HSC 6636: Costs, Value, & Trends

1Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Topics

• Rising Costs• The Value of Healthcare• Containing Costs• Trends

“…although the GDP was increasing—creating a much bigger national economic pie—health care spending was an ever-larger slice of that pie. It also means that less of the pie is available for spending on all other goods and services.”

Text, pp. 480-481

HSC 6636: Costs, Value, & Trends

2Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

CostsHealthcare costs are projected to grow to 20% of GDP by 2015

HSC 6636: Costs, Value, & Trends

3Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Rising Costs

• What are all of the contributing components of the increasing healthcare costs that we have seen?– National gross expenditures– Per capita expenditures– National expenditures as a % of GDP

HSC 6636: Costs, Value, & Trends

4Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

The Value of Healthcare

• “Would the average American want to go back to a medical system where life expectancy at birth was 47 years, where one out of every five children died before the age of 10, and where there were no antibiotics or heart surgery, in order to have another $6,280 per year to spend at the mall?”

Text, p. 482

HSC 6636: Costs, Value, & Trends

5Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

The Value of Healthcare (cont.)

• What is the fundamental problem with valuing healthcare?

• What is the fundamental problem with managing healthcare?

• What do we do about it?– As individuals– As a nation and society– As a healthcare providing organization

“But at the end of the day, all of the money must come from somewhere.”

Text, p. 490

HSC 6636: Costs, Value, & Trends

6Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Containing Costs

• The text lists several approaches for containing costs

• We want to identify these approaches as to whether they are incremental or fundamental

– Incremental: Carves out relatively small areas of slack or inefficiency (though repetition may make the improvements significant at the national level)

– Fundamental: Has an order of magnitude impact on costs by either

• Finding larger areas of cost savings• Fundamentally changing HC consumption

HSC 6636: Costs, Value, & Trends

7Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Containing Costs (cont.)

• Areas for cost containment– Managed care– Healthcare information technology– Evidence-based management– Outsourcing– Managing the revenue cycle– Physician buy-in– Addressing the nursing shortage

HSC 6636: Costs, Value, & Trends

8Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Containing Costs (cont.)

• Containing prescription drug costs– Most rapidly increasing component of HC costs– Marked by low manufacturing costs but high

development costs– Little federal policy activity

• Efforts resisted by Congress– Medicare prescription drug coverage has given the

federal government a dog in the fight– What pharmaceutical cost controls are already

underway?

HSC 6636: Costs, Value, & Trends

9Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Containing Costs (cont.)

• Medicare and Medicaid Reform – Review:

• What are the fundamental differences between these two programs

• How do these differences affect – Costs • Who pays them– Who has decision rights

– Approaches• Setting a fixed budget• Managed care• Restricting coverage

HSC 6636: Costs, Value, & Trends

10Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Containing Costs (cont.)

• Additional approaches– Using competition– Anti-trust policy– Medical Savings Accounts and Consumer-Driven

healthcare– Reducing fraud– Price controls

HSC 6636: Costs, Value, & Trends

11Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Containing Costs (cont.)

• Who are the decision makers?• What are the consequences of the decisions they

face?– “The problem is not that we do not know how to

control costs, but that controlling costs is painful.”

– “The grim reality of cost containment is that only two things actually reduce cost in labor-intensive service industries: cutting wages or cutting the number of employees.”

– “Ultimately, the nation will probably have to resort to policy approaches, such as rationing, that limit access to care.” (pp 502-3)

HSC 6636: Costs, Value, & Trends

12Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Trends

• The semester has been a historical review of the HC delivery system in the US (with a peek at other countries along the way)

• What have been the major trends we have seen?– Technical and knowledge advances– HC worker education and training– Changes in organizations offering HC– Changes in insurance and other payers– Changes in the roles of governments– Changes in public (and voter) attitudes– Demand for healthcare

HSC 6636: Costs, Value, & Trends

13Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Trends (cont.)

• What elements of the US HC System are currently in a state of flux?– Which elements have major transitions in progress

at the current time?

• Technical and knowledge advances• HC worker education and training• Changes in organizations offering HC• Changes in insurance and other payers• Changes in the roles of governments• Changes in public (and voter) attitudes• Demand for healthcare

HSC 6636: Costs, Value, & Trends

14Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Trends (cont.)

• What new and existing trends do we expect to see in the future?

• How do we expect these trends to affect us…– …personally?– …professionally?

• Technical and knowledge advances• HC worker education and training• Changes in organizations offering HC• Changes in insurance and other payers• Changes in the roles of governments• Changes in public (and voter) attitudes• Demand for healthcare

HSC 6636: Costs, Value, & Trends

15Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Healthcare Reform

• Note that the book was written before passage of the Patient Protection and Affordable Care Act of 2010 and before the 2007 presidential election

• What are the provisions of the PPACA of 2010?• You should be able to look at almost any

provision of this Act and…– …Identify the problem it was designed to address– …Identify who will benefit from the provision– …Identify who will pay for the provision

• Cover non-monetary ‘costs’ or impacts– …Identify other impacts of the provision

HSC 6636: Costs, Value, & Trends

16Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Wellness and Prevention

• Why are wellness and prevention so important in future HC policy?

• What are the fundamental problems with addressing HC costs through wellness and prevention programs?

HSC 6636: Costs, Value, & Trends

17Dr. Lawrence West, Health Management and Informatics Department, University of Central Floridahttp://systems.cohpa.ucf.edu/lwest

Chronic Conditions

• What is the perverse result of improved HC on the prevalence (and cost) of chronic conditions?

• What is the role of existing coverage for those with chronic conditions?

• Are there coverage gaps which suggest big impacts for targeted policy or coverage changes?