HSA 3111—The U.S. Healthcare System
Dr. Larry West
HTTP://SYSTEMS.COHPA.UCF.EDU/LWEST
Write This Down
HSA 3111: Intro to Course and US Healthcare System
Topics
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Motivations
The Healthcare System
Ten Characteristics
Why Should We Care?
Trends and Directions
Healthcare in Other Countries
Course Administration
“We have now just enshrined, as soon as I sign this bill, the core principle that
everybody should have some basic security when it comes to their healthcare.”
Barack Obama
“This is a big f*****g deal”
Joe Biden
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
What Is the U.S. Healthcare System?
• What are the major components listed in the
book?
• Consider a routine and common medical
procedure such as a knee replacement
– Name each type of person that participates in the
delivery of the procedure
– Name each type of institution that participates in
the delivery
– Name individuals and institutions that could have
a financial stake in the procedure
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Motivations
• What are the motivations for each participant in
the procedure we just discussed?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Motivations (cont.)
• Economists argue that the behavior of an
economic system is best explained when
assuming that each participant makes decisions
that provide the best payoff to the decision
maker.
• Whenever the structure and conduct of an
industry is studied, this assumption holds the
greatest explanatory power.
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Motivations (cont.)
• The U.S. healthcare system consists of
individuals and institutions (companies and
governments) that deliver healthcare.
• We want to know:
– What forces shaped the roles, practices, and
institutions?
– What are the decision rights each participant has?
– What are the costs and benefits faced by each
decision maker?
– How do decisions impose or create costs and
benefits for other participants?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Motivations (cont.)
• List the types of decisions that a physician will
make over the course of their career
• For each type of decision list the cost and benefit
to the physician of the different possible choices
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Healthcare in the U.S.
• “Most developed countries have national health
insurance programs run by the government and
financed through general taxes. Almost all
citizens in such countries are entitled to receive
health care services” (p. 2)
• “Such is not the case in the United States, where
not all Americans are automatically covered by
health insurance.” (p 2)
• Why do you think this is?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
8
HSA 3111: Intro to Course and US Healthcare System
The Healthcare “System”
• “Hence, it may be somewhat misleading to talk
about the American health care delivery “system”
because a real system does not exist.” (p. 2)
• “The US health care system is unnecessarily
fragmented, which is perhaps its central feature.”
(p. 2)
• System (definition) (dictionary.com)
– an assemblage or combination of things or parts
forming a complex or unitary whole
– a coordinated body of methods or a scheme or
plan of procedure; organizational scheme
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
9
HSA 3111: Intro to Course and US Healthcare System
The Healthcare “System” (cont.)
• “US health care does not consist of a network of
interrelated components designed to work
together coherently, which one would expect to
find in a veritable system. To the contrary, it is a
kaleidoscope of financing, insurance, delivery,
and payment mechanisms that remain
unstandardized and loosely coordinated.” (p 4)
• Once again, why do you think this is?
• What are the consequences to all parties?
• Can you name a system that does work together
coherently?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
10
HSA 3111: Intro to Course and US Healthcare System
The Healthcare “System” (cont.)
• “The market-oriented economy in the United
States attracts a variety of private entrepreneurs
driven by the pursuit of profits in carrying out the
key functions of health care delivery.” (p 4)
• “Each individual and corporate entity within a
predominantly private entrepreneurial system
seeks to manipulate financial incentives to its
own advantage without regard to its impact on
the system as a whole.” (p. 5)
• Is this good or bad? Justify your answer!!!
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
11
HSA 3111: Intro to Course and US Healthcare System
The Healthcare “System” (cont.)
• The blend of public and private involvement in
the delivery of health care has resulted in (p. 5):
– A multiplicity of financial arrangements that enable
individuals to pay for health care services
– Numerous insurance agencies
– Multiple payers that make their own determinations regarding how much to pay for service
– A large array of settings where medical services
are delivered
– Numerous consulting firms offering expertise
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
12
HSA 3111: Intro to Course and US Healthcare System
The Healthcare “System” (cont.)
• “Such a system is not subject to overall planning,
direction, and coordination from a central agency,
such as the government. Due to the missing
dimension of system-wide planning, direction,
and coordination, there is duplication, overlap,
inadequacy, inconsistency, and waste leading to
complexity and inefficiency.” (p. 5)
• Name another large system that is centrally
planned and controlled.
– Is the efficiency any better?
• Again, what are the trade-offs?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
13
HSA 3111: Intro to Course and US Healthcare System
The Healthcare “System” (cont.)
• What are the roles of governments in the
healthcare system as described?
• Name other ways in which the government is
involved in the economy and society
• What are the motivations for government
involvement?
• (What is the motivation for having government at
all?)
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
14
HSA 3111: Intro to Course and US Healthcare System
Size of the Healthcare System
• The Kaiser Family Foundation reports that in 2008
healthcare expenditures in the United States
topped $2.3 trillion to represent over 16% of the
Gross Domestic Product (GDP) *
• Total employment 10 million
– 744k physicians
– 2.2 million nurses
– 168k dentists
– 226k pharmacists
– 700k administrators – 325k therapists
• 5,760 hospitals
• 150 medical schools
• 56 dental schools
• 91 pharmacy schools
• 1,500 nursing programs
* http://www.kaiseredu.org/topics_im.asp?imID=1&parentID=61&id=358
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
15
HSA 3111: Intro to Course and US Healthcare System
The Text’s Four Components
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Financing
Insurance
Delivery
Payment
What are the differences in purpose between
Financing, Insurance, and Payment?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
The Disenfranchised
• What is the status of a destitute U.S. citizen who
needs a readily available medical procedure to
save their life but who cannot afford to pay for it?
• What groups in the U.S. are disenfranchised or
underenfranchised from the healthcare system?
• We know the impacts on these individuals—what
are the impacts on the rest of us?
• Who decides?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Transitions to Managed Care
• What is “managed care”?
• What are the differences between HMOs and
PPOs?
• What are the goals of managed care?
• Who receives the benefits?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Ten Characteristics
1. No central agency governs the system
2. Access to health care services is selective based
on ability to pay
3. Health care is delivered uner imperfect market
conditions
4. Third-party insurers act as intermediaries
between financing and delivery
5. Existence of multiple payers makes the system
cumbersome
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
19
HSA 3111: Intro to Course and US Healthcare System
Ten Characteristics (cont.)
6. Balance of power among players prevents
domination by any one
7. Legal risks influence practice behavior
8. Development of new technology creates an
automatic demand for its use
9. New service settings have evolved along a
continuum
10. Quality is no longer accepted as an unachievable
goal in the delivery of health care
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
20
HSA 3111: Intro to Course and US Healthcare System
Characteristics—No Central Agency
• Note the reference to other nations with a “global
healthcare budget”
– How is care allocated?
– What happens when the money runs out?
– Global prioritization also gives global control
• The U.S. is decentralized
– Private financing accounts for 55% of payments
– Government finances other 45% (much delivered
through states)
– Some government standards
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
21
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Partial Access
• Book cites Universal Access for countries with
national healthcare programs
– What economic behavior might we see with
universal access?
– Do we see it?
• What are the consequences of partial access?
– Individuals
– Social
– Providers
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
22
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Imperfect Market
• What is a perfect market?
• What are the “imperfections” in the healthcare
market?
– Who sets prices and availability?
– Information problems (many)?
– Quality problems?
– Moral hazard
• Why do insurance programs have deductables
and copays?
– Physicians as agents setting demand
• (Who is the “customer” for textbooks?)
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
23
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Third-Party Payers
• How do insurers interject themselves as ‘thirdparty’ participants in a healthcare transaction?
– How is the transaction different because of
insurers than it might have been if only the patient
and provider were involved?
– What is the insurers motivation?
• What decisions do each party to the transaction
make?
– What are your options?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Characteristics—Multiple Payers
• “Multiple payers often represent a billing and
collection nightmare for the providers of
services.” (p. 16)
• What are the consequences of having many
independent reimbursing agencies involved in
healthcare?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
25
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Balance of Power
• In the retail supply chain from providers to
customers WalMart is large enough to be able to
dictate terms to the other participants.
• There is no corresponding 900 lb. gorilla in the
healthcare field, “One positive effect of these
opposing forces is that they prevent any single
entity from dominating the system.” (p. 17)
• “On the other hand…In an environment that is rife
with motivations to protect conflicting selfinterests, achieving comprehensive systemwide
reforms is next to impossible…” (p. 17)
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Characteristics—Legal Risks
• How many advertisements do you see on a
weekly basis from attorneys seeking clients for
medical malpractice suits?
• How much does one of these attorneys make for
a successful claim?
• What is defensive medicine?
• What other consequences does the risk of legal
action create for the system?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
27
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Technology
• Name a medical technology that didn’t exist 100
years ago.
• Does a patient have a right to a new technology?
• What is a “capital investment” and what are the
implications for the healthcare system?
• What are the incentives for the inventors of new
technologies?
• (What are the incentives for the inventors of new
procedures that don’t involve new physical
artifacts or equipment?)
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
28
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Continuum of Service
• New settings and specializations have arisen for
providing healthcare services along a continuum.
• Cradle-to-grave services by a single provider is
almost nonenxistent
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
29
HSA 3111: Intro to Course and US Healthcare System
Characteristics—Quality
• Why are there increasing pressures for not only
delivering quality care but for measuring quality
of care?
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Trends and Directions
• Trends in healthcare—explain the motivations
– Illness → Wellness
– Acute care → Managed care
– Inpatient → Outpatient
– Individual health → Community well-being
– Fragmented care → Managed care
– Independent institutions → Integrated systems
– Service duplication → Continuum of services
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Why do we Care?
• Understanding the healthcare delivery system is
critical for a number of participants
– Practitioners
– Policy makers
– Managers
– Patients
– Participating companies
– Non healthcare employers
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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HSA 3111: Intro to Course and US Healthcare System
Healthcare in Other Countries
• The variety of healthcare delivery approaches
around the world provides a laboratory for
exploration.
• Understanding the motivations and outcomes of
different approaches helps us to understand what
might come about here or what we may be able to
change
– Policy makers
– Voters—get beyond the rhetoric
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
33
HSA 3111: Intro to Course and US Healthcare System
Course Administration
• Tour of the web site
– Syllabus and grading
– Schedule
– Registration
– Quizzes
– What you need
• Attendance, etc.
• How to succeed
Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida
http://systems.cohpa.ucf.edu/lwest
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