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HSC 6636: Costs, Value, & Trends
1Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Topics
• Rising Costs• The Value of Healthcare• Containing Costs• Trends
“…although the GDP was increasing—creating a much bigger national economic pie—health care spending was an ever-larger slice of that pie. It also means that less of the pie is available for spending on all other goods and services.”
Text, pp. 480-481
HSC 6636: Costs, Value, & Trends
2Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
CostsHealthcare costs are projected to grow to 20% of GDP by 2015
HSC 6636: Costs, Value, & Trends
3Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Rising Costs
• What are all of the contributing components of the increasing healthcare costs that we have seen?– National gross expenditures– Per capita expenditures– National expenditures as a % of GDP
HSC 6636: Costs, Value, & Trends
4Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
The Value of Healthcare
• “Would the average American want to go back to a medical system where life expectancy at birth was 47 years, where one out of every five children died before the age of 10, and where there were no antibiotics or heart surgery, in order to have another $6,280 per year to spend at the mall?”
Text, p. 482
HSC 6636: Costs, Value, & Trends
5Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
The Value of Healthcare (cont.)
• What is the fundamental problem with valuing healthcare?
• What is the fundamental problem with managing healthcare?
• What do we do about it?– As individuals– As a nation and society– As a healthcare providing organization
“But at the end of the day, all of the money must come from somewhere.”
Text, p. 490
HSC 6636: Costs, Value, & Trends
6Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Containing Costs
• The text lists several approaches for containing costs
• We want to identify these approaches as to whether they are incremental or fundamental
– Incremental: Carves out relatively small areas of slack or inefficiency (though repetition may make the improvements significant at the national level)
– Fundamental: Has an order of magnitude impact on costs by either
• Finding larger areas of cost savings• Fundamentally changing HC consumption
HSC 6636: Costs, Value, & Trends
7Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Containing Costs (cont.)
• Areas for cost containment– Managed care– Healthcare information technology– Evidence-based management– Outsourcing– Managing the revenue cycle– Physician buy-in– Addressing the nursing shortage
HSC 6636: Costs, Value, & Trends
8Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Containing Costs (cont.)
• Containing prescription drug costs– Most rapidly increasing component of HC costs– Marked by low manufacturing costs but high
development costs– Little federal policy activity
• Efforts resisted by Congress– Medicare prescription drug coverage has given the
federal government a dog in the fight– What pharmaceutical cost controls are already
underway?
HSC 6636: Costs, Value, & Trends
9Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Containing Costs (cont.)
• Medicare and Medicaid Reform – Review:
• What are the fundamental differences between these two programs
• How do these differences affect – Costs • Who pays them– Who has decision rights
– Approaches• Setting a fixed budget• Managed care• Restricting coverage
HSC 6636: Costs, Value, & Trends
10Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Containing Costs (cont.)
• Additional approaches– Using competition– Anti-trust policy– Medical Savings Accounts and Consumer-Driven
healthcare– Reducing fraud– Price controls
HSC 6636: Costs, Value, & Trends
11Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Containing Costs (cont.)
• Who are the decision makers?• What are the consequences of the decisions they
face?– “The problem is not that we do not know how to
control costs, but that controlling costs is painful.”
– “The grim reality of cost containment is that only two things actually reduce cost in labor-intensive service industries: cutting wages or cutting the number of employees.”
– “Ultimately, the nation will probably have to resort to policy approaches, such as rationing, that limit access to care.” (pp 502-3)
HSC 6636: Costs, Value, & Trends
12Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Trends
• The semester has been a historical review of the HC delivery system in the US (with a peek at other countries along the way)
• What have been the major trends we have seen?– Technical and knowledge advances– HC worker education and training– Changes in organizations offering HC– Changes in insurance and other payers– Changes in the roles of governments– Changes in public (and voter) attitudes– Demand for healthcare
HSC 6636: Costs, Value, & Trends
13Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Trends (cont.)
• What elements of the US HC System are currently in a state of flux?– Which elements have major transitions in progress
at the current time?
• Technical and knowledge advances• HC worker education and training• Changes in organizations offering HC• Changes in insurance and other payers• Changes in the roles of governments• Changes in public (and voter) attitudes• Demand for healthcare
HSC 6636: Costs, Value, & Trends
14Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Trends (cont.)
• What new and existing trends do we expect to see in the future?
• How do we expect these trends to affect us…– …personally?– …professionally?
• Technical and knowledge advances• HC worker education and training• Changes in organizations offering HC• Changes in insurance and other payers• Changes in the roles of governments• Changes in public (and voter) attitudes• Demand for healthcare
HSC 6636: Costs, Value, & Trends
15Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Healthcare Reform
• Note that the book was written before passage of the Patient Protection and Affordable Care Act of 2010 and before the 2007 presidential election
• What are the provisions of the PPACA of 2010?• You should be able to look at almost any
provision of this Act and…– …Identify the problem it was designed to address– …Identify who will benefit from the provision– …Identify who will pay for the provision
• Cover non-monetary ‘costs’ or impacts– …Identify other impacts of the provision
HSC 6636: Costs, Value, & Trends
16Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Wellness and Prevention
• Why are wellness and prevention so important in future HC policy?
• What are the fundamental problems with addressing HC costs through wellness and prevention programs?
HSC 6636: Costs, Value, & Trends
17Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest
Chronic Conditions
• What is the perverse result of improved HC on the prevalence (and cost) of chronic conditions?
• What is the role of existing coverage for those with chronic conditions?
• Are there coverage gaps which suggest big impacts for targeted policy or coverage changes?