Organizational Strategies of Adopting Health Policies

Policy adoption can be very challenging to healthcare leaders. Many organizations employ consultants to assist with the implementation of new policies. There have been significant changes to health policies over the past few years that have forced providers to institute implementation strategies, ensuring that they remain competitive and profitable. Review the “Global Medical Coverage” case (Chapter 6)
Does Blue Ridge Paper Products’ (BRPP) policy differ from a traditional employee stock ownership plan (ESOP)?
Are there any implications?
Are there any ethical concerns in the case?
Did the case present a buyer-dominant or a seller-dominant approach?
What important lesson(s) are learned from this case study?
Provide examples of how would you apply this to practice?
healthcareHealthcare Admin
ATTACHED FILE(S)
Chapter6
AlternativeResponsesandInitiativesofInstitutionsandProfessions
Nongovernmentalhealthcareorganizationsprovidemostmedicalservicesandhandlethefinancingofmuchofthesystem.For-profitandnonprofitinstitutionsoperatesidebyside,oftencompetingdirectlyforthesamebusiness.
Thischapteridentifiesanumberofstrategiesthatindividualsandorganizationsadoptinresponsetogovernmentalprogramsorinitiateontheirowntoinfluencehealthpolicy.Westartwith
Table6-1
,whichoutlinestheactorsandthealternativesforrespondingtogovernmentactionsandthemarketplace.Wherealternativeshavebeenaddressedandtermsdefinedinearlierchapters,wetrynottorepeatthatinformation.
6.1COMMONRESPONSES
AlloftheplayerslistedinTable6-1employstrategiestoinfluencethemarketplaceanditsregulators.Thesecanbeclassifiedintothreemaintypesofinterventions:
•Publicrelations
•Marketingandeducation
•Lobbying
Table6-1ResponsesandInitiativesofInstitutionsandProfessions
CommonApproaches
•Publicrelations
•Marketingandeducation
•Lobbying
Payers
•Employers
•Eligibility
•Subsidyoffered
•Plansoffered
•Relationshipwithinsurers/self-insurance
•Workereducationandtraining
•Insurers
•Methodoforganization
•Methodofpayment
•Plansoffered
•Casemanagement/carve-outs
•Utilizationconstraints
•Consumereducation
Providers
•Professionals
•Organizationofpractice
•Servicesoffered
•Incentives
•Pricing
•Patientrelationships
•Primaryversusspecialtycare
•Efficiency
•Institutions
•Organizationalstructure
•Scopeandscaleofservices
•Pricing/discounts
•Efficiency
•Qualityimprovement
•Consumerinformation
•Credentialingdecisions
•Involvingpayersinchangeprocesses
•Professions
•Qualityimprovement
•Providereducation
•Consumereducation
Consumers
•Planselection
•Providerselection
•Self-help
Eachplayermanagesitsrelationshipswiththemediaandwithpoliticiansandregulatorsdirectly,andeachactsindirectlythroughtradeassociationsandprofessionalgroups.Youwillseeillustrationsofthisthroughoutthecasesincludedinthistextandinsubsequentchaptersdealingwithpoliticalfeasibilityandvalues.Thefocusofeachinterventionchangesdependingonthenatureofthespecificmarket.LobbyingisparticularlyintenseinadministeredmarketssuchasMedicareandMedicaid,especiallywhennewlegislationisunderconsideration.Lobbyingalsogoesoncontinuouslywiththerelevantexecutivebranchagencies.Publicrelationsandeducationareusedmoreassertivelywhenregulatorsareconsideringchanges,andmarketing,especiallyadvertising,ismostintensewherethemarketislessregulated.Thetermeducationcanapplytothemanydifferenttypesofeffortstoinfluencebehavior.Governmentantismokingcampaignscanbecharacterizedaseducation,forexample,butthetermcanalsobeusedasoneoftherationalesbehindhighlycommercialinterventions,
suchasdirect-to-consumeradvertisingofprescriptiondrugs.
6.2PAYERS
Customarily,thetermpayersreferstothefinancialentities,usuallyinsurers,whopaythebills;however,theyareonlyintermediariesforthetruepayers,thosewhosignthecontractsforcare,whoareusuallyemployersandthegovernment.Inanincreasingnumberofcases,insurerswillcoverindividualswhopurchasetheirpoliciesdirectlyorthroughstateandfederalinsuranceexchanges,iftheychoosetoparticipateinthem.
Employers
Employment-basedhealthcarebenefitshavechangedmarkedlysincethe1950s.Atfirst,employerswereverypassiveaboutwhethertheirunionstookcollectivebargainingsettlementsaswagesorasbenefitsandhowthosebenefitsweredistributed.Allthattheycaredaboutwastheimmediatecostperhourofthetotalcontractagreement.Healthcarecostswerelow,andtheworkforcewasyoung;however,thesedefinedbenefitpackagestookonalifeoftheirownascostsinbothpensionsandhealthcarebegantorisemuchfasterthanpricesorproductivity.Nowemployershavetodealwithbothrisingcostsandthereactionsofemployees,retirees,andthepublicwhentheyreducebenefits.AnumberofU.S.steelandairlinecompanies,forexample,havegonethroughChapter11bankruptcyproceedingsinparttofreethemselvesofthese“legacy”liabilitiesfortheiremployees,eventheunionizedones.
Employerscompeteforthebestworkers,especiallythehighlyskilledones,ineverylabormarket.Theywanttheirhealthbenefitsforworkersandtheirfamiliestobeinlinewiththoseofferedbycompetingemployers.Ifbenefitsaretoolow,betteremployeeswillgoelsewhere.Iftheyaretoohigh,theemployerwillattractthosewithhighhealthcarecostsorhealthrisksintheirfamilies(adverseselection)andbecomesaddledwithhighercoststhantheircompetition.
WiththepassageoftheAffordableCareAct(ACA),employerswithmorethan50full-timeemployeesthathavenotofferedahealthinsurancebenefitorthatareconsideringdroppingithavetofactorinthecostofthepenalty,whichis$2,000to$3,000peruncoveredemployee.Thisis,ofcourse,wellbelowtheaveragenonpublicemployercontributionforindividualpremiumcoverage,whichwasabout$4,500in2012.
Eligibility
Employerscandecidewhogetshealthcarebenefitsandwhentheystart.Newemployeesusuallyhaveawaitingperiodbeforetheyareeligibleforhealthcarebenefits.Fullcoverageistypicallylimitedtofull-time,directlyemployedindividualsandtheirfamilies.Thisisonereasonwhycontractemploymentandoutsourcinghavebecomesoattractive.Contractingrelievestheemployerofthedirectexpenseofhealthcareandpensionbenefits,althoughsomeofthosecostsareprobablyreflectedinhigherwagespaidtoskilledcontractemployeesandinthebidsfromprospectivedomesticsuppliers.UnderprovisionsoftheACA,however,federalregulationswilldeterminewhoisconsideredafull-timeemployeeforpenaltypurposes(initially,
30hoursormoreofserviceperweekor130hoursinamonth),andemployerworkinghoursandbenefitpolicieswilltendtoalignwiththat.
SubsidyOffered
Theproportionofemployees’healthinsurancethattheemployerpaysisfixedbycontractinunionizedsettingsandbycompanypolicyelsewhere.Theemployernegotiatesforanarrayofplans,marketingthemtoemployees,collectingpremiums,andfundingmuchofthecostofthebasicplan.Morerecently,employershavemovedtowardpledgingadefinedcontribution(afixeddollaramount).Coveragefordependentsisusuallymuchcheaperundertheemployer’splanthananythingavailableindependently.Thisisduetothepurchasingpowerofthegroupandthereducedcoststotheinsurerofmarketingandadministeringtheplan.Employersmayalsoofferadditionalhealthinsuranceproductsnotnormallyincludedinhealthinsurance,suchasdentalinsurance,long-termcareinsurance,andvisioninsurance.Hereemployersmostlikelydonotsubsidizethecare,butpassalongtheadvantagesofgrouppurchasing.
Manyemployershavetraditionallyofferednewemployeesplansthatdonotexcludepreexistingconditions,offeringcoveragenotusuallyavailableontheopenmarketpriortotheACA.Someemployers,however,dorequireapre-employmentphysical.UndertheAmericanswithDisabilitiesAct,theuseofthisinformationmustbelimitedtotheabilitytomeetspecificjobrequirements,butitmaystillhaveachillingeffectonthejob-seekingbehaviorsofthosewhohaveseverehealthproblems.
PlansOffered
Mostemployersoffermultipleplanssothattheydonotbeartheonusofforcingtheiremployeestoparticipateinaspecificplan.BecauseoftheantipathyamongAmericanstoplansthatdonotallowachoiceofproviders,mostofferapoint-of-service(POS)planaswellasthebasicplanandplanswithalternativetiersofdeductiblesandcopayments.TheexchangesundertheACAalsoofferchoicesofplanswithvariouslevelsofbenefits.
Someemployersalsooffercafeteriaplans,whichallowemployeestoselectcustomizedsetsofbenefitsthatbestmeettheirindividualneeds,includingorexcludinghealthcarebenefits.CafeteriaplansarealsocalledflexiblebenefitplansorSection125plansaftertheapplicablesectionoftheInternalRevenueCode.
Employers,especiallythosewithself-insuredplans,canalsoprovideincentivestotheiremployeestoparticipateinwellnessprograms,payonlythepricesnegotiatedwithlocalcentersofexcellenceforspecificprocedures,orlimitriskthroughreferencepricing.Thelatterputsacaponwhattheplanwillpaybasedonpricesofservicesavailableinthecommunity.Forexample,grocerSafewayfoundthatpricesforacolonoscopyintheSanFranciscoarearangedfrom$898to$5,984.Thecompanydeterminedthatitcouldprovidereasonablecoveragewithpracticescharging$1,500orlessin2009,andlimiteditspaymenttothat.Thiswasreducedin2010to$1,250(Robinson&MacPherson,2012).AnumberofEuropeancountriesusereferencepricingforprescriptiondrugs.UsingitintheUnitedStatesrequirescarefulattentiontobothfederalandstateregulations.
RelationshipwithInsurers/Self-Insurance
Employersofferinginsurancehavetheoptionofbargainingwithinsurersorofself-insuring.Aself-insuredplanmaybeadministeredbytheemployerorbyaninsurancecompaniesorthird-partyadministrator,butregardlessofwhoadministersit,theemployertakestherisksandrewardsoftheresultingunderwritinglossratios.Usuallytheemployeralsopurchasesstop-lossinsuranceagainstanystringofunexpectedadverseevents.Thisalternativeisusedmostlybylargeemployers.MorethanhalfofallcoveredU.S.employeesworkforself-insuredemployers.Thisproportionoffirmsthatchooseself-insuranceisparticularlyhighamongfirmswithmorethan1,000employeesandinmultistatecompanies.Smallemployersareshowinggreaterinterestinself-insuredplanstoavoidthebenefitlevelsrequiredfortheexchangesundertheACA.
WorkerEducation,DiseaseManagement,andWorksiteWellness
Increasingly,employersareprovidingwellnessanddiseasemanagementprogramsdirectlyorthroughtheirinsurers.Mostcommonly,theyprovidewellnesspromotionthroughWeb-basedportals.Someemployersprovidepersonalinterventions.Companynurseswhointhepastweremostlyresponsiblefortreatingacuteproblemsoftennowplayaproactiveroleinidentifyinghigh-riskemployeesandhelpingthemchangetheirbehaviors.Someemployersalsoprovideincentivesforhealthybehaviors,suchasnotsmokingorjoiningandusingahealthandfitnessclub.Somearechangingtheworkplaceenvironmenttopromotehealth—forexample,placingparkinglotsawayfromthebuilding,publishingwalkingmapsandholdingwalkingmeetings,installingexerciseequipmentonsite,andreplacinghigh-calorie,high-fatfoodanddrinkinlunchroomvendingmachineswithmorehealthyfare.TheCentersforDiseaseControlandPrevention(CDC)decorateditsstairwellswithartandpipedinmusictomakethemmoreenticingtoemployeeswhomightotherwisetakeanelevator.
Employershaveastronginterestinpromotingmedicalsavingsaccounts,whichshiftmoreofthecostsofroutinemedicalcaretotheemployeeswhilestillprovidingcatastrophiccareinsurance.
Insurers
Insurersareintermediariesbetweenpayersandpatients.Manyinsurersprovideawidearrayofinsuranceproductsandworktosellemployersontheeconomicsofone-stopshoppingforalloftheirinsuranceneeds.Othersofferonlyorprimarilyhealthinsuranceproducts.Somearefor-profit,andsomearenonprofit.Theyallcompeteinthesamemarketwithsimilarproductsofferedunderthesamestateregulatoryrequirements.Insurerscompetewitheachotherbasedonprice(drivenbycosts),theirabilitytokeepenrolleeshappy,andtheirabilitytocomeupwithcreativesolutionstoperceivedproblems.
Historically,insurancehasbeendescribedas“drivingthroughtherear-viewmirror.”Premiumsarebasedonexperiencerating,namelythepastclaimsexperienceofone’semployeesorsimilaremployeegroups.Ifclaimswerehighinoneyear,lossescouldberecoupedbyraisingpremiumsthenext.Evenwhenchanginginsurers,onecannotnecessarilyrunawayfromacostlyclaimshistory.Underwritersexaminepastdataandthecompositionoftheworkforceanddecidewhethertotakeonagroupand,ifso,atwhatpremiumlevel.Theiranalysesarebackedbystatisticalanalysts,calledactuaries,whoestimatetrendsincostsandclaimsandforecastoutcomes.
MethodofOrganization
Theinsurercanprovideinsuranceonly,oritcanprovidehealthcareservicesaswell.Organizationsthatcombinebothinsuranceandcaremanagementfunctionstendtobecalledhealthmaintenanceorganizations(HMOs).Ifthecompanyisonlyaninsurer,itnegotiatesthetermsofcontracts(policies)withprovidersandwiththeenrollee.Itcollectsapremiumupfrontandinvestsitinreservesuntilclaimsarefiled.Corporateprofitsareafunctionofclaimshistory,operatingefficiency,andinvestmentearnings.Iftheinvestmentincomeissufficient,premiumscanbelessthanthecombinedcostsofoperatingandpayingclaims.Ifacompanyprovidescoverageatsiteswhereitdoesnotmaintainmuchofapresence,thatcompanymayuseathird-partyadministratortoprocessclaimsandprovideotherserviceslocally.
Reinsurance
Insuranceisabusinessoftakingrisks.Iftheinsurerdecidesthattheriskistoogreattotakeonalone,itmaypurchasereinsuranceagainstunacceptablelosses(alsocalledstop-lossinsurance)fromoneormoreotherinsurers.
MethodofPayment
Thepayerwantstomotivateproviderstolookafteritsinterests.Ineconomicsthisiscalledanagencyissue.Forhealthcareproviders,agencyisamajorissuebecausethephysicianisalreadyanagentforthepatient;thus,iftheproviderisalsoexpectedtobeanagentforthepayerortheinsurers,thissetsupapotentialconflictofinterest.Toexertsomeinfluenceoverclinicaldecisionmaking,insurershaveexperimentedwithanumberofalternativewaysofpayingforcare.
Table6-2
listsvariouscontractoptionsusedbyinsurersandalsoidentifiesthedominantorganizationalformassociatedwitheachpaymentmethodandthedegreeofcontrolthateachmethodexertsonproviders.
Healthinsurancecompanieshistoricallypaidforcareonafee-for-servicebasis,withtheproviderestablishingafeescheduleandbillingaccordingly.Thenlargepayers,especiallytheBlueCrossandBlueShieldorganizations,begantotakediscounts,andMedicareandMedicaidtookevengreaterdiscountstothetuneof40–60%.Somepayerscontractwiththeirkeynetworkproviders,usuallyprimarycaregatekeepers,toassumesomeoftheriskandallowawithholdfromtheirpaymentsuntilacertainsettlementdate,atwhichtimeeachproviderreceivessomeorallofthewithheldfundsdependingontheircostperformance.Today,anumberofpayershavepay-for-performanceclausesbuiltintotheircontractsthatofferadditionalcompensationformeetingcertainqualitycriteria,especiallyintheareasofpreventionandfollowingevidence-basedpractices.Ultimately,payerswanttopayforoutcomes,butsuchcompensationsystemsdependonintegratedinformationsystemsthatcancapturemorethanjustanepisodeofcare.
Capitationinvolvesgivingtheprovidersomuchperenrolleepertimeperiodandleavingtheprovidertotaketheprofitorlossontheactualtransactionsfortheperiod.Forexample,aprimarycareprovidermightbegivenacertainamountpermemberpermonthtocoverprimarycareanddiagnostics.Sometimesthecostsofsubspecialtyreferralsareincluded,whichputstheprimarycareprovideratevengreaterrisk.Providerorganizationsmaychooseastaff-modelHMOstructureaswell.Wherestatemedicalpracticeactsallow,physiciansmaybeemployeddirectly.Otherwise,theyformaseparatepartnershipentitythatcontracts(sometimesexclusively)withtheHMOtodeliverservices.Insuchcases,thearrangementmayofferadditionalcompensationtothephysiciangroupifitmeetscertaintargets.
Table6-2CompensationArrangementsforPhysicianHealthCareServices
FFS=feeforservice.PPO=preferredproviderorganization.ACO=affordablecareorganization.
HMOs
HMOsstartedoutasprovidersthatintegratedprepaymentandservicedeliveryintoamanagedcaresystem,usuallywithaclosedpanelofproviders.Overtime,thatdistinctionhasblurred.Today,HMOisvirtuallysynonymouswithamanaged-careorganization,onethatdoesmorethanpayclaims.Ittakesresponsibilityforthequalityandcontentofcareoveraperiodoftime.
TheHMO–providerrelationshipcanbesetupinanumberofways:
•Staffmodel.Physiciansareemployedorinacaptivegroupwithphysiciansonsalary,withorwithoutperformancebonuses.
•Groupmodel.AphysiciangroupacceptscapitationfromtheHMOandallocatesthecapitationpaymentsamongitsmembers.
•Networkmodel.TheHMOcontractswithgroupsandindividualphysicianstotakecareofitsenrollees.Providersmaybepaidbycapitationoronadiscountedfee-for-servicebasis.
•Individualpracticeassociation(IPA)model.Agroupofpracticescontractasawholeforpaymentundereithercapitationordiscountedfeeforservice.
TheACApromotedasimilarorganizationcalledanAccountableCareOrganization(ACO).AnACOisnotdominatedbyaninsurer,butallowsforpartnershipsamongproviders(i.e.,doctorsandhospitals),withtheproviderssharinginthesavingsratherthanpassingmostofthemontotheinsurer.Therefore,thestandardsofcareareunderthecontroloftheprovidersratherthantheinsurer,andthepotentialantagonismbetweendoctorsandhospitalsthatbundlingthreatenstocreateisreducedbyhavingacommonincentivesystem.
PlansOffered
Insurersusuallyofferanarrayofplanstomeetemployerdemands.Mostcorporatebenefitsmanagerswouldprefertoleavethechoicesuptoemployeesratherthanriskabacklashfromdissatisfiedemployeeswhobelievethecompanyisforcingthemunfairlytouseaspecificplanorspecificprovider.ThedominanttypeofplaninrecentyearshasbeenthePOSplan,whichgivesemployeesmorechoiceamongprovidersbutatadditionalcost.Themostrecentrapidgrowthhasbeeninhigh-deductiblehealthplans.
CaseManagement/Carve-Outs
Manyoftheproblemsinpatientcareoccurbecauseofalackofcoordination.Forexample,apatientmaystayinthehospitalextradaysbecausethefamilycannotarrangeforcareathomeorfacilitiesinthearealackthecapacityforaftercare.Payershaverespondedbyemployingcasemanagersforcostlycases.Wherethereisbetterexpertiseoutsidetheorganization,theinsurermaycarveoutasetofcases,suchasdiabetesorcongestiveheartfailure,foraspecializedcontractortomanage.Thisisalsotypicallydonewherementalillnessiscovered(carryingthedubiousname“behavioralhealth”)becausetheinsurer’sprofessionalsmaybefamiliaronlywithmedical/surgicalcases.Inmanymarketsinsurerswillhavecontractswithmostestablishedacute-careproviders.Casemanagersoftenoverseeservicesprovidedafterhospitaldischargeandmayactaspatientadvocateswithinthehospital.Insomesituations,theymayrecommendproviderswhoareespeciallyqualifiedtodealwithraresituations;however,thereareconcernsaboutapayerrepresentativedirectingsomeonetoaproviderbecauseofcostratherthanquality.In2002,theAmericanCaseManagementAssociation(2009),whosemembersarepredominantlynursesandsocialworkers,defineditsfieldasfollows:
CaseManagementinHospital/HealthCareSystemsisacollaborativepracticemodelincludingpatients,nurses,socialworkers,physicians,otherpractitioners,caregiversandthecommunity.TheCaseManagementprocessencompassescommunicationandfacilitatescarealongacontinuumthrougheffectiveresourcecoordination.ThegoalsofCaseManagementincludetheachievementofoptimalhealth,accesstocareandappropriateutilizationofresources,balancedwiththepatient’srighttoselfdetermination.
UtilizationConstraints
Precertificationandpreauthorizationaredeviceswidelyusedtocontrolhospitalanddrugcosts.Theprovidermustobtainauthorizationbeforeadmissionforcommonproceduresandusuallyistoldhowmanyinpatientdaysareallowed.Iftheadmittingphysicianwishestokeepthepatientlonger,heorshemustnotifytheinsurerandgetreauthorizationfortheadditionalcostsiftheinsurancecompanyistopay.Certainproceduresandprescriptiondrugsmustbepreauthorizedbecausetheyareexpensive,oflimitedvalue,orexperimental,sotheinsurer’smedicalstaffmustagreebeforehandthattheinterventionismedicallynecessary.
Althoughmostprovidersobjectstronglytothesemeasures,theyarenotasdraconianastheyappear.Iftheproviderpushesbackhardenough,theinsurerusuallylacksascientificreasonforrejectingthephysician’sdefinitionofmedicalnecessityandultimatelygivesin.Muchofthecostreductionseemstocomefromthesentineleffect—providerschangetheirbehaviorjustbecausetheyknowthatsomeoneiswatching.
Insurershaveexperimentedwithanumberofwaystoreduceinappropriateutilizationofhealthcareresources.Theyprofileproviderstoidentifyoutliersintermsofcostperdiagnosis,consumersatisfaction,andappropriatenessoftreatment,andtheycancelcontractswiththosewhoappeartoomuchoutofline.Thefederalgovernmenthasprofiledphysiciansonthebasisoftheirdistributionofcodesusedforofficevisits,usingthedatatosearchforindicatorsof“fraudandabuse.”
ConsumerEducation
Insurershavepartneredwithemployerstoprovideconsumereducationmaterials,guidelines,andevents.Theyadvertisetheirskillatthistypeofinformationdisseminationandarecontinuouslyupgradingtheironlineportalsformoreandbettercustomizedinformationforeachenrollee,fromtheworriedwelltothechronicallyill.
6.3PROVIDERS
Professionals
Formanyyears,mostphysiciansanddentistswereinsolopracticeorasimplepartnership.Theseentitieshavegraduallybeenreplacedbyonesthatmixthepartnershipandthecorporateformunderthetitlesofprofessionalassociation(PA)orlimitedliabilitypartnershiporcorporation(LLPorLLC).Suchentitiesenabletheprofessionalstomaintaincontrol,butoffertaxadvantages,greateraccesstocapital,and/orprotectionfromsomeliabilityclaimsotherthanmalpractice.Whichentitiesareacceptabledependsoneachstate’scorporatepracticeofmedicineactanditsmedicallicensingboard’sinterpretationofthatact.Essentially,amedicalpracticeactrestrictsthepracticeofmedicinetoanindividuallicensedpractitionerandforbidsothersfromexercisingsuchprivileges.TheMedicalBoardofCaliforniastatedin2006thattheexistinglegislation“isintendedtopreventunlicensedpersonsfrominterferingwithorinfluencingthephysician’sprofessionaljudgment”andgovernsthefollowing:
•Determiningwhatdiagnostictestsareappropriateforaparticularcondition
•Determiningtheneedforreferralsto,orconsultationwith,anotherphysician/specialist
•Responsibilityfortheultimateoverallcareofthepatient,includingtreatmentoptionsavailabletothepatient
•Determininghowmanypatientsaphysicianmustseeinagivenperiodoftimeorhowmanyhoursaphysicianmustwork
•Ownershipisanindicatorofcontrolofapatient’smedicalrecords,includingthecontentsthereof,andshouldberetainedbyaCalifornia-licensedphysician
•Selectionandhiring/firing(asitrelatestoclinicalcompetencyorproficiency)ofphysicians,alliedhealthstaff,andmedicalassistants
•Settingtheparametersunderwhichthephysicianwillenterintopatientcareservices
•Decisionsregardingcodingandbillingproceduresforpatientcareservices
•Approvingtheselectionofmedicalequipmentandmedicalsuppliesforthemedicalpractice
Similarboardsanddistinctiveregulationsgovernotherhealthcareproviders,includingnurses,pharmacists,dentists,andphysicaltherapists.However,withmorethanhalfthephysiciansinthecountryemployed,andwiththecontinuingtrendofconsolidationofindividualpracticesintolargerorganizations,thecompleteautonomyvisualizedinthatlegislationhasgonebytheboards.
Withsuchrestrictions,howcanHMOs,hospitals,andphysicianpracticemanagementfirms(PPMs)buyphysicianpracticesandmergethemintoahorizontallyorverticallyintegratedcaresystem?KaiserPermanente,along-standingandrespectedintegratedsystemwithmuchofitsoperationsinCalifornia,hasbeenabletodothisbyseparatingthemedicalpracticecomponentfromeverythingelse.After1955,KaiserPermanentesplitintothreeorganizations:twononprofits,oneforthehealthplan(insuranceandadministration)andonefortheownedhospitals,andafor-profitorganizationforthephysicians.Subsequently,tomeettherequirementsofthemedicalpracticeacts,thephysiciangroupshavebecomeseparateentitiesineachstate.TheKaiserhealthplancontractswiththelocalmedicalgroupforphysicianservices.Kaiserphysicianstendtoself-selectonthebasisofvaluesotherthanincomemaximization,butnegotiationshavebeencontentiousattimes.
Emergencydepartmentsareanareawherethereareconflictingconceptsofprofessionalpracticeresponsibilities.AtleasthalftheemergencyroomsinthecountryarestaffedundercontractswithPPMsthatspecializeinstaffingandoperatingthese24/7activities,whicharenotofmuchinteresttoothercommunityphysicians.ThePPMsandtheAmericanAcademyofEmergencyMedicinehavebeenatoddsoverdueprocessfortheircontractphysicians,theproportionofprofessionalfeesgoingtothem,jobopportunitiesforboard-certifiedindividuals,andphysicianaccesstobillingandeconomicdataontheirworksites(McNamara,2006).Mosthealthcareprofessionalsotherthanphysicianscanbeemployeddirectly.Somestatesrequiresupervisionbyaphysicianinsomesituations,whereasothersdonot.
Theseexamplesillustratethebalancingactthepoliticalsystemgoesthroughtomaintainprofessionalaccountabilityforservicesandenforcelicensurerequirements,yetavoidsustainingtheoldprofessionalmonopoliesandnotinterferetoomuchwithappropriatelaborsubstitutionandthedevelopmentofintegratedhealthdeliverysystems.
PracticeOwnership
Asphysicianincomesdroppedinthe1990s,manyphysicianschosetoselltheirpracticestoneworganizationalentitiesortoformassociationstodealfromapositionofstrengthwithpayersandthehospitals.Thesenumerousandsometimescomplexrelationshipsledtothealphabetsoupofthe1980sand1990s.Alternativeshaveincludedthefollowing:
•Sellingout
•ToHMOsthatweredevelopingintegratedserviceorganizations,oftenwithoutownershipofthehospitalcomponent.
•Tohospitalsthatwereattemptingtodevelopintegrateddeliverysystemsandcapturepatientsthroughtheirphysicians.
•Toacademicmedicalcentersthatalsowereattemptingtodevelopintegrateddeliverysystems.
•TopubliclytradedPPMs,whichwereinvogueinthe1990s,butthenranintoprofitabilityproblemsduetotheirinabilitytoincreasephysicianproductivity.
•Toothers.
•Takinggreaterrisksinreturnforgreaterrewards(ideally)
•Acceptingcapitation,whichinvolvesafixedpaymentforprovidingcaretoanenrolledpopulationforadefinedsetofservicespermemberpermonth.IthastendedtobetooriskyforallbutthelargestintegratedpracticesandIPAs.
•JoiningIPAs,whichcontractwiththemanagedcareorganization,usuallyforcapitation,andthenallocatingtheworkandtherevenuetotheirmembers.
•Partneringwithinstitutions
•Physician-hospitalorganizations,usuallyformedtocontractwithmanaged-careplans.
•Medicalserviceorganizations,oftenownedbyhospitalsthatprovidemanagementandsupportservicestoindependentpracticesandmaypurchasecertainpracticeassetsintheprocess,presumablyatafairmarketprice.
•Withholds,whichareusuallyassociatedwithagatekeeperroleandinvolvethepayerholdingbacksomeportionofthenegotiatedfeeasariskpoolincaseofcostoverruns.
•Communityhospital,oftenbyseekingmoreboardrepresentationinhopesofinfluencingtheimpactofcostcuttingonproviders.
•TheACOsencouragedbytheACApresumablywouldalignincentivesbetweenphysiciansandhospitalsinamorenuancedwaytoencourageeffectivecoordinationofcareandreducedcost.
•Pricing
•Negotiatingthefeespaidundermanagedcarecontracts.Practices’bargainingpowervarieswidely.Ifapracticeislarge,providesascarceresource,orincludesasubstantialnumberofthepayer’senrollees,itcanandshouldbargain.Ifthepracticeissmallandhasmanycompetitors,itcandolittlemorethanacceptthediscountstructureoffered.Inlargeurbanareas,apracticemaycontractwithmanypayers.Inruralareas,optionsforeitherorbothpartiesmaybelimited.
•RefusingtoacceptinsuranceorspecificplanssuchasMedicaidorMedicare.Ifaproviderbelievesenoughpayingpatientswouldbewillingtopaydirectly,theprovidermayrefusetoacceptinsurancepaymentsentirely.Thepatientcaneitherpaydirectlyorfiledirectlyforinsurance,usuallybasedonpaperworksuppliedbythephysician’soffice.Therisksofreducedpayments,denials,anddeductiblesthenrestwiththepatient.
•Offeringboutiqueorconciergemedicine,inwhichtheprovider,usuallyaprimarycareprovider,agreestoprovidedoutpatientcareforafixedannualfee,takingmanyfewerpatientsandhavingmoretimetodevotetotheconcernsofeachone.Somepracticesmeldbothinsuranceandanannualfeeforpersonalizedservice.
•RefusingtoacceptassignmentfromMedicare,perhapsonapatient-by-patientbasis.ProviderswhoacceptassignmentfromMedicareagreetochargepatientsnomorethantheMedicareapprovedamounts.Thisincludescopaymentsandunmetdeductibles.MoneyispaiddirectlytothephysicianbytheMedicarePartBintermediary.Physicianswhodonotacceptassignmentreceivesomewhatless(about5%)fromMedicare,butareallowedtobillthepatientforanadditionalamount(calledbalancebilling),cappedat15%abovethelowerschedule.TheMedicareintermediarywritesthechecktothepatient,whomustthenwriteacheckforthefullamountduetothenonparticipatingphysician.
ServicesOffered
Physicianscanorganizebyspecialtyorjoinamultispecialtygroup.Solopracticeisanoptionforsome,butmostpreferagrouppartnershiptodealwithissuesofafter-hourscoverage,efficiencyofoperation,economiesofscale,contractnegotiation,collegiality,andintellectualstimulation.Groupstabilitytendstovarywidelydependingonpersonalitiesandthedegreeofagreementonlifestyleandwork–lifeobjectives,which,ofcourse,changeovertime.Academicmedicalcenterstendtobeorganizedalongrigidlyspecializedlines,whereasthemultispecialtygrouppracticeismoreprevalentintheoutsidecommunity.
Dividinglinesbetweenspecialistsandgeneralistsoftenarefuzzy.Primarycareprovidersmayperformproceduresoftenlefttospecialists.Examplesincluderadiologicexamsandsigmoidoscopiesinprimarycarepracticesandautomatedneurologictestinginprimarycareoffices.Someinsurersofferincentivestoprimarycareproviderstoperformoutpatientservices,suchassigmoidoscopy,thatotherwisewouldrequireaspecialistreferral.
Incentives
Thehealthpolicyliteraturedevotesampleattentiontothemisalignmentofincentivesinthehealthcaresystem.Providersareencouragedbyfee-for-servicepaymentsystemstopromoteoverutilization,whereaspayersandHMOsmightprovideincentivesthatencourageunderutilization.Theissueishowtodefineandincentivizeright-utilizationbasedonscientificknowledgeandexpertassessments.Free-marketcapitalismisfueledbyever-increasingconsumption,andhealthcareisnoexception.
Pay-for-performance,alsoknownaspay-for-quality,isacurrenthopeofmanyinterestedinhealthpolicy.Itinvolvesprovidingincentivepayments(usuallyasapercentageoftheusualnegotiatedfees)tothoseprovidernetworkmemberswhoconformtocertainprocessrequirements,suchacomputerizedprescriptionorderentry,computerizedbilling,andmeetingtargetsforpreventiveservices.Forthemostpart,itdoesnotmeanachievingspecificclinicaloutcomesbecauseofthedifficultyofrecordingandtheneffectivelyrisk-adjustingthem.Whatpayersdonotwanttodoismotivatethebetterclinicianstoavoiddifficultorhigh-riskcasesjusttoimprovetheirnumbers.
Planmanagerswhowanttoencourageproviderparticipationcanalsoenhancetheratestheyarepayingtoadesiredgroup.Medicaidplansinanumberofstates,forexample,haveraisedobstetricalfeestogetpregnantwomenintocareearlier,evenwhileholdingdownorreducingotherfeesforotherservices.
Disincentivesforutilizationarenumerousandvaried.Weallhearlitaniesofthenumbersofcallsapracticemakesinadaytoobtainpriorapprovalsandtoreversedenials.Someinsurersseemtousedenialsasahurdletheofficestaffmustclearinordertogetpaid,butpaidlate.Providersalsohavetokeepinmindthattheirdecisionsmightbereviewedbytheinsurer’sutilizationreviewstaff,byMedicareandMedicaid’sdata-miningfraudandabusecomputers,andbythehospital’squalityauditstaff.Anyoneofthesemaycostfuturebusinessincome.PorterandTeisberg(2006)offeredanalternativeviewofincentives.Theyarguedthatthecurrentcompetitioninhealthcareisbasedonaninappropriatezero-summentalitythatcausesproviders(1)toprovidethebroadestrangeofservicestoavoidmovementtootherprovidersorlocationsand(2)toreduceutilizationthroughhurdles,barriers,copayments,anddeductibles.
Theysuggestedasomewhatutopianalternativemindsetinwhichthefocusofallpayerandproviderdecisionswouldbeonmaximizingthevalueofhealthcareforthepatient.Werevisitsomeoftheirproposalslateron.
PatientRelationships
Individualprovidersandproviderorganizationsarebecomingincreasinglysensitivetotheirservicereputationswithpatientstheywanttokeep.Thisisdueinparttothewidespreaduseofconsumersatisfactionsurveysbypayersandemployers.Consistentnegativeevaluationscanaffecttheiraccesstopatientrevenues,butanevenmoreimportantreasonistheincreasingcompetitionforthepatient’sattention,especiallyasmoreandmorecommercialentitiestrytodisintermediatetraditionalpatient–providerrelationships.Forexample,emergencyroomwaitingtimes,whichhadaveraged38minutesin1997,increased25%from46.5minutesto58minutesbetween2004and2009(Hing&Bhuiya,2012).Thishasprompteddevelopmentofalternativesystemsfordeliveringacutecareonalow-cost,rapid-accessbasis,especiallyasinsurerstakemeasurestodiscourageusinghospitalemergencyroomsasdispensaries.UrgentcarecentersandclinicsstaffedbynursepractitionersandphysicianassistantsareappearinginchainstoressuchasWal-MartandTarget.Theychargelessandoffershorterwaitingtimes,andtheirlongerhourshelppatientsandfamilymembersavoidlostwages.Theireffortsseemfocusedontheneedsofuninsuredfamilies.Itisinterestingtospeculatehowthissystemmightdevelopasthenumberofindividualswithoutinsuranceincreasesordecreases.AnotherexampleisWal-Martandotherpharmacychainsofferingalowfixedpriceforamonth’ssupplyofabroadarrayofgenericprescriptions.
Traditionalprimarycarepracticeshaverespondedbysettingasidealargerportionoftheirdayforsame-dayacutecarevisits.Thishasmeantlongerwaitsforthoseneedingroutinephysicalsandcheckups.Availablesoftwarehasenabledpracticestohandlemoreprescriptionrenewalsandpatientinquirieswithouttelephonecallsandvisitsandtoschedulesame-dayvisitseffectively.SomeinsurersalsocompensatephysiciansforrespondingtopatientsviatheInternet.
PrimaryVersusSpecialtyCare
Inmostcountries,thegatekeeperroleoftheprimarycarephysicianiscriticaltotheefficientfunctioningofthehealthcaresystem.IntheUnitedStates,however,thereisconsiderableconfusion,muchofitpurposelycreated,abouttheroleofprimarycareandhowitisdelivered.MostU.S.patientsdonothesitatetoself-refertoaspecialistbasedontheirpersonalassessmentoftheproblem.Specialistsencouragethisbyadvertisingthemselvesasprimarycareprovidersforspecificpopulations.Anexamplewouldbeasportsmedicineclinic.Itwouldlikelybepartofaspecializedorthopedicpractice.
Amalepatientwhousesanacademicmedicalcenterandhasachronicheartproblemmightselectanyofthefollowingasaprimarycarephysician:
•Aphysicianinafamilymedicinedepartment
•Aphysicianinthegeneralinternalmedicinedivisionoftheinternalmedicinedepartment
•Aphysicianinthecardiologydivisionoftheinternalmedicinedepartment
HischildrencouldgotoeitherpediatricsorfamilymedicineandtheirmothertoeitherOB/GYNorfamilymedicine.Forvisioncare,thefamilycouldgotoanophthalmologistoranoptometrist,unlesstertiarycareisrequired.Thefamilyalsohassimilarlyconfusingchoicesamongphysiciansinthecommunity,nottomentionadditionalchoicesamongchiropractors,urgentcarecenters,andcommunityhealthcenters.
Therewasoncegreathopeforintegratedhealthsystemsbuiltaroundmultispecialtygroupslinkedtooneormorecommunityhospitals;however,thathasnotprovedassuccessfulashopedforandisthreatenedbythedevelopmentofspecialtyhospitalsandambulatorysurgerycenters.
Efficiency
Providersworkhardtoincreasethenumberofpatientsseen.Visitshavebeencontinuallyshortened.Moreandmorepracticeshaveaddednotonlynursesandnursingassistants,butalsonursepractitioners,physicianassistants,andcertifiednursemidwives.Physicianshaveresistedcomputerizedsystemsthatfailtospeeduptheirworkprocesses,buttheyhaveaddedsuchsystemswheretheyanticipateimprovedefficiency.Forexample,oneofthedriversforsame-dayappointmentsystemsisthattheytendtoeliminateno-showsandincreasepracticethroughput.
Physicianshavealsoembracedelectronicclaimsfiling.
Thesubsidiesfor“meaningful”useofelectronicmedicalrecordsundertheHealthInformationTechnologyforEconomicandClinicalHealth(HITECH)Actof2009aresignificant,butitwilltaketimeforproviderstosmoothouttheworkflowtothepointwhereitpaysoffintermsofefficiency.Akeyelementinthesuccessofthesenewsystemsistheinvolvementoftheclinicalstaffintheirdesignandimplementation.
DistributionofSpecialties
Overtime,theavailabilityofphysiciansinspecificfieldsreflectsperceptionsofincomepotential.Averagephysicianincomeinconstantdollartermshasfalleninrecentyears.Increasingly,medicalstudentshavechosentoavoidprimarycaretraining(familymedicine,pediatrics,andgeneralinternalmedicine)andhaveinsteadchosenspecialtiesthatproducefeesforperformingprocedures.Anorthopedicsurgeoncouldexpecttoearnroughlytwicetheincomeofaprimarycarephysicianafterexpenses.Yet,aprimarycarephysicianmaybringinalmostasmuchrevenuefromvisits,labtests,andproceduralfees,butnotincludingreferrals(about$2million).Primarycarephysiciansarenowinshortsupplyandhighdemand.Thisincreaseddemandiscausingsalariesforprimarycarephysicianstorisefasterthanthoseformanyspecialties,butoverallphysiciansalarieshavenotrisenasfastasoverallmedicalcarecosts.
Theexperienceofothercountriesandstudiesofsmallareadifferencesinpracticepatternsindicatethattheprevalenceofspecialistsandotherresourcesoftenseemstoinfluencetheamountofcaredelivered,someofwhichisofquestionablevaluetopatients,evenatthemedicalcenterswiththemostprestigiousreputations(Fisheretal.,2004).
Institutions
Thedominantactorsamonghealthcareinstitutionshavebeenthegeneralhospitals,especiallycommunityhospitals,andacademicmedicalcenters.Thearrayofinstitutionsdeliveringcare,however,includescommunityhealthcenters,specialtyhospitals,largeintegratedsystems,largemultisitepractices,stateandlocalgovernmenthospitals,pharmaceuticalcompanies,andothervendors.
RelationshiptoProviders
Muchofthetime,aninstitution’skeyobjectiveistocapturealargepopulationforitsservices.Ifoneacceptstheprimarycareproviderasagatekeeper,thewaytoincreaseactivityistocapturereferralsfromlocalgatekeepers,especiallyifinsurersconstrainself-referral.Thisisonereasonwhyhospitals,academicmedicalcenters,andothershaveboughtsomanyprimarycarepracticesandhaveworkedtoputsatellitecentersinshoppingcentersandcontinuingcareretirementcommunities.Theywantthereferrals,togetherwiththeancillaryrevenuesintheirlaboratories,operatingrooms,andimagingcenters.Theirbehaviorsepitomizethezero-summentalityPorterandTeisberg(2006)citedasacoreproblembehindthegrowthinhealthcarecosts.
Despiteextensiveregulationsdesignedtopreventinstitutionsfrombuyingreferrals,thereisacontinuousefforttobindreferringproviderstotheinstitution.Hospitalsbuildofficebuildingsonsiteorinhigh-trafficareas,offerphysiciansseatsonhospitalboards,andgivetheminfluenceoverthecapitalinvestmentsthehospitalmakes.
Pharmaceuticalcompaniesdonatesamples,provideeducationallunchesandspeakers,andsupporttechnicalsocietymeetings.Someevenmakelargedonationstocharitiescontrolledbyprivate-practicephysiciansthatfundresearchandmedicalresidencyprograms(Abelson,2006b).Manyinstitutionshavetakenstepstocurbsomeoftheseactivities,andfederalregulationsnowrequiremuchmoretransparencyconcerningthesepotentialconflictsofinterest.
Efficiency
Institutions,includinglargemedicalpractices,havetodecidehowtoconfiguretheirstaffandfacilitiesfortheefficientuseofalltheirresources.Theymustconformtoallsortsofregulationsandrestrictionsandstillcomeupwithanefficientandeffectivedeliverysystem.Especiallysensitiveareasincludestaffingandlaborsubstitution.Becausetheseinstitutionsarelooselycoupledorganizations,mostdepartmentstrytooperateasindependentlyaspossibleandtendtoemphasizegrowthoverreduceduseofresources.Interestinsavingresourcestendstofocusonscarcitysituations.Efficiencyismoreofasloganthanagoalinmanyproviderenvironments.
Staffing
Perhapsnodebateragesaslongorasloudlyaswhetheraninstitutionisstaffedadequately.Healthprofessionalsusuallyseethemselvesasover-workedbecausethereisalwaysmorethatcouldbedoneforthepatient.Thedemandfortheirservicesishighlyvariable,andthustherearepeakperiodswhentheyareunderpressuretogofaster.Thisisnotwithoutrisks,butstaffingonlyforpeakdemandresultsinconsiderablelostvaluetherestofthetime.Thereisusuallyadynamictension,therefore,betweenprofessionalleadershipandinstitutionalmanagementoverwhethermorestaffiswarranted.
Staffingshortageshavebeencriticalinsomeareas,suchasnursingandchildpsychiatry.Anincreasingbodyofevidencesuggeststhatadversehospitalevents,suchashospital-acquiredpneumoniasandurinarytractinfections,areassociatedwithlowlevelsofnursestaffingandnursingstaffeducation(Stanton,2004).Themarketresponseistoraisewages,andmostinstitutionstrythat.Itdoesworkovertime.Nursingeducationprogramsareexpandingaspotentialstudentsareincreasinglyattractedbyrisingwagesandplentifulemploymentopportunities;however,institutionsarealsosensitivetotheincreasedsalarycosts.Thepressuretodevelopandlicensesubstitutesisgreat.
LaborSubstitution
Currentareasofcontentionrelatedtolaborsubstitutionincludetheeducationalrequirementsforregisterednurses,substitutionofothernursingstaffforregisterednurses,thedegreeofindependentpracticeallowednursepractitionersandphysicianassistants,substitutionofanesthesiologistassistantsfornurseanesthesiologists,andgrantingprescribingauthoritytopsychologists.Thesebattlesdifferfromstatetostate,butitisnotunusualforthehealthcommitteesofstatelegislaturestodevoteasignificantamountoftheirtimetoscopeofpracticeissues.Thecurrentlydominantprofessionalgroupusuallyobjectsstronglytosubstitution.Thetrainingandlicensureofsubstitutesisusuallyjustifiedatfirstonthebasisofworkforceshortages.Afteranewgroupgainsafootholdinsomestatesandestablishesanacceptablesafetyrecord,itsmemberspushforprivilegesinotherstatesaswell.
Institutionsseethesesubstitutionsashavingpotentialforleveragingexpensivestaffmembersandforallowingflexibilityinworkteamcomposition.Asecondaryissueissometimescontrol.Inahospital,forexample,nursepractitionersusuallyreporttothedirectorofnursing,whereasphysicianassistantsreporttoadifferentadministrativeunitortothemedicalstaffdirectly.Medicalstaffsoftenpreferthelatter.
ScopeandScaleofServices
Institutionscanaddordropprograms.Manyhospitalsaredroppingservicesthatdonotappeartopayforthemselves.Theriskisthatpatientsandproviderswillgosomewhereelsetoaccessamissingserviceandnotcomeback.
Pricing/Discounts
Hospitalsdonotoffermeaningfulpricelistsandtrytodealwithpayersindividually.Monopsonisticfederalandstateprogramsarbitrarilysettheirownpaymentlevels,butthereisroomtonegotiatewithlargeinsurers.Theindividualconsumerusuallylacksreliableinformationonwhichtocomparecostsorquality,thecornerstonecomparisonsofanyconsumer-drivenhealthcaresystem.Regulatorsandlegislatorsunderstandtheissueandaretakingactionbitbybit.Thepublicisincreasinglyawareoftheissue,especiallyafterthefederalgovernmentmadecomparativedatareadilyavailablein2013andtheissuewashighlightedinthepopularpress(Brill,2013).
QualityImprovement
Institutionsarethekeytoqualityimprovement.Theyhavethedataandoperateonacorporatemodelthatcansupportimprovementandchange.Accreditationrequiresthattheyshowthatqualityimprovementeffortsareunderway.Themainproblemremainsproviderinvolvement.Institutionsthathaveeffectiveprograms,however,haveachievedmajoroutcomeimprovements.Asqualityisincreasinglyreported,theseprogramsshouldbegintopayoffinimprovementsinpatientvolumesandincreasedreimbursementsunderpay-for-performanceinitiatives.
ConsumerInformation
Institutions,justlikeinsurers,wooconsumerswithWebportalsandinformationaladvertising.Theyadvertise“askanurse”linestocaptureself-referralsandincreasepatientloyalty.Theyworkwithprimarycareproviderstostimulatereferralsandestablishcentersofexcellencetoenhancevisibilityinthemarketplaceforprofitableprocedures.
CredentialingDecisions
ManyphysicianscannotserveMedicareandMedicaidpatientswithouthospitalprivileges,eveniftheyhavepredominantlyoutpatientpractices.Hospitalscanawardorwithholdtheseprivilegesthroughtheircredentialingprocesses.Credentialingisintendedtoensurequalityofcareandpatientsafety,buttherearealsoopportunitiesforeconomiccredentialing—rewardingphysicianswhobringinprofitablepatientsandpenalizingthosewhoowncompetingorganizations.
InvolvingPayersinChangeDecisions
Theimpactofchangesmaybenefitothersratherthantheinstitution.
Onestrategyistoinvolvethepayersinthechangeprocesssothattheycanexplaintostaffwherethecostsoftheinstitutionareoutoflinewithcompetingprovidersandalsoseehowthebottomlineoftheproviderisaffectedbyprocesschanges.Forexample,VirginiaMasonMedicalCenterinSeattleteamedupwithAetnaandStarbuckstolookatthecostoftreatingbackpaincases.Itfoundthatitwasnotrespondingrapidlyenough,andthatmanycasescouldbereferreddirectlytophysicaltherapywithoutexpensivemagneticresonanceimaging.Thosecasesthatappearedcomplicatedweresenttospecialistsforworkup,butthosethatwereacutewithoutsciaticaweretreatedpromptlyatmuchlowercost.AfterareviewofthefinancesbyAetnaandStarbucks,Aetnaagreedtoincreasethepaymentsforphysicaltherapytooffsetsomeofthelostincome(Fuhrmans,2007b).
Professions
Professionalsocietiesandtheirrepresentativescanhaveamajorinfluenceonthecost,quality,andaccessdimensionsofhealthcare.Starr(1982)documentedtheAmericanMedicalAssociation’slongandstrongoppositiontouniversalhealthinsuranceasaprimaryreasonwedonothaveittoday.Becausethesocietiestestandcredentialtheirmembers,theyalsohaveamajorpotentialtoinfluencethequalityofthecareprovided.
QualityImprovement
Twophysicianleadersofthequalitymovement,LucentLeapeandDonaldBerwick(2005),pointedtotheirprofession’sneedforautonomyandauthorityasamajorbarriertotheimplementationofmanyqualityimprovementmeasures.Theyarguedthataclimatedevotedtosafetywouldrequireacknowledgmentoferrorsandadditionalteamworktoreducethem.Theysuggestedanumberofinterventions,includingparallelandcoordinatedenforcementofstandardsbytheJointCommission,theCentersforMedicare&MedicaidServices(CMS),andtheNationalCommitteeforQualityAssurance(NCQA)andasystemofincentivesforimplementingsafepracticesanddisincentivesforthecontinuationofunsafeones.In2003,theJointCommissionbegantorequirehospitalstoimplement11safetypracticesandaddedmorein2005.Theerror-ratereductionsreportedatspecificinstitutionswerequiteimpressive:
•62%reductioninventilator-associatedpneumonias
•81%and90%reductionsinmedicationerrors
•15%reductionincardiacarrests
•66%and78%reductionsinpreventableadversedrugreactions(LeapeandBerwick,2005)
Reportingofpreventableeventshasbroadened,andeventsthatwereonceconsideredroutinesideeffects,suchashospital-acquiredpneumoniasandcentrallineinfections,arenowconsideredreportablemedicalerrorsandnotworthyofreimbursement.
ProviderEducation
Mostprofessionshavecontinuingeducationrequirementslinkedtocertificationandlicensure.Providersmustmaintainproficiencyintheirfieldandretakeprofessionalexaminationsatprescribedintervals.Giventhedataonregionalvariabilityincare,onemustquestionhowup-to-dateandevidence-driventhesecoursestendtobe.Somesubspecialtygroupshaveaddedrequirementsforparticipationinqualityimprovementprogramsaspartoftheirrecertificationprocess.
ConsumerEducation
Professionalsocietiesalsoundertakeconsumereducationprogramsdesignedtopersuadepotentialpatientstousetheirmembers.Oftenitisdifficulttodifferentiatebetweenconsumereducationandadvertisingindefenseofprofessionalturf.Societiesoftenlendtheirnamesanddatatootheradvertisingcampaignsacceptabletotheirprofessionalethics.Thereisconsiderableriskindoingthisbecausenewdatamightshowthattheysupportedapolicyorproductthatlaterturnedouttobecounterproductive.
6.4CONSUMERS
Thechoicesconsumersmakeinvolvetheirpreferencesandtheoptionsavailabletothem.Untilrecentlythosechoiceswerelimitedtoafewofferedbytheiremployers.Nowtheirchoicesareexpanding.
PlanSelection
Duringthemanagedcarerevolutionofthe1980sand1990s,planswerequiterestrictiveintheireffortstokeepmemberswithintheirprovidernetworks.Afterconsumersrebelled,insurersexpandedtheirnetworksandofferedPOSoptions.Enrolleesalsohadtodecidewhatgamblestotakeintermsofdeductiblesandcopayments,balancingpremiumcostsabovethebasicemployerplanagainstanticipatedout-of-pocketcostsduringeachenrollmentperiod.TheimplementationofstateandfederalexchangesundertheACAaddedadditionalchoicesformany,butthereremainsastrongneedformoreconsumereducationandsupportindecisionmaking.
RetirementPlanning
Middle-andupper-incomefamiliesalsohavetoplanfortheirhealthcareneedsduringretirement,especiallygiventheincreasinglyshakystatusofemployment-basedcoverageplansforretirees.Theymustmakedecisionsaboutcoverageduringretirement,long-termcareinsurance,andspecializedinsuranceandincomeneeds.
ProviderSelection
Individualswanttocontinuetheirproviderrelationshipsiftheyaresatisfactory.Theyhavemadetheirpreferencefornotchangingprovidersclear.
MostofthoseforcedtochangeprovidershavebeenmembersofMedicaidmanagedcareorretireebenefitprogramswithrestrictedchoices.Patients’qualityconcernsseemtocenterontheaffectiverelationshipswiththeirprovidersandarethefocusofmostconsumerqualityassessmentquestionnaires.Technicalproficiencyoroutcomemeasuresmaybeavailable,but,wheretheyexist,consumershavetobealertedtotheiravailabilityandtaughthowtointerpretthem.Bedsidemannerstillisimportant,especiallyasinteractionswithprovidershavebeenshortenedbyproductivityandincomepressures.
Self-Help
Increasingly,planmembersarebeingsteeredtoonlineself-helpsites.Manylargeinsurers,includingHMOs,providecustomizedWebportalsfortheirinsured,whichbuildondiagnosesreportedbynetworkproviders.Theseportalsprovideinformationontreatmentandpreventionaswellaslinkstolowercostprovidersofcomplementaryservicesandsupplies.Experienceswiththesesitesmayencourageenrolleestosearchfurtherontheirownandstudyavailablequalityinformationonpotentialproviders.
InsuredwithLowLikelihoodofUse
Manyoftheinsuredhavelittlelikelihoodofusingservicesduringaparticulartimeperiod.Some20%ofthepopulationunder65accountfor80%ofthatgroup’sexpenses.Giventherecentimpositionofincreaseddeductiblesandcopaymentsinmanyplans,eventhoseseekingacute,episodiccarewillnotfileclaimsexcepttobuildtheirdeductibles,justincase.Membersofthisgroupwouldbethecandidatesformedicalsavingsaccountsandhighdeductibles,thatis,consumer-drivenhealthcare.Iftheyremainhealthy,therearenoclaims,andtheirpremiumsgodownfurther,butiftheyhavemajorclaims,theyarecoveredforamountsforcatastrophiceventsabovethelargedeductible.
UndertheindividualmandateoftheACA,theyalsofacethepossibilityofapenalty,or“tax,”bytheIRSforfailingtosecurecoverage.Thepenaltywillbephasedinovertime,andonceitiscompletelyphasedinitwillbeadjustedforinflation.The2016amountissetat$695perpersonforuptothreepeopleinthehousehold(or$2,085).Householdswithhighertaxableincomelevelswouldpay2.5%ofhouseholdincomeabovethefilingthreshold,butthepenaltycannotexceedtheaveragecostofabasic(or“bronze”)planthroughtheexchanges.Therearerealquestionsastowhetherthatpenaltywillbesufficienttomotivatecomplianceevenwiththepremiumtaxcreditsofferedtolow-incomeindividuals.Alsoconsiderthatindividualsupto100%offederalpovertylevel(FPL)insomestatesand130%ofFPLinothersareeligibleforMedicaid.
Preventionisanimportantarenawiththishealthiergroup.Iftheirinsurer,theiremployer,orthemediakeeptheminformedofrisksofchronicandacutediseaseandtheyfollowvalidadvice,theyshouldbenefitlikeeveryoneelse.Thequestionstilltobeanswerediswhethertheywillbehavedifferentlyfromtheuntreatedpopulationingeneralandwhethereffortstoreachthemwillinducechanges.Anumberoffactorsarepushinginbothdirections.Ontheonehand,physiciansareknowntobeastrongforceforchangewhentheyhaveabondwiththepatient,buttheseindividualsmightnotvisitaprimarycarepracticeregularlyorformabondwiththeproviderstaff.Ontheotherhand,theywillhavethefinancialmotivationtostayhealthy.
6.5FOR-PROFITVERSUSNONPROFIT
Wenotedatthestartofthischapterthatfor-profitandnonprofitfirmsoperatesidebysideinmanyhealthcaresectors.Onepolicychoiceiswhethertoencourageoneformortheotherintheprivatesectorortoignoretheissue.Hansmann(1996)notedthatthenonprofitportionoftheeconomyhasgrownsteadily.Hesuggestedthatnonprofitfirmscomeintobeingwhenconsumersarenotinapositiontodeterminethequalityorquantityofwhattheyarepurchasingwithoutunreasonablecostoreffort.Thismeanstheconsumerscouldbeseriouslyexploitedbyafor-profitfirm.“Thesolutionistocreateafirmwithoutowners—or,moreaccurately,tocreateafirmwhosemanagersholditintrustforitscustomers.Inessence,thenonprofitformabandonsanybenefitsoffullownershipinfavorofstricterfiduciaryconstraintsonmanagement”(Hansmann,1996,p.228).
Manyofthesameissuesarecitedasthesociologicalgroundingofprofessionalstatusandautonomyforhealthcareproviders.Somehowaccountabilitymustbeestablishedtoprotecttheinterestsofthepatientswhenonlyhighlyimperfectinformationisavailabletotheindividualatrisk.
6.6THEVALUE-DRIVENCAREINITIATIVE
Whatifweweretomakethevalueofferedtothepatientthebasisofcompetitioninthehealthcaremarketplace?ThisistheobjectivesuggestedbyPorterandTeisberg(2006).Toachievethisfocus,theyrecommendthefollowing:
•Mandatingparticipationinhealthinsurancebyall,withsubsidiesforlow-incomeparticipants
•Focusingonthecompletediseasemanagementprocessatthelevelofspecificmedicalconditions(suchascoronaryarteryblockage)tooptimizeprocesscoordinationandefficiencyandinformationflow
•Providingreliableandrelevantinformationatthemedicalconditionlevelontotalcostandoutcome
•Organizingsystemsofcaretocompeteonthebasisofmaximumpatientvalue,whichtheybelievewouldresultinnarrowerproductlinesincommunityhospitals,morereferralsofcomplexandrarecasestocentersofexcellence,andmoreorganizationintomultisite(horizontallyintegrated)systems
•Reportingallprocessstepselectronically,producingreportsthatgivebundledcostsofcareacrossprovidersandinstitutions,andprovidingmoreextensivefollow-upandreportingofoutcomes
•Creatingextensiveincentivestoreduceduplicationandwasteandimprovequalityforeachmedicalconditionatallprocessstages
PorterandTeisberg’sanalysishasattractedconsiderableinterestamongemployersbecauseitiseasytounderstandintermsoftheindustrialmodelformarketingandoperationalimprovement,appearslikelytosupportnewformsofoligopolisticcompetition,anddrawsparallelsfromconsumerexperienceswiththerationalizationofotherprofessionalserviceswheretheconsumerwasonceconsideredunabletomakedecisions(suchastravel,insurance,andfinancialservices).Theimpactontheprofessionsandhealthcaredeliveryinstitutionsofsuchamajorshiftinemphasiswouldbeprofound.Justwhatwoulddriveitovertheoppositionofentrenchedinterestsishardtocontemplate,althoughtheACAisastart..Thatiswhywereferredtoitaboveasbeingsomewhatutopian.However,itwouldmakegreatsenseifwewerebuildingourhealthsystemfromscratch.
Theauthorshavediscussedelsewherethenotionofacontinuumofmarketpowerrangingfromamarketdominatedbyasinglebuyer(amonopsonysuchastheU.K.’sNationalHealthService)toonedominatedbysingleseller(amonopoly),withotherformsalongthecontinuumbeingadministeredcompetition,afreemarket,andanoligopycomprisinginsurersandproviders.
Figure6-1
placesvalue-drivenhealthcareonthiscontinuum.Despitetheemphasisoncompetition,wehaveincludeditasanadministeredsystembecauseitisgoingtohavetobebuyer-drivenattheonset.
Figure6–1Modifiedstagesofhealthcaremarketpower.
6.7CONCLUSION
Thehealthcaremarketplaceisverycomplex.Manyactorsandmanyalternativesmeritconsiderationasthesystemtriestostrikeabalancebetweenoverutilizationandunderutilizationandasthecommercialaspectsofhealthcarebecomeincreasinglyapparent.
ase6GlobalMedicalCoverage
BACKGROUND
BlueRidgePaperProducts,Inc.(BRPP)inCanton,NorthCarolina,isapapercompanywhosepredominantproductisfoodandbeveragepackaging.ItwasthelargestemployerinWesternNorthCarolinain2006,with1,300coveredemployeesinthestateand800elsewhere.StartedastheChampionPaperplantin1908,itwaspurchasedbytheemployeesandtheirunion(aUnitedSteelworkerslocal)inMay1999withtheassistanceofaventurecapitalfirm.Todayitoperatesunderanemployeestockownershipplan(ESOP).Topurchasetheplant,theemployeesagreedtoa15%wagecutandfrozenwagesandbenefitsfor7years.Fromthebuyoutthroughtheendof2005,thecompanylost$92millionandpaidout$107millioninhealthcareclaims.Itbecameprofitablein2006.Maintaininghealthbenefitsformembersandretireesisaveryhighprioritywiththeemployeesandtheunion,althoughretireemedicalbenefitshavebeeneliminatedforsalariedemployeeshiredafterMarch1,2005.TheventurecapitalfirmthatfinancedtheESOPretained55%ownershipwith40%goingtotheemployeesand5%toseniormanagement.Profitabilityvariedfromyeartoyearasthecompanyexpandedcapacityandimprovedproductivityofitssingle-servingdrinkcartonlinesandwascaughtupinanumberofsuitsoverwaterpollutionproblemsatitsCanton,NorthCarolina,plant.
ThemajorityofBRPPemployeesaremale,olderthanage48,andhaveseveralhealthriskfactors.Mostemployeeswork12-hour,rotatingshifts,makingitextremelydifficulttomanagehealthconditionsorimprovelifestyle(Blackley,2006).TheESOPhasworkedhardtoreduceitsself-insuredhealthcarecosts.Healthinsuranceclaimsfor2006hadbeenestimatedat$36million,butappearedlikelytoholdnear$24million,whichisstill75%abovethe2000numbers.Avolunteerbenefitstaskforcecomposedofunionandnonunionemployeesworkedtoredesignacomplexbenefitsystem.After2yearsof18%healthcarecostincreases,therateofgrowthdroppedto2%in2003.Itwas5%in2004and–3%in2005.
Programsinitiatedin2001includedaplanofferingfreediabeticmedicationsandsuppliesinreturnforcompliance,andatobaccocessationplanwithcashrewards.In2004,thecompanyopenedafull-servicepharmacyandmedicalcenterwithapharmacist,internist,andnurses.In2005,itbeganapopulationhealthmanagementprogram.Coveredemployeesandspouseswhocompletedahealthriskassessmentwererewardedwith$100andassigneda“personalnursecoach.”Thenursecoachassistedthosewhowerereadytochangetosetindividualhealthgoalsandtochoosefromamongoneormoreof14availablehealthprograms,whichincludedreducedcopaysonmedications,freeself-helpmedicalaids/equipment,andeducationalmaterials.
WhereBRPPcouldnotseemtomakeheadwaywaswiththepricespaidtolocalproviders.Communityphysiciansrefuseddeeperdiscounts.Evenbandingtogetherinabuyingcooperativewithothercompaniescouldnotmovethelocaltertiaryhospitaltomatchdiscountsofferedtoregionallydominantinsurers.Thishospitalwasnotdistressedandhadabove-averageoperatingmargins.
Articleson“medicaltourism”inthepressandontelevisionattractedtheattentionofbenefitsmanagement.Reportswereofhigh-qualitycareat80%orlessofU.S.priceswithgoodoutcomes.BRPPcontactedacompanyofferingservicesathospitalsinIndia,IndUShealthinRaleigh,NorthCarolina,andbeganworkingonaplantomakeitsservicesavailabletoBRPPemployees.
INDUSHEALTH
IndUShealthprovidesacompletepackagetoitsU.S.andCanadianclients,includingaccesstoIndiansuperspecialtyhospitalsthatareJointCommissionInternationalaccreditedandtospecialistsandsupportingphysicianswithU.S.orU.K.boardcertification.ItarrangesforpostoperativecareinIndiaandfortravel,lodging,andmealsforthepatientandanaccompanyingfamilymember—allforasinglepackageprice.Forexample,itrepresentstheWockhardthospitalsinIndia,whichareJointCommissionInternationalaccreditedandaffiliatedwithHarvardMedicalInternational.OtherIndianhospitalsboastaffiliationswiththeJohnsHopkinsMedicalCenterandtheClevelandClinic.
MITRALVALVEREPLACEMENT
Oneofthefirstcasesconsideredwasamitralvalvereplacement.IndUShealthandBRPPsoughtpackagequotesfromanumberofdomesticmedicalcentersandcouldgetonlyoneestimate.Thatquote,fromtheUniversityofIowaacademicmedicalcenter,wasinthe$68,000to$98,000range.ThequotefromIndiawasfor$18,000andincludedtravel,food,andlodgingforthepatientandonecompanion.TestifyingbeforetheU.S.SenateSpecialCommitteeonAging,Mr.RajeshRao,IndUShealth’sCEO(2006),citedthefollowingcosts:

Procedure

TypicalU.S.Cost

IndiaCost

Heartbypasssurgery

$55,000to$86,000

$6,000

Angioplasty

$33,000to$49,000

$6,000

Hipreplacement

$31,000to$44,000

$5,000

Spinalfusion

$42,000to$76,000

$8,000
EMPLOYEEPARTICIPATION
Toencourageemployeeparticipation,BRPPpreparedaDVDonitsmedicaltourisminitiative,whichitcalledGlobalHealthCoverage.ItoutlinedtheopportunitiesanddescribedtheIndianfacilitiesandcredentials.Thenextstepwastobeatripbyanemployee“duediligence”committeetoIndiatoinspectfacilitiesandtalkwithdoctors.Thentheywoulddiscusshowtohandletheoptioninthenextsetofunionnegotiations.
SENATEHEARINGS
OnJune27,2006,theU.S.SenateSpecialCommitteeonAgingheldhearingstitled“TheGlobalizationofHealthCare:CanMedicalTourismReduceHealthCareCosts?”BothBRPPandIndUShealthtestifiedforthecommittee.WhentestifyingtotheSenatesubcommittee,BonnieGrissomBlackley,benefitsdirectorforBRPP,concluded:
ShouldIneedasurgicalprocedure,providemeandmyspousewithanallexpense-paidtriptoaJointCommissionInternational-approvedhospital,thatcomparestoa5-starhotel,asurgeoneducatedandcredentialedintheU.S.,nohospitalstaphinfections,aregisterednursearoundtheclock,noonepushingmeoutofthehospitalafter2or3days,aseveral-dayrecoveryperiodatabeachresort,emailaccess,cellphone,greatfood,touring,etc.,etc.for25%ofthesavingsupto$10,000andIwon’tbeabletogetoutmypassportfastenough.
BLUERIDGEPAPERPRODUCT’STESTCASE
Thetestcaseunderthenewarrangementwasavolunteer,CarlGarrett,a60-year-oldBRPPpaper-makingtechnicianwhoneededagallbladderremovalandashoulderrepair.HereportedlywaslookingforwardtothetripinSeptember2006,accompaniedbyhisfiancée.A40-yearemployeeapproachingretirement,hewouldbethefirstcompany-sponsoredU.S.workertoreceivehealthcareinIndia.Thetwooperationswouldhavecost$100,000intheUnitedStates,butwouldcostonly$20,000inIndia.Thearrangementwasthatthecompanywouldpayfortheentirething,waivethe20%copayment,giveGarrettabouta$10,000incentive,andstillsave$50,000.
However,theUnitedSteelWorkersUnion(USW)nationalofficeobjectedstronglytothewholeideaandthreatenedtofileforaninjunction.Thelocaldistrictrepresentativecommented,“Wemadeitclearthatifhealthcarewasgoingtoberesolved,itwouldberesolvedbymodifyingthesystemintheU.S.,notbyoffshoringorexportingourownpeople.”USWPresidentLeoGerardsaid,“NoU.S.citizenshouldbeexposedtotheriskinvolvedintravelinternationallyforhealthcareservices.”TheUSWsentalettertomembersofCongressthatincludedthefollowing(Parks,2006):
Ourmembers,alongwiththousandsofunrepresentedworkers,arenowbeingconfrontedwithproposalstoliterallyexportthemselvestohavecertain“expensive”medicalproceduresprovidedinIndia.
WithcompaniesnowproposingtosendtheirownAmericanemployeesabroadforlessexpensivehealthcareservices,therecanbenodoubtthattheU.S.healthcaresystemisinimmediateneedofmassivereform.
Therighttosafe,secure,anddependablehealthcareinone’sowncountryshouldnotbesurrenderedforanyreason,certainlynottofattentheprofitmarginsofcorporateinvestors.
Theunionalsocitedthelackofcomparablemalpracticecoverageinothercountries.ThecompanyagreedtofindadomesticsourceofcareforMr.Garrett,butmaycontinuetheexperimentwithitssalaried,non-unionemployees.CarlGarrettrespondedunhappily.“Thecompanydroppedtheball…peoplehavegivenmesomuchencouragement,”hesaid,“somuchpositiveresponse,andthey’redevastated.Alotofpeoplewerewaitingformetoreportbackonhowitwentandperhapsgothemselves.Thisleavestheminlimbotoo”(Jonsson,2006,p.2).
DiscussionQuestions
1.WhatdifferencediditprobablymakethatBRPPisanESOPownedbytheunionmembersorthatthenationalunionisbusyrecruitinghealthcareworkersasmembers?
2.Whataretheethicalimplicationsofarewardofupto$10,000fortheemployeetogotoIndiaforamajorprocedure?
3.Ifyouwereahospitaladministrator,howwouldyoureactwhenanumberofpatientsandcompaniesbegantoasktobargainaboutprices,includingpresentingpricequotesfromcompanieslikeIndUShealth?
4.Whatwouldbethedifferenceinthebargainingpositionofanacademicmedicalcenterandalargetertiarycommunityhospitalsystem?
5.Howmightstateandnationalgovernmentsrespondtothisincreasinglypopularphenomenon?

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