Collapse of the
Healthcare System
The US Healthcare System
“There Will Always Be Patients,
Someone Will Care For Them”
Issues Are:
Quality of the Caregiver
Timeliness of Care
Medical Infrastructure
14
12
P
10
e
r 8
c 6
e 4
n
t 2
0
US
UK
Canada Poland Mexico
Healthcare Spending As A Percent Of GDP
Dollar Amount
US
UK
Canada
Poland
Mexico
$4631
$1763
$2535
$576
$490
(Per Capita Spending in US$)
The United States Spends $1.3 Trillion
On Healthcare Annually (And Rising)
Percent
Actual And Projected Health Care Costs As A
Percent Of Gross Domestic Product
18
16
14
12
10
8
6
4
2
0
Yr = 1950
Yr = 1993
Yr = 2010
The United States Spends More On
Healthcare Than Other Countries
Health Care Spending As A Percent Of GDP (2000)
14
12
Percent
10
8
6
4
2
0
United States
France
Britain
The US Healthcare System*
is 69% more costly than the Health
System of Germany, 83% more
costly than Canada, and 134%
more costly than the OECD
Countries
($4,631/person/year)*
Drug Costs
Hospital OP
MEDICAL CARE SPENDING WILL ACCELERATE
US NOW SPENDS 1.4 TRILLION$ ON HEALTHCARE
Are We Paying For:
More Technology
More Comprehensive Care
Better Healthcare Providers
Improved Infant Mortality
Better Preventative Medicine
Longer Lifespan
Convenience
Are we
90
80
70
Number of CT
Scanners Per 100,000
Population
60
50
40
30
20
10
0
US
Japan
UK
Korea
Mexico
About $4600/Year Per Person
Spent on American Healthcare
8
7
V
a
l
u
e
6
5
4
3
2
1
0
1st $1K
2nd $1K
3d $1K
4th $1K
WHO Rankings – Healthcare Efficiency
1
.
.
.
.
36 Columbia, South America
37 United States of America
Cost of Prolongation of
1 Year of Life in a
Dialysis Patient =
$55,000
Much of Increased
Spending Goes To
Convenient Access
Satisfaction WIth The Healthcare System In Various
Countries
70
Percent
60
50
40
Satisfied
30
Unsatisfied
20
10
0
AUS
CAN
NZ
UK
US
Source: Commonwealth Fund/Harvard/Harris Interactive
Satisfied = Very Satisfied Or Fairly Satisfied
Unsatisfied = Not Very Satisfied Or Not At All Satisfied
HEALTHCARE
DOLLAR
Government
Private Carriers
Self-Pay
HEALTHCARE POOL$
Administrative Costs Are High
In The United States
Comparison Of Administrative Healthcare Costs
Between The US And Canada (1999)
$1,200
$900
$600
$300
US
$0
ta
l
To
er
Ot
h
ls
it a
Ho
sp
ne
rs
Canada
tit
io
Pr
ac
US Dollars
per Capita
In General
These Costs
Are Passed
Along To
The Patient
HEALTHCARE CEO COMPENSATION (2002)
CEO
Jeffrey
Barbakow
Richard
Scrushy
Norman
Payson
Leonard
Schaeffer
Alan Miller
COMPANY
Tenet Healthcare
COMPENSATION
$116,682,680
HealthSouth Corp. $112,336,914
Oxford Health
Plans
WellPoint Health
Networks
Universal Health
Services
$76,010,825
$21,765,532
$20,314,933
HEALTHCARE
DOLLAR
Government
Private Carriers
Self-Pay
HEALTHCARE POOL$
Government (Medicare - Medicaid)
Drug Benefits For Seniors (400 Billion/10Yrs)
Baby-Boomers
Medicare Will Be Severely Strained In The Future
Actual And Projected Percent Of US Population
Age 65 Years Or Greater
Year
2050
2000
1950
0
5
10
Percent
15
20
HEALTHCARE
DOLLAR
Government
Private Carriers
Self-Pay
HEALTHCARE POOL$
Self-Pay (An Increasing Problem)
Premiums + Deductibles
+ CoPays Up 22%
48 Million Uninsured
22 Million Underinsured
Medical Centers
Nonelderly People Without Health
Insurance in 1998
Characteristic
Uninsured at
any time during
the year
Uninsured all year
< 19
26.8
7.3
19 to 24
41.9
14.4
25 to 34
31.1
12.3
35 to 44
20.2
9.3
45 to 54
15.1
7.6
55 to 64
14.0
6.7
Demographics Are Changing In The United States
Number Of Foreign-Born Or First-Generation US
Citizens (Millions)
60
50
40
Millions 30
20
10
0
Yr 1970
Yr 2000
CODING
•ICD-9
•CPT
•RBRVS
•Started in England in 1600’s
•Called London Bills of Mortality
•Evolved into International List of
Causes of Death in 1937
•World Health Organization published
International Classification of Diseases
in 1948 to track Morbidity and Mortality
•9th Revision Published in 1977
•1988 Congress Passed Medicare
Catastrophic Coverage Act – Although
Later Repealed, Mandate requiring
ICD9 codes on all Part B Claims was
Upheld.
ICD-9 and CPT Codes Must Match
ICD-10 Is Coming
GOVERNMENT
Developed by
AMA in 1966
Initially Covered
Surgical
Procedures
16 Member Panel, 11
From AMA
Category I: Services that have received approval from the FDA,
are
performed across the country in multiple locations by many physicians and
have proven clinical efficacy. (Also Category II and III Codes)
Adding a New Code Requires
Description of Procedure (Op Note)
Clinical Vignette of a Typical Patient
Copies of Peer Reviewed Articles
Evidence of FDA approval
Government
Spending
Category I: These are five digit codes describing services that have
received approval from the FDA, are performed across the country in
multiple locations by many physicians and that the clinical efficacy has
been well established.
Category II Code certain services and/or test results that contribute to
positive health outcomes and quality care. The use of these codes is
optional.
Category III Facilitate data collection on new services and procedures to
substantiate widespread usage or in the FDA approval process. They will
be eliminated in five years if they have not placed in category I
LBJ Signed Medicare and Medicaid into Law in 1962
Resource-Based Relative
(1992)
Value Scale (RBRVS)
Work Effort
Practice Expense
Malpractice Costs
Dr. Hsiao
Assigned a Relative Value To 7000 CPT Codes
Government Just Adds Multiplier
Procedure Specialties Hurt Most
Longer Procedures Affected Even More
Suffers From
Compression
Effect
Vascular Procedures Were Undervalued
(No Input From Vascular Surgeons)
Vascular Reimbursement
Over The Last 10 years
THE PRACTICING
CLINICAL PHYSICIAN
MD Compensation Changes 1995-1999
Adjusted For Inflation
P
E
R
C
E
N
T
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
All MD's
Prim Care
Specialists
Other Prof
MD Morale Is Decreasing
90
80
70
P
E
R
C
E
N
T
60
50
40
30
20
10
0
Resident Career
Dissatisfaction
Lower MD Morale
Less Enthusiasm
Early Retirement
MD’s Get 20% of HC$ and Make 80% Of Spending Decisions
Survival Of Medical Practices
(If They Fail The System Fails)
Percent
Revenue vs. Expenses (1998 vs. 2000)
10
9
8
7
6
5
4
3
2
1
0
CPI
Operating Expenses
Medical Revenue
No
Perfect
Explanation
For
Rising Malpractice Premiums
Public Now Appreciates Lack Of
Access To Care (OB – Neurosurgery)
Medicare Reform
Rising Overhead
Costs
Decrease
Collection
Rates
Government
Regulations
Medical
Practice
Increasing
Malpractice
Premiums
Workforce Issues
Nursing
Workforce
Issues
NURSES = 2,696,540
The Nursing Workforce Is Aging
50
40
AVERAGE AGE OF NURSES
30
AVERAGE AGE OF RECENT
GRADUATES
AGE
20
PERCENT OF WORK FORCE
UNDER 30
10
0
1980
1984
1988
1992
1996
The Nursing Shortage Will Worsen
Reasons Nurses Leave
•Salaries that are not competitive
•Dissatisfaction with benefits
•Limited advancement opportunities
•Inadequate staffing (patient safety)
•Disillusionment with work environment
•Lack of institutional recognition
•Lack of Institutional loyalty
Active Physicians In The United States
Active Physicians (Ratio To 100,000 Population) Actual
And Projected (MD & DO)
300
250
200
Number 150
100
50
0
Yr 1950
Yr 1970
Yr 1990
Yr 2010
Comparison Of Physician Workforce
In Various Countries
Physician's Per 1,000 Population
United Kingdom
Japan
Australia
United States
Sweden
Netherlands
Spain
France
Germany
0
0.5
1
1.5
2
Number
2.5
3
3.5
4
Doctor Shortage
1929
Population
(millions)
Physicians
Total
Physicians/
100,000
Shortage
121
2000
286
2010
325
2020
345
144,000 772,000 887,300 964,700
119
Cooper, Health Affairs, Jan/Feb 2002
270
283
280
50,000 200,000
NON-PHYSICIAN CLINICIANS
384,000 NPC’s by 2005 = ½ number of practicing physicians
More NP + PA’s than Family Practice MD’s
NPC’s growing at 5X the rate of MD’s
Medicare recognizes NP’s, PA’s, CNS’s Chiropractors and
others
NP’s can practice independently in 22 States
More out of pocket money spent on NPC’s than on
allopathic providers
NP’s provide independent primary care at a level = to MD’s
(Mundinger Study)
Growth Rate of Practitioners
Between 1995-2005
50
40
30
20
10
0
Increase in NP's and PA's
Increase in Physicians
Salaries For Mid-Level Providers
Are Increasing
Annual Salaries For New And Experienced NP's
and PA's
$74,000.00
$72,000.00
$70,000.00
$68,000.00
$66,000.00
$64,000.00
$62,000.00
New PA and NP Graduates
Experienced NP's and PA's
Alternative Medicine Is Having
A Greater Impact On Medical Care
Estimated Increase in Number of Alternative
Medicine Providers Between 1995-2005
Year
05
95
0
20000
40000
60000
Number
80000
100000
120000
All Countries Use Alternative Care
Percent of the Population Using Some Form of
Alternative Medicine
80
60
Percent 40
20
0
United
States
Australia France
Country
Canada
In-Patient Hospitalization
In-hospital Patient Days Are Decreasing
200
8
150
6
100
4
50
2
0
0
1985
2001
Year
Days
Number
Decreasing Discharge Rates And Lengths Of
Stay
Discharges per
1,000 Population
(number)
Length of Stay
(Days)
Outpatient Surgery Is Increasing
Increasing Number Of Operations Performed On
Outpatients
80
60
Percent 40
20
0
1980
1990
Year
2001
Comparison Of Hospital Admissions
In Various Countries
Hospital Admissions Per 1000 Population (2000)
250
Number
200
150
100
50
0
Australia
Canada
Germany
UK
US
In-hospital Usage Is Relatively
Low In The United States
Acute Care Beds And Length Of Stay Per 1,000
Population
12
10
8
6
4
2
0
Acute Care Beds (#)
U
S
U
K
y
an
er
m
G
ad
a
C
an
Au
s
tr a
lia
Hospital Stay (Days)
Ambulatory Care Centers Are Increasing In Number
INTERACTIONS WITH
COMMUNITY HOSPITALS
Hospital Revenue Generation By Specialty
Merritt Hawkins Survey
Specialties
Generate
Most
Revenue
For
Hospitals
Study Included Primarily Community Hospitals
Hospitals Depend On Ancillary Fees
From Specialty Services
Hospital Revenue Generated Per FTE Physician
3.5
3
Million$
2.5
2
1.5
1
0.5
0
Cardiac Services
Neurosurgery
Vascular Surgery
Hospital
Physician
VERTICAL INTEGRATION
Physician Becomes An
Employee Of The
Hospital
Hospitals: Protect market share and enhance physician loyalty
for admissions and ancillary services
Physicians:
Access to capital
Decreased overhead through economies of scale
An opportunity to improve the quality of care
Access to management expertise
Realize Equity From The Practice
Loss per FTE Physician in Hospital and IDS
Owned Groups
Hospital
Relationship
Year 2000
Year 2001
Physician
65,000
70,000
75,000
80,000
85,000
90,000
Dollars
IT DIDN’T
WORK OUT
Percent Overhead Expensese For Medical
Practices
80
60
Percent 40
20
0
Hospital Owned
Practices
Independent Practices
95,000
“I’M FROM THE
GOVERNMENT
I’M HERE TO HELP YOU”
Civil Monetary Penalty
Section of the
Social Security Act
The hospital may not pay physicians directly or
indirectly for reducing or limiting services to Medicare
and Medicaid patients = $2000 in penalties for each
patient.
Government officials may invoke this statute as a
means of limiting gain-sharing relationships between
physicians and hospitals.
+
GAINSHARING
Physicians receive a share of any hospital savings
resulting from the joint development of new systems and
protocols for more effective care management.
Limited by CMP statute of the Social Security Act
Recently the OIG has permitted some gain-sharing
arrangements under strict guidelines (OIG 01-01)
Anti-Kickback Law
Doctor
Medical Laboratory
Hospital Administrator
Drug Company
Medical Device Maker
“Prohibits anyone from knowingly and willfully receiving
or paying anything of value in an attempt to influence
patient or business referrals under federal healthcare
programs" = a criminal offense with fines up to $25,000
as well as imprisonment.
THE STARK LAWS
(Civil Penalty)
Rep. Pete Stark
The stark Law prohibits a
physician or immediate
family member from having a
financial interest in an entity
to which the physician refers
patients for designated
health services (DHS)
STARK LAW APPLIES TO:
•Clinical laboratory services
•Physical therapy, occupational therapy, and speech language
pathology services
•Radiology and other imaging services (not nuclear medicine)
•Radiation therapy (not nuclear medicine)
•Durable medical equipment and supplies
•Prosthetic orthotics devices and supplies
•Home health services
•Outpatient prescription drugs
•Inpatient hospital services
•Outpatient hospital services
•Partenteral and enteral nutrients
Rep. Pete Stark
UNLESS THERE IS AN EXCEPTION:
•Two or more physicians must be legally organized
Pete Stark
•Each doctor must provide at least 75% of his/her
services within the group
•Physicians cannot receive compensation based
directly on the volume or value of designated health
service referrals
MEDICAL
DIRECTORSHIPS
WITH
HOSPITALS
May Violate Anti-Kickback Law
Better Called Consultation Agreements
It is important to have a written document specifying
the consulting services that are expected. The
compensation should be determined at a fair market
value.
Purchased
Diagnostic Test Rule
Lab Bill To Practice
(Not Allowed)
+ 35%
=Patient Bill
Certificate of
Need
State Specific
The American health planning Association has
ranked the level of state regulation based on the
scope of the CON laws. High review standards
exist in the mid-Atlantic states and lower regulations
are generally found in the West.
ABN is provided to
Medicare
beneficiaries before
furnishing services
not anticipated to be
covered. This allows
the consumer to
decide whether or
not to undergo the
suggested service.
The antitrust law restricts
physicians from collectively
negotiating with third party
carriers.
“safety zones for exclusive physician network joint ventures
(IPA’s) is applicable if those ventures comprise less than 20% of
physicians in a particular clinical specialty in a geographic
market, and involves the sharing of financial risk among
physicians”
Hospital
Based
Clinic
•Proper licensure (CON)
•Hospital administration and supervision
•Financial integration with the hospital
•Public awareness of the relationship
•Location of the practice close to the campus
•Utilization of hospital information systems
•Unique services are offered
MD
Reimbursement
is Decreased By
15%
Other Hospital
Physician
Relationships
Joint Equity Ventures
MSO’s (Management Services Organizations)
Preferential Bonds
PHO’s (Physician Hospital Organizations)
Payer Contracting
Hospital Within A Hospital
Boutique Medicine
Usually Cosmetic
Proponents: We are giving the consumer what he/she
wants – It’s the American way
Opponents: The government funded a large
portion of medical education and the physician
has an obligation to the general public
LUXURY PRIMARY CARE
Annual Fee in addition to regular fees
Patient keeps health insurance
Doctor decreases patient load
Fees range from $400 - $25,000
Patient Gets:
Guaranteed Next-Day Appointments
Longer Visits With Doctor
24 Access to Physician
House Calls
Accompany Patient to Specialists
IS THIS BALANCE BILLING?
Specialty
Hospitals
Primarily CV and Ortho
Stark Law Doesn’t Apply
Improved Care?
Patient Convenience?
Strains Comm. Hosp.
Aren’t Comprehensive
Patient Selectivity?
Where Do We
Go From Here?
•Disease Management Programs
•National Health Service
•Care Rationing
•Regulation of HMO’s
•Limiting of Alternative Care Licensure
•Increasing Specialty Hospitals
“For every complex problem
there is a solution that is
simple, direct and wrong.”
H. L. Mencken
UNIVERSAL HEALTH CARE
• 1915--American Association for Labor Legislation
(>$1200/yr) –AMA,labor, insurance industry
opposed.
• 1930’s -- New Deal – unemployment, insurance,
old age benefits,Wagner National Health Act,FDR
support minimal
• 1940’s – Wagner-Murray -Dingell Bill –
compulsory national health insurance by payroll
tax.14 years in every session. President Truman
advocates for NHS.Opposed by interest groups.
UNIVERSAL HEALTH CARE
• 1965 President Johnson signs Medicare and Medicaid into
law
• 1971 President Nixon proposes mandatory employer based
health insurance $ managed care model. Opposed by liberals
and conservatives. Vietnam, scandals preoccupy.
• 1993 Health Security Act of Clintons focuses on “managed
competition.” Public support dwindles in wake of political
mismanagement..
• 1996 Health Insurance Portability and Accountability Act
(HIPAA) to protect insurance when jobs changed. Privacy
issues predominate.
• 1997 – The State Children’s Health Insurance Program –
low income, but lack Medicaid
The
Practice Administrator
Average Salaries of Practice Administrators
160,000
140,000
$
120,000
100,000
1996
80,000
1998
60,000
2000
40,000
20,000
0
<7 MDs
>6 MDs
CEOs
Number Is Increasing
AHA Opposition Focuses On
Amend Stark Law
Disclose Ownership
Revoke Staff Rights
Economic Credentialing
Strengthen CON