Testing an inpatient nursing intensity billing model

There has been growing concern about the costs and intensity of inpatient nursing care, which consumes more than 40% of hospital direct costs and $165 billion each year. Allocating nursing labor as an average cost per patient and charged as room and board creates cost compression, distorts hospital payment, and hides the economic value of nurses. This article examines a method for adjusting daily room charges using nursing intensity weights assigned by the diagnosis related group. In a test using claims data from 286 hospitals in four states representing 1,856,256 patient discharges in 2002, the nursing intensity adjustment improved explained total cost variance by 8.5% for adult all payer patients (R2 = .4448 vs. .4825) and 9.4% for Medicare only patients (R2 = .4387 vs. .4798) compared to unadjusted days. This article discusses unbundling inpatient nursing care intensity and charges from room and board and recommends implementing this billing process at all U.S. hospitals.