located in nursing schools, medical libraries, and even drug stores. In the 1920s, several medical innovations such as aseptic surgery, radiography, and medical laboratories led to an explosive growth of hospitals. Nurses followed patients from their homes to hospitals continuing the tradition of private duty. Nurses then presented a separate bill to the patient at discharge directly competing with the hospital and physician bills. This direct economic relationship between nurse and patient was short lived as hospitals gained increasing power in the marketplace and absorbed the private duty nurses as employees.1


This historical context is noteworthy for several reasons. First, the emergence of hospitals as the primary setting for healthcare created new business opportunities where, previously, hospitals had been places only for the destitute. Second, nurses were quite entrepreneurial during this time, often marketing their services through a variety of methods. Nurses lost their economic independence when they became employees of the hospital. Last, as hospitals transitioned from philanthropic-supported entities to modern businesses, they struggled with how best to bill for their services. In particular, nurses now made up a large portion of salaries where, in the past, unpaid students delivered most of the inpatient care. Hospitals began to use billing models established by local hotels, and subsequently, nursing expenses were placed into room and board accounts.2 Nurses essentially became "invisible" because there was no separate line item in the hospital bill.


Modern Context

The vestiges of this 1930s accounting system persist today. Modern hospitals bill patients for a room, for example, private or semiprivate, at a fixed daily rate. All nursing care is subsumed within this per diem charge. Nursing costs are rolled up into summary department cost centers and are not itemized in the Medicare Cost Report used to set national Medicare reimbursement rates. The medical diagnosis in the form of the Diagnosis Related Group (DRG) is the primary, if not sole, basis for payment.


The combination of these issues creates several false assumptions. For example, the fixed daily room rate implies that nursing care is static and the same for all patients within the billing code. The use of the DRG as the basis for payment suggests that nursing care is wholly linked to the medical diagnosis. Several recent studies have provided evidence to refute these commonly held notions.


* Inpatient nursing care is highly variable within and across similar nursing units and varies significantly across hospitals.3,4


* Billing for nursing care at a flat per diem rate significantly understates the actual direct costs of nursing care and potentially puts some hospitals at an economic disadvantage.5


* The use of the medical diagnosis (DRG) as the sole basis of payment to hospitals does not adequately represent the nursing care delivered to patients.6



The cumulative evidence of these and other studies provides an imperative to change the manner in which nursing care is billed and reimbursed at US hospitals. The key question is how to accomplish this. It is enticing to consider an independent inpatient nurse billing system similar to the early 20th century. Unfortunately, that would be impractical in the modern hospital environment. The overall concept of recreating the direct link between the nurse and the patient in the billing system is appealing, however. There are 2 main barriers to implementing such a system: (1) there are no universally collected data for capturing actual hours of nursing care delivered to individual patients in hospitals in which to produce a nursing bill for the hospital stay, and (2) there are no itemized nursing costs or total hours of care in the existing routine and intensive care cost centers of the Medicare Cost Report to calculate a cost-to-charge ratio necessary to affect changes in DRG reimbursement.


In April 2006, the Centers for Medicare and Medicaid Services (CMS) proposed sweeping changes to the Inpatient Prospective Payment System.7 The Medical University of South Carolina proposed an alternative model to CMS to include separating nursing charges from room and board and creating a nursing cost center in the cost report.8 The proposal was rejected by CMS primarily due to a lack of data to support an inpatient nurse costing and billing system.


Billing for Inpatient Nursing Care

Both the American Nurses Association and American Organization of Nurse Executives support the overall goals of the Medical University of South Carolina proposal, and both organizations have impanelled experts to address the CMS change to hospital reimbursement. The most daunting task of the initiative, creating a separate revenue code for inpatient nursing care, may actually be relatively easy to implement. An existing but rarely used code, 023X Nursing Incremental Charges, can be used to bill for nursing care independent of the daily room charge. Creating a separate nursing cost center will require modification of the Medicare Cost Report.


An American Organization of Nurse Executives task force is considering strategies to incorporate nursing care into the revised CMS prospective payment system. One approach being evaluated is the creation of a national set of nursing intensity weights that can be used with routine and intensive care revenue codes linked to the DRG. Hospitals could use these weights at discharge to create an independent line item for the direct nursing charge for the hospitalization independent of room and board. This method would not require additional data collection at the point of care. The main weakness is that it does not establish a relationship between individual nurses and patients and does not account for the variability of nursing care delivered to each patient regardless of the DRG.


A second method being considered is to isolate nursing care from per diem room charges by collecting daily nursing intensity data. Cumulative nursing care hours for each patient would be billed directly using the existing 023X revenue code. Such an approach would be independent of the DRG and would allow comparison of nursing care across different hospital settings if these data were combined in a national data repository. The main detractor of a concurrent nursing intensity billing scheme is the administrative burden it places on hospitals to collect accurate daily data.


Perhaps the most practical approach to implementing a national inpatient nurse billing model is to create a hybrid of both methods. A select set of representative hospitals could be invited to collect daily nursing intensity data and bill directly for nursing based on actual hours of care. Aggregate nursing intensity means could be established for each DRG guided by a national panel of experts and updated each year. The incentive for hospitals to collect concurrent nursing intensity data is a more accurate link between costs and reimbursement. Likewise, a shared pool of data would allow comparison of nursing care across many hospital settings. This was the vision of the Nursing Minimum Data Set explicated in the mid-1980s.9


A national inpatient nursing data repository based on charge and time data would allow a wide range of analysis and research not possible today. For example, researchers could examine the distribution of inpatient nursing resources by case mix and provide better models for predicting staffing needs in an increasingly complex and aging patient population. A national minimum data set could also trend nursing costs and intensity independent of the medical diagnosis potentially laying the foundation for a pay for inpatient nursing performance system. Last, the separation of nursing from room and board would again showcase the inherent value of nursing care in much the same way as when nurses of the early 20th century were hired directly by patients and billed separately from the physicians and hospitals.


Future Considerations

The impending revision of hospital prospective payment1 provides a unique opportunity to explore alternative models to cost, bill, and reimburse inpatient nursing care. The historical foundation of the problem is rooted in complex social changes related to how nurses have provided care to patients. Nursing care continues to be overlooked in hospital billing and reimbursement mechanisms. The resolution to the problem will lie in reestablishing a direct link between individual nurses and patients in the administrative and billing databases. Doing so will require minor modification to the Medicare Cost Report and charging for inpatient nursing care independent of the existing daily room rate.




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