How is health care cost defined and measured?
Chapter 12
Cost, Access, and Quality
What Are The Three
Cornerstones of US
Healthcare?
Introduction
Three cornerstones of healthcare
delivery:
• Cost
• Access
• Quality
Uncontrolled expenditures reduce
a nation’s ability to provide access
to quality healthcare (e.g. FAX)
Introduction
High quality care
• Most cost-effective care
• Cost is important in
evaluating quality
• Achieved when:
• accessible services are
efficient
• cost-effective
• provided in an acceptable
manner
Learning Objectives
• Understand:
• Healthcare costs, their trends, and underlying factors
• Why some regulatory cost-containment schemes were unsuccessful
• Nature, scope and dimensions of quality
• The difference between quality assurance and assessment
• Regulatory and market-oriented ways to contain costs
• Appreciate the dimensions of access to care
• Analyze access indicators and measurements
• Discuss the implications of the Affordable Care Act on cost, access, and quality
What Are Possible
Meanings (or
Perspectives) to:
“Cost of Healthcare?”
Three possible meanings:
Cost of
Healthcare
1) Price (Patient perspective):
physician’s bill, prescription
bill, premiums
2) National perspective: how
much a nation spends on
healthcare (healthcare
expenditures)
3) Provider perspective: cost of
production (staff salaries,
capital, supplies)
Trends in National Health Expenditures
Trends in National Health Expenditures
Trends in National
Health
Expenditures
• In 2009, 17.4% of GDP
was spent on healthcare
• $7,960 per capita
• Slowed – 2016-2019,
17.8-18%
• CMS projecting 20% by
2025 now.
Do We Need
to Contain
Costs?
Reasons to control costs:
1) Health care consumes a
greater percent of the total
economic output
• Resources are limited
• Other economic uses are
curtailed
2) Limited resources should be
directed to their highest value
3) Corporations bear the
additional cost of doing
business
4) Public spending for
healthcare will become
unsustainable
Reasons for
Healthcare
Cost Escalation
(cost inflation)
• Third party payment
• Imperfect market
• Growth of technology
• Increase in elderly
population
• Medical model of
healthcare delivery
• Multi-payer system,
administrative costs
• Defensive medicine
• Waste and abuse
• Practice variations
Third party payment:
• Moral hazard
• Provider-induced demand
Imperfect market:
Reasons for
Cost
Escalation
• Health care market in the U.S. is
neither free nor highly regulated, and
prices far exceed the cost of
production
• E = Q x P [expenditures = quantity x
price]
• In national healthcare systems,
both Q and P are controlled by a
central agency
• Both remain unchecked in an
imperfect market
• Technology and
specialization:
• Beliefs and values
• High R&D spending
• Innovation that leads
to utilization
• Surplus of specialists
Reasons for Cost Escalation
https://www.ssa.gov/oact/STATS/table4c6.html
• Increase in elderly
population:
• Increased longevity
• Baby boomers
• The elderly use
nearly three times
as much healthcare
as younger people
Inefficiencies related to:
• Financing
• Insurance
• Delivery
• Payment functions
Reasons for Cost Escalation
Multi-payer System and
Administrative Costs
•
•
•
•
•
•
Enrollment process
Contracts
Claims processing
Utilization
Denials and appeals
Marketing
Reasons for Cost
Escalation
Defensive Medicine
Waste and Abuse
• Medical tests and
treatments that are not
immediately justified, but
done for self-protection
(reduce litigation)
• Inefficiencies and Fraud
• Knowing disregard of
the truth
• A major problem in
Medicare and Medicaid
• Unnecessary services
may be provided
• Upcoding
• Misallocation of costs
to increase
reimbursement (in
cost-plus
reimbursement
systems)
• Receiving kickback for
referrals
• Self-referral (Stark Laws
– Medicare/Medicaid)
Reasons for
Cost Escalation
• Practice variations (small area
variations)
• 2016 study documents
differences
o 40-50% demand for variation
o 50-60% demographic supply
• Signal gross inefficiencies in
the system
• Compromise both cost and
quality
All-payer (singlepayer) system
ACA
Cost
Containment:
Regulatory
Approaches
Health Planning
Price Controls
Peer Review
All-payer (single-payer) system
Cost
Containment:
Regulatory
Approaches
• Top-down control (global budgets)
• The U.S. does not have an all-payer
system
• Bottom-up cost control
• Cost shifting occurs
Health Planning
• Government’s efforts to align and
distribute healthcare resources to
achieve health outcomes
• e.g. one hospital for cancer; one
hospital for heart disease
• No system-wide planning and controls
in the U.S.
• CON planning used by some states
Cost
Containment:
Regulatory
Approaches
Price Controls
• Economic Stabilization
Program used during the
Nixon presidency
• Provider-induced demand (no
control on Q) mitigated the
effects of price controls
• DRG-based PPS (prospective
payment system) shifted costs
to the outpatient sector
• Arbitrary rate setting by
Medicaid
• Pay for performance
• Drug price controls (new
discussions in US policy)
Cost
Containment:
Regulatory
Approaches
Peer Review
• Peer Review Organizations
(PROs)
• Statewide private
organizations
• Review by physicians and
other health professionals
• Paid by federal
government
• To review care provided to
Medicare patients
• Is care reasonable?
Necessary?
Appropriate?
• Meets quality?
Peer Review Organizations (PROs)
Cost
Containment:
Regulatory
Approaches
• Each state has a PRO
• Can deny payment if care
not necessary or
appropriate
• PROs are now called
quality improvement
organizations (QIOs)
Demand-side Incentives
Supply-Side Regulation
Cost
Containment:
Competitive
Approaches
Payer-Driven Price Competition
Utilization Controls
Competition
• Rivalry among sellers for customers
• Health care competition can be based
on technology, quality, amenities,
access
Demand-side incentives
Cost
Containment:
Competitive
Approaches
• Cost-sharing by consumers
• A self-rationing mechanism
(reduces moral hazard)
• RAND experiment (‘74-’81)
Supply-side regulation
• Antitrust laws
• Anticompetitive practices can
be illegal
Payer-driven price competition
Cost
Containment:
Competitive
Approaches
• Patients are not customers in the
economic sense
• They pay little out of pocket
• They lack technical information
• Payer-driven competition occurs at two
levels:
• Employers shop for value in health
insurance plans
• Managed care shops for best value
from providers
Utilization controls
• Employed by MCOs
• They overcome the information gap
that patients face (case situations)
Access to Care
Access:
• Ability to obtain needed,
affordable, convenient,
acceptable, and effective
personal health services
timely
• Key implications:
• Determinant of health
• Benchmark in assessing
effectiveness
• Equity
• Quality and efficient use of
needed services
Access to Care
Access concepts:
• Does patient have a source of
care?
• Primary care physician
• Use of healthcare
• Availability, convenience,
referral
• Acceptability of services
• A patient’s preference and
values
Access to Care
Dimensions of Access
• Accessibility: fit between the
locations of providers and
patients (transportation,
convenience)
• Affordability: ability to pay
• Accommodation: how
resources are organized to
provide services and the
patient’s ability to use the
services (timely
appointments, quick service,
walk-ins, etc)
• Acceptability: compatibility
(waiting time; race, culture,
gender, etc.)
Institute of Medicine definition:
• Increased likelihood of desired health
outcomes
• Use of current professional knowledge
Quality of
Care
Dimensions of quality
• Microview
• Clinical (technical) aspects
• Interpersonal aspects
• Quality of life
• Macroview
• Mortality
• Incidence and prevalence
Quality
Assurance
Based on total
quality
management
(TQM)
• Similar to continuous
quality improvement
(CQI) and quality
improvement (QI)
A step beyond
quality
assessment
• Cannot occur without
quality assessment
A system-wide
commitment to
engage in the
improvement of
quality on an
ongoing basis
Quality
Assessment
• Measurement of quality against
an established standard
• Use of data
• Subjective measures must be
quantified
• Measurement scales must have
• Validity (assesses what it says
it measures)
• Reliability (the same results
should occur with repeated
measurements)
Quality
Assessment
The Donabedian Model (1985)
• Structure – the capacity to
deliver quality
• Process – how healthcare is
delivered
• Outcome – effects or results
obtained
In 1980s, many industries
realized good process = good
outcome (e.g. CMM, ISO, etc.)
Structure
The
Donabedian
Model
• Facilities: license,
accreditation
• Equipment
• Staffing levels
• Staff qualifications
• Staff training
• Distribution of hospital beds,
physicians, etc. in a given
population
Process
The
Donabedian
Model
• Clinical practice guidelines
(medical practice guidelines)
• Evidence-based protocols
• Professional consensus
when scientific evidence is
lacking
• Critical pathways
• Timeline
• Identifies planned medical
interventions
• With expected patient
outcomes for a diagnosis
Cost-efficiency
The Donabedian
Model
Processes
• Do benefits exceed the costs?
• Underutilization and overutilization
are based on cost efficiency
Risk management
• Proactive
• Efforts to prevent adverse events
related to clinical care and facility
operations
• Focused on avoiding medical
malpractice
Outcome
The
Donabedian
Model
• Bottom-line measure of
effectiveness
• Recovery, improved health
• Postoperative infections,
nosocomial infections,
iatrogenic illnesses,
rehospitalizations
• Malpractice litigation
• Patient satisfaction
• Quality of Life measures
Quality Report
Cards
• HEDIS
• Health Plan Employer Data
and Information Sets
• Standard for reporting
quality in managed care
plans
• Measures: effectiveness,
access and availability,
satisfaction, health plan
stability, utilization, cost,
informed choices
• CMS Program on Quality
• AHRQ Quality Indicators
• State Public Reporting of
Hospital Quality
ACA Takeaway
Cost control measures
included:
• Competition among health plans to
drive down insurance costs
• Value-based purchasing
• Reduction in Medicare payments to
providers
Promised to increase
access to affordable
insurance coverage,
and supports
improvements in
primary care and
wellness
• Insurance premiums rose after the first
few years due to insurers uncertainty
about markets and their greed
Included provisions for
improving quality of
care, through
programs that link
payment to:
• Quality outcomes in Medicare
• Strengthening of the quality
infrastructure
• Encouraging the development of new
patient care models
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