Purpose: This study was done to propose an improvement in the Nursing Fee Differentiation Policy to alleviate polarization of nursing staffing level among hospitals and to rectify the confusion of legally mandated standards between the Korean Medical Law and National Health Insurance Act. Methods: The policy regulation was reconstructed related to nurse staffing standards and nurse-to-patients ratios. Data on nurse staffing grades were obtained from database of the Health Insurance Review & Assessment Service (HIRA) for the third quarter of 2010 for 44 tertiary hospitals, 274 general hospitals, and 1,262 hospitals. A break-even analysis was used to estimate financial burden of the revised policy improvement proposal. An industrial engineering method was used to calculate Nurse-to-Patients ratios per shift. Results: Twelve tertiary hospitals were downgraded. 74 general hospitals and 102 hospitals were upgraded after application of the regulation. Finances for total hospitalization expenditures changed from -3.55% to +3.14%. Conclusion: The results indicate that the proposed policy would decrease polarization between tertiary hospitals and small hospitals, and would not put a major strain on the finances of the Korean National Health Insurance. Therefore, it is suggested that government stake-holders and many interest groups consider this policy proposal and build a consensus.