Bed Occupancy

Bed occupancy is expressed as the total number of occupied beds by the total number of available beds. Usually the calculation is expressed in the percentage (%) of occupancy. These numbers are used for a great many financial calculations and projections.

Reimbursement for the prospective payment system (Medicare) is predicated on the projected occupancy rate for each hospital. The following graph can help explain the calculations.

In acute care institutions, the census at midnight is usually the point that is used to identify the occupancy rate. Although a cutoff point is needed, this census does not necessarily express the total volume of patients for the day. An excellent example is a surgical unit. At midnight you may have a patient in the bed who is ready to go home. Once discharged, the bed is available and very likely will be filled by another patient coming from the operating room. The census will show one patient in the bed, but two occupied the same bed in one 24-hour period. The total number of patients admitted and then discharged provides a better picture of the total census each day. Staffing patterns need to reflect these calculations as well.

Prospective payment under Medicare is an advanced payment to the health care provider (the hospital) according to predefined rates. The diagnosis-related groups (DRG) system drives the payment structure for these patients. The DRG payment system was started in 1983 for most states and in 1986 for all states in the United States. These groups included risk-adjusted, severity-of-care, and expected-length-of-stay projections.

The DRG system groups like diagnoses together to simplify the payment for prospective payments. The assumption is that the care rendered will be of an acute nature and a covered service.

[Page 42]If, however, the care rendered is not of an acute nature or not a covered service under Medicare the reimbursement for that time frame will be deducted when determination is made. One of the downsides to this payment system is that the payment is made based on the payment schedule from a rate determined by costs of one or more years ago. That means, for example, that the funds received in 2004 (prospective payment) are calculated on the costs for 2002. As costs continue to escalate, it can be understandably difficult to manage with the level of funds based on prior years’ costs.

Bed occupancy drives other financial decisions. Staffing patterns, equipment and supplies, food supplies, and other major needs are determined by the anticipated bed occupancy levels. These are measured by census figures and the projected growth based on these numbers. The bed occupancy figures help the administrative staff forecast what is required to maintain the organization and what state and federal regulatory requirements may be anticipated.