DQ: #4

Chapter 12

Cost, Access, and Quality

Learning Objectives

• Understand: – Health care costs, their trends, and

underlying factors – Why some regulatory cost-containment

approaches were unsuccessful – Nature, scope, and dimensions of quality – The difference between quality assurance

and assessment

Learning Objectives

• To become familiar with regulatory and market-oriented ways to contain costs

• To appreciate the framework and dimensions of access to care

• To learn about access indicators and measurements

• To discuss the implications of the Affordable Care Act on cost, access, and quality

Introduction

• Three cornerstones of health care delivery – Cost – Access – Quality

• Uncontrolled expenditures mitigate a nation’s ability to provide access to quality health care

Introduction

• High quality care – The most cost-effective care – Cost is important in evaluating quality – Achieved when:

•Accessible services are efficient •Cost-effective •Provided in an acceptable manner

Cost of Health Care

• Three meanings 1. Price: physician’s bill, prescription bill,

premiums

2. National perspective: how much a nation spends on health care (health care expenditures)

3. Provider perspective: cost of production (staff salaries, capital, supplies)

Trends in National Health Expenditures

• Evaluating national health care expenditures 1. Compared to Consumer Price Index (CPI)

•CPI measures general inflation in the economy and calculates the annual changes (see Figure 12−2)

2. Compared to Gross Domestic Product (GDP) •See Figure 12−3

Trends in National Health Expenditures

• United States uses a larger percentage of economic resources on health care – See Table 12−2

• 2009, 17.4% of GDP was spent on health care – $7,960 per capita

• 2015, 20% of GDP projected to be spent on health care

Do We Need to Contain Costs?

• Reasons to control costs 1. Health care consumes a greater percentage of the

total economic output • Resources are limited • Other economic uses are curtailed

2. Limited resources should be directed to their highest value

3. Corporations bear the additional cost of doing business

4. Public spending for health care will become unsustainable

Reasons for Cost Escalation • Medical cost inflation influenced by: – Third-party payment – Imperfect market – Growth of technology – Increase in elderly population – Medical model of health care delivery – Multipayer system, administrative costs – Defensive medicine – Waste and abuse – Practice variations

Reasons for Cost Escalation

• Third-party payment – Moral hazard – Provider-induced demand

• Imperfect market – Health care market in the United States is neither

free nor highly regulated, and prices far exceed the cost of production

– E = Q × P – In national health care, both Q and P are

controlled by a central agency – Both remain unchecked in an imperfect market

Reasons for Cost Escalation

• Technology and specialization – Beliefs and values – High R&D spending – Innovation that leads to utilization – Surplus of specialists

• Increase in elderly population – Increased longevity – Baby boomers – The elderly use nearly three times as much health

care as younger people

Reasons for Cost Escalation

• Medical model of health – Misplaced emphasis on medical treatments – Health promotion/disease prevention takes

a back seat

Reasons for Cost Escalation Multipayer System and Administrative Costs

• Inefficiencies related to:

• Financing • Insurance • Delivery • Payment functions • Enrollment process

– Contracts – Claims processing – Utilization – Denials and

appeals

– Marketing

Reasons for Cost Escalation

• Defensive Medicine – Medical tests and treatments that are not justified, but

done for self-protection • Waste and Abuse – Inefficiencies and Fraud

• Knowing disregard of the truth • A major problem in Medicare and Medicaid – Unnecessary services may be provided – Upcoding – Misallocation of costs to increase reimbursement

(in cost-plus reimbursement systems) • Receiving kickback for referrals • Self-referral (Stark Laws)

Reasons for Cost Escalation

• Practice variations (small area variations) – Signal gross inefficiencies in the system – Compromise both cost and quality

Cost Containment: Regulatory Approaches

• All-payer (single-payer) system • ACA • Health Planning • Price Controls • Peer Review

Cost Containment: Regulatory Approaches

• All-payer (single-payer) system – Top-down control (global budgets) – The United States does not have an all-payer system

• Bottom-up cost control • Cost shifting occurs

• Health Planning – Government’s efforts to align and distribute health

care resources to achieve health outcomes

– No system-wide planning and controls in the US • CON planning used by some states

Cost Containment: Regulatory Approaches

• Price Controls – Economic Stabilization Program used during the

Nixon presidency – Provider-induced demand (no control on Q)

mitigated the effects of price controls – DRG-based PPS shifted costs to the outpatient

sector – PPS extended to other health care sectors – Arbitrary rate setting by Medicaid – Pay for performance

Cost Containment: Regulatory Approaches

• Peer Review – Peer Review Organizations (PROs)

•Statewide private organizations •Review by physicians and other health professionals •Paid by federal government •To review care provided to Medicare patients –Is care reasonable? Necessary?

Appropriate? –Meets quality?

Cost Containment: Regulatory Approaches

• Peer Review Organizations (PROs) •Each state has a PRO •Can deny payment if care not necessary or appropriate •PROs are now called quality improvement organizations (QIOs)

Cost Containment: Competitive Approaches

• Demand-side Incentives • Supply-Side Regulation • Payer-Driven Price Competition • Utilization Controls • Competition – Rivalry among sellers for customers

•Health care competition can be based on technology, quality, amenities, access

Cost Containment: Competitive Approaches

• Demand-side incentives – Cost-sharing by consumers – A self-rationing mechanism (reduces moral

hazard) – RAND experiment

• Supply-side regulation – Antitrust laws – Anticompetitive practices can be illegal

Cost Containment: Competitive Approaches

• Payer-driven price competition – Patients are not customers in the economic sense

• They pay little out of pocket • They lack technical information

– Payer-driven competition occurs at two levels • Employers shop for value in health insurance plans • Managed care shops for best value from providers

• Utilization controls – Employed by MCOs – They overcome the information gap that patients face

Access to Care

• Access – Ability to obtain needed, affordable,

convenient, acceptable, and effective personal health services timely

– Key implications •A determinant of health •A benchmark in assessing effectiveness •Equity •Quality and efficient use of needed services

Access to Care

• Access concepts – Does patient have a source of care

•Primary care physician – Use of health care

•Availability, convenience, referral – Acceptability of services

•A patient’s preference and values

Access to Care

• Dimensions of Access – Accessibility: fit between the locations of providers

and patients (transportation, convenience)

– Affordability: ability to pay – Accommodation: how resources are organized to

provide services and the patient’s ability to use the services (timely appointments, quick service, walk-ins, etc.)

– Acceptability: compatibility (waiting time, race, culture, gender, etc.)

Access to Care

• Types of Access 1. Potential: capacity, organization, financing 2. Realized: type, site, purpose of health

services 3. Equitable/inequitable: distribution of health

care to patient’s perceived need 4. Effective and efficient: links realized access to

health outcomes • Current Indicators of Access – Look at Tables 12−3 and 12−4 – Look at Table 12−5

Quality of Care

• Institute of Medicine • Increased likelihood of desired health

outcomes

• Use of current professional knowledge

Quality of Care

• Dimensions of quality • Microview

• Clinical (technical) aspects • Interpersonal aspects • Quality of life -General HRQL -Disease-specific HRQL - Institution-related quality of life

• Macroview • Mortality • Incidence and prevalence

Quality Assurance

• Based on total quality management (TQM) – Similar to continuous quality improvement

(CQI) and quality improvement (QI)

• A step beyond quality assessment – Cannot occur without quality assessment

• A system-wide commitment to engage in the improvement of quality on an ongoing basis

Quality Assessment

• Measurement of quality against an established standard

• Use of data • Subjective measures must be quantified • Measurement scales must have: – Validity (extent to which it actually assesses

what it purports to measure) – Reliability (extent to which same results

occur from repeated applications)

Quality Assessment

• The Donabedian Model – Structure–The capacity to deliver quality – Process–How health care is delivered – Outcome–Effects or results obtained

The Donabedian Model

• Structure – Facilities: license, accreditation – Equipment – Staffing levels – Staff qualifications – Staff training – Distribution of hospital beds, physicians,

etc., in a given population

The Donabedian Model

• Process – Clinical practice guidelines (medical practice

guidelines)

• Evidence-based protocols • Professional consensus when scientific

evidence is lacking

– Critical pathways • A timeline • Identifies planned medical interventions with

expected patient outcomes for a diagnosis

The Donabedian Model Processes

• Cost-efficiency •Do benefits exceed the costs? •Underutilization and overutilization are

based on cost efficiency • Risk management

•Proactive •Efforts to prevent adverse events related to

clinical care and facility operations –Focused on avoiding medical malpractice

The Donabedian Model

• Outcome – Bottom-line measure of effectiveness – Recovery, improved health – Postoperative infections, nosocomial

infections, iatrogenic illnesses, rehospitalizations

– Malpractice litigation – Patient satisfaction – HRQL

Quality Report Cards

• HEDIS – Healthcare Effectiveness Data and Information Set

•Standard for reporting quality in managed care plans •Measures: effectiveness, access and availability,

satisfaction, health plan stability, utilization, cost, informed choices

– CMS Program on Quality – AHRQ Quality Indicators – State Public Reporting of Hospital Quality

ACA Takeaway

• Cost-control measures include competition among health plans to drive down insurance costs, value-based purchasing, and reduction in Medicare payments to providers.

• Promises to increase access to affordable insurance coverage, and supports improvements in primary care and wellness.

• Includes some provisions for improving quality of care, through programs that link payment to quality outcomes in Medicare, strengthening of the quality infrastructure, and encouraging the development of new patient care models.