This document discusses inpatient facilities and services, including the evolution and transformation of hospitals in the United States. It covers the factors that contributed to the growth of hospitals prior to the 1980s, as well as the subsequent decline in hospitals and utilization. It also differentiates between various types of hospitals, including classifications by ownership, public access, services provided, and multi-unit affiliation. Key concepts around hospital utilization measures, costs, governance and regulations are also introduced.

2. Chapter 8
Inpatient Facilities and Services

3. Learning Objectives
• To get a functional perspective on the evolution of
hospitals
• To survey the factors that contributed to the growth
of hospitals prior to the 1980s
• To understand the reasons for the subsequent
decline of hospitals and their utilization
• To learn some key measures pertaining to hospital
operations and inpatient utilization
• To differentiate among various types of hospitals

4. Learning Objectives
• To learn how the Affordable Care Act affects
physician-owned specialty hospitals and nonprofit
hospitals
• To comprehend some basic concepts in hospital
governance
• To understand and differentiate between licensure,
certification, and accreditation and the Magnet
Recognition Program of the American Nurses
Credentialing Center
• To get a perspective on some key ethical issues

5. Introduction
• Inpatient
– requires an overnight stay in a health care facility
• Hospital
– an institution with at least 6 beds whose function
is to deliver patient services that include
diagnostics and treatment
• must be licensed
• have an organized physician staff
• provide continuous nursing services supervised
by RNs

6. Introduction
Other Hospital Characteristics:
– a governing body is legally responsible for hospital
conduct
– a CEO is responsible for operations
– medical records on each patient
– pharmacy services supervised by a registered
pharmacist
– food services to meet nutritional needs

7. Introduction
Construction and operations of a hospital are
governed by:
– federal laws
– state health regulations
– city ordinances
– Joint Commission standards
– fire codes
– sanitation standards

8. Introduction
• “Medical Center”
–hospitals that offer specialization and a
large scope of services
• Hospital / health system:
–multihospital chain
–provides a variety of health care services

9. Introduction
• Hospitals consume the biggest share of
national health spending; hence, were
the first to be targeted with PPS
• Subsequently, outpatient services
mushroomed

10. Hospital Transformation in the US:
Evolution of Five Dominant Functions
1. Social welfare
– almshouses and pesthouses
2. Care for the sick
– public and voluntary institutions
3. Medical practice
– medical science and technology
– hospital administration, organization, efficiency

11. Hospital Transformation in the US:
Evolution of Five Dominant Functions
4. Medical training and research
– collaboration between hospitals and universities
5. Consolidated systems
– organizational integration
– service diversification

12. Expansion of U.S. Hospitals:
Late 1800s to Mid-1980s
Six main factors in the growth of hospitals:
1) advances in medical science
2) development of specialized technology and
surgical services
3) advances in medical education
4) development of professional nursing
5) growth of health insurance
6) role of government

13. Expansion of U.S. Hospitals
• Development of Professional Nursing
– Florence Nightingale transformed nursing
– Efficiency of treatment; hygiene
• Growth of Health Insurance
– Great Depression closed many hospitals
– Insurance allowed people to pay for health care
– Increased the demand for health care

14. Expansion of U.S. Hospitals
• Role of Government
– Hospital Survey and Construction Act (Hill Burton
Act), 1946
• Federal grants to build nonprofit community
hospitals
• Charitable care was a condition
• Biggest factor to increase nation’s bed supply
• By 1980, goal of 4.5 beds per 1,000 population
reached
– Public health insurance (Medicare and Medicaid)

15. Hospital Downsizing: Mid-1980s
Onward
• Changes in Reimbursement
– From cost-plus to PPS
– Decrease in inpatient utilization
• Impact of Managed Care
– Emphasis on cost containment
– Efficient utilization of resources (care in
alternative settings)

16. Hospital Downsizing: Mid-1980s
Onward
• Hospital Closures
– Economic constraints
– Many rural and urban hospitals had to close
– Other hospitals closed wings or used them for
alternative purposes

17. Utilization Measures and Operational
Concepts
• Discharges
• Inpatient Days
• Average Length of Stay
• Capacity
• Average Daily Census
• Occupancy Rate

18. Utilization Measures and Operational
Concepts
• Discharges
– discharges per 1,000 population
• an indicator of access and utilization
– number of overnight patients a hospital serves in
a given time period
– include newborns and deaths
• Inpatient Day (patient day)
– a night spent by a patient
• Days of care
– cumulative patient days over a time period

19. Utilization Patterns
Higher utilization among:
• The elderly
• Children under one year of age
• Women
• People of lower socio-economic status
• Medicare and Medicaid beneficiaries

20. Utilization Measures and Operational
Concepts
• Average Length of Stay (ALOS)
– Days of care / Discharges
– An indicator of severity of illness and resource use
– Highest in federal hospitals, followed by state and
local government hospitals
– Private nonprofit and for profit hospitals had the
same ALOS in 2010

21. Utilization Measures and Operational
Concepts
• Capacity
– Size is determined by number of beds set up and
staffed
– 84% of community hospitals in U.S. have fewer
than 300 beds
– Average size of a community hospital is 161 beds
• Average Daily Census
– average number of beds occupied per day
– days of care / number of days

22. Utilization Measures and Operational
Concepts
• Occupancy Rate
– percent of capacity occupied
– Calculation: average daily census / number of
available beds (capacity) x 100
– a measure of performance

23. Hospital Utilization and Employment
• Long-term factors that affect utilization and
employment:
– Size and nature of population (population growth,
aging, health status)
– Advances in medical technology, but certain
pharmaceuticals have reduced hospitalizations
– Changes in insurance status

24. Hospital Utilization and Employment
• Starting around 1995, outpatient settings
started employing more workers than
hospitals
• Declines in reimbursement can lead to staff
cuts and hiring freezes
• Employment growth in hospitals is
countercyclical

25. Hospital Costs
• 2010: Average cost per stay was $9,700
• High cost incurred by those between ages 45
and 84
• Costs are average for age 85 and over
• Medicare accounts for the greatest share of
costs
• Two main cost drivers:
– Intensity of services
– Population growth

26. Types of Hospitals
• Over half are private nonprofit (voluntary)
• State and local government owned are the
next largest group
• For-profit or investor-owned come next
• Federal hospitals are the fewest in number
• Numerous ways to classify
• Classifications are not mutually exclusive

27. Hospital Classification by Ownership
• Public (Government ownership)
• Private nonprofit
• Private for-profit (Proprietary)

28. Public Hospitals
• First appeared when almshouses and pesthouses
evolved into hospitals
• Owned by federal, state or local governments
• Federal hospitals are open to special groups only
(native Americans, military, veterans)
• VA runs the largest hospital system (federal)

29. Public Hospitals
• States run mainly psychiatric hospitals
• Local hospitals (county or city-owned) serve a high
proportion of disadvantaged groups
• Overall high utilization
• ALOS highest in federal hospitals
– The veteran population is aging

30. Private Nonprofit Hospitals
• owned and operated by community
associations or other nongovernment
organizations
• their mission is to benefit the community
• largest group of hospitals

31. Private For-profit Hospitals
• operated for the financial benefit of owners or
stockholders
• have gained market share, mainly as
physician-owned specialty hospitals have
grown in number
• lower occupancy rates than nonprofits

32. Classification by Public Access:
Community Hospitals
–Nonfederal, short-stay
• Serve the general public
• Can be proprietary, voluntary or government
owned (only state or local)
• Can be a general or specialty hospital
• 87% of US hospitals are community hospitals

33. Classification by Public Access:
Noncommunity Hospitals
–Federal hospitals
–Hospital units of institutions (prisons,
colleges)
–Long-stay hospitals

34. Hospital Classifications: Multiunit
Affiliation
• Two or more hospitals (owned/ leased/ managed)
• 2011: 61% of hospitals were affiliated with a
multihospital system (52% in 2005)
• Nonprofit chains dominate
• Advantages:
– economies of scale
– wide spectrum of care; variety of markets
– access to capital
– ease of contracting with managed care
– access to management resources and expertise

35. Hospital Classifications: Type of Service
1) general hospital
2) specialty hospital
3) psychiatric hospital
4) rehabilitation hospital
5) children’s hospital

36. General Hospitals
Broad set of services for various conditions
• general and specialized medical
• obstetrics
• diagnostics
• treatment
• surgery
–Most hospitals in the U.S. are general

37. Specialty Hospitals
Narrow range of services for specific conditions
or patient types
–Exceptions: psychiatric care or substance
abuse
–Examples: rehabilitation, children’s,
women’s, orthopedic, cardiac, oncology,
etc.
–Many are physician-owned

38. Physician-owned Specialty Hospitals
Physicians find efficiency and financial benefits, control,
time flexibility, and higher incomes
– Legal issues: Stark Laws (self-referral) – self-
referral to a “whole hospital” is permitted

39. Physician-owned Specialty Hospitals
– MedPAC findings:
• Serve a lower share of Medicaid patients
• Admit less severe, more profitable cases
• Draw patients from community hospitals
• Severity-adjusted costs are not lower
• Provider-induced demand may be
occurring
– Other controversy
• Cream skimming (no emergency services)

40. The ACA and Physician-Owned Hospitals
• To participate in Medicare, new or existing hospitals
had to be certified by December 31, 2010
• Restrictions on expansion of existing hospitals
– viewed as an assault on the American
entrepreneurial system
• In response, these hospitals are expanding hours and
services, and rejecting Medicare patients

41. Psychiatric Hospitals
Provide psychiatric, psychological and social
work services
–state mental hospitals continue to treat
people with severe and persistent mental
illness

42. Rehabilitation Hospitals
– therapeutic services to restore maximum function
in patients
– Medicare rule: 75% of the inpatients must require
intensive rehabilitation (at least 3 hours of therapy
per day)
– PT, OT, Speech/language pathology
– Approximately 80% are hospital-based units
rather than freestanding

43. Children’s Hospitals
Specialize in complex, severe, or chronic
illnesses among children
– Generally have neonatal and pediatric intensive
care, trauma care, and transplant services
– In most communities, general hospitals serve as
de facto children’s hospitals

44. Hospital Classifications: Length of Stay
• Short stay hospitals
– ALOS of 25 days or less
– Treat acute conditions
• Long stay hospitals
– ALOS > 25 days
– Psychiatric; LTCHs; chronic care
• LTCHs
– Must meet Medicare guidelines
– Patients with complex medical needs
– Rapid growth has occurred

45. PPS Reimbursement for LTCHs
• PPS is based on Medicare Severity Long-Term
Care Diagnosis-Related Groups (MS-LTC-
DRGs)

46. Hospital Classification by Location
–Urban hospitals
• located in a metropolitan statistical area (MSA)
• have higher costs: high salaries, competition,
broader and complex services
–Rural hospitals
• not in a MSA
• 40% of all community hospitals
• Inner city urban and rural hospitals treat poor
and elderly disproportionately

47. Rural Hospitals: Swing-bed Hospitals
• Swing bed: A bed that can be used for acute
care or skilled nursing care as needed
• For SNF, a patient requires discharge from
acute care (3-day acute care stay is required)
• SNF prospective payment applies

48. Rural Hospitals: Critical Access Hospitals
Authorized under the Balanced Budget Act,
1997
• To save small rural hospitals from closure
• Maximum 25 acute care or swing beds
• Emergency services must be available
• Must meet a distance test
• Can have a 10-bed psychiatric unit, a 10-bed
rehabilitation unit, and a SNF
• Cost-plus reimbursement, not to exceed 101%
of cost

49. Hospital Classification by Size
– no standard classification by size
– costs per adjusted patient day are significantly
higher beyond 150 beds
– medium and large hospitals
• extensive and specialized services
• technology
• highly-trained personnel

50. Teaching Hospitals
• AMA approved residency programs for physicians
• Academic medical centers: Teaching hospitals
organized around medical schools; heavily engage
in research and clinical investigations
• Approx. 400 are members of the Council of
Teaching Hospitals and Health Systems (COTH)

51. Teaching Hospitals
• Main characteristics
– Medical training and research. Additional
reimbursement from Medicare.
– Broad and complex scope of services (often have
tertiary care services)
– Many located in economically depressed areas.
Provide disproportionate share of
uncompensated care. COTH members provide
nearly half of charity care nationwide.

52. Church-affiliated Hospitals
• First established by catholic sisterhoods
• Mostly community general hospitals
• Owned or influenced by church groups
• Do not discriminate in giving care
• Spiritual and dietary emphases are often
present

53. Osteopathic Hospitals
• Till about 1970, osteopaths operated their
own hospitals
• Subsequent acceptance by allopathic
practitioners
• Separate osteopathic hospitals are no longer
needed; they are also more costly and less
productive
• Many have closed

54. Expectations from Nonprofit Hospitals
• IRS Code: tax-exempt status
–must provide some defined public good
(service, education, welfare—charity care)
–no distribution of profits to any individual
–executive pay may not be deemed
unreasonably high

55. Nonprofit Hospitals: Key Issues
–They often compete head on with for-profit
hospitals (institutional theory)
–Mixed performance on charity care
• IRS now requires documentation on
community benefit expenditures
–Tax exemption is controversial
–Some debate over what constitutes a
community benefit

56. The ACA and Nonprofit Institutions
• Nonprofit hospitals must assess community
health needs and implement plans to meet those
needs
• Establish written policies on financial assistance
and emergency care
• Limit charges according to financial assistance
policy
• Limit billing and collection actions
• Report on community health needs and provide
annual audited financial statements to the IRS, or
face an excise tax

57. Management Concepts
• Hospital governance: A tripartite structure
– Board of Trustees
• Governing body, board of directors
– CEO
• Administrator / President
– Medical Staff
• Chief of Staff heads the medical staff
• Historical shift of power from the trustees, to
physicians, to senior managers
• Parallel operational structure (medical and
administrative) creates opportunities for conflict

58. Board of Trustees
– Legally responsible for operations
– Establish mission and long-term direction
– Evaluate major decisions and approve plans and
budgets
– Monitor performance
– Appoint and evaluate the CEO
– Approve appointment of medical staff
– Committees (e.g. Executive Committee, Medical
Staff Committee)

59. Chief Executive Officer
–Carry out the mission and objectives
–Responsible for day-to-day operations
–Leadership
–Receives delegated authority from the
board

60. Medical Staff
– Accountable to the board
– Physicians are formally granted admitting
privileges
– Chief of staff (medical director)
– Chiefs of service (for specialties) in major
hospitals
– Committees: Executive, Credentials, Medical
records, Utilization review, Infection control,
Quality improvement

61. Licensure, Certification and
Accreditation
• Licensure
– A hospital must be licensed to operate
– State government oversees w/ own set of
standards
– Emphasizes physical plant compliance with:
• building codes
• fire safety
• climate control
• space allocations
• sanitation

62. Licensure, Certification and
Accreditation
• Certification
– Not mandatory (required only if a hospital wants
to participate in Medicare and Medicaid—most
do)
– A federal function
– Hospitals must comply with the conditions of
participation—federal standards for health,
safety, and quality
– Currently revised conditions focus on quality of
care delivered and the outcomes of that care

63. Licensure, Certification and
Accreditation
• Accreditation
– Joint Commission or American Osteopathic
Association
– Accreditation is a private undertaking
– It is voluntary for the hospital
– It confers deemed status on hospitals
– Deemed status is not conferred on nursing homes

64. Magnet Recognition Program
• Designation conferred by the American Nursing
Credentialing Center
• Recognizes quality of care, nursing excellence,
and innovations in professional nursing practice
• Organizational environment helps attract and
retain well-qualified nurses
• Visionary leadership, empowerment, and
collaboration create healthy work environments,
attract qualified nurses, and improve patient care

65. Ethical and Legal issues
• Arise because of
– Complex circumstances requiring advanced
technology
– Life and death issues
– Research and experimental medicine

66. Principles of Ethics
Used as guides for ethical decision making.
• Respect for others
– Autonomy: empowerment
– Truth telling: honesty
– Confidentiality: privacy
– Fidelity: duty and promises
• Beneficence—benefit to the patient
• Non-maleficence—do no harm; benefits > potential
harm
• Justice—fairness and equality

67. Legal Rights
Challenges arise in treating incompetent and comatose
patients
– Patient Self-Determination Act of 1990
– Inform patients of their rights upon admission
– Main rights:
• confidentiality
• consent re: medical care
• information on diagnosis and treatment
• right to refuse treatment
• formulation of advance directives

68. Informed Consent
–Right to make an informed choice regarding
medical treatment
–Right to obtain complete current
information on diagnosis, treatment, and
prognosis
–Patient-centered care: organizational
culture that promotes patient involvement,
respects preferences, solicits patient’s
inputs, and furnishes needed information
and education

69. Advance Directives
– Patient’s wishes regarding continuation or
withdrawal of treatment when patient lacks
capacity to make end-of-life decisions

70. Advance Directives
– Three types:
1) Do Not Resuscitate (DNR)—no CPR
2) Living will
–Patient’s wishes are indicated in advance
–Main drawback: Limited in scope
3) Durable power of attorney
–Patient appoints someone else to make
decisions
–Main drawback: patient’s wishes may be
bypassed

71. Mechanisms for Ethical Decision Making
• Ethics committees
– Develop guidelines and standards
– Address ethics issues
– Multidisciplinary
• Moral agent
– Health care managers
– Moral responsibility to put patient needs above
those of the organization
– Ethics transcends compliance with the law