Leadership final

• An HMO is an example of the model of managed care. HMO follows the model of capitation. Capitation is based on the provision of specified services to and individual over a set period of time. If the services cost more than the
• allotted amount, the provider absorbs the cost; however, if the services are less than the allotted amount, the provider gets a profit. The advantage of
• this type of system is that that there is a decrease in unnecessary services, things are preformed in a timely manner, care provided is appropriate, and prevention is practiced more.

Managed care is a reimbursement method for services. This model unites delivery and financing. The goal of this type of system is decrease to unnecessary services, decrease cost, and works to provide timely and appropriate care.

Healthcare organizations it may own, have contractual agreements with, or have authority over by virtue of the fact that it reimburses the organization for services provided its patients.

• Managed care thrives on providing the best care for the cheapest price. Keeping this in mind, prevention and health promotion are key aspects to keeping cost for services down. If a provider can keep an individual from being sick and needing various tests, this is the best option for them. Facilities operating under this type of care also have to perform in a timely manner and want to decrease
• the amount of unnecessary services. Physicians are also given bonuses if they are able to keep their fees for services in a range that complies with the MCO standards. Those who are not able to do this are in a sense cut off. They are
• no longer able to take patients with this type of insurance.

• Facilities merge in order to reorganize, restructure, and reengineer to decrease waste and economic insufficiency. A merger occurs when one organization buys another. The
• organizations combine to form a new entity, sharing an infrastructure.

• Not for profit- are controlled by voluntary boards and provide care to a mix of paying and charity patients; excess revenue over expenses is redirected into the organization for maintenance and growth rather than returned as dividends
• to stockholders.
• For profit- operate with the specific intent of earning a profit by providing healthcare services to individuals who can afford to pay for these services.

• (Yoder
• p. 234) The designation between the two refers to the tax status of the
• organization and specifies how the profit can be used.

• *For
• profit organizations: do pay taxes and the profit from the organization can be
• disturbed to managers or investors. Profit=revenues-expenses.

• *Not-for-profit
• organizations: do not pay taxes and must reinvest all of profits (called net
• income or income above expenses) back into the organization to better serve the
• public.

• (Finkleman
• p. 111)

• *For
• profit organizations rely on shareholders, who invest in the organization and
• expect a financial return. Shareholders are allowed to sell their share to the
• organization.

• *Not-for-profit
• organizations do not have shareholders but rather contributions from charitable
• institutions, churched, government, and other reimbursement sources. This type
• of organization must reinvest the profit back into the organization.

• Geographic dispersion, regional access to care,
• incomes of the population, aging of the population, and immigration trends are among the demographic factors influencing the design of healthcare organizations. Changing economic and demographic characteristics of many communities are resulting in a larger number of uninsured and underinsured individuals. Geographic isolation often limits access to necessary health services and impedes recruitment of healthcare personnel.

• By year 2025, more than 18% of the population is
• expected to be older than 65 years. In response to this demographic shift, the CMS provides the Program of All-inclusive Care for the Elderly (PACE) to ensure
• that quality care is provided to impaired and frail elderly who are nursing home eligible. PACE aims to keep this population out of nursing homes by access to a full continuum of comprehensive community-based care.

• Without a broad array of basic healthcare services
• affordable and available, failure to treat minor problems can result in high-cost illnesses.

a. acute care- An acute care hospital is a facility in which the average length of stay is less than 30 days. Patients are discharged as soon as their conditions are stabilized.

b. long-term care- aka chronic care, provide services for the patients who require care for extended periods in excess of 30 days

c. rehabilitative care- tertiary care

Capitated payments are based on the provision of specified services to an individual over a set period such as 1 year. Providers are paid a per-person-per-year (or per-month) fee. If the services cost more than the payment, the provider absorbs the loss. Likewise, if the services cost less than the payment, the provider makes a profit. Capitation is the mode of payment characteristic of health maintenance organizations (HMOs) and other managed care systems. (Yoder-Wise)

• Capitation is a prepayment to a provider to deliver
• health care services to enrollees of a health plan. This is usually a monthly payment, but it can also be paid on an annual basis. The provider agrees to provide all care for the enrollee’s health care needs that the provider is qualified to provide. If the enrollee requires no services in the allotted time period, the provider is still paid. If the enrollee’s care incurs additional expenses, the provider receives no extra payment. The capitation method is dependent on a contract between the provider and a third-party payer. The focus
• is on covered lives of the number of persons who are enrolled in a health plan rather than individuals. For example, costs are typically described as inpatient days per 1,000, visits per 1,000, or cost per life. Capitation changes the focus from how much a provider will be paid, as is the case with fee-for-service, to how much it costs to provide the care required. In doing this, the third-party payer no longer carries the full financial risk for the employer because much of it is shifted to the provider to keep costs down when
• decisions are made about care. (Finkleman)

• Cash budget- the operating plan for monthly receipts and
• disbursements. Organizational survival depends on paying bills on time. A rapidly growing census, can induce a cash shortage because of increased expenses in the short run. The financial officer prepares the cash budget in large organizations.

• Capitalbudget- reflects expenses related to the purchase of major capital items such as equipment and physical plant. A capital expenditure must have a useful life of more than 1 year and must exceed a cost level specified by the
• organization. The minimum cost requirement for capital items in healthcare organizations is usually from $300 to $1,000, although some organizations have a much higher level. Anything below that minimum is considered a routine
• operating cost. Organizations usually set aside a fixed amount of money for capital expenditures each year.

Operating budget- the financial plan for the day-to-day activities of the organization. The expected revenues and expenses generated from daily operations, given a specified volume of patients, are stated. The expense part of the operating budget consists of a personnel budget and a supply and expense budget for each cost center. A cost center is an organizational unit for which costs can be identified and managed. The personnel budget is the largest part of the operating budget for most nursing units.

• Generally, one FTE can be equated to working 40 hours/week, 52 weeks/year, for a total of 2,080 hours of work paid per year.
• The 2080 hours paid to an FTE in a year consist of both productive hours and nonproductive hours. Before the number of FTEs needed for the workload can be
• calculated, the number of productive hours per FTE is determined by subtracting the total number of nonproductive hours per FTE from the total paid hours. The total number of FTEs needed to provide the care is calculated by dividing the total patient care hours required by the number of productive hours per FTE.
• (Box 12-5). The total number of FTEs calculated by this method represents the number needed to provide care each day of the year. It does not reflect the number of positions or the number of people working each day.

• An unfavorable, or negative, variance
• means that the budget was less than the actual amount spent p. 244 Yoder-Wise

• ·
• Variances can be positive or negative. A negative variance is an undesired outcome. P. 261 Yoder-Wise

• Typically, monthly reports of operations are sent to nurse managers, who then investigate and explain the underlying
• cause of variances greater than 5%. Many factors can cause budget variances, including patient census, patient acuity,
• vacation and benefit time, illness, orientation, staff meetings, workshops, employee mix, salaries, and staffing levels. To
• accurately interpret budge variances, nurse managers need reliable data about patient census, acuity, and LOS; payroll reports; and unit productivity reports.

·However, even uncontrollable variances that increases expenses might require actions of nurse manager. For example: If supply costs rise drastically because a new technology is being used, the nurse manager might have to look for other areas where the budget can be cut. P. 244 Yoder-Wise

• ·
• The formula for calculating the workload
• or the required patient care hours for inpatient units is a s follows:

• o
• Workload volume = Hours of care per
• patient day x Number of patient days (refer to Table 12-2) Yoder-Wise p. 240

• The number of productive hours Subtract the total number of
• nonproductive hours per FTE from total paid hours.
• Finally, the number of FTEs needed to provide the care is calculated by dividing the total patient care hours required by the number of productive hours per FTE

Productive hours are paid time that is worked

• ·Nonproductive hours are paid time that is not worked, such as vacation, holiday, orientation, education, and sick
• time.

Productivity = output divided by input

• Example:Input: 24 hours of nursing care (one patient per day). Inputs are predetermined budgeted nursing care hours per patient day based on the patient’s acuity and required
• patient care activities.

Outputs: the outcomes; achieved patient goals



Productivity is the ratio of outputs to inputs. The inputs are the resources used to provide the services such as personnel hours and supplies. Only decreasing the inputs or increasing the outputs can increase productivity. Hospitals often use hours per patient day (HPPD) as one measure of productivity. For example, if the standard of care in a critical care unit is 12 HPPD, then 360 hours of care are required for 30 patients for 1 day. When 320 hours of care are provided, the productivity rating is 113% (360/320=1.13), meaning productivity was increased or needed care was not delivered.

• External variable includes things that can’t be controlled such as supply costs rising drastically because a new technology is being used. When this happens, the nurse manager might have to look for other areas where the budget to be cut.
• (Yoder-Wise p. 245)

Internal variable include patient census, patient acuity, vacation and benefit time, illness, orientation, staff meetings, workshops, employee mix, salaries, and staffing levels. (Yoder-Wise p 245)

• Staffing involves planning for hiring and deploying qualified human resources to meet the needs of a group of
• patients, is a primary responsibility of the nurse manager. Scheduling is a function of implementing the staffing plan by assigning unit personnel to work specific hours and days of the week. (Yoder-Wise p. 273)

• ( Yoder-Wise p.300-302) There are two types of performance appraisal tools: Structured (Traditional Method) and Flexible (Collaborative Method). The structured type consists of the Graphic Rating Scale and Rating Scales. The flexible type consists of the Behaviorally Anchored Rating Scales (BARS), Management by Objectives (MBO), and Peer Review.
• Structured:
• Graphic Rating Scales:Comprises a numbering system that
• indicates high and low values for evaluating performance
• Is popular because it is easy to construct and easy to use
• Problems with this type of scale is that it lacks specificity and may promote a Halo Effect. Halo Effect- a common example of a personality bias in which the rating is based on a characteristic of the individual that actually has nothing to do with the work trait being considered. Manager may give higher ratings to individuals they like (a positive halo effect) and lower ratings to individual they don’t like (a
• negative halo effect).Information needs to be gathered over
• the entire evaluation period. Evaluations shouldn’t be a reflection of isolated incidents
• Rating Scales:
• Usually consists of generalizations, not
• specific behaviors. The rating is relatively subjective in
• nature some managers don’t give “5” with the
• rationale that no employee always exceeds expectations

• Flexible:
• Behaviorally Anchored Rating Scales: focus is on behavior and should include employees in the development
• combine ratings with critical incidents (specific examples that have occurred) or criterion references (examples usually based on standards of practice or competency based standards)
• -is specific to the specialty of nursing
• delivered and preestablised outcomes
• -describes the employee’s performance quantitatively and qualitatively
• -is expensive and time consuming to implement(must be designed for each specific position description or standard
• of practice
• -provides concrete employee evaluation with minimal subjectivity

• Management by Objectives
• -performance goals established jointly between the manager and the employee for the upcoming evaluation period
• -progress regarding the accomplishment of these goals is documented throughout the rating period by the employee and manager
• -in effect, the employee has created a “performance contract” as well as defined future goals for professional
• performance

• Peer Review
• -used because nurses tend to function in
• their normal pattern in the presence of peers
• -important to obtain objective ratings based on performance, not subjective ratings based on friendships
• -should not be used if manager is attempting to institute team-building strategies or if the unit is unstable and employees don’t like eac

Rating scales compromise a numbering system that indicates high and low values for evaluating performance. Generalizes information, does not record specific behaviors, and it is subjective in nature. (Page 301-302, Yoder-Wise)

• Role Conflict – Employee DOES know what is expected of them but they are unwilling or unable to meet requirements.
• Role Ambiguity- misunderstanding and hindrance of effective communications. Individuals DO NOT have a clear understanding of what is expected of their performance or how they will be evaluated. (Yoder-Wise, 295)

The Effective team is characterized by its clarity of purpose, informality, and congeniality, commitment, and high level of participation. (Yoder-Wise, 347-348)

• Table18-2(348):
• Working environment is informal, comfortable, relaxed. Discussions are focused and shared by almost everyone. Objectives are well understood and accepted.
• Listening, everyone is respectful of one another and encourage participation. Ability to handle conflicts they are comfortable with disagreement and open to discussion of conflicts. Decision making is usually reached by consensus,
• formal voting kept to minimum, general agreement necessary for action; dissenters are free to voice. Criticism is frequent, frank, relatively comfortable, constructive, directed toward removing obstacle. Leadership is shared. Assignments are clearly stated, and accepted. Feelings freely expressed
• and open or discussion. Self-regulation is frequent and ongoing, primarily focused on solutions.

• Quality improvement refers to ongoing process of innovation, prevention of error, and staff development that is used by institutions such as hospitals that adopt the
• quality management philosophy. Involvement of nurses in patient care improvement efforts, (such as patient flow problems, safe delivery, of care during low staffing or high census and high acuity times, communication problems associated with complex patients, improving med safety) can promote quality and safety of patient care and also positively affect job satisfaction and improve work environment!( Yoder-Wise, 390-391)

• Identify errors and hazards in care ; understand
• and implement basic safety design principles, such as standardization and simplification; continually understand and measure quality of care in terms of structure, process and outcomes in relations to patient and community needs;
• and design and test interventions to change processes and systems of care, with the objective of improving quality.(Finkelman, 444)

Characteristics of Magnet hospitals include structure factors( decentralized organizational structure, participative management style, and influential nurse executives) and process factors (professional autonomy and decision making, ongoing professional development/education) (Yoder-Wise,392)

Magnet hospitals demonstrate more effective and innovative work environments, more shared governance, empowerment of nurses, and better quality care. Positive workplace environments impact positively on patient outcomes. (Finkelman, 23)

Flexible, adaptive, and innovative. (Yoder-Wise,326)

• Process:
• Apply, submit documentation to demonstrate compliance with Magnet standards, and hosts a site visit by Magnet appraisers. If successful status is awarded for 4 yrs. (Yoder-Wise, 265)

• Hours
• of care per patient per day X Number of patient days

40hrs/week, 52 weeks/year, Total of 2080 hours/year worked

• Paid
• Vacation, holiday, personal, or sick time, orientation, continuing education
• activites. (yoder-wise, 284) Ex.) Vacation 15 days, Holiday 7 days, sick time 4
• days, TOTAL=26 days. 26 daysX 8hr shifts=208 NONproductive hours.
• 2080hrs(estimated work)-208nonproductive hours=1872 PROductive hours

• Total
• FTE Calculation: Required Patient Care Hours(WORKLOAD) divided by productive
• Hours per FTE= Total FTEs Needed. Ex.)82,420/1872=44 FTEs

• Output/ input. Ex.) 320 hours are provided but
• 360 hours are required for 30 patients for 1 day. 360/320=1.13, productivity
• rating was 113% meaning productivity was not delivered. Did not use all hours!
• Want variance to be minimal!