Nursing Finance Term Paper

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Healthcare Practices in Nursing Today

Over the last 50 years, health care systems all over the world have experienced rapid and significant changes. Some of these changes have been the result of innovative developments in medical science and technology that have greatly benefited patients, prolonging and saving the lives of millions. Some of these changes, however, have had the unfortunate result of limiting patient access to prescribed treatment and diminishing the overall quality of care.

Significant challenges are being faced in health care as systems restructure and reinvent themselves in a difficult and often painful effort to make more efficient use of their available resources (ICN, 2001). Since health care is such a labor-intensive industry, the stresses on these systems inexorably trickle down to affect those employed by the system. Nurses, who are the most highly trained caregivers who have ongoing, regular patient contact, stand at the very heart of any health care system, regardless of where it is located (Clark & Clark, 2003).

Widespread anecdotal evidence points out that the issues in health care have negatively affected the workplace experience of nurses. The media regularly reports on the challenges that nurses face daily in the workplace, ranging from low pay in Ireland, to safety and health problems in South Africa, emigration in the Philippines and mandatory overtime in the United States. It is clear that nursing is a profession in crisis, a situation that extends around the world. (Clark & Clark, 2003).

The health care reforms that have been introduced around the world, including privatization and the introduction of market-based approaches to health care, have succeeded in bringing numerous new pressures to bear on health care systems and health care workers (Clark, Clark, Day & Shea, 2001). While the crisis in health care is multifaceted, encompassing shortages of trained medical personnel, epidemics (including AIDS, tuberculosis and malaria), environmental problems (air pollution, water contamination), natural disasters, the consequences of war (civilian casualties, refugees), and changing demographics, the root of the problem is ultimately economics. In today's world, developing nations cannot provide the most basic of health care to their citizens. The public and the private sectors in developed countries have difficulty keeping pace with the rapidly escalating cost of health care (Clark & Clark, 2003).

The purpose of this paper is to identify the successful cost-effectiveness practices that are in place in various healthcare settings in the United States, as well as to take a look at how nurses and nursing fit into these practices and which cost-control factors can make a contribution to a successful nursing budget. A summary of the research on nursing administration and the efficiency, cost-effectiveness, cost-containment and quality control issues facing the nursing profession will be provided in the conclusion.

Review and Discussion

Background and Overview

The health care systems of all capitalist democracies were subjected to radical transformation during the 1990s, rooted in the need to control the cost of health care for the government, business, insurers and individuals. Some of the factors driving this need include the increasing number of effective services, the growing population of elderly and changes in what patients expect. A central issue has been the attempt to allow market forces to control costs (Griffith, 1999).

The provision of care in the U.S. has been predominantly in the private sector, with large-scale hospital chains playing a significant part. Doctors and hospitals have traditionally been paid on a fee-for-service basis, funded primarily through insurance, which has given health care providers powerful incentives to increase costs. A result, millions of Americans today have no insurance coverage for health care, despite publicly funded systems like Medicare (for the elderly) and Medicaid (for the impoverished).

This traditional model of health care has made way for managed care plans called Health Maintenance Organizations (HMOs).

In 1980, nine million Americans were covered by HMOs, with that number rising to over 23 million in 1986 and to greater than 41 million by 1992 (which translates to over 15 per cent of the total U.S. population -- in 1992 (Griffith, 1999). The transaction costs within the United States health care system are huge. A five-year study conducted in Boston, Los Angeles and Philadelphia discovered that overhead costs of 20-34 per cent were routinely claimed by managed care plans.

There is little evidence that quality of health care is poorer under managed care in the United States. Over 70 per cent of observations indicated that there is no significant difference in quality between managed care and alternative plans. However, it emerges that managed care organizations consistently achieve lower ratings for patient satisfaction (e.g. In relation to the professional competence of the clinicians and the time devoted to consultations. In one study, 27 per cent of former members of HMOs reported that they left the managed care system due to dissatisfaction with the quality of care (Griffith, 1999).

It has been reported that managed care techniques, together with market forces, have caused insurance premium growth rates to retreat from 10.6 per cent in 1992 to 1.2% in 1996. Managed care mechanisms have resulted in lowered use of expensive discretionary procedures, also leading to fewer hospital admissions. Utilization review has decreased hospital costs by 10-15 per cent.

On the other hand, Health Maintenance Organizations under Medicare appear to cost almost six per cent more than non-HMO arrangements, resulting in the government losing money on the people who use them. There is also strong evidence that HMOs that operate in markets with twelve or more other HMOs charge notably lower premiums that those who operate in areas that have less competition (Griffith, 1999).

Medicine and Cost-Efficiency

Primary Care Nurses vs. Team Nursing

Primary care nursing was a reorganization that began in the late 1960s, gradually replacing other forms of nursing organization. Before that time, team nursing was the accepted form of nursing organization. Under team nursing, RNs, LPNs, and aides all worked together in providing patient care, with RNs overseeing the work. Team nursing effectively moved RNs out of direct patient care and into a managerial role. In contrast, primary care nursing has each RN assigned to the overall care of five to eight patients (Krall & Prus, 1995). Although LPNs and aides are still utilized in this type of nursing organization, their roles were diminished and subordinated to the authority of the primary RN (Marram, 1977).

Use of RNs vs. LPNs and Aides

Pope and Menke provided an analysis of the hospital labor market in the 1980s by saying, "Because of the low wages of some more highly skilled occupations relative to their productivity, hospitals could provide care at lower cost by substituting the occupational categories with higher skills (e.g. RNs) with those with lower skills (e.g. licensed practical nurses and aides)" (Pope & Menke, 1990, p. 130).

However, the history of cost containment pressure on hospitals over the past few decades shows that these pressures have changed the intensity and complexity of hospital care. In 1983, the U.S. government implemented prospective reimbursement for hospital costs, effectively categorizing admissions according to diagnosis-related groups (DRGs). As stated by Pope and Menke, "The results of these efforts and other trends has been fewer, but more severely ill, inpatients, shorter length-of-stay, and increased outpatient activity" (Pope & Menke, 1992, p. 127).

It appears that cost containment policies have essentially limited the amount of time patients may remain in the hospitals for any given health issue, and have restricted inpatient hospital care to more serious procedures. As length of hospital stay and severity of patient illness increase, more acute care is required from nursing personnel. Many of the tasks that would be performed by lesser skilled nursing personnel have simply been eliminated. Ordinarily, the need to contain labor costs might result in an increasing utilization of lower-paid workers and a minimization of the use of more highly skilled and highly paid workers. However, the change in complexity and intensity of hospital care caused hospital administrations to attempt to eliminate from the mix any workers who were not capable of being flexibly deployed (Krall & Prus, 1995).

Licensed practical nurses rapidly disappeared from acute-care hospitals as the changeover to all-RN staffs picked up momentum across the country in the 1990s. The reasons were relatively clear. As patient acuity increased and cost-containment pressures grew, nursing directors believed that they could employ only nurses who were qualified to deliver a broader range of care. At the same time, cost containment pressures created an environment in which hospitals had to more closely account for and justify their nursing costs. As Prescott pointed out in her 1986 article, "Especially now that hospitals face serious fiscal constraints associated with changing reimbursement and cost control mechanisms, administrators must look closely at both the number an d type of nursing staff they employ" (Prescott, 1986b, p. 81).

Use of Patient Classification Systems to Track Nursing Costs

Nursing costs are notoriously difficult to track due to the fact that it is difficult to predict exactly how many and which type of workers…[continue]

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