Journal of Gerontological Nursing


Elizabeth Rumph, MSN, RN, CCRN


PROPAC has recognized the need for quality caiv of Medicare patients in this era of cost constraints. Such awareness is necessary to deal with the increasing needs of the geriatric population.


PROPAC has recognized the need for quality caiv of Medicare patients in this era of cost constraints. Such awareness is necessary to deal with the increasing needs of the geriatric population.

The Social Security Amendment of 1983 (PL. 9821) mandated changes that would have a broad effect not only on the elderly population but on the American health-care delivery system as a whole. Medicare had used a cost-based reimbursement plan to hospitals for medical care of individuals age 65 and older. With advanced medical technology and an increasing number of older individuals, the cost of health care was escalating. From 1970 to 1984, Medicare expenditures rose from $4 billion to almost $40 billion with a 60% increase from 1979 to 1982.(p-3)

Congress had previously mandated the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). This set certain reimbursement limits on hospital inpatient operating costs and the rate of increase on these costs (Senate Report 98-23). The Department of Health and Human Services (HHS) was also mandated to develop a prospective payment system (PPS). RL. 9821 called for a three-year transition to a national payment rate that would be based on this PPS. The Prospective Payment Assessment Commission (ProPAC) was formed to assist in its implementation. ProPAC reported to Congress about how PPS affected Medicare. The purpose of this article is to focus on ProPAC's 1986 and 1987 reports to Congress, note how PPS has altered health care for the elderly, and suggest alternatives that should increase quality care under Medicare.

1986 Report

ProPAC was formed from 15 individuals knowledgeable in the areas of financing, research, and health-care delivery. They were to advise the Secretary of HHS on necessary changes of di agnosis- related groups (DRGs) and appropriate "update" changes of Medicare payment for hospitals. 1(p-12)

There are approximately 468 DRGs to which a patient is assigned for payment purposes. Sex, age, and surgical procedures are factors to be considered in this assignment. The relative resource use for a certain DRG corresponds to a weight. This DRG weight times a standardized amount and applicable adjustments will determine what a hospital receives for giving a Medicare patient hospital service. 1(pll) Therefore the hospital receives a fixed rate for inpatient service that has been prospectively set.

It is evident in reading the reports and in talking to individuals on ProPAC that quality of patient care under PPS is a major concern. ProPAC relies on the peer review organization (PRO) to monitor inpatient care. Hospitals that receive Medicare funding must contract with PROs to review their facilities' service.

Hospitals now have an incentive to lower the cost of inpatient care. This may be done by early discharges of Medicare patients or focusing on profitable services that have higher payments based on DRG weights. An article2 reported a trend in hospital administration after PPS had been in effect for one year. It was stated that the length of stay for all âges had fallen dramatically, but those age 65 and over had the sharpest decline.

The potential of decreased quality patient care, compounded by hospitals focusing on increasing revenues, is a real concern. ProPAC is aware that PPS will cause a change in both the structure and process of care but does not have a clear view on how this will affect health outcomes. Itpl5)

In the 1986 report, a study was cited in which 78% of admitting physicians reporting early patient discharges were encouraged by hospitals. Also in this report, hospitals' inpatient care had declined, probably due to outpatient and ambulatory service. Strategies which hospitals had used to deal with PPS included decreasing the number of hospital beds, substituting less costly technology, reducing the number of staff per patient, and utilizing product line management. I(P25)

Geographical differences in the cost of certain medical services were recognized by ProPAC and adjustments caused by PPS were observed. There was little difference in change of resources between regions, but there was a change within regions. Hospitals that are in high cost regions will need to reduce their present level of resources as national PPS rates are phased in. According to ProPAC, effects of PPS on medical technology have not caused any adverse effects. This is due to recalibrating the DRG weights frequently and in adjusting the update factor. ProPAC was concerned with the way hospitals were reimbursed for capitalrelated costs such as physical plant improvement, insurance, and depreciation. A reasonable cost basis was the only stipulation the hospital had to meet. A capita) payment method under PPS is needed. '<P55>

In the 1986 report, ProPAC also evaluated the effects of PPS on access to quality health care. The incentive for hospitals to specialize and concentrate on certain services could improve the quality of care. Post-discharge services, however, were recognized as being very important. A negative effect of PPS was that beneficiaries were having to pay more out-of-pocket expenditures. This was due to the increased cost per day in hospitals brought about by the decline in admissions. Outpatient facilities that were not completely reimbursed under Medicare Part B added further to out-of-pocket expenditures.

The effect that PPS has had on quality of care cannot be thoroughly analyzed as data is not collected on patients after they are discharged from the hospital. The need for studies in this area was mentioned as patients discharged from the hospital were often sicker than they previously had been. Certainly both nursing and social work should focus on this problem, not only for research but for follow-up care.

Malpractice liability was cited as a way to discourage hospitals from decreasing the quality of care; however, beneficiaries and their families had complained of inadequate care. ProPAC conducted a study of these complaints but did not find instances of low quality care. They did request that beneficiaries of Medicare receive increased information regarding ppS.'<p-65> Patients and their families can appeal the decision regarding their discharge. Unfortunately, they are not made aware of this.

1987 Report

Capital costs of hospitals were seen increasing at a faster rate than operating costs in the 1987 report to Congress. Based on the Medicare Cost Report, the majority of hospitals were doing well financially. Medicare patients continued to use outpatient services so it was still difficult to monitor the quality of care. Concern was voiced about difficulties in financing medical education, uncompensated health care, and clinical research. 3<p-8>

Medical prices were not as large as in previous years, but they were still higher than other services and goods. ProPAC stated that more studies were needed on how PPS affected the financial health of hospitals. Hospital inpatient admissions continued to remain low with an increase in outpatient services. Patients who were hospitalized continued to be more frequently in higher weighted DRG categories. It was surmised that this might be due to the lower weighted categories being shifted to outpatient services. Hospitals were still specializing in services, alternating sites of care, and adopting management strategies to reduce cost per case. 3(p37>

PROs had reviewed 4 million inpatient cases with 288,500 cases identified as being readmissions within 15 days of discharge. It was determined that 4,600 of these cases were due to premature discharge and 2,840 were readmissions for services that could have been rendered on the first admission. 3<p-27>

How Medicare beneficiaries were affected by PPS was explored in greater detail. ProPAC was concerned that the House Select Committee on Aging projected that between 1984 and 1990, the elderly's out-of-pocket expenditure for health care would rise twice as rapidly as their income. 3^P63' Beneficiaries had increased deductible expenses for inpatient care and hospitalized coverage under Medicare could quickly be depleted if the individual was seriously ill. Beneficiary cost per enrollee had grown significantly, 150% between fiscal year 1978 and 1984.3(P-77) It was concluded that Medicare benefits needed to be altered to be consistent with PPS incentives of having patients receive outpatient services over inpatient hospital services.

The final chapter and appendixes of the 1987 Report were very enlightening. ProPAC stated that many problems of the health-care delivery system of America were brought to light due to the change to PPS , but not necessarily caused by PPS. Many medical and technological changes have occurred since Medicare was implemented. Portions of Medicare's part A and B need to be reexamined as a result. The need for coverage of long-term care and outpatient services is apparent, not just the coverage for acute care as is presently done. The author supports many of the statements made in regard to quality of care and PPS. Developing adequate measurements of quality care has been a problem recognized by nurses for some time. It was encouraging to learn that Congress has mandated a study of all Medicare quality monitoring activities by the Institute of Medicine at the National Academy of Sciences. This hopefully will increase the development of new instruments that will measure quality of care.

Review of the Literature

It is evident that PPS has caused a great deal of turmoil in America's health-care delivery system. Concern about care elderly patients receive under PPS has been voiced.4·5 The effect of PPS on the acute care setting also has been scrutinized by nurses.6·7 The need to furnish alternative types of care for the elderly and ways to bridge the gap to extended care facilities have been suggested.

Liu et al mention the problem of using similar classifications of PPS for patients in skilled nursing facilities. That elderly patients require more care once they are discharged from the hospital also has been documented.12·13 Concern about lack of care for individuals that don't have insurance under PPS also has been mentioned.14 Physicians also have considered other means of payment under Medicare. One group concluded that no matter what was offered, the poor and those who suffer from complex, chronic illnesses would be at risk for reduced access to care and quality of care.15

An in-depth and scholarly look at Medicare reform has been offered by the Center of Health Policy at Harvard.16 One article mentioned that hospitals were profiting under PPS and offered suggestions to increase its efficiency.17 One proposal was made to change the medical coding system used in formulating DRGs.18 How capitalrelated expenses can be dealt with by Medicare also has been addressed.19

Alternative Plan

The author proposes that hospital units be designed in acute care hospitals for geriatric patients. This already has been done in several hospitals along with educational courses for nurses on how to adapt nursing techniques for the elderly.20'23 Specific needs of elderly patients and their families could be addressed.

In hospitals with low occupancy, certain units could be combined, leaving one unit available for physical renovation and adaptation for the geriatric population. There are factors that must be considered when working with the geriatric population. In dealing with the elderly, it must be remembered that they have a decreased capacity to adapt to unfamiliar surroundings and diminished psychophysiological reserves. It would be beneficial to have primary nursing or the same staff member working with the elderly to compensate for the new ward. The ward design should take into consideration the sensory changes of the elderly. Color schemes, lighting, and safety factors are elements that can be implemented to improve care.

There is also the group of subacute elderly patients who require skilled care but not acute care. Campion, Bang, and May24 recommended hospitals enter long-term care, which has since occurred. This was due to the negative impacts that skilled nursing facilities (SNF) have on their residents, the shortage of SNF beds that back up patients in the acute care facility, and the lack of incentive by SNF to accept patients that require attention.

In a recent survey by the American Hospital Association, 75% of the hospitals plan to establish new long-term beds.25 The use of swing-beds in rural hospitals was implemented in 1973. 26 In low-occupancy hospitals that focused on acute care, converting beds for long-term care was thought to be more cost effective than building new skilled nursing facilities. These rural hospitals had 50 beds or less and were exempted from certain long-term care standards. It was found that the acute care length of stay was decreased due to this new program.

Other benefits that were noted included improved occupancy rates in the hospitals, subacute care needed was provided, and families had decreased travel time. The Federal Register27 stated the swing-bed concept allowed small hospitals to use their beds interchangeably as either hospital, SNF, or intermediate care beds with reimbursement based on the specific type of care provided by Medicare and Medicaid.

Congress is presently addressing the development of insurance for catastrophic illness. This is important but a great priority is coverage for long-term care. There are Medigap insurances that unfortunately do not always fill the void. As the number of elderly citizens in America increases, this is going to become an even greater problem. Now is the time for joint discussion between all services that deal with the elderly to arrive at alternative plans for the financial and physical well-being of the senior citizen.

ProPAC has recognized the need for quality care of Medicare patients in this era of cost constraints. Means must be developed that will decrease healthcare costs without compromising health-care services. Recognition of this problem along with review of possible alternatives should be an intergenerational goal.


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  • 3. Prospective Payment Assessment Commission (ProPAC). (1987). Medicare prospective payment and the American health care system, report to Congress. US Government Printing Office. 4. Long-term care gaps seen plaguing PPS. Hospitals 1985: 59<21):93-94.
  • 5. Medicare DRGs pose problems for elderly. Hospitals 1985: 59(24): 75-76.
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