1. Budgeting for Nursing Care
Knowing how many RNs you need, Knowing what it will cost
Knowing how to keep them
First of 3 talks about budging for nursing care

2. Staffing and Patient Needs
Research validates contribution of RNs to improved patient outcomes and prevention of premature mortality
Primary considerations for staffing a nursing unit
Number of patients
Intensity of care required
Staff experience and preparation
Geography of the environment
Available technology
Research evidence tells us that nurses contribute to improving pt outcomes and preventing premature mortality
Nurses are an essential resource to the care delivery system.
The question is how many nurses do you need to meet the charge of the IOM to deliver care that is safe, effective, efficient, equitable, timely and patient centered?
Considerations for staffing will include the number of patients and the complexity of the needed care,
the mix of experienced verses more novice nurses,
the work space and its affect on time to accomplish tasks,
and the availability of technology which will either improve efficiency of the nurses work or add to the work load.

3. Staffing and Patient Needs (Cont’d)
Patient classification systems
Categorize patients according to care needs (acuity level)
Higher acuity levels mean that nursing care needs are more intense
To determine the complexity of care that is needed, we use a pt class system.
These acuity systems were developed using time and motion studies to determine the amount of time it takes to do particular tasks.
Nurses input the data and then then number of hours of needed care are determined.
Higher acuity means that nursing care needs are more intense and take more time.

4. Staffing and Patient Needs (Cont’d)
ANA recommends that classification systems should consider patients’:
Age and functional ability
Communication skills
Cultural and linguistic diversities
Severity and urgency of the admitting condition
Scheduled procedures
Ability to meet health care requisites
Availability of social supports
Other specific needs identified by patient and RN
The ANA recommends that additional considerations be given for the determination of nursing care needs.
These items may or may not be accounted for in an acuity system, but are important determinants of the needed nursing time
For instance if there are language differences, it will require the use of a translator or translation device with will slow the delivery of nursing care.
Or if the patient has particular social concerns which need to be addressed, the nurse will have to take time for that.

5. Staffing and Organizational Needs
Organizational needs affected by staffing include:
Financial resources
Licensing regulations and accreditation standards
Customer satisfaction
Efficient staff management ensures the organization’s financial solvency
Nurse manager accountable for budgetary guidelines for:
Numbers of staff working at any given time
Staff mix
RNs the most expensive staff; thus ratios for RNs to other types of care providers may be established
Another consideration is the needs of the organization which may affect the staffing levels.
The financial resources available to hire staff might be an issue.
In CA we must comply with th nurse to pt ratios laws.
And our work is reflected in patient satisfaction surveys.
We are accountable for the efficient use of organization financial resources.
This requires that we have a staffing budget and guidelines for the number and mix of staff working at any given time
Personnel costs account for the largest portion of most business budgets, and registered nurses are expensive staff, so the mix of nurses with other types of staff is important to consider.

6. Staffing and Organizational Needs (Cont’d)
Licensing and accreditation agencies do not impose mandatory staffing ratio but do look for evidence that patients are adequately cared for
Customer satisfaction is critical to an organization's success
A customer’s personal interaction with employees is key to satisfaction
Nurse manager’s number one challenge:
Appropriate staffing within budget constraints with well-trained, competent, professional staff members who are committed to providing safe, high-quality care
Licensing and accreditation agencies do not impose mandatory staffing ratios nor specify staffing plans, but do look for evidence that patients are adequately cared for
For example, if there were to be an adverse event, and the dept of health investigated, one item which would be looked at would be the number and type of staff who were involved in the incident, as well as the training records of those staff members.
Customer satisfaction is critical to an organization's success particularly now as it is part of the critiera used to determine medicare and Medicaid reimbursement rates.
Nurse and patient personal interactions is key to satisfaction so having sufficient numbers of the right classification of staff, is likely to affect the balance of the budget.
So you can see that it is the nurse leaders challenge to have appropriate staffing levels within budget constraints
with well-trained, competent, professional staff members who are committed to providing safe, high-quality care

7. Financing the Health Care Industry
Who is paying for what?
Now lets talk about who is paying for this.

8. 2 Views Health Care Organization Nation-wide
Critical issues related to current national health care expenditures
Care delivery
Provider performance and patient outcomes
Reimbursement
Critical issues related to budgeting for survival
Revenues vs expenditures
Resources allocation—new equipment, supply purchase, staffing, etc
We can consider 2 views of the payment issue.
On a nation wide level, the issue is the expenditures on health care as part of the gross domestic product.
The priorities are utilizing care delivery model and reimbursement models with will achieve high quality patient centered outcomes in the most cost efficient manner.
This includes attending to the IOM’s overarching strategic goals for delivering high quality health care and at the same time, reducing the overall cost of health care.
Related to that is the issue of reimbursement and how much the insurance companies will pay for care, how much individuals pay and how that is determined.
At the HCO, the issue is budgeting for survival.
This includes not only analyzing revenues and expenditures but also planning the allocation of resources to remain competitive in the health care market.
It may be necessary to invest in newer technology or add new services which will improve the organziations marketability.

9. Where is most money spent?
Expenditures
Most health care expenditures relate to hospital care
Despite a relatively steady LOS over the last 15 years, inflation-adjusted costs continue to rise (H-CUP, 2013)
us.ahrq.gov/overview.jsp
At the macrolevel or national view,
We know that most health care expendatrues relate to hospital care and that despite relatively steady LOS over the last 15 years,
There has been a substantial increase in the cost of hospital care, according to the data from the Healthcare cost and utilization project database, which tracks this information.

10. Balancing the budget Expenditures vs Reimbursement Complex
Varied perspective of payers, providers, consumers
Is spending more on medical care worth it in terms of its impact on length and quality of life?
Is spending more directly related to better outcomes?
Who is paying the bill?
The balancing of the health care budget is complex.
There are varying perspectives between the payers who want to pay for the most cost effective care,
The providers want to be paid a reasonable amount
and the consumers who want their insurance to pay for care, but who also want to pay low insurance premiums.
And there is the question of how much care is worth providing in terms of length and quality of life.
We must ask if more spending is always lead to better outcomes?
Of course the issue of how to spend health care dollars can be debated as an ethical issue,
for the purpose of this discussion, we will simple note that end of life care is often relatively expensive.

11. Essential Health Benefits
2014: health care service categories that must be covered in order to be certified and offered in the Health Insurance Marketplace.
States expanding their Medicaid programs must provide these benefits to people newly eligible for Medicaid.
Apply to Health plans offered in
Individual and small group markets
Inside and outside of the Health Insurance Marketplace
The ACA includes a list of the essential health benefits which all health insurance policies must cover in order to be certified and included in the health insurance market places.
This requirement is applicable to the expansion of mediciad programs as well as insurance plans in small group markets.

12. Essential Health Benefits
Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services including behavioral health treatment
Prescription drugs
Rehabilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care.
This is the list of the essential health benefits. The inclusion of this provision in the ACA, caused some older policies to be cancelled because they did not cover these services.
If you recall, president Obama claimed that people could keep their existing policies, but this turned out to not be possible when policies did not meet this standard.
Those who were intimately involved in the roll out of the law failed to foresee this consequence which led to this misrepresentation of the ACA.
This list is likely to be debated and perhaps amended as time goes on because some believe it is an unfair list.
For example, if a person does not intend to have children, then one could argue that the maternity and newborn care and the pediatric services add an unnecessary cost to insurance coverage.

13. Third-Party Payers: Insurance Companies
Third-party payers have power to influence care and reimbursement.
The payer pays or underwrites coverage for health care for another entity, such as a business or an individual, by providing group coverage or individual coverage
Insurance companies are considered the 3rd party in the relationship between patients and providers.
Because of their power to control reimbursements rates, both what they will pay for and how much they will pay,
3rd party payors have significant power and influence over health care services. If the insurance company denies coverage for a service, the patient will either have to pay for it out of pocket or decide to not have the care at all.
This is one reason the essentials health benefits list was included in the ACA. That provision forces insurers to cover basic services which are aimed at preventative care and services if emergency care or hospitalization is needed.
Insurance companies rarely provide individual coverage, particularly with the enactment of the ACA which allows indivduals to purchase insurance as part of a group plan with the health insurance exchanges.
Most often, health insurance is offered through group coverage, when a company negotiates with an insurance company on behalf of employees and the premium rate is determined during that negotiation.
Very large companies, who have the potential to bring a lot of customers to the insurance company, may be able to negotiate more favorable premium costs for their employees.

14. Financial Risk for Third-Party Payers
Loss of invested money
Administrative costs
Underestimation of costs
The 3rd party payers, the insurance companies, assume the financial risk in the patient-provider-insurer relationship.
They are most often publicly held companies, so have a responsibility to share holders to operate at a profit.
And Insurance companies invest their assets to grow capital so they have sufficient monies to pay claims.
Administrative costs for insurance companies comprise a significant amount of their operating budget. The management of policies and claims is certainly complicated and then there is the need to compete for customers in the market.
Watch TV for any period of time and it is likely you will see an advertisement for an insurance company.
Also, insurance companies run a risk of making mistakes in the estimation of the cost of services. A tremendous amount of data is collected on an ongoing basis to determine the likely cost of services.

15. International Classification of Diseases, 10th Revision (ICD-10 Codes)
Standard diagnostic classification tool
Used to
Analyze general health situation of population groups
Monitor incidence & prevalence of diseases and other health problems of countries and populations.
Classify diseases and other health problems recorded health and vital records, death certificates and health records.
Provide the basis for the compilation of national mortality and morbidity statistics by WHO Member States
Make reimbursement and resource allocation decisions by countries.
Used by
Physicians, nurses, other providers, researchers, health information managers and coders, health information technology workers, policy-makers, insurers and patient organizations
It is worth mentioning that the ICD 10 codes are used to classify and track health occurrences around the world. This standardized classification system was implemented initially in the 1970s. Because it tracks detailed information, it is useful to monitor population health trends.
All HCO enter ICD-10 codes for each patient encounter.
Insurance companies use these codes as a basis for determining reimbursement rates.

16. Federal Government
The federal government is a major player in the health care arena,
Directly affects nursing care because of the likelihood of interaction with patients in these programs
Changes in government reimbursement often result in reimbursement within the broader health insurance industry.
The federal government is the largest payor of health care services in the united states, as the funder and administrator of Medicare and Medicaid services.
As nurses, we interact on daily basis with clients who are insured through one of these programs.
The federal government is continually looking to improve the quality of health care as that affects the cost of providing it.
Changes in government reimbursement or policies usually result in similar changes being adopted by the broader heath care insurance industry.

17. Reimbursement Why is it important to understand reimbursement?
It affects patient care delivery
It has an impact on provider performance and patient outcomes
It affects financial resources that are available for health care organization
Affects health care work environment
Reimbursement is important for us to consider.
It can affect the care we can provide, the providers who can see patients and the services they can provide,
Under the ACA, medicare and Medicaid reimbursement rates are in part determined by the quality of care that is provided.
For instance, the patient satisfaction scores on the HCAHPS survey determine some of the reimbursement rates
and this has a significant impact on the financial resources of the HCO.
And that can affect the health care workers’ workload and the availability of equipment and supplies.

18. Reimbursement
To survive the changes in the future and develop new roles, nurses need to be active participants in new delivery systems.
How have nursing and nurses been affected by reimbursement, and how can they affect reduction in costs?
Nurses have to be knowledgeable and active participants in designing care delivery systems that will promote cost effective care.
Because we deliver a large portion of direct patient care, our work is affected by reimbursement, and we are obligated to play our part to reduce costs and improve the efficiency of our processes.

19. Budgeting for Care Delivery
Now that we have a handle on reimbursements, lets talk about issues involved in budgeting for care delivery.

20. Three Major Components of Cost in a Budget
Salary and wages
Largest part, includes earned benefits, overtime and raises
Operations
Estimate of the volume and mix of activities and services and the resources required to provide them
Capital:
Estimate of purchases of major capital items (designated dollar amount)
There are 3 major components of the cost portion of a budget to consider.
First is salary and wages.
As previously mentioned, this is the largest portion of the budget.
Operations is the second component and includes supportive services and resources which are needed to provide care.
Consider the supplies and equipment you use every day as well as the cost of technology that support our care delivery.
Operations at the higher level includes things such as building and property maintenance expenses, depreciation on equipment, employee orientation and training and administrative costs.
Finally is the capital expenditures. These are major purchases. There is a designated dollar amount with qualifies an item as a capital expense. Most often, capital expenditure decisions are made with regards to the HCO strategic plan.
For instance, if there is a plan to expand services to include robotic surgery, that would be a strategic plan and the purchase of this expensive equipment to support that goal would be a capital expense.

21. Three Major Budget Functions
Planning
Management of ongoing activities and services
Control of spending
Variance report
Productivity
The key to managing a budget lies in the planning on the front end.
A poorly planned budget may cause either over or under spending.
While saving money is usually a good thing, if expenditures are not well envisioned, money may be inappropriately allocated.
Once a good plan is written, a budget requires ongoing management to determine if the budget is on track.
Nurse managers often have a system of monitoring the variance report, meaning whether the daily operations of the unit are over or under budget.
And the manager may do a regular productivity report as part of the monitoring process.

22. Budgets Revenue verses Expenses Ratio of output to input
Cost of providing care : Amount of payment for services (increasingly based on quality of outcomes)
Efficiency and effectiveness
Factors affecting
Nurse managers also monitor the revenue being generated verses the expense to provide care.
To do this, the nurse will look at the type of insurance each patient has.
And may work with administrative support personnel to help patients who are not insured to get enrolled in an insurance plan if they are eligible or to search for alternate funding sources which may be available.

23. Cost Containment Decreasing costs while maintaining quality
Decrease overtime
Decrease sick time
Prevent costs for repair of equipment
Use supplies wisely
Decrease inventory of supplies
Maintain productivity standards
Prevent employee accidents
Improve staffing decisions
This is a list of actions that can be taken to contain costs.
Of course decreasing the expense of overtime is high on the list.
Preventing the breakage of equipment and the wise use of supplies can have a substantial impact on the operations costs.
And working with charge nurses to help them understand the financial effect of staffing decisions may improve the salary and wages costs.

24. Assessing Productivity
Patient acuity classification system
Cost accounting
Budget reports
As mentioned earlier, patient acuity can be helpful to assess productivity. For instance, if the unit is budgeted for 5 nurses, but one or two patients have very high acuity, that data will help to justify going over budget in order to provide safe care.
The nurse manager receives regular budget reports to analyze through out the fiscal year which help the manager stay knowledgeable of the unit financial condition.
If there has been an over-expenditure on staffing, for instance, and the acuity information does not support this variance, the manager will have to investigate further to determine the cause of the overage and determine what corrective action to take.

25. Assessing Productivity
Position control
FTE analysis
# Full-time Employees
# Part-time Employees
The position control is the list of all employees which includes their job classification, salary, percent time and benefits.
This is determined during the budget process and serves to help the manager determine personnel costs as well as showing where there are vacancies in employment.
It is up to the manager to decide the FTE, or full time equivalent allotment on a given unit. for instance a nurse who works 36 hours a week, is a 0.9 FTE, or 90%. This is based on a standard 40 hour work week.
For staffing purposes, it is helpful to have a mixture of full and part time employees. Given the 24/7 nature of hospital nursing, the splitting of FTE positions allows for more nurses and this provides more flexibility in the scheduling of staff. It is also helpful to have some part time people who may be willing to work an extra shift if needed and who will not be paid at an overtime rate to do that.

26. What you need to know Strategic goals HCO financial health
Budget assumptions
Past expenditures / revenues
Prediction units of service for next cycle
In order to manage a budget the leader needs to understand the strategic goals of the organization, have a sense of the organization’s financial health, what the budget assumptions are, (reducing costs or expanding services) know what has been occurring with expenditures and revenue and be able to use data to predict the budget for the next cycle.

27. As nurses we want to provide the best possible care to our patients and it is sometimes difficult to keep in mind that health care is a business.
We are integral to contributing to keeping our HCO financially sound so we are able to deliver the high quality care patients deserve.