Nurse Practitioner and Nurse Leader Strategies for Practice
Budgeting
· Waxman, K. (2022). Financial and business management for the doctor of nursing practice (3rd ed.). Springer Publishing LLC.
o Read Chapters 3 and 5
· Review the module lecture materials. (MO 1-4)
This week, we jump into budgeting and scheduling for daily staffing in acute care units and address the ambulatory environment. Based on feedback in the discussion, I want to assure understanding of an FTE, units of service (HPPD), touch a bit on supply and demand, the essential Key Performance Indicators for Financial Management.
Download the PowerPoint presentations below and use them to take notes on the assigned readings in the Waxman and Knighten 3rd Ed text for Chapters 3 & 5 (ATTACHED).
Download Chapter 3_Nurse Practitioner and Nurse Leader Strategies for Practice .pptx (ATTACHED).
Chapter 5_ Budgeting in Acute Care Settings.pptx (ATTACHED).
Discussion on Hospital Readmission and Hospital-Acquired Conditions – The Financial Impact
For this discussion you will need to review the Centers for Medicare and Medicaid information on the Hospital Readmissions Reduction Program (HRRP). Below:
You will also need to navigate to the Kaiser Family Foundation Penalty Tracker site.
While at this site, look up your organization: https://khn.org/news/hospital-penalties/
If you are not working for a hospital, look up your nearby hospital.
Report on the following: In 600 WORDS
· Click on the Readmission tab. Examine the readmission rate trend from 2020 to the present. What does this data convey about the organization’s ability to reduce readmission rates?
· Click on the Hospital-Acquired Conditions tab. Has the organization been penalized for hospital-acquired conditions from 2020 to the present? What type of costs do you perceive that the organization might incur related to the hospital-acquired conditions (HACs) shown on the KFF site?
· What impact might the penalties associated with HACs have on the organization?
Financial and Business Management for the Doctor of Nursing Practice Third Edition
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Lisa Duncan and Karen A. Van Leuven
Chapter 3: Nurse Practitioner and Nurse Leader Strategies for Practice and Population Health Management: Financial Implications
POWERPOINTS TO ACCOMPANY
Reimbursement for Nurse Practitioner (NP) Services
1990—start of direct reimbursement for NP services by Medicare; limited to NPs in rural areas and SNFs
1997—Medicare amended its reimbursements of APRNs to include all geographical regions and included reimbursement for clinical nurse specialist (CNS), nurse midwife, and nurse anesthetist services. Reimbursement by commercial insurers followed suit
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Incident-To Versus Direct Billing
If billed directly, NP services are reimbursed at 85% of the physician fee schedule.
If billed as incident-to physician billing, then reimbursement is 100%
Since many practices bill NP services as incident-to, it is difficult to calculate the contribution of the NP
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Requirements for Incident-To Billing
Services provided to Medicare beneficiary
Services are in “noninstitutional setting” and not in a Federally Qualified Health Center or Rural Health Center
Must be a follow-up visit with an already established plan of care
Care must be provided under “direct supervision” of physician
Physician must “actively” participate in and manage course of treatment
Both physician and NP must be employed by the same entity
The service must be of a type usually performed in the office setting and part of the normal course of treatment
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Billing and Coding
Current Procedural Terminology (CPT) codes describe medical, surgical, and diagnostic services
Evaluation and Management (E&M) codes are based on the following:
Setting, complexity of problems addressed or complexity of data to be reviewed or analyzed, and risk of complications
or
Time spent
Levels are Straightforward, Low, Moderate, and High
Must include a medically appropriate history and/or examination
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ICD Coding
International Statistical Classification of Diseases and Related Health Problems (ICD) codes identify the disease, sign, symptom, or complaint
Allow specificity for complexity of the diagnosis or complications
Currently using 10th edition, plans for 11th edition
Overseen by the World Health Organization in cooperation with the National Center for Health Statistics in the United States, so allows for international data sharing
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Calculating Contribution to Practice
Need to Understand
Payer Mix of Practice and of NP
Average Number of Visits
Most Commonly Used E&M Codes
Overhead Costs
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Population Health
Improving the health of a community using nontraditional partnerships among various institutions such as the following:
Government Agencies
Educational Institutions
Healthcare Organizations
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Population Health Outcomes
Health Outcomes
Disease Burden
Behavioral Factors
Physiological Factors
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Scope of Practice Restrictions
Research suggests that increasing NP scope of practice provides more accessible care in underserved areas and reduces costs by reducing emergency room use
Eliminating scope of practice restrictions in all states would result in estimated annual Medicare cost savings of US$44.5 billion nationally
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Calculating NP Contribution
| Percentage of Visits | Average Reimbursement per Visit | Amount Reimbursed per Week | |
| Straightforward | 10% of 80 = 8/week | $35 | $280/week |
| Low | 35% of 80 = 28/week | $50 | $1,400/week |
| Moderate | 35% of 80 = 28/week | $75 | $1,400/week |
| High | 20% of 80 = 16/week | $90 | $1,440/week |
| Totals | 80 visits/week | Average reimbursement/visit $56.50 | $4,520a/week |
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Calculating NP Contribution
Jane Doe is employed at an office-based practice 4 days per week. On average, she sees 20 patients per day. Her average weekly number of visits is 80.
aAdditional revenue may be received in the form of co-payments at each visit. This will vary widely based on insurance coverage of patients.
Allowing for 2 weeks of vacation per year, plus an additional 2 weeks of time for holidays, Jane works on average 48 weeks/year. As a result, the revenue she generates is: 48 weeks × US$4,520 of reimbursement/week—US$216,960 per year. Her office employs multiple support staff per provider. The billing agent estimates that overhead (the cost of doing business) consumes 50% of revenue. As a result, US$108,480 of her revenue is used to cover the cost of support staff, licensing, rent, benefits, and so forth. An additional US$108,480 is available for salary and profits.
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Opportunities
Understanding a practices payer mix, patient mix, and overhead is critical to calculating the value of the NP in the practice
Advocacy for removing scope of practice restrictions may improve access to care and decrease costs without decreasing quality of care
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Financial and Business Management for the Doctor of Nursing Practice Third Edition
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ChrysMarie Suby
Chapter 5: Budgeting in Acute Care Settings
POWERPOINTS TO ACCOMPANY
Chapter Focus
Provides the doctor of nursing practice (DNP) educated nurses in executive leadership in acute care settings with essential skills and tools
Develop and manage annual full-time equivalent (FTE) budgets
Translate FTEs into annual and daily hours and shifts for scheduling, daily staffing, and management reporting
Successfully oversee care delivery models and workforce management that:
Promotes healthful work environments and safe workplaces
Manages emergency preparedness
Formulates programs to encourage work-life balance
Develops recruitment and retention strategies
Meets healthcare outcomes
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Failure to translate budget FTEs into annual and per day targets for worked and productive hours, and replacement of deficit demands for scheduling, staffing, and daily staffing decision making create FTE budget, schedule, and payroll leakage averaging 2.5 FTEs or US$100,000/cost center/year
Balancing available labor resources and workload units of service (UOS) for optimal workforce management and cost-effectiveness can only be achieved when the DNP nurse leader in acute care settings truly understands and sets the expectation with unit leadership for financial principles, formulas, and the interrelatedness of the 1-year annual budget in FTEs translated to hours and shifts.
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Nursing Unit Leadership Accountability
Unit leaders are the CEOs for Unit Financial Accountability
Stewards of financial dollars in the form of payroll dollars and labor expenses
Accountable for the expense and revenue relationship
Requires defined strategies to manage labor
Managing financially requires a financial and clinical partnership
Nursing + Finance; Nurse Leaders + Staff Nurses
With data we can defend our budgets, FTEs, and Hours/UOS, negotiate for changes, and have and hold a seat at the decision-making table.
“Without data, you’re just another person with an opinion” W. Edwards Deming (Jones, Silberzahn, 2016)
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What Is the Budget?
Annual plan that establishes revenue and expense relationships
Specifies the workload type demand
Identifies deficit demand
Sets the foundation for the resource management plan
Budget assumptions
Flexible or variable budgeting is the foundation of census driven schedule
Expenses and revenue will remain relative as agreed
Volume is projected for each schedule and staffing response adjusted
Worked hours are determined for each workload UOS
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Essential Budget Components
Budget year definition
Total worked
Budget census/
budget patient days
Budget FTEs
Direct
Indirect
Education/orientation as part of total worked or productive?
Nonproductive
Education/orientation as part of nonproductive?
Benefit (paid not working)
Vacation
Holiday
Sick
LOA/FMLA
Budget total paid
Key performance indicators (KPIs)
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Budget Assumptions
Flexible or variable budgeting is the foundation of census driven schedule
Expenses and revenue will remain relative as agreed
Volume is projected for each schedule and staffing response adjusted
Worked hours are determined for each workload UOS
Essential Budget Components
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Defined Targets for:
Workload Units of Service
The foundation for telling your unit’s story
The foundation for defending your unit’s budget
The foundation for asking for increases in hours or FTEs
Every cost center or department must have a primary workload UOS
Census is workload UOS for Inpatient units
ED Visits is workload UOS for Emergency units
Deliveries are the workload UOS for Obstetric units
Most units may have secondary workload UOS
Examples for inpatient units include admissions, discharges, transfers (ADT), bedded outpatients, or observation hours
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Workload Units of Service (Cont’d)
Workload UOS Glossary of Terms
Patient Days are the sum of the census at midnight for the survey period.
Common agreement between nursing and finance that the midnight census does not adequately describe the impact of the work to be done on the unit as it ignores the secondary workload
Secondary workload
ADT work intensity
Bedded outpatients or observation hours
Other workload
Primary Workload UOS defined in the annual staffing budget
Adjusted Workload UOS is the sum of the primary and secondary Workload UOS
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Workload Units of Service (Cont’d)
Workload UOS should be identified by day of week in four ranges as planning for these trends can reduce costs without reducing care
Peak Workload UOS or volume: The volume consistent with the capacity of the unit if every bed or bay is occupied
Possible Volume: The workload UOS between the most frequent and peak UOS volume of capacity of the unit
Most Frequently Occurring or Probable Volume: Includes the most frequently occurring workload actual average daily workload UOS, and actual average daily workload UOS by day of week (weekday and weekend) on 50% or more of all days in the survey period
Best guideline for proactive scheduling and staffing
Best tool to reduce overscheduling fixed by overstaffing, floating, or cancelling
Best tool to prevent under scheduling fixed by short staffing, floating or calling-in, extra, OT, and agency
Certain or Most Common Volume: The most common workload UOS is the one that rarely drops below this volume
The most frequent volume or MFV helps unit leadership measure the “range of staffing elasticity” for direct care staff reflected in ADTs within the shift that may or may not require additional staff (see Table 5.1)
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Workload UOS: Fluctuating, Erratic, and Most Frequent Volume
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Fluctuating: Increases or decreases within the target RN to patient ratio when measured in 4, 8, 12, or 24 hours
Erratic: Increases or decreases GREATER than the target RN to patient ratio when measured in 4, 8, 12, or 24 hours
MFV: Most commonly occurring volume by day of week
| Comparison of Budget Average (BA) UOS to MFV and RNs Scheduled Versus Needed | Mon | Tue | Wed | Thu | Fri | Sat | Sun | Avg. |
| Budget Average (BA) UOS | 20 | 20 | 20 | 20 | 20 | 20 | 20 | 20 |
| Actual MFV by Day of Week (DOW) | 26 | 24 | 26 | 22 | 16 | 14 | 12 | 20 |
| # of RNs Needed at BA UOS if Target Ratio is 1:4 | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 |
| # of RNs Needed to MFV if Target Ratio is 1:4 | 6.5 | 6 | 6.5 | 5.5 | 4 | 3.5 | 3 | 5 |
| Variance Over/Understaffed When Scheduled RNs Based on BA UOS Compared to MFV | −1.5 | −1.0 | −1.5 | −0.5 | +1.0 | +1.5 | +2.0 | ±4.5 |
Table 5.1 Example Comparison of Budget UOS to MFV and Scheduled to Required RNs with a Target Direct RN to Patient Ratio of 1 RN to 4 Patients
Source: Suby (2021b) Reproduced with permission from the Labor Management Institute (LMI)
Workload UOS: Fluctuating and Erratic Volume
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| Time of Day | Census Unit A | ± Change | Erratic or Fluctuating | Census Unit B | ± Change | Erratic or Fluctuating | |
| 5am | 22 | 0 | Fluctuating | 22 | 0 | Fluctuating | |
| 9am | 23 | +1 | Fluctuating | 26 | +3 | Fluctuating | |
| 1pm | 19 | −2 | Fluctuating | 18 | −8 | Erratic | |
| 5pm | 21 | +2 | Fluctuating | 26 | +8 | Erratic | |
| 9pm | 22 | +1 | Fluctuating | 19 | −7 | Erratic | |
| 1am | 21 | −1 | Fluctuating | 18 | −1 | Fluctuating | |
| 24 Hrs. Avg. | 21.33 | −1 | Fluctuating | 21.5 | −5 | Erratic | |
| Census is unchanged or fluctuates between a range of −2 to +2 across the 24-hour period; neither change justified addition or decrease of an RN | Census changed by four or more patients in 3 of 7-time intervals justifying the increase or decrease of 1 to 2 RNs across the 24 hours |
Table 5.2 Example Fluctuating or Erratic Workload for a Tele/Stepdown Unit; ADC is 20 and RN to Patient Ratio is 1 to 4
Source: Suby (2021b) Reproduced with permission from the Labor Management Institute (LMI)
ADT Workload Intensity Index Formula and Sample Thresholds
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ADT Work Intensity Formula: Admission + Discharges + Transfers (ADT)
÷ Midnight Census × 100 = % ADT Index
Example: 20 ADT ÷ 25 Midnight Census × 100 = 80% ADT Index
| Acute Care Unit Type | Threshold Range in ADT Index Percentage (%) |
| Critical Care | 85–90% |
| Intermediate Care (e.g., Telemetry/SD) | 65–75% |
| General Adult Medical-Surgical | 50–60% |
| Mother Baby/Post Partum, NICU/PICU | 80–90% |
| Mental Health | 35–40% |
| Rehab-Skilled Nursing | 25–30% |
Table 5.3 LMI’s ADT Work Intensity Index Thresholds by Acute Care Unit Type
Source: Suby (2021b) Reproduced with permission from the Labor Management Institute (LMI)
Comparison of nurse staffing based on changes in unit-level workload associated with patient churn Hughes, R; Bobay, K; Jolly, N; Suby, C; JONM 2013
Key Findings:
High ADT Work Intensity associated to shortened LOS
Low ADT Work Intensity associated to lengthened LOS
When HPPD is above budget, and the MN census is below budget it is due to high ADT Work Intensity
When the ADT Work Intensity Index was used in determining RN staffing across all hospitals throughout all three shifts, each type of hospital unit would have needed additional RN staffing. This increased need ranged from a mean of 0.91 (SD = 1.46) to 6.98 (SD = 4.33) additional RNs when patient churn was the highest because of ADT.
ADT Work Intensity Index produced a larger increase in calculated nurse staffing requirements (M = 6.29, SD= 3.28), than patient churn using LOS (M = 4.31, SD = 2.20), compared to the midnight census (M = 4.26, SD = 2.20, P = 0.999, multivariate partial g2 = 0.80), by an average of 2.35 RN HPPD, except in critical care units
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Business Case Strategies to Consider
Consider allocating a position to ADT Nurse on the DOW and time of day of highest need
Negotiate for an “earned productivity credit” for secondary workload that increases the worked hours of care
Annually in the budget based on the difference between annual average and actual secondary workload (e.g., expected to actual ADT, bedded outpatients, observation hours, etc.), awarded retrospectively at the end of the year
Bi-annually or quarterly based on the difference between projected budget average and actual secondary workload awarded retrospectively at the end of the year
Each pay period based on the difference between the projected budget average and actual secondary workload awarded retrospectively at the end of the year
Eliminate the assistant manager role or charge nurse from indirect care and set expectation for them to take a full patient assignment counting as a direct caregiver
Reduce or eliminate nursing assistants or their equivalent to maintain or increase RNs with lower RN to patient ratios (charge RNs count as direct care taking a patient assignment
Reduce or eliminate patient safety attendants (PSAs) or sitters to maintain or increase RNs with lower RN to patient ratios (charge RNs count as direct care taking a patient assignment
Reduce or eliminate clerical support to maintain or increase RNs with lower RN to patient ratios (charge RNs count as direct care taking a patient assignment
To retain them assess the unit’s highest days and shifts of ADT activity to identify when they will be most needed
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LMI Workload UOS Best Practices
Define annual financial plan for primary and secondary workload UOS
Trend workload volumes by DOW for MFV patterns
Develop employee schedules based on the MFV that reflect DOW patterns (“the work drives the schedule”)
Proactive assessment of “Erratic” and/or “Fluctuating” volume changes by unit each DOW in 4, 8, 12, 16, 24, 48, and 72-hour intervals
Staffing practices consistent with daily staffing policies
Identify sources for supplemental staffing replacement FTEs and hours for mutually agreed upon goals such as:
actual workload greater than budget,
unplanned employee absences for emergent call-ins,
LOAs greater than 2/shift,
unit vacancy at or above 20% of total budgeted positions.
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Essential Budget Components: Budget Year
Annualized
365 in 3 of 4 years
366 in 1 of 4 years (leap year)
365.25 days in 4 years (3 × 365 + 366 ÷ 4)
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