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Financing Healthcare (Part 2) Lecture D
- 1. Introduction to Health Care and Public Health in the U.S. Financing Health Care, Part 2 Lecture d This material (Comp 1 Unit 5) was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number 90WT0001. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
- 2. Financing Health Care, Part 2 Learning Objectives - 1 • Describe the revenue cycle and the billing process undertaken by different health care enterprises. (Lecture a) • Explain the billing and coding processes, and standard code sets used in the claims process. (Lecture a) 2
- 3. Financing Health Care, Part 2 Learning Objectives - 2 • Identify different fee-for-service and episode-of- care reimbursement methodologies used by insurers and health care organizations in the claims process. (Lecture b) • Review factors responsible for escalating health care expenditures in the United States. (Lecture c) • Discuss methods of controlling rising medical costs. (Lecture d) 3
- 4. Controlling Health Care Costs - 1 • Review some potential methods of controlling rising costs in medicine – Examine the role of health information technology in reducing and limiting costs o Use of electronic health records and evidence- based medicine (EBM) o Clinical decision support o Clinical practice guidelines 4
- 5. Controlling Health Care Costs - 2 • Examine delivery models for reducing health care expenditures – Retail clinics/Urgent care – Extenders/Doctors of Nursing Practice (DNP) – Patient-Centered Medical Home o Direct primary care – Concierge medicine 5
- 6. Cost Drivers: Technology • 50 % of total annual expenditures • Devices advance diagnosis and care – Imaging: CT, MRI – Artificial devices: Hips, knees, pacemakers • New procedures treat the untreatable, minimize risk, improve outcomes – Surgery: da Vinci robot 6
- 7. Cost Drivers: Increased Utilization • Physician and Hospital Utilization – Aging o Increasing number >65 y.o. o Increasing cost >65 y.o. – Chronic disease o Diagnostic tests o Management of disease o Prevention of progression and complications 7
- 8. Cost Drivers: Administrative Costs and Reimbursement Methods • Administrative Costs – Billing Procedures o Rules o Process • Reimbursement Methods – Fee-for-service encourage utilization – Disparities within and among insurance plans 8
- 9. Cost Drivers: Defensive Medicine & Patient Preference • Defensive medicine – Overutilization of services – Tort reform • Patient preference – Request for specific test or medication – Direct to consumer advertising 9
- 10. Fixing a Broken System? • Limit resource availability – Rationing • Incentives to change utilization – Increase patient cost – Wellness and prevention • Increase in efficiency – Health Information Technology (HIT) – Evidence-based medicine (EBM) – Clinical Practice Guidelines 10
- 11. Health Information Technology • Health Information Technology for Economic and Clinical Health Act (HITECH) – Reward ($$$) for meaningful use of EHR • EHR Facilitates – Coordination of care – Support providers o Clinical decision support (CDS) o Clinical practice guidelines/EBM o Shared information (health information exchange) o Error avoidance 11
- 12. Evidence-Based Medicine • Systematic Review of Published Research • Clinical Practice Guidelines • Standard of Care – Lower costs – End defensive medicine – Cookbook medicine? • Evaluating Technology 12
- 13. The Medical Home • Provides comprehensive medical care – Personal physician = director – Practice team o Collective responsibility – Enhanced access o Same day appointments 13
- 14. Concierge Medicine - 1 • Also called direct primary care or retainer practice • Patient pays fee or retainer – Monthly or annual – Receives special service – Enhanced access • Multiple models – Practice size limited – Limited or no insurance billing – Should maintain private health insurance for emergencies 14
- 15. Concierge Medicine - 2 • Typical features – Same day urgent care appointments – Next day non-urgent care appointments – 24-hour telephone access – Extended office visits – Preventive care physicals/screenings 15
- 16. Concierge Medicine - 3 • Other features – Patient’s home or workplace consultations – Wellness and nutrition planning – Mental health counseling – Stress reduction counseling – Smoking cessation support – Coordination of medical needs during travel 16
- 17. Concierge Medicine - 4 • Practice costs lower – Lower staff costs o Fewer patients = fewer administration/nursing – Lower overhead costs o Rent smaller office o Lower utility costs • Perception of improved quality – No difference from traditional primary care 17
- 18. Concierge Medicine - 5 • Challenges – Health insurance for specialty services, high- cost procedures, emergency treatments, and hospitalization. – No data on how model affects overall health care costs – Employers evaluating model for savings – Could exacerbate the shortage of primary care providers 18
- 19. Alternative Delivery Methods • Urgent Care – Low cost alternative o Incentives to avoid the high cost of the ED – X-ray and lab on site – Extended hours • Retail Clinics – Located in non-traditional provider locations o Pharmacy and large retail locations o Staffed by nurse practitioners and physicians o Minimal x-ray and laboratory services 19
- 20. Doctor of Nursing Practice • Graduate trained • Post-graduate training • Certification examination • Work independently • Benefits – Lower cost for professional development – Lower expenditures 20
- 21. Tort Reform • Frivolous lawsuits – No lawsuits for expected complications • Damage caps – Limit punitive awards – Limit attorney fees – Pain and suffering • Binding arbitration 21
- 22. Financing Health Care, Part 2 Summary – 1 – Lecture d • Improved efficiency – Health information technology – Evidence-based medicine • Medical home model – Lower costs 5.6% – Comprehensive care • Concierge medicine or Retainer – Enhanced services – No research to support cost containment 22
- 23. Financing Health Care, Part 2 Summary – 2 – Lecture d • Alternate delivery methods – Urgent care & retail clinics – New providers • Tort Reform – Reduction in defensive medicine costs 23
- 24. Financing Health Care, Part 2 Summary - 1 • Revenue cycle is a unique process – Requires submission of claim to payors – Methodology involves fee-for-service or episode-of-care • U.S. has highest per capita national health expenditures and highest national health care expenditures as a percentage of GDP in the world. 24
- 25. Financing Health Care, Part 2 Summary - 2 • Challenge: Reduce costs, maintain quality of care, and improve outcomes and accessibility to care • Reduce costs through HIT, EBM, clinical practice guidelines, new primary care models, and urgent care and retail clinics • Tort reform may change providers’ practice patterns 25
- 26. Financing Health Care, Part 2 References – 1 – Lecture d References Callahan, D. (n.d.). The Hastings Center Bioethics Briefing Book. Retrieved January 24, 2017, from http://www.thehastingscenter.org/uploadedFiles/Publications/Briefing_Book/health%2 0care%20costs%20chapter.pdf Centers for Disease Control and Prevention. Meaningful Use. http://www.cdc.gov/ehrmeaningfuluse/introduction.html. Updated October 11, 2012. Accessed January 24, 2017. The Congress of the United States Congressional Budget Office. Washington DC: 2008 [cited July 31, 2010]. Technological Change And The Growth Of Health Care Spending. Available at: http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31- TechHealth.pdf. Accessed January 24, 2017. Fisher E, Bynum J, Skinner J. The Policy Implications of Variations in Medicare Spending Growth. The Dartmouth Atlas: The Dartmouth Institute for Health Policy and Clinical Practice Center for Health Policy Research, February 27, 2009. [cited 2010 July 31]. Available at: http://www.dartmouthatlas.org/downloads/reports/Policy_Implications_Brief_022709.p df. Accessed January 24, 2017. 26
- 27. Financing Health Care, Part 2 References – 2 – Lecture d References Jackson, G. L., Powers, B. J., Chatterjee, R., & Prvu Bettger, J. (n.d.). The Patient- Centered Medical Home: A Systematic Review. Annals of Internal Medicine. doi: 10.7326/0003-4819-158-3-201302050-00579 Robert Wood Johnson Foundation. Source for health issue research and health policy. Available at: http://www.rwjf.org/. Last accessed: Mach 30, 2016. The Peterson Center on Healthcare and the Kaiser Family Foundation. Menlo Park, CA (2016) Health costs. Available from: http://www.healthsystemtracker.org/. Provides background information, links to key data and policy information on US healthcare costs. Last accessed January 24, 2017. 27
- 28. Introduction to Health Care and Public Health in the U.S. Financing Health Care, Part 2 Lecture d This material was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number 90WT0001. 28
Editor's Notes
- Welcome to Introduction to Health Care and Public Health in the U.S.: Financing Health Care, Part 2. This is lecture d. The component, Introduction to Health Care and Public Health in the U.S., is a survey of how health care and public health are organized and how services are delivered in the U.S. It covers public policy, relevant organizations and their interrelationships, professional roles, legal and regulatory issues, and payment systems. It also addresses health reform initiatives in the U.S.
- The learning objectives for Financing Health Care, Part 2 are to: Describe the revenue cycle and the billing process undertaken by different health care enterprises. Explain 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 health care organizations in the claims process. Review factors responsible for escalating health care expenditures in the U.S. And, discuss methods of controlling rising medical costs.
- This lecture discusses potential methods of addressing rising health care costs in the U.S. through the use of health information technology to coordinate care; the use of electronic health records to improve health information exchange; and the use of evidence-based medicine, or EBM, such as clinical decision support and clinical practice guidelines, to better support providers.
- This lecture also describes newer health care delivery models, including retail clinics and urgent care centers, and the use of physician extenders and doctors of nursing practice, or DNPs, as well as the patient-centered medical home and concierge medicine, and their capacity to reduce health care expenditures.
- There are many factors driving the increase in expenditures for medical care in the U.S. Among them are the cost of technology, increased utilization, and administrative costs. According to the Congressional Budget Office, technology costs account for fifty percent of the total annual expenditures on health care. New imaging devices - such as computerized tomography, or CT scanners and magnetic resonance imagers, or MRIs - and artificial parts and devices - such as artificial joints for knees and hips, 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 treatments for previously difficult or untreatable illnesses and injuries, for example the lap-band for morbid obesity. Use of the da Vinci 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.
- Beginning in 2011, the oldest of the sixty-six million people born between 1946 and 1964, known as baby boomers, will reach age 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 that care will continue to raise health care 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 health care system.
- Administrative costs account for an estimated seven percent of total health care expenditures in the U.S. These costs are more than double the average of other industrialized countries, primarily due to the myriad requirements for claim submission. Payors establish different rules and processes for the submission of claims, and these processes result in additional administrative costs by health care organizations to meet the specific requirements for submission and additional costs by payors to evaluate submissions. Transparency, or lack thereof, on the part of third party payors about the processes involved in determining the value of health care services and reimbursements, leads to variations in payment amounts 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 to pay practice expenses. This leads to an increased need for additional staff and to a cycle of increasing utilization and administrative costs.
- 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’s direct-to-consumer advertising about products and services that may imply additional health benefits through their adoption and use. The cost of this new technology may not be justified based on the marginal increase in value of care and treatment of patients. However, providers may begin using more expensive treatments due to patient demand.
- Health care 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 payor, 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 health care 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 health care delivery using health information technology, evidence-based medicine, and clinical practice guidelines. Additional savings may be achieved through new models of health care delivery and tort reform.
- Health information technology, or HIT, in conjunction with evidence-based medicine, offered an opportunity to slow health care expenditures. The Health Information Technology for Economic and Clinical Health Act, or HITECH, authorized the federal government to take a leadership role in developing standards to 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 HITECH Act set meaningful use of interoperable electronic health record, or EHR, adoption in the health care system as a critical national goal and incentivized EHR adoption. The goal is not adoption alone but 'meaningful use' of EHRs—that is, their use by providers to achieve significant improvements in care. In order to receive the EHR stimulus money, the HITECH act requires doctors to show meaningful use of an EHR system. As of October 2016, there are no penalty provisions for Medicaid. Since 2015, hospitals and doctors not using electronic health records have been subject to financial penalties under Medicare. 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. CDS 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 health care 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, 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.
- 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 da Vinci robot has been justified by the lower complication rate and decreasing length of stay, thus lowering overall costs of care. By comparing the overall costs of minimally invasive surgery using the da Vinci system, including its complications, against those of standard minimally invasive surgery, evidence can be gathered to support or disprove the cost savings assumption.
- 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. 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 Medical Home holds promise for improving the experiences of patients and staff and potentially for improving care processes, but current evidence is insufficient to determine effects on clinical and most economic outcomes. 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.
- 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.
- 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 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.
- 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. They also provide coordination of medical needs while traveling.
- 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.
- 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 health care expenditures. Some employer groups are testing the model to see if it results in lower overall health care 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.
- 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 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 equipment 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.
- Recent discussion about the future of primary care includes proposals for the use of the Doctor of Nursing Practice, or 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.
- Defensive medicine drives up costs by spending health care dollars on tests and procedures that have minimal clinical value to avoid malpractice. Estimates of the cost of defensive medicine run into the billions of dollars annually. Tort reform has been suggested as a means of lowering health care 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.
- This concludes lecture d of Financing Health Care, Part 2. In summary, prospective cost savings may come from a combination of health care 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. 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 and retainer practice models.
- Some additional methods to lower health care 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.
- This also concludes the unit Financing Health Care, Part 2. In summary, the revenue cycle for health care organizations is a unique process that requires submission of medical bills or claims to insurance payors using standardized codes for review and adjustment. The methodology used to adjust the claim involves either a fee-for-service or episode-of-care method, which is a function of the provider-payor contract. The U.S. has the highest per capita national health care expenditures and the highest national health care 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 to the health care 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 health care costs. New primary care models, such as the Medical Home, have shown reduction in costs and potential for savings, while evidence for Concierge Medicine and retainer practice models is still being gathered. Some additional methods to lower health care 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.
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