Want to Fix the Nursing Shortage? Change This 100-Year-Old Policy

The COVID-19 pandemic revealed to the public that the nursing profession is in a state of crisis. A recent survey by McKinsey & Company found that one in three registered nurses who provide direct patient care may quit their jobs in the next year. If this holds true, our healthcare system will be in serious trouble, as it is nurses who provide most direct care to patients. 

In the McKinsey survey, the top reason nurses identified as to why they are quitting their jobs is insufficient staffing. Addressing insufficient staffing seems straightforward - simply hire more nurses. As reported in the New York Times, there are more qualified nurses today than ever before in U.S. history. Therefore, the question we must ask is, is there really a shortage of nurses, or is there a shortage of nurses willing to work in healthcare systems as they are staffed today?  

Heightened patient needs have contributed to the challenging staffing levels plaguing our healthcare system, but this is not the sole cause of the problem we are facing. Rather, this challenge is a result of a reimbursement model created at the inception of Medicare in the 1930s, which rolled nursing services into room and board rates of hospitals, and placed nurses squarely as a cost to healthcare systems. The effects of this reimbursement model have rendered the value of nursing invisible and unmeasurable, and the nursing profession unsustainable, in the financially fraught world of healthcare.

How did we get here?

In 1920, the 19th Amendment was ratified, guaranteeing women the right to vote. Many nurses were strong supporters of the Women’s Suffrage Movement. Following this historic milestone, nursing became one of the few established career pathways for women to achieve financial equity and freedom. Nurses in the 1920s owned and operated independent, private, nursing practices where they billed patients directly for nursing services. 

Advances in medical technology and surgery in the 1920s led hospitals to need nurses for 24-hour patient care. The addition of 24-hour nursing care transformed hospitals from places where only the most destitute sought care, to the central location for healthcare delivery. At discharge, patients would receive a separate bill for private duty nursing services in addition to bills for physician and hospital services. 

In the 1930s, as hospitals gained power in the marketplace, they began to view private duty nurses as business competition and thus, started to employ nurses directly in the hospital. Nursing services were no longer itemized on bills. Instead, the associated costs were buried within room and board charges. As noted by the historian, Donna Diers, hospital administrators acted with “a deliberate attempt to keep nurses away from the money" when formulating reimbursement models. Clear models were outlined for physician-based care, but nursing services were glaringly absent from financial reimbursement models. Fast forward to 2022, and nursing's contributions are still buried in room and board fees and not listed as a billable provider service.

Where are we today?

John Welton, PhD, RN, Professor Emeritus at the University of Colorado, has argued persuasively that the nursing reimbursement system of the 1930s rendered both the cost and value of nursing care invisible to patients and payors. Today, Medicare continues this policy to include nursing services in hospitals and nursing homes under other facility charges, such as bed and board, even as the practice and scope of nursing has changed dramatically in the last 100 years.

Because hospitals and nursing homes cannot bill separately for nursing services, to make money or reduce costs, they cut nursing positions or increase nurse to patient ratios, as systems are reimbursed the same amount for nurses who have a ratio of 1:4 patients or a ratio of 1:8.  Therefore, more nurses equals more costs, without associated revenues, which places nurses on the loss side of profit and loss statements to healthcare systems. In practical terms, this means nurses are caring for more patients per shift, which can be deadly. 

As researchers at the University of Pennsylvania have shown in studies of hospitals in Illinois and New York, for each additional patient the average nurse takes care of, the odds of in-hospital mortality, longer lengths of stay, and 30-day readmissions increase significantly. In New York, the researchers estimated that if hospitals maintained safe nurse staffing levels, 4,370 more patients would live, and $720 million would be saved through shorter length of stay and avoided readmissions.

How do we move forward?

One solution for rectifying the current nursing reimbursement model is for Congress to amend the Social Security Act (which governs Medicare) to enable a reimbursement code for bedside nursing services. Another solution, as proposed by the American Nurses Association, is for the Center for Medicare and Medicaid Innovation to experiment with different reimbursement models for nursing, selecting the best model based on the resulting data.

There is precedence for such action. Over the last century Medicare billing codes have been added for multitudes of healthcare practitioners, including physical therapists, occupational therapists, and advanced practice nurses, such as nurse practitioners. Only licensed nurses at the bedside remain mired in the past.

The answer to creating a sustainable nursing workforce across all of healthcare simply comes down to ending a 100-year-old reimbursement model that placed nurses as costs to healthcare systems. When healthcare systems can stop treating nurses as costs, and rather as a reimbursable service, the inherent misalignment in healthcare over nurse staffing levels can be resolved, and with it, the nursing shortage. Some may argue that we cannot afford to do this, but the reality is, if we want there to be a sustainable future for the nursing profession, improved patient outcomes and viable healthcare systems, we can’t afford not to.

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