Hospital employment under revised medicare payment schedules - Diagnosis Related Groups-based medicare payments' effects on employment

Monthly Labor Review, August, 1986 by Eileen Appelbaum, Cherlyn Skromme Granrose

One speciality hospital we examined had initiated a study of how it should respond to the impact of DRG's. As a result of what it had learned by the time of the interview, this hospital had taken steps to become an outpatient surgery facility. It had arranged for an acute care hospital to take its more seriously ill patients and had already converted an entire inpatient floor to day surgery. Because of these measures and the increasingly competitive environment in which the hospital operates, the inpatient census at this facility was at 40-percent occupancy in 1985, compared with 56 percent a year earlier. However, the outpatient service increased over the same period: outpatient visit increased 8.4 percent between fiscal years 1984 and 1985 while outpatient surgical procedures increased 19.7 percent over the same period.

In this hopsital, the effect on employment levels had been minimal, although employees had been shifted from inpatient to outpatient care. The nursing staff remainded stable between 1983 and 1985, with 82 registered nurses (of whom 76 work full time), 14 nurse's aides, and no licensed practical nurses. The number of ward clerks in patient care units decreased from 16 to 12 over that period. However, total clerical employment also remained stable at about 41, because three position for coder-abstracters (currently filled by temporary workers) have been added in the medical records department. The nubmer of people employed as medical technicians, secretaries, and administrators remained unchanged.

The hospital anticipated reduced labor requirements in areas such as dietary, housekeeping, and maintenance services as the shift from inpatient to outpatient care proceeds, but his had not occurred at the time of the interview. Employment in the sevice unit, which numbered about 125 in 1983, had been reduced by two full-time-equivalent positions, and there had been a moderate shift toward more part-time staff in this area. The only employment growth anticipated by this hospital was in the medical records department, which at the time was burdened by the increase in the number of people seen as outpatients. A systems analyst position wa expected to be added and two or three clerical positions were to be made permanent when an evaluation of medical records operations was completed.

Separate reimbursement for medical education expenses under the DRG payment system has had differential effects on the revenue of teaching and nonteaching hospitals. Payments for direct education costs are based on actual cost, while those for indirect costs depend on the size of house staff, the number of beds, and the total payment from medicre. It has been estimated that adjustments for indirect teaching costs increase the payments to teaching hospitals with one or more iterns or residents for every four beds by an average of 53 percent, while combined adjustments for direct and indirect medical education costs approximately double the reimbursement to a teaching hospital compared with the DRG payment per case to nonteaching hospital. In part, these increased payments are intended by medicare to compensate teaching hospitals for the greater severity of the illnesses they treat and for the free care they provide to patients with no medical coverage, although other hospitals with acutely ill patients or which provide free medical services receive no such compensation. The result of this payment system has been to encourage teaching hospitals to categorize expenditures as direct educational costs whenever possible and to shield their revenues from the effects fo DRG's.