Justification of Staff Positions in a Tightening Marketplace

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

Cynthia Burt, MS,


reimbursement. As a result, requests to increase or refill positions are closely scrutinized. Managers must be able to develop staff justifications utilizing program, productivity, wst, revenue and reimbursement projections based on viable marketing surveys. This paer resents guidelines for development of a marketing survey. &a& and rogram options based on the results of such a survey are examine and discussed. A staffing justification proposal is included which demonstrates an effective method whtch can use to develop dynamic programs and services to ensure continued growth of the profession of occupational therapy.


Staff justification has become both a science and an art. Because of recent changes in the health care environment, it is becoming more difficult to justify new staff positions to expand and develop hospital programs. These changes include both higher costs and Cynthia Bun, at the time of writing, was Director, Occupational Therapy Department, Northridge Hospital Medical Center, Northridge, CA. She has a BS in Psychology and MS degrees in Occupational Therapy and Rehabilitation Counseling. She is currently in doctoral study at UCLA. This article appears jointly in The Occuporioml Thempy Manager's Survivol Hondbwk (The Haworth Press. Inc., 1988) and in Occupotio~lThempy in Heolrh Care, Volume 5 , Number 1 (1988). O 1988 by The Haworth Press. Pnc. A11 rights resewed.


Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.


The Occupatwnal 'Iherapy Manager's Survival Handbook

reduced reimbursement. The Medicare Prospective Payment System, capitation, and contracting have resulted in a tightening of budgets, with hospital administration cutting costs whenever possible.'.Z,3,'JSince payroll costs are the largest expenditure in a hospital's budget, requests to increase staff are carefully scrutinized. At Northridge Hospital Medical Center, the occupational therapy department has taken an aggressive position to keep abreast of the changing economic environment. Programs have been modified to allow for growth while maintaining a healthy budget. Between 1984 and 1986, a major shift in programs and services has occurred. Outpatient and specialty programs such as pain management, industrial injury, and driver's preparation have provided improved reimbursement to the department. This presentation will describe the process involved in the development and justification of the staff required to provide these services.

KEY PARTICIPANTS The administrative director of rehabilitation services is responsible for coordinating and managing all programs and deparhents associated with the rehabilitation center. Departments include physical therapy, occupational and recreational therapy, communication disorders, psychology, and vocational services. Specialized programs include Head Injury, Driver's Preparation, Hand Injuly, Pain Management, Stroke, Spinal Cord Injury, and ICAN (Innovative Communication Assessment for the Non-Verbal) programs. The administrative director has five years experience in this position. Mandated by hospital administration to reduce expenses by 5% annually while increasing revenues by minimum of lo%, she is responsible for keeping abreast of regulatory and fiscal changes occurring in the rehabilitation environment. The occupational therapy director is responsible for management and supervision of all occupational and recreational therapy programs and services, as well as the coordination and supervision of all outpatient programs. The Driver's Preparation and Hand Injury programs are subdivisions of the occupational therapy department. The staff of 24.0 full-time equivalent positions includes 26 individuals.

The director has three years experience in administration, and is faced with developing programs that do not exclude occupational therapy as a reimbursable service.

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

THE ORGANIa TION The occupational therapy department at Northridge Hospital Medical Center is located in the Institute for Living (IFL), a 50 bed acute rehabilitation center. Physically, the IFL is adjacent to the general hospital, which has 325 medicavsurgical beds. The occupational therapy department provides services for the rehabilitation center, the medicaUsurgical floors, as well as outpatient programs. Northridge Hospital Medical Center is affiliated with Healthwest, a progressive, nonprofit health care system which has been a national innovator in the concept of hospital networking and program diversification. CHRONOLOGY OF EVENTS

Between the end of World War 11 and the early 1980's, acute care hospital services experienced unparalleled g r o ~ t h . ~Medical '.~ insurance programs and Medicare legislation assured providers of cost-based reimbursement for services. This system encouraged a high volume of patients with long lengths of stay.5 In the early 1980's, Health Maintenance Organizations (HMO), Preferred Pmvider Organizations (PPO), Diagnostic Related Groups (DRG), and capitation programszwere instituted. HMOs are prepaid health care plans that offer comprehensive medical services to their members. They contribute significantly to lower health care costs to consumers, because they provide members services for a fured subscription fee. Since 1971, they have grown dramatically and presently serve over 16 million subscribers. Forty-seven million enrollments are projected by 1990. In 1980, PPOs were established to assist in reducing health care costs. This plan gives preference to certain "preferred" providers who have negotiated fees at discounted rates with the plan."n 1983, the Prospective Payment System (PPS) was enacted by the federal government, forcing external

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.


The Occupational Thempy M a ~ g e r ' sSurvival Handbook

controls on the health care system. Under the PPS, patients have limited hospital stays which are based on DRG cut-off dates.I0 The prospective payment philosophy quickly swept the private insurance industry in the form of capitated rate^.^.'^." Insurance companies began demanding discounted costs for services in return for sending patients to specific facilities. Under these capitated contracts, all required services are provided to insurance subscribers at predetermined "capitated" rates." Reduced reimbursement has led to an existing need to reduce medical costs. The impact of PPOs, HMOs, and DRGs is being felt with decreased inpatient services and a resulting increased need for outpatient programs. New staffing patterns are emerging due to the shifting of programs and the need to reduce costs." CONTEXT

Due to this reduced reimbursement environment, progressive hospitals are reevaluating the delivery of their services. Hospitals have been forced to gain a better understanding of the economics of health care services. Increased productivity, staff reductions and more efficient methods to deliver services have become primary cost reduction issue^.'.'."^ Less expensive alternative forms of health care have become an economic necessity, since hospitals are finding it financially necessary to move long-term patients out of acute care beds and into less costly health care settings. Vertical systems of health care are being developed as a result.'~~"Nonhridge Hospital Medical Center (NHMC)has developed a vertical system during the 1980's. (See Figure 1.) The growth of the occupational therapy department at NHMC has been influenced by these changes in the hospital environment. Until 1973, the department consisted of two therapists, providing services to the medicaVsurgical units of the hospital. At that time, the rehabilitation program was started, and the department grew to a staff of 24 by 1978. In 1980, the hospital administration began closely evaluating all rcquests for new and vacant staff positions. Productivity, cost, revenue, and reimbursement projections became the key elements in the justification of staff positions. Between 1985 and 1986, it became evident that reimbursements

Rehabilitation Beds

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

Ham Heblth

(M-Patient Pmgrams

m a t o r y h~grans

my weatment

F i g u m 1. verticalizatim of Northridge Hospital

Medical Cente:

Haspital Swicg.

for occupational therapy acute services were decreasing due to DRGs, capitation and contracting.'~" The exclusion of occupational therapy from many insurance plans also increased.' Thus, justification of vacant or new occupational therapy positions became difticult. Decisions concerning the future direction of occupational theravv services were eminent. To helv make these decisions in the G s t effective way possible, a ma;keting survey was completed. This marketing plan included an assessment of the occupational therapy department's objectives, as well as an analysis of the market itself. Economic, political, social, competitive and technical forces were all considered. (See Figure 2.) The marketing survey demonstrated the following: 1. A decreased need for occupational therapy acute care medical/ surgical services was developing due to reimbursement constraints. Under DRGs and capitation plans, occupational and physical therapy services are not billable services, but must be provided by the hospital under the DRG or capitated rate. As a result, hospital management has attempted to streamline ser-

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.


The Occuparional Therapy Manager's Swvival Handbook

vices. Patients are seen by a single ancillary service whenever possible. Home programs are instituted early in the hospital stay, and nursing has become more involved in self-care training. 2. DRGs have resulted in shorter inpatient lengths of stay.'> Patients are leaving the hospital with a continuing need for medical intervention which is provided on an outpatient basis. This is reflected in the fact that between 1984 and 1986, referrals to NHMCs outpatient occupational therapy program increased 250%. 3. A need existed to decrease costs and increase productivity to adjust for decreasing reimbursement rates. Viable options included the provision of less expensive treatment services in group formats rather than in individual sessions.

CHOICES Based on the existing constraints and marketing survey results, the following options were considered. 1. Staff changes. Decreasing reimbursement resulting from DRGs and capitation has made it difficult to maintain an adequate profit margin. Expenses are continuing to increase while reimbursement is steadily decreasing. Since .salary expense is 90% of the occupational therapy budget, elimination or downgrading of staff positions would have the most immediate effect on balancing the budget. The downgrading of OTR positions to COTA or aide level would also reduce expenses, although to a lesser degree. However, this second option would not necessitate a reduction in services that could be provided to patients since the amount of manpower could remain constant. 2. Increased productivity. An increase in staff productivity would produce more reimbursement without significantly increasing expenses. Methods that could be used to increase productivity include the provision of services in group format, or by increasing the billable hour expectation of individual staff member.

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

Cynthia Burt


3. Shiftng of programs from inpatient to outpatient services to capture a market with increased insurance reimbursement potential. Inpatient occupational therapy services are less profitable for hospitals than outpatient services due to the development of per diem and DRG rates for inpatients. Occupational therapy cannot be billed under these programs as a separate service, so no revenue is produced. The hospital must bear the expense of providing any needed services. Thus, the development of outpatient programs was considered. Programs that would attract private insurance carriers and workman's compensation programs (i.e., hand injury program, specialty brain injury program) were most closely evaluated due to the greater reimbursement factor associated with these third-party payors.

RISKS AND COATSTBAINTS In considering these options, it was evident that the simplest way to adjust staff expense with reimbursement would be to reduce occupational therapy positions and increase productivity expectations. However, the occupational therapy director felt that this was the most dangerous option, both for the occupational therapy profession and for the quality of patient treatment. Reduction of staff positions could undermine the strength of the occupational therapy department within the hospital. Services such as self-care and cognitive training would continue to be required. With reduced occupational therapy staff, there would be an increased possibility that other ancillary services would attempt to provide these services in periods of high census. It was also felt that the productivity expectation of the department was at a reasonable level. Increasing this level could lead to possible staff bum-out and decreased morale. Transitionalization of OTR positions to less expensive COTA and OT Aide positions was felt to be a more desirable option. The number of staff positions in the department would remain constant, and salary cost would be reduced. However, the complexity of programs and patients associated with the occupational therapy department had to be considered before reducing the competency level As a regional trauma center, spinal cord within the de~artrnent.~ injury center and brain injury center, the hospital admits patients

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.



services. Marketing system u s e d ta determine p o t e n d d l of new O . T .

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

with complex injuries that require experienced and highly trained therapists to provide appropriate treatment. The quality of the program could possibly suffer from a reduction in the number of OTRs since the COTAs require ongoing supervision from the OTRs. A balance had to be maintained between the number of OTRs and COTAs to avoid placing excessive work demands on the OTRs. In addition, the dramatic increase in audits seen during the last few years has required more specific documentation of treatments, with ongoing assessment to document pr~gress.".'~According to AOTA guidelines, COTAs and aides are not qualified to assess patient status to document progress." OTRs are more highly trained in documentation procedures than COTAs and are better able to justify treatment sessions and plans. The most viable long-term solution to the staffing dilemma appeared to be a shifting of senvices from inpatient to outpatient programs, with emphasis on the development of new services that would attract the private and industrial insurance sector. This plan would allow for retention of professional staff by increasing the reimbursement received from services provided by the occupational therapy department. Units of service provided would also increase through the development of new programs. A proposal to justify staffing was submitted to hospital administration. This proposal included program goals and delineated increased staffing requirements as well as a summary of department statistics to demonstrate current productivity. An example of this proposal to justify an increase in occupational therapy staffing is presented below: Justification for Additional OTR Position Objective: To provide adequate staffing to meet the expanding needs of the outpatient program, head injury day treatment program, and driver's preparation program. Plan: Addition of 1 full-time staff level OTR Annul Cost: 1.0 OTR (full-time)

Salaty 23,000






The O c c u p a t w ~ Therapy l M a ~ g e r ' sSurvival Handbook

Justification: The present changes in the health care environment have resulted in a reevaluation of the programs provided by the NHMC occupational therapy department. A shift has been made from expansion of inpatient programs to increased development of outpatient programs. The following expansions have occurred in the occupational therapy outpatient programs:

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

1 . Head Trauma Day Tmatment. The occupational therapy department presently provides 11 hours of coverage per week. The program is ready to expand, and the program coordinator is asking the occupational therapy department to provide 24 hours of coverage. The patient evaluation component of this program must be completed by an OTR. An additional 13 hours per week is required to provide services for this program. The day treatment program clients are screened for insurance coverage prior to acceptance into the program. There is a high reimbursement rate associated with services. During the 1985-86 fiscal year, the actual reimbursement rate of the program was 96%of charges. 2. Olapatieatt Program. The occupational therapy outpatient program has grown from 9,800 units of service (UOS) in 1984 to 13,700 UOS in 1985. The projected UOS for 1986 is 19,500. The outpatient waiting list has averaged 34 patients during the last 9 months. Over 213 of those wait listed are NHMC rehabilitation patients. It is a weakness of our program that we cannot provide timely follow-up services for our own patients. A review of patients on the wait list documented that 50% have private or industrial insurance coverage. An average of 5 patients per month seek rehabilitation services elsewhere due to the excessive waiting period. An additional 20 hours per week of OTR staff time is required to provide services for this program. 3. Driver's Preparation Program. In December 1985, a parttime (24 hours week) OTR position within the Driver Prepatation Program was vacated and placed on hold. The occupational therapy department has assumed management of the Driver's Preparation Program since that time. After spending

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

Cynthia Burt

2 months training staff and redesigning the program, we began providing services to the pubnic in March. We are presently completing driver's evaluations one day per week. Each day that the service is provided, the OTR produces a minimum of 6 hours of evaluation charges at the rate'of $115 per hour. Only an OTR can provide this program. The added OTR hours are necessary to continue the provision of this program without decreasing the services provided in our other programs. An additional 8 hours per week of staff time is required for this program to provide training services two days per week to meet the present demand. The following department statistics will demonstrate the effective management and operation of the occupational therapy department during the last six months from June 1, 1985 to December 31,

Fived Variance Flexible



943,338 1 2 4 , 6 5 6 1,086,125 ( 1 8 , 1 3 1 )






( 1,941)

Units of Senrice






288,295 ( 3 1 , 0 1 8 ) 19,862

1,067,994 257,277









( 790,507

The occupational therapy department has operated at a productivity level of 108%during the period from June 1, 1985 to December 31, 1985. The fixed (projected) and flexible (based on actual units of service) budgets have both been exceeded. As a result, the department has made a contribution of more than $100,000 in excess of that projected for the first six months of the fiscal year.


The Occupatwwl %mpy Manager's Survival Handbook

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

OUTCOMES The proposal for an additional full-time OTR was accepted by hospital administration, and the position was filled in March, 1986. Revenue increased by projected amounts and productivity remained at 108%through the end of the fiscal year in June, 1986. The contribution of the department exceeded the budget by $292,000, with of that amount. The out~atientsewices accountine " for $160.000 . , outpatient programs are continuing to expand with improved r e h bursement rates. Sewices srovided to ~atientswith ~rivateinsurance or w o r h a n ' s cornperktion mverige have increased by 21%. This is significant due to the fact that actual reimbursement from these carriers is significantly higher than reimbursement from capitated, per diem or Medicare programs. Thus, the hospital is cdlecting a higher percentage of produced revenue than in the previous year. The most positive result that occurred was that occupational therapy services have continued to be recognized by hospital administration as both R valuable and reimbursable service. This recognition is vital for the future of our profession. Justification of both new and vacant staff positions requires careful evaluation of present and future programming needs, expenses and reimbursement. Managers must keep abreast of changing plitican, social, and economic factors affecting potential occnnpaaiona8 therapy markets. $taffimg patterns must be based upon sound financial predictions and presented to hospital administration in a professional manner. The ability to justifqr staff positions is necessay for aI1 managers to develop in order to assure the continuation and provision of occupational therapy services to the public.

1. What major changes in the political and economic environment have made justification of new staff positions difficult? 2. What are the key elements in the justification of staff positions? 3. What are important aspects of a marketing plan? Why is a marketing plan necessary when determining program needs and direction?

Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

4. What did the marketing survey determine occupational therapy program needs and directions to be? 5. What alternatives existed to meet the changing program needs? 6. Discuss the positive and negative aspects of converting OTR positions to COTA or OT aide positions. 7. Why was the addition of an OTR position considered to be the best option available? REFERENCES 1. Knopf R, Greenberg JA: Strategic Anabsii for Hospital Management. Rockville, MD: Aspen Publications, 1984 2. Johnson EA,Johnson RL:Hospitals in Tmnsirion. Rockville, MD: Aspen Systems Corp, 1984 3. Weinstein I: Social Consequences of Changes in Financing and Delivery of Health Care. Momentum Spring, 1983 4. Richards G: Working Smarter. Hospitals 92-100, October, 1983 5. Special Seaion: PPS After the First Year. Hospitals 37-81, September 1984 6. L a AL:How DRG's Will Affect Your Hospital and You. RN 71-81, May 1984 7. Weinstein I: The Doctrine of Affordable Health Care. Presented at Northridge Hospital Medical Center Staff Retreat, Universal Ciiy, CA. 1983 8. Davy JD: Preferred Provider Organizations. Am J Occup Ther 38:327329,1984 9. HMO Fact Sheer. U.S. Department of Health and Human Services, Public Health Service, Office of Health Maintenance Organizations, April 1985 10. MedicarelMedicaid Fact Finder. Washington, DC: McGraw-Hill. Washineion Health Letters. 1984 11. Boullon R: ~ e b rtot Northridge Hospital Department Head Meeting, June 26. 1986 12. Economic Trends. Hospital Research and Educa~ionalTrust, American Hospital Association, Summer 1985 13. Kuntz EF: Healthwest's Team Uses Management Specialties to Cmk Up New Ventures. Modem Healthcare 70-77, November 1983 14. Foto M: Speech to Western Area Chapter Occupational Therapy Association of California Meeting, Van Nuys, CA, February 1985 15. Mittlestadt P: Future of Our Nation's Health Care-Will Rationing be Needed? Am J Occup Ther 36:229-232, 1982 16. Schell BAB: Guide to Classification of Occupational Therapy Personnel. Am J Occup Ther 39:803-810. 1985



The O c c u p t w ~Therapy l Manager's Survival Handbook


Occup Ther Health Downloaded from informahealthcare.com by UB Stuttgart on 11/20/14 For personal use only.

Drucker PF: Managing in Turbulent Times. New York: Harper & Row, 1980 Kuriloff AH. Hem~hillJM:How to StaH Your Own Business and Succeed. New York: ~ c G r a w : ~ i l l1981 . The Occupational Therapy Manager. I . Blair. M Gray, Editors. RockviIIe, MD: American Occupational Therapy Association, 1985

Justification of staff positions in a tightening marketplace.

Recend economic and political changes in the health care environment have made justification of both new and vacant staff positions increasingly diffi...
446KB Sizes 0 Downloads 0 Views