Virkstis, Katherine L. ND; Westheim, Jared BA; Boston-Fleischhauer, Carol RN, MSN, JD; Matsui, Paul N. BA; Jaggi, Tonushree BA
In October of 2008, the Centers for Medicare and Medicaid Services (CMS) officially launched a new Medicare payment provision, through which 11 hospital-acquired conditions (HACs), deemed reasonably preventable, may result in decreased reimbursement if not coded as present on admission (POA).1 With many private payers following suit,2,3 the new reimbursement policy represents a clear migration in the industry's approach to pay-for-performance (P4P) from carrot to stick-shifting from paying out bonuses for high-quality care to withholding payment if certain conditions arise during a hospital stay. Hospital-based executives are increasingly shining a spotlight on nursing, and with a good reason-many of the CMS's no-pay conditions are measures for which nursing is largely responsible.4 As these changes in the nation's healthcare payment system take root, questions remain about how the CMS policy will impact hospitals and health systems financially.
In this article, Nursing Executive Center researchers closely examine the new payment rule and quantify its impact on hospital Medicare revenues, focusing on the 2 indicators most closely aligned with nursing: pressure ulcers and patient falls. The analysis also provides detailed estimates of the cost savings associated with the prevention of these conditions. Upon close examination of the data, the authors found that even when using conservative cost estimates, the incremental costs associated with treatment of these conditions far exceed the total revenue at risk resulting from the new payment provision. At a time when economic pressures continue to worsen, this article presents findings from this analysis in a format that can be readily used by nurse executives to build a comprehensive business case for advancing nursing goals while safeguarding their larger organizations' financial health.
Evolution of Pay-for-Performance
In 2001, the Institute of Medicine (IOM) released Crossing the Quality Chasm, a report that suggested the United States was failing to translate medical advances into better care.5 The IOM's report became a catalyst for healthcare reform, playing an influential role in the emergence of financial incentives for providing high-quality care. Pay-for-reporting programs through CMS and the Joint Commission represented the first of those incentive structures, requiring hospitals to report compliance with specific guidelines for various conditions, such as pneumonia and heart failure.6 In 2003, the CMS/Premier Hospital Quality Incentive Demonstration made headlines when it began rewarding highest performing hospitals with financial bonuses, representing one of the earliest examples of P4P. Since then, the healthcare industry has witnessed a boom in the number of private payer-sponsored P4P programs, which has grown from less than 40 to nearly 150 in just 5 years, with more than a third of those programs now targeting hospitals.7 Furthermore, a growing number of conditions are now tied to financial incentives, with the Joint Commission's original list of 10 core measures ballooning to 42.8
Examining the Impetus for the No-Pay Provision
In migrating from bonus payment to withholding payment, the CMS no-pay provision represents a major departure from traditional P4P programs, not only in terms of incentive structure but also program ambition. While early pay-for-reporting and P4P initiatives were part of a patent industry-wide movement focused on improving care quality, the CMS provision appears to be driven by a broader agenda-one focused not only on quality, but also on cost. Indeed, it is noteworthy that the law authorizing the policy was none other than the Deficit Reduction Act of 2005, and close examination of the language contained in the law is revealing. As provided in Public Law 109-171, "Section 5001(c) of the Act requires the secretary to identify conditions that are (a) high cost or volume or both; (b) result in the assignment of a Diagnosis-Related Group (DRG) that has a higher payment when present as a secondary diagnosis; and (c) could reasonably have been prevented."9 The language leaves little room for interpretation, indicating that the dominant catalyst for this change in direction is cost.
Targeting Nursing-Sensitive Measures
Historically, nursing-sensitive measures have not played a prominent role in P4P programs, but the list of conditions selected for the CMS provision reveals another directional change. Of the 11 conditions included on the list, 4 of them-catheter-associated urinary tract infection, patient falls, vascular catheter-associated infections, and stage III and IV pressure ulcers-are officially endorsed as nursing sensitive by both the National Quality Forum10 and the National Database of Nursing Quality Indicators.11 Furthermore, 2 other indicators-deep vein thrombosis/pulmonary embolism and glycemic control-are widely considered nursing sensitive,12 although they have not been officially endorsed as such. Accordingly, more than half of the conditions included in the provision are measures for which nursing is largely held responsible.
Of the nursing-sensitive conditions included in the provision, this article focuses its analysis on the 2 conditions deemed to be the most pervasive challenge for nursing: pressure ulcers and patient falls. Indeed, pressure ulcers and patient falls are among the most prevalent and costly of the 11 conditions; they are also among the most widely endorsed by industry quality improvement organizations. Notably, both conditions are included in National Quality Forum's "Serious Reportable Events"10 and "Nursing-Sensitive Patient Outcome Measures,"13 the Agency for Healthcare Quality Research's "Patient Safety Indicators,"14 and the National Database of Nursing Quality Indicators' "Nursing-Sensitive Indicators."11
Estimating the Reimbursement at Risk Nationally
In response to the many unanswered questions about how the new CMS provision will affect healthcare providers, the Nursing Executive Center's Data and Analytics Group has conducted analysis that estimates the impact on hospitals' inpatient Medicare revenue for individual hospitals, as well as for the nation's hospitals in aggregate. Based on the final list of approved conditions contained in the CMS provision as outlined in the fiscal year (FY) 2009 Inpatient Prospective Payment System Final Rule released on July 31, 2008, researchers used historical Medicare inpatient discharge data from FY 2007 to estimate the number of cases affected nationally by the new provision. The analysis also approximated the amount of hospital inpatient Medicare revenue that could potentially be impacted by the provision. Importantly, this analysis makes the following assumptions or caveats: (1) the number and mix of cases represented in the FY 2007 claims database remain constant through FY 2008, (2) the number and mix of complications and comorbidities reported in the FY 2007 claims database remain unchanged, (3) coding practices represented by FY 2007 data remain constant through FY 2008, (4) discharge data only reflect those discharges that fall within the Medicare Acute Inpatient Prospective Payment System, and (5) discharges designated as ungroupable following application of the Medicare Severity DRG (MS-DRG) grouper have been excluded from this assessment (this applies to <1% of all cases nationwide, primarily because of changes in the International Classification of Diseases, Ninth Revision coding system).
Only a Fraction of Cases Affecting Reimbursement
The policy states that all 11 conditions included in the final ruling must be coded as POA to receive full payment. If a claim includes one of the conditions targeted by this policy as a secondary diagnosis that is not coded as POA-either because the condition was acquired during the hospital stay or because the condition was not documented upon admission-it will be reimbursed as if the secondary diagnosis was not present, potentially resulting in a drop in severity tier to a lower-weighted MS-DRG and decreased reimbursement. Importantly, this does not result in nonpayment, but rather a reduction in payment based on the MS-DRG reassignment. Moreover, payment will not change at all if there is another major complication or comorbidity (MCC) listed that retains the discharge at a higher severity tier (L. Grabert, Centers for Medicare and Medicaid Services, telephone interview, October 8, 2008).
To further illustrate this point, Figure 1 represents 3 possible scenarios for a patient admitted to a hospital for coronary bypass surgery. Patient 1 has a pressure ulcer that was documented as POA. Because a stage III or IV pressure ulcer is designated as an MCC, the patient's MS-DRG assignment remains in the highest severity tier, and the hospital receives full reimbursement. Patient 2 has a pressure ulcer that was not documented as POA, so the MS-DRG assignment is coronary bypass without MCC, and the hospital receives approximately $7,500 less than for patient 1. Patient 3 also had a pressure ulcer that was not documented as POA, but in this case, the hospital still receives full reimbursement because the patient has an additional secondary diagnosis listed-cardiogenic shock, an MCC that results in a higher-weighted MS-DRG assignment.
In fact, close examination of the data reveals that most patients suffering from pressure ulcers or preventable injuries in the hospital also suffer from MCCs. Reimbursement for such patients remains unaffected, regardless of whether the condition is coded as POA. Nationally, it is only a fraction of total discharges that will change in MS-DRG assignment and affect hospital reimbursement. Table 1 shows that in the worst-case scenario, only 44% of pressure ulcer cases and 19% of injurious falls cases change in MS-DRG assignment and affect hospital reimbursement at all.15 For the many hospital executives concerned about the depth of impact the CMS provision will have on reimbursement, these findings should offer some relief, indicating that the worst-case revenue at risk may be much less than initially expected.
Estimating the Incremental Costs of Treatment
It is widely recognized that pressure ulcers and patient falls represent a sizable cost to the US healthcare system, yet the amount of additional cost required to treat these 2 conditions is not well understood. A thorough literature search revealed wide variance in both the ranges of cost estimates as well as the types of costs considered. Examples of such cost estimates include total costs per hospitalization of patients with pressure ulcers1,16 and falls,1,17 costs of pressure ulcer care excluding physician fees and inpatient care,18 excess charges associated with injurious falls during hospitalization,19 average monthly costs of pressure ulcer care in long-term care environments,20 and cost ranges of various stages of pressure ulcers in medical versus surgical patients.21
To quantify the cost burden of pressure ulcers and patient falls on hospitals, the Nursing Executive Center used incremental cost estimates found in previously published literature. For pressure ulcers, a range of incremental cost per case, based on National Pressure Ulcer Advisory Panel estimates,22 was used to capture the variation in treatment costs for wounds of different stages. The lower range estimate used was $3,529 per case (adjusted for inflation to 2008 dollars), and the upper range estimate used was $52,931 per case (adjusted for inflation to 2008 dollars). An average incremental cost of $15,418 per case (adjusted for inflation to 2008 dollars), based on Rizzo et al,23 was used to calculate the additional cost of treatment for injurious falls. In the case of both pressure ulcers and patient falls, the incremental costs were reviewed by a panel of experts, including chief nursing officers, directors of clinical quality, and wound ostomy continence nurses,12 who generally considered the values to be conservative estimates.
Cost of Treatment Far Outpacing National Revenue at Risk
When plotted against the national worst-case revenue at risk as seen in Figure 2, it is clear that even when using conservative estimates, the costs associated with treatment of pressure ulcers and patient falls far exceed the total revenue at risk, offsetting any potential financial gain from reimbursement. The biggest financial challenge-as well as the greatest opportunity-appears to be preventing such conditions from occurring in the first place. Put another way, the strongest business case for quality is the case for investment in the prevention of HACs. For nursing, this is especially true for pressure ulcers and patient falls.
Projecting the Cost-Savings Opportunity
The Nursing Executive Center has provided 2 helpful reference tools for nursing leaders to use when estimating the cost-savings opportunity at their own organizations. The first, shown in Figure 3, is a worksheet that uses the total number of patient discharges with pressure ulcers or falls during the previous year to calculate the total cost-savings opportunity associated with the prevention of these events for a given institution. This worksheet-most useful for organizations with ready access to their POA data-enables hospital executives to project their unique cost-savings opportunity. The second tool, shown in Table 2, provides a side-by-side comparison of worst-case Medicare reimbursement-at-risk to the potential cost savings by the number of patients discharged with each condition. Using this table, nursing leaders without access to such detailed POA data can still roughly estimate and readily demonstrate the profound potential impact on financial savings achieved through prevention of pressure ulcers and patient falls.
The complexity of the CMS POA provision places inherent limitations on the accuracy of the projections for reimbursement at risk. Specifically, the projections do not distinguish between different stages of pressure ulcers because coding for pressure ulcer stages was not available at the time of the analysis; currently available data do not allow for a determination of whether each condition was POA or acquired during the hospital stay; and patients with multiple conditions targeted by the POA provision complicate the assessment of individual conditions; as such, patients' revenue impact may be counted multiple times within the analysis (ie, sum of the parts is greater than the whole), or patients with multiple conditions may have a greater likelihood of DRG reassignment resulting in a greater revenue impact (ie, whole is greater than sum of the parts). In addition, the accuracy of estimates for additional costs of treatment depends heavily on the accuracy of the incremental costs used in the calculation.
Two key limitations should be noted. First, there exists a lack of widely accepted values for the incremental costs of treating pressure ulcers and patient falls. Second, given the lack of accepted values, the authors had to rely on the best available data from the literature-mean costs of treatment. Because the distribution of costs tends to be non-normal, mean costs inevitably do not fully capture the wide range of associated treatment costs and therefore represent an imperfect proxy for cost of treatment. Given these limitations, further studies are needed to ensure greater accuracy of cost projections.
Realizing the Return on Quality
As healthcare faces an eroding financial market, economic pressures on hospital executives are expected to worsen. Nursing leaders will need to maintain unprecedented strategic discipline to advance nursing goals while safeguarding their larger organizations' financial position. To help nurse executives strike this critical balance, chief nursing officers and other key nursing leaders are encouraged to leverage the data and tools provided in this article to generate meaningful conversations with chief financial officers and other hospital executives, building a powerful business case for investment in nursing to enhance clinical quality while simultaneously generating significant financial savings for their organizations.
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