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  • 1.
    • U.S. Healthcare System:
  • How it works and How it doesnt
  • J. B. Silvers, PhD
  • Wm. & Elizabeth Treuhaft Professor of Health Systems Management
  • WEATHERHEAD SCHOOL OF MANAGEMENT/School of Medicine
  • CASE WESTERN RESERVE UNIVERSITY

2. Big topic. . but let me try, building on the 6 questions

  • Payment:Money drives decisions
  • Physician :Choices here are no exception
  • Product :Good care and good value are the key
  • Purchaser :Unique role for business in the U.S.
  • Prospects :Sustainability threatened
    • . . .a little like a good restaurant on a bad day!

3. It might have good things but it doesnt always work well . . .! HOWS EVERYTHING? 4. SIX QUESTIONS TO TEST YOUR HEALTH SYSTEM LITERACY

  • 1. A "PPO" IS WHICH OF THE FOLLOWING? (PREFERRED PROVIDER ORGANIZATION)
    • LIMITED GROUPING OF HEALTH CARE PROVIDERS
    • A NEW TERRORIST ORGANIZATION
    • A MECHANISM FOR CHANNELING PATIENTS

VOTE 5. Method of Organization and Payment Central to System

  • Source of Funds: Federal, State, Employers, Individuals
    • Medicare : Over 65, Disabled, ESRD (Federal Categorical)
    • Medicaid : Federal match of State $ for Children and Poor Families (relative to Federal Poverty Line)
    • Employee-Sponsored( fully-insuredorself-insuredexempt from state insurance regulation via ERISA)
    • Individual : Purchased directly from companies or through brokers
  • Type of Payment:
    • Conventional(i.e.,80% of charges), usually fee-for-service (FFS)
    • Health Maintenance Org (HMO)flat per member per month (pmpm) capitation, FFS or other incentive to providers
    • Preferred Provider Org(PPO)restricted network, lower payment
    • Point of Service (POS)patient choice of restricted or unrestricted network with higher co-pay for use of out-of-network providers
    • Consumer Directed ,High DeductibleHealth Plans (CDHP, HDHP)

6. Two things you need to know about the money side

  • Medicare dominates everything on payment
    • Sets prices for hospital stays & physician services
      • Others copy them (i.e., pay X percent of Medicare)
    • Hires managed care as option (Medicare Advantage)
      • Capitated payment at higher rate (+11%) for more services
      • Even higher rate (+17%) for rural plans (Private Payment Medicare Advantage) . . .these are the target for cuts to finance physician incomes
  • Employer-Sponsored Health Plans dominate otherwise
    • Smaller employers buy regular insurance (90%)
      • Typically through brokers who get 5-10% of the premium
    • Larger employers self insure (80%)
      • Hire insurance co. as agents, admin services only (ASO)
    • Most (82%) of employees are in ERISA plans exempt from state insurance regulation

7. Spending differs by payor and segment of the population Drugs(w/o Part D) Hospital Physician Admin Drugs Hospital Physician Admin Medicaid ($5000/yr*) * Children $1600/yr (17% of total) Adults $2100/yr(12%) Elderly $11,800/yr(26%) Disabled $13,500/yr(41% ) Medicare Traditional($6000/yr) Nursing Homes Drugs Hospital Physician Admin Drugs Hospital Physician Admin Medicare Advantage ($7000/yr) Employer-Sponsored ($3500/yr) Other Other Other Other 8. SIX QUESTIONS TO TEST YOUR HEALTH SYSTEM LITERACY

  • 2. A "DRG" IS WHICH OF THE FOLLOWING? (DIAGNOSIS RELATED GROUP)
    • A WAY TO DESCRIBE A HOSPITAL ADMISSION
    • A WAY TO GROUP SIMILAR CASES
    • A WAY TO CREATE PAYMENT INCENTIVES

VOTE 9. Byzantine Medicare Inpatient Payment Determination Hospital Adjusted Operating & Capital Base Payment Rate 2009 Operating & Capital Base Payment Rate 2008 UpdateWage IndexMS-DRG Weight (Medical Severity Adjusted* Diagnosis Related Group weight **) Hospital Adjusted Base Payment Rate 2009 * Principal Diagnosis, Procedure,Complications & co-morbidities ** 745 individual DRG weightsDirect(pass-through) &Indirect Medical(Interns, Residents/bed)Education Pmt. Disproportionate Share Payments(if Medicaid & SSIPt Days >15% of total) Other Policy Payments(Critical Access Hospital>35 mi, Medicare-dependent>60%) Outlier Payments(Est. Cost > Loss Threshold) Reduction for Early Transfer(LOS MS-DRG #001: Heart transplant or implant of heart assist system w MCC

    • DRG Weight=23.1117 x$13,499large teaching hospital = $312,000
    • Geometric Length of Stay ~30.8 days (Arith Length of Stay ~45.6)
  • MS-DRG #063: Acute ischemic stroke w use of thrombolytic agent w/o CC/MCC
    • DRG Weight=1.8642 x $9,278average hospital = $17,300
    • Geometric Length of Stay ~3.9 (Length of Stay LOS~4.5 )
  • MS-DRG #063: 90 Concussion w/o CC/MCC
    • DRG Weight=0.7405 x$6,026small rural hospital=$4,462
    • Geometric Length of Stay ~2.0 (Length of Stay LOS~2.5)

11. SIX QUESTIONS TO TEST YOUR HEALTH SYSTEM LITERACY

  • 3. PHYSICIANS GENERALLY ARE PAID WELL BECAUSE
    • IT COSTS A LOT OF MONEY TO TRAIN THEM
    • PATIENTS LOVE AND ARE LOYAL TO THEIR DOCTORS
    • THEY PROVIDE VALUABLE SERVICES TO PATIENTS IN NEED

VOTE 12. Complicated Medicare Physician Payment Determination Adjusted for geographical cost factors Conversion Factor 2009 Conversion Factor 2008 UpdateRelative Value Units (RVU)* -work -practice expense -malpractice expense PhysicianPayment Rates by procedure 2009 * Determined for 10,000 procedures as defined byHealthcare Common Procedure Coding System (HCPCS)UPDATE ADJUSTMENT FACTOR (UAF) SUSTAINABLE GROWTH RATE (SGR) Growth rate that reflects inflation, enrollment,real GDP per capita and policy changes Change required to recoup (or pay extra) thecumulative difference between actual changes and max allowable under SGR (=< 7%) Limitation 13. And these changes are followed by all other payers!!

  • Private payers follow Medicare but pay about 25% more.
  • When the Medicare Fee Schedule [MFS] changes everything shifts with it.

14. SIX QUESTIONS TO TEST YOUR HEALTH SYSTEM LITERACY

  • 4. "GOOD" PRACTICE PATTERNS LEADING TO HIGH QUALITY USUALLY ARE BASED ON WHICH OF THE FOLLOWING?
    • THE AVERAGE OF SIMILAR PHYSICIAN CHOICES
    • THE EXPERT OPINION OF A CONSENSUS PANEL OF PHYSICIANS
    • THE RESULTS OF OUTCOMES RESEARCH COMPARING ALTERNATIVES

VOTE 15. Multiple Views of Quality

  • Internal practice settings and payment review
    • Hospital committees
    • Report cards by insurance, gov, or accreditation
    • Utilization review
  • Externally validated standards and measures
    • National Quality Forum ( www.nqf.org )
    • Joint Commission (Quality Check,www.jcaho.org )
    • Center for Medicare & Medicaid Services (CMS-Hospital Compare
    • Consensus conferences
  • Randomized controlled Trials (RTC)
    • Evidence-Based Medicine

16. SIX QUESTIONS TO TEST YOUR HEALTH SYSTEM LITERACY

  • 5. BUSINESS GROUP PURCHASERS OF HEALTH CARE SERVICES FOR THEIR EMPLOYEES ARE MOST INTERESTED IN THE FOLLOWING:
    • MINIMIZING TOTAL HEALTH CARE COSTS TO THE COMPANY
    • SHIFTING AS MUCH COST TO EMPLOYEES AS IS POSSIBLE
    • MAXIMIZING THE PRODUCTIVITY OF THE WORKFORCE

VOTE 17. Remarkably Stable Coverage of Employees declining Retirees

  • Percentage of Employers (3-199 employees) Offering Health Benefits, 1996-2007
    • Steady at around 60%
  • Percentage of Employers (500+ employees) Offering Retiree Health Benefits, 1993-2007
    • Constant decline from almost half to a quarter
    • Large impact of accounting change that made them recognize this obligation [FAS 106]
    • Government is about to have same accounting shock under GASB 45

18. SIX QUESTIONS TO TEST YOUR HEALTH SYSTEM LITERACY

  • 6. U.S. HEALTHCARE COSTS ARE HIGH BECAUSE--
    • AMERICANS RECEIVE MORE