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Date Created: 09/17/15
Instructor s Manual for Delivering Health Care in America Fourth Edition Leiyu Shi and Douglas A Singh CHAPTER 6 Health Services Financing HEALTHCARE DELIVERY FUNCTIONS 39 Financingiby employers government or individuals to purchase health insurance Insuranceicommercial insurance managed care self insurance government and large companies 39 Paymentireimbursement methods and disbursement of funds to providers for services rendered 39 Deliveryiprovision of services In this chapter the term financing is used in a broad sense to include the functions of financing insurance and payment ROLE AND SCOPE OF HEALTH SERVICES FINANCING Insurance increases demand for health care services Demand translates into utilization of services Insurance leads to greater consumption of health care services than if the same were to be paid out of pocket moral hazard 0 Financing also in uences supply of health care services New services proliferate when they are covered by health insurance Financing has given rise to new subindustries eg home health subacute care In uence on technology diffusion 0 Various types of management decisions are in uenced by reimbursement 0 Financing affects the supply and distribution of health professionals Financing eventually affects total health care expenditures FINANCING AND COST CONTROL 0 Expenditures can be controlled by restricting financing expansion of health insurance will increase expenditures without controlling supply and access Increase in health insurance premiums increases expenditures Restricting reimbursement to providers reduces expenditures directly It also reduces expenditures indirectly by restricting supply 0 Supply is also constrained by having fewer specialists and by spending less money on RampD Utilization affects expenditures and can be controlled directly by designating certain services as noncovered a type of supply side rationing THE INSURANCE FUNCTION 39 RiskiPossibility of a substantial financial loss from some event Probability that the event will occur is small 39 Predictability of loss For individualsiunpredictable 2007 Jones and Bartlett Publishers Inc For a large groupipredictable group insurance 39 Pooling of resources premiums 39 sharing of losses by the group PRIVATE FINANCING AND INSURANCE 39 Employer sponsored group insuranceiA dollar of health insurance received from the employer is worth more than the same amount received in taxable wages An incentive to obtain employer sponsored health insurance Self insuranceieliminates the insurance company the middleman ERISA19747exemption from having to provide certain mandatory benefits Also premiums are not taxed because they do not constitute revenue as they would for an insurer 39 Individually purchased insuranceifor those not covered under an employer s plan and can afford to purchase privatelyiself employed farmers and others Surprisingly premium costs are lower than for employer sponsored group plans Tax advantaged treatment of fringe benefits at work make people purchase more extensive insurance coverage than they would pay for on their own 39 Managed care plans HMOs and PPOs HEALTH INSURANCE CONCEPTS 39 The insured beneficiary 39 Premium 7 Amount charged by insurer to insure against risk 7 Employer employee cost sharing Actuarial assessment of risk Two methods 1 Experience rating 0 group s medical claims experience 0 vary from group to group due to different risks 2 Community rating 0 risk is spread among a larger community gtgt Pure community ratingisame premium for everyone gtgt Modified community ratingiprice can differ on account of age and sex while ignoring other factors that may in uence risk 0 good risks help pay for poor risks ie the healthy subsidize those in poor health 39 Cost sharing Deductible The insured must pay before insurance pays anything Generally an annual out of pocket cost Copayment Each time services are used Coinsurance ratio of cost sharing is a variation of copayment Stop loss provision limits the insured s out of pocket expenses Cost sharing reduces moral hazard Rand Health Insurance Experiment 39 Indemnity and Service Plans 2007 Jones and Bartlett Publishers Inc 7 Indemnity plan 39 Reimburses the insured a predetermined amount per service 39 Insured is responsible for paying provider 7 Service plan 39 Provides services to the insured and pays the provider directly except for the deductible and copayments 39 Covered Services Benefits 39 Services covered by an insurance plan medically necessary 39 Specified in a contract 39 Dental coverage is often separate 39 Commonly excluded services self care and over the counter products cosmetic surgery work related conditions rest cures 39 Preexisting conditions for new enrollees must be covered if they were covered under the previous employer s plan HIPAA 39 Referrals to specialists or preauthorizations for hospitalizations surgery etc may be required PUBLIC FINANCING Categorical programs Designed to benefit specified categories of people who meet the required eligibility criteria MEDICAREicovers the elderly disabled on Social Security and people with end stage renal disease A federal program Consistent eligibility criteria and benefits across the nation The Balanced Budget Act 1997 authorized the creation of MedPAC to advise US Congress on cost access quality and other issues Four parts of Medicare 39 Part A HI7Entitlement Financed through a mandatory payroll tax Employer and employee pay equally into the Hospital Insurance Trust Fund Covered services inpatient hospital care skilled nursing facility home care hospice Benefits are applied per benefit period 39 Part B SMI7Voluntary Premium cost sharing between the government and beneficiary Premiums are subsidized by the government out of general tax revenues Medicare Prescription Drug Improvement and Modernization Act 2003 MMA authorized income based means tested premiums effective 2007 Covers various outpatient services 39 Part C Medicare AdvantageiVoluntary Created in 1998 Balanced Budget Act 1997 as MedicareChoice Changed to its current name under MMA 2003 It provides for voluntary enrollment in managed care Does not add any specific benefits but managed care plans may provide some benefits as an incentive to enroll Special needs plans are available in some locations 39 Part D Prescription Drug CoverageiVoluntary Created under MMA 2003 2007 Jones and Bartlett Publishers Inc Implemented in 2006 Premium cost sharing between the government and beneficiary Enrollees can choose between a stand alone prescription drug only plan for those not enrolled in Part C or Part C in which all services are delivered through managed care Medicare nancing 2001 Estimated 2006 Payroll taxes 56 40 General tax revenues 27 41 Premiums 8 1 1 Other sources e g interest earnings 9 8 For accounting purposes two trust funds are kept one for HI and the other for SMI and Part D HI trust fund is projected to be depleted in 2018 SMI trust fund is expected to remain solvent Main factors that will put pressure on the solvency of these funds medical cost in ation an aging population and shrinking workforce that will shrink the tax base 39 MEDICAIDicovers the poor who meet certain income and asset requirements means test Also known as Title 19 of the Social Security Act 39 Eligibility and covered services are determined by each state but certain services are federally mandated Automatic coverage for 1 SSI recipients 2 TANF temporary assistance to needy families recipients 3 Children and pregnant women if family income is below 133 of the Federal Poverty Level FPL 4 Other categories defined by federal law 5 People defined as medically needy by a state 39 Medicaid is a comprehensive health care program 39 Financed by states with federal matching based on per capita income for the state By law the Federal Medical Assistance Percentage FMAP has been set between 50 to 83 of total Medicaid costs in a state averaged 57 in 2005 39 Distinctions between Medicare and Medicaid Medicare Entitlement rights to eligibility and access can be enforced in courts Medicaid Welfare eligibility and access cannot be enforced Medicare Not a comprehensive program Medicaid A comprehensive health care program except that dental care is limited People may have dual eligibility for both programs 18 of Medicare enrollees are dually covered Medicaid is the payer of last resort PACE Program of All inclusive Care for the Elderly 2007 Jones and Bartlett Publishers Inc 39 Enacted under the Balanced Budget Act of 1997 39 Spans both Medicare and Medicaid 39 Provides community based care for persons aged 55 or over who already qualify for placement in a nursing home 39 A PACE team coordinates all medical and social services 39 The objective of PACE is to provide long term care services in community settings to people who otherwise risk being in nursing homes SCHIP State Children s Health Insurance Program Title XXI of the Social Security Act 39 Enacted under the Balanced Budget Act of 1997 39 Covers children under 19 years of age from low income families who are not covered under a private plan Available to families with incomes up to 200 of FPL 39 Requires that applicants be first screened for and enrolled in Medicaid if eligible 39 Three basic options for administering the program 1 Expansion of Medicaid 2 Establishment of a special child health assistance program 3 Combination of 1 and 2 39 Military Health Services System MHSS and TriCare 39 Operated by the Department of Defense 39 75 hospitals and 461 clinics operated in 2005 to serve 89 million 39 Mainly for active duty personnel 39 Dependents retirees and survivors of deceased members can enroll in TriCare TriCare 39 Regionally managed 11 US regions Europe Latin America and Pacific Structured after managed care 39 MHSS staff and facilities civilian health care services Three plan options 1 TriCare Prime Modeled after HMOs Must have a primary care manager PCM to coordinate the beneficiary s total health care needs 2 TriCare Extra Modeled after PPOs Care is received through a civilian network of providers 3 TriCare Standard Traditional fee for service program similar to its predecessor CHAMPUS 39 TriCare for Life is for elderly beneficiaries 39 Veterans Health Administration 0 Operated by the Department of Veterans Affairs VA 0 VHA operates the largest integrated health services system in the US 39 163 hospitals 39 913 clinics 39 137 nursing homes Employs 180000 health care professionals 2007 Jones and Bartlett Publishers Inc Treats both service connected and other conditions on a priority basis Medical education and research are important components of its mission Global budget model Money is appropriated in advance for the entire system Administrative structure 22 geographically distributed VISNs Veterans Integrated Service Networks CHAMPVA for eligible dependents VHA provides a window into a potential national health care system characterized by strained capacity to meet high demand 39 Indian Health Service IHS 39 Federal program 39 Comprehensive care to native Americans living on reservations and in rural areas 39 IHS operates its own hospitals health centers and health stations 39 Some services are contracted from private providers MISCELLANEOUS PRIVATE AND PUBLIC PROGRAMS Medigap Private Medicare covers less than half of beneficiaries costs Some options to cover the remaining costs 39 Medicaid if dually eligible 39 Part C can offer some additional benefits Retiree benefits from past employer 39 Purchase private policies Medigap Under the Omnibus Budget Reconciliation Act 1990 only standardized Medigap plans can be sold Roughly nine different plans are now available Each provides different benefits and premiums vary accordingly Workers Compensation 39 Not a regular health insurance program 39 Covers those who became ill or injured or were killed on the job 39 Covers lost wages medical expenses indemnification for loss of occupational capacity survivor s death benefits 39 The program is state administered but is financed by employers THE PAYMENT FUNCTION Includes reimbursement and disbursement 39 Reimbursementidetermination of the method and amount of reimbursement to be paid to providers 39 Disbursementiactual payment after services have been delivered 39 Chargerate Price Charge set by the provider Rate set by a third party payer Claim Bill submitted to a third party payer by the provider to get paid 2007 Jones and Bartlett Publishers Inc Reimbursement Methods 1 Fee for service 39 Fees charges or prices are set by providers 39 Each service is separately billed 39 Variations a Fee for service limited to a usual customary and reasonable UCR charge7 balance bill for the remaining portion b Discounted fee for service under some managed care arrangements notably preferred provider organizations 39 Main drawback7provider induced demand 2 Bundled charges or package pricing Reduces provider induced demand because the fee is inclusive of all bundled services 3 Resource Based Relative Value Scale RBRVS Implemented in 1992 7 A relative value is assigned to each CPT current procedural terminology coded physician service 7 RVUs are based on time skill and intensity they re ect time effort and expertise 7 Separate RVUs are assigned for overhead costs and malpractice insurance 7 RVU for each service is adjusted to re ect geographical cost variations using the Geographical Practice Cost Index 7 Each year Medicare establishes a dollar Conversion Factor CF 7 Reimbursement for a service 2 RVU x CF 4 Managed care approaches a Preferred provider approach Discounted fee schedule Fee for service charges are discounted b Capitation7PMPM fee to cover all needed services Creates incentive to provide only medically necessary services Minimizes provider induced demand Drawback7incentive to limit services can result in underutilization when necessary services are withheld c Salary 5 Reimbursement for inpatient services A Cost plus retrospective7per diem rate based on historical costs no longer in use B Prospective7based on preestablished criteria Rate is established in advance of the delivery of services Types of prospective methods 39 Diagnosis Related Groups DRGs7used for hospitals Fixed rate per discharge a bundled charge based on principal diagnosis at the time of admission The hospital must provide whatever services the patient needs 2007 Jones and Bartlett Publishers Inc Adjustmentsiprevailing wages rural vs urban location teaching hospital disproportionate share of low income patients to support safety net hospitals located in inner cities and rural areas Additional reimbursement is also made for outliers In 2005 DRGs were developed for psychiatric patients Inpatient psychiatric facilities receive a per diem rate not a case specific rate To make a profit a hospital must keep its operating costs below the fixed rates 39 Ambulatory Payment Classification APC7for hospital outpatient departments outpatient surgery radiology and other diagnostics clinic visits and emergency services All outpatient services are classified into more than 300 procedural groups based on clinical similarity and resource use Each APC is assigned a relative payment weight based on the median cost of services within the APC A bundled reimbursement rate that includes services such as anesthesia certain drugs supplies and recovery room charges is established for each APC 39 Case Mix Methods Aggregate of the intensity severity of conditions Severity is determined by comprehensive patient assessment Mutually exclusive categories re ect resource use 1 Resource Utilization Groups RUGsifor Skilled Nursing Facilities SNFs A case mix method is used to determine the composite level of clinical intensity by classifying each Medicare patient in a RUG category based on individual assessment of each patient on admission A per diem rate is established based on the case mix 2 Case Mix Groups CMGsifor inpatient rehabilitation facilities Assessment at admission and discharge 21 rehabilitation impairment categories RICs 100 CMGs within the RICs 39 Home Health Resource Groups HHRGsithe PPS for home health pays a fixed predetermined rate for each 60 day episode of care based on case mix All services provided by a home health agency are bundled under one payment made on a per patient basis 39 Disbursement of Funds 39 Internal claims departmentsiinsurance companies MCOs 39 Self insured employersiTPAs 39 Medicare and Medicaidifiscal intermediaries NATIONAL HEALTH EXPENDITURES Also called health care spending and more loosely health care costs 2007 Jones and Bartlett Publishers Inc M 2 trillion 6697 average per capita 16 of GDP 7 share of total economic output consumed by health care 2015 Projections 4 trillion 20 of GDP Four main components 1 Personal health expenditures All health care services products and supplies 2 Administrative costs Government administrative costs Net cost of private health insurance 3 Expenditures for public health programs 4 Investment Noncommercial research Structures and equipment I Distribution of national health expenditures 55 private 45 public I Medicare Medicaid and SCHIP consume 13 of national health expenditures I Of the total public spending approximately 71 is federal and 29 is state and local I Over 12 of the total expenditures are incurred for hospital and physician services I Of the combined insurance and out of pocket costs Employers pay 74 Employees pay 26 TRENDS PROBLEMS AND ISSUES I PayforPerformance P4P o Linking of reimbursement to quality and efficiency 0 Its cost effectiveness is unknown at present 0 But has intuitive appeal I Insurance Portability and Continuity o COBRA 1985 allowed employees to continue existing coverage for 18 months after separating from a job 0 The individual must pay 102 of the group rate 0 Because of no employer subsidy the cost is prohibitive for many HIPAA 1996 Exhibit 6 8 contains the main provisions 0 I Erosion of Private Insurance Coverage 0 Rise in the number of uninsured 2007 Jones and Bartlett Publishers Inc 10 0 Health insurance churning 22 of the nonelderly gain and lose coverage multiple times Underinsurance many are not protected against catastrophic health care expenses Debt from medical bills personal bankruptcies Reasons for the erosion of private insurance I Unaffordable for small businesses I Unaffordable cost sharing by employees I Globalization has put cost pressuresishrinkage of full time workforce temporary part time and contracted labor has been on the rise 0 00 Community Rating And Adverse Selection 0 Several states require that community rating be used for underwriting o The healthy end up subsidizing those in poor health 0 Advantageous for high risk people who enroll in high numbers adverse selection 0 Some healthy people disenroll 0 Cost of premiums rise in a continuous upward spiral Favorable Risk Selection cream skimming o The very sick 1 of the population consume 30 of health care spending 0 The healthy 50 of the population consume 3 of health care spending 0 Insurers select low risk people 0 Makes it difficult for high risk people to get coverage 0 Risk rating has been criticized I Equity grounds I Politically unacceptable Cost Shifting o This was the traditional way for providing health care to the uninsured o Capitation and prospective payment methods have eroded this capability nancing for the Uninsured 0 Work of Hadley and Holahan 2003 o The government may already be paying as much as 84 of uncompensated care 0 These funds could be used to establish a new program for the uninsured 0 But why fix what is not broken Fraud and Abuse 0 A significant problem particularly in Medicare and Medicaid o The system lacks monitoring and control 0 False Claims Act and 1986 Amendments I Qui Tam provisionsiprivate parties called relators can bring cases on behalf of the government 0 Sanctions also provided under HIPAA 2007 Jones and Bartlett Publishers Inc TERMINOLOGY 39 Adverse selectionioccurs when high risk individuals enroll in comprehensive plans and as the cost of premiums goes up healthy individuals start dropping out Eventually the plan is left with a disproportionate number of high risk people 39 Balance billiThe amount a provider bills to the patient for the portion not paid by insurance 39 BeneficiaryiRefers to the insured especially a person insured through a public program such as Medicare or Medicaid 39 Bene t periodi Medicare inpatient benefits are based on benefit periods It is determined by a spell of illness beginning with hospitalization and ending when a beneficiary has not been an inpatient in a hospital or a skilled nursing facility for 60 consecutive days 39 Benefitsiservices covered by an insurance plan 39 CarriersiPrivate claims processors for Medicare Part B services 39 CasemixiRefers to the overall intensity of medical conditions requiring medical and nursing intervention It is determined by an assessment of each patient s condition and an estimate of the amount of resources the patient will need 39 Categorical programsiPublic health insurance programs each designed to benefit a certain category of people Examples are Medicare for the elderly and certain disabled individuals Medicaid for the indigent Defense Department s programs for active service people and VA for former armed forces personnel 39 ChargeiFee price for a service generally set by the provider 39 ClaimiRefers to a billing for services the provider has to file with the insurer in order to receive payment 39 Coinsuranceilhe ratio of cost sharing between the insurance plan and the insured For example an 80720 coinsurance means that insurance will pay 80 and the patient will pay 20 of an approved charge 39 Community ratingiA method for the determination of health insurance premiums that spreads the risk among members of a large community and establishes premiums based on the utilization experience of the whole community For a set of benefits the same rate applies to everyone regardless of age gender occupation or any other indicator of health risk 39 Copaymentilhe portion of total medical costs that the insured has to pay out of pocket each time health services are received 39 CostplusiA method of reimbursement in which total operating costs and certain allowable capital costs are included in arriving at the per diem rate 39 Cost shiftingilhe practice whereby providers charge extra to payers who do not exercise strict cost controls to make up for inadequate reimbursement from other sources or to make up for uncompensated care rendered 39 Current Procedural Terminology CPT iAn accepted standard for coding physician services 39 DeductibleiAmount the insured must first pay before benefits by the plan are payable A deductible is commonly required to be paid on an annual basis 39 EntitlementiA program to which people are entitled because they have contributed toward it For example the elderly are entitled to Medicare benefits regardless of the amount of income and assets they may have 39 Experience ratingiA method for the determination of health insurance premiums that is based on a group s own medical claims experience Under this method premiums differ from group to group because different groups have different risks 2007 Jones and Bartlett Publishers Inc 39 Fee scheduleiA list showing individual fees for each type of service 39 Firstdollar coverage plansiHealth insurance plans without deductibles and copayments Such plans are now quite rare 39 Fiscal intermediariesiPrivate sector insurers such as Blue CrossBlue Shield and commercial insurance companies who process provider claims under contract from Medicare and Medicaid 39 GDPiThe total value of goods and services produced in a country It is an indicator of total economic production 39 Group insuranceiA policy obtained through an entity such as an employer a union or a professional organization that anticipates that a substantial number of people in the group will participate in purchasing insurance through that entity 39 Indemnity planiProvides reimbursement to the insured without regard to the expenses actually incurred The term is often used for traditional health insurance plans that are not managed care plans 39 InsuranceiA mechanism for protection against risk 39 InsurediThe individual who is covered for risk by insurance 39 InsureriThe insuring agency that assumes risk 39 Job lockilnability of a person to change jobs for fear of losing health insurance with his or her current employer 39 Major medicaioriginally designed to cover catastrophic situations that could subject the insured to substantial financial hardships such as hospitalization extended illness and expensive surgery Now major medical coverage is all inclusive comprehensive coverage 39 Meanstested programiAny government insurance program in which eligibility is determined by the person s assets and income 39 Medical loss ratioiRatio of benefit payments to premiums which indicates the proportion of the premiums spent on medical expenses 39 MedigapiA private insurance policy purchased by many of the elderly to pay for expenses not covered by Medicare 39 Moral hazardiConsumer behavior that leads to a higher utilization of healthcare services because people are covered by insurance 39 National health expendituresiTotal amount spent for all health services and supplies and health related research and construction activities consumed in the United States during a calendar year 39 OutliersiUnusual cases that call for additional reimbursement under a payment method These are atypical cases requiring an exceptionally long inpatient stay or exceptionally high costs compared to the overall distribution of cases 39 PayforperfornmnceiLinking reimbursement to quality and efficiency as an incentive to improve health care quality and reduce costs 39 Personal health expendituresiThe expenditures remaining after expenditures for research and construction administrative expenses incurred in health insurance programs and costs of government public health activities have been subtracted from national health expenditures These expenditures are for services and goods related directly to patient care 39 Preexisting conditioniA health problem that an insured had prior to obtaining health insurance coverage 39 PremiumiThe amount charged by the insurer to insure against specified risks 39 Prospective reimbursementiA method of payment in which certain preestablished criteria are used to determine in advance the amount of reimbursement 2007 Jones and Bartlett Publishers Inc l3 39 RateiThe price for a healthcare service generally set by a third party payer whereas a charge is the price set by the provider 39 ReinsuranceiA mechanism whereby an insurer can cover high risk losses through insurance from another insurer For example self insured employers generally protect themselves against the risk of high losses by purchasing reinsurance from a private insurance company 39 Relative value units R VUsiMeasures based on physicians time skill and intensity it takes to provide a service 39 Retrospective reimbursementiA reimbursement methodology in which rates are set on the basis of costs already incurred 39 RiskiThe possibility of a substantial financial loss from an event of which the probability of occurrence is relatively small 39 Risk ratingilnsurance rating according to which high risk individuals pay more than the average premium price and low risk individuals pay less than the average price 39 Risk selectioniThe skimming of healthy people to enroll into a health plan 39 Service planiA health plan that provides specified services to the insured The plan pays the hospital or physician directly except for the deductible and copayments for which the insured is responsible 39 StoplossiThe maximum out of pocket liability that an insured can incur in a given year The plan pays 100 of expenses beyond the stop loss limit 39 T birdparty administratoriContracted agencies that process and pay claims on behalf of self insured employers 39 T hirdparty payersilnsurance companies Blue Cross Blue Shield and the government for Medicare and Medicaid who make payment for claims on behalf of the insured 39 UnderinsurediPeople whose insurance does not adequately protect them against catastrophic health care expenses 39 UndemtilizatimiiWithholding of necessary services due to cost constraints 39 UnderwritingiA systematic technique for evaluating selecting or rejecting classifying and rating risks 39 UninsurediPeople who are not covered by either private or government sponsored health insurance programs REVIEW QUESTIONS 1 What is meant by healthcare financing in its broad sense What impact does financing have on the healthcare delivery system In broad terms financing includes the concepts of financing insurance and payment In basic terms financing enables people to obtain health insurance The payment function determines reimbursement and undertakes the actual payment for services received by the insured The key impact of financing is in determining access to health care services Thus the demand for health care is directly related to its financing Increased demand means greater utilization of health services given adequate supply Financing also in uences supply side factors such as how much health care is produced Health services managers are typically guided by demand side factors including reimbursement in evaluating what type of services to offer Management decisions such as acquisition of new equipment renovation or expansion of 2007 Jones and Bartlett Publishers Inc facilities and launching of new programs are also heavily in uenced by the amount of reimbursement needed to recoup the capital costs over time New technology is rapidly developed and disseminated when it is a covered service Similarly new services proliferate when private insurance plans or Medicare start paying for them Financing eventually affects the total healthcare expenditures incurred by a health delivery system 2 Discuss the general concepts of insurance Describe the various types of private health insurance options pointing out the differences among them Insurance is a mechanism for protection against riski the possibility of a substantial financial loss from an event of which the probability of occurrence is relatively small at least in a given individual s case There are four fundamental principles underlying the concept of insurance 1 Risk is unpredictable for the individual insured 2 Risk can be predicted with a reasonable degree of accuracy for a group or a population 3 Insurance provides a mechanism for transferring risk from the individual to the group through the pooling of resources 4 Actual losses are shared on some equitable basis by all insured members There are four main types of private health insurance options available to Americans 39 Group insurance is a policy obtained through an employer a union or a professional organization Risk is spread over the entire group 39 Self insurance is an option chosen by many large employers who can generally predict their medical expenditures from year to year Rather than pay insurers a premium to bear the risk large employers can simply assume the risk by budgeting a certain amount to pay medical claims incurred by their employees Self insurance gives employers a greater degree of control over their health insurance costs 39 Individually purchased private health insurance is an option available to the self employed the family farmer the recent college graduate the early retiree and the employee of a business that does not offer health insurance Individual private insurance determines premium price and eligibility based on the risk indicated by each individual s health status and demographics 39 Managed care plans such as HMOs and PPOs assume responsibility for the functions of financing insurance payment and delivery Payment arrangements to providers include capitation and discounted fees 3 Discuss how the concepts of premium covered services and cost sharing apply to health insurance A premium is the amount charged by the insurer to insure against specified risks Premiums are determined by the actuarial assessment of risk Services covered by an insurance plan are referred to as benefits covered and noncovered services are included in a contract Most plans include medical and surgical services hospitalizations emergency services prescriptions and maternity care and delivery Services such as eyeglasses and routine dental care may or may not be covered depending on the plan Services most commonly excluded are those not ordered by a physician such as self care and over the counter products Other services commonly excluded from health insurance coverage are cosmetic and reconstructive surgery work related illness and injuries which are covered under workers compensation rest cures genetic counseling etc Employers and employees generally share in the cost of premiums In addition the insured pays out of pocket expenses referred to as deductibles and copayments A deductible paid annually 2007 Jones and Bartlett Publishers Inc 15 is the amount the insured must first pay before benefits by the plan are payable Copayment is the portion of total medical costs that the insured has to pay out of pocket each time health services are received after the deductible amount has been paid 4 What is the difference between experience rating and community rating In experience rating premiums are based on a group s own medical claims experience Under this method premiums differ from group to group because different groups have different risks Community rating spreads the risk among members of a large community and establishes premiums based on the utilization experience of the whole community In this case good risks subsidize poor risks In other words cost is shifted from people in poor health to those who are healthy 5 What is Medicare Part A Discuss the financing and cost sharing features of Medicare Part A What benefits does Part A cover What benefits are not covered Part A the hospital insurance HI portion of Medicare is financed by special payroll taxes collected for Social Security The Hospital Insurance Trust Fund is financed by a payroll tax of 145 from the employee and 145 from the employer All income is taxed A deductible applies per benefit period A benefit period is a spell of illness beginning with hospitalization and ending when a beneficiary has not been an inpatient in a hospital or a skilled nursing facility for 60 consecutive days Part A covers hospital inpatient services care in a skilled nursing facility SNF home health visits and hospice care The following services are covered 39 A maximum of 90 days of inpatient hospital care is allowed per benefit period Once the 90 days are exhausted there is a lifetime reserve of 60 hospital inpatient days There is no limit to the number of benefit periods Beneficiaries must make copayments after the first 60 inpatient days per benefit period 39 Up to 100 days of care in a Medicare certified skilled nursing facility SNF are allowed provided the beneficiary has been hospitalized for at least three consecutive days not including the day of discharge Admission to the SNF must occur within 30 days of hospital discharge A copayment applies after the first 20 days 39 Home health care is covered when a person is homebound and requires intermittent or part time skilled nursing care or rehabilitation care 39 For terminally ill patients Medicare pays for care provided by a Medicare certified hospice The noncovered services are long term care with the exception of limited SNF care described above custodial services and personal convenience services for example televisions telephones private duty nurses private rooms when not medically necessary 6 What is Medicare Part B Discuss the financing and cost sharing features of Medicare Part B What benefits are covered under Part B What benefits are not covered Part B the Supplementary Medical Insurance SMI portion of Medicare is a voluntary program financed partly by general tax revenues and partly by required premium contributions from the enrollees As of 2007 premiums are means tested There is annual deductible and 807 20 coinsurance The main services covered by SMI are outpatient services such as physician 2007 Jones and Bartlett Publishers Inc 16 services hospital outpatient services outpatient surgery diagnostic tests radiology etc emergency department visits outpatient rehabilitation services renal dialysis prostheses and medical equipment and supplies Services such as vision care eyeglasses outpatient prescription drugs routine physical exams and preventive services are not covered Exceptions are screening Pap smears mammography colorectal and prostate cancer screening glaucoma screening u shots and vaccinations against pneumonia 7 Brie y describe the Medicare Advantage program Medicare Advantage is also called Part C but it does not add specifically defined new services It merely provides some additional choices of health plans with the objective of channeling a greater number of beneficiaries into managed care plans The Balanced Budget Act BBA of 1997 authorized the MedicareChoice program which took effect in 1998 MedicareChoice was renamed Medicare Advantage through the passage of the MMA of 2003 Beneficiaries can either choose to enroll in a managed care plan or remain in the original Medicare fee for service program Medicare Advantage plans may offer additional benefits that are not offered by the Original Medicare Plan andor may have lower out of pocket costs 8 Brie y explain the prescription drug program under Medicare Part D Part D is voluntary It requires payment of a monthly premium by those who want the coverage The program is available to anyone regardless of income who has coverage under Part A or Part B Coverage is offered through two types of private plans a Stand alone Prescription Drug Plans that offer only drug coverage are available to those who want to stay in the original Medicare fee for service program b Medicare Advantage Prescription Drug Plans are available to those who want to obtain all health care services through managed care organizations participating in Part C There are three levels of benefits after an annual deductible has been paid At the basic level the plan has 75 25 coinsurance up to a certain amount Then there is a gap or doughnut hole in which no benefits are paid When a beneficiary has incurred a defined amount of out of pocket costs the catastrophic level kicks in that carries a 95 5 coinsurance 9 Discuss the financing eligibility and covered benefits for the Medicaid program Medicaid finances healthcare services for the indigent The program is jointly financed by the federal and state governments The federal government provides matching funds to the states based on the per capita income in each state Medicaid is a means tested program in which eligibility is based on the beneficiary s income and assets People receiving Supplemental Security Income SSI which includes many of the elderly the blind and the disabled and families with children receiving support under the Temporary Assistance for Needy Families TANF program are automatically covered States at their option also may designate as medically needy certain people not automatically covered under Medicaid Each state administers its own Medicaid program Hence eligibility criteria covered services and payments to providers vary from state to state However federal law mandates that every state provide some specific basic health services 2007 Jones and Bartlett Publishers Inc 17 The main federally mandated services include hospital inpatient and outpatient care physician services laboratory and X ray services SNF care home health services for those eligible for SNF services prenatal care and family planning services and supplies In addition states may elect to cover certain optional services such as prescription drugs optometrists services eyeglasses and dental care 10 What provisions has the federal government made for providing health care to military personnel and to veterans of the US armed forces The Department of Defense operates the Military Health Services System MHSS to provide medical services to the active and retired members of the armed forces and their dependents Active duty servicemen are served by hospitals and clinics operated by the Department Military facilities are supplemented by services purchased from the civilian healthcare system Dependents of uniformed personnel and military retirees can receive care through the TriCare program when the same services cannot be obtained through a military facility due to space limitations Some cost sharing applies The VA is an executive department of the US government The VA healthcare system was originally established to treat veterans with war related injuries and to help rehabilitate past service men and women with war related disabilities However the system has been increasingly used by poor veterans with medical conditions unrelated to military service VA is a tax financed agency that for the most part delivers care directly through salaried physicians and government owned facilities It provides most institutional long term care through its own nursing homes but purchases some nursing home services from private facilities especially in areas where there are no VA facilities CHAMPVA Civilian Health and Medical Program of the Department of Veterans Affairs is a healthcare benefits program for the eligible dependents and survivors of veterans 11 What are the major methods of reimbursement for outpatient services The following main methods are used for the reimbursement of outpatient services a Fee for service reimbursement pays a separate amount for each identifiable and individually distinct unit of service such as examination X ray urinalysis and a tetanus shot in the case of physician services Each of these services is separately itemized on one bill and there can be more than one bill if different providers are involved Due to its perverse financial incentives the fee for service method has been largely discontinued b Charges may be based on a set of bundled services For example normal vaginal delivery may have one set fee that includes the procedure and pre and post delivery care Optometrists sometimes advertise package prices that include the charges for eye exams frames for eyeglasses and corrective lenses c Reimbursement based on a resource based relative value scale RBRVS is used by Medicare to reimburse physicians according to a relative value assigned to each physician service Relative values take into account the time skill and intensity it takes to provide a service and the actual reimbursement is derived using a complex formula 2007 Jones and Bartlett Publishers Inc 18 d There are three main payment approaches used under the various managed care arrangements 39 The preferred provider approach may be regarded as a variation of the fee for service approach The main distinction is that an MCO establishes fee schedules based on discounts negotiated with providers 39 Under capitation a set monthly fee per enrollee is paid to the provider All services rendered by the provider are covered under the capitated fee 39 Salary is the third method used by some MCOs that employ their own physicians e Ambulatory Payment Classification APC system is a prospective payment method used for paying hospital outpatient departments by Medicare Rates are established for each APC category based on the median cost of services within the APC The reimbursement rates are adjusted for geographic variation in wages APC reimbursement is a bundled rate that includes services such as anesthesia certain drugs supplies and recovery room charges in a packaged price established by Medicare 12 What are the differences between the retrospective and prospective methods of reimbursement Retrospective a Reimbursement is based on actual costs incurred in the past In other words costs are evaluated retrospectively b The total reimbursement is directly related to length of stay services rendered and the cost of providing the services c Providers have an incentive to increase costs and not be sensitive to the need for efficiency and cost containment in the delivery of services d Cost increases generally become essential for maximizing reimbursement Prospective a Certain preestablished criteria not costs are used to determine in advance the amount of reimbursement b Reimbursement is related to diagnosis diagnosis related groups a composite of the patients acuity level case mix or other methods measuring resource inputs c Because of the fixed reimbursement providers have an incentive to reduce costs and provide services more efficiently d Cost increases generally lead to a loss to be absorbed by the provider 13 Discuss the prospective payment system under DRGs The prospective payment system PPS under DRGs is used by Medicare to determine reimbursement rates for inpatient hospital care The amount of payment is set per discharge rather than per diem Hence it is a rate established for bundled services On admission a patient is assigned a DRG category according to the principal diagnosis Based on the patient s DRG classification the hospital receives a set amount Additional factors may account for differences in reimbursement for the same DRG including differences in wages due to geographic characterizations location of the hospital in urban versus rural areas whether or not the 2007 Jones and Bartlett Publishers Inc 19 institution is a teaching hospital and an adjustment for treating a disproportionately large share of low income patients 14 Distinguish between national health expenditures and personal health expenditures National health expenditures estimate the amount spent for all health services and supplies and health related research and construction activities consumed in the United States during a calendar year In addition costs incurred in the administration of private and public health insurance and spending on public health activities are included Personal health expenditures are confined to services and goods related directly to patient care More specifically personal health expenditures constitute the amount remaining after expenditures for research and construction administrative expenses incurred in health insurance programs and costs of government public health activities have been subtracted from national health expenditures Services include hospital care physician services dental care other professional services nursing home care home health care drugs nondurable products durable medical equipment vision care and other personal health care 15 What is pay for performance What is its main objective Pay for performance links reimbursement to quality and efficiency Providers who can demonstrate improvement in care and more efficient performance stand to reap financial rewards Its objective is to improve health care quality and reduce costs However its cost effectiveness is currently unknown 16 Discuss the main provisions of HIPAA in health insurance portability and continuity If an employee changes jobs the right to full coverage is portable to another place of employment without waiting Coverage cannot be dropped if an insured person becomes seriously ill An insurance company or MCO cannot drop an employer s plan because of high utilization experience Coverage under COBRA may continue beyond the 18 month limit premiums must be paid if the person cannot obtain coverage from an employer 17 How has globalization affected the number of uninsured Americans Globalization has put pressures on US corporations to keep their costs down Consequently employers have increased the use of nontraditional workers ie temporary or part time workers and use of contracted labor They are twice as likely as regular full time workers to be uninsured unless they can rely on insurance through a working spouse or be eligible for a public insurance program 18 How does community rating lead to adverse selection Under community rating healthy people subsidize the insurance cost for the less healthy particularly those with high cost chronic conditions High risk people find community rating to be more advantageous and they enroll in greater numbers It leads to a larger pool of high risk 2007 Jones and Bartlett Publishers Inc 20 individuals participating in the plan than would be the case if everyone were paying according to true risk 19 What incentive do insurers have to engage in risk selection Why is risk rating criticized Risk selection or favorable risk selection amounts to cream skimming Health plans may selectively enroll healthier people and avoid sicker ones Since patients with chronic health problems are likely to consume more services risk selection can help insurers to increase their profitability Adjusting premiums to re ect health status and making potential high cost enrollees pay more is called risk rating It is criticized on equity grounds It has also been politically unacceptable to have the sick pay higher costs for coverage In addition very high risk individuals may be unable to obtain coverage at affordable rates 20 Pertaining to fraud and abuse what are the main provisions of the 1986 False Claims Act Amendments The law clarified that the False Claims Act applied to Medicare and Medicaid It also made it easier for private parties called relators to bring cases on behalf of the government under the qui tam provisions 2007 Jones and Bartlett Publishers Inc 21 CHAPTER 7 Outpatient and Primary Care Services OUTPATIENT SERVICES Reasons for growth 1 Changes in reimbursement constraining inpatient services and favoring outpatient services 39 Few payment restrictions in outpatient services surgeries chemotherapy dialysisi paid as fee for service Two main agents of change 39 MedicareiPPS reimbursement based on DRGs fixed rate per admission quicker and sicker discharges coverage of home health 39 Managed careicapitation 2 Development of new technology 39 Less invasive procedures enable quicker recuperation from surgery Patients often do not need to be hospitalized for routine surgery 3 Utilization controlsimanaged care 39 Restrictions on utilization 39 Quicker discharge 39 Prior authorization precertification 39 Utilization review 4 Social factors 39 Preference for obtaining services at home or in community based settingsiespecially true for long term care HOSPITAL OUTPATIENT DEPARTMENTS Hospitals have been in a competitive position to develop outpatient services 1 Financial ability to adopt new technology 2 Physical ability to provide appropriate facilities operating rooms recuperation rooms 3 Best equipped to provide emergency care 4 Excess unutilized capacity Advantages 39 Significant contribution to profits 39 Continuum of services One stop shopping for managed care 39 Cross referrals within a hospital s own network OUTPATIENT CARE SETTINGS 39 Private practiceishift from independent solo practice to group practice institutional employment Advantages to physicians 39 Lower operating costs startup sharing of overhead equipment diagnostics 39 Greater opportunities to contract with managed care Advantages to patients 39 Most routine services available at one place 2007 Jones and Bartlett Publishers Inc 22 39 Cross referrals 39 Hospital based Five main types of hospital outpatient services 1 Clinical servicesispecialist consultations 2 Surgical services 3 Emergency services for acute conditions 39 Emergentirequire immediate attention 39 Urgentiattention within a few hours 39 Nonurgent nonemergencyimisuse of emergency departments but used mainly by the uninsured as a substitute for primary care 4 Home health care 5 Women s health centers 39 Women are the major users of health care 39 Greater proportion of women in the population 39 Unique healthcare needs that were previously ignored 39 Freestanding facilitiesiwalk in clinics urgi centers surgi centers 39 Mobile medical servicesiambulance EMT and paramedics 39 Diagnostic vansiX ray MRI Service vans eye and dental care TERMINOLOGY 39 Adult day careiComplements informal care provided at home by family members with professional services available in adult day care centers during the day 39 Alternative medicineiRefers to nontraditional approaches and includes the broad domain of all health care resourcesi other than those intrinsic to biomedicineito which people have recourse Examples include homeopathy herbal formulas use of other natural products as preventive and treatment agents and acupuncture 39 Ambulatory careiRefers to outpatient services It includes 1 care rendered to patients who come to physicians offices outpatient departments of hospitals and health centers to receive care 2 outpatient services intended to serve the surrounding community community medicine and 3 certain services that are transported to the patient 39 Case managementiProvides coordination and referral among a variety of healthcare services The objective is to find the most appropriate setting to meet a patient s healthcare needs 39 Categorical programsiPublic health programs specifically designed to address certain categories of disease or serve specific categories of persons Community health center CHC Local nonprofit communityowned health care providers sewing lowincome and medicallyunderserved communities 39 Communityoriented primary care C 0PC 7lncorporates the elements of good primary care delivery and adds to this a population based approach to identifying and addressing community health problems 0 Complementary and alternative medicine CAM the broad domain of all health care resources other than those intrinsic to biomedicine to which people have recourse eg homeopathy herbal formulas use of other natural products as preventive and treatment agents acupuncture meditation yoga exercises biofeedback and spiritual guidance or prayer 2007 Jones and Bartlett Publishers Inc 23 39 Durable medical equipment DME7lncludes certain medical supplies and equipment such as ostomy supplies hospital beds oxygen tanks walkers and wheelchairs 39 Emergent conditionsiRequire immediate medical attention time delay is harmful to patient and the disorder is acute and potentially threatening to life or function 39 Afree cliniciA general ambulatory care center serving primarily the poor and the homeless who may live next to af uent neighborhoods Free clinics are staffed predominantly by trained volunteers and care is given free or at a nominal charge 39 GatekeepingiT39he care coordination role of a primary care practitioner It implies that patients do not visit specialists without referral from the primary care physician who functions as the gatekeeper It is not designed to be a controlling mechanism to deny people necessary care It is designed to protect patients from unnecessary procedures and overtreatment 39 Home health careilncludes various types of services that are brought to the patients in their own homes Such patients are generally unable to leave their homes safely to get the care they need 39 HospiceiRefers to a cluster of comprehensive services that address the special needs of dying persons and their families It blends medical spiritual legal financial and family support services Services are taken to patients and their families wherever they happen to be located 39 Iatrogenicilllness or injury is any complication that is caused by the process of health care 39 Medically underservediA designation determined by the federal government It indicates a dearth of primary care providers and delivery settings as well as poor health indicators of the populace The majority of this population group are Medicaid recipients 39 Nonnrgent conditionsiDo not require the resources of an emergency service and disorder is nonacute or minor in severity 39 Outpatient servicesilnclude any healthcare services that are not provided on the basis of an overnight stay in which room and board costs are incurred The term is synonymous with ambulatory care 39 Aphone care systemiProvides telephone access to bring expert opinion and advice to the patient especially during the hours when physicians offices are generally closed 39 Primary health careiEssential health care that constitutes the first level of contact by a patient with the health delivery system and the first element of a continuing healthcare process 39 Secondary careilncludes routine hospitalization routine surgery and specialized outpatient care such as consultation with specialists Compared to primary care these services are usually short term in nature and more complex involving advanced diagnostic and therapeutic procedures 39 SnrgicentersiFreestanding ambulatory surgery centers independent of hospitals They usually provide a full range of services for the types of surgery that can be performed on an outpatient basis and that do not require overnight hospitalization 39 Telephone triageiRefers to a telephone call in system staffed by specially trained nurses who receive patients calls Using a computer system they can access a patient s medical history and view the most recent radiology and laboratory test results The nurses use standardized protocols to guide them in dealing with the patient s problem and consult with primary care physicians when necessary If necessary the staff can direct patients to appropriate medical services such as an ED or a physician s office 39 Tertiary careiConstitutes the most complex level of care Typically tertiary care is institution based highly specialized and highly technological Examples include burn treatment transplantation and coronary artery bypass surgery 2007 Jones and Bartlett Publishers Inc 24 39 Urgent care centersiCommunity based freestanding clinics open 24 hours a day 7 days a week These emergency centers however generally are not equipped to serve truly emergent patients or to receive ambulance cases 39 Urgent conditionsiRequire medical attention within a few hours a longer delay presents possible danger to the patient and the disorder is acute but not necessarily severe 39 Walkin clinicsiProprietary community based freestanding clinics that provide ambulatory services ranging from basic primary care to urgent care They are generally used on a nonroutine episodic basis The main advantage of these clinics is convenience of location evening and weekend hours and availability of services on a walk in no appointment basis REVIEW QUESTIONS 1 Describe how some of the changes in the health services delivery system have led to a decline in hospital inpatient days and a growth in ambulatory services Medicare reimbursement and cost saving efforts of managed care are the two main factors that have led to a decline in hospital inpatient days and a growth in ambulatory services Medicare instituted the prospective payment system PPS for reimbursing hospitals in the mid 1980s PPS reimbursement based on DRGs provides fixed case based payment to hospitals Hospitals therefore have a strong incentive to minimize the inpatient length of stay and continue treatment in an outpatient setting The outpatient sector has fewer payment restrictions Cost containment strategies adopted by managed care also stress lower inpatient utilization with a corresponding emphasis on outpatient services These financial factors for instance have provided a major impetus for the unprecedented growth of home health care Such changes coupled with the availability of new technology have also shifted a number of inpatient surgical procedures to the outpatient setting 2 What implications has the decline in hospital occupancy rates had for hospital management Due to declining occupancy rates hospital executives have been forced to view ambulatory care as an essential portion of their overall healthcare business rather than a supplemental product line of an inpatient facility Seeing their inpatient business erode hospital administrators have realized that establishing a firm position in the ambulatory care market is critical to the continued survival of their organizations To meet the growing demand for outpatient services hospitals have expanded into services that previously were not considered a part of their core business The growth of nonhospital based ambulatory services has intensified competition for outpatient medical services between hospitals and community based providers Examples of such competition include home health care and ambulatory clinics for routine and urgent care 3 All primary care is ambulatory but not all ambulatory services represent primary care Discuss Accessibility is an essential feature of primary care One of the goals of primary care is to bring health care as close as possible to where people live and work Hence all primary care services are ambulatory in nature In other words true primary care is community based It represents convenience and easy accessibility The term ambulatory care is used interchangeably with 2007 Jones and Bartlett Publishers Inc 25 outpatient services Primary care is delivered on an outpatient basis and is therefore ambulatory However the scope of ambulatory services extends beyond primary care For example hospital emergency departments and trauma centers provide secondary and tertiary care Outpatient surgery and rehabilitative therapies are examples of ambulatory services that are not primary care Certain tertiary treatments such as renal dialysis and chemotherapy are also commonly rendered in outpatient settings 4 What are the main characteristics of primary care Primary care is the point of entry into the health services system where healthcare delivery is organized around primary care Primary care is the first contact a patient makes with the health delivery system Referrals for specialized services are made by primary care physicians One of the main functions of primary care is to coordinate the delivery of health services between the patient and the myriad delivery components of the system Hence in addition to providing basic services primary care professionals serve the role of patient advisor advocate and system gatekeeper In this coordinating role the provider refers patients to sources of specialized care gives advice regarding various diagnoses and therapies discusses treatment options and provides continuing care over time Coordination of an individual s total healthcare needs is meant to ensure continuity and comprehensiveness Primary care is comprehensive because it addresses any health problem at any given stage of a patient s life cycle Primary health care is regarded as essential health care As such the goal of the health delivery system is to optimize population health not just the health of individuals who have the means to access health services Achievement of this goal requires that disparities across population subgroups be minimized to ensure equal access 5 Discuss the gatekeeping role of primary care In a gatekeeping system patients do not visit specialists without a referral from their primary care physicians On the surface gatekeeping may appear to be a controlling mechanism for denying needed care In most cases however the interposition of primary care protects patients from unnecessary procedures and overtreatment This is because specialists are much greater users of tests and procedures and such interventions carry a definite risk of iatrogenic complications Gatekeeping must emphasize the coordinating role of primary care to ensure comprehensiveness and continuity of care 6 What is community oriented primary care Explain Community oriented primary care COPC incorporates the elements of good primary care delivery and adds to this a population based approach to identifying and addressing community health problems It is based on the biopsychosocial paradigm which is broader in scope than the more restricted medical model of healthcare delivery The former emphasizes the health of the population as well as the individual A system of healthcare delivery based on COPC would require developments on at least four fronts 1 Primary care will have to take the central role in the delivery of health services 2 The biomedical model that has dominated both research and health professions education must be broadened to include a stronger element of the social and behavioral sciences 2007 Jones and Bartlett Publishers Inc 26 3 COPC cannot be achieved without appropriately linking primary and secondary prevention in a clinical setting with population based health programs This is because primary and secondary prevention as well as certain aspects of tertiary prevention are essential elements of primary care 4 COPC foresees a strengthening of public health functions as an adjunct to clinical interventions This is because most population based health problems cannot be dealt with by clinicians alone Community organizations such as schools social service agencies churches and employers must become partners in strengthening public health programs 7 Discuss the two main factors that determine what should be an adequate mix between generalists and specialists The first factor is how rigidly a health delivery system employs the concept of gatekeeping The British national health service for instance employs this concept more rigidly than the Canadian health system Consequently the proportion of primary care physicians is 50 percent in Canada compared to 70 percent in Britain In the United States gatekeeping is gaining prominence in the managed care system Consequently the proliferation of healthcare delivery through managed care is creating a greater demand for primary care physicians The second factor driving the need for primary care providers is the propensity of people in a given population to utilize primary care services Greater utilization suggests more professionals are needed to adequately serve a population It is estimated that about 75785 of people in a general population require only primary care services in a given year However these proportions will vary in populations with special healthcare needs 8 What are some of the reasons solo practitioners are joining group practices Very few graduates of residency programs are entering solo practice Several factors account for this shift rapid changes in the health delivery system contracting by MCOs with consolidated rather than solo entities competition from larger health delivery organizations the high cost of establishing a new practice the complexity of billing and collections in a multiple payer system and increased external controls over the private practice of medicine Group practice and other organizational arrangements offer the benefits of a patient referral network negotiating leverage with MCOs sharing of overhead expenses ease of obtaining coverage from colleagues for personal time off and in a growing number of instances attractive starting salaries along with benefits and profit sharing plans Most young physicians find that these advantages far outweigh the allure of being an independent solo practitioner 9 Why is it important for hospital administrators to regard outpatient care as a key component of their overall business strategy Outpatient services now constitute a key source of profits for hospitals As hospitals have seen inpatient revenues steadily erode they have expanded outpatient services Under prospective and capitated reimbursement methods more and more patients are now being discharged from inpatient beds earlier than before and these patients represent a substantial market for ongoing outpatient services Outpatient services are generally reimbursed on a fee for service basis independent of prospective reimbursement for inpatient care A hospital providing both inpatient 2007 Jones and Bartlett Publishers Inc 27 and outpatient services can enhance its revenues by referring postsurgical cases to its affiliated units for rehabilitation and home care follow up Patients receiving various types of outpatient services constitute an important source of referrals back to the hospital for inpatient care A hospital can thus expand its patient base Industry experts believe hospitals will continue to derive a greater share of their total revenues from ambulatory services 10 Discuss the main hospital based outpatient services Hospital based outpatient services can be broadly classified into five main types clinical surgical emergency home health and women s health 39 Clinical ServicesiClinical services often correspond to the services provided by private physicians in their offices Hospitals located in underserved areas often provide ambulatory services to patients who lack health insurance and do not have routine access to private practitioners Centers affiliated with teaching hospitals provide research oriented specialized services Some large teaching hospitals may have 100 or more specialty and subspecialty clinics 39 Surgical ServicesiHospital based ambulatory surgery centers provide same day surgical care The surgical clinic group may include general surgery orthopaedics urology plastic surgery and rehabilitation Surgical care is usually episodic and short term 39 Emergency ServicesiThe emergency department has been a vital outpatient component of most community hospitals The main purpose of this department is to have services available around the clock for patients who are acutely ill or injured particularly for Those with serious or life threatening conditions requiring immediate attention The emergency department also offers prompt hospitalization if needed 39 Home Health CareiMany hospitals have opened separate home health departments that provide mainly postacute care and rehabilitation therapies Hospitals have entered the home health business to keep discharged patients within the hospital system 39 Women s Health CentersiWomen s health centers specialize in meeting the healthcare needs of women Since the 1980s the emerging recognition of the prominence of women as a major health market has led medical institutions to develop specialized women s health centers in hospital based andor hospital affiliated settings In addition to services in obstetrics Gynecology and primary care women s health centers offer mammography ultrasound osteoporosis screening and other health screening Specialized inpatient programs for women in the form of special units pavilions and women s hospitals are also in operation 11 What are some of the social changes that led to the creation of specialized health centers for women Women s health centers grew out of social changes which include 1 the market assessment that women are the major users of health care 2 a growing concern that research in women s health was not being appropriately funded 3 a recognition that the female majority in the United States will continue to grow due to an aging population and 4 policy initiatives to make women s health a national priority 12 Why is the hospital emergency department sometimes used for nonurgent conditions What are the consequences 2007 Jones and Bartlett Publishers Inc 28 Reasons for emergency department use for nonurgent care include erroneous self perceptions of the severity of ailment or injury the 24 hour open door policy convenience and unavailability of primary care providers Since many private physicians do not provide services to Medicaid enrollees because of low reimbursement rates Medicaid beneficiaries often have no primary care provider Since emergency departments are required by law to evaluate every patient regardless of ability to pay Medicaid patients and the uninsured frequently use them for primary care treatments Even the insured sometimes feel that they need medical attention immediately regardless of how their problem might be classified by a provider Such patients present themselves at the emergency department because they cannot find needed care elsewhere Since the emergency department requires sophisticated facilities and highly trained personnel and must be accessible 24 hours a day costs are high and services are not designed for nonurgent care Inappropriate use of the emergency department wastes precious resources 13 What are mobile healthcare services Discuss the various types of mobile services Mobile health care services are transported to patients Ambulance service and first aid treatment provided to the victims of severe illness accidents and disasters by trained emergency medical technicians EMTs are the most commonly encountered mobile medical services Even specialized ambulance services such as mobile coronary care units and shock trauma vans are becoming increasingly prevalent In some situations mobile eye care and dental care units are an efficient and convenient means for providing such services These mobile units are often brought to nursing home sites where a large number of facility residents can be served saving frail elderly patients the inconvenience of having to make difficult trips to regular clinics Mobile diagnostic services include mammography and magnetic resonance imaging MRI Such mobile units take advanced diagnostic services to small towns and rural communities They offer the advantages of convenience to patients and cost efficiency in the delivery of diagnostic care Screening vans staffed by volunteers who are trained professionals and generally operated by various nonprofit organizations are often seen at mall and fair sites Various types of health education and health promotion services and screening checks such as blood pressure and cholesterol screening are commonly performed for consumers interested in these services 14 What is the basic philosophy of home health care Describe the services provided through home health care Home health is consistent with the philosophy of maintaining people in the least restrictive environment possible Most people would prefer to live and receive health services at home than be institutionalized Home health services typically include nursing care such as changing dressings monitoring medications and providing help with bathing short term rehabilitation such as physical therapy occupational therapy and speech therapy homemaker services such as meal preparation shopping transportation and some specific household chores and durable medical equipment such as hospital beds oxygen tanks walkers and wheelchairs Certain specialized high technology home therapies that were once available only in hospitals are now delivered in the home These specialized services include intravenous antibiotics oncology therapy hemodialysis parenteral and enteral nutrition and ventilator care 2007 Jones and Bartlett Publishers Inc 29 15 What are the conditions of eligibility for receiving home health services under Medicare Patients are eligible to receive home health services under Medicare if they meet three basic conditions 1 The patient is homebound 2 The patient is under the care of a physician who will establish a home health plan 3 The patient needs physical therapy occupational therapy speech therapy or intermittent skilled nursing care 16 Explain the concept of hospice care and describe the types of services provided by hospices Hospice includes a cluster of comprehensive services for the terminally ill with a life expectancy of 6 months or less Hospice is a method of care not a location Hence services are taken to patients and their families wherever they happen to be located Hospice regards the patient and family as the unit of care Comfort and quality of life rather than prolongation of life are the main goals of hospice care Hospice services are medical psychological and social Medical services focus mainly on relieving pain and controlling symptoms such as nausea Psychological services focus on relieving mental anguish Counseling and spiritual help are made available to help the patient deal with death After the patient s death bereavement counseling is offered to the family Social services include help with arranging final affairs 17 What are some of the main requirements for Medicare certification of a hospice program To receive Medicare certification a hospice must provide the following services staffing on a 24 hour basis medical and nursing care home health aide services access to inpatient care social services counseling and bereavement support medications medical supplies and durable medical equipment and physical occupational and speech therapy 18 Describe the scope of public health ambulatory services in the United States Public health services provided by local health departments range from immunization services to a full range of outpatient services However there is no consistent pattern for the scope of services offered in different geographical sectors of the country Generally public health programs are quite limited in scope They include well baby care venereal disease clinics family planning services screening and treatment for tuberculosis and ambulatory mental health Many health departments also provide home care services usually through a public health nursing division As a general rule public health programs offer services that do not directly compete with those provided by private practitioners Typically such services are restricted to those areas in which private practitioners have little interest or they are targeted to serve inner city poor uninsured populations School health programs in public schools fall under the public health domain but they are limited to vision and hearing screening and assistance with dysfunctions that prevent learning The public school setting is a growing area of practice for physical therapists occupational therapists and speechlanguage pathologists These therapists help children with special physical and emotional dysfunctions Ambulatory clinics in prisons also fall under the public health domain 2007 Jones and Bartlett Publishers Inc 30 19 Describe the main public and voluntary outpatient clinics and the main problems they face Community health centers CHCs operate under the auspices of the Bureau of Primary Health Care Public Health Service or Department of Health and Human Services CHCs provide comprehensive ambulatory and social services to the poor living in inner cities and rural areas and the nonpoor living in medically underserved areas Typically staffed by a salaried multidisciplinary team of professionals these clinics pioneered in the training and employment of nurse practitioners and physician assistants Many of the CHCs have affiliations with hospitals for specialized services and inpatient care The majority of funding for the operation of CHCs comes from Medicaid and various public and private grants Medicare private insurance and private out of pocket payments make up the rest The latter are based on sliding fee scales determined by the patient s income Free clinics are general ambulatory care centers serving primarily the poor and the homeless who may live next to af uent neighborhoods There are only 200 or so such clinics spread across the country Care is given free or at a nominal charge by predominantly trained volunteer staff who are often medical students Other community health centers developed under federal financing are migrant health centers serving transient farm workers in agricultural communities and rural health centers in isolated underserved rural areas The Community Mental Health Center program was established to provide ambulatory mental health services in underserved areas The combination of free clinics community health centers public health services and some hospitals now forms the informal safety net of providers for individuals who lack private health insurance These clinics face serious problems because of inadequate funding Other challenges include the difficulty of recruiting and retaining physicians and other qualified health professionals and the dearth of patients covered under private insurance or those who have the ability to pay for services 20 What is alternative medicine What role does it play in the delivery of health care Alternative medicine also referred to as complementary medicine nonconventional therapies or natural medicine refers to the broad domain of all healthcare resources other than those intrinsic to biomedicine to which people have recourse Alternative therapies are regarded as nontraditional because the efficacy of many of these treatments has not been scientifically established Hence alternative medicine is not recognized by conventional Western medicine Alternative treatments include homeopathy herbal formulas use of other natural products as preventive and treatment agents and acupuncture Sometimes meditation biofeedback and spiritual guidance or prayer are also included Many Americans are persuaded that at least there is no harm in trying alternative therapies regardless of the unproven claims There also appears to be a growing appeal for holistic concepts The vast majority of people who seek out alternative therapies believe that they have already explored the utility of conventional Western approaches Most have chronic illnesses for which Western medicine can offer only symptomatic relief not definitive treatment Many patients also report that they seek out alternative therapies and individuals who practice them because they want practitioners to take the time to listen to them show understanding and deal with their personal life as well as their pathology They believe that alternative practitioners will meet those needs For the most part alternative treatments have received disdainful resistance from mainstream medicine There are 2007 Jones and Bartlett Publishers Inc 31 signs that this may be gradually changing Chiropractic and even osteopathy were once pariahs in medical practice Doctors of osteopathy now work alongside medical doctors in medical institutions Chiropractic even though largely alienated from the mainstream of modern medicine has been increasingly recognized for its healing values Chiropractic care is covered by Medicare and most states mandate chiropractic benefits As cost containment in health care continues to occupy center stage insurance companies MCOs and the government are eager to learn about the cost effectiveness of alternative therapies In the meantime these agencies are slowly and cautiously proceeding toward accepting the integration of certain unorthodox treatments with traditional medical interventions 21 Brie y explain how a telephone triage system functions A telephone triage system provides telephone access to bring expert opinion and advice to the patient especially during the hours when physicians offices are generally closed The telephone call in system operates 7 days a week 24 hours a day The system is staffed by specially trained nurses who receive patients calls Using a computer system they can access a patient s medical history and bring up the most recent radiology and laboratory test results The nurses use standardized protocols to guide them in dealing with patients problems and consult with primary care physicians when necessary 2007 Jones and Bartlett Publishers Inc 32 CHAPTER 8 Inpatient Facilities and Services HOSPITAL Legal description 39 Minimum 6 beds 39 Provides diagnosis and treatment 39 Licensed by state 39 Organized physician staff 39 Nursing care under the supervision of RNs Other appellations in current use 39 Medical Centerioffers a wide array of specialized services 39 Hospital System or Health Systemicovers a large geographic area with a variety of facilities such as satellite hospitals physician clinics rehab centers long term care facilities home health care etc EVOLUTION OF HOSPITALS Five stages 1 Institutions of social welfare 39 almshouses custodial function and pesthouses isolation function 39 public government institutions 39 charity function 2 Distinct institutions of care for the sick 39 Distinct from existing almshouses and poorhouses 39 Sometimes an extension of the above public government institutions 39 Founding of voluntary nongovernment hospitals became predominant financed by rich philanthropists 39 Hospitals opened in Philadelphia New York and Boston were the most prominent 39 Control in the hands of the boards of trustees 39 Many of the early hospitals were unsanitary unventilated had unskilled staff and were dreaded as houses of death 39 Europeistarted by religious orders later converted to public hospitals 3 Institutions of medical practice 39 Science and technologyianesthesia germ theory of disease antiseptic and sterilization techniques X ray 39 Hospital services became indispensable for diagnosis treatment and surgical procedures 39 Hospitals started to attract af uent patients 39 Physicians started many of the first proprietary hospitals generally financed by wealthy sponsors 39 Hospital administration became a discipline Organization of the hospital into functional units or departments 2007 Jones and Bartlett Publishers Inc 33 39 Emphasis on operational efficiencyieconomy quality and access 39 Inpatient treatment began to be restricted to the acute phase of illness 4 Institutions of medical training and research 39 Hospital experience became necessary for physicians 39 Affiliations between medical schools and teaching hospitals 39 Many training programs for nurses were hospital based 39 ResearchiA vast number of clinical records and a variety of medical conditions provided a wealth of data to conduct clinical research 5 Consolidated systems 39 Consolidation necessitated by reimbursement changes that led to declines in utilization 39 Hospitals diversified their services into nonacute areasioutpatient departments physician clinics home health long term care etc 39 Mergers and acquisitions vertical integration network contracts 39 As a result of consolidation competition has eroded in certain markets HOSPITAL EXPANSION Late 18005 to Mid19805 39 Hospitals grew once they became institutions of medical practice and surgical work expanded 39 Reasons for growth 1 Advances in medical science 2D p ofr y 3 Advances in medical education 4 Development of professional nursing 0 Increased efficiency of treatment 0 Hygiene improved 0 Hospitals found acceptance with the upper and middle classes 5 Growth of health insurance 0 Created demand 0 Generous reimbursement 6 Role of government 0 Hill Burton Act in 1946 provided federal construction grants to states 0 Medicare and Medicaid extended coverage to the elderly and the indigent 0 Between 1965 and 1980 hospital beds increased by roughly one third HOSPITAL DOWNSIZING Mid19805 Onward 39 Changes in Reimbursement Cost plus to DRGsifinancial incentives to reduce length of inpatient stay Decrease in inpatient utilization Many hospitals fully or partially closed 39 Rural Hospital Closures Economic constraints Swing beds enabled some to survive 2007 Jones and Bartlett Publishers Inc 34 39 Impact of Managed Care Emphasis on cost containment Efficient utilization of resources delivery of care in alternative settings saved costs UTILIZATION MEASURES AND OPERATIONAL CONCEPTS 39 Discharges Number of overnight patients a hospital serves in a given time period It includes newborns and deaths It is one indicator of access and utilization 39 Inpatient day patient day or hospital day A night spent by a patient Cumulative patient days Days of care Direct correlation between age and utilization Compared to men women incur a higher rate of discharge per 1000 population but have a slightly lower utilization overall after factoring out child birth related use Blacks incur higher utilization than whites Hospital use is higher among people of lower socioeconomic status than the more af uent Utilization is the lowest in western US and highest in the northeast 39 Average length of stay ALOS Days of care Discharges An indicator of severity of illness and of resource use First PPS and then managed care had a marked in uence on the decline in ALOS Alternative settings and technology enabled quicker discharges without harm to patients 39 Capacity Number of beds set up and staffed 84 of US community hospitals have less than 300 beds Average size is 165 beds Average daily census Average number of beds occupied per day Days of care in a given time period Number of days in that time period 39 Occupancy rate Percent of beds occupied Average daily census Capacity X 100 A measure of performance HOSPITAL EMPLOYMENT 39 The hospital industry employs 47 million workers full time equivalent 39 4 of all service jobs in America 39 US hospitals are better staffed than those in other developed countries but quality outcomes are not necessarily greater TYPES OF HOSPITALS 2007 Jones and Bartlett Publishers Inc 35 There are numerous ways to classify The classifications are not mutually exclusive 1 Ownership a PubliciGovernment ownership They incur higher utilization compared to voluntary and proprietary hospitals 39 Federalido not serve the common public serve special groupsi Native Americans military personnel veterans 39 Stateimostly mental and TB hospitals a large number of psychiatric patients who were previously housed in state mental hospitals have been deinstitutionalized 39 Localicounty and city governments Mostly community hospitals Serve mainly the inner city urban indigent minority groups The majority are small to mid sized located in small towns Some large ones in urban areas are teaching hospitals Many have been privatized due to financial pressures b Private Two types 39 Voluntaryinon profit mission is to benefit the community operated by community associations or other nongovernment organizations Over half of all hospitals nearly 60 of beds in the US are non profit Proprietary investor owned for profit owned by individuals partners or corporations operated for the financial benefit of the owners or stockholders The sector has gained market share in recent years 2 Multiunit Affiliation a Independent b Multi unit hospital chains hospital systemsitwo or more hospitals are owned leased or contractually managed by a central organization Almost half of all US hospitals are part of a chain Advantages of belonging to a chain 39 Reduced administrative overhead 39 Ability to provide a wide spectrum of services 39 Ability to reach a variety of markets 39 Access to capital 39 Access to management resources and expertise 3 Length of Stay a Short stay ALOS lt25 days Acute care b Long stay ALOS gt25 days Subacute care TB chronic disease psychiatric care 39 Long term care hospitals LTCHs specifically defined by the Social Security Act must meet Medicare guidelines 2007 Jones and Bartlett Publishers Inc 36 treat patients with complex medical problems numbers have grown rapidly while other types of long stay hospitals have declined 4 Type of Service a General hospitals Provide a variety of services to meet the general medical needs of the community such as general and specialized medicine general and specialized surgery obstetrics etc b Specialty hospitals Admit only certain types of patients women children or treat only certain types of conditions TB psychiatric rehabilitation cardiac care etc 39 Many are physician owned 39 Possible con ict with Stark Laws self referral without full disclosure 39 Cream skimming of patients is another issue c Psychiatric hospitals They must have psychiatric psychological and social work services and have written agreement with a general hospital for patient transfers Despite deinstitutionalization state mental hospitals continue to treat people with severe and persistent mental illness d Rehabilitation hospitals 39 Therapeutic services that restore functioning who have suffered a recent disability 39 Medicare rule 75 of the inpatients must require intensive rehabilitation 39 Examples of conditions stroke spinal cord injury multiple trauma brain injury limb amputation orthopedic surgery 39 Main therapies PT OT speechlanguage pathology e Children s hospitals 39 Specialize in complex severe or chronic illnesses among children 39 Generally have neonatal and pediatric intensive care trauma care and transplant services 39 The US has 45 children s hospitals All are nonprofit and are located in major metropolitan areas 39 In most communities general hospitals serve as de facto children s hospitals 5 Public Access Community hospital 39 Nonfederal short stay ALOSlt 25 days acute 39 Services available to the general public 39 May be proprietary voluntary or statelocal government owned not federal 39 It can be a general or specialty hospital as long as it meets the above conditions 2007 Jones and Bartlett Publishers Inc 37 39 Examples of noncommunity hospitals7federal long stay prison or student infirmaries in colleges or universities 39 85 of all US hospitals are community hospitals 6 Location 39 Urban located in an MSA 39 Rural hospitals outside an MSA To save many small rural hospitals from closure the designation Critical Access Hospital was authorized under the Balanced Budget Act of 1997 Maximum 25 beds Emergency services must be available Cost plus reimbursement 7 Size 39 No standard way to classify by size 39 A simple classification7Small 6 100 beds Medium 101 499 beds Large 500 beds 39 Economies of scale tend to evaporate after 100 beds 8 Other Types of Hospitals a Teaching hospitals7have AMA approved residency programs for physicians 39 Teaching hospitals organized around medical schools and heavily involved in research activities are referred to as academic medical centers 39 Main characteristics of teaching hospitals 7 Offer most specialties and subspecialties 7 Broad and complex scope of services often have tertiary care services 7 Research activities 7 Additional reimbursement than standard DRG payments to offset salary and training costs 7 Technology intensive 7 Many located in economically depressed areas b Church affiliated Hospitals 0 Catholic sisterhoods first established these hospitals Often community general hospitals Owned or in uenced by church groups Do not discriminate in giving care Spiritual and dietary emphases are often present 0000 c Osteopathic hospitals7community general hospitals operated according to osteopathic principles These hospitals have been found to be less efficient than other hospitals Possible reasons inefficient outpatient services and high cost of education WHAT MAKES A HOSPITAL NONPROFIT IRS Code Section 501c3 7 taxexempt status 2007 Jones and Bartlett Publishers Inc 38 7 must provide some defined public good service education welfare7charity care 7 no distribution of profits to any individual 7 executive pay may not be deemed unreasonably high Main Issues 7 They often compete head on with for profit hospitals institutional theory actually predicts such behavior because both for profit and nonprofit hospitals face similar regulatory legal and professional constraints the tendency is for them to imitate each other 7 For profit hospitals often provide charity care at levels similar to nonprofits Quality of care is often similar between for profit and nonprofit hospitals 7 Hence tax exemption is controversial HOSPITAL GOVERNANCE Tripartite structure 39 Board of trustees governing body7define the mission set long term direction establish relationship with the community establish broad operational policies carry legal responsibility for the operations appoint and evaluate the CEO approve appointment of physicians to the medical staff 39 CEO7responsible for day to day operations to accomplish the mission and objectives in accordance with established policies reports to the board Medical director7chief medical officer chief of staff Responsible for clinical oversight Medical staff7chiefs of service head specialty departments Medical staff committees executive credentials medical records utilization review infection control quality improvement LICENSURE CERTIFICATION ACCREDITATION 39 Licensure7state function mandatory Requires compliance with state laws building codes fire safety sanitation standards 39 Certification7federal function Not mandatory but necessary if a hospital wants to participate in Medicaid and Medicare Requires the hospital to satisfy the conditions of participation7federal standards for health safety and quality 39 Accreditation7private function J CAHO voluntary Requires compliance with Joint Commission standards Accreditation confers deemed status on a hospital7hospital is deemed to have met the conditions of participation The American Osteopathic Association also has deeming authority ETHICS PRINCIPLES 39 Respect for others Autonomy patient empowerment Truth telling honesty Confidentiality privacy 2007 Jones and Bartlett Publishers Inc 39 Fidelity do one s duty toward the patient keep promises 39 Beneficence7benefit to the patient alleviate suffering 39 Nonmaleficence7do no harm benefits to exceed any potential harm Justice7fairness and equality nondiscrimination LEGAL RIGHTS AND PATIENT BILL OF RIGHTS 7 Patient Self Determination Act of 1990 7 Inform patients of their rights upon admission 7 Main rights confidentiality 39 informed consent 39 decisions re medical care information on diagnosis and treatment 39 right to refuse treatment 39 formulation of advance directives Informed consent 7 Right to make an informed choice regarding medical treatment 7 Right to obtain complete current information on diagnosis treatment and prognosis 7 Patient centered care organizational culture that promotes patient involvement respects preferences and need for information Advance directives 39 Do not resuscitate orders 39 Living will 39 Durable power of attorney Ethical decision making Ethics committees Moral agency HOSPITALS AND PUBLIC TRUST Hospitals to be regarded as community assets Maintain financial and operational integrity Genuine concern for the welfare of patients and the community Concerns about quality and safety must be addressed Fraud and abuse generates wide publicity TERMINOLOGY 39 Academic medical center7A hospital or health system organized around a medical school These centers train physicians provide specialized services and actively engage in research and clinical investigations 39 Accreditation7A private mechanism designed to assure that accredited health care facilities meet certain basic standards Advance directives7A patient s wishes regarding continuation or withdrawal of treatment when the patient lacks decision making capacity 2007 Jones and Bartlett Publishers Inc 40 39 Average daily censusiAverage number of hospital beds occupied daily over a given period of time This measure provides an estimate of the number of inpatients receiving care each day at a hospital 39 Average length of stay ALOS7The average number of days each patient stays in the hospital For individual or specific categories of patients this measure indicates severity of illness and resource use 39 Board of trusteesilhe governing body of a hospital It is legally responsible for hospital operations and is charged with defining the mission and long term direction of the hospital 39 Certi cationiConferred by the US Department of Health and Human Services it entitles a hospital to participate in Medicare and Medicaid A necessary condition is for the hospital to comply with the conditions of participation 39 Chief of serviceiA physician who is in charge of a specific medical specialty in a hospital such as cardiology 39 Chief of sta fiAlso referred to as the medical director a physician who supervises the medical staff in a hospital 39 Community hospitaliA nonfederal short stay hospital whose facilities and services are available to the general public It can be a private or a public city or county hospital a general or a specialty hospital 39 Conditions of participationiStandards developed by the Department of Health and Human Services DHHS that a facility must comply with in order to participate in the Medicare and Medicaid programs 39 Credentials committeeiA committee that reviews qualifications of clinicians for admitting privileges 39 Critical Access Hospitali Medicare designation for small rural hospitals with 25 beds or less that provide emergency medical services besides short term hospitalization for patients with noncomplex health care needs They receive cost based reimbursement from Medicare to keep their operations viable 39 Days of careiCumulative number of patient days over a given period of time Deemed statusiA designation used when a hospital by virtue of its accreditation by the Joint Commission or the American Osteopathic Association does not require separate certification from the DHHS to participate in the Medicare and Medicaid programs 39 DischargeiA patient who has received inpatient services Total number of discharges indicate access to hospital inpatient services as well as the extent of utilization 39 Donot resuscitate order DNR7An advance directive in which an individual patient expresses his or her wish not to be resuscitated through cardiopulmonary resuscitation CPR Such wishes are based on the premise that a patient may prefer to die than live when the quality of life available after resuscitation is likely to be worse than before 39 Durable power of attorneyiA written legal document in which the patient appoints another individual to act as the patient s agent for purposes of healthcare decision making in the event that the patient is unable or unwilling to make such decisions 39 Ethics committeeiAn interdisciplinary committee responsible for developing guidelines and standards for ethical decision making in the provision of health care and for resolving issues related to medical ethics 39 Executive committeeiA committee within the governing body that has monitoring responsibility and authority over the hospital Usually it receives reports from other committees monitors policy implementation and makes recommendations The medical staff also have a 2007 Jones and Bartlett Publishers Inc 41 separate executive committee that establishes policy and has oversight regarding medical matters 39 General hospitaliA hospital that provides a variety of services including general medicine specialized medicine general surgery specialized surgery and obstetrics to meet the general medical needs of the community it serves It provides diagnostic treatment and surgical services for patients with a variety of medical conditions 39 HospitaliA licensed institution with at least six beds whose primary function is to deliver diagnostic and therapeutic patient services for various medical conditions A hospital must have an organized physician staff and it must provide continuous nursing services under the supervision of registered nurses 39 Infection control committeeiA medical committee that is responsible for reviewing policies and procedures for minimizing infections in the hospital 39 Informed consentiA fundamental patient right A patient who has the capacity to understand information being given must give a written consent before any treatment or procedure is performed or medication is given 39 InpatientiA patient who incurs an overnight stay in a healthcare facility The term is also used in reference to an overnight stay such as inpatient care inpatient procedure inpatient day etc 39 Inpatient dayiA night spent in the hospital by a person admitted as an inpatient It is also called a patient day or a hospital day 39 Investorowned hospitaliSee proprietary hospital 39 LicensureiLicensing of a health care facility that an organization must obtain to operate Licensure is conferred by each state upon compliance with its standards 39 Living williAn advance directive given by a competent adult in the form of an explicit written statement that he or she does not wish life sustaining measures to be used in the event of hopeless illness 39 Longterm care hospital LTCH7Medicare designation for a hospital that is licensed for acute care but has an average length of stay ALOS greater than 25 days The patients served by these hospitals have complex chronic conditions 39 Medical records committeeiA medical committee that is responsible for certifying complete and clinically accurate documentation of the care given to each patient 39 Medical staff committeeiA committee within the governing body that is charged with medical staff relations in a hospital For example it reviews admitting privileges and the performance of the medical staff 39 Moral agentiA person such as a healthcare executive who has the moral responsibility to ensure that the best interest of patients takes precedence over fiduciary responsibility toward the organization 39 Occupancy rateilhe percentage of a hospital s total inpatient capacity that is actually utilized 39 Osteopathic medicineiA holistic approach to medical practice that involves correction of the position of the joints or tissues and also emphasizes diet and environment as factors that determine natural resistance to disease 39 Patientcentered careiProvider mindsets and organizational culture that emphasize involving patients in medical decisions respecting patient preferences and creating an environment in which patients inputs and need for information are solicited 39 Patient s bill of rightsiA document that re ects the law concerning the rights a patient has while confined to an institution such as a hospital Some common issues addressed in the bill of rights include confidentiality consent and the right to make decisions regarding medical care to 2007 Jones and Bartlett Publishers Inc 42 be informed about diagnosis and treatment to refuse treatment and to formulate advance directives 39 Proprietary hospitaliAlso referred to as investor owned hospital it is a for profit hospital owned by individuals a partnership or a corporation 39 Public hospitaliA hospital owned by the federal state or local government 39 Quality improvement committeeiA medical committee that is responsible for overseeing the program for continuous quality improvement 39 Rehabilitation hospitaliA hospital that specializes in providing restorative services to rehabilitate chronically ill and disabled individuals to a maximum level of functioning 39 Rural hospitaliA hospital located in a county that is not part of a metropolitan statistical area 39 Shortstay hospitaliA hospital in which the average length of stay is less than 25 days 39 Specialty hospitaliA hospital that admits only certain types of patients or those with specified illnesses or conditions Examples include rehabilitation hospitals tuberculosis hospitals children s hospitals cardiac hospitals orthopedic hospitals etc 39 Swing bedsiBeds in rural hospitals that have been authorized under the Omnibus Reconciliation Act of 1980 to be used either as acute care beds or long term care skilled nursing facility SNF beds according to need 39 Teaching hospitaliA hospital with an approved residency program for physicians 39 Urban hospitaliA hospital located in a county that is part of a metropolitan statistical area 39 Utilization review committeeiA medical committee that evaluates the appropriateness of admissions and length of stay and reviews the various resources used in providing care 39 Voluntary hospitaliA private nonprofit hospital owned and operated by community associations or other nongovernment organizations for the benefit of the community REVIEW QUESTIONS 1 What is the difference between inpatient and outpatient services Inpatient services are provided to patients while they spend an overnight stay in a health care facility Outpatient services are provided while the patients are not lodged in a health care institution 2 As hospitals evolved from rudimentary custodial and quarantine facilities to their current state how did they change in their purpose and function The changing purpose and function of hospitals can be divided into five main stages a Before hospitals became institutions of medical care delivery they mainly fulfilled a social welfare function The almshouses essentially provided food and shelter to the destitute Pesthouses were used to quarantine people with contagious diseases such as smallpox and yellow fever b Some almshouses contained infirmaries where ill residents were isolated These infirmaries later became medical care institutions set apart for taking care of the sick Caregiving personnel during this period were unskilled and untrained and hospitals were viewed as houses of death and institutions of charity c Advances in medical science made hospitals more acceptable to the middle and upper classes The discovery of anesthesia aided significantly in advancing new surgical techniques and the development of the germ theory of disease led to the subsequent discovery of antiseptic and 2007 Jones and Bartlett Publishers Inc 43 sterilization techniques Hospital laboratories and X ray units became more effective in diagnosing disease and hospitals became institutions of medical practice d The application of medical science and technology in hospitals made it necessary for physicians to receive their training and to practice medicine in hospital settings Hospitals provided a natural laboratory to study a variety of cases with similar clinical symptoms Many of the large hospitals became centers of medical research and training through affiliations with medical schools e In the final stage of the evolution hospitals have become institutions of health service consolidation Various economic and social factors have led to the downsizing of hospital capacity As the acute inpatient care sector has become less profitable hospitals have increasingly diversified into nonacute services such as outpatient care home health care long term care and subacute care with the aim of providing a continuum of services 3 What were the main factors responsible for the growth of hospitals until the latter part of the 20th century Six main factors have been significant in the growth of hospitals in the United States a Advances in medical science b Development of specialized medical technology c Advances in medical education transformed hospitals into institutions of medical practice As advanced diagnosis treatment and surgical procedures could be performed only in hospitals the demand for hospital services increased d Development of professional nursing ensured increased efficacy of treatment and cleanliness improved patient recovery Along with the previous three developments trained nurses transformed hospitals into places of healing Hospitals became more acceptable to the middle and upper classes e Health insurance provided a vehicle enabling people to pay for hospital services Insurance also contributed to the increased demand for health services Historically insurance plans provided generous coverage for inpatient care Consequently there were few restrictions for patients and physicians to opt for more expensive hospital services Even more important was the method of reimbursement for inpatient care Prior to the introduction of prospective and capitated reimbursement mechanisms there were few restrictions on what hospitals could charge f Between 1950 and 1965 the government played a significant role in the expansion of hospitals First the Hill Burton Act provided grants to states for the construction of new hospital beds The Hill Burton program assisted in the construction of nearly 40 of the beds in the nation s short term general hospitals and was the greatest single factor in the increase in the nation s bed supply during the 1950s and 1960s The Hill Burton program made it possible for even small remote communities to have their own hospitals Secondly the creation of Medicare and Medicaid programs in the mid 1960s had a significant impact on the increase in the number of hospital beds and their utilization as government funded health insurance became available to a large number of elderly and poor Americans 4 Name the three main forces that have been responsible for hospital downsizing How has each of these forces been responsible for the decline in inpatient hospital utilization 2007 Jones and Bartlett Publishers Inc 44 The three main forces responsible for hospital downsizing are 1 changes in reimbursement 2 economic constraints faced by small rural hospitals and 3 growth of managed care Medicare reimbursement from cost plus to a prospective payment system PPS based on diagnosis related groups marked a major change in the way hospitals had been paid for inpatient services PPS changed hospital reimbursement from a cost based to a case based method Following Medicare s lead several states adopted prospective methods to reimburse hospitals for services provided to their Medicaid enrollees Other payers resorted to competitive pricing and discounted fees in addition to putting sharp squeezes on utilization A number of small rural hospitals closed due to economic constraints Hospitals of all sizes throughout the country had to close entire wings or convert these beds for alternative uses such as psychiatric care or long term care Managed care expanded rapidly during the 1990s emphasizing inpatient utilization controls and use of alternative delivery settings such as outpatient clinics home health and nursing homes Such measures have had a tremendous impact on the downsizing of individual hospitals 5 What is a voluntary hospital Explain How did voluntary hospitals evolve in the United States Voluntary hospitals are non government privately owned hospitals that are operated on a nonprofit basis They are owned and operated by community associations or other non government organizations These hospitals are called voluntary because the development and financial backing of the institutions is done voluntarily by citizens without government involvement This sector comprises the largest group of hospitals in the United States Voluntary hospitals were the first hospitals built specifically to care for the sick in the general population Examples are Pennsylvania Hospital in Philadelphia that opened in 1752 the New York Hospital built in 1775 and the Massachusetts General Hospital in Boston that opened in 1821 The founding of voluntary hospitals was often inspired by in uential physicians with the financial backing of local donors and philanthropists These hospitals accepted both indigent and paying patients but their operating expenses could not be covered without charitable contributions from private citizens Later private health insurance created demand for hospital services and became an important source to pay for their services The Hill Burton Act of 1946 was a significant factor in the growth of voluntary hospitals because it made federal grants available to the states for the construction of voluntary hospitals 6 Discuss the role of government in the growth as well as the decline of hospitals in the United States The government played a direct role in the expansion of hospitals through the Hill Burton program Hill Burton was the greatest single factor that led to the growth of the nation s bed supply The program created nearly 40 of the beds in the nation s short term general hospitals The government also played a major indirect role in the growth of hospitals through the Medicare and Medicaid programs Through these programs government funded health insurance became available to a large number of elderly and poor Americans increasing the demand for hospital services The government s role in the decline of hospitals has been indirect The change in Medicare reimbursement from cost plus to a prospective system based on DRGs marked the 2007 Jones and Bartlett Publishers Inc 45 turning point PPS reimbursement was responsible for a drastic reduction in the utilization of hospital beds 7 What are inpatient days What is the significance of this measure An inpatient day also referred to as a patient day or a hospital day is a night spent in the hospital by a person admitted as an inpatient The cumulative number of patient days over a certain period of time is referred to as the days of care providing a measure of access and utilization particularly when days of care are associated with a population measure such as per 1000 population 8 How does hospital utilization vary according to a person s age gender and race Age is directly correlated with the number of discharges days of care and average length of stay Utilization among the elderly is higher than it is in younger age groups Women incur a higher rate of discharges than men but after child birth related utilization is factored out women have fewer days of care and shorter lengths of stay than men Overall hospital utilization is higher among blacks than whites 9 Discuss the different types of public hospitals and the roles they play in the delivery of healthcare services in the United States Public hospitals are operated by the federal state and local governments Federal hospitals are maintained primarily for special groups of federal beneficiaries such as Native Americans military personnel and veterans As a general rule federal hospitals do not serve the common public State governments have generally limited themselves to the operation of mental and tuberculosis hospitals re ecting the government s early role in protecting communities by isolating the mentally ill and persons with contagious diseases Local governments such as counties and cities operate hospitals that are typically open to the general public These hospitals serve as an important safety net for indigent inner city minority populations Some large public hospitals are affiliated with medical schools and offer residency programs to train physicians The majority of hospitals operated by city and county governments are small to moderate size and are located in small cities and towns Their operating costs are met primarily through third party reimbursement and they receive little direct tax support A significant amount of uncompensated care has created financial pressures that have led some public hospitals to privatize or close 10 What are some of the differences between voluntary and investor owned hospitals Voluntary a Owned by community associations or other non government organizations b Operated primarily for the benefit of the community c Nonprofit which means they cannot distribute profits to any individuals d Tax exempt Investor owned a Owned by individuals partnerships or corporations 2007 Jones and Bartlett Publishers Inc 46 b Financial returns to the owners or stockholders is an important objective c Pay taxes 11 What is a long term care hospital LTCH What role does it play in health care delivery in the United States Medicare has created the designation of LTCH for certain small rural hospitals To qualify an LTCH must meet Medicare s conditions of participation for acute short stay hospitals and must have an ALOS greater than 25 days LTCHs serve patients who have complex medical needs and may suffer from multiple chronic problems requiring long term hospitalization Many LTCH patients are admitted directly from short stay hospital intensive care units with respiratoryventilator dependent or other complex medical conditions 12 The table below gives some operational statistics for two hospitals located in the same community Answer the questions following the table a Calculate the following measures for each hospital wherever appropriate calculate the measure for each pay type Discuss the meaning and significance of each measure and point out the differences between the two hospitals 1 Hospital capacity There is no calculation needed for this measure For hospital A the capacity is 320 beds it is 240 beds for hospital B Capacity indicates the number of beds that are set up and staffed for inpatient use Hospital A has a larger capacity than hospital B 2 ALOS Hospital A Overall ALOS 7242112051 60 Medicare 2 369355130 72 Medicaid 231753565 65 Private insurance 2 123113356 37 Hospital B Overall ALOS 516849230 56 Medicare 2 263593876 68 Medicaid 129212118 61 Private insurance 2 124043236 38 The overall average length of stay is higher for Medicare patients than for patients covered by Medicaid Both Medicare and Medicaid patients stay significantly longer than privately insured patients The overall ALOS is higher in hospital A This means that patients on average stay longer in hospital A This is also true for both Medicare and Medicaid pay types in hospital A but ALOS for privately insured patients is slightly lower A comparison of days of care between the two hospitals shows that hospital A experiences greater utilization by Medicare and Medicaid patients But that alone does not explain why the ALOS is higher A comparison of ALOS for privately insured patients indicates that hospital A may have adequate utilization review controls to keep patients for only as long as is necessary It is possible that hospital A is a teaching hospital and the overall case mix has a higher acuity level 3 Occupancy rate Hospital A Average daily census 2 72421365 1984 Occupancy rate 1984320 x 100 62 Hospital B Average daily census 2 51684365 1416 Occupancy rate 1416240 x 100 59 2007 Jones and Bartlett Publishers Inc 47 Hospital A on average utilized 62 of its total capacity hospital B utilized 59 This means that hospital B has a slightly larger proportion of empty beds b Operationally which hospital is performing better Why Hospital A Revenue per bed 2 45755000320 142984 Revenue per discharge 2 45755000 12051 3797 Hospital B Revenue per bed 2 35800000240 149167 Revenue per discharge 2 35800000 9230 3879 Hospital B is performing better Even though hospital A has a slightly higher occupancy rate revenue bed and revenuedischarge are both higher for hospital B The most likely reason is that hospital B has a higher proportion of its revenues coming from private insurance based on private hospital days hospital A has 17 1231172421 private hospital days whereas hospital B has 24 1240451684 The assumption here is that reimbursement for similar conditions is higher from private insurance than it is from Medicare and Medicaid c Do you think the nonprofit hospital is meeting its service obligations to the community in exchange for its tax exempt status Please give reasons for your answer Dollar value of charity care as a proportion of its total revenues Hospital A 500000045755000 x 100 109 Hospital B 350000035800000 x 100 98 The nonprofit hospital A provides charity care worth 109 of its total revenue which is only slightly higher than what the for profit hospital B provides Hence it does not appear that hospital A is meeting its service obligations to the community in exchange for its tax exempt status The for profit hospital appears to be doing almost as much for the community d Do you think the hospitals have a problem with excess capacity If so what would you recommend Yes both hospitals have a problem with excess capacity 1 Take some of the beds out of service Do not staff these beds 2 Think of ways to utilize some of the excess capacity For example convert some of the beds to long term care use or to provide specialty services in order to capture a market niche 13 Why have physicians developed their own specialty hospitals What legal issues can likely arise when physicians have an ownership interest in a hospital Physicians get an ownership interest in such hospitals They find such specialized hospitals more efficient than general hospitals Affiliation with such hospitals gives physicians control over hospital operations exibility with their time and opportunity to enhance their incomes However physician owned facilities raise legal and ethical issues with regard to self referrals without full disclosure Stark Laws prohibit self referrals to entities in which a physician may have full or part ownership 14 What criteria does Medicare use to classify a hospital as a rehabilitation hospital 2007 Jones and Bartlett Publishers Inc 48 To be classified as a rehabilitation hospital according to Medicare rules 75 of a hospital s inpatients must require intensive rehabilitation services for the treatment of stroke spinal cord injury major multiple trauma brain injury and other specific conditions 15 How do you differentiate between a community hospital and a non community hospital A community hospital is a nonfederal short stay hospital whose facilities and services are available to the general public Its primary mission is to serve the general community Non community hospitals have been designated to serve only certain categories of people For example federal hospitals serve Native Americans military personnel and veterans not the general public Hospital units of institutions such as prisons and infirmaries in colleges and universities are also non community hospitals Finally the definition of a community hospital excludes long stay hospitals 16 What is a Critical Access Hospital CAH Why was this designation created Certain rural hospitals can be classified as Critical Access Hospitals CAH if they have no more than 25 acute care beds and if they provide emergency medical services If a hospital elects CAH status and meets the criteria for CAH designation it can receive cost plus reimbursement under Medicare Part A The Balanced Budget Act of 1997 authorized the Medicare Rural Hospital Flexibility Program MRHFP to save some of the very small rural hospitals from having to close 17 What are some of the main differences between teaching and nonteaching hospitals There are three main differences between teaching and nonteaching hospitals First teaching hospitals provide teaching as well as patient care They incur certain costs directly associated with training of physicians the largest category being the salary and benefits expense for interns and residents The second major difference is the broader and more complex scope of services offered by teaching hospitals These hospitals more frequently operate several intensive care units possess the latest medical technologies and attract a diverse group of physicians representing most specialties and many subspecialties Major teaching hospitals also offer tertiary care services not generally found in other institutions such as burn care and trauma care Teaching hospitals attract patients who frequently have more complicated diagnoses or are in need of more complex procedures As a result of the greater case mix complexity of teaching hospitals greater amounts of resources are required for treatment Finally many of the major teaching hospitals are located in economically depressed older inner city areas and are generally owned by state or local governments Consequently these hospitals often provide larger amounts of uncompensated care than other hospitals 18 Can church affiliated hospitals be classified as voluntary hospitals Please explain A voluntary hospital is established by the involvement of local citizens without government help for the benefit of the local community Even though church affiliated hospitals are established without government help and may have a charitable mission they may or may not 2007 Jones and Bartlett Publishers Inc 49 satisfy some of the other criteria that define a voluntary hospital If a community has a good representation of the members of a particular religious group and they start a hospital to benefit the community it can be regarded as a voluntary hospital If involvement of the local citizens is minimal the hospital may not be classified as a voluntary hospital 19 Discuss some of the issues relative to the tax exempt status of nonprofit hospitals If you were a member of the board of trustees of a nonprofit hospital what would you recommend such a hospital do to justify its nonprofit status Nonprofit hospitals are given tax exemptions under the assumption that nonprofit facilities have a primary mission of providing charity care to needy people Theoretically the benefits received by a community should at least equal the benefit of tax exemption enjoyed by the hospital One major concern is that some nonprofit community hospitals do not provide uncompensated care equal to the tax subsidies they receive There has been consistent evidence that many for profit hospitals have levels of charity and uncompensated care equivalent to those of their nonprofit counterparts It has also been observed that many nonprofit hospitals engage in the same kinds of aggressive marketplace behaviors that for profit hospitals engage in Competition commonly occurs in the same communities for the same patients with revenues coming from the same public and private third party sources and frequently involving the same physician providers who have admitting privileges at more than one hospital Hence there is broad concern that unless nonprofit entities can redefine their missions there may not be any substantive difference between nonprofit and for profit providers The board of trustees of a nonprofit hospital is primarily responsible for ensuring that the hospital s tax exempt status is not jeopardized It is important that the hospital be able to produce incontrovertible evidence that it returns tangible value to its community in exchange for the tax subsidies Nonprofit hospitals must reemphasize their core mission of service to the community and delivery of care to the uninsured These hospitals must also assume a leading role in improving the community s health By actively engaging in community health assessments it is possible to identify areas where a nonprofit hospital can have the greatest impact in improving the community s health Depending on the area of greatest need such service activities could include lowering the rates of low birth weight newborns by providing prenatal care to low income women Other community based programs may include special services for children or the elderly Another recommendation is to link the CEO s performance evaluation to the accomplishment of public health priorities 20 Why are hospitals among the most complex organizations to manage Both the external and internal environments of hospitals are more complex than those of most other types of business enterprises A hospital is generally responsible to numerous stakeholders in its external environment These stakeholders include the community the government insurers managed care organizations and accreditation agencies Internally hospital governance involves three major sources of power whose motivations are sometimes at odds The organizational structure of a hospital also differs substantially from that of other large organizations The CEO receives delegated authority from the board and is responsible for managing the organization with the help of senior managers but the medical staff constitute a separate organizational structure parallel to the administrative structure Such a dual structure is 2007 Jones and Bartlett Publishers Inc 50 rarely seen in other types of businesses and it presents numerous opportunities for con ict to arise between the CEO and the medical staff Matters are further complicated when the lines of authority sometimes cross between the two structures For example nursing service pharmacists diagnostic technicians and dietitians are administratively accountable to the CEO via the vertical chain of command but professionally accountable to the medical staff The medical staff generally are not paid employees of the hospital yet they play a significant role in its success It requires special skills on the part of the CEO to manage this dual structure to achieve the overall objectives of the organization 21 Discuss the governance of a modern hospital Hospital governance has traditionally followed a tripartite structure The three major sources of authority in hospital governance are the CEO the board of trustees and the hospital s medical staff Over time power dominance has shifted from the trustees to the physicians and more recently to the administrators The CEO or president of a hospital is responsible for the day to day operations and for accomplishing the mission and objectives of the organization The board of trustees also referred to as the governing body is responsible for defining the mission and long term direction of the hospital It is legally responsible for the operations of the hospital One of the most important responsibilities of the board is to appoint and evaluate the performance of the CEO who is charged with the responsibility of providing the board timely reports on the progress or lack thereof in achieving the missions and objectives of the institution The board also has the power to remove the CEO In most hospitals the board approves the appointment of physicians and other professionals to the hospital s medical staff The hospital s medical staff is an organized body of physicians who provide medical services to the hospital s patients and perform related clinical duties Most physicians who treat patients in hospitals are in private practice outside the hospital The hospital grants them admitting privileges that enable them to admit and care for their patients in the hospital Though the medical staff is technically accountable to the board it has a routine functional relationship with the CEO Lines of communication and accountability to the CEO and the board of trustees are established through various committee representations 22 In the context of hospitals what is the difference between licensure certification and accreditation Licensure of healthcare facilities is carried out by the state governments and each state sets its own standards for licensure All facilities must be licensed to operate but they may or may not be certified or accredited Licensure standards place heavy emphasis on hospitals physical plants fire safety heating space allocations and sanitation Minimum standards are also established for equipment and personnel Certification gives a hospital the authority to participate in the Medicare and Medicaid programs The federal government through the Department of Health and Human Services oversees the certification of facilities based on their compliance with the Conditions of Participation Accreditation is bestowed by the Joint Commission on Accreditation of Healthcare Organizations Joint Commission which is a private nonprofit organization The Joint Commission sets standards and accredits 84 of the nation s general hospitals as well as many other types of healthcare facilities Seeking accreditation is voluntary Facilities accredited by the Joint Commission or the American 2007 Jones and Bartlett Publishers Inc 51 Osteopathic Association are conferred deemed status by Medicare meaning that they qualify to admit Medicare and Medicaid patients without a separate certification 23 What can a hospital do to address some of the difficult ethical problems relative to end of life treatment Advance directives play a significant role in end of life treatment especially when the patient is or becomes mentally incompetent The hospital should have procedures for explaining on admission what options patients have regarding resuscitation and continuation of life support and the importance of giving advance directives to the hospital Do not resuscitate orders and living wills enable patients to convey their wishes in advance of losing their mental capacity to make decisions A durable power of attorney for health care enables the patient to appoint another individual to act as the patient s agent for purposes of health care decision making in the event that the patient is unable or unwilling to make such decisions To deal with situations when advance directives are not available the hospital must have a functioning ethics committee To make decisions regarding end of life treatment the ethics committee should involve family members legal guardians and health care providers in the decision making process 24 What can hospitals do to maintain the public s trust Hospital boards need to refocus their attention to the hospital s mission of benefiting the community so that the hospital regardless of whether it is investor owned or nonprofit is viewed by the public as a community asset A breach of public trust often ensues when such a viewpoint is lost and when hospital governance places other priorities ahead of its primary responsibility of serving the community Hospitals must maintain their financial and operational integrity but these concerns must not be put above a genuine concern for the welfare of patients and the community The community s concerns such as access to care cost increases whether medical decisions are made in patients best interests and whether caregivers are uncaring and impersonal should receive a higher priority than they may have received in the past Federal investigations for fraud have made headline news Allegations such as overcharging providing unneeded services billing for services that were not provided and billings by medical faculty when the services are actually performed by young physicians in training raise serious concerns in the minds of the public regardless of whether such medical institutions are eventually found to be guilty or not 2007 Jones and Bartlett Publishers Inc 52 CHAPTER 9 Managed Care and Integrated Organizations Managed care versus indemnity insurance and fee for service prepaid plans 39 Integration of the quad functions is not a feature of indemnity plans in which there is open access to any provider and the provider s charges are reimbursed on a fee for service basis 39 Both managed care and prepaid plans make contractual arrangements with selected providers Indemnity insurance does not make such arrangements 39 Utilization control measures are lacking in both indemnity and fee for service prepaid plans 39 Both managed care and prepaid plans put providers at risk to the extent that providers may deliver services in excess of what the capitated or prepaid rates cover INTEGRATION OF HEALTH CARE DELIVERY FUNCTIONS 39 Financingiassist employers to manage financing 39 InsuranceiMCO assumes risk an estimated 17720 of premium is retained for insurance costs 39 Delivery780783 medical loss ratio healthcare delivery is arranged through employed physicians or contracts 39 Paymentirisk sharing in varying degrees with providers Capitation PMPM7most risk sharing Discounted feesiminimum risk sharing Salariesicoupled with bonuses and withdrawals tied to utilization patterns allows some risk sharing OTHER CHARACTERISTICS OF MANAGED CARE 39 Defined group of enrollees 39 Comprehensive services Service are contracted from selected providers which limits the choice of providers 39 Capitation or discounted fees as payment methods 39 Risk sharing with providers 39 Utilization controls 39 Financial incentives to providers for efficiency Accountability for plan performance quality EVOLUTION OF MANAGED CARE 39 Financial structure of the Baylor Plan 1929 was based on capitation 39 Contract practiceidefined group of enrollees and linking the insured to the providers 39 Prepaid group practiceicomprehensive services 39 Managed careiutilization controls were added FORCES BEHIND MANAGED CARE S EMERGENCE 39 The AMA s opposition to prepaid medicine was found to be in violation of the Sherman Antitrust Act 39 Health Maintenance Organization Act 19737federal funds for the development of HMOs as an alternative to fee for service to stimulate competition to contain the growth of healthcare 2007 Jones and Bartlett Publishers Inc 53 expenditures At the time HMOs did not become popular because the insured preferred open access and minimal controls over utilization REASONS FOR GROWTH OF MANAGED CARE 1 Flaws in fee for service O Uncontrolled utilization 0 Moral hazard 0 Overutilization of specialty care 0 Provider induced demand 0 Uncontrolled prices and payment 0 Charges set at artificially high levels 0 Insurers were passive payers of claims 0 lnefficiencies absorbed by raising premiums 0 Focus on illness rather than wellness 0 Little emphasis on prevention 0 Lucrative for physicians to hospitalize patients 2 Cost appeal of managed care 0 Shadow pricing iHMOs started offering better benefits at lower costs 0 General resistance from employees due to restricted choice and providers due to the threat of lower incomes and external controls 0 Employers found it economically necessary as premiums were rising by 12 annually 3 Weakened economic position of providers 0 Excess capacity empty beds in hospitals brought on by PPS 0 Physicians gave in to the momentum of managed careiparticipate or be left out EFFICIENCIES AND INEFFICIENCIES IN MANAGED CARE 1 Efficiencies 39 Elimination of insurance and payer intermediaries 39 Risk sharing with providers to minimize provider induced demandiindirectly controls utilization through prudent delivery of health care 39 Coordination of a broad range of services and monitoring the delivery of services for appropriateness and cost efficiency Eg Emphasis on outpatient care over hospitalizations emphasis on preventive care 3 lnefficiencies 39 Complexity for providers of having to deal with numerous plans 39 Laboratory and some other services are carved out more of a convenience factor for consumers 39 Lengthy appeals when services are denied COST CONTROL IN MANAGED CARE The methods promote utilization management Traditionally HMOs have used tighter controls than other MCOs 2007 Jones and Bartlett Publishers Inc H P 5quot U 54 Choice restrictioniindirectly controls utilization 39 Closed panel closed access in networkiservices can be obtained only from providers affiliated with the plan 39 Open panel open access out of networkiaccess to providers outside the panel is allowed but at higher cost sharing to discourage open access 39 Utilization is better managed under closed panel 39 Cause some dissatisfaction for the enrollees Gatekeeping 39 A primary care physician PCP is the portal of entry into the health care delivery system 39 The PCP delivers all basic and routine care 39 The PCP determines the need for secondary care and makes referrals Case management 39 Coordination of care for complex and potentially costly cases AIDS spinal cord injury other severe injuries transplants etc 39 Continuity of care is ensured as needs change over time 39 The most appropriate and cost effective settings are arranged Disease management 39 A population oriented strategy case management is individualized 39 Evidence based treatment guidelines are used for people with chronic problems 39 Focus is on education self management training monitoring of the disease process and follow up to ensure compliance 39 The goal is to prevent or delay complications 39 At present cost savings appear to be elusive Utilization review UR 39 The process for evaluating the appropriateness of health services utilization 39 It requires a review of each case to determine the most appropriate level of services ensure cost efficiency plan subsequent care 39 Utilization review falls into three categories a ProspectiveiDecision to make a referral or not preauthorization precertification second opinions inform concurrent review about the case b ConcurrentiDecisions about length of stay and discharge planning Discharge planning Expected inpatient stay Anticipated outcomes Next appropriate setting Special requirements 2007 Jones and Bartlett Publishers Inc 55 c RetrospectiveiReview of medical records review appropriateness and patterns feedback to physicians claims review 6 Practice pro ling Evaluation of individual practice patterns by comparing them to a norm Provide feedback to change behavior with the goal of improving quality and efficiency However the method is somewhat controversial because of its potential for misuse when it focuses on punishment rather than improvement TYPES OF MCOs Why different types 9 HMOs did not become widely popular except in California and Minnesota The main drawbacks of HMOs were Choice restriction for enrollees Capitation for providers Utilization management for both 9 PPOs emerged on the basis of offering better choice and less risk sharing with providers 9 Different ways of arranging service delivery led to different HMO models HMOs 39 Emphasize preventive services 39 Use capitation to pay providersimaximum risk sharing carve outs for certain services mental health substance abuse 39 Closed panel 39 Control over utilization and accountability for quality 39 May employ physicians on salaryiallows some risk sharing Types of HMOs 1 Staff model 39 Employ physicians on salary 39 Contracts for only uncommon specialties and hospital services 39 Advantages Can exercise control over physicians Convenience of one stop shopping 39 Disadvantages Fixed salary expense can be high Expansion into new markets is difficult Limited choice of physicians The least common of the four HMO models 2 Group model 39 Contract with a single large multispecialty group practice 39 Separate hospital contracts 39 Group practice is paid a capitation fee 2007 Jones and Bartlett Publishers Inc 56 39 Advantages No salary or facility expenses as in staff model Well known practice may lend prestige and perception of quality Choice is limited 39 Disadvantages Cannot meet service obligations if a large contract is lost 3 Network model 39 Contract with more than one group practice 39 Variations Contracts with only PCPs who are financially responsible for specialty services or Separate contracts with PCPs and specialists 39 Advantage Wider choice of physicians 39 Disadvantage Dilution of utilization control 4 IPA model Independent practice association 39 Separate entity from the HMO IPA acts as an intermediary between the HMO and physicians 39 HMO contracts with IPA IPA is the risk bearing entity and is paid a capitated fee 39 IPA not HMO contracts with providers 39 Advantages Eliminates the necessity to contract with various providers Transfers financial risk to the IPA Choice of providers 39 Disadvantages Difficulty with service obligations if a contract is lost Dilution of utilization control Generally a surplus of specialists The most common of the four HMO models PPOs 39 Contracts with preferred providers 39 Discounted fee arrangements generally 25 35 discount off charges 39 Allows use of open panel but higher copayments An Exclusive Provider Plan does not allow the out of network option 39 Little or no risk sharing 39 Little control over utilization and quality 39 No gatekeeping but use prior authorizations for hospitalizations and expensive procedures 39 The most popular managed care option Point of Service POS Plans 39 Cross between HMO and PPO 39 HMO features are retained utilization controls capitation 2007 Jones and Bartlett Publishers Inc 57 39 PPO features open plan option are available at the point of service 39 Have lost popularity due to high out of pocket costs TRENDS IN MANAGED CARE Managed care has become a mature industry in the US Private Insurance Enrollment 39 Fee for service has declined from a 27 share in 1996 to just 3 in 2006 39 The rise in premiums had escalated again in the early 2000s but have started to moderate 39 Employers are requiring increased cost sharing from employees 39 High deductible health plans is a new trend 39 A switch from defined benefit plans to defined contribution plans may also be on the horizon Medicaid Enrollment 39 Balanced Budget Act 1997 allowed states to enroll Medicaid beneficiaries in managed care 39 60 of the beneficiaries are in managed care 39 Managed care is not available in some geographic locations specially rural areas 39 Primary care case management PCCM One option states are using to contract directly with providers on a fee for service basis The beneficiary must have a PCP but open access is allowed Medicare Enrollment 39 Options fee for service or Managed Care TEFRA 1982 39 Capitated risk contracts 39 MCO pullouts began in 2000 due to reduced capitation under BBA 1997 39 MMA 2003 added generous funding for Medicare Advantage but enrollment is at 14 39 Most seniors value choice over lower out of pocket costs IMPACT ON COST ACCESS AND QUALITY In uence on Cost Containment 39 Earlier successes 39 Backlash from consumers and providers 39 Cost in ation has reignited 39 Tight restrictions on utilization are necessary 39 But such rationing measures will be unpopular 39 Alternative medicine may offer savings in some areas mainly certain chronic conditions But the effectiveness and savings potential of these therapies is not well investigated Impact on Access 39 Improved access to primary care and preventive services e g breast and cervical cancer screenings Otherwise impact on access has not been well established Impact on Quality 2007 Jones and Bartlett Publishers Inc 58 39 Extensive research shows no erosion of quality in managed care contrary to earlier perceptions and anecdotal evidence 39 Actually overall quality has improved 39 Better cost effectiveness reduced hospitalizations better use of costly resources 39 No negative impact on care based on racesocioeconomic status 39 Quality may be somewhat lower in for profit plans vs nonprofit plans BACKLASH REGULATION AND AFTERMATH Backlash Three main reasons 39 Employees faced barriers to free choice of providers 39 Employees did not see lower out of pocket costs 39 Physicians reacted negatively to utilization management and lower reimbursement Regulation 39 Federal Newborns and Mothers Health Protection Act 1996 39 Numerous laws were passed across states eg Limits on utilization based financial incentives to physicians Quick appeals and external reviews Mandated benefits Right to seek redress in courts Aftermath 39 Better relations with providers 39 Relaxed utilization controls 39 Consumers will accept less choice at lower out of pocket costs 39 Emergence of high deductible health plans 39 Greater individual responsibility ORGANIZATIONAL INTEGRATION Integration occurred in response to 39 Cost pressures 39 New alternatives for care delivery 39 Concentration of power in the hands of MCOs A response by providers to a fear of dominance by managed care Three general models of Integration 1 Consolidation Concentration of control consolidation of existing assets 2 Expansion Building new assets 3 Diversi cation Adding new services options consolidation expansion or use of excess capacity Advantages of integration 2007 Jones and Bartlett Publishers Inc 59 39 Greater efficiencies theoretically Many integrated systems have failed to realize cost savings 39 Ability to offer a continuum of services sought by managed care Disadvantages of integration 39 Complex to manage 39 Confusing to patients INTEGRATED DELIVERY SYSTEMS 39 A network of organizations that provides or arranges to provide a coordinated continuum of services to a defined population and is willing to be held clinically and fiscally accountable for the outcomes and health status of the population serviced 39 Major participants are physicians and hospitals who sometimes also join hands with insurance companies or MCOs Types of Integration 1 Based on major participants 39 Group practices IPAs MSOs PPMs and PSOs are based on physician integration 39 PHOsiphysician hospital organizations contract with MCOs or direct contract with employers antikickback laws apply 2 Based on degree of ownership 39 Acquisition 39 Merger 39 Joint ventureiwhen diversification but not competition is desired 39 Allianceiagreement to share resources simple to form offer the opportunity to evaluate mutual benefits can be easily dissolved 39 Networkialliances between several providers 39 Virtual organizationiformed using contracts IPA is a prime example little capital is needed to enter new markets 3 Based on service consolidation 39 Horizontal integrationia mode of geographic expansion not diversification 39 Vertical integrationito add services along the continuum diversification Some Issues 39 Economies of scale are not always achieved 39 Erosion of competition despite antitrust laws 39 Some friction with physicians persists 39 Seamless integration of information systems has been lacking TERMINOLOGY 2007 Jones and Bartlett Publishers Inc 60 39 AcquisitioniPurchase of one organization by another 39 AllianceiA joint agreement between two organizations to share their resources without joint ownership of assets 39 AntitrustiFederal and state laws that make it illegal to form an integrated delivery system IDS for the purpose of sti ing competition Business practices prohibited or regulated by antitrust laws include price fixing price discrimination exclusive contracting arrangements and mergers among competitors 39 CapitationiPayment of a fixed amount per enrollee per member per month to cover all services the enrollee may need 39 Carve outiA special contract to cover specialized services that are funded by a managed care organization separately from regular capitation 39 Case managementiThe coordination and management of care over a period of time by an experienced healthcare professional In consultation with primary and secondary care providers case managers determine what care is necessary Patients are channeled through the health delivery system to receive services in the most appropriate and cost effective settings 39 Closed panel or closedaccessiA plan that does not allow enrollees to use providers outside the panel 39 ConsolidationiConcentration of control by a few organizations over other existing organizations through a consolidation of facility assets that already exist Acquisitions mergers alliances and formation of contractual networks are examples of consolidation 39 Discharge planningilncludes an estimate of how long the patient will be in the hospital what the expected outcome is likely to be whether there will be any special requirements at discharge and what needs to be facilitated 39 Disease managementiA population oriented strategy for people with chronic conditions It focuses on patient education training in self management ongoing monitoring of the disease process and follow up to ensure that people are complying with their medical regimens 39 Diversi cationiAddition of new services that the organization has not offered before 39 ExpansioniA growth strategy in which an organization builds new facilities to add new services or services similar to those it has offered before 39 Fee scheduleiA list of fees for various health care services 39 Group modeliAn HMO model in which the HMO contracts with a multispecialty group practice and separately with one or more hospitals to provide comprehensive services to its members 39 HM 0 health maintenance organization 7A managed care organization that provides comprehensive medical services for a predetermined annual fee per enrollee 39 Horizontal integrationiA growth strategy in which a health delivery organization extends its core product or service 39 Independent practice association IPA 7A legal entity representing a large number of physicians that is organized for the purpose of establishing contracts with HMOs 39 Integrated delivery systemiA network of organizations that provides or arranges to provide a coordinated continuum of services to a defined population and is willing to be held clinically and fiscally accountable for the outcomes and health status of the population within its geographic service area 39 IntegrationiA broad expression that may refer to certain types of consolidations expansions or diversifications that generally involve new products or services 2007 Jones and Bartlett Publishers Inc 61 39 IPA modeliAn organizational arrangement in which an HMO contracts with an independent practice association for the delivery of physician services 39 Joint ventureiCreation of a new organization in which two or more institutions share resources to pursue a common purpose 39 MergeriUnification of two or more organizations into a single entity through mutual agreement 39 Mixed modeliAn organizational arrangement in which an HMO cannot be categorized neatly into a single model type because it features some combination of large medical group practices small medical group practices and independent practitioners most of whom have contracts with a number of managed care organizations 39 MS07Management services organization An MSO is an organization that brings management expertise and in some instances capital for expansion to physician group practices 39 Network modeliAn organizational arrangement in which an HMO contracts with more than one medical group practice 39 Open panel or openaccessiA plan that allows access to providers outside the panel but some conditions apply such as higher out of pocket costs 39 PaneliProviders affiliated with an MCO to render services to the MCO s enrollees 39 PHO physician hospital organizationiA legal entity that allows a hospital and its physicians to negotiate with MCOs or if a PHO is large enough to contract directly with employers 39 Pointofservice planiA plan that combines features of classic HMOs with some of the characteristics of patient choice found in PPOs 39 PPMiPhysician practice management A management services organization that buys physician practices and integrates them into a network 39 PP07Preferred provider organization A type of managed care organization that has a panel of preferred providers who are paid according to a discounted fee schedule The enrollees have the option to go to out of network providers at a higher level of cost sharing 39 Practice profilingiUse of provider specific practice patterns and comparing individual practice patterns to some norm 39 Primary care case management PC CM 7A variation of the managed care arrangement in which a state contracts directly with primary care providers who agree to be responsible for the delivery andor coordination of medical services for Medicare recipients under their care Payment is on a fee for service instead of capitation basis PCCM programs are authorized by section 1915b of the Social Security Act 39 PSO providersponsored organization sometimes called provider service organizationiA quasi managed care organization that is a risk bearing entity sponsored by physicians hospitals or jointly by physicians and hospitals to compete with regular MCOs 39 Risk contractiA managed care contract in which the MCO is liable for services regardless of their extent expense or degree in exchange for a fixed capitated fee 39 Sta modeliAn HMO arrangement in which the HMO employs salaried physicians 39 Utilization review UR 7The process of evaluating the appropriateness of services provided 39 Vertical integrationiLinking of services that are at different stages in the production process of health care for example organization of preventive services primary care acute care and postacute service delivery around a hospital 39 Virtual integrationilhe formation of networks based on contractual arrangements REVIEW QUESTIONS 2007 Jones and Bartlett Publishers Inc 62 1 What are some of the key differences between traditional health insurance and managed care Traditional insurance 1 Healthcare functions are fragmented 2 Little or no control over utilization Insurance companies are generally passive payers of claims 3 Provides open accessithe insured can see any provider including a specialist without needing a referral 4 Billing and payment follow the fee for service model Charges are generally set by providers with few limitations 5 Coverage is for a diagnosis based condition Preventive check ups are not covered Managed care 1 Managed care integrates the financing insurance delivery and payment functions 2 Employs gatekeeping and other methods to control utilization 3 Access is restricted to providers on the panel If open access is permitted the enrollee incurs additional expenses 4 Payment is based on capitation or discounted fees 5 Comprehensive coverage including regular physical checkups 2 Explain how the fee for service practice of medicine led to increased healthcare costs The fee for service system lacked incentives for providers to deliver services cost effectively Since providers could bill for each type of service separately there was an incentive to deliver extra services that were not always needed Traditional insurance provided more thorough coverage when a person was hospitalized Also the physician was paid for daily hospital visits when the patient was being treated in the hospital Thus it was more lucrative for physicians to hospitalize their patients 3 Despite increasing healthcare costs why did the Health Maintenance Organization Act of 1973 fail to achieve its objectives The primary reason was reluctance on the part of enrollees to join HMOs Before managed care came into prominence the delivery of health care was dominated by the fee for service practice of medicine Care received from specialists and utilization of sophisticated technology gave patients the perception of high quality Competition was driven by such perceptions of quality rather than price Hence managed care plans were initially at a disadvantage Individuals who were covered by insurance plans that allowed them to choose their own physician and hospital saw little benefit in joining a plan that would restrict these choices 4 What are the three main payment mechanisms managed care uses In each mechanism who bears the risk MCOs use three main types of payment arrangements with providers 1 capitation 2 discounted fees and 3 salaries Sometimes a limited amount of fee for service is used for 2007 Jones and Bartlett Publishers Inc 63 specialized services Under capitation the provider is paid a fixed monthly sum per enrollee The provider receives the capitated fee per enrollee regardless of whether or not the enrollee uses healthcare services and regardless of the quantity of services used The provider is responsible for providing all needed healthcare services regardless of the number and complexity of services provided to the enrollees Under capitation risk is shifted from the MCO to the provider Discounted fee arrangements can be regarded as a modified form of fee for service After services have been delivered the provider can bill the MCO for each service separately but is paid according to a pre negotiated discount schedule In this case risk is borne by the MCO but the MCO is able to lower its costs by paying discounted rates Salaries which are frequently coupled with bonuses or withholdings are paid when the provider is an employee of the MCO Often at the end of the year a pool of money is distributed among the physicians in the form of bonuses based on utilization or other evaluative measures The bonuses are not paid if the predetermined performance objectives are not achieved Under this method risk is shared between the MCO and the physicians 5 What three main avenues have been used by MCOs to achieve cost efficiencies First by eliminating insurance and payer intermediaries MCOs are able to realize some savings Second MCOs control costs by extracting discounts from providers or by sharing risk with providers Risk sharing makes providers more accountable for utilization It provides financial incentives for minimizing overutilization Hence risk sharing is an indirect way of utilization control Third cost savings are achieved by employing mechanisms that ensure the coordination of a broad range of patient services and by monitoring care to determine that it is appropriate and delivered in the most efficient and inexpensive way 6 What are some of the inefficiencies that have resulted from numerous health plans in the managed care system Most providers find the complexity of having to deal with numerous plans overwhelming A tremendous amount of inefficiency is created as providers must deal with the protocols adopted by each plan Different plans are also confusing to many consumers 7 Discuss the concept of utilization monitoring and control Utilization monitoring and control utilization management should include three key elements 1 expert evaluation of which services are medically necessary in a given case so that only medically necessary services are actually provided 2 determination of how these services can be provided most inexpensively without compromising quality and 3 review of the process of care and changes in the patient s condition to revise the course of medical treatment if necessary 8 What are the various mechanisms used by MCOs to monitor and control utilization Brie y discuss each mechanism There are six common mechanisms used by MCOs to monitor and control utilization 1 choice restriction 2 gatekeeping 3 case management 4 disease management 5 utilization review and 6 practice profiling Most managed care plans impose some restrictions on where 2007 Jones and Bartlett Publishers Inc 64 the patient may obtain medical care Patients still have a choice of physicians but the choice is limited to physicians participating in the plan Open access if allowed is at a higher cost sharing Under the gatekeeping method a primary care physician controls access to higher levels of medical services Secondary care services such as diagnostic testing consultation from specialists and admission for inpatient hospital care are provided only when referral to such services is made by the primary care gatekeeper Patients with complex problems such as AIDS spinal cord injury and bone marrow transplant may need secondary and tertiary care services often and need primary care only occasionally In such cases case management is used to coordinate services and monitor utilization Case managers determine what care is necessary and arrange for patients to receive services in the most appropriate and cost effective settings Disease management focuses on patient education training in self management ongoing monitoring of the disease process and follow up to ensure that people are complying with their medical regimens Its primary purpose is to prevent complications from developing Utilization review UR is used to evaluate the appropriateness of services provided Each case is reviewed to determine the most appropriate level of services the most appropriate settings in which the services should be delivered the most cost efficient methods for care delivery and the need for planning of subsequent care Practice profiling refers to the development of provider specific practice patterns and the comparison of individual practice patterns to some norm The main use of such profiles is to decide which providers have the right fit with the plan s managed care philosophy and goals The profile reports are also used for feedback to providers so they can modify their medical practice behavior 9 Describe the three utilization review methods giving appropriate examples Discuss the benefits of each type of utilization review Prospective Utilization ReviewiUnder this method appropriateness of utilization is determined before the care is actually delivered The decision by a primary care gatekeeper to refer or not refer a patient to a specialist is a type of prospective utilization review Other examples include preauthorization of hospital admission and second opinions for surgical procedures The main benefit of prospective review is that it prevents unnecessary or inappropriate services before they are rendered Concurrent Utilization ReviewiConcurrent utilization review occurs when decisions regarding appropriateness are made during the course of healthcare utilization The most common examples of this type of review involve the monitoring of inpatient lengths of stay and discharge planning A certain number of inpatient hospital days may be preauthorized but any extended stay would require authorization The main benefits of concurrent review are to prevent overutilization of inpatient hospital services and to facilitate discharge planning Retrospective Utilization ReviewiThis refers to managing utilization after services have already been consumed The review is based on an examination of medical records to assess the appropriateness of care It allows monitoring of billing accuracy and compilation of provider specific practice patterns Such statistical data can be helpful for taking corrective action and for monitoring subsequent progress Retrospective data can also be used for improving quality 10 How does case management achieve efficiencies in the delivery of health care 2007 Jones and Bartlett Publishers Inc 65 Case managers coordinate complex cases In such cases patients needs often change over time The goal of case management is to provide quality health care along a continuous process by arranging the delivery of services in the most appropriate and cost effective settings The delivery of services is periodically reviewed to ascertain their appropriateness and efficacy 11 How do case management and disease management differ Case management is highly individualized and focuses on coordinating the care of high risk patients with multiple or complex medical conditions Disease management is a population oriented strategy for people with chronic conditions such as diabetes asthma depression and coronary artery disease In case management a trained professional oversees and monitors care of the patient and procures appropriate services as needs change Disease management focuses on patient education training in self management ongoing monitoring of the disease process and follow up to ensure that people are complying with their medical regimens 12 What is an HMO How does it differ from a PPO HMO stands for health maintenance organization It is a type of managed care organization that provides comprehensive medical care for a predetermined monthly fee per enrollee HMO a Capitation is the primary method of payment b The HMO shares risk with providers c Generally it has a closed panel d HMOs have organizational mechanisms to assume corporate responsibility for cost containment and quality assessment e It may employ physicians on salary PPO a Discounted fee for service is the primary method of payment b Generally there is no risk sharing with providers c It allows enrollees to go outside the panel d PPOs do not have such intrinsic controls e It uses only contractual arrangements with physicians 13 Brie y explain the four main models for organizing an HMO Discuss the advantages and disadvantages of each model The four main models are 1 staff model 2 group model 3 network model and 4 IPA model A staff model HMO employs its own salaried physicians Based on physicians productivity and the HMO s performance bonuses may also be paid on top of the salary Physicians work only for their employer HMO and provide services to that HMO s enrollees Staff model HMOs must employ physicians in all the common specialties to provide for the healthcare needs of their members Contracts with selected subspecialties are established for infrequently needed services There are two main advantages of the staff model 1 The HMO is 2007 Jones and Bartlett Publishers Inc 66 able to exercise control over the practice patterns of their physicians Hence it is easier to monitor utilization and build a common culture of care delivery 2 Staff model HMOs also offer the convenience of one stop shopping for their enrollees because most common types of services are centrally located in the same clinic The two main disadvantages are 1 the large fixed salary expense which often prevents expansion into new markets and 2 a limited choice of physicians for the enrollees A group model HMO contracts with a multispecialty group practice and separately with one or more hospitals to provide comprehensive services to its members The physicians in the group practice are employed by the group practice not by the HMO The HMO generally pays an all inclusive capitation fee to the group practice to provide physician services to its members Advantages include 1 leverage regarding financial terms and utilization controls since the HMO brings a block of business to the group practice 2 avoiding large expenditures in fixed salaries and facilities and 3 a certain degree of prestige and perception of quality if the HMO is affiliated with a reputable multispecialty group practice Disadvantages include 1 disruption of the delivery of services if the contract is lost and 2 limitations in the choice of physicians Under the network model the HMO contracts with more than one medical group practice A common arrangement is to have contracts only with group practices of primary care physicians Enrollees generally have the choice to select physicians from any of these groups Each group is paid a capitation fee based on the number of enrollees The group is responsible for providing all physician services The group can make referrals to specialists but is financially responsible for reimbursing them for any referrals it makes Advantages of this model 1 The model is specially adaptable to large metropolitan areas and widespread geographic regions where group practices are located 2 Generally the network model is able to offer a wider choice of physicians than the staff or group model The main disadvantage is the dilution of utilization control Under the IPA model an HMO contracts with an organization the independent practice association that is separate from the HMO The IPA establishes contracts with both independent solo practitioners and group practices and functions as an intermediary representing a large number of physicians The IPA is generally paid a capitation amount It may in turn reimburse physicians through capitation or some other mechanism such as a modified fee for service Advantages 1 The HMO is relieved of the administrative burden of establishing contracts with numerous providers 2 Financial risk is transferred to the IPA 3 The IPA model provides an expanded choice of providers to the enrollees 4 It also allows small groups and individual physicians the opportunity to participate in managed care and get a slice of the revenues Disadvantages 1 The major disadvantage of the IPA model is that if the contract is lost the HMO loses a large number of participating physicians 2 The IPA does not have as much leverage in changing physician practice behavior as a staff or a group model HMO has So utilization controls are diluted 3 Many IPAs contain a surplus of specialists which creates some pressures to utilize their services 14 What is a point of service plan Why did it grow in popularity What caused its recent decline 2007 Jones and Bartlett Publishers Inc 67 A point of service POS plan combines features of classic HMOs with some of the characteristics of patient choice found in PPOs The features borrowed from HMOs are capitation or other risk based reimbursement to providers and the use of the gatekeeping method of utilization control The feature borrowed from PPOs is the ability of a patient to choose a nonparticipating provider at the point time of receiving services However out of network utilization incurs higher out of pocket costs Point of service plans grew in popularity because choice of providers had a special appeal for most enrollees Often the perception of choice is more important to consumers than the actual exercise of such choice Enrollment in POS plans subsequently declined mainly due to the increased out of pocket costs 15 What strategies are employers using to cope with the rising cost of health insurance premiums To cope with the rising premiums employers are requiring increased cost sharing from covered employees Another emerging strategy is to offer high deductible health plans in conjunction with health savings accounts Employers may also resort to changes in benefits such as moving from defined benefit plans to defined contribution plans but at present interest in such options is low 16 Why has managed care enrollment among Medicare beneficiaries remained low despite the creation of Medicare Advantage The Tax Equity and Fiscal Responsibility Act TEFRA of 1982 gives Medicare beneficiaries the option to enroll in managed care or remain in the traditional fee for service program Medicare seniors seem to value unrestricted choice of providers hence interest in managed care has been low According to a national study only 44 of the seniors were willing to trade broad provider choice for lower out of pocket costs 17 To what extent has managed care been successful in containing health care costs Managed care was successful in reducing the growth rate of health care costs during the 1990s mainly by reducing inappropriate use of high cost services However a subsequent backlash from both enrollees and providers prompted MCOs to back away from aggressive cost control measures Health care cost in ation has reignited but future cost reductions may not be forthcoming without tighter restrictions on utilization particularly on the use of expensive new technology 18 Has the quality of health care gone down as a result of managed care Explain Research studies over time have pointed out that the quality of care under managed care and traditional fee for service is roughly equivalent for a wide range of conditions diseases interventions and among different population groups Quality of health care provided by MCOs has actually improved over time Early detection and treatment is more likely in a managed care plan than in a traditional fee for service plan Higher managed care penetration was also associated with increased quality in hospitals when such indicators as inappropriate utilization wound infections and iatrogenic complications were used to assess quality 2007 Jones and Bartlett Publishers Inc 68 19 What is organizational integration What is the purpose of integration in healthcare delivery What are its drawbacks Organizational integration refers to various types of growth strategies such as consolidations expansions or diversifications that generally involve new products or services Consolidations concentrate existing facilities and assets under the control of one or two organizations whereas expansion refers to the addition of new facility assets The ultimate aim of integration is to provide a seamless array of services around a hospital which functions as the central core Such an organization would be a veritable health system capable of fulfilling most of the healthcare needs of a community For many health delivery organizations however integration has become a rational choice for survival Consolidation with an integrated system often provides greater financial stability Among its drawbacks integration adds complexity to the size and management of an organization It can also present obstacles for customers Many frail and sick people may find it difficult to navigate a large and complicated delivery system 20 Explain how managed care has contributed to the development of integrated delivery systems Managed care has contributed to the development of integrated delivery systems IDSs in three ways 1 It is more cost effective for MCOs to contract with organizations that can provide a comprehensive array of services Instead of establishing contracts with a number of different providers a single contract with an IDS can ensure a full spectrum of services to enrollees Therefore various integrated systems have developed so as not to be left out of the expanding managed care market 2 Managed care also seeks providers who can render services in a cost efficient manner and who will take responsibility for the quality of those services Providers seek greater efficiencies by joining with other organizations or by diversifying into providing new services 3 Hospitals physicians and other providers have been concerned about protecting their autonomy They have found the growing power of managed care invading their turf when they have been isolated By forging linkages they strengthen their positions in their dealings with MCOs A merger with an MCO gives providers the best of both worlds They can have a say in how the MCO is run and also get referral of patients who are enrollees of the MCO 21 What are the different types of services provided by an MSO MSOs management services organizations provide various types of services that bring management expertise to physician groups Since MCOs managed care organizations generally require that the provider be the contracting agent MSOs generally do not enter into contractual relationships on behalf of physicians The services provided by MSOs include billing and collection administrative support and other services In more complex arrangements the MSO may actually purchase many of the assets of the physicians practices for example the office space and equipment The MSO may also employ the office support staff for the physician Other services offered by the MSO may include utilization management quality assessment provider relations and services for enrollees such as health bulletins 24 hour telephone access etc 2007 Jones and Bartlett Publishers Inc 69 22 What is the difference between a merger and an acquisition What is the purpose of these organizational consolidations Give examples Mergers and acquisitions both involve integration of existing assets In an acquisition the acquired company ceases to exist as a separate entity and is absorbed under the name of the purchasing corporation In a merger the separate assets of two organizations are brought together typically under a new name Hence both of the former entities cease to exist and a new corporation is formed Such consolidations are carried out to gain efficiencies For example two small hospitals may merge together to eliminate duplication of services Second consolidations may help organizations expand into new markets and new service areas A large hospital may acquire smaller hospitals to serve as satellites in a large metropolitan area with sprawling suburbs A regional health system may be formed after a large hospital has acquired other hospitals and diversified into services such as long term care and rehabilitation Multifacility nursing home chains and home health firms often acquire other facilities to expand into new geographical markets 23 When would a joint venture be considered a preferable integration strategy A joint venture would be the strategy of choice when the new service can benefit all the participants and when competing against each other for that service would be undesirable Hospitals in a given region may engage in a joint venture to form a home health agency that would benefit all partners An acute care hospital a multispecialty physician group practice a skilled nursing facility and an insurer may join to offer a managed care plan 24 What is the main advantage of two organizations forming an alliance Alliances are relatively simpler to form than mergers An alliance is commonly a first step that allows the two organizations to evaluate the potential advantages of an eventual merger It also provides the opportunity to evaluate possible financial and legal ramifications of a potential marriage Alliances require little financial commitment and can be easily dissolved very much like an engagement prior to a potential marriage 25 State the main strategic objectives of horizontal and vertical integration Horizontal integration is primarily a mode of geographic expansion that extends the organization s core product or service The main objective of vertical integration is to diversify into new products andor services 26 What is antitrust policy Which business practices does antitrust law prohibit Why do antitrust laws exist Antitrust policy consists of the interpretation and enforcement of antitrust laws which are intended to prevent integration moves designed primarily to sti e competition The business practices prohibited or regulated by antitrust laws include price fixing price discrimination exclusive contracting arrangements and mergers among competitors The purpose of antitrust policy is to ensure the competitiveness and thus the efficiency of economic markets 2007 Jones and Bartlett Publishers Inc 70 2007 Jones and Bartlett Publishers Inc 71 CHAPTER 10 LongTerm Care INTRODUCTION 7 The elderly are the predominant but not the only users of LTC 7 Most LTC services are designed for the elderly 7 But most elderly do not need LTC most are physically and mentally healthy 7 73 of 65 years adults consider their health to be good or better lower among blacks 7 However aging contributes to chronic conditions 7 Need for LTC is associated with chronic conditions and comorbidity that lead to illness disability and death 7 Low cognitive functioning depression and serious illness or injury are high risks for functional decline 7 Functional incapacity necessitates LTC not the mere presence of chronic conditions Eg accidents and surgical mishaps can cause functional incapacity 7 LTC clients need a variety of services over time 7 Hence LTC cannot be an isolated component of health care ease of transition is necessary 7 The number of people 70 years and older needing LTC will increase from 10 million in 2000 to 15 million in 2020 There also will be a growing need for institutional care even though the rate of institutionalization has fallen in recent years Rising levels of obesity diabetes and disability are found among the younger cohorts that are approaching old age Osteoporosis hip fractures stroke cancer heart disease etc have also risen among the elderly 7 Other developed countries face similar challenges THE NATURE OF LONGTERM CARE Definition A variety of individualized well coordinated services that are designed to promote the maximum possible independence for people with functional limitations and these services are provided over an extended period of time to meet the patients physical mental social and spiritual needs while maximizing their quality of life Seven components 1 Variety of services The elderly are a heterogeneous group Needs vary among people and they also change over time 2 Individualized services Services are tailored based on individual assessment 3 Well coordinated total care LTC providers are responsible for total care which includes services provided by non LTC providers 4 Promotion of functional independence Impairments are evaluated in terms of ADLs eating bathing dressing toileting transfer and maintaining continence and IADLs cooking shopping housekeeping money management etc The goal of LTC is to enable the individual to maintain functional independence to the maximum level that is practicable 5 Extended period of care Short duration LTC lasts less than 90 days Most patients need LTC over a longer duration 2007 Jones and Bartlett Publishers Inc 72 6 Holistic care A patient s physical mental social and spiritual needs and preferences should be incorporated into medical care delivery 7 Quality of life Quality of life take added significance in LTC because 1 a loss of self worth often accompanies disability and 2 patients remain in LTC settings for relatively long periods with little hope of full recovery in most instances Five facets of Quality of Life Lifestyle pursuits for personal enrichment Comfortable safe and appealing living environment Clinical palliation Human factors that emphasize caring compassion respect and dignity Personal choices weave LON GTERM CARE SERVICES Range of services viewed from different perspectives 1 Medical care Post acute continuity of care Management of chronic conditions Treatment of physical and mental dysfunction 2 Mental health services Mental disorders not a normal part of aging But they affect 20 of the elderly Diagnosing is a challenge in the elderly Anxiety depression delirium and dementia are common 3 Social support Changing life events require coping and adaptation Con ict often arises between 39 Patient and family 39 Patient and caregivers Total care needs ie whatever a patient needs within or without the long term care system must be coordinated Link with the community and the outside world are important 4 Preventive and therapeutic LTC Prevent and postpone disease and disability 39 nutrition 39 routine medical care 39 vaccinations and u shots Prevent or delay institutionalization 39 community based support shopping light cleaning errands light maintenance and repairs etc Restoration of temporary loss of function when institutionalized 39 return patient to community as soon as possible 5 Informal and formal care Informal Donated care family and friends 39 Nursing home care is delayed Issues 0 13 of comrnunity dwelling elderly have unmet needs 2007 Jones and Bartlett Publishers Inc
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