Transcript Fiscal Planning & DRGs - Shelbye's CSON Notes Blog

4209Fiscal Planning & DRGs
Presented by Teri Pierce, MSN, RN
Nsg 401
Rev. Fall 10
Fiscal Planning
1. Not intuitive; it is a learned skill that improves
with practice.
2. An important but often neglected dimension
of planning.
Fiscal Planning
1. Should reflect the philosophy, goals, and
objectives of the organization
2. Increasingly critical to nursing managers because
of increased emphasis on finance and the
business side of health care
3. NM’s role: Understanding fiscal terminology and
maintaining a cost-effective unit
Cost Containment
• Refers to effective and efficient delivery of services
while generating needed revenues for continued
organizational productivity
• Responsibility of every health care provider
• Viability of most health care organizations today
depends on wise use of resources
Cost Effective
• Not the same as being inexpensive
• Defined by the American Heritage Dictionary of the
English Language (2005) as “economical in terms of
the goods or services received for the money spent.”
(A product is worth the price)
• Cost does not always equate to quality in terms of
health care
Each ofResponsibility
an organization’s Accounting
revenues, expenses,
assets, and liabilities is someone’s
responsibility.
Person with the most direct control is held
accountable (unit level= nurse manager)
Budget
• A plan that uses numerical data to predict the
activities of an organization over a period of time
• Desired outcome- maximal use of resources to meet
organizational short- and long-term needs
• Provides a mechanism for planning and control and
promotes each unit’s needs and contributions
Steps in the Budgetary
Process
Budget
Process
Evaluate
Implement
Assess
Develop
Forecasting
Forecasting involves making an educated
budget estimate using historical data.
of Budgets
1. Personnel orTypes
workforce
2. Operating
3. Capital
4. Continuous or perpetual
5. Fiscal year
Personnel Budget
• Largest of the budget expenditures
• Reason: health care is labor intensive
• Takes a lot of people to run a hospital
• Don’t want to be overstaffed or understaffed
Personnel Budget
•
•
•
•
Productive/Worked Time
Worked hours
Overtime
Per diem
• Nonproductive Time
• Cost of benefits
• New employee
orientation
• Employee turnover
• Sick time
• Holiday time
• Education time
• Breaks
Nursing Care Hours Per Patient Day
(NCH/PPD)
Total hours worked by nursing staff in a 24-hour
period
patient census at the end of that
24-hour period
FTE Formula
(Full Time Equivalent)
Total hours worked by a nurse (over 7 days)
40 hours
FTE’s
Operating Budget
• Involves all managers
• After personnel costs, 2nd most significant
component of hospital budget
• Reflects expenses that change in response to
the volume of service
• Examples
Capital Budget
• Plans for the purchase of buildings or major medical
equipment
• Includes equipment that has a long life
• Equipment not used in daily operations
• Equipment is more expensive than operating supplies
• May have to exceed a certain $ amount
• Annual or semi-annual
• May also be called capital expenditures
• Examples
Budgeting Methods
• Incremental budgeting
– Not very cost effective, predicts for next year
• Zero-based budgeting
– Decision package – that’s how you set your priorities for what
you want in your budget
– Each year you start over from ground zero, can’t assume that
because it was included last year that it will be included this
year
• Flexible budgeting
– Varies with volume and labor, calculates what you need based
on your bottom? Who knows
• New performance budgeting
– Based on outcomes, like home health wants new glucometers,
keeps track of how these new ones work better than the old
ones, to justify need for new ones
Critical Pathways
Also called clinical pathways
Definition- standardized prediction of
patients’ progress for a specific diagnosis or
procedure
Length of stay (LOS)
Variance analysis - may be justifiable… ?
Other Budgeting Terms
• Direct costs
– Attributed to direct source, like medication. You can
track exactly where they came from and where they
went
• Indirect costs
– We can’t attribute to a specific source, usually more
hidden costs, usually spread out over all departments,
like housekeeping. Everyone in the hospital needs
housekeeping
Other Budgeting Terms
• Controllable costs
– Staffing ratios, staffing mix (more LVN’s vs less
RN’s), the type of materials you buy
• Uncontrollable costs
– Equipment depreciation, the number and type of
supplies that pt’s need (lots of drains go thru lots
of stuff), overtime in the instance of an
emergency
Other Budgeting Terms
Fixed costs – things that don’t
change, the amt you pay every
month is the same
Variable costs – varies with volume
and staff
DRGs, Reimbursement, &
Managed Care
Types of Health Care Reimbursement
•
•
•
•
Fee for Service (FFS)
Medicare
Medicaid
Diagnosis-Related Groups (DRGs) & the
Prospective Payment System (PPS)
• Managed Care
Fee for Service (FFS)
• Little emphasis on budgeting
• Virtually limitless reimbursement
• Reimbursement=
cost to provide service+ profit
• More services= greater amount billed
• Encourages overtreatment of patients
• Health care costs skyrocketed
Medicare
• CMMS
– Center for Medicare and Medicaid Services
• Medicare
– Elderly (>65)
– Catastrophic or chronic illness (no age limit)
– Part A – covers hospital or inpatient services, pts have to
pay deductable
– Part B – usually covers labs, flu shots, outpt services
(physician charges)
– Part C (Medicare Advantage)
– Part D – newer, came into existence in 2006, Medicare
prescription drug coverage
Medicaid
• Federal and state cooperative health insurance plan
• Administered by the states under broad federal
guidelines (CMMS)
• Primarily for the financially indigent
• Majority of Medicaid recipients are women and
children
Prospective Payment System (PPS)
• The creation of Medicare, Medicaid, and fee for
service (FFS) reimbursement caused health care
costs to skyrocket
• Government established regulations for justifying
need for service and quality monitoring
• So… the Prospective Payment System was started
• Here’s what you’re going to get paid, you can work
within these bounds…
Diagnosis-Related Groups (DRGs)
• 1983- to monitor cost containment
• Medicare & Medicaid
• Predetermined pay rates set for inpatient hospital
stays based upon admitting diagnosis (flat fee)
• Rates reflected historical costs for treatment
• Prospective payment, not retrospective as in the
past with FFS
Prospective Payment System (PPS)
• Hospitals receive a specified amount for each
Medicare patient’s admission- regardless of the
actual cost of care
• Outliers
– Exceptions
– Extra payment justified
• Length of stay (LOS) declining
• Reimbursement declining
Managed Care
• Attempts to integrate efficiency of care, access,
and cost of care
• Primary care physicians (PCPs)- “gatekeepers”
• Selective contracting
• Copayments- “copays”
• Use of formularies
• Continuous quality monitoring/improvement
• Utilization review (UR)
Types of Managed Care Organizations
(MCOs)
• HMO
– Certain financial, geographic, & professional
limits
– Different types of HMOs
• PPO
– Financial incentives to consumers if using
preferred provider
• Medicare & Medicaid Managed Care
Capitation
• A hallmark of managed care
• Fixed payment regardless of services used by
the patient during that month
• Less cost= provider profit
• Cost > capitated amount= loss for provider
• Goals
– Stay healthy, avoid illness
– Eliminate unnecessary use of health care services
• Most difficult part- calculation of the
Capitation
capitation amount
• Must be acceptable to the purchaser and must
cover the expenses
• Number of enrollees too low- provider may
not be able to cover practice costs
• Ethical dilemma- encourages underutilization
of services
• Pros
• Cons
Pros and Cons of Managed Care
• Decreased costs
• Broader patient benefits
• Shift from inpatient to
outpatient settings
• Higher physician productivity
• High enrollee satisfaction levels
• Loss of existing physician-patient
relationships
• Limited choice of physicians
• Lower continuity of care
• Decreased physician autonomy
• Longer wait times
• Consumer confusion over rules
Moral Hazard
• Overuse of more medical services than
necessary just because insurance covers so
much of the cost.
Impact of Managed Care
• Reimbursement is not guaranteed by
provision of service
• Need for self-awareness regarding values in
provision of care
Recent Trends
Participation in managed care plans (by both
consumers and providers) declining
Still a major force affecting contemporary health
care
Managed care no longer significantly less
expensive for consumers or insurers
Providers frustrated- limited reimbursement &
need to justify services
Will continue to change
References
Marquis, B. L., & Huston C. J. (2009). Leadership roles and
management functions in nursing: Theory and
application (6th ed.). Philadelphia: Wolters Kluwer
Health.