Financing?of?Health?Care/NURS 6050: Policy and Advocacy for Improving Population Health ?Healthcare Economics and Financing?
NURS 6050: Policy and Advocacy for Improving Population Health
?Healthcare Economics and Financing?
NARRATOR: The challenges of financing the health care system.
DEBORAH TRAUTMAN: Health care financing is very important. And it’s an area
that we will see change over time.
NARRATOR: Looking for ways to pay for health care reform initiatives.
WILLIAM J. WARD, JR.: They’re going to come from physician payment
schedules, and they’re going to come from hospitals. Historically, Medicare has
not kept pace with inflation over the years. And we’ve known that for a number of
years. It’s going to get worse in that regard.
NARRATOR: And to reduce health care spending and control costs.
MARY WAKEFIELD: The big challenge with cost in the United States today, and
that we can anticipate will not be solved anytime soon, is a challenge of trying to
slow down the rate of growth in spending of health care costs.
NARRATOR: And fulfill the vision of health care reform.
CARMELA COYLE: Health care reform is going to be one of the greatest
challenges that I think hospitals have faced in their history.
NARRATOR: This week our experts examine the economics and financing of
health care. And factors that influence the high cost of health care in this country.
MARY WAKEFIELD: There are a number of different contributors to rising health
care costs that nurses should know about. Some of the major drivers of health
care cost inflation, or increases if you will, have to do with, for example, changing
demographics. We have a baby boomer generation that has some pretty high
expectations in terms of what they get for health care for themselves, for their
spouses, even for their parents. So their expectations are pretty high. And I think
those expectations will likely not change when they move into the post-age 65
And what we know with certainty, based on data that you could look at, is that
people in their latter years tend to consume many more health care services, and
so more health care dollars than their younger counterparts. So here we’ve got
sort of a bulge in the population, baby boomers, at the doorstep of retirement.
And with the expectation that they’re going to be using a lot of services. That has
implications today, but it has major implications for us in the out years, in terms of
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trying to find ways to dampen the demand, if you will, or at least to try and
redirect demand so it is appropriate utilization of health care services.
So one major driver of rising costs are demographics of our country. And in fact,
that’s not unique to the United States. We have a lot of countries that are
experiencing exactly the same changes. And although not in exactly the same
place we are, are also anticipating rising health care expenditures.
We also see health care costs rising because of the new great technology that
research and technology development has teed up for us, if you will. These new
types of equipment– imaging, scanning– are wonderful services and
technologies that are available to the American public. But they come with a
pretty big price tag attached to them.
A lot of the health care dollars spent in the United States come from public
programs. Public programs like the Medicare program and the Medicaid
program. So the payor, in this case federal government and state government, is
starting to get a little bit antsy about what it is they’re paying for. And the costs of
the services that are being provided for those Medicare beneficiaries and
Medicaid enrolled individuals and families.
You have a third stream, of course, that comes into play as well. And that’s
private pay. So private insurance. And in addition, out of pocket pay. So
individuals who have no insurance coverage. If it’s public coverage, like Medicare
or Medicaid, and also who do not benefit from having a private insurance policy.
So four streams of payment, if you will.
Most people think about the Medicare program, because it’s sort of the largest
public payer as the 600 pound gorilla. What the Medicare program, for example,
chooses to cover often will influence what this private insurance stream will
choose to cover. So what decisions are made by public policy makers are not
avoided, or they’re not ignored by private insurance companies, who then
exercise decisions about what they’ll cover as well, based on what they’re seeing
government doing. So important streams– private sector insurance, out of pocket
affecting individuals and families, Medicare, and Medicaid– all influenced by
rising care costs, driven by changes in demographics, changes in and high
priced technologies, and a competitive marketplace that doesn’t always hold
down health care costs very effectively at all.
WILLIAM J. WARD, JR.: Well, in terms of how people practice medicine, what’s
probably the most important thing to remember from the institutional standpoint,
from the hospital standpoint, is that most of the reimbursement is case based.
There’s still a little bit of percent of charges, a little bit of fee for service. But
mostly it’s case based. So that if I bring a patient into a hospital with a specific
DRG, I’m going to be paid a specific amount of money. If I move that patient
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through the hospital in seven days, as opposed to four days, I’m getting the same
amount of money.
You know, you look at coronary artery bypass graft surgery. A patient comes in
for a cabbage procedure. That’s about seven days worth of length of stay. If that
patient catches an infection, a hospital acquired infection, and they’re in for 22
days, you’re still going to be paid the same rough $13,000 for that case. But if
you didn’t give them the infection and got them out in the seven days, you’d be
paid for three of that same procedure, because you take in the first patient, plus a
second, plus a third.
So the real important piece is move patients through the hospital as appropriately
and expeditiously as you possibly can. The real big name is throughput. How well
do you orchestrate the resources? How well do you plan things out and
orchestrate things so that that patient can come in, and in a really expeditious
way, boom, everything happens that should, and they’re off and back to– as I
sometimes like to call it– back to taxpayer status.
I think probably the biggest reimbursement issue that we face in health care is
not having enough money to do everything we want to do. In the abstract,
everybody talks about, we need to do less. When it gets to the personal side
however, it’s like, I want everything and I want it now. In a country that’s got 300
million different people wanting to maximize what they get, how do you decide
what doesn’t get funded? Do you just make a cutoff and say, at age 65, there’s
no more kidney dialysis? I think the Brits tried that and it didn’t go over real well.
But what do you do? That’s the issue. Can we afford what we want? And if we
can’t, how do we trim back?
As you look at balancing cost, quality, and access to care, I think we’ve got to try
something different. We’ve tried barriers to access. And from a provider
standpoint, from my old provider side, managed care was basically barriers to
access. You had to leap through hoops in order to get to the hospital, or to get a
procedure done, and so on. So I think we’ve tried barriers to access.
But we can’t say that quality health care with no barriers to access, in other
words, unlimited amounts of access, is going to cost us substantially less than
we’re paying now. We may get more efficient at it, but we’re still going to be
spending a trillion dollars or more for health care when you open the floodgates.
To put 30 million more people into the demand side of health care and expect to
be able to take out $30 billion on the supply side, it just doesn’t work.
It sounds wonderful. But when you begin doing that, the system begins to break.
It’s like trying to overpressurize an old pipe. You can’t put more water through an
old pipe unless you replace the old pipe with a new pipe. Otherwise, you’re just
going to shatter it. It’ll break into a million pieces. And then nobody gets water
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from point A to point B. And regrettably, I think that’s almost where we’re
As we look at what resources we have to provide the care, we are barely doing
that today. We’ve got doctor shortages, nurse shortages, pharmacist shortages.
All these shortages that are out there. And then we’re going to take an extra 30
million people worth of demand– about 10% of the population– and put that on
top and expect this population of providers to be able to take care of that. I don’t
see that working. Further compounding it is, as you try to take $30 billion out of
the system, some providers are going to opt out of the system themselves.
DEBORAH TRAUTMAN: The problem is that our system currently is a fee for
service system. So we pay for volume rather than value. And that means that
there is payment and reimbursement for more tests, more procedures. And we
are not yet savvy enough to say how we can change. But we haven’t advanced
far enough to think about what would be the ultimate driver to get us to focusing
more on the value of health care than volume of services.
And so we’ll see movement more towards integrated delivery systems. We are in
the legislation. For example, there is, one would say, some payment reform
initiatives. One of those is around hospital readmissions. The legislation now has
a provision that actually provides a financial holdback to hospital’s if patients are
discharged from the hospital, and then readmitted sooner than what they should
be. So it actually tries to put a financial incentive in place to drive better practice.
So some of the examples of where the legislation is moving towards thinking
about payment differently than today, so moving away from fee for service,
looking at also accountable care organizations. What does it mean to be an
accountable care organization? And there are very specific criteria in the
legislation about what is an accountable care organization. And it primarily is
about coordinating care, about assuring that not only the immediate acute
intervention, but then followup and ongoing treatment and evaluation, as well as
even preventive services, are considered.
CARMELA COYLE: I think the trend in health care policy in the last several years
has been to focus on payment incentives. Many people believe that the most
significant flaw in our health care system today is what’s often referred to as, we
don’t have alignment of incentives. What do people mean by that? What they
mean is a hospital today, for example, gets paid a single fixed amount to treat a
patient with a particular condition.
But physicians today are paid by the piece. They’re paid for every procedure,
every test, every technology that’s used. So we have a conflict between the two
organizations that you very much want working together, working in sync. One
being given an incentive to be more efficient, the other arguably, an incentive to
do more in terms of maximizing their potential revenue.
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Health care policy has begun to focus much more on those payment incentives.
One of the experiments that will be part of the health care reform legislation, for
example, is called the bundling of payment. So in this case, what if we gave the
hospital and the physicians a single payment amount? If we bundle those
payments together, would that give the hospital and the physician an incentive to
align their work? To say gee, now we’re all pulling on the same rope, and we all
have the same incentive to provide exactly the care that’s necessary, but no
more than that level of care.
Another example of health care policy changing the way in which health care is
financed is something called the primary care medical home. If you’re willing to
be a primary care medical home, we’re going to pay more to do that initially. We
will pay you to have email contact with your patients. We will pay you to follow up
by telephone. You don’t have to drag your patient into your office every time to do
the right thing, to manage their care, to remind them of their next visit. Or to pick
up the phone and say, how’s your blood pressure today?
So we can change the financial incentives by rewarding the things we want to
see in primary care– followup, routine visits, and that human connection with a
patient and their primary care physician– in a way that we think overall can save
the health care system money. So it’s another example of how health care policy
can be used to change the financial incentives, to get what we all hope is a better
One of the biggest barriers that we’re going to have in the United States, and we
certainly have it here in Maryland, we don’t have enough primary care
physicians. And we don’t have enough nurses. In Maryland, we have tried to both
enact legislation that will increase reimbursement for physicians, and make
Maryland more physician friendly.
And in terms of nurses, we have just topped off an $18 million private fundraising
campaign to double the number of nurses in the state of Maryland. But if you
think about what health care reform is all about, it’s about coordinating that
patient care, especially for chronically ill individuals. Who’s going to be doing
that? Primary care physicians and nurses.
And so one of the things we’re really going to have to be careful of in health care
reform is that we don’t promise coverage that, in fact, it turns out to not be
meaningful. We can give everybody a health insurance card tomorrow, but if they
can’t get in to see a primary care physician, we haven’t made the kind of change
we’re seeking to make.
WILLIAM J. WARD, JR.: When you’re saying consciously, we’re going to spend
$30 billion less, that’s a sizable chunk of money that isn’t going to be available to
fund new initiatives in terms of technology, information systems, and the like, to
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make those providers go further. The implications for nursing– I think nursing
gets to be on the front line, in place of doctors in many cases.
We see it with the minute clinic. You’re sick, we’re quick, come on in. You’re
seeing more and more of that. You see with some of these doc in the box places
where you’re actually seen by a physician assistant under the supervision of a
physician, and you might see the physician when you leave, as you’re getting
ready to go out the door. But you’re basically being cared for by a physician
assistant, or in the case of the minute clinic, you’re being seen by a nurse
practitioner. Is that sufficient? In a lot of cases it is. But the question then is, do
we have enough nurses? And are we educating enough nurse practitioners and
Take it a step further. What do you do when the faculty begins to retire, as many
have? So we’ve got a real systemic problem here on the supplying side in terms
of amount of resources, but also the ability to produce more resources– people
resources primarily– to deal with this new wave of demand.
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