Introduction to Healthcare and Public Health in the US: Financing Healthcare
(Part 2)
Audio Transcript
Slide 1
Welcome to Introduction to Healthcare and Public Health in the US, Financing
Healthcare (Part 2). This is Lecture (c).
The component Introduction to Healthcare and Public Health in the US, is a survey
of how healthcare and public health are organized and services delivered in the US.
Slide 2
The objectives for Financing Healthcare (Part 2) are to:
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Describe the revenue cycle and the billing process undertaken by different
healthcare enterprises.
Understand the billing and coding processes, and standard code sets used in the
claims process.
Identify different fee-for-service and episode-of-care reimbursement
methodologies used by insurers and healthcare organizations in the claims
process.
Review factors responsible for escalating healthcare expenditures in the US.
Discuss methods of controlling rising medical costs.
Slide 3
This lecture discusses potential methods of addressing rising healthcare costs in the
US through the use of health information technology to control costs through
coordination of care; the use of electronic health records to improve health information
exchange; and the use of evidence based medicine, including clinical decision support
and clinical practice guidelines to better support providers.
Slide 4
It will also describe newer healthcare delivery models including retail clinics and urgent
care centers, and the use of physician extenders, and their role in primary care delivery,
as well as the patient-centered Medical Home and Concierge Medicine, and its capacity
to reduce healthcare expenditures.
Slide 5
There are many factors driving the increase in expenditures for medical care in the US.
Among them is the cost of technology, increased utilization, and administrative costs.
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
1
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
According to the Congressional Budget Office, fifty percent of the total annual
expenditures on healthcare pay technology costs. New imaging devices such as CT
scanners and magnetic resonance imagers, and artificial parts and devices such as
artificial joints for knee and hip, or pacemakers for the heart, contribute to major
advances in the diagnosis and management of patients with chronic disease. At the
same time, they also contribute to increasing costs.
New procedures have led to new treatments for difficult or untreatable illnesses and
injuries, for example the lap-band for morbid obesity. Use of the daVinci robot for
minimally invasive surgery has the potential to decrease length of stay and reduce the
risk of complications, but costs thousands of dollars more per procedure, due to the
high cost of the equipment.
Slide 6
Beginning in 2011, the oldest of the sixty-six million people born between 1946 and
1964, known as baby boomers, will reach the age of sixty-five and become eligible for
Medicare. Claims analysis indicates that individuals greater than sixty-five years of age
expend over eight thousand dollars per year on medical services. The increases in both
the numbers of aging individuals requiring care and the expenditures associated with
them will continue to raise healthcare expenditures.
The increase in chronic disease in the aging population will result in the use of
additional resources in the diagnosis, management, and prevention of disease
progression and complications, further straining the healthcare system.
Slide 7
Administrative costs account for an estimated seven percent of total healthcare
expenditures in the US. These costs are more than double the average of other
industrialized countries, primarily due to the myriad requirements for claim submission.
Payers establish different rules and processes for the submission of claims, and these
processes result in additional administrative costs by healthcare organizations to meet
the specific requirements for submission and additional costs by payers to evaluate
submissions.
Transparency, or lack thereof, on the part of third party payers in the process of
determining the value of healthcare services and reimbursements, leads to variations of
payments for the same service among different insurance companies, and in some
cases, within the same company.
Insurance companies have traditionally looked to providers for discounts in order to cut
costs. In a fee-for-service reimbursement scheme, physicians may alter their practice
patterns by increasing utilization of fee based services to offset lost income and pay
practice expenses. This leads to an increased need for additional staff and to a cycle of
increasing utilization and administrative costs.
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
2
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
Slide 8
Two additional factors driving utilization are defensive medicine and patient preference.
Defensive medicine is the prescribing of diagnostic and/or therapeutic measures to
avoid malpractice litigation . The additional diagnostic value to avoid risk may
contribute to over-utilization of some services, for example expensive imaging studies.
Tort reform and the use of clinical guidelines discussed later in this lecture may help to
lower costs in the future.
Demand for new technology can be driven through the media or direct-to-consumer
advertising about products and services that may imply additional health benefits
through their adoption and use. This cost of new technology may not be justified by the
marginal increase in value in the care and treatment of patients. However, providers
may begin using more expensive treatments due to patient demand.
Slide 9
Healthcare costs are increasing for a myriad of reasons. What methods can be used to
increase access to care, improve quality, and control costs? Who becomes responsible
for keeping costs under control – the patient, the physician, the hospital, the third-party
payer, or the employer? How does one determine the value of new technology in
improving patient outcomes? How do we slow or avoid the development of chronic
disease in an aging population?
There are no easy answers to these questions. One potential cost control method
includes limiting the available resources, or rationing. Another method involves
decreasing utilization patterns by increasing the patient share of the costs, or by
investing in wellness and prevention.
Both rationing and increasing the patient share of costs raises ethical questions about
care for the disadvantaged, the potential for creating a two-tiered healthcare delivery
system, and the appropriate utilization of services by untrained consumers. In addition,
while wellness and prevention programs may result in fewer complications and longer
periods of health, the additional consumption of health resources needed in wellness
and prevention programs may offset potential savings.
Perhaps the best method of controlling costs is to increase the efficiency of healthcare
delivery using health information technology, evidence-based medicine, and clinical
practice guidelines. Additional savings may be achieved through new models of
healthcare delivery and tort reform.
Slide 10
Health information technology, or HIT [H-I-T], in conjunction with evidence-based
medicine, offers an opportunity to slow healthcare expenditures. The Health
Information Technology for Economic and Clinical Health Act, or HITECH [high-tehk],
authorized the federal government to take a leadership role in developing standards to
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
3
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
allow for the nationwide electronic exchange and use of health information to improve
quality and coordination of care. It will provide savings through the reduction of medical
errors and duplicate care. The government will invest over nineteen billion dollars to
reward healthcare organizations and providers who use electronic health records, or
EHRs [E-H-Rz], in a meaningful way.
An EHR facilitates the coordination of care and can support providers through the use of
clinical decision support, or CDS, based upon the clinical practice guidelines applicable
in a particular clinical situation.
Clinical decision support is the real time delivery of information that could aid in the
diagnosis or management of the patient as the physician uses the electronic medical
record. Physicians receive reminders that may help them make appropriate decisions
regarding the use of healthcare resources for the diagnosis and management of the
patient.
The use of CDS has the potential to lower costs by avoiding diagnostic expenses such
as duplicate testing and/or procedures that have only a marginal value in aiding the
decision-making process. It aids management of patients by avoiding errors, for
example, prescribing a medication to which the patient has an allergy or which may
adversely interact with another medication the patient is already taking. Real time
decision making may avoid the additional expense associated with these errors.
HIT [H-I-T], further supports lowering costs through health information exchange by
permitting access to records through the sharing of information among providers, and
decreasing the potential of duplication of procedures and services.
Slide 11
Evidence-based medicine, or EBM, involves the review of published research studies in
evaluating the value of a treatment. Using the results or evidence of these reviews to
design clinical practice guidelines, practitioners can treat patients based on an
established standard of care. This has the potential to lower costs since patients are
treated according to a standard based on evidence of the effectiveness of a treatment.
It also has the potential to stop the practice of defensive medicine by establishing a
standard for care.
Some physicians have criticized clinical practice guidelines as cookbook medicine, but
the goal of clinical practice guidelines is to establish a benchmark from which a
physician can initiate treatment under a particular set of circumstances. It does not
prevent a physician from altering the treatment plan in the future, based upon the
results of the standard of care.
Evidence-based medicine can be used to establish the value of new technology. For
example, the additional cost of minimally invasive surgery using the daVinci robot has
been justified by the lower complication rate and length of stay, thus decreasing overall
costs of care. By comparing the overall costs of minimally invasive surgery using the
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
4
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
daVinci system, including its complications, against those of standard minimally invasive
surgery, evidence can be gathered to support or disprove the cost savings assumption.
Slide 12
Attempts to lower costs while maintaining access, comprehensiveness, and quality of
care, include an approach called the Patient Centered Medical Home or Medical Home
for short. Early indicators suggest that this approach may result in lower costs. It could
be considered a long-term approach to providing comprehensive evidence based
primary care to meet the medical needs of patients. Services include care for acute and
chronic illness, preventive care, lab, and x-ray, among others.
The primary care physician directs medical services with the assistance of a team. This
team may include nurse practitioners, physician assistants, nutritionists, pharmacists,
social workers, and behavioral health specialists, and takes collective responsibility for
the patient’s medical needs. There is enhanced access to all care team members,
which facilitates partnerships between patients and providers.
Slide 13
The team is responsible for coordinating care with other organizations such as home
health providers or hospice, and making appropriate referrals to hospitals and
specialists.
Active patient participation in the decision making process empowers patients and their
families. A care planning process using evidence-based medicine, clinical decision
support tools, and quality performance measurements assures quality and safety. In
2004, a study using the Medical Home model found an overall reduction in medical
expenses of five-point-six percent and the potential for reducing healthcare costs.
Slide 14
Another approach is Concierge Medicine, also called direct primary care or retainer
practice. In this case, the patient pays a monthly or annual retainer or membership fee
and receives all primary care through the practice, including special services and
enhanced access to providers.
There are variations on this model. All of the models limit the number of patients in the
practice, usually less than 500. Some may bill insurance in addition to the membership
fee, but many do not. The plans are not a substitute for insurance, and patients should
maintain private health insurance for catastrophic medical events.
Slide 15
Typical features of the retainer practice are similar to the Medical Home. Appointments
are available the same day for urgent medical issues and next day for non-urgent
issues. The patient has the provider’s mobile or home number and access 24 hours a
day. Patients receive the personal attention of the provider during extended office
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
5
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
visits. Many insurance plans do not cover this practice, or limit the number or type of
preventive services available. Most retainer practices offer a full range of preventive
care physicals and screenings.
Slide 16
When necessary and appropriate, patients receive house calls to their home or
workplace as required. Wellness and nutrition counseling are provided, along with
mental health counseling and behavioral counseling for such issues as stress reduction
and smoking cessation.
Slide 17
In general, practice costs are lower primarily due to the limited number of patients in the
practice. Since many concierge practices do not bill insurance, administrative staff
costs are lower. In addition, less nursing staff is needed to support the smaller volume
of patients seen on any particular day.
Overhead costs are also lower as less office space is needed to accommodate the
smaller number of patient appointments and administrative staff for billing. This also
results in lower utility costs.
Quality of care is perceived to be higher by patients, but evidence suggests that there is
no difference in the quality of measured medical outcomes from a traditional primary
care practice.
Slide 18
According to a report in Health Affairs, published in 2010, further study is needed to
show if this model will have any effect on overall healthcare expenditures. Some
employer groups are testing the model to see if it results in lower overall healthcare
spending. Since patients must still maintain health insurance for extraordinary
expenses not covered by the membership fee, there may not be any real cost savings.
In addition, during the short term this model may exacerbate the shortage of primary
care physicians as more providers move to the model, but it eventually may lead to
more physicians becoming primary care specialists.
Slide 19
Many insurers provide incentives to avoid emergency department visits and seek lower
cost options. Urgent care centers and retail clinics are two delivery methods that
accomplish this. Urgent care clinics emerged in an effort to move patients from the
emergency department to a lower cost alternative. These facilities provide convenient
access to rapid and convenient medical care for those in need of urgent but not
emergency care. Urgent care centers usually offer basic x-ray and laboratory services
on site and operate beyond the typical physician office hours. Examples of the types of
conditions that could be treated include an asthmatic who cannot get a same day
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
6
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
appointment with their regular primary care physician or an individual with a laceration
that requires a few stitches.
Another delivery model is the retail clinic. Retail clinics can be found in non-traditional
provider locations such as a pharmacy or store. They may be staffed by nurse
practitioners or licensed physicians; however, most lack radiographic and the more
complex laboratory services. A criticism of the use of retail clinics for primary care is
that only the difficult cases, requiring more time and expense, will remain with traditional
physicians.
Slide 20
Recent discussion about the future of primary care includes proposals for the use of the
Doctor of Nursing Practice (DNP) as a solution to the primary care crisis. A DNP is a
graduate trained nurse who completes post-graduate training much like physicians do
through internships and residency programs. Upon completion of this training and
passing a certification examination, the DNP would open a practice or work for a
hospital or clinic without the need for a physician supervisor. Physicians would be
available as specialist consultants.
Benefits of developing this model include the lower cost of professional development
and potentially lower expenditures.
Slide 21
Defensive medicine drives up costs by spending healthcare dollars on tests and
procedures that have minimal clinical value to avoid malpractice. Estimates of the cost
of defensive medicine runs into the billions of dollars annually. Tort reform has been
suggested as a means of lowering healthcare expenditures by avoiding the cost of
defensive medicine. Some suggestions for tort reform include boards to review the
validity of a claim to weed out frivolous lawsuits. Federal laws could prohibit the filing of
lawsuits for the occurrence of known potential complications to which a patient was
advised.
Additional suggestions include limits on punitive awards, attorneys’ fees, and on
payments for pain and suffering, as well as arbitration in certain cases.
Slide 22
This concludes lecture (c) of Financing Healthcare (Part 2). In summary, prospective
savings may come from a combination of methods.
Improved efficiency through the use of health information technology, evidence-based
medicine, and clinical practice guidelines has the potential to produce the most saving.
Evaluating new technology and incorporating the evidence of its effectiveness into
clinical practice guidelines may lead to substantial savings in the future.
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
7
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
New primary care models such as the Medical Home have shown reduction in costs
and potential for savings, while the jury is still out on Concierge Medicine retainer
practice models.
Slide 23
Some additional methods to lower healthcare expenditures include moving care from
the high cost emergency departments found In hospitals to lower cost alternatives such
as urgent care and retail clinics. Additional savings may be achieved by the
development of new levels of providers such as the doctor of nursing practice. And
finally, tort reform may change the practice patterns of providers by decreasing the need
for defensive medicine.
Slide 24
This also concludes Financing Healthcare (Part 2). In summary, the revenue cycle for
healthcare organizations is a unique process that requires submission of medical bills or
claims to insurance payers using standardized codes for review and adjustment. The
methodology used to adjust the claim involves either a fee-for-service or episode-ofcare method, which is a function of the provider-payer contract.
The US has the highest per capita national healthcare expenditures and the highest
national healthcare expenditures as a percentage of GDP in the world. Factors driving
costs include increased demand and utilization due to aging and chronic disease,
technology, pharmaceutical costs, and high administration costs.
The challenge of the healthcare delivery system is to reduce or slow costs, maintain
quality of care, and improve outcomes and accessibility to care.
Improved efficiency through the use of health information technology, evidence-based
medicine, and clinical practice guidelines has the potential to reduce healthcare costs.
New primary care models such as the Medical Home have shown reduction in costs
and potential for savings, while the jury is still out on Concierge Medicine retainer
practice models.
Some additional methods to lower healthcare expenditures include moving care from
the high cost emergency departments found In hospitals to lower cost alternatives such
as urgent care and retail clinics. Additional savings may be achieved by the
development of new levels of providers such as the DNP. And finally, tort reform may
change the practice patterns of providers by decreasing the need for defensive
medicine.
Slide 25
References slide. No audio.
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
8
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.
Slide 26
References slide. No audio.
Health IT Workforce Curriculum
Version 3.0 / Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare, Part 2
Lecture c
9
This material (Comp1_Unit5c) was developed by Oregon Health and Science University funded by the Department of
Health and Human Services, Office of the National Coordinator for Health Information Technology under Award
Number IU24OC000015.