Journal of Nursing Education

The articles prior to January 2012 are part of the back file collection and are not available with a current paid subscription. To access the article, you may purchase it or purchase the complete back file collection here

BRIEFS 

Health-Care Economics and the Medicare Prospective Pricing System: Implications for Undergraduate Nursing Curricula

Carol Maier Boston, RN, MS

Abstract

The emergence of the Medicare Prospective Pricing System (MPPS) has had profound economic impact on all departments within hospitals, including nursing. In view of increased patient care technology, patient acuity levels, and life expectancy rates, MPPS has challenged nurse executives to ensure quality nursing care amidst current economic constraints. Nurse executives have responded to this challenge by initiating departmental strategies to assist with institutional adherence to MPPS limits on patient care reimbursement. Examples of such strategies include nursing management information systems, expanded ambulatory nursing care services, nursing productivity measures, and methods to measure nursing care costs. In addition, nursing care delivery systems have been examined in an effort to increase responsiveness to the current environment for nursing practice. But what about nursing education? Does the emergence of prospective payment for patient care have implications for nursing curricula as it does for nursing service? If so, what are these implications, and how can they best be integrated at the undergraduate level?

As a fundamental prerequisite to answering the questions posed, nurse educators should obtain a solid understanding of health-care economics, including MPPS. As an historical overview, the Medicare Prospective Pricing System is a radically different method of payment to hospitals for patient care services. Approved by Congress in March 1983, MPPS was initiated in response to the rapidly escalating Medicare costs of health care for the elderly and disabled Social Security beneficiaries. With Medicare costs steadily rising faster than annual inflation rates, MPPS represents an aggressive attempt by the federal government to control costs and secure long-term financial stability for the Medicare program. In general, acute care hospitals are primarily affected by MPPS; children's hospitals, long-term care, psychiatric, rehabilitation, and alcohol and drug treating hospitals are presently excluded (Gaynor, 1984).

In the past, Medicare reimbursed hospitals on a retrospective cost basis for per them services rendered to patients. For hospitals now subject to MPPS, reimbursement for patient services rendered is according to prospective national payment rates based on diagnosis-related-groups (DRGs). The DRG classification system currently consists of over 400 categories of major clinical diagnoses. Upon admission, all Medicare patients are assigned a DRG on the basis of principal diagnosis, secondary diagnoses, surgical procedures, and age. Hospitals are reimbursed only for those patient care costs prospectively established as reasonable for each DRG; with slight variations currently allowed according to hospital, regional, and/or urban-rural differences. Except in outlier cases; i.e., those atypical cases exceeding DRG limits, patient care costs incurred above what have been established as reasonable are no longer reimbursed by Medicare, and therefore must be absorbed by the hospital. Financial incentives for hospitals to adhere to DRG limits are influenced by compliance with patient discharge dates established via DRG assignments. Given the complexities of prospective payment and the significant effects it has on the entire health care industry, MPPS is currently being phased in over a four-year period, with the final phase-in year targeted for 1987 (American Hospital Association, 1983; Gaynor, Kant & Miles, 1984; ShafFer, 1984).

In view of the economic realities associated with MPPS, it is vital that schools and colleges of nursing provide education responsive to the current nursing practice environment. There are two major implications of MPPS for undergraduate nursing education. The first is provision of educational opportunities for student nurses to acquire a general understanding of healthcare economics. It is imperative that student nurses fully appreciate the importance of cost consciousness in the delivery of nursing care. This understanding can be facilitated by assisting students in obtaining pertinent information about MPPS; including societal and economic factors prompting the system's development, current federal regulations, and impact of…

The emergence of the Medicare Prospective Pricing System (MPPS) has had profound economic impact on all departments within hospitals, including nursing. In view of increased patient care technology, patient acuity levels, and life expectancy rates, MPPS has challenged nurse executives to ensure quality nursing care amidst current economic constraints. Nurse executives have responded to this challenge by initiating departmental strategies to assist with institutional adherence to MPPS limits on patient care reimbursement. Examples of such strategies include nursing management information systems, expanded ambulatory nursing care services, nursing productivity measures, and methods to measure nursing care costs. In addition, nursing care delivery systems have been examined in an effort to increase responsiveness to the current environment for nursing practice. But what about nursing education? Does the emergence of prospective payment for patient care have implications for nursing curricula as it does for nursing service? If so, what are these implications, and how can they best be integrated at the undergraduate level?

As a fundamental prerequisite to answering the questions posed, nurse educators should obtain a solid understanding of health-care economics, including MPPS. As an historical overview, the Medicare Prospective Pricing System is a radically different method of payment to hospitals for patient care services. Approved by Congress in March 1983, MPPS was initiated in response to the rapidly escalating Medicare costs of health care for the elderly and disabled Social Security beneficiaries. With Medicare costs steadily rising faster than annual inflation rates, MPPS represents an aggressive attempt by the federal government to control costs and secure long-term financial stability for the Medicare program. In general, acute care hospitals are primarily affected by MPPS; children's hospitals, long-term care, psychiatric, rehabilitation, and alcohol and drug treating hospitals are presently excluded (Gaynor, 1984).

In the past, Medicare reimbursed hospitals on a retrospective cost basis for per them services rendered to patients. For hospitals now subject to MPPS, reimbursement for patient services rendered is according to prospective national payment rates based on diagnosis-related-groups (DRGs). The DRG classification system currently consists of over 400 categories of major clinical diagnoses. Upon admission, all Medicare patients are assigned a DRG on the basis of principal diagnosis, secondary diagnoses, surgical procedures, and age. Hospitals are reimbursed only for those patient care costs prospectively established as reasonable for each DRG; with slight variations currently allowed according to hospital, regional, and/or urban-rural differences. Except in outlier cases; i.e., those atypical cases exceeding DRG limits, patient care costs incurred above what have been established as reasonable are no longer reimbursed by Medicare, and therefore must be absorbed by the hospital. Financial incentives for hospitals to adhere to DRG limits are influenced by compliance with patient discharge dates established via DRG assignments. Given the complexities of prospective payment and the significant effects it has on the entire health care industry, MPPS is currently being phased in over a four-year period, with the final phase-in year targeted for 1987 (American Hospital Association, 1983; Gaynor, Kant & Miles, 1984; ShafFer, 1984).

In view of the economic realities associated with MPPS, it is vital that schools and colleges of nursing provide education responsive to the current nursing practice environment. There are two major implications of MPPS for undergraduate nursing education. The first is provision of educational opportunities for student nurses to acquire a general understanding of healthcare economics. It is imperative that student nurses fully appreciate the importance of cost consciousness in the delivery of nursing care. This understanding can be facilitated by assisting students in obtaining pertinent information about MPPS; including societal and economic factors prompting the system's development, current federal regulations, and impact of the system on the health care industry as a whole. Suggesting teaching methodologies include lectures, seminars, student presentations, and panel discussions.

Introduction of health-care economics into undergraduate nursing curricula should not be reserved for senior leadership courses. On the contrary, this information should be introduced with other basic concepts taught at the freshman/sophomore levels, when students' frameworks for professional values and philosophies typically originate. Early introduction and integration of health care economics as a thread throughout all levels of undergraduate curricula will provide nursing students with the opportunity to acquire a solid knowledge base, as well as the opportunity to incorporate cost containment into development of professional standards.

The second implication of MPPS for undergradute nursing education is for student nurses to acquire expertise in clinical skills especially pertinent to the needs of today's nursing practice environment. When establishing educational priorities for development of such skills, nurse educators should examine trends in patient volume and acuity levels influenced by MPPS and patient care demands consequently placed on nursing service. In an effort to maintain economic stability for hospitals, there is increasing pressure to shorten patient lengths-of-stay and serve a greater patient volume. Medicare patients with specific clinical diagnoses are often discharged earlier in contrast to comparable patient populations that were covered by Medicare payments with retrospective rates. Furthermore, hospitals in competition with each other have initiated marketing strategies for additional patient admissions, as well as other economic ventures designed to expand institutions' revenue bases. Staff nurses are therefore faced with caring for highly variable patient populations whose needs are intensified because of decreased patient care days.

The current nursing practice environment requires nursing professionals at the bedside to possess strong physical assessment skills. In collaboration with other professionals, RNs are responsible for assessing patients' responses to treatment modalities in preparation for impending discharge. Moreover, medical records and quality assurance departments are assisted by accurate documentation of patients' assessed responses to treatment modalities. Nurse educators are urged to integrate fundamental physical assessment skills into undergraduate nursing courses. Suggested teaching methodologies include laboratory demonstration and assimilation, reinforced with audiovisual materials or computer tutorials. In addition, return demonstrations of physical assessment skills can easily be included in all clinical learning experiences.

Decreased patient lengths-of-stay in line with DRG limits have precipitated earlier discharge dates for Medicare patients. The likelihood of these patients returning home with the need for further treatments and medications has therefore increased. An increasing need for patient education at the bedside has emerged in part as a response to the growing expectations for Medicare patients to assume self-care activities upon discharge. It is no longer reasonable for nursing departments to depend exclusively on patient education coordinators or departments in meeting the increased educational needs of Medicare patients. All staff nurses must be prepared to assist Medicare patients in learning about selfcare activities that they will be expected to assume upon discharge. Student nurses who can effectively assume patient education responsibilities upon graduation will assist nursing departments in preparing Medicare patients for discharge within DRG length-of-stay limitations. Suggested teaching methodologies for acquisition of patient education skills include clinical experiences with Medicare patients possessing a variety of educational needs, in addition to background information on adult motivational and learning theories.

Extensive discharge planning has become a basic component of effective nursing care. Early identification and mobilization by staff nurses of services that will be needed by Medicare patients upon discharge contributes to discharge readiness. A number of nursing departments across the country have created discharge nurse positions, or in some cases, discharge nursing departments. Student nurses need learning opportunities to develop an appreciation of the importance of thorough discharge planning for Medicare patients. Moreover, student nurses need to realize that effective discharge planning helps achieve quality care amidst pressures to discharge (Hamilton, 1984). Suggested teaching methodologies include discharge planning experiences in various clinical settings, including contacts with a variety of outpatient and home-health care services. If the school or college of nursing affiliates with a health care institution that employs discharge nurses, clinical experiences for students with these personnel would also be valuable.

Institutional adherence to MPPS limits on patient care reimbursement requires multidisciplinary cooperation and communication. In addition to nursing, hospital departments directly involved with the planning and implementation of the DRG system include medicine, surgery, finance, medical records, patient accounts, data processi ng, utilization review, quality assurance, public relations, admitting, ancillary services, and social services (Olsen, 1984). The nurse-physician relationship assumes added importance as patient treatment modalities are identified, implemented, and evaluated in preparation for impending discharge. Collaboration between nursing and medicine facilitated by effective communication skills, assists these two disciplines with respective efforts in institutional adherence to DRG limits. Accurate written and verbal skills are required of registered nurses practicing in the current environment. Concise documentation by staff nurses on patient records, as well as expanded management information systems; i.e., patient classification systems, is essential. Student nurses need expanded learning opportunities designed to develop effective communication skills. Suggested teaching methodologies include seminars and panel discussions, in addition to role playing, clinical observations, and return demonstrations in the clinical settings.

Current health-care economics and MPPS emphasize keeping patients out of the hospital, as well as efforts to shorten lengths of stay. Medicare patients that are not capable of assuming self-care responsibilities upon discharge often require further treatment in either community health centers or long-term skilled nursing facilities. Furthermore, increased efforts to integrate health promotion concepts both in the hospital setting as well as in outpatient agencies presents new career opportunities for registered nurses (Shaffer, 1984). Because career alternatives to hospital nursing have emerged in response to current health care needs, it is essential that student nurses are fully prepared to assume professional responsibilities in these alternatives. Such preparation will facilitate recruitment for outpatient agencies and long-term facilities in the current environment highly in need of employing qualified nursing professionals. The availability of employment opportunities for graduate nurses is an added incentive for those schools and colleges of nursing whose graduates have recently experienced difficulty in obtaining hospital nursing employment for reasons including hiring freezes, position consolidations, and staff budget cuts associated with the environment's current economic constraints. Nurse educators should provide student nurses with learning opportunities for obtaining knowledge of career alternatives to hospital nursing. Moreover, expertise in skills associated with alternatives to hospital nursing are needed, as well. In addition te lectures and discussions, suggested teaching methodologies include clinical experiences in local ambulatory nursing centers, community health care agencies, and long-term skilled nursing facilities.

Finally, MPPS has accentuated the already growing demand for accurate and complete documentation of patient care services and costs. Nursing information systems have emerged, including those systems that merge management and patient-care information. Moreover, the use of automated equipment for documentation, recording, communication, and storing patient care information has greatly increased. It is imperative that nurse educators provide learning opportunities for students to attain basic knowledge and understanding of computer usage and those nursing information systems directly associated with nursing care delivery; i.e., patient classification systems. Suggested teaching methodologies include computer assisted instruction, computer based simulations and computer managed instruction, in addition to classroom discussion regarding the use of nursing information systems (Ziemer, 1984). When identifying the need for student nurses to be prepared in this area, the issue of faculty preparation in computer literacy is especially acknowledged, as well as associated costs. Schools and colleges of nursing committed to providing education geared to the needs of today's marketplace are urged to explore mechanisms for faculty development in computer literacy as well as procurement of funding for development of computer resource facilities (Hölzerner, Slichter, Slaughter, Stotts, Chambers & Scheetz, 1984).

The economic constraints of today's health-care industry are here to stay. As other third party payers for patient care services examine alternatives to retrospective reimbursement, the challenge to deliver quality nursing care in a costconscious environment will continue. Nursing service has initiated proactive strategies in response to the growing pressures of MPPS. Schools and colleges of nursing are faced with the need to develop curricula that are not only responsive to trends in increased patient care technology, patient acuity levels, and life expectancy rates. The added challenge also exists for integration of health-care economics and pertinent clinical skills into undergraduate nursing curricula. As these challenges are met, student nurses will receive educational preparation clearly responsive to the current nursing practice environment.

References

  • American Hospital Association (1983, April). Special report 3: Medicare prospective pricing: Legislative summary and management implications.
  • Gaynor, J.M., Kant, D.C., & Miles, E.M. (1984). DRGs: Regulatory and budgetary adjustments. Nursing and Health Care. 5(5), 275-2.79.
  • Hamilton, J.M. (1984). Nursing and DRGs: Proactive responses to prospective reimbursement. Nursing and Health Care, 5(3), 155-159.
  • Hölzerner, W.L., Slichter, M.J., Slaughter, R.B., Stotts, N.A., Chambers, D.B., & Scheetz, S. (1984). Development of a computer resources facility. Nursing and Health Care, 5(10), 545-547.
  • Olsen, S.M. (1984). The challenge of prospective pricing: Work smarter. Journal of Nursing Administration, 14(4), 22-26.
  • Shaffer, FA. (1984). A nursing perspective of the DRG world, part 1. Nursing and Health Care, 5(1), 48-51.
  • Ziemer, M. (1984). Issues of computer literacy in nursing education. Nursing and Health Care, 5(10). 537-542.

10.3928/0148-4834-19860401-10

Sign up to receive

Journal E-contents