U.S. Healthcare System

• Overview in 90 minutes or less

• Stakeholders

• Major challenges

STAKEHOLDERS

• Patients/clients/customers

• General Public

• Employers

• Governments

• Insurance Plans

• Providers

CHANNEL OF DISTRIBUTIONINPATIENT SURGERY

CONSUMER

INSURER

PCP

SURGEON

HOSPITAL

EMPLOYER

PER CAPITA HEALTH EXPENDITURES

0

500

1000

1500

2000

2500

3000

3500

4000

4500

U.S. Norway Austria U.K. Poland

1999

HEALTH CARE TRIANGLE

COST

QUALITY ACCESS

Total U.S. Health Expenditures

0

200

400

600

800

1000

1200

1400

1600

1800

1965 1970 1980 1990 2000 2005

$ Billions

STAKEHOLDERS: THE PUBLIC

• Potential patients

• Taxpayers

• Purchasers of other goods and services

• Expectations?– Is health care a right like public education or

police protection?

• When do they show interest?

Projected Growth in U.S.Population Age 65 and Older

0

10

20

30

40

50

60

70

1980 1990 2000 2010 2020 2030

Millions

STAKEHOLDERS:EMPLOYERS

• Pay most of the private insurance premiums

• Taxpayers

• Competing for workers

• Competing globally for markets

• >10% premium increases

• How are they coping?

STAKEHOLDERS:GOVERNMENTS

• DOMINANT PAYER (ABOUT 50%)– Medicare, Medicaid, VA

• HUGE REGULATOR– Federal, State, Local

• DIRECT PROVIDER– VA– State hospitals, clinics, health departments– County/City hospitals, clinics, health departments

• POLITICS

STAKEHOLDERS:INSURANCE PLANS

EVOLUTION• 1930’s—Blue Cross• POST WW2—Rapid growth of employer based

plans• 1980’s—Managed Care• Integrated networks

STAKEHOLDERS:INSURANCE PLANS

FUNCTIONS

• Develop coverage plans

• Contract with providers

• Market the plans

• Underwrite

• Manage utilization, quality, cost

• Administer claims

STAKEHOLDERS:INSURANCE PLANS

STATUS• Cyclical profit and loss • Return to rapid premium increases• Consolidation• Backlash against controls

– Consumers

– Politicians

– Courts

STAKEHOLDERS:INSURANCE PLANS

KEY ISSUES• Control total cost

– Number of services used

– Cost per unit of service

• Manage (shift) the risk• Satisfy consumers, regulators, courts

STAKEHOLDERS:PROVIDERS

• HOSPITALS• OUTPATIENT CENTERS• PHYSICIANS• OTHER CLINICIANS• LONG-TERM CARE• MENTAL HEALTH• PUBLIC HEALTH

HOSPITALS

HISTORY

1873        178

1909        4,300

1946        6,000

1970’S 7,200

2000’S <4,000

HOSPITALS

STATUS• Losing money• Upward pressure on costs

– Critical staff shortages– Legislative/judicial mandates– Insurance premiums

• Increasing inpatient volume• Competition for outpatients

Inpatient Admissionsin Community Hospitals

28

29

30

31

32

33

34

35

36

37

1980 1985 1990 1995 2000 2003

Millions

HOSPITALS

CHALLENGES• Reposition philosophy, organization, facilities

– Emergency, Critical Care, outpatient services

• Re-establish partnerships with physicians• Continue to invest in technology• Employer of choice, again• Public accountability and confidence• Advocate national health policy: fix payment syst.

OUTPATIENT CENTERS

• START WITH: GP’s office, Hospital indigent clinics, Hospital ER’s, public health clinics

• ADD: Group practices, Hospital outpatient departments, specialty clinics

• NOW: Freestanding centers– Primary care, urgent care, surgery, imaging, eye

treatment, gastro-intestinal, and on and on

OUTPATIENT CENTERS

STATUS

• Burgeoning volume (Why?)

• Diverse ownership

• Increasing regulatory and insurance plan scrutiny

OUTPATIENT CENTERS

CHALLENGES

• Anticipate technology changes

• Maintain quality and public confidence

• Maintain profitability with lower payments

• Increasing competition

PHYSICIANS

EVOLUTION:

Doc-in-a-buggy to Doc-in-a-box

• Solo practice

• Group

• Multi-specialty group

• Employee

PHYSICIANS

STATUS• 60 to 70% Specialists, most clustered around

Academic Medical Centers• Not enough Primary Care in many places• Dramatic decline in payments• Baby boomers retiring: shortages ahead?• Lost power to insurance plans• Cost pressure: labor, insurance premiums, regs

PHYSICIANS

CHALLENGES

• Re-establish control of patient care

• Negotiate better payments/contracts

• Reform malpractice liability system

• Anticipate changes in technology and competition; establish long-term position

• Replace retiring colleagues

LONG-TERM CARE

EVOLUTION

• Mom and Pop rest homes

• Neglect and abuse scandals: regulation

• Corporate owned skilled nursing facilities

• Diversity in settings and types of patients

LONG-TERM CARE

STATUS• SNF’s

– Declining occupancy last 15 years• Older adults healthier• Vast increase in options• Federal prospective payment

– Will reverse with dramatic increase in numbers of “super-elderly” over next 25 years

– Medicaid is largest payer

LONG-TERM CARE

• Assisted living– Rapid growth: expect to double by 2025– Often part of retirement community– Private pay

• Adult Day Care– Another option; small but growing– Private pay

LONG-TERM CARE

• Home care– Fastest growing segment of U.S. health – Mix of long and short-term– Medicare is largest payer, cutting payments

• Hospice– Offered in many settings– Growing recognition of value – Medicare pays

LONG-TERM CARE

CHALLENGES• Demographics: over 65 will double from year

2000 to 2030; over 85 will increase more rapidly• Family changes: career women, or 70 year old

“child” unable to care for 90 year old parent• Technology: extends life, diversifies care options

LONG-TERM CARE

CHALLENGES (continued)• More sophisticated consumers: aware of

options• Government scrutiny: pressure for high

quality; budget crunches• Labor shortages: traditionally lower pay and

benefits than hospitals and outpatient centers

MENTAL HEALTH

HISTORY: Grim and grimmer• Locked in asylums (or worse)• 1930’s to early 60’s: development of shock

therapies and first effective drugs increased ability to manage inpatients

• 60’s to 80’s: Community mental health centers; reduced funding for inpatients; marketing competition for private dollars

MENTAL HEALTH

STATUS

• Tremendous capabilities to specifically diagnose and effectively treat most forms of severe mental illness

• Only half of severe and persistent mentally ill receive treatment

• Insurance coverage significantly limited

MENTAL HEALTH

CHALLENGES

• Stigma, misperceptions

• Unresolved public policy debate: maintaining mental health VS. treating severe and persistent illness

• Insurance limitations resulting from above

• Patient compliance with treatment

PUBLIC HEALTH

EVOLUTION

• Sanitary reform

• Epidemic control

• Prevention, education, immunization

• Unable to compete with M & M for funds

• Renewed interest because of terrorism, new viruses

PUBLIC HEALTH

STATUS

• Less than 1% of U.S. health dollars are spent for public health

• Greatly increasing public demand for management of new diseases, water supply, food supply, and more

PUBLIC HEALTH

CHALLENGES

• Strong cultural bias favoring cure of the individual over promotion of the general health of the population

• Convert current public concerns into political clout for increased funding