Money Matters

Daytonite, BSN, RN · Oct 8, 2006

the first thing is that neither medicare and medicaid allows a hospital to make a profit on patients treated under those plans. is that true?

that's not exactly true. most hospitals are non-profit corporations. they are allowed to make a profit, but it's what they do with the profit that makes the difference. they are supposed to use it toward improving the facility and facility services. if they are a charitable institution then their profit has to be used for their stated charitable purpose. making a profit doesn't stop them from paying competitive wages for good workers. what a corporation does with it's profit depends on the state laws under which it is incorporated.

so my question is, given that no profit is allowed on the bulk of patient treatment and roughly 40% of the balance doesn't even pay their bill, how does a hospital pay its own bills, which might include more money for nurses, the latest in technology, etc.? is it all an accounting game?

this depends on the community of patients the facility treats. i worked for one large city hospital as a manager where i would attend management meetings where the financial officer was always reporting that 50% of the accounts receivable (patient bills) were uncollectible and being written off. how, i wondered, were they able to keep their doors open? the answer is strict budgeting. one way is making sure nursing has no lost charges off their central service carts!

there is one more piece of the puzzle. it is my understanding that medicaid and medicare pay for treatment according to diagnosis. in other words, a fixed amount of money irrespective of how long the patient stays in the hospital or what drugs are prescribed. is that true?

yes. it is called drgs, diagnosis related groups. it is a prospective payment system that was instituted back in the mid-80s as a way to curtail rising medicare costs. there are what are called "overrides" for special cases when patients develop complications and end up staying longer than the drg usually pays. this is something that is handled and managed through the utilization review or quality assurance department of your facility. these professionals know these medical drg guidelines very well and have educated the physicians as well in order to maximize the payment the facility will get while minimizing the resources the patient will use without (and that's an important concept in medicare philosophy) compromising the quality of care the patient is receiving. the drg system also has what are called co-morbidity diagnoses built into it that increase the payments that hospitals get. a comorbidity is something like a patient who has a disease like diabetes in addition to all his/her other problems. so, patient assessment and identification of all a patient's problems is so-o-o important.

some salaries are low because some facilities are just not good at budgeting their costs. every other business in the country was budgeting costs long before medicare got involved as a third party payer of medical insurance. when the people running medicare saw the wastefulness going on in healthcare, they and the legislators felt they needed to curtail the wasteful spending that was going on. the hospitals couldn't get together and do it on their own, so we all got stuck with the government doing it for them. it's our taxes that pay for medicare services.

also, jcaho ties in with all this as well. in order for a facility to be an approved medicare provider of services for medicare beneficiaries they have two choices. they can pass a medicare inspection or be jcaho certified. most facilities chose jcaho certification. you may have heard recently that king drew in la is having to close their er. the reason is because they lost their jcaho accreditation. they failed their current inspection. it's been all over the news out here as community leaders are trying to get them opened up again because of the drain on other nearby ers. what they're not reporting is why they are having to close. well, their problem is with medicare. they could keep their er open, but since most of their patients are medicare and medicaid, they wouldn't be able to bill medicare or medicaid for the patient bills since they lost their jcaho accreditation. those bills would remain unpaid and they'd go broke and know it. we discussed this very thoroughly in my health information management classes this week. medicare and medicaid patients are the bread and butter of most healthcare facilities. payment from medicare and medicaid is pretty much a sure thing as long as the facility has followed all their rules.

i am currently back in school studying health information management and we are learning all about this stuff. medicare is driving what is going on in the payment of healthcare today. good things are also coming from it as well. they are trending care with their supercomputers and have already found modalities of medical care that are much more efficient from analysis of patient data. they are also currently involved in a massive collection of data on medication errors from which will come new methods to reduce mistakes in prescription and administration.

by the way, this prospective payment system, or paying of a lump sum for services provided to medicare patients, is also done for nursing homes, home health care, outpatient services and clinics, and most recently was required by outpatient surgical centers. doctors offices are next on the list, but won't be initiated for a couple more years. when medicare institutes a system like these prospective payment systems, the major medical insurance carriers usually are not far behind in following suit. many insurance companies now have case managers. while some review cases from their office, a good many have cms who go out to hospitals and follow up on hospitalized patients similarly to what the utilization review employees at the hospital do. the difference is that these case managers are employees of the insurance companies, often rns, and their job is to make sure their company's insurance beneficiary gets in and out of that hospital as quickly and with as little money expended toward the treatment of their medical problem as possible. know who's really good at this? hmos.

want to hear more shocking news. nanda and nursing diagnoses figure in to all this too. their role is yet to be instituted, but it is planned for and on the books. isn't healthcare fun?

travel920 · Oct 15, 2006

Thank you. I do know what DRG means. Your explanation helps me to understand and I appreciate it. I do believe that it is a serious mess.

D

bobarb, BSN, RN · Oct 15, 2006

EEEEK!! I HATE nursing diagnoses.......I have never found that spending time coming up with those stupid nursing diagnosis has helped me with patient care. And now they are going to be part of our hospital's reimbursement? Another example (in my opinion) of too much govt. interference. I don't know of a single nurse that I work with who thinks nursing diagnosis is worthwhile. Our joke is always that some BSN or MSN who was going for PhD came up with nursing diagnosis and never actually used it themselves. What is the general opinion here? I would be interested to know.

KCIN · Oct 15, 2006

EEEEK!! I HATE nursing diagnoses.......I have never found that spending time coming up with those stupid nursing diagnosis has helped me with patient care. And now they are going to be part of our hospital's reimbursement? Another example (in my opinion) of too much govt. interference. I don't know of a single nurse that I work with who thinks nursing diagnosis is worthwhile. Our joke is always that some BSN or MSN who was going for PhD came up with nursing diagnosis and never actually used it themselves. What is the general opinion here? I would be interested to know.

please dont be so harsh and negative about the nursing diagnoses,because they are part of the plan of care, with emphasis being placed on the patient. from my understanding, nursing is an independent profession from medicine, ie nurses are not doctors, and so they have developed their plan of adressing issues and concerns regarding patients independent from the physicians, and so here come the nursing diagnoses. if you are extremely dissatisfied with them , then perhaps you could write a book and in that book, make recommendations on how and why we should change the current format, perhaps you can do that as part of your PhD study, just a suggestion.What am actually saying is dont just lash out at nurses and nursing ideas and practices without offering tangible alternatives, and fixes for what are 'problems' to you.yeah they are redundant, but sometimes necessity is the mother of invention, so i urge you to invent something.