The way the United States pays for nurses is broken

The epidemic brought to light a long-standing issue in hospitals: we rely on nurses to provide high-quality treatment, yet the American health-care system does not adequately value their efforts – in the most literal sense.

The majority of hospitals in the United States operate on a fee-for-service basis, which means they generate money by invoicing for specific treatments. Doctors are a source of money in this universe. They direct that tests be performed, that imaging be done, and that medicine be given. They do procedures and examinations. Each of those distinct services can be charged by the hospital, and patients will see them on their invoices.

Nurses play a critical role in all of these services. However, because hospitals do not bill insurers for the treatment provided by nurses to support a doctor’s instructions, they end up as a labor cost on the balance sheet. Patients are charged for nurses’ services in the same manner as they are for cleaning or Jell-O as part of the hospital room bill.

Under the present fee-for-service payment paradigm, the job they undertake — checking on patients, inserting an IV line, evaluating patients for infections, teaching patients how to care for themselves — is not considered a billable service.

The way the United States pays for nurses is broken

“Except for maybe the equipment I utilized, all of that effort is unseen,” Matthew McHugh, a nursing professor at the University of Pennsylvania, told me. “The obscurity of nursing labor, the inability to assign a monetary value to it… is not consistent with how any other professional service would function.”

As a result, hospital systems have a financial incentive to retain nurse staffs as minimal as feasible. In comparison to hospitals in other affluent nations, where most of which have universal health systems that do not rely on fee-for-service reimbursement, US hospitals employ less health care workers per capita.

Nursing and other labor expenditures are frequently targeted for reduction when their finances become tight — such as when a global epidemic causes them to discontinue money-making elective services. That’s why, just before being inundated with Covid-19 patients, US hospitals began furloughing nursing personnel.

However, this failure to respect nurses had an impact on the quality of care provided to patients prior to the pandemic, and it will continue to do so unless hospitals and policymakers decide to address it.

“We’re going to keep having this problem until nurses are regarded as income creators and as vanguards of quality, which they are,” Betty Rambur, a professor of nursing at the University of Rhode Island, said.

How the United States’ health-care reimbursement system undervalues nurses’ labor
Fee-for-service medicine, which entails paying separately for each treatment, test, and prescription prescribed by a doctor, has a very narrow definition of what constitutes medical care. Before a doctor ever sees a patient, a lot of work is done.

The way the United States pays for nurses is broken

When a patient arrives at a hospital with a high temperature and shortness of breath, which are frequent symptoms during a pandemic, nurses run through a lengthy checklist to ensure that the patient is safe and ready to see a doctor. They’ll examine their airways before starting an IV. They’re going to take blood from two distinct places. They may need to insert a catheter to collect the patient’s pee. Then they must enter that information into the hospital’s records system in order to provide the physicians with a narrative about the patient’s condition.

All of this takes time — up to 30 minutes for each patient — and the nurses are pressed for time. If an antibiotic is required, the objective is to put the patient on antibiotics within two hours. But first, all of the tests and cultures that the nurse is in charge of must be completed.

None of the nursing job is compensated in the same manner that a doctor’s labor is. Nurses recognize that the medical hierarchy is in place for a purpose, but they are also aware of the ways in which hospitals undervalue the job they do to care for patients.

Andrea Riley, an ER nurse at Windham Community Hospital in Connecticut, told me, “We’re not authorized to diagnose and we’re not allowed to charge for our services.” “Corporations… have no concept of the physical labor required to carry out a doctor’s instruction.”

The significant disparity between good patient outcomes and hospital profitability

Numerous studies have identified a link between the number of nurses on a hospital’s staff and the quality of care provided to patients. For the past 20 years, Linda Aiken and her colleagues at the University of Pennsylvania have been researching this association. Higher staffing numbers, according to studies published in 2003 and 2014, would result in fewer fatalities. A similar result was shown in a 2019 research that focused on individuals in cardiac arrest.

A more recent study by Aiken’s team, which looked at hospitals in four US states and was published in Nursing Outlook in 2021, backed up those earlier research. They wanted to see if the type of education nurses received had an impact on patient outcomes. It didn’t, they discovered, but the sheer quantity of nurses employed at the hospital did.

Despite this, the link between more nurses and better treatment does not appear to be driving how hospitals staff their facilities. In fact, Riley informed me that rather of hiring more nurses, hospitals often plan for nurses to pick up extra shifts to ensure that their units have appropriate assistance.

The difficulty is that the way hospitals are compensated for medical services in the United States does not encourage them to explore the relationship between nursing and care quality when making staffing selections.

Nursing work, for example, is lumped in with other “hospital services” for which institutions are paid a set per-discharge price for inpatient hospital care under Medicare. These payments do not differentiate between a nurse caring for patients with complicated requirements, such as someone on a ventilator or a dementia patient who is at danger of falling, and another nurse caring for a patient who requires less continuous attention.

In some ways, “you can’t blame hospitals,” said Olga Yakusheva, a nursing professor at the University of Michigan. They’re merely responding to the economic incentives built into the health-care payment system in the United States.

However, what makes financial sense for hospitals and what is best for patients are at odds.

Yang Wang, a PhD candidate at Johns Hopkins School of Public Health, showed that when hospitals have additional cash due to increased rates paid by private insurers, they don’t spend it on enhancing patient care, such as by employing more nurses, in a research published last year in Health Services Research. Instead, the majority of the extra funds were used to cover administrative costs and the hospital’s own excess.

“The majority of the excess revenue was dedicated largely to activities and initiatives that benefited the hospital rather than the patients,” Wang wrote.

When money is tight and sacrifices must be made, hospitals will prioritize labor expenditures, which includes nursing, according to Yakusheva.

“That is entirely due to the economics of how health care is paid for,” she explained. “From the hospital’s standpoint, what happens to patients is of very little significance. They make money by providing services.”

The actions of private equity firms when they purchase a hospital are instructive. According to study published in April in Health Affairs, the hospitals’ financial performance improved following the purchase since the cost to the institution for each discharged patient decreased while profit margins increased.

However, in order to achieve their better profit margins, these hospitals reduced their nursing workforce by more than ten full-time employees on average. Although the impact on care quality at those locations was beyond the scope of this investigation, such findings are concerning given what we know about the association between nurse staff levels and clinical outcomes.

“Our findings highlight the shaky link between financial performance and clinical quality,” the scientists wrote, “where a rise in the former may be the result of structural changes that undermine the latter.”

That tension was shown by Covid-19. Hundreds of hospital systems around the country were laying off staff members and placing nurses on furlough as a deadly new virus swept the country, bringing tens of thousands of Americans to the hospital and ICU.

Nurses had to deal with some of the most severe working situations they’d ever encountered. “You’re basically trying your best to keep your patient alive,” Riley explained. “And you’re sobbing in your car, and this happens all the time.”

Many of them still don’t feel appreciated any more than they did before Covid-19. Cakes to commemorate “Nurses Week” make no impact. They believe their jobs are still in jeopardy, based on measures connected to the same payment system that gives their labor no intrinsic worth. Appeals for more nurses and assistance continue to go unanswered.

Riley remarked, “We’ve been shouting at the top of our voices.” “Every day, it falls on deaf ears.”

It’s not easy to change the way the US pays for health care.

Hospitals in the United States are engaged in the present system because they know how to profit from it. Most of the experts I talked with said that altering how hospitals are compensated for the care they deliver, in a way that recognizes the importance of what nurses do, would be required to force US hospital systems to reassess how they’ve operated for decades.

“We need make sure that the resources that go to hospitals are really directed toward the individuals who perform the work,” Rambur added.

Value-based payments, which are based on the results patients experienced rather than just the services they received, are one notion that the US is already experimenting with. This would help establish a financial incentive to spend in things like nursing, which has been shown to improve results. The federal government (through pilot schemes such as accountable care organizations) and commercial insurers (via contracts with hospitals) are attempting to start paying hospitals more based on the quality of treatment provided rather than the quantity.

The concept is that if a hospital’s patients are less likely to experience problems or be readmitted later for a connected health concern, the hospital should be compensated more. Given what we know about the association between greater staffing levels and outcomes like readmissions, hospitals would have excellent motivation to invest in nurses in order to meet those benchmarks.

“The more wide and extensive value-based reimbursement develops, the more hospitals will be able to improve outcomes and save costs,” Yakusheva told me. “You have to put money into nursing because that’s where the results are.”

There are even more aggressive plans out there, such as requiring hospitals to spend a particular percentage of their earnings on nursing personnel, according to Rambur.

In May 2021, the National Academy of Medicine released a paper describing the future of nursing over the next ten years as well as legislation that might improve the profession. The authors propose a variety of payment modifications that would better value the labor of nurses.

The most important suggestion they made was to switch from fee-for-service to value-based payments. Recognizing that the change will take years, they suggested measures that might be implemented right away, such as permitting nurses to bill for virtual services.

Change, on the other hand, will be tough. Another potential solution to these difficulties was a ballot measure in Massachusetts in 2018, which would have mandated hospitals in the state to maintain specific nurse-to-patient staffing ratios. The move to greater value-based payment has been slow; while the Affordable Care Act (ACA) encouraged more experimentation, the bulk of health-care services in the United States are still paid on a fee-for-service basis.

Hospitals are fiercely protective of their bottom lines, and every congressional district has a hospital as a key employer, as experts and industry insiders frequently point out. They have enormous political clout, with the ability to stifle substantial reform efforts.

Something, though, must alter. “Hospitals and nurses have a potential to leverage the Covid-19 pandemic experience to reset the hospital-nurse relationship,” Yakusheva and Rambur said in a JAMA paper published in August 2020.