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Journal of Nursing Administration:
doi: 10.1097/NNA.0b013e3181d04297
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The Valuation of Nursing Begins With Identifying Value Drivers

Rutherford, Marcella M. PhD, RN

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Author Information

Author Affiliation: Assistant Professor, Nova Southeastern University, College of Allied Health and Nursing, Fort Lauderdale, Florida.

Correspondence: Nova Southeastern University, 3200 S University Dr, Fort Lauderdale, FL 33321 (rmarcell@nova.edu).

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Abstract

Adequate investment in a profession links to its ability to define and document its value. This requires identifying those elements or value drivers that demonstrate its worth. To completely identify nursing's value drivers requires meshing the economic, technical, and caring aspects of its profession. Nursing's valuation includes assessing nursing's tangible and intangible assets and documenting these assets. This information communicates nursing's worth and ensures adequate economic investment in its services.

Nurses are an essential and costly resource, and the nation should know the value gained from nursing's services. To communicate value, nursing can borrow methods from the field of economics. "Valuation as an economic term is used to define worth or value and, as a field or endeavor, involves financial valuing of a company's resources."1,2 Value drivers are those elements or assets that are part of nursing's "day-to-day operations that have the most impact on the entity's value."3 Valuation originated in the 1960s as a management tool, using the economic present value method, and involves assessing opportunity costs of assets, examining the value of the next best alternative related to resource choices.3,4 A valuation study when presented to shareholders entices investors to entrust funds in support of the company's products and services.3 Nursing can use the valuation method by compiling its value drivers demonstrating its worth to gain investment from its stakeholders. These stakeholders include hospital administrators, payers, legislators, and healthcare consumers.

Traditionally, nursing has had difficulty measuring its value, fearing that the sweeping generalizations of financially minded persons fail to capture important nursing actions.5 Nurses need to actively participate in the economic chronicling of valid, reliable, and unembellished data related to nursing value drivers. Today's nurse leaders, however, are handicapped by limited research focused on the value of nursing.6,7 The purpose of this article was to stimulate a dialogue on nursing's value drivers, to explore how documentation of value drivers safeguards an investment in nursing, to examine the relationship of nursing to money, and to discuss how this relationship to money challenges and benefits nursing's value.

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Nursing's Value Drivers

Nursing's value drivers are those operational elements involved in value creation.3 Identifying these drivers aligns objectives, harmonizes professional goals, guides industry investment, identifies financial and operational elements, and focuses current performance and future growth opportunities.3 Nursing's value drivers are represented by both tangible and intangible assets. Table 1 lists nursing's assets. Rutherford2 identified these assets in a historical case study that analyzed primary and secondary financial, administrative, and nursing's documents found in the archives of a northern Florida hospital. The themes identified in this research supported the value drivers presented here, identified as instrumental to the nursing administrator's ability to gain funding in the research findings.

Table 1
Table 1
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Models are used to describe and offer visual ideas, present concepts, enhance understanding, and guide action.8Figure 1 represents the value drivers that harmonize nursing's economic goals, those identified nursing assets, both tangible and intangible, documenting its worth.8 The model visually demonstrates the impact of nursing's value drivers on health, value, and profitability and was developed based on the historical research by Rutherford.2

Figure 1
Figure 1
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Value Assessment Based on Tangible Assets

A profession's worth has clarity and "dispels dispute when dollars and numbers are used to tell the story."9,10 Tangible assets are those valuable elements that can be documented and quantified. In traditional businesses, these assets include such things as buildings and inventory. For nursing, tangible assets are worth the effort needed for collection and measurement.

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Nursing Knowledge

Nursing competence is based on knowledge gained from both formal education and practice experience.11 Investing in educating nurses on the business aspects of healthcare, in addition to clinical training, offers important value-added preparation. Fiscal health of a hospital system calls for "leaders who have vision and judgment-leaders who understand that society is trying to serve many values and recognize that having more of one thing will often require having less of another."12 Healthcare management requires leaders to make hard business choices. Financial and clinical expertise makes nurses valuable participants in these decisions. In Rutherford's2 case study, a value advantage was identified from the owner's commitment to ensure that the nursing administrators received education in both nursing and finance.

Aiken et al13 examined and found that baccalaureate-level or higher education reduces the risk-adjusted mortality of or failure to rescue surgical patients. The research findings of Aiken et al14 indicated that a higher percentage of nurses with a BSN level of nursing education resulted in fewer healthcare complications. Nursing studies focusing on the connection between higher levels of nursing education to improved patient outcomes are mounting. Preparing nurses in both the clinical and business aspects of healthcare has an economic worth, enhancing research focusing on nursing's value.2,11

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Nursing Revenue Centers

Nursing is a revenue center, and its services support hospital reimbursement. Standard billing format requires nursing and all hospital revenue departments to bill using unique revenue codes. Nursing literature, however, has balked at its services being "bundled" into the room and bed charge. Placing nursing cost in the bed rate is thought to hide its worth.

When discussing healthcare revenue, it is important to understand the difference in payment for nursing services versus the cost and the charge. Payment for inpatient care for Medicare and managed care is based on the diagnosis-related group (DRG)/Medicare severity DRG assigned to the patient or a per-diem rate. The level of nursing services (ie, medical/surgical, intensive care, etc) for most payers is noted in the charge.15 The intensity of nursing resources is built into the DRG weights and payment. Reimbursement, therefore, is predominantly not affected by charges. Creating nursing charges would not impact the overall payment for inpatient services.

Outpatient Centers of Medicare & Medicaid Services (CMS) and managed care payments are made according to Current Procedural Terminology (CPT) and All Patient Category rates. The CPT codes reflect the resource intensity of care and are the basis for the fee schedule used for payment. Observation services for outpatients require additional nursing services, with time assigned to a CPT code. Intravenous therapy services is a recent change in the CMS billing rules (2006) and is a noted exception, where outpatient infusion oversight (start and stop time for intravenous therapeutic infusions) generates additional billing related to nursing services.16

Nurses have bristled at their costs being assigned to the bed room rate. In response, nurses petitioned the CMS in 2007 to adapt or change the hospital billing system, asking to bill nursing based on intensity of care separate from the room rate.17 The CMS rejected this request. Changing billing regulations for payers, clearinghouses, and various billing software systems would be a monumental undertaking. In 2007, Dr Steven Finkler at a meeting sponsored by the Robert Wood Johnson Foundation at Rutgers University pointed out that the costs of implementing this sweeping change could outweigh the minimal revenue change.4,18 This comment is consistent with economic research that reminds "the collection of cost data should only be undertaken if the value of this information is likely to be greater than the costs of obtaining it."19 Undertaking the precise documentation in microcosting should be assessed as worth the cost of collection.4

Scott Davis, a director of Revenue Cycle Management in a large multihospital system in south Florida, responded to nursing's concern, pointing out that nursing services "are not 'bundled into' the room and board rate-they are the room and board rate" (personal communication, October 23, 2009). The room and board revenue reflects nursing services on the patient's bill. Included in the room rate are a few additional nominal supplies designated by the CMS rules as nonbillable, used by nurses to provide patient care (personal communication, October 23, 2009). Davis also thought that perhaps some incremental change in gross revenue might result from separating nursing from the room rate; however, additional costs would be associated with the added documentation burden required to capture intensity data. Nursing would need to document these data, and Davis pointed out that the accuracy of nursing documentation has historically challenged the profession.

Nursing should consider first taking ownership of the reimbursement it generates. Seeking process improvements, collecting related nursing data, and exploring ways to increase efficiency will increase the net revenue attributable to nursing (personal communication with S. Davis, October 23, 2009). Dialoguing with the financial and information services colleagues will allow nursing to develop the means to capture nursing services detail on the charge master.

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Nursing Efficiency of Care

The ability of a hospital to realize a profit is affected by the coordination of care. "Fragmented care is one of the greatest systemic flaws of health coverage today."20 Nursing, as the coordinator of care, has an opportunity to document efficiencies it designs, plans, and implements. Increasing cost efficiencies in a fixed revenue environment increases profitability.

Nursing research recently has explored patient-driven, activity-based cost accounting. Research demonstrates that reducing the patient's length of hospital stay, preventing delays in services, and reducing supplies and treatment time lower costs.21 Patient-driven accounting uses actual costs of supplies, procedures, and nursing costs, in addition to costs from the laboratory, x-ray, and all treating departments, linking these costs to the medical diagnosis.5,21 Overhead costs are allocated to each revenue department. Adding statistical charges to the charge master, such as the hours an obstetric patient is in labor or time in the emergency room and so on, could be easily captured to track efficiency measures. Nursing's advice is sought and valued when the hospital is looking to make operational changes for their ability to improve processes while maintaining patient satisfaction and safety (personal communication with S. Davis, October 22, 2009).

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Nursing Care Patient Outcomes

Current research is recently examining nursing's value relative to patient outcomes.13 New Medicare reimbursement policy links payment to patient outcomes. In 2008, the CMS stopped paying for identified high-volume, preventable healthcare complications.15 The system could not afford to pay for avoidable poor outcomes. Nursing research began to examine the role nursing intervention plays in healthcare outcomes.13 Concerns over medical error have stimulated various not-for-profit, corporate, state, and national agencies to collect healthcare performance data. Nursing responded and began to explore the relationship of nursing intervention on patient outcomes.22-25 Value is noted as "improved patient care that prevents nosocomial complications, mitigates complications with rapid identification and intervention, and leads to more rapid patient recovery, creates medical savings."26 Reducing patient's recovery time and improving mortality statistics have economic implications.26,27 Nursing interventions are linked to preventing many of the targeted hospital-acquired complications, and documenting these efforts increases its valuation.

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Value Assessment Based on Intangible Nursing Assets

Nursing's intangible assets are difficult to measure in numbers or dollars.10 These hard-to-define attributes can become invisible assets if not accounted for. Intangible assets are not reported because of "restrictive accounting rules, fear of divulging company secrets, loss of competitive advantage, the absence of a vocabulary that is universally understood, and the ability to measure intangible resources."28 In 2009, with difficult economic choices facing the nation, nursing cannot afford to have invisible assets that could impact nursing funding.

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Nursing Intuition

Nursing literature presents intuition as a nonlinear process, citing that it uses "sound, rational, relevant knowledge based in situations that, through experience, are so familiar that the person has learned to recognize and act on appropriate patterns in the presenting problem."29 Expert nurses identify subtle patterns of physical characteristics and symptoms as signals that may trigger patient rescue. This experiential knowledge offers value to all patients. Qualitative studies exploring nursing interventions related to intuition triggers leading to patient rescues and improved outcomes are worth pursuing.

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Nursing Caring

Caring and economics are often seen in direct opposition in nursing circles. Nurse scholars are now examining nurse caring from an economic perspective.30 Nursing's caring, for example, results in higher patient satisfaction, leading to a willingness to pay. Patient satisfaction correlates to a facility's ability to collect account receivables. With the increase of patient copayment and high deductible, this portion of cash flow has become substantial. Nursing valuation should include studying the link between a perception of a caring relationship between the nurse and the patient to collecting patient payments. There is an economic value in the patient's perception of good hospital care that is directly related to good nursing care.31 Correlating patient nursing satisfaction to collecting account receivables is a worthwhile effort.

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Trust in Nurses

Trust is defined as "the expectation that individuals and institutions will meet their responsibilities to us."32 Earning community trust is a difficult task. Corporate abuse, greed, and unethical practices have created an atmosphere of distrust. In healthcare, the public is aware that insurance companies, pharmaceutical companies, and other related medical supply entities amass large profits while insurance premiums and patient expense grow each year. Rising unemployment, coupled with the rise in insurance premiums, has resulted in many citizens being underinsured or uninsured. The public ends up distrusting those who appear to benefit from their illness. Recent Gallup Polls continue to list nursing as the most trusted, honest, and ethical profession-ranking higher than pharmacists, medical doctors, and clergy.33 Nursing should examine the worth of its trusted status, understand those characteristics that contribute to this status, and protect this position of strength. Nurses experience a distance from money that may contribute to patient trust. Nurses do not own or directly bill for their services. They neither gain from company profits nor suffer losses. As employees, nurses are paid an hourly or salaried rate from an employer, and the public does not see nurses directly linked to the healthcare payment. Nurses experience no conflict of interest related to the quantity and timing of the services they deliver. Their pay remains stable no matter how many patients they treat or supplies they dispense. Nurses are seen as the patient advocate and protector in a time in the patient's life when he/she is not fully self-reliant. Patients, therefore, trust nurses' motives and see their services as genuine, not affected or connected to personal tangible gain.

Nurses question, as stated earlier, why their services are not accounted for on patient billing.7,17 If nurse services are billed, will creating a direct link between nursing and money, associated with the quantity of services dispensed, change nursing? The community trusts nurses' motivations and willingly entrust themselves into their hands. Will linking nursing to a level of payment cause patients to question nursing motives? Will nurses be inclined to increase the billed resources to increase the perception of their worth? The culture of healthcare emphasizes profit making and capitalism. Identifying nursing's value, while safeguarding its "most trusted" status, needs to go hand-in-hand.34 On the other hand, will the stagnant nursing salaries noted in 2008 and 2009 impact nurse's initiative, thus impacting patient satisfaction? There is value in nursing safeguarding this trusted status. Actions perceived to link nursing services to money or direct payment should be approached with caution.2 This is not to say nurses need not collect cost data and conduct research that documents the value of their services. Documenting value can be undertaken without sacrificing patient trust.12 The role of nurse as trusted patient advocate, unencumbered by their choices being linked to payment, makes nursing unique.

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Conclusion

Adelaide Nutting35 (1858-1948) demonstrated her concerns and interest in the economic side of nursing. In 1926, she discussed the benefit of tracing "the lines of development and follow the sequence of events, for such appraisal as we can bring to them." Her writing examined the costs relative to nursing education and training. Costs she stated "…must be placed somewhere… are incurred in a measure of every act, and are as inevitable as death."35

In 2009, these words remain pertinent and prophetic. Successful businesses invest in actions that produce growth; "sometimes, though, growth does not come in easily measured units such as new stores."3 Documenting nursing value begins with identifying value drivers that support success and fosters growth. To enhance nursing's valuation, the profession needs to spotlight elements that denote its value. Nursing knowledge in clinical and financial aspects of healthcare, acknowledging the revenue generated by nursing services, increases delivery efficiencies related to nursing's actions, and enhancing patient outcome can be measured and communicate professional worth. Nursing intuition, caring, and trusted position in healthcare are intangible assets that strengthen the profession's valuation. Today, in an age of economic shortfall, investing in documenting and communicating nursing's value drivers becomes the foundation of the profession's valuation. This effort will communicate that nursing services represent a value to society that far outweighs its cost, thus strengthening and justifying a healthy investment in nurses.

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