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Review Session

November 20/2015

Definition of Health
Definition of Health by World Health Organization:
Health is a state of complete physical, mental and social
well-being and not merely the absence of diseases or
infirmity.

World Health Organization: One of the specialized


agencies of the United Nation that is concerned with
international public health. It was established on April
7th, 1948. The headquarter is located in Geneva,
Switzerland.

Health is a subjective concept


1. Intra personal variation
2. Inter personal variation
- Coping mechanism
- Childhood experiences and up-bringing
- Personal choices
3. Influence of cultural values and norms
- Irish vs. Italian patients
4. Societal Changes
- Influence of changes in norms and values

Determinants of Health
1. Societal factors
2. Economic variables
3. Physical factors
4. Personal factors
5. Healthcare system

Use of Water Bottle and Dental Cavity


Societal factors
Economic variables

Physical factors

Personal factors

Dental
Cavity

Healthcare system

Healthy People 2020


A national initiative under the auspice of US Public Health
Services, Centers for Disease Control and Prevention

Establishes goals and objective with 10 year targets to guide


national health promotion and disease prevention for all people
in the US

Current Leading Health Indicators/Concerns


Level of Physical activity
Over weight and obesity
Tobacco use
Substance abuse
Responsible sexual behavior
Mental health
Exposure to injury and violence
Environmental quality
Immunization status
Access to healthcare

Definition of Health vs. Its Application


Application of health is limited to the concept of absence of the disease

Presently, healthcare services impact on health is late in the events that lead to
disease and illness.
- Focusing on changing the Sick Role to Normal Role

Should we consider delivery of healthcare services as a failure in prevention?

Epidemic of Obesity
Medical

Definition of Obesity: Accumulation of excessive adipose tissue


(body fat), usually 20% or more that an individuals ideal body weight.
Body Mass Index (BMI) of 30 or over is classified as medically obese
BMI= Weight in Kg /

Should we consider epidemic of Obesity as a threat to our national security? Why?

Terms to learn
Incidence and prevalence are used extensively by researchers,
healthcare administrators to demonstrate social and ecological
distribution of diseases, impairments and/or accidents.
Incidence= Number of new patients/cases/afflicted individuals divided by
number persons at risk for the specific disease/impairment

e.g. Motor vehicle injury among men ages 16-25.


Incidence of car accidents among men ages 16-25 divided by
the total population of young men (16-25 years)

Terms to learn
Prevalence: The proportion of individuals with a specific disease/health
condition during a specific period of time, usually one-year.
Prevalence: Total number of individuals with the disease or health condition/ Total population
e.g. Prevalence of drug addition among young women (age16-25)
Total number of young women diagnosed with drug addiction divided by the
population of young women ages 16-25

Definition of Healthcare System

Healthcare System= The collection of all institutions and processes that


support prevention, early detection, diagnosis, treatment and healing.

This system is organized to facilitate the delivery of healthcare by


trained providers.

Categories of Healthcare
Primary Healthcare: Focus and objectives are to eliminate or reduce factors that can
increase the likelihood of diseases/adverse health conditions/ compromised quality of life.
- Environmental Quality
- Public Sanitation
- Public Safety
- Vaccination and Immunization
- Engineering and technology
- Education
- Legal System
- Food Safety
- Drug Abuse Prevention
- Suicide Prevention

Categories of Healthcare
Secondary Healthcare: Focus and objectives to reduce the
burden of disease through early detection and/or early
intervention
- Screening for chronic diseases
- Annual check-up
- Eye exam (ocular pressure check)
- Fortification of food items
- Fluoridation of water supply
- Pre-natal care
- Annual/semi annual dental check up

Categories of Healthcare
Tertiary healthcare: Focus and objectives are to eliminate
or moderate the disability/disease/health problem
presented in advanced stages
- Diagnostic and treatment interventions

Players and Organizers of US Healthcare System


1. US government
- Federal and State and Local
- Direct delivery of healthcare
- Indirect delivery of healthcare
2. Private not-for-profit healthcare sectors
3. Private for profit/commercial healthcare sectors

US Government
The principal governmental health authority
- US Department of Health and Human Services
Direct Delivery of Health Services
- VA Hospital System
- Department of Defense
- State Mental Health Facilities
- Public Health Clinics and Hospitals
- Public Health Services

US Government
Indirect Delivery of Health Services
A: Surveillance and Monitoring
Centers for Disease Control and Prevention
- Surveillance Epidemiology and End Result (SEER)
- Cancer Registries
- Infectious Disease Control and Surveillance
- Chronic Disease prevention
- Healthy People Initiatives 2020
- National Health and Nutrition Examination Survey

US Government

Indirect Delivery of Health Services


A: Education and Research
- National Institute of Health
- Agency for Health Research and Quality
- Department of Defense
- Centers for Disease Control and Prevention
- National Science Foundation

US Government
Indirect Delivery of Health Services
- Food and Environmental Safety, etc.
-

Environmental Protection Agency (EPA)

Food and Drug Administration (FDA)

Occupation Safety & Health Administration

US Department of Agriculture

US Custom

Drug Enforcement Agency (DEA)

US Geological Survey (USGS)

US National Weather Bureau

Private Sector

Not-for-Profit
- Solo Practice (Almost an extinct species! )
- Group Practice
- Healthcare System

What are the differentiating characteristics among the three


classification?
What are the differences between solo and group practices?

What are the differentiating characteristics between group practice and healthcare
system?
Group Practice
Providers join together to form their own company. Company then contracts with a management (financing
&administrating) entity to provide services management entity sells prepaid healthcare coverage packages to
beneficiaries or their employers.
Five elements of medical practice can be shared
- Space
- Supporting Staff
- Practice Income
- Practice Expenses
- Medical Work
Healthcare System: A business entity that assumes or shares both the financial risks (insurance) and the
delivery risk associated with providing comprehensive medical service to a voluntary enrolled population
within a particular geographic area, usually in return for a fixed pre-paid fee. Health System may contain one
or several group practices, salary based providers or may contract with independent providers.
Comprehensive medical services is defined healthcare spanning from primary care to tertiary, nursing homes
and end of life care (hospice)

Private Sector
For-Profit or Proprietary Sector
A: Direct Operation of Healthcare Services
e.g. Vanguard Healthcare Services, LLC
B: Indirect Operation of Healthcare Services
- Pharmaceutical Industry
- Medical Information Technology
- Commercial Health Insurance
- Genomic Industry
- Home Health Care
- Nursing Homes
- Biotechnology Industry

Sources of Nations Health Dollar


1. Health Insurance

2.

A.

Private Health Insurance

B.

Medicare

C.
D.

Medicaid title XIX


Medicaid and Local governmental support

E.

VA, DoD

Out of Pocket

3. Other Third Party and/or Programs


A.

Community and neighborhood clinics

B.
C.

Indian Health Services


Workers Compensation

4. Investment
5. Government Public Health Activities
A. Disease Surveillance
B. Inoculation & Immunization Programs
C. Public Health Laboratories
D. Disease prevention programs and initiatives

Problems/limitations associated with the traditional model (fee-for-service, solo practice)


of healthcare system
1.

Fragmented services

2.

Duplication of services

3.

Medical Errors

4.

Inefficiency in the delivery of care

5.

Ineffective care

6.

Poor communication among different specialties

7.

Poor communication between providers and patients

8.

Poor compliance

9.

Poor health outcomes

10. Compromised patients satisfaction


11. Compromised patients safety
12. Compromised providers safety
13. High cost of care

Changes in American Demographic Structure

Changes in American Demographic Structure


U.S. Population
309 million
- 72% White-Americans (including Hispanics or Latino origin)
- 12.6% African-Americans
- 4.8% Asian-Americans
-

10.2% Mixed race/ethnicity and Native-Americans

Improving Quality of Care for : one of the major objectives of US Healthcare System for the 21 st
Century
1. Americans have shorter life expectancy than their counterparts in other developed countries.
- Disparity in life expectancy among various racial/ethnic groups in the US
2. Americans spend the most on healthcare and drugs than their counterparts in other
developed countries.
- Most of the healthcare budget is spent the last year of life
3. American are still dying from treatable disease.
- Disparity by socioeconomic status
- Disparity across the racial/ethnic groups
4. US life expectancy varies by skin color and gender and socioeconomic status

Definition of Life Expectancy


Life Expectancy, defined by WHO, as the number of years of life that can be
expected, on the average, at birth in a given population.

What are the factors that contribute to a longer life expectancy?

What factors contribute to shorter life


expectancy for Mississippians when
compared with Minnesotans?

Improving Quality of Care : One of the major objectives of US Healthcare System for
the 21st Century

5. US has the highest infant mortality than other western


countries, why? What are the contributing factors?

Improving Quality of Care : One of the major objectives of


US Healthcare System for the 21st Century
6. American opt out of vaccinations, leading to new cases of
preventable diseases
7. Doctors in the US do not spend much time with their
patients
8. Life saving prescription drugs cost a fortune in the US
9. It is more costly to give birth in the US than in other
developed countries

Treatment for Hepatitis C


A class of drugs called direct-acting antiviral (DAA) are now
available to treat Hepatitis C

Sofosbuvir and Ledispavir are the two DAA, marketed by the


pharmaceutical company named Gilead.

12 week treatment cost $ 84,000.00 which equals to $1,000 per


pill.

American Hospital
William Penn, a business man, established the first
American Hospital Poor House in 1731

Hill-Burton Act of 1946


The Hospital Survey and Construction Act, passed during the 79th US Congress in 1946.
- The Bill was sponsored by Senator Harold Burton of Ohio and Senator Lister Hill of
Alabama
- The Bill was designed to address the shortage of beds in the underserved areas, especially
in rural south
- Grants and loans were issue to hospitals to
1. Modernize and improve infra-structure
2. Provide healthcare to all people within their service catchments
3. Participate in Medicare and Medicaid programs
4. Post information about their community services in English and Spanish
5. Provide emergency services and maintain unbiased patient admissions

Program stopped providing funds to hospitals in 1994; about 200 hospitals remain obligated to offer
free and/or below federal government poverty guidelines

Classification of Hospitals

I.

Health Condition
-

II.

Psychiatric and Chemical Dependency


Obstetric and Gynecology
Eye, Ear, Nose and Throat
Cancer
Heart, Lung, and Vascular Disease

Ownership/Control: The type of organization that is responsible for drafting,


execution and implementation of institutional regulations and policies concerning
the overall operation of hospital
- Government
- Not-for-Profit
- For-Profit

III. Number of Beds: Per the American Hospital Association regulations, a minimum of
beds are required to meet the standards for a hospital

Hospital Medical Services


I.

In patient Services

II.

Out Patient Services

III. Emergency Room


1) Care to critically ill
2) Secondary medical office
3) Portal entry into the system and hospitalization
4) Source of healthcare for patients
IV.)

Out-reach programs and community services

Patients and Hospitals


1. Sick role accentuated
2. Identity is stripped
A.
B.
C.

Change of clothing
No Personal belonging
Rooms not personal

3. Control of resources
Further accentuation of dependency

4.

Control of mobility

Patients Responses
1. Withdrawal
2. Aggression
3. Integration
4. Acquiescence

Wall Street Journal: How House Calls Can Cut Medical Costs
For infirm older patients, Medicare finds that personal visits can keep people out of the hospital

Patient Centered Care


Institute of Medicine defines Patient Centered Care as Providing care that
is respectful and responsive to individual patients preferences, needs and
values and ensuring that patients value guide all clinical decisions.

Patient Centered Care is an essential component of high quality care, with


expectation of improving the treatment process, through increased
satisfaction, increased adherence to treatment and follow-up and reduced
symptoms severity.

Patient Centered and Service Line Model of Health Care


1. Cooperative and continuous care
- Reduction in error rate
- Improve efficiency of delivery of healthcare
- Improve effectiveness of intervention
- Improve patients satisfaction
- Improve patients compliance

2. Economic benefits
- Cost saving measures
- Prevention of unnecessary and costly intervention

Community Oriented Primary Care


Community Oriented Primacy Care: A process by which a defined populations
health problems are systematically identified and addressed. Ideally it combines principles
of primary care, epidemiology, and public health. The main objective to have the
community fully integrated with its health at every step.

Monitoring and tracking performance of patient-centered care


and service line model
Clinical Report Card

1. Financial Reports
- Cost per Case (patient)
- Margin of Operation: How much $ left in my balance sheet after delivery of services

2. Clinical Quality
- Re-admission rate
- Infection rate (nosocomial infection)
- Length of Stay
- Other complications

3. Patient Satisfaction
-

Did patient understand the course of his/her treatment


Questions were answered adequately to his/her comprehension level?

4. Efficiency in the delivery of care


- Time from sign-in to sign-out (Pathology)
- Door-to-balloon time (Cardiology)

5. Continuous monitoring of performance through data collection and evaluation


- Identify weakness in the chair of services
- Develop constructive approaches to resolve the problem

Rewarding high performing hospitals and providers


Pay-for-Performance: an umbrella term for initiatives aimed at improving
the quality of care and overall value of healthcare.
- Financial incentives are provided to hospitals, physicians and
healthcare providers to carry out improvements and achieve optimal
outcomes for patients.

other

- Financial penalties for failing to achieve specific goals or cost saving


measures. Medicare programs no long pays hospitals to
treat patients
who acquire certain preventable conditions during their hospital stay, i.e.
pressure sores or urinary track infection associated with use of catheters.

Four indicators for performance evaluation


1. Process/Activities: Evaluation of healthcare interventions that have been
demonstrated to contribute to positive or improved outcomes. For
example, counselling for smoking cessation, aspirin given to heart attach
patients, weight loss and dietary counselling, genetic counselling?

2. Out comes: Evaluation of effects of care delivered using laboratory or


other clinical testing measures. For example, blood pressure, blood
glucose, uric acid level, hemoglobin level.

Four indicators for performance evaluation


3. Patient experience: Evaluation and assessment of patients perception
about the quality of care delivered, their level of satisfaction with the
team of healthcare providers and the healthcare system

4. Structural measures: Evaluation and assessment of facilities, equipment


used in diagnosis and treatment
- Adoption of Health Information Technology

Potential Limitations of Pay for Performance Initiatives

1. Clinical outcomes are influenced by social and


personal factors (some even argue psychological
factors) unrelated to the quality of care and treatment.

2. Adoption of new strategy for the delivery of care by all


hospitals (not just those participating in the Pay for
Performance initiative); no baseline for comparison.

What is Value-based-Purchasing in Medicine?


The concept of value-based-purchasing in medicine underlines the importance of demand (consumer/patients)
strategy.
- Short term: Cost reduction and savings to change the current healthcare
- Long term: Improving population health by impacting all the determinants of health, not just
delivery

healthcare

Consumers [private employers purchasers of health services, public sector purchasers of health services
(Medicare and Medicaid), and individuals] are demanding quality of care which incorporates, price, efficiency of
delivery of care, effectiveness of care provided and align these requirements with incentives.
Providers are rewarded by:
1. Improved reputation
2. Enhanced payment through differential reimbursement
3. Increased market share

Medical and Nursing Education in the US


American Medical Association (AMA) was founded in 1847 in Philadelphia

In 1904 AMA established the Council on Medical Education to accelerate


the campaign to raise educational requirements for physicians

In 1905 AMA established the Council on Pharmacy and Chemistry to set


standards for drug manufacturing and advertising and prevention of quack
patent medicine and nostrum trade.

Medical and Nursing Education in the US


Abraham Flexners report of 1906
Abraham Flexner an educator was commissioned by Carnegie
Foundation to review performance and quality of education of the 155
medical school in the US
Closure of under performing medical schools
Withholding of funds from private foundations
Institution of governmental regulations and requirements for licensing of
trained providers

AMA and its influence on Medical Education


Two factors led to the influential role of AMA in Medical Education:
1. Federal and State governments turned to AMA Council on Medical
Education to establish standardized requirements for medical education

2. The trade agreement of 1910 gave AMA the exclusive right and the sole
power to regulate medical profession

What did Flexners report do for medical education?


1. Standardization of requirements for admission to medical schools
2. Indirectly influenced standardization for admission to the other healthcare
professional schools
3. Improved quality of medical education
- Combination of theory and research and incorporating them into practice
- Development of patient-oriented curriculum

4. Decreased the supply of physicians

Decline of Power
Several Factors impacted this decline:
1.

American Association of Medical Colleges and individual schools began to take more
decisive and independent decisions about their curriculum

2.

Drop in AMA membership

3.

Beginning of the crisis in healthcare


- birth of HMO during Richard Nixons administration

4.

Womens movement

5.

Assertion of the nursing power

Nursing Profession
American Nursing Association was founded in 1896 as the Nurses Associated Alumnae; in
1911 it was renamed to American Nursing Association
Five foci of nursing profession
1. Assessment
2. Diagnosis
3. Planning
4. Intervention
5. Evaluation
Traditionally patient not the disease in the emphasis of the nursing profession
in contrast to medical profession

Practicing Medicine in US
Governmental Agencies
- State and local Health Departments
-

Prison System

Department of Defense

VA Health System

National Institute of Health (if clinical trial)

Food and Drug Administration

Direct delivery of healthcare

- Centers for Disease Control and Prevention


- Agency for Health Research and Quality

Private Agencies
-

Group Practice

Solo Practice

Health Maintenance Organization/Healthcare Systems

Pharmaceutical Industry

Biomedical and genomic industry

Direct delivery of healthcare

Pattern of Practice
1. Privilege for ambulatory basis care and in-patient hospital patients

2. Hospitalists

- Hired by a hospital and only provide in-patient care


- Gate Keeper in the hospital

3. No hospital privilege

A small fraction of physicians who do not have hospital privilege

Strategies to improve quality of care and to reduce cost of care


A. Hospitalist
1. Reduce patients length of stay
2. Reduce the other costs associated with patient care
3. Reduce operational cost under several different risk-based payment
system (insurance)
4. Fewer inappropriate admission through ER
5. Improved satisfaction of patients and hospital staff
6. Reduce re-admission rate
7. Increased admission from physicians practicing in remote regions
8. Standardization of care protocol and disease management

Strategies to improve care and reduce cost of care


B. House Calls
1.
2.
3.
4.
5.
6.

Prevention hospital admission


Prevention of long-term care facility admission
Familiar environment for patient
Care provided by family members and loved ones
Improved patient satisfaction
Reduce the utilization rate of high technology

Role of US Government in Healthcare System


US government has dominance in provision of healthcare services that are
not profitable:
1. Healthcare for financially dis-advantage segment of the society
2. Mentally ill
3. Hearing and visually impaired
4. Infections control
5. Native Americans
6. Long-term care of elderly

Role of US Government in Healthcare System


Federal Government: provision of healthcare by categories of persons

Members of the uniformed services and their families

- Native Americans
- Military veterans

State Government: provision of healthcare by disease classification

State mental health program

Tuberculosis and other infectious disease control program

Visually and hearing impaired

Local Government: provision of healthcare by economic class

Public health clinics

Role of US Government in Healthcare System


I.

Financing of Operations

- Cover the cost of operating its own programs, VA hospitals, municipal clinics and
hospitals, state mental hospitals, state public health agencies.

II.

Grants and Contracts

- Provides financial supports to biomedical, population-based and clinical research,


education in healthcare

III. Financing and managing health risk (insurance)


- Medicare, Medicaid, Children Health Insurance Program

Terms to remember
Third-Party: Any one, other than patient for the patients family, responsible for payment of
a healthcare cost to the provider
Out-of-Pocket Expenditure: Costs that are not covered by your health insurance
- Co-pay
- Direct payment to providers for non-insured services
- Deductibles
- Co-insurance
Point-of-Service: Receiving health services from a provider of the choice within a
plan/managed care

Terms to remember
Four parts to Medicare
1. Part A/Hospital insurance: Hospital insurance and skilled nursing facility care,
hospice and home health care

2. Part B/Medical insurance: Supplementary medical insurance covers physician


and certain health professional services, hospital outpatient care

3. Part C (Medicare Advantage): An alternative to traditional Medicare which allows


patients to choose a plan that can provide the flexibility they need based on their
specific requirements

4. Part D/Drug insurance: Prescription drug coverage

Terms to remember

Diagnosis Related Group (DRG): One form of prospective payment system


which is based on a pre-determined and fixed amount. The payment amount
for a particular service is calculated based on the classification of that service.

Risk assumption by hospitals


In response to the possibilities of merger of several major health insurance companies, hospitals
are considering providing their own health insurances because of potential business
advantages.
- Keeping more patients (maintaining/expanding market share)
- Private Insurance exchanges created under the ACA have made it easier for a
local hospital to offer health insurance
- Launching a health insurance plan involves obtaining a state license and meeting
capital reserve requirements
- A minimum of 100,000 members are needed to spread the risk
- Hospitals need a large enough network of doctors to attract consumers
- Monthly premiums rates should be set high enough to account for the needs of
their sickest patients
- Arrangements with other providers should be made, in case a patient require a
specialist outside the hospitals own system

Payments to Providers and Institutions

Six different methods to compensate for services


Cost/Cost Plus
Hourly or Time and Material
Fee-for-Service
Fixed Price
Capitation
Value-based Compensation
You need to know the definition of each term; Lecture 8: 10/16/2015

What happens when a patient cant pay his/her bills?


Unpaid bills either become bad debt for patients or they are written off as
Charity Care.

Hospitals with the most financial resources to offer charity care are not in
geographic areas where people most need it. In high-income areas,
hospitals are better funded and more able to provide charity care. But for
hospitals in low income areas, i.e. inner city, the demand is the highest.

Floor-and-Trade System
To address this mismatch, the researchers propose a floor-andtrade system, where all hospitals are required to provide some charity
care to low-income patients. Currently, the average nonprofit hospital
devotes 2.3 percent of its operating expenses to charity care. In the
proposed system, hospitals would set a floor, or a minimum, for the
amount of charity care theyll provide each year.
To incentivize hospitals to provide charity care and rectify the current
geographical mismatch, hospitals would be able to purchase and
trade charity-care credits. Under this system, a hospital in a lowincome area can receive funding allocated for charity care from one in
a high-income area thats not providing as much charity care.

Population health outcomes


Purpose: To assess and evaluate health status of a different
populations
Health status is a reflection of quality of public health interventions
and quality, availability and accessibility of healthcare
Population: can be defined different patients from different hospitals,
subpopulations within a society, e.g. Hispanic-Americans, NativeAmericans, White-Americans, or different group of people defined
by geopolitical boundaries.

Indicators for Population Health

Mortality Rate
Morbidity Rate
Disease-Specific Death Rate

Life Expectancy
Time lost to Premature Death
Infant Mortality Rate (IMR)
Quality Adjusted Life Years
Healthy Life Expectancy
Years of Potential Life Lost
YOU NEED TO KNOW THE DEFINITION OF THESE TERMS. REFER TO YOUR
TEXT, GOOGLE SEARCH, LECTURE NOTES, 10/30/2015

Healthcare system: Business Model


A. Group Medical Practice: Five elements must be shared
1. Space
2. Supporting Staff
3. Practice Income
4. Practice Expenses
5. Medical Work
You need to know the advantages of group practice for patients and providers

Healthcare system: Business Model


B. Health Maintenance Organization: A healthcare system that assumes
or shares both the financial risks and the delivery of risk that is associates
with providing comprehensive medical services to a voluntary enrolled
population in a particular geographic area, usually for a fixed, pre-paid fee
HMO
Close system: Enrollees use only the pre-paid capitated health services
of the HMO panel of healthcare providers
Open-ended system; Enrollees use the pre-paid HMO healthcare
services from providers who are not part of the HMO panel

Healthcare system: Business Model


Providers
1. Staff Model
2. Group Model
3. Independent Practice Association
4. Network Model
5. Mixed Model
YOU NEED TO KNOW THE DEFINITION OF EACH MODEL

Information technology and healthcare system


Health Information Technology consumes the highest proportion of operational
cost in a healthcare system
Reasons
1. ACA
2. Consumer demand
3. Increase the likelihood for seamless delivery of care
4. Improve monitoring of recovery and patients progress
5. Reduce hospital admission rates
6. Reduce ER visits

Narrow Network
Narrow Network: A cost containment strategy. Insurance company offer
lower premiums by limiting the group of providers available to the plan
enrollees.
Four factors will be used to assess if a network providers is sufficient
1.

The ratio of people enrolled in a health plan to the number of physicians in each specialty

2.

The geographic accessibility of providers

3.

Waiting time for appointments

4.

The ability of health plans to meet the needs of low-income people and children and
adults with serious chronic or complex health conditions or physical or mental disabilities

Changes in medical and other healthcare education


Use of big data in medical education
- Data analysis
- Statistical techniques

The consortium of medical schools are working synergistically to develop common


solutions to transform medical education in key areas

- Developing flexible, competency based pathways


- Teaching new contents in healthcare delivery sciences
- Working with healthcare delivery system in novel ways
- Making technology work for learning
- Envisioning the master adaptive learner
- Shaping tomorrows leaders

Final Words
Curiosity, Imagination and Persistence

Do not give up on your dreams and goals

Cost or Cost Plus


All costs associated with services rendered are painstakingly and
meticulously are recorded
The service provider then submits receipts/documents for
reimbursements
Institutions often are reimbursed on a cost-plus basis
Cost-plus: The actual cost of service rendered plus a % for these cost.
The % increase is based on the contractual agreement between the
provider and the payer.

Reimbursement, ceiling and payment threshold must be explicitly


specified in contracts between payer and provider of the service.

Cost or Cost Plus


The primary advantage is transparency of the financial
operation
Disadvantages
1. Extremely detailed and nettlesome; most payers
understand the bottom line (how much do I have to pay)
2. Cost or Cost Plus does not reward the
hospital/provider for improved quality, efficiency or
effectiveness of care.

Time and Material


Often refers to as hourly payment method
A fixed hourly rate covering all costs, except for consumables and material used
while rendering the service, is charged to the payer.
Charges for material and consumables are based on the contractual agreement
between provider and the payer.
It is the system choice in situations where the scope of work in not clear to
involved parties (payer and provider)
Per diem reimbursement most often used in hospitals is one form of Time and
Material payment and remains the preferred choice for hospitals.

Fee-for-Service

The traditional payment for services in healthcare industry


Mostly used when the scope of work is specified
Viewed as Provider-Centric system of payment
Disadvantages
1. Patient is susceptible to poor medical advice and perhaps unnecessary intervention
2.

Does not calculate additional time for inefficacies, waste and duplication

3.

Does not reward provider for better quality of care, improved efficiency

4.

Preventive medicine is most often ignored

Fixed Price
Productized: A service that can be marketed or sold as a
commodity.
Implication: A fixed price will buy a known quantity of
the service
The known quantity is referred to as Customer-Centric
Outcome
Fixed Price system of reimbursement was developed for
and adopted by federal government in 1983 to curb the
cost of Medicare

Fixed Price
Under the Fixed Price system, hospital is paid a pre-determined
rate for each Medicare enrollee, adjusting for medical condition.
Each patient is classified into Diagnosis-Related Group (DRG)
The $$ amount for each patient/case is determined by a formula based on a
fiscal construct that is called Diagnosis-Related Group (DRG)

DRG is one form of Prospective payment system.

Prospective payment system is based on a predetermined and fixed


amount. The payment amount for a particular service is calculated based on
the classification of that service.

Fixed Price
Excluding certain highly cost patients, hospitals receive a flat rate
for the DRG, regardless of the volume of actual services rendered
Advantage
System is rewarded for efficiency
System is rewarded for quality of care

Disadvantage
Providers can abuse the system by exaggerating the reported severity of the disease
(up coding) because classification of the disease determines reimbursement (DRG).
Providers can attract or seek healthier patients
Preventive medicine usually receive a low priority score

Capitation
A fixed prepayment per person to the provider for a pre-agreed
set of services.
Payment is fixed regardless of type of service or frequency of
utilization of services
Advantage
- Promote the least expensive service
- Promote preventive medicine
Disadvantage
- Focus on enrolling healthier patient

Capitation
Global Budgeting: One form of capitation, often used by
the federal government.
Covers the cost of healthcare services sectors with direct
delivery of health services.
US congress approves the operating budget for VA
system
State government approves budget for mental health
facilities, and local health departments

Value-based Compensation
This method of payment is gaining momentum in healthcare industry
The organization/institution is rewarded for the value of product that is
rendered.
- Value of service/product should be easily measured
- Value of service/product should be agreed by all parties
involved
Effective value-based compensation is an external motivator for providers to
provide effective and efficient, safe care, timely, patient-centered, and
equitable healthcare services

Value-based Compensation
A framework for value-based compensation
1. Standardized performance measurement
- Performance measurement should be conducted on multiple levels,
including health plans, hospitals, physician groups and individual
healthcare providers.
- Measurement should be able to answer question

Healthcare System: Business Model


Staff Model: HMO providers are employees of HMO
Group Model: HMO contacts single multi special group
to provide care for HMO members
Independent Practice Association: Independent
practicing providers who maintain offices but join
together to contract services for HMO
Network Model: Multiple physician groups contacted for
service to HMO members
Mixed Model: Combines features from above

Indicators for population health


Morbidy Rate: How frequently a disease appears in a
population. Used to determine rate of premiums
Mortality Rate: Number of deaths in a given area or period
from a particular cause/disease
Disease-Specific death rate: Death rate for a specific
disease and often reported on the basis of 100,000 persons
Life Expectancy: Life remaining at a specific age, assuming
all mortality rates
Time Lost to premature death: Potential years of life lost by
each death

Indicators for population health


Infant mortality rate: Number of deaths under 1 year of
age occuring among the live births in a given
geographical area during a given year
Quality adjusted life years: Generic measure of disease
burden, including quality and quantity of life lived. Used
to assess the value for money at a medical intervention
Healthy life expectancy: Average number of years a
person can expect to live in full health , excluding years
lived in less than full health due to disease or injury
Years of potential life lost: Estimate in the number of
years a person would have lived if they hadnt died
prematurely

Value based healthcare


Question1: The value-based management is becoming an acceptable
form of healthcare practice in the US and most of the Western
societies. Its implementation is pivoted on two main objectives. List
these two objectives;
Objective 1: To solve problems of quality of care
Objective 2: To reduce the cost of delivery of care
The philosophy of value-based management is a customer-focused
system that is built upon shared principles and care values. The
objective is to instill an ownership culture within an organization. Valuebased management is catalyzed by authentic leaders who actively
seek to empower others; it is developed and sustained from ground-up
and follows the market-oriented theory of economic justice.

Value based healthcare


Question 2: Why so much attention to value-based healthcare? What
are the expectations through implementation of value-based
healthcare?
Due to the aging population the projected cost of healthcare is quite
considerable. Additionally, implementation of advanced technology
and novel therapy is expensive. Therefore, to sustain the operation of
healthcare while curbing the cost of operation, innovative approaches
are needed. Although, the concept of value-based management is not
new and have been implemented in other industry such as
construction and air-travel industry, this approach and concept is new
in healthcare industry.
The expectations are to improved efficiency and effectiveness of
healthcare delivery in conjunction with reducing the cost.

Value based healthcare


Question3: What factors or variables should be considered
when/if the concept of a new business
management/intervention are entertained?
What is the outcome; what to we want to accomplish
Process of measures; how do we want to get to the end points
Implementation of measures and data collection; how are we
doing? Are we achieving our objectives? Are we on track?
Data Analysis and evaluation
Development of implementation of improvement initiatives

Value based healthcare

Question 4: Describe Lynch Syndrome?


Lynch Syndrome history goes back to 1895 when Aldred Warthin, M.D.
began his long tenure with the University of Michigan in Ann Arbor. At that
time, his seamstress appeared depressed and being an extremely
inquisitive and caring physician, he asked her about her depression. She
replied that she was convinced that she was going to die of cancer and it
would involve her gastrointestinal tract or her female organs. She
explained that everyone in her family dies of cancer. Her statement
piqued Warthins interest and he began compiling her pedigree, along with
many others from the tumor registry at the University of Michigan. The
results of his work were quite alarming, the very cancers that the
seamstress had discussed with him were present through four generations
of her family. Also, just as she had predicted, the seamstress died at an
early age because of metastatic endometrial carcinoma.

Value based healthcare


In 1962, Lynch, then a second year resident in internal
medicine was called to see a patient who was
recovering from delirium tremens and in a statement
remarkably similar to that of Warthins seamstress, said
that he knew he was going to die of colorectal cancer
which was highly prevalent in his family; therefore, he
was depressed and was using alcohol to pacify his
depression. As he predicted he died of colorectal
cancer.

Value based healthcare


Lynch presented his patient family history in the
American Society of Human Genetics in 1964. It was at
that meeting that Marjoirn Shaw, MD, a medical
geneticist at the University of Michigan became
intrigued with the report that was presented by Lynch.
She stated that she had a similar family and would like
to collaborate with Lynch. This collaboration led to the
publication of both families in 1966.

Value based healthcare


Lynch syndrome, is an autosomal dominant genetic
disorder that increases the risk of colorectal,
endometrial and ovarian cancer. The cardinal feature is
early onset of cancer, approximately between ages of
20-25 years.

Value based healthcare

Question 5: What was the objective of the study?


To explore how the hospital staff/representatives for four project
teams understand the concept of value based health care
Question 6: Describe the design of the study.
A qualitative design; Data collection consisted of open-ended
interview since the intention was to understand the participants
perspectives and statements.
Question 7: Describe the setting where the study was conducted.
The study tool place at a Swedish University hospital providing
highly specialized care and treatment to children and adults.

Value based healthcare


Question 8: Define the two terms Bundle Payment and
Reimbursement System.
Bundle Payment: Traditionally Medicare made separate payments to
providers for each of the individual services that they furnished.
Because of the Affordable Care Act the Center for Medicare and
Medicaid Innovation was created. This Center was established to
test innovative payments and service delivery models that have
potentials to reduce Medicare and Medicaid or Children Health
Insurance Program expenditure while preserving or enhancing
quality of care for beneficiaries. Under the Bundle Payment strategy,
a provider is paid for a set of services not per unit of care
delivered which was the method of payment under the fee-forservice mechanism.

Value based healthcare


Bundle of payment for care improvement initiative is comprised
of four broadly defined models of service which link payments for
the multiple services beneficiaries receiving during an episode of
care. These models which currently are being evaluated at
different healthcare systems, may lead to higher quality and
more coordinated care at a lower cost to government.
Reimbursement System: Payments for health services like other
services must follow rules and regulations. Health insurance
plans have a variety of healthcare reimbursement plans and
carry contracts with individual practices and healthcare systems.
Therefore, prices/cost of delivery of care may vary within the
system and outside the system for the same service.

Value based healthcare


Additionally, the price of the service is not the retail
price that the provider charges. Payers have a
maximum allowed payment for every CPT code. The
CPT code is the first step in cost calculation for the
services that was rendered.
The payer then adjust the maximum allowed payment
with the Claim edits which is used to disqualify
payments for some services and payment rule which
usually reduce payments for some services.

Value based healthcare


Example; Use of claim edits eliminates payment for the
administration of a vaccine when the physician bills for
the vaccine itself. While, payment rule, reduces the
payment when the physician performs more than one
procedures during the same visit.
CPT= Current Procedure Terminology (CPT). A system
developed by the American Medical Association for
standardizing the terminology and coding used to
describe medical services and procedures.

Value based healthcare


Question 9: Define the Helsinki Declaration
Helsinki Declaration was adopted in 1964; it has undergone several
revision with the last revision was performed in 2013. The Declaration
which was developed and adopted by the World Medical Association is
a set of ethical principles regarding human experimentation. This
declaration has set the foundation on ethics of conducting research on
human and respecting human dignity.
Question 10: List the five items that emerged from the study/
Healthcare providers point of view vs. patients point of view,
benchmarking
Cost perspective, a new method of governance, improvements guided
by outcome measures

Value based healthcare


Question 11: Define the concept of Lean
Management strategy.
A management system that focuses on identifying and
eliminating waste. The philosophy is to identify what
adds value while eliminating unnecessary steps.
Question 12: List strength(s) and limitation(s) of the
study.
Strength: Diversity of participants; participants came
from different project teams and different experiences
and perspectives
Limitation: Small sample size and timing of data

Market factor hospital patient


satisfaction
Define Patient Centered Care
Institute of Medicine defines Patient-Centered Care as providing
care that is respectful and responsive to individual patient
preferences, needs and values and ensuring that patients values
guide all clinical decision making.
Why Patient Centered Care (PCC)?
PCC is an essential component of high quality of health care. An
approach that puts the patient at the center of the care process.
This approach is sensitive, emphatic and responsive to patients
individual need, preferences and values. PCC is expected to
improve the treatment process, through increased satisfaction,
improved adherence to treatment and reduced symptoms severity

Market factor hospital patient


satisfaction
What is the benefit of Care Coordination/Integrated Service Line
The emphasis in on hospital physician alignment and
coordinated care have forced the traditional model of silo
design to a service line model.
Service lines are designed to promote integrated care and
collaborative approach in patient care. While the traditional silo
model tends to create a segmented organization with little
communication or partnership between separate departments.
A significant increase in hospitals embracing the service line
structure because the market is demanding demonstrable value
at a fixed price.

Market factor hospital patient


satisfaction
Define Patient Protection and Affordable Care Act (ACA)
Signed into law by President Obama in 2010. ACA will ensure that all Americans have
access to quality, affordable healthcare and will create the transformation within
healthcare system to contain cost. ACA has nine titles, each addressing an essential
component of the reform:
Quality, affordable healthcare for all Americans
The role of Public Programs
Improving the quality and efficiency of healthcare
Prevention of chronic diseases and improving public health
Healthcare work force, revenue provisions
Transparency and program integrity
Improving access to innovative medical therapies
Community living assistance services and supports

Market factor hospital patient


satisfaction
Define Pay-for-Performance
An umbrella term for initiative aimed at improving the quality of care,
efficiency and overall value of healthcare. This arrangements provide
financial incentives to hospitals, physicians and other healthcare
providers to carry out improvement and achieve optimal outcomes for
patients.
What is Value Based Purchasing
Value-based purchasing is a demand side strategy to measure report and
reward excellence in healthcare delivery.
Value-based purchasing involves the actions of coalitions, employer
purchases, public sector purchasers, health plans and individual
consumers in making decisions that take into consideration access,
prices, quality, efficiency and alignment of incentives

Market factor hospital patient


satisfaction
Effective healthcare services and high performing
healthcare providers are rewarded with:
Improved reputation through public reporting
Enhanced payments through differential
reimbursements
Increased market share through purchaser, payer and/or
consumer selection

Market factor hospital patient


satisfaction
What is the overall objective of Value Based Purchasing
Long-term Objective: To prevent diseases and to improve population
health by impacting all the determinants of health status not just
healthcare
Short-term Objective: Savings that could be applied to transform the
current healthcare delivery system.
What are the four major structural components of the
article/manuscript
1: Background/Introduction
2: Study Design/setting/Methods and Material
3: Results 4: Discussion

Market factor hospital patient


satisfaction
Define the overall objectives of the article
To assess the relationship between the external market factors and
patient satisfaction
In the background section, the authors have addressed the issue of
demographic characteristics of a population and its influence on
hospital resource seeking behavior?
Because atient satisfaction is associated with a sense of having
control over ones life, being older, female, having White/Caucasian
racial/ethnic heritage and attending a general practice compared
In the Method sections, the authors have described the design of their
study. Explain: Retrospective cross-sectional design

Market factor hospital patient


satisfaction
What are the sources of data that the authors used to analyze
their data and tabulate their results?
2008 data compiled from the American Hospital Association,
the Area Resource File and 2008 Dartmouth Atlas.
Define the term Quality Differentiation Strategy
To provide a variety of products, services or features to
consumers that set you apart from the rest of the crowd.
Why Quality Differentiation Strategy is important to hospitals
Quality Differentiation Strategy is a marketing strategy that
can increase a hospital market share and thereby revenue.

Market factor hospital patient


satisfaction
Why hospitals consider physicians as customers?
Physicians sign contracts with hospitals to provide their services.
Additionally, high quality performing physicians or physicians with highly
valued reputation attract patients to hospitals. Therefore, physicians are
one source of income/revenue for hospital.
We have spoken about the role and responsibilities of a Hospitalist. In
this, article it is suggested that although hospitalist model might be a
good model for patient satisfaction
The authors suggest that hospitalists provide the immediate support, care
for in-patient services. Additionally, hospitalists act as the bridge
between patients and their regular providers. The immediate attention
decreases the wait time and increases efficiency in providing the needed
care which results in improved patient satisfaction.

Market factor hospital patient


satisfaction
The authors allude to the concept of a negative correlation
between per capita income and patient satisfaction?
Individuals at higher socioeconomic status tend, in general, are
more tuned in with their psychological and physiological needs.
Additionally, they have better and quicker access to services
needed. These factors impacts patient satisfaction.
The authors have addressed the limitations of their study. Why
should the limitations of a study be explained to the readers?
No study is perfect! By addressing the limitations of a study,
authors acknowledge the weakness of their research and
provide caution in interpretation of their findings.

Narrow networks and ACA


Define the concept of Narrow Networks
The use of narrow networks in health insurance plans is a
cost containment strategy. Insurance plans with narrow
networks seek to offer lower premiums by limiting the group
of providers available to plan enrollees. Consumers choose
among a set of providers under contract with the plan.
An assumption underpinning the narrow network strategy is
that narrow and limited networks can reduce costs by
encouraging patients to seek care from low-cost providers
and perhaps markets can be made more efficient, given that
currently prices among the same types of providers vary.

Narrow networks and ACA


Explain why insurance market place serve as a
key component of the ACA?
Insurance companies under the ACA are intended
to improve the amount and quality of information
available to consumers. The idea is to provide
consumers cost-comparisons among different
insurance plans, assess and regulate quality of
each plan and streamline enrollment process.

Narrow networks and ACA


The authors have argued that the narrow market
holds the potential for better care and lower cost.
Explain.
Competition and Lower Cost.
Competition: Lower performing healthcare
systems/hospitals can be excluded from the
network.
Lower Cost: Reduction in cost and quantity of
care; greater use of primary care and reduced
utilization of specialty care.

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