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Session_6_Chapter_12_Part-1_COST 6/14/20 1 Chapter 12 Cost, Access, and Quality: 1. Introduction 2. Cost Introduction • Cost, access, and quality are • Three major cornerstones of health care delivery. • Aka the “Iron Triangle of Healthcare” • An interactive relationship exists between • The cost of health care, • People’s ability to get health care when needed, • The quality of services delivered. Cost of Health Care • “Cost” has three different meanings and can be viewed in 2 perspectives 1. Consumer: Price - microperspective A physician’s bill or health care premium 2. Government: Health Care Expenditure or Spending (P*Q = E) where P=price & Q=quanity - macropersepective –Reflects the consumption of economic resources in the delivery of care •Resources are health insurance, professionals’ skills, pharmaceuticals, medical equipment, discoveries 6/14/20 2 Cost of Health Care 3. Provider: – Microperspective – Physician’s perspective includes staff salaries, capital, rental, supplies, etc. © 2010 Jones and Bartlett Publishers High in Cost • Health care spending spiraled upward at double-digit rates during the 1970s. • Following a massive growth in access created by the Medicare and Medicaid programs in 1965. Reasons For High Cost • Third-Party Payment • Pays the lion’s share for most of the services used; not the consumer. • Imperfect Market • Utilization of health care is driven by need, not demand. • Quantity of health care produced is usually higher than in competitive markets. • Prices are permanently higher than the true cost of production. 6/14/20 3 Reasons For High Cost • Growth of Technology • Growth and intensive use of technology have a direct impact on the escalation of health care cost. • Once new technology is developed, it creates demand for its use. • Technology raises the expectations of consumers about what medical science can do to diagnose, treat disease, and prolong life. Reasons For High Cost • Increase in the Elderly Population • Elderly consume more health care at 3.5 times the rate. • With increased life expectancy and the aging of the baby-boomer generation, there are increases in its elderly population. Reasons For High Cost • Medical Model of Health Care Delivery • The medical model emphasizes medical intervention. • Prevention is de-emphasized. • Health promotion and disease prevention have not accorded their place in the US health care delivery system. 6/14/20 4 Reasons For High Cost • Multipayer System and Administrative Costs • Administrative cost are cost associated with the management of the financing, insurance, delivery, and payment functions. • And can include managing enrollment, monitoring utilization, claims processing, denials and appeals, marketing, and promotion. • Administrative costs can amount to about 24- 25% of all health expenditures. Reasons For High Cost • Defensive Medicine • Because the U.S. has many legal risks for providers. • Leads to tests and service that are not medically justified, but are performed by physicians to protect themselves against malpractice lawsuits. • Unrestricted malpractice claims add to health care costs. © 2012 Jones and Bartlett Publishers Reasons For High Cost • Waste and Abuse • Fraud involves a knowing disregard of the truth. • It typically occurs when billing claims or cost reports are intentionally falsified. • Fraud is a major problem in Medicare and Medicaid • Examples of fraud include: • Providing services not medically necessary or billing for a higher-priced service. 6/14/20 5 Cost Containment • Health Planning • An undertaking by government to align and distribute health care resources that would achieve health outcomes for all. • Currently, market forces are allowed to govern the system. Cost Containment • Price Controls • (Read pp. 143-146 of your textbook for this topic) • One of the most important undertakings to control price for inpatient hospital care was the conversion of hospital Medicare reimbursement from a retrospective to a prospective system. • A system based on diagnosis-related groups (DRGs) as authorized under the Social Security Amendments of 1983. • Costs, however, shifted from inpatient to outpatient. Cost Containment • Price Controls • Reimbursement : payments made by health insurance companies to the providers of health services. Providers can mean hospitals, clinics, or an individual provider • Why is it called reimbursement? • Payments made for healthcare services in the US are called reimbursements because it is a settlement for services provided beforehand. The services have already used up resources that the provider shouldered at the time of visit. • Reimbursements are done after the provider files a claim to the patient’s insurance company for services rendered. 6/14/20 6 Cost Containment • Price Controls • Two main types of healthcare reimbursement: • Retrospective reimbursement: • Most common example is Fee for Service reimbursement • Each distinct unit of service provided is paid for by looking back (historical) at total cost of services at time of filing the claim • Based on cost like length of stay (for hospitalization), services rendered, cost pf providing service. • Problematic because it gives providers the incentive to provide services that may not be essential or necessary • Providers can then increase their incomes by increasing the volume of services. Cost Containment • Price Controls • Two main types of healthcare reimbursement: • Prospective reimbursement: • Uses certain pre-established criteria to determine in advance the amount of payment that will be given when claim is filed by provider • Medicare started this concept in 1983 for hospital stays • Done mainly through Diagnosis Related Groups (DRG) • Approximately 500 DRGs • Principal diagnoses grouped together for the reason of admission e.g. Myocardial Infarction (heart attack) Cost Containment • Price Controls • Two main types of healthcare reimbursement: • Prospective reimbursement -> DRG (continued): • Each DRG correspond to the most prevalent diagnoses and types of services among patients that were admitted to the hospital for a particular reason. • Reimbursement rates are therefore given for bundled services. • Hospitals receive from the government the predetermined fixed rate for each DRG. • Note: even though it is called prospective (not historical) it is still called reimbursement because payment is done after the services are given and after the claim has been filed by the provider. 6/14/20 7 Cost Containment • Price Controls • Two main types of healthcare reimbursement: • Prospective reimbursement (continued): • Prospective reimbursement cuts cost because it disincentivizes providers to give non-essential services that can increase their payments • It also allows government programs like Medicare and also hospitals to better predict healthcare spending and budgets. Cost Containment • Price Controls • Two main types of healthcare reimbursement: • Prospective reimbursement (continued): • Extended to Outpatient Prospective Payment system in 2000 • Main example is the capitationmethod • “per head” – monthly payments given to outpatient providers for each patient that is signed up by the insurance company to that provider to receive health services • This is the reason why can only see (or at least encouraged) to see providers within our network. • Regardless of how much services the patient receives, the provider receives a flat payment per patient • This encourages providers to provide the amount of services within that monthly capitated fee Cost Containment • Competitive Approaches • Demand-side incentives • Cost-sharing mechanisms that place a larger cost burden on consumers. •Encouraging consumers to be more cost conscious in selecting the insurance plan that best serves their needs and judicious in utilization. Write your name here Click or tap here to enter text. Assignment # 1: Cost, Access and Quality (HCM 11 – Sarmiento) Things to remember about this assignment: · Download this document, save it in your computer hard drive or cloud drive · Type in your answers after the text that says “start typing here” · When done, upload this document using the assignment page in blackboard. Perform an online research in the web and do your best to answer the following questions: 1. Based on what was discussed in the Session covering Cost, Access and Quality, name one particular disease or health condition that you think greatly impacts the US healthcare system in terms of the different domains of the healthcare system’s iron triangle (cost, access and quality). Disease or condition: start typing here Click or tap here to enter text. 2. By using examples, explain how this disease or health condition impact the different domains of the healthcare triangle below: · COST start typing here Click or tap here to enter text. · ACCESS start typing hereClick or tap here to enter text. · QUALITY start typing hereClick or tap here to enter text. 3. In your perception and based on what you know, which domain of the iron triangle (cost, access or quality) is affected most by this disease or condition? Domain: choose oneChoose an item. Why? start typing here Click or tap here to enter text. 4. List down at least 5 online references you used by copying and pasting each web address on each of the 5 reference fields provided below: · Online reference #1: start typing here Click or tap here to enter text. · Online reference #2: start typing here Click or tap here to enter text. · Online reference #3: start typing here Click or tap here to enter text. · Online reference #4: start typing here Click or tap here to enter text. · Online reference #5: start typing here Click or tap here to enter text.