DRGs Diagnostic-Related Groups: payment rate based on specific diagnoses
Used by Medicare-participating hospitals: pretreatment diagnosis billings based on
Prospective Payment System
DRGs; rate decided ahead of time between insurance companies and hospitals
Exclusive Provider Used by HMO's: insurance coverage for contracted providers or institutions
Health maintenance organizations: comprehensive healthcare to people who pay a fee
HMOs
for a fixed period of time
Fixed rate paid to provider per member per month for healthcare services; set fee paid
Capitation
by insurance company per month for all the patient needs
Preferred provider organizations: special reduced rate for services when customers use
PPOs
certain providers approved by the insurance company; usually fee-for-service
Individual provider arrangements: provide care in their offices for prepaid plans;
IPAs
coalition of physicians who serve HMO patients and third-party patients
Long-term equipment or physical purchases: usually over $500-$1000 that will last
Capital Expenses
years and depreciate over time and be used multiple times
With each new budget (i.e. fiscal year), it is determined which programs/areas get
Zero-Based Budget money; no historical context is used; may rank packages and then only fund top-ranked
ones; can be time-consuming way to create a budget
Variance $ /Budgeted $ X 100 = % difference; contract staff on separate line of budget;
Variance Calculation & Reminders
many staff sick costs more than a few staff on LOA
Cost of Nursing Services Calculation Nurse Time X (Avg. RN Hourly Rate + Benefits + Indirects) = Total Nursing Cost per DRG
General Nurse Staffing Calculation # of RNs needed X days open / # days worked per RN
Full-time equivalent = full-time employee paid for 1 year
FTE Definition & Calculation
FTE = (Hours per shift X # of days worked) / 40 hours
Fixed Costs Stay the same no matter the census: manager salaries, keeping phones on, rent, etc.
Variable Costs Change with census and how much staffing is used
CNML Test
1/6
, 8/30/24, 7:24 PM
Gross Revenue - Deductions from Revenue (DRGs and the Contractual allowances paid
Net Revenue Calculation
by insurance companies)
UAP Unlicensed assistive personnel (CNA's)
ADC Average daily census (patients in a bed at midnight)
Total Patient Days Calculation ADC X Days open per year (for SCH - ADC X 365)
Total Direct Care Hours / Total Patient Days = # of RN hours needed to provide care for
a pt. for 24 hours.
Nurse Hours Per Patient Day (HPPD)
Calculation
For example - for 12 hour staff and 12 workers each shift you multiply 12 staff X 2 shifts =
24 staff X 12 hours each = 288 divided by midnight census of 31 = NHPPD
Value-based purchasing: how CMS determines how much to reimburse a hospital for
VBP care (benchmarked standards and how they are meeting it); quality of care & following
best practice & patient experience
Negotiated pay for services by insurance companies regardless of what services were
Per Diem Rate
actually completed; per day admitted
Unit of service: patient days for inpatient nursing but could be visits or # of procedures
UOS
or whatever that healthcare organization counts
Relative value unit: what ancillary services might use to add up their UOS; # of hi-flows
RVU
hooked up or vents started for RT., for example
ALOS Calculation Average length of stay = # of pt. days / # of discharges (in same time period)
CPUOS Cost per unit of service = salaries / UOS
# of staff hours or $'s / # of UOS
RN hours / patients in beds @ midnight (HOC)
Productivity RN salaries / UOS
Output / input
Amount of work performed by a set # of staff
Minimum staff needed to operate unit usually determined by law, hospital policy, and pt
Minimum Staffing
safety
Needed in order not to lose money; minimum patients needed to meet budget using
Breakeven minimum staffing; can't control admissions but some would work with staffing office to
ensure minimum occupancy occurred
Federal program that helps those over 65, those on dialysis/ESRD, and combines with
Medicare state run Medicaid, younger people who are permanently disabled, and physician
residency training
Emergency Medical Treatment and Active Labor Act: must treat people in ED
EMTALA
regardless of ability to pay, citizenship, and legal status
A system that classifies patients by age, diagnosis, treatment, clinical, and financial
Case Mix Index
categories to develop the reimbursement rate
Productive Time 2080 hours - Benefit hours
Gross = $ charged
Revenue
Net = $ collected
OE for Budgets Operating Expenses: salaries, supplies, rent, non-productive time, etc.
CNML Test
2/6
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