If we don’t know where we’ve been, we may not understand where we are now, much less know where we are going. In the late 1970s and early 1980s, the government decided to implement major changes in how hospitals would be paid for providing inpatient care. Healthcare expenses were recognized as being out of control, even back then. Patients went to the hospital the day before their operation, spent the night, and stayed for many days afterward, until feeling well enough to go home. For a woman having a mastectomy, the average length of stay was 7 days. This healthcare finance system, named Prospective Payment, assigned codes to each diagnosis and procedure. Specific amounts of reimbursement were provided based on the patient’s diagnosis (including comorbidities) and procedures. The amount of money, along with a defined number of days allocated for the hospital stay, was tied to a specific diagnosis related group (DRG). When a patient exceeded that length of stay or maxed out on the dollar limit, the hospital finance department knew it would not be receiving any additional money for the care of that patient. Some exceptions, such as specific complications or comorbid conditions, would bump the patient into a higher paying DRG, but the system was quite imperfect. If, however, the patient was discharged before the designated number of days and/or the expenses associated with the care were less than the DRG payment, the hospital would make additional profit.
As a way to monitor this process, sites, especially managed care providers, conducted reviews. A utilization review (UR) was a process for monitoring the use and delivery of services to control health care costs. Insurance companies employed UR nurses to perform (retrospective) medical record reviews and determine if hospital or professional resources had been used inappropriately. Days of hospitalization that occurred on weekends when radiology services weren’t available and an extra night in the hospital because the patient didn’t have someone to drive him or her home were closely scrutinized. Patients needing transfer to a nursing home or rehabilitation center were also closely reviewed, as these patients commonly waited days or even as long as 1 week to be discharged to a lower level of care.
Doctors and hospitals received denial letters from UR departments at managed care organizations or the organizations overseeing Medicare and Medicaid (called Peer Review Organizations [PROs]) informing them that certain days of care or tests performed during hospitalization would not be covered. It was hard to persuade the organizations to reverse these verdicts.
Conversely, some patients were prematurely discharged from hospitals due to the realization that they had reached their DRG limit. Money became the driver rather than quality of care. In an attempt to anticipate which patient’s record might result in the issuance of a denial letter, hospitals also employed UR nurses to perform the same chart-review task. These individuals would inform the finance department of potential risk of financial loss based on their medical record review. In some cases, the hospital UR department sent letters to the doctors informing them of this potential loss and requesting that they explain why care was delivered in a less-than-optimal manner. However, by the time these letters were received, those patients had gone home and the doctors were busy taking care of new ones. The doctors’ interest in explaining why the radiology department isn’t open on weekends or why a patient requested to stay an extra day were the least of their current worries. More concerning, however, were the situations in which patients were prematurely discharged, resulting in poor care. The tail was wagging the dog.