How Will You Make Money If You Don’t Know What Nursing Costs?

nursing cost analytics

August 19, 2015  |  Dianne Foster

“We have to cut nursing costs” are dangerous words when we don’t know what it actually costs for nurses to deliver patient care. Often, nursing care is still considered part of Room and Board. Without a better understanding, we cannot know if we are making money, breaking even, or losing money. This becomes particularly important in a bundled payment arrangement.

The problem with using the standard nursing hours per patient day formula is that it is based upon an average. Not all patients are average. Individual nurses with varying levels of experience care for individual patients of varying severity. Using an average leaves money on the table, especially in critically acute cases.

We recently learned about a study that investigated the relationship among patient characteristics, nurse characteristics, nursing intensity, and nursing cost. The purpose of the study was to explore the variability of nursing cost per acute care episode.

It compared the amount of nursing care in patients who shared the same DRG and degree of complication. It calculated nursing intensity x nursing wage x shift cost to determine the daily cost of patient care. The study found tremendous differences in the intensity of nursing care: the per day cost ranged from $4.87 to $322.66. A regression analysis parsed the cost impact of nursing characteristics such as years of service, degree, and so forth.

The study author presented a methodology that other hospitals can replicate. It’s a good start. The next steps are to develop benchmarks and align costs with reimbursement and outcomes. Perhaps a far-reaching goal, but achievable today with presently available data. However, a common data model does not yet exist.

The ability to assign the right nurse to the right patient to provide the best outcomes gets to the heart of the value of nursing. Once it exists, a complete database for nurse characteristics that ties to patient care assignments, patient care acuity, and outcomes can accurately capture the value of nursing in terms of cost. Linking the data is key to success, as business intelligence merged with clinical intelligence is the future of healthcare.

Dianne L. Foster RN BSN MBA
Dianne Foster hospital transition planningAsk Dianne about reinventing the nursing profession: dianne@freemanwhite.com

Dianne has three-plus decades of clinical and leadership experience in 90-600+ bed hospitals. Her expertise in complex hospital operations, patient care environments, and cultivating relationships helps hospitals surpass the status quo.

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