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| How to Establish a Palliative Care Program | ||||
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Financing Palliative Care Programs - Acute Hospital ReimbursementA hospital receives money for services and puts that money into one pot. Out of that pot, they pay for its programs. There is not a one-to-one correlation between where the money comes from, and the programs on which it is spent. That is up to the hospital to decide. Revenue
Payer-mix. For a given service, the hospital receives different amounts of reimbursement from different sources. The percent of revenue from each source determines the overall funding for the hospital. For example, hospital provides the same services to a patient who has an acute myocardial infarction whether or not the patient has no insurance, Medicaid, Medicare, an HMO, or a commercial indemnity plan. The reimbursement from these sources of revenue for this discrete service is variable. The hospital charges commercial indemnity plans more in order to balance the smaller revenue from the other sources. Hospitals who have a higher percentage of patients with indemnity insurance plans will have larger amounts of revenue than hospitals who have a high percentage of patients with Medicaid. Contracts. Hospitals are paid for their managed care patients under contracts. The hospital who does the best job negotiating contracts will have more revenue that a hospital who is disadvantaged in contracting. Billing. Hospitals that have efficient billing and collections departments do better than hospitals that don't. Basic billing information is available at www.ahima.org and www.mgma.org Budgeting Expenses
Volume-based budgeting. Some tie budget amounts to volume. For example, If an inpatient ward of 40 beds has 38 patients in it, then they get 38 "units" of money to run that ward for that day. If the census drops to 20 patients, they get 20 "units". Global budgeting Some tie budgets to global estimates. For an inpatient ward of 40 beds, if the nurse-to-patient ratio is 1:5, then that ward needs the salaries of 8 nurses. If the unit is 50% occupied on average over the year, then the budget is chopped 50% the following year. Revenue-based budgeting. Some tie budgets to overall revenue from that unit. For example, in a ward of 40 beds, if the unit had 100% occupancy with commercial indemnity insurance, and the average bills per patient were $3,000 per day, the hospital would get $120,000 per day for the care on that unit. If the ward were 100% filled with Medicaid patients, each would get $300 per day, and the hospital would get $12,000 per day for care on that unit. Most hospitals use a combination of these methods. Units or services that are associated with high reimbursement are favored with resources and marketing to maintain and increase the revenue source. Services or areas that are associated with revenues that do not meet the costs must be subsidized from other sources. Important pearl: Most hospitals budget inpatient care based on bed occupancy. The more beds you control, the more money that comes to your cost center for the purposes of budgeting for the program. More occupied beds, more money. Less occupied beds, less money. There are economies of scale. For example, A 20 bed unit is not 5 times more expensive to run than a 5 bed unit. But, for budgeting purposes, it will get 5 times more revenue based on a bed-occupancy system of budgeting. Each unit requires a minimal staffing of nurses, clerks, and ancillary staff. If the usual staffing ratio for a unit is one nurse for 5 patients, this would suggest that the 5-bed unit has one nurse. But, the nurse has to eat, take breaks and needs help with some patients. Someone else needs to be able to respond when the nurse is busy with an individual patient. Consequently, the unit needs a minimum of 2 nurses. But, on the 20 bed unit, where you would calculate you need four nurses, there are economies of scale. You need an RN for assessment and medication and treatments. But, you also need tasks that someone with lower skills can perform, such as an LPN or nurse's aid or volunteer. So, that 20 bed unit could be staffed by 2 RN's, an LPN, and an aide. Same revenue, lower costs. Important Pearl: Go for the largest unit for which you can justify occupied beds. Hospitals do provide services that are not bed-based. For example there may be a diabetic nurse specialist that helps with patient teaching and nurse education. She is paid from the excess revenue from those beds that is not used to run that unit. Her costs are bundled in with the hospitals entire costs that are turned into its charges. However, with Medicare paying a set rate, Medicaid paying a set rate, and HMO's negotiating a set rate, it is more and more difficult for hospitals to free up money for these kind of ancillary services. Consequently, their number has been decreasing. In addition to budgeting direct costs (such as salaries), hospitals budget for indirect costs (such as heat, lights, depreciation). These are indicated on a full-cost profit and loss statement. It is beyond the scope of this manual to describe this in detail. Ask hospital or health care system staff to explain how this is done in that institution. CAPC Resources:
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