MHSOS Complete Chapter One Instructor's Sneak Peek

Managing Health Services Organizations and Systems
SIXTH EDITION
From Managing Health Services Organizations and Systems, Sixth Edition. Copyright 2014 by Beaufort B. Longest, Jr., and Kurt Darr. All rights reserved.

SIXTH EDITION
by Beaufort B. Longest, Jr., Ph.D., FACHE University of Pittsburgh Kurt Darr, J.D., Sc.D., FACHE The George Washington University
Baltimore London Sydney
Health Professions Press, Inc. Post Ofce Box 10624 Baltimore, Maryland 21285-0624 www.healthpropress.com Copyright 2014 by Beaufort B. Longest, Jr., and Kurt Darr. All rights reserved. Interior and cover designs by Mindy Dunn. Typeset by Barton Matheson Willse & Worthington, Baltimore, Maryland. Manufactured in the United States of America by Versa Press, East Peoria, Illinois. The information provided in this book is in no way meant to substitute for the advice or opinion of a medical, legal, or other professional expert. This book is sold without warranties of any kind, express or implied, and the publisher and authors disclaim any liability, loss, or damage caused by the contents of this book.
Library of Congress Cataloging-in-Publication Data Longest, Beaufort B., Jr., author. Managing health services organizations and systems / by Beaufort B. Longest, Jr., Kurt Darr. Sixth edition. p. ; cm. Includes bibliographical references and index. ISBN 978-1-938870-00-2 (case) ISBN 1-938870-00-X (case) I. Darr, Kurt, author. II. Title. [DNLM: 1. Health Facility AdministrationUnited States. 2. Hospital AdministrationUnited States. WX 150 AA1] RA971 362.1068dc23 2014006399 British Cataloguing in Publication data are available from the British Library. E-book edition: ISBN 978-1-938870-34-7
Contents
About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii About this Edition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii Acronyms Used in Text . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
Part I. The Healthcare Setting

Chapter 1. Healthcare in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health and System Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lack of Synchrony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Processes That Produce Health Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Brief History of Health Services in the United States . . . . . . . . . . . . . . . . . . . . . Other Western Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure of the Health Services System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Classication and Types of HSOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Local, State, and Federal Regulation of HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . Other Regulators of HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accreditation in Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Education and Regulation of Health Services Managers . . . . . . . . . . . . . . . . . . . . Regulation and Education of Selected Health Occupations . . . . . . . . . . . . . . . . . . Associations for Individuals and Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . Paying for Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government Payment Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . System Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: Gourmand and FoodA Fable . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Wheres My Organ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Dental Van Shenanigans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 2. Types and Structures of Health Services Organizations and Systems . . . . . . . The Triad of Key Organizational Components . . . . . . . . . . . . . . . . . . . . . . . . . . . Governing Body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chief Executive Ofcer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional Staff Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Structures of Selected HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . . Acute Care Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nursing Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Triad in HSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ambulatory Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hospice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
v
3 4 6 7 11 16 17 19 22 25 25 29 33 39 41 46 49 50 51 52 53 54 65 66 68 72 73 81 84 90 93 96 102 103
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Home Health Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Managed Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Public Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diversication in HSOs and HSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Environmental Pressures to Change Types and Structures of HSOs/HSs . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: The Clinical Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: The Role of the Healthcare Executive in a Change in Organizational Ownership or Control . . . . . . . . . . . . . . . . . . . . Case Study 3: Public Health and the Health Services Delivery System . . . . . . . . . Case Study 4: Board Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 3. Healthcare Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . History and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Types of Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effects of Technology on Health Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forces Affecting Development and Diffusion of Technology . . . . . . . . . . . . . . . . . Responses to Diffusion and Use of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . HSO/HS Technology Decision Making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Managing Biomedical Equipment in HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . . Health Information Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Telemedicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technology and the Future of Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: The Feasibility of BEAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Who Does What? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Lets Do a Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: Worst Case Scenariothe Nightmare . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 4. Ethical and Legal Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Society and the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Relationship of Law to Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ethics Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal Ethic and Professional Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health Services Codes of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ethical Issues Affecting Governance and Management . . . . . . . . . . . . . . . . . . . . . Biomedical Ethical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . End-of-Life Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Responses to Ethical Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . Managers and the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Torts and HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reforms of the Malpractice System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Legal Areas Affecting HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Process of a Civil Lawsuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special Considerations for the Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107 110 114 116 118 119 120 120 122 123 124 131 134 135 138 139 144 150 154 158 165 166 167 168 169 170 171 172 172 183 184 185 185 191 192 194 198 200 211 218 223 225 226 230 232 234
CONTENTS vii
Case Study 1: Whats a Manager to Do? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Bits and Pieces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Understanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
235 236 237 238 238
Part II. Managing Health Services Organizations and Systems

Chapter 5. The Practice of Management in Health Services Organizations and Systems . . . . . . 251 The Work of Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 Key Denitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 Management and Organizational Culture, Philosophy, and Performance . . . . . . . 255 Management Functions, Skills, Roles, and Competencies . . . . . . . . . . . . . . . . . . . 258 A Management Model for HSOs/HSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Case Study 1: The CEOs Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Case Study 2: Todays Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 Case Study 3: Healthcare Executives Responsibility to Their Communities . . . . . 287 Case Study 4: The Business Ofce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 Case Study 5: Very Brief History of Management Theories . . . . . . . . . . . . . . . . . . 289 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 Chapter 6. Managerial Problem Solving and Decision Making . . . . . . . . . . . . . . . . . . . . Problem Analysis and Decision Making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem Solving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Process and Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inuencing Problem Solving and Decision Making . . . . . . . . . . . . . . . . . . . . . . . Unilateral and Group Problem Solving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Problem-Solving and Decision-Making Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: The Nursing Assistant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: The New Charge Nurse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Listening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: Ping-Ponging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 7. The Quality Imperative: The Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Improving Quality and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taking A CQI Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CQI, Productivity Improvement, and Competitive Position . . . . . . . . . . . . . . . . . Theory of CQI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Quality Planning: Hoshin Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizing for Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Next Iteration of CQIA Community Focus . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: Fed Up in Dallas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Clinics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Where and How to Start? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: Extent of Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 5: Surgical SafetyRetained Foreign Objects . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
293 294 295 297 308 312 314 318 318 319 320 320 321 325 326 332 337 338 349 354 356 357 357 358 359 360 361 361
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Chapter 8. The Quality Imperative: Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . Undertaking Process Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Improvement Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barriers and Facilitators to Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Improvement and Problem Solving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistical Process Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tools for Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Productivity and Productivity Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Physicians and CQI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Patient and Worker Safety in Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Quality Improvement Structures/Processes Useful in Patient/Worker Safety . . . . . Overlapping Safety Issues for Patients and Workers . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: The Carbondale Clinic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Noninvasive Cardiovascular Laboratory . . . . . . . . . . . . . . . . . . . . . Case Study 3: InfectionsC. difcile (CDI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: InfectionsCLABSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 5: InfectionsFlu Vaccination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 6: Sharps Injuries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 7: Slips, Trips, and Falls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 8: Safe Patient Handling and Patient Movement Injuries . . . . . . . . . . Case Study 9: Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 10: Violence in the Workplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 9. Strategizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategizing and Systems Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategizing and Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Strategizing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Situational Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . External Environmental Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Environmental Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategy Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Issues Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: No Time for Strategizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: A Response to Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: HSO Strategic Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: Closing Pediatrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 5: Afliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 6: Healthcare Firms Send Jobs Overseas . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 10. Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketing Dened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Marketing Management and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . The Marketing Mix: Core Concepts in Marketing Management . . . . . . . . . . . . .
367 368 370 375 376 377 378 385 390 394 398 400 407 408 409 410 411 411 412 412 413 413 414 414 421 422 424 434 434 435 440 441 449 450 454 455 455 456 457 457 458 458 459 463 464 467 468
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Challenges in Identifying the Customer and Target Markets . . . . . . . . . . . . . . . . . Examples of Marketing Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industry Structure and Competitive Position: Porters Model . . . . . . . . . . . . . . . . Market Position Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strategic Marketing Postures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ethics in Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: Lactation Services at Womens Wellness Hospital . . . . . . . . . . . . . . Case Study 2: What Is Marketing? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Image Management and Branding at the Disability Services Organization of Rivertown . . . . . . . . . . . . . . . . . . Case Study 4: Hospital Marketing Effectiveness Rating Instrument . . . . . . . . . . . Case Study 5: Nontraditional Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 11. Controlling and Allocating Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monitoring (Control) and Intervention Points . . . . . . . . . . . . . . . . . . . . . . . . . . . Control Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Levels of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control and CQI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control and Problem Solving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information Systems and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Control and Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stafng Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RM and Quality Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Healthcare and Public Health Emergency Preparedness . . . . . . . . . . . . . . . . . . . . Control Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Use of Analytical Techniques in Resource Allocation . . . . . . . . . . . . . . . . . . . . . . Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specic Construction Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: Admitting Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Centralized Photocopying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: Barriers to an Effective QI Effort . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: State Allocation DecisionsCentralize or Decentralize . . . . . . . . . Case Study 5: Financial Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 6: Healthcare Emergency Preparedness . . . . . . . . . . . . . . . . . . . . . . . . Case Study 7: Placing Imaging Services to Support ED Operations . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 12. Designing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Ubiquity of Designing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Formal and Informal Aspects of Organization Design . . . . . . . . . . . . . . . . . . . . . . Classical Design Concepts in Building Organization Structures . . . . . . . . . . . . . . Designing Interorganizational Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . An Integrative Perspective on Organization Design . . . . . . . . . . . . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
471 474 477 481 483 484 485 486 487 488 489 490 493 494 497 498 500 501 502 502 502 504 508 510 520 527 535 548 558 569 572 573 574 575 576 577 579 580 580 587 588 589 590 606 613 617
Case Study 1: Is the Matrix the Problem or the Solution? . . . . . . . . . . . . . . . . . . . Case Study 2: Trouble in the Copy Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 3: I Cannot Do It All! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: Somebody Has to Be Let Go . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 5: Is Outsourcing Part of Designing? . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
618 619 619 620 621 622
Chapter 13. Leading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 Leading Dened and Modeled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629 Ethical Responsibilities of Leaders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 Power and Inuence in Leading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Motivation Dened and Modeled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 635 Conclusions About the Roles of Power and Inuence and of Motivation in Leading . . . 646 Approaches to Understanding Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 Toward an Integrative Approach to Effective Leading . . . . . . . . . . . . . . . . . . . . . . 661 Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 Case Study 1: Leadership in the West Wing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Case Study 2: Charlotte Cooks Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664 Case Study 3: The Presidential Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Case Study 4: The Young Associates Dilemma . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Case Study 5: The Holdback Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 Case Study 6: Ethical Aspects of Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 Chapter 14. Communicating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Communicating Is Key to Effective Stakeholder Relations . . . . . . . . . . . . . . . . . . Communication Process Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barriers to Effective Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Flows of Intraorganizational Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . Communicating with External Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special Situations of Communicating with External Stakeholders . . . . . . . . . . . . . Discussion Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 1: Apple Orchard Assisted Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 2: Information Technologies in Rural Florida Hospitals . . . . . . . . . . . Case Study 3: You Didnt Tell Me! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 4: How Much Should We Say? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Case Study 5: Getting Help When Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 674 675 678 682 686 688 694 694 695 696 696 697 697
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699
About the Authors

Beaufort B. Longest, Jr., Ph.D., FACHE, M. Allen Pond Professor of Health Policy & Management in the Graduate School of Public Health at the University of Pittsburgh and Founding Director of the Universitys Health Policy Institute, an organization he led from 19802011. Professor Longest is a fellow of the American College of Healthcare Executives and a member of the Academy of Management, AcademyHealth, and American Public Health Association. With a doctorate from Georgia State University, he served on the faculty of Northwestern Universitys Kellogg School of Management before joining the University of Pittsburghs Public Health faculty in 1980. He is an elected member of the Beta Gamma Sigma Honor Society in Business as well as in the Delta Omega Honor Society in Public Health. His research on modeling managerial competence, issues of governance in healthcare organizations, and related issues of health policy and management has appeared in numerous peerreviewed journals and he is author or co-author of 11 books and 32 chapters in other books. His book, Health Policymaking in the United States, now in its fth edition, is among the most widely used textbooks in graduate health policy and management programs. His newest book is Managing Health Programs: From Development Through Evaluation (2014). Professor Longest has consulted with healthcare organizations and systems, universities, associations, and government agencies on health policy and management issues and has served on several editorial and organizational boards. Kurt Darr, J.D., Sc.D., FACHE, Professor, Department of Health Services Management and Leadership, School of Public Health and Health Services, The George Washington University, Washington, DC 20052 Dr. Darr is Professor of Health Services Administration in the Department of Health Services Management and Leadership at The George Washington University. He holds the Doctor of Science from The Johns Hopkins University and the Master of Hospital Administration and Juris Doctor from the University of Minnesota. Professor Darr completed his administrative residency at Rochester (Minnesota) Methodist Hospital and subsequently worked as an administrative associate at the Mayo Clinic. After being commissioned in the U.S. Navy, he served in administrative and educational assignments at St. Albans Naval Hospital and Bethesda Naval Hospital. He completed postdoctoral fellowships with the Department of Health and Human Services, the World Health Organization, and the Accrediting Commission on Education for Health Services Administration. Professor Darr is a Fellow of the American College of Healthcare Executives, a member of the District of Columbia and Minnesota Bars, and served for 20 years as a mediator in the Superior Court of the District of Columbia. He serves or has served on commissions and committees for various professional organizations, including The Joint Commission on Accreditation of Healthcare Organizations, the American College of Healthcare Executives, and the Commission on Accreditation of Healthcare Management Education. He is a voluntary consultant on quality improvement and ethics to hospitals in the District of Columbia metropolitan area. Professor Darr regularly presents seminars on health services ethics, hospital organization and management, quality improvement, and application of the Deming method in health services delivery. He is the author and editor of numerous books and articles in the health services eld.
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Preface
Leading health services organizations (HSOs) and health systems (HSs) are setting the benchmarks and establishing the best practice standards for others to emulate. They are simultaneously satisfying their customers, achieving quality and safety goals, and meeting cost objectives. The benchmarks of excellence in health services delivery are being established in HSOs and HSs that have excellent managers, as well as talented clinicians and dedicated governing bodies. Our purpose in this 6th edition, as in previous editions, is to present information and insight that can set the benchmarks of excellence in the management of health services delivery. The book will be useful to two groups. It will assist students as they prepare for health services management careers through programs of formal study. In addition, it has broad use in providing knowledge of applied management theory that is part of professional development for practicing health services executives. We hope both groups will nd the book a useful reference in their professional libraries. As in previous editions, the main focus is managing HSOs and HSs. This edition gives signicant attention to managing the increasingly important system of public health organizations and services. Hospitals and long-term care organizations continue to be prominent HSOs and are treated as such here. Ambulatory care organizations, home health agencies, and managed care organizations, among other HSOs, are also covered. Whether HSOs operate as independent entities or align themselves into various types of HSs, all face dynamic external environmentsa mosaic of external forces that includes new regulations and technologies; changing demographic patterns; increased competition; public scrutiny; heightened consumer expectations; greater demands for accountability; and major constraints on resources. The interface between HSOs and HSs and their external environments is given added attention in this edition. The 6th edition includes over 30 new case studies and updated coverage of healthcare services issues and practicesincluding nancial management. In addition, there are new sections on emergency preparedness, patient and staff safety, infection control, employee stress, hazardous materials, workplace violence, and applying project management in health services. As in previous editions, we present management theory so as to demonstrate its applicability to all types of HSOs and HSs. This objective is accomplished by using a process orientation that focuses on how managers manage. We examine management functions, concepts, and principles as well as managerial roles, skills, and competencies within the context of HSOs and HSs and their external environments. For nascent managers, the book introduces and applies terms of art, provides an updated list of acronyms, and explains concepts that will be a foundation for lifelong learning and professional development. Experienced managers will nd reinforcement of existing skills and experience, provision and application of new theory, and application of traditional theory and concepts in new ways. Managing in the unique environment that is health services delivery requires attention to the managerial tools and techniques that are most useful. The fourteen chapters in this 6th edition of Managing Health Services Organizations and Systems are an integrated whole that covers how management is practiced in HSOs and HSs. The discussion questions and cases will stimulate thought and dialogue of chapter content. It is our hope that the book will assist all who aspire to establish the benchmarks of excellence in the extraordinarily complex and essential economic sector that is the health services eld.
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About this Edition

Part I describes the setting in which health services (HSs) are delivered. Chapter 1, Healthcare in the United States, develops a framework of the important public and private entities that are the grounding for delivery of health services. Discussed are regulators, educators, and accreditors, as well as sources of nancing for services. The books second chapter, Types and Structures of Health Services Organizations and Health Systems, provides a generic discussion of governance, management, and professional staff organization found in health services organizations (HSOs). This triad is applied to selected HSOs that are archetypal of those in the health services eld. Each type is discussed briey. Technology has a central role in delivery of health services. Chapter 3, Healthcare Technology, describes the history, effects, and diffusion of technology and the decisions made by HSOs in acquiring and managing technology in the workplace. Chapter 4, Ethical and Legal Environment, establishes the pervasive inuence and effects of ethics and law in the health services eld. Ethical frameworks are discussed, ethical issues are identied, and HSO responses to them are suggested. Law is the minimum level of performance in managing health services. The relationship between the law and the work of managers is also identied. Part II builds on the previous chapters by focusing on the process of managing in HSOs/ HSs. In Chapter 5, The Practice of Management in Health Services Organizations and Health Systems, management is dened and a comprehensive model of the management process in HSOs/HSs is presented. This model provides a framework for understanding what managers actually do. The management process is considered from four perspectives: the functions managers perform, the skills they use in carrying out these functions, the roles managers fulll in managing, and the set of management competencies that are needed to do the work well. These perspectives form a mosaica more complete picture than any one perspectiveof management work Managerial Problem Solving and Decision Making, is discussed in Chapter 6. The pervasive decision-making function is examined, particularly as it relates to solving problems. Application of a problem-solving model is a major focus of the chapter. Chapter 7, The Quality Imperative: The Theory, describes and analyzes the development of the theoretical underpinnings of quality and performance improvement. Chapter 8, The Quality Imperative: Implementation, focuses on how HSOs make continuous improvement of quality and productivity a reality. The emphasis is process improvement, which leads to improved quality and enhanced productivity. Organizing for quality improvement requires a commitment from governance, management, and physicians, as well as the involvement of staff throughout the HSO in applying the methods and tools described. Chapter 9, Strategizing, details how managers determine the opportunities and threats emanating from the external environments of their organizations and systems and how they respond to them effectively. Chapter 10, Marketing, details how managers understand and relate to the markets they serve. Chapter 11, Controlling and Allocating Resources presents a general model of control and focuses on controlling individual and organizational work results through techniques such as management information systems, management and operations auditing, human resources management, and budgeting. Control of medical care quality through risk management and
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quality assessment and improvement is discussed. The chapter concludes with applications of quantitative techniques useful in resource allocation, such as volume analysis, capital budgeting, costbenet analysis, and simulation. Chapter 12, Designing, provides conceptual background for understanding HSO/HS organizational structures. It contains information on general organization theory, including classical principles and contemporary concepts as they relate to organizations, systems, and alliances of organizations. Chapter 13, Leading, differentiates transactional and transformational leadership and models and denes leadership. The extensive literature on leader behavior and situational theories of leadership is reviewed. Motivation is dened and modeled. The concept of motivation and its role in effectively leading people and entire HSOs/HSs is also discussed. Chapter 14, Communicating, describes a communication process model and applies it in communicating within organizations and systems and between them and their external stakeholders.
Instructor Resources
Downloadable Course Materials
Attention Instructors! Downloadable materials are available to help you design your course using Managing Health Services Organizations and Systems, Sixth Edition. Please visit www.healthpropress.com/longest-course-materials to access the following:

Customizable PowerPoint presentations for every chapter, totaling more than 350 slides Image bank of gures and tables* in PDF format for easy use in your PowerPoint presentations, tests, handouts, and other course purposes Summary of chapter learning objectives for use in course syllabus and classroom/online instruction Additional discussion questions and case studies for each chapter to extend student learning opportunities List of acronyms for quick and easy reference
*Some gures and tables are not included due to permissions constraints.
Acknowledgments
Professor Longest thanks Carolyn, whose presence in his life continues to make many things possible and doing them seem worthwhile. He extends appreciation to Mark S. Roberts, M.D., Chair of the Department of Health Policy and Management; Donald S. Burke, M.D., Dean of the Graduate School of Public Health; and Arthur S. Levine, M.D., Senior Vice Chancellor for Health Sciences at the University of Pittsburgh, for encouraging and facilitating a work environment that is conducive to the scholarly endeavors of faculty members. Professor Darr is grateful to Anne for her unstinting support of this latest edition and for never becoming impatient with the sometimes snail-like pace of the work. My department chair, Robert E. Burke, Ph.D., was supportive of my work on this 6th edition, and I am pleased to acknowledge him. A book of this magnitudeeven a revisioncannot be researched and written without help. Thanks are owed to my graduate assistants during its writing. Ayla Baughman and Nora Albert worked effectively, often under severe time constraints. Both of these young women have the qualities to succeed in the health services eld. I wish them all good things in the future. The authors wish to thank several people at Health Professions Press for their assistance with this book. Mary Magnus, Director of Publications; Kaitlin Konecke, Marketing Coordinator and Textbook Manager; Erin Geoghegan, Graphic Design Manager; and Carol Peschke and Diane Ersepke, copyeditors; each made important contributions. We are grateful to Cecilia Gonzlez, Production Manager, for her untiring efforts to make the book as good as it could be. She saw us through the project with good cheer and much assistance. We also thank the publishers and authors who granted permission to reprint material to which they hold the copyright. Finally, and last but not least, we are grateful to users of the 5th edition whose comments and critiques helped us to improve the 6th edition.
The authors acknowledge the contributions made by our coauthor on earlier editions, Jonathon S. Rakich, Ph.D. Professor Rakich collaborated with us on Managing Health Services Organizations and Systems for more than three decades. His participation and historic role in setting direction and selecting substance to achieve a high-quality book can be found even in the 6th edition. We thank him.
xvii
Acronyms Used in Text

AA associate of arts (degree) AAAHC Accreditation Association for Ambulatory Healthcare AAHSA American Association of Homes and Services for the Aging, also known as LeadingAge AAMC Association of American Medical Colleges ABC activity-based costing ABMS American Board of Medical Specialties ACA Affordable Care Act of 2010 ACHE American College of Healthcare Executives ACO accountable care organization ACS American College of Surgeons ADL activities of daily living ADR alternative dispute resolution AHA American Hospital Association AHCA American Health Care Association AHCPR Agency for Health Care Policy and Research AHIP Americas Health Insurance Plans AHRQ Agency for Healthcare Research and Quality AI articial intelligence AIDS acquired immunodeciency syndrome ALOS average length of stay AMA American Medical Association ANA American Nurses Association AND allow natural death AOA American Osteopathic Association APACHE acute physiology and chronic health evaluation APC ambulatory payment category APG ambulatory patient group ASC ambulatory surgery centers ASQ American Society for Quality BCG Boston Consulting Group Matrix BEAM brain electrical activity mapping BIM building information modeling BLS Bureau of Labor Statistics BSC balanced scorecard BSN bachelor of science in nursing (degree) CABG coronary artery bypass grafting CAD computer-aided design CAHME Commission on Accreditation of Healthcare Management Education CalRHIO California Regional Health Information Organization CAMH Comprehensive Accreditation Manual for Hospitals CAS carotid artery stenting CAUTI catheter-associated urinary tract infection
xix
xx
CBO Congressional Budget Ofce CDC Centers for Disease Control and Prevention CDI Clostridium difcile infection CDSS clinical decision support system CEA carotid endarterectomy CEO chief executive ofcer CEPH Council on Education for Public Health CFO chief nancial ofcer CGE continuing governance education CHA Catholic Health Association of the United States CHAP Community Health Accreditation Program CHC community health center CHIN community health information network CIO chief information ofcer CLABSI central lineassociated bloodstream infection CMO chief medical ofcer CMS Centers for Medicare and Medicaid Services CNA certied nursing assistant CNM certied nurse midwife CNO chief nursing ofcer CNS clinical nurse specialist COE Center for Outcomes and Evidence CON certicate of need COO chief operating ofcer COP conditions of participation CPI consumer price index CPM critical path method CPR cardiopulmonary resuscitation CQI continuous quality improvement CQO chief quality ofcer CRM crew resource management CRNA certied registered nurse anesthetist CSS clinical support system CT computerized tomography CTO chief technology ofcer CUS I am Concerned. I am Uncomfortable. This is a Safety issue. CUSP comprehensive unit safety program DBS deep brain stimulation DHHS Department of Health and Human Services DIC diagnostic imaging centers DMAIC Dene, measure, analyze, improve, control DNR do not resuscitate DNVHC Det Norske Veritas Healthcare, Inc. DO doctor of osteopathy DOL U.S. Department of Labor DRG diagnosis-related group DVA Department of Veterans Affairs EAP employee assistance program ECHO echocardiogram
ACRONYMS USED IN TEXT xxi
ED EH EHR EMR EMS EMT EOC EPC EOP EPM EVM FAH FC FDA FEMA FMEA fMRI FQHC FTC FTE GB GDP GE GPO HAI HCFA HCAHPS HCQIA HEDIS HHA HIPDB HIT HIV HME HMO HQI HR HRET HRM HS HSA HSO HTA HVA ICRC ICU IDN IDS IEC
emergency department employee health electronic health record electronic medical record emergency medical services emergency medical technician environment of care evidence-based practice center emergency operations plan epidemiological planning model earned value management Federation of American Hospitals xed costs Food and Drug Administration Federal Emergency Management Agency failure mode effects analysis functional magnetic resonance imaging Federally Qualied Health Centers Federal Trade Commission full-time equivalent employee governing body gross domestic product General Electric group purchasing organization healthcare-associated infection Health Care Financing Administration Hospital Consumer Assessment of Healthcare Providers and Systems Health Care Quality Improvement Act of 1986 Health Plan Employer Data and Information Set home health agency Healthcare Integrity and Protection Data Bank health information technology human immunodeciency virus home medical equipment health maintenance organization hospital quality improvement human resources Hospital Research and Educational Trust human resources management health system health systems agency health services organization healthcare technology assessment hazard vulnerability analysis infant care review committee intensive care unit integrated delivery network integrated delivery system institutional ethics committee
xxii
IHI Institute for Healthcare Improvement IHIE Indiana Health Information Exchange IOM Institute of Medicine IOR interorganizational relationship IPA independent practice association IRB institutional review board IRS Internal Revenue Service IS information system ISO International Organization for Standardization IT information technology IV intravenous JCAHO Joint Commission on Accreditation of Healthcare Organizations JCC joint conference committee KQC key quality characteristic KPV key process variable LAN local area network LCL lower control limit LIP licensed independent practitioner LLC limited liability company LOS length of stay LPC least preferred co-worker LPN licensed practical (vocational) nurse LTC long-term care LTCH long-term care (extended stay) hospital M&M morbidity and mortality MBNQA Malcolm Baldrige National Quality Award MBO management by objectives MBR management by results MCO managed care organizations MD medical doctor MDSS management decision support system MGMA Medical Group Management Association MICU medical intensive care unit MIS management information systems MRI magnetic resonance imaging MRSA Methicillin-resistant Staphylococcus aureus MSD musculoskeletal disorder MSDS material safety data sheets MSI magnetic source imaging MSO management services organization M-TAC multidisciplinary technology assessment committee MVS multi-vendor servicing NCQA National Committee for Quality Assurance NA nursing assistant NASA National Aeronautics and Space Administation NaSH National Surveillance System for Healthcare Workers NCHSRHCTA National Center for Health Services Research and Health Care Technology Assessment NCHCT National Center for Health Care Technology
ACRONYMS USED IN TEXT xxiii
NCHL NCVL NF NGC NHS NHSN NICU NIH NIOSH NLM NLN NLNAC NP NPSG OBRA ODS OPG OR OSHA OT OTA PA PAC PAS PBT PDCA PDSA PERT PET PGY PHO PI PICU PIT POS PPE PPO PRO PSDA PSO PSRO PT PTCA PVR PVS QA Q/PI QA/I QI
National Center for Healthcare Leadership noninvasive cardiovascular laboratory nursing facility National Guideline Clearinghouse National Health Service (U.K.) National Healthcare Safety Network (CDC) neonatal intensive care unit National Institutes of Health National Institute for Occupational Safety and Health National Library of Medicine National League for Nursing National League for Nursing Accrediting Commission nurse practitioner National Patient Safety Goals Omnibus Budget Reconciliation Act of 1987 organized delivery system ocular plethysmograph operating room Occupational Safety and Health Administration occupational therapy Ofce of Technology Assessment physician assistant political action committee physician-assisted suicide proton beam therapy plan, do, check, act plan, do, study, act program evaluation and review technique positron emission tomography postgraduate year physician-hospital organization productivity improvement pediatric intensive care unit process improvement team point of service personal protective equipment preferred provider organization peer review organization Patient Self-Determination Act professional staff organization professional standards review organization physical therapy percutaneous transluminal coronary angioplasty pulse volume recording plethysmograph persistent vegetative state quality assurance quality/productivity improvement quality assessment and improvement quality improvement
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QIC quality improvement council QIO quality improvement organization QIT quality improvement team QMHCD quality management for health care delivery QWL quality-of-work life RBRVS resource-based relative value scale RDE rule of double effect RHIO regional health information organization RM risk management RN registered nurse ROI return on investment RT rehabilitation therapy RUG resource utilization group SA strategic alliance SBAR situation, background, assessment, recommendation SBU strategic business unit SCAP service, consideration, access, and promotion SD standard deviation SEA sentinel event alert SHRM strategic human resources management SICU surgical intensive care unit SNF skilled nursing facility SPC statistical process control SPECT single-proton emission computed tomography SSU strategic service unit STEPPS strategies to enhance performance and patient safety SWOT strengths/weaknesses/opportunities/threats TB tuberculosis TC total costs TEAM Technology Evaluation and Acquisition Methods TEE transesophageal echocardiography t-PA tissue plasminogen activator TQM total quality management UCL upper control limit UPMC University of Pittsburgh Medical Center UR utilization review USPHS United States Public Health Service VAP ventilator-associated pneumonia VC variable costs VNS vagus nerve stimulation VP vice president VPMA vice president for medical affairs WAN wide-area network
To those who manage health services organizations and to those who aspire
1
Healthcare in the United States
Learning Objectives
Discuss the development of healthcare in the United States Comprehend the importance of prevention compared with other interventions Compare the roles of various organizations in delivery of health services Understand the health policy and regulatory processes Describe the education and regulation of selected health occupations Understand the role of government in organizing health services and paying for them Detail the importance and effect of accreditation in health services
1
Part I
The Healthcare Setting
01--Chapter 1--1-64.indd 1
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Healthcare in theUnited States

Chapter Outline
Health and System Goals Lack of Synchrony Processes That Produce Health Policy A Brief History of Health Services in the United States Other Western Systems Structure of the Health Services System Classication and Types of HSOs Local, State, and Federal Regulation of HSOs/HSs Other Regulators of HSOs/HSs Accreditation in Healthcare Regulation and Education of Selected Health Occupations Associations for Individuals and Organizations Paying for Health Services Government Payment Schemes System Trends
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This rst chapter describes the system of healthcare in the United Statesthe general environment in which managers of health services organizations (HSOs) and health systems (HSs) work. The chapter develops conceptual frameworks and presents information about healthcare resources that show their historical development, nature, and extent and the relationships among them. Resources include HSOs/HSs, programs, personnel, technology, and nancing. Information about several types of HSOsacute care hospitals, nursing facilities, ambulatory care organizations, hospice, managed care organizations (MCOs), and home health agencies is provided in Chapter2. Data and information presented here describe the managers environment. Successful managers have a comprehensive and accurate understanding of the world beyond their organizations; this includes a thorough understanding of trends and developments. The management model presented in Figure 5.7 (Chapter 5) shows this relationship and should be referenced as necessary. It is important not only to understand the individual presentations of data but also to appreciate their interactions. Health expenditures in the United States in 2010 were roughly $2.6 trillion, which was 17.9% of gross domestic product (GDP), or more than $8,000 per capita.1 Table 1.2 shows that actual numbers for 20062010 and projections to 2021 have a much slower annual percentage change in the increase of health spending. Rates of growth for health expenditures are also a function of changes in GDP because these changes affect the denominator.2 These changes have slowed the large upward trend of health expenditures as a percentage of GDP that had been observed since the 1960s.3 Table 1.2 shows that, from $2.7 trillion in 2011, expenditures are projected to increase to $4.8 trillion in 2021, or 19.6% of GDP.4 Growth in healthcare spending is projected to average 6.2 percentage points per year above the rate of GDP growth for 20152020.5 Expending such huge sums suggests both the magnitude of the problems and the opportunities for HSO/HS managers. An Institute of Medicine report issued in 2012 estimated that about 30% ($750 billion) of health system expenditures are wasted as the result of unneeded care, complex paperwork, fraud, and other waste.6
Health and System Goals

Distinguishing the healthcare system from the health services system may seem a pedantic exercise, but health services managers must understand the connections between them. Blums model, shown in Figure 1.1, identies factors affecting health. The relative size of the arrows shows the degree of their effectsmedical care services (prevention, cure, care, rehabilitation) are much less important than environment and somewhat less important than heredity and lifestyles in affecting health (well-being). In explaining the model, Blum states that the largest aggregate of forces resides in the persons environment. Ones own behavior, in great part derived from ones experience with ones environment, is seen as the next largest force affecting health.7 Effective managers understand the numerous inuences on health status, both as factors that lead to episodes of illness and as affecting recovery and long-term absence of illness and minimization of disability. HSO/HS managers must have a broad view of illness and health. This requires looking beyond the organization. They must understand that, at best, the health services system has a limited effect and can provide only stopgap measures if negative inuences on health undo what delivery of services has done. Blum suggests several goals for a health system: Prolonging life and preventing premature death Minimizing departures from physiological or functional norms by focusing attention on precursors of illness
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CHAPTER 1

POPULATION (size, distribution, growth rate, gene pool)
RC OU ES R AL UR AT
ES
HEREDITY
CU LTU RA
LS YS TE
M S
Internal Satisfaction ENVIRONMENT Fetal, physical (natural and man made), sociocultural (economics, education, employment, etc.) External Satisfaction Reserve
cia l
Life Expectancy Impairment

m so ic at
Discomfort
HEALTH (well-being)
Disability
MEDICAL CARE SERVICES prevention, cure, care, rehabilitation
so
Interpersonal Behavior Social Behavior
psychic Ecologic Behavior
Participation in Health Care Health Behavior

N TIO AC ISF
S
O LO
Figure1.1. 1.1. The The force-field and and well-being well-being paradigms of health. (From Blum, Henrik K. Expanding Health Figure force-eld paradigms of health (From Blum, Henrik K. Expanding Health Care Horizons: From General Systems Concept of Healthof to Health a National Policy, 2nd ed.,Policy 37. Oakland, CA: 37. Care Horizons: From General Systems Concept to Health a National Health , 2nd ed., Third Party Publishing, 1983; reprinted 1983; by permission.) Oakland, CA: Third Party Publishing, reprinted by permission.)
Minimizing discomfort (illness) Minimizing disability (incapacity) Promoting high-level wellness or self-fulfillment Promoting high-level satisfaction with the environment Extending resistance to ill health and creating reserve capacity Increasing opportunities for consumers to participate in health matters8 These goals are part of the conceptual framework underlying the use of this book. The Precede-Proceed planning model in Figure 1.2 is a more applied conceptualization of the relationships among activities that are part of health promotion planning and evaluation and that should be part of the efforts to deliver comprehensive healthcare.9 Phase 1 is a social assessment that recognizes the relationships among health and various social issues by identifying a target populations social, economic, cultural, and other nonmedical concerns and goals. The epidemiological assessment in Phase 2 has the initial goal of identifying specic health goals or problems that may contribute to, or interact with, the social goals or problems noted in the social assessment of Phase 1. Phase 2 uses vital indicators such as morbidity, disability, mortality, and demographic patterns, as well as genetics and behavioral and environmental indicators of health problems. The health concerns needing amelioration are listed in rank order after the objectively appraised health problems identied in Phase 2 are compared with the subjectively appraised quality-of-life issues identied in Phase 1. The educational and ecological assessment in Phase 3 groups the factors associated with health concerns into predisposing factors, reinforcing factors, and enabling factors. The elements of these factors are sorted,
EC
GI
CA LB
AL AN CE
LIFESTYLES attitudes, behaviors
A HUM
NS
AT
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6
PHASE 4 Administrative & policy assessment and intervention alignment

PHASE 3 Educational & ecological assessment PHASE 2 Epidemiological assessment PHASE 1 Social assessment
HEALTH PROGRAM Educational strategies
Predisposing
Genetics
Reinforcing
Behavior
Health Policy regulation organization
Quality of life
Enabling
Environment
PHASE 5 Implementation
PHASE 6 Process evaluation
PHASE 7 Impact evaluation
PHASE 8 Outcome evaluation
Figure1.2. 1.2. The The model health promotion planning and evaluation. (From Health Program Planning: An Figure model forfor health promotion planning and evaluation (From Health Program Planning: An Educational Ecological Approach. 4th Lawrence ed. Lawrence W. Green and Marshal Kreuter. New York: Educational andand Ecological Approach. 4th ed. W. Green and Marshall W.W. Kreuter. New York: McGrawMcGraw-Hill, 2005, With permission of the McGraw-Hill Companies, Inc. Hill, 2005, 10.) With10.) permission of the McGraw-Hill Companies, Inc.
categorized, and selected in terms of their greatest potential to change the behavioral and environmental targets generated in previous stages. The administrative and policy assessment and intervention alignment in Phase 4 begin the interventions that lead to the Proceed portion of the model. This phase answers questions about what program components and interventions are needed and whether policy, organization, and resources are sufcient to make the program a reality. The result is the implementation in Phase 5. Phases 6, 7, and 8 are among the most important in the model. Here the program is evaluated in terms of process, impact, and outcome. The evaluation criteria are linked to objectives dened in the corresponding steps of the Precede portion of the model. The increasing emphasis on health promotion and prevention makes the Precede-Proceed model a useful tool in planning and delivering comprehensive healthcare, especially in integrated delivery systems that focus on population health.
Lack of Synchrony
The wide geographic variation in rates of hospitalization and lengths of hospital stay by diagnosis has been known for decades. Similar geographic variation occurs in the use of nursing facilities by Medicare beneciaries.10 The variation in hospital use is a true difference that cannot be explained by redening or estimating the effect of variables such as age, sex, and climate. Even more puzzling are the large differences in rates of hospitalization and lengths of stay by diagnosis within geographic regions, and even within individual hospitals. The most plausible explanation is that physician practice patternsphysicians clinical decisionsvary, sometimes widely. It can be hypothesized that some rates of hospitalization and lengths of stay
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CHAPTER 1
are more appropriate than others. This means that exceeding the appropriate level of resource use has signicant implications for HSOs/HSs striving to use resources judiciously. Other data have shown signicant differences between morbidity and mortality caused by a disease and the amount of hospitalization for that disease.11 The lack of synchrony can be explained in various ways: hospitals are constrained by available technology; hospitalization may be inappropriate to treat the medical condition that causes death or limits activity; and some medical conditions require more attention to prevention, which is historically a general decit of acute care hospitals. Achieving synchrony suggests that services provided by HSOs and their use are in harmony with health needs. There are important distinctions between the need and the demand for health services. Need is measured by morbidity and mortality data and by disability that limits activity. Need is more objective than demand, but value judgments invariably underpin conclusions about need. Demand occurs when need (or perceived need) is converted into demand for services. As suggested, need and demand do not have a one-to-one relationship. Providers such as hospitals and physicians have a role in demand, as does the availability of third-party payment for services. Demand for a service or treatment may be articially low in a service area if, for instance, a hospital does not offer it and potential users must go elsewhere. Physicians perspectives about whether a medical service is needed directly affect demand for it. From the consumers perspective, need may not become demand, because consumers lack knowledge about a disease or because social or cultural mores dissuade them from seeking services or treatment. In addition, demand may be less than need because people lack nancial resources or there are other access barriers. Further, some demand, such as that for cosmetic surgery, is subjective and varies by individual consumers and their resources. The relationships between need and demand must be considered as health services are planned. The ethical dimensions of need and demand are addressed in Chapter 4.
Processes That Produce Health Policy

The federal Constitution is the basic law of the United States. The federal system that it established arose after the American Revolution when the several sovereign states relinquished specic powers to a central government. The enumerated powers of the federal government are interpreted by the U.S. Supreme Court and its inferior courts. Powers not delegated to the federal government are reserved to the states or the people. This is important because of the states police power. Each state has a constitution that establishes its form of government. The right to petition government is found in the First Amendment to the federal Constitution. This guarantee of access to government and its processes has produced various nonpublic efforts to affect the legislative, regulatory, and judicial processes.
Public Processes
Legislative Process
Statutes are enacted by state legislatures and the U.S. Congress. Comparable legislative activities are performed by local governments when ordinances are passed. The laws are binding, but they may be challenged in court if they violate constitutionally protected rights or were improperly enacted because of procedural irregularity. The legislative branch relies on the executive branch to implement and enforce the laws.
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Paradigmatic of these processes is the process that occurs in the U.S. Congress. The basic legislative process in the Senate and House of Representatives is the same. The majority political party controls committees and subcommittees and determines legislative priorities. Bills related to healthcare introduced in either house are referred to committees or subcommittees and may be amended at various points, including in committee or subcommittee, on the oor, or in conference between the houses. During the legislative process, or to learn more about problems before drafting bills, committees or subcommittees may hold hearings in which testimony about a problem or issue is heard. Individual managers or governing body members of HSOs/HSs rarely participate in the legislative process. Testimony, drafts of bills, and other input are provided by professional or trade associations, either by their staffs or through lobbyists. A bill approved by the Senate and the House and signed by the president becomes law.
Implementing LawRegulations
Laws are implemented by regulations issued by executive departments and agencies and independent regulatory bodies such as the Federal Trade Commission (FTC). This process is governed by the Administrative Procedure Act of 1946, as amended.12 Requirements include notice of proposed rule making, proposed regulations, and nal regulations. The steps before nal regulations are issued permit interested parties to comment on provisions. Interim regulations that test the effect of proposed regulations may be issued before nal regulations are drafted and approved. During the time for public comment, individual HSOs/HSs and their trade associations and lobbyists seek to affect the content of nal regulations. It is most cost-effective to inuence the process at this point. The record of HSOs/HSs and their trade associations is mixed. Lobbying by provider groups moderated the Medicare fraud and abuse regulations. Conversely, the federal National Labor Relations Board did not accept the position of hospitals during rule making regarding the denition of bargaining units. Results of the implementation process appear in the Federal Register, which is published each working day. Final regulations are compiled in the Code of Federal Regulations.
Multiple Functions of the Regulatory Process

Implementation and enforcement of federal laws are accomplished by executive branch departments and agencies and by independent regulatory bodies, all of which were established by Congress. The regulatory process melds legislative, executive, and judicial functions. Drafting and promulgating regulations (rule making) give executive departments and agencies and independent regulatory bodies quasi-legislative authority.13 The basic laws specicity determines the latitude for interpretation in the rule-making process. The regulations reect the law and congressional intent and have general (prospective) application. Executive departments and agencies and independent regulatory bodies have quasi-executive powers because they have authority to enforce the regulations. Compliance is achieved by bringing complaints, issuing directives such as cease-and-desist orders, and levying nes, all of which can occur pending a decision in the agencys hearing and review process or prior to a hearing in an emergency. Executive departments and agencies and independent regulatory bodies have quasi-judicial powers because they judge compliance in hearings and reviews that are held before their hearing ofcers or administrative law judges. Such ofcials have a degree of independence because they are appointed for specic terms by the president and can be removed only for cause. Challenging a regulatory decision by engaging in the administrative hearing and review process is time-consuming and expensive. Legal counsel expert in the law being disputed, as well as in administrative law, are needed to work with retainer or in-house corporate counsel.
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As a practical matter, small HSOs/HSs have little choice but to comply with a regulation or to simply accept an adverse administrative ruling without appeal to the courts. Legal challenges are costly and usually can be undertaken only by a large HSO/HS or association. This may change, however, because some federal laws permit successful challengers to recover costs. An important development beginning in the late 20th century is the increasing complexity and signicance of administrative law and the rule-making processes. Some political scientists argue that bureaucracies have become a de facto fourth branch of federal (and state) government. Generally, the parties must exhaust the administrative review process before appeal to the federal courts is allowed.
Judicial Process
Space does not permit full discussion of various courts and their jurisdictions and authority. Sufce it to say that state and federal court systems are similar. Both have trial courts (county and district courts, respectively), intermediate courts (appeals courts), and supreme courts. Some states reverse use of the terms supreme and appeals. Judge is the title for jurists in courts other than the highest state and federal courts; justice is the title for members of state supreme courts and the Supreme Court of the United States. Typically, governors nominate state judges and justices, who are ratied by the state senates. Some states elect judges and justices, although the election of judges is more common. Elected jurists typically serve terms of 10 or 15 years. Federal court judges and justices are nominated by the president and conrmed by the Senate. They serve for life. Appointment insulates the judiciary somewhat from politics. This results in more predictable and consistent court-made law. Judges and justices appointed by governors or presidents will likely have compatible political philosophies; the history of the U.S. Supreme Court shows some notable exceptions, however. The need for legislative conrmation and the almost universal review of nominees by bar committees usually result in appointment of competent and ethical members of the judiciary.
The Courts
HSOs/HSs are often involved in state and federal courts, as plaintiffs (those bringing civil legal action) or defendants (those against whom civil legal action is taken). In addition, when a case is heard by an appeals court, an individual or association may submit legal briefs as a friend of the court, or amicus curiae. The briefs bring to a courts attention legal precedents and other information from that groups perspective.
Stare Decisis and Res Judicata

Two legal doctrines make courts a source of formal law. Stare decisis is Latin meaning that courts will stand by precedent and not disturb a settled point.14 Intrinsic to a stable society is that the law is xed, denite, and known and that courts and litigants are guided by previous cases with similar facts. Whimsical changes and uncertainty must not result from judge-made law or legislative enactments. Nevertheless, precedents are sometimes overturned. The second doctrine is reected in the Latin phrase res judicata, which means that a matter has been judged or a thing has been judicially acted on or decided.15 Thus, rehearing will occur only if there is a substantial problem in the original judgment because of factual error, misrepresentation, or fraud or if signicant new information becomes available. Res judicata adds stability and predictability to the law because a case is rarely reopened after appeals are exhausted.
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10
Executive Orders
Formal law results from executive orders issued by the president through the executive branch of the federal government. Authority for some executive orders, such as the presidents role as commander-in-chief of the armed forces, is derived from the U.S. Constitution. Decisions arising from treaties result in executive orders. Another example is delegation of authority by Congress to the president to act in special circumstances, such as emergencies. An executive order that declares a disaster will enable an HSO/HS to qualify for federal assistance.
Private Processes
Inuence of HSOs/HSs
Healthcare became highly politicized after massive federal nancing of health services began in the mid-1960s with enactment of Medicare and Medicaid. The legislative and regulatory processes affecting health services were increasingly subject to the inuence of lobbyists, political action committees (PACs), and other interest groups, all of whom sought to ensure that their concerns were known. For HSOs/HSs and their trade associations, participating in federal and state government processes that affected them was a matter of survival. In the management model in Figure 5.7, the change loop (number 6) suggests that HSOs/ HSs affect their external environment, even as they are affected by it. This occurs when they advocate a position or support a trade association or PAC. Another effect results from bringing a lawsuit.
Trade Associations and Interested Parties

Washington, D.C., and environs are home to thousands of trade associations; among them are many from healthcare. Physical proximity to policy makers and the bureaucrats who develop and enforce federal laws and regulations is considered an advantage. In addition to major associations, there are hundreds of narrowly focused special interest groups. At best, trade associations and interested parties provide information that enhances the results of legislative and regulatory processes. HSOs/HSs and their associations seek to further their own interests, but their quasi-public role means that their interests have much in common with the publics interests. Associations and interested parties make their positions known at various points in the legislative and regulatory processes. The myriad bills and their often complex subject matter minimize the depth of decision makers knowledge. An essential role of lobbyists is providing decision makers with information that otherwise is unavailable, as well as analyzing the intended and unintended consequences of legislation being considered. Interactions with lobbyists occur in private, which is not to suggest illegal or immoral acts. Legislators and their staffs know that lobbyists will present information most advantageously for the party that they represent. A cardinal rule among lobbyists is that truthfulness is essential. Lobbyists caught lying or purposefully misleading decision makers or staff will irretrievably lose credibilitytheir greatest asset. The obvious bears repeating: There will always be dishonest legislators whose vote can be bought and special interests who try to do more than express a viewpoint and make a convincing argument. Despite occasional publicity to the contrary, such ethical and legal lapses are the exception.
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11
A Brief History of Health Services in the United States

Figure 1.3 shows trends in U.S. health services since 1945. It provides a useful context for understanding the evolution and current status of healthcare and health services.
Technology
The importance of ensuring the purity of food and water was shown during the great sanitary awakening that occurred in the mid-19th century. One result was the creation of local and state health departments. At about the same time, the work of scientists such as Pasteur, Lister, and Koch resulted, rst, in antisepsis and, later, asepsis. In addition, medical technology such as radiographs, inhalation anesthesia, blood typing, and improved clinical laboratories in the late 19th century permitted efcacious surgical interventions with greatly reduced morbidity and mortality. Making these scientic advances available to the public required an organization, specialized staff, and effective systems. Hospitals became the answer. It was common for hospitals to be sponsored by private, not-for-prot corporations that had been formed by religious groups, concerned citizens, or wealthy benefactors; local governments sponsored others. In addition, many small hospitals were established as for-prot corporations, often by individual physicians who needed a place to care for patients following surgery. Long-term care facilities were rare because extended families cared for one another. Persons with mental illnesses were isolated from society in facilities owned almost exclusively by state governments. Effective, large-scale treatment for them did not occur until after World War II through the use of psychoactive drugs. Another type of HSO sponsored by local and state governments was the public health department. Chapter 3 details the role of technology in contemporary health services.
Mortality and Morbidity

Except for tuberculosis, the incidence of which declined rapidly at the end of the 19th century mainly because of improved nutrition and housing, and leprosy, which has never been a major medical problem in the United States, there were few chronic diseases before the 20th century. Primarily, people died of acute gastrointestinal and respiratory tract infections, such as pneumonia, that usually occurred well before they could develop chronic diseases. Many communicable health problems common in the mid-19th century were solved through preventive measures taken by health departments. Pure food and water and improved sanitation were major contributors to decreased morbidity and mortality. The greatest inuence on public health in the United States came from work done in England. Local public health departments were established in the early 19th century; those in Baltimore, MD, and Charleston, SC, were among the rst.16 Causes of mortality and morbidity in the mid-20th century were much less amenable to easy prevention or inexpensive treatment, and greater emphases on acute services substantially increased costs. As in the United States, the worldwide trend is that fewer illnesses are acute and result, for example, from water- and foodborne diseases that lead to premature death. Aging populations have more disability and will be aficted by diseases such as Alzheimers and Parkinsons. Such conditions are long-term and require signicant amounts of resources.17
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12
THESE FORCES
THESE TRENDS
THESE EFFECTS
THESE REACTIONS
THESE RESULTS ON HEALTH SERVICES PROVIDERS Defensive strategies Higher risk
Deregulation Greater competition
Excess capacity
Closures Multiorganizational arrangements More acute illness Increase in uncompensated care Cost shifting by providers HSOs at financial risk Higher cost care
High cost of healthcare
Under/uninsured
Lessened access Personal financial risk
Increased bankruptcies/ fewer providers willing to treat uninsured Modified direction of technological change in medicine
Medicare Medicaid ESCALATION IN HEALTHCARE COSTS Cost controls by public and private health insurers
More federal regulation: PROs, DRGs, RBRVS, RUGS
Growing health insurance (especially for hospitalization)
Better insurance coverage for ambulatory care and extended care Growth of managed care
Changing balance of power: MDs MCOs HSOs
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Geographic maldistribution of doctors Growth of hospital salaried MDs
Hill-Burton
Growth of suburbs
Growth of wellequipped community hospitals
EMPHASIS ON SECONDARY AND TERTIARY CARE AND INADEQUATE ATTENTION TO OTHER LEVELS OF CARE
Trend toward group medical practices
Cooperation among HSOsmergers, shared services, integration, etc.
Growing specialization of doctors
Growth of nonphysician providers Neighborhood health centers National Health Service Corps Loan forgiveness for MDs working in shortage areas
Government funding of research, and development of medical technology
Growing power of medical schools
Emphasis on home health, ambulatory care, palliation, and hospice
Growing influence of teaching hospitals
Growth in numbers and influence of nondoctors in health system
Trend toward institutional rather than physician referrals
Figure in the theU.S. U.S. healthcare system since 1945. Cambridge Research Trendsthe Affecting theCare U.S. Health Care Planning System, Information [Health Planning Figure 1.3. 1.3. Trends Trends in healthcare system since 1945. (From(From Cambridge Research Institute.Institute. Trends Affecting U.S. Health System [Health Information 409. DC: Washington, DC: Human Resources 1976. Adminstration, 1976. Revised and updated by the authors, 2013.) Series], 409. Series], Washington, Human Resources Administration, Revised and updated by the authors, 2013.)
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In 2010, life expectancy in the United States at birth was 78.7 years. The 15 leading causes of death in 2010 were as follows: 1. Diseases of the heart (heart disease) 2. Malignant neoplasms (cancer) 3. Chronic lower respiratory diseases 4. Cerebrovascular diseases (stroke) 5. Accidents (unintentional injuries) 6. Alzheimers disease 7. Diabetes mellitus (diabetes) 8. Nephritis, nephrotic syndrome, and nephrosis (kidney disease) 9. Inuenza and pneumonia 10. Intentional self-harm (suicide) 11. Septicemia 12. Chronic liver disease and cirrhosis 13. Essential hypertension and hypertensive renal disease (hypertension) 14. Parkinsons disease 15. Pneumonitis due to solids and liquids18 Figure 1.1 shows a link between lifestyle and medical problems. Several of the leading causes of death listed above reinforce the seeming connection between lifestyle choices and medical conditions that result in death. Many types of prevention require changes in behavior. Efforts to effect these changes raise issues of individual choice and liberty rights, which are much more complex than purifying water and protecting food supplies. Modifying behavior raises questions such as What are the limits of governments efforts to force people to live healthy lives? What is societys obligation to treat those whose illnesses are a direct result of engaging in activities known to be unhealthy or to result in injury?
Social Welfare
A major shift in the locus of responsibility for social welfare occurred with the Social Security Act of 1935,19 whose enactment resulted from the Great Depressions catastrophic economic and social problems. To the extent that government was involved in social welfare before 1935, it was provided at the local and state levels. City or county governments might own a poor farm, for example, where needy persons could live and work until they could regain their independence. Since 1935, there has been a massive shift of perceived and actual responsibility for social welfare from state and local levels to the federal government. This accretion continued virtually uninterrupted until revenue sharing and other federal programs were developed in the 1970s and 1980s. Federal governmentsponsored national health insurance programs, ranging in scope from all-encompassing to modest, were seriously considered in the late 1940s and late 1960s and again in the early 1990s. Various factors made them unattractive: lack of voter interest
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because of their cost and the fear of government control, widely available employer-provided health insurance, and the presence of Medicare and Medicaid that covered millions of Americans. Organized medicines opposition is often cited, but its role is overstated. The experience with Medicare and Medicaid from 1966especially their rapidly rising costsblunted the political will to universalize them. Passage of the Patient Protection and Affordable Care Act (ACA) (PL 111-148) marked a substantial increase in the federal governments involvement in organizing, controlling, and nancing delivery of health services. In 2010, 13% of the population was age 65 or older; it is projected that by 2050, this proportion will grow to 20.0%.20 These data suggest that there will be a greater demand for health services in geriatrics, chronic diseases, rehabilitation, and institutional long-term care.
Federal Initiatives
Major beneciaries of early federal programs were not-for-prot acute care hospitals, including those operated by state and local governments. From 1946 to 1981, the Hill-Burton Act (Hospital Survey and Construction Act of 1946, PL 79-725)21 provided more than $4 billion in grants, loans, and guaranteed loans in a federal-state matching program and aided nearly 6,900 hospitals and other health services facilities in more than 4,000 communities. Initially, new inpatient facilities were constructed; later, outpatient facilities were constructed or remodeled. In return for Hill-Burton assistance, organizations had to provide uncompensated services for varying lengths of time.22 The legal processes that produced Hill-Burton and laws like it were discussed earlier in this chapter. Another federal program provided generous funding for medical research. The National Institutes of Health (NIH) began with experimentation on cancer in the 1930s. In 2012, there were 21 institutes and 6 centers and related activities, such as the National Library of Medicine (NLM) and the NIH Clinical Center.23 In 2013, the NIH budget was $30.9 billion, over four times the $7.6 billion in 1990 and more than nine times the $3.4 billion in 1980 (for only nine institutes and related activities).24 In 2011, the NIH provided grants to more than 45,000 research projects in universities, medical schools, and independent research institutions.25 By way of context, an estimated $140.5 billion was spent on U.S. health research in 2010. Industry spent $76.5 billion (55%), including $37 billion (26%) from the pharmaceutical industry, $30 billion (21%) from the biotechnology industry, and $9 billion (9%) from the medical technology industry. Government spent $46 billion (33%); most of this came from NIH ($35 billion [25%]), and other federal agencies and state and local governments spent $11 billion (8%). The remaining $18 billion (13%) was spent by universities, independent research institutes, voluntary health organizations, and foundations.26 Signicant federal programs to educate more physicians, nurses, technicians, and managers were established and funded in the 1960s. It was clear to Congress that the knowledge produced by NIH and the care delivered at hospitals built by Hill-Burton could improve health status only if health professionals were available in sufcient numbers. The federal government has also built large numbers of Department of Veterans Affairs (DVA) hospitals and other HSOs to serve former military personnel. The DVA system is separate from the services provided to groups in special categories, including inmates in federal prisons, American Indians and Alaska Natives, and active-duty and retired military personnel and their dependents in the U.S. Army, U.S. Navy, and U.S. Air Force health facilities. In 1965, amendments27 to the Social Security Act of 1935 obligated the federal government to pay for health services under the newly enacted Medicare and Medicaid programs. Medicare is exclusively federal and pays for medical services provided to persons who have
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disabilities or are 65 or older. Originally, Medicare included only Part A, to pay for hospital inpatient services, and Part B, to pay for physicians services. The Balanced Budget Act of 1997 (PL 105-33)28 added Part C, which allows Medicare beneciaries to choose from various health plans, including fee-for-service, coordinated care plans, provider service organizations, and medical savings accounts.29 Part D was added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (PL 108-173)30 to establish a voluntary prescription drug benet program. Medicaid is a state-federal cost-sharing program. States determine eligibility. The federal government subsidizes a states Medicaid program in varying ratios. Medicaid requires that participating states offer a minimum set of benets: inpatient and outpatient hospital services; physician, midwife, and certied nurse practitioner services; laboratory and x-ray services; nursing homes and home healthcare for individuals age 21 or older; early and periodic screening, diagnosis, and treatment for children under age 21; family planning services and supplies; and rural health clinics or federally qualied health center services. In addition to the basic benets, states can receive federal matching funds for optional services, including prescription drugs, prosthetic devices, hearing aids, and dental care.31 The open-ended cost-sharing commitment by the federal government has proven largely uncontrollable because limiting or reducing benets is politically infeasible. This has caused Medicaid to become extremely expensive for both state and federal governments. Meanwhile, federal legislators have sought to rationalize health services.32 The Comprehensive Health Planning and Public Health Service Amendments Act of 1966 (PL 89-749) was the rst attempt. It enhanced the modest planning requirements in Hill-Burton by encouraging voluntary planning and use of planning processes and techniques. This legislation was amplied and expanded in the National Health Planning and Resources Development Act of 1974 (PL 93-641), which increased the control that planning agencies had over expansion of hospitals and services in an effort to regulate the supply of services. Monitoring the use and quality of services provided under Medicare and Medicaid programs was included in the Social Security Amendments of 1972 (PL 92603) that established professional standards review organizations (PSROs). Political changes caused reassessment of planning and PSROs. Federal support of planning ended. PSROs were replaced by peer review organizations (PROs), which are discussed later in this chapter. Such regulatory controls were thought to be essential in slowing the rapid increases in healthcare costs. Generally, they were ineffective. Except for 4 years between 1969 and 1996, the medical-care-items component of the consumer price index (CPI) had the highest rates of increase, usually by wide margins. In several years, the average annual percentage changes for hospital services were two to three times the annual percentage changes for all items measured by the CPI.33 Healthcare costs are discussed later in this chapter. The Tax Equity and Fiscal Responsibility Act of 1982 (PL 97-248) and the Social Security Amendments of 1983 (PL 98-21) established a prospective payment system to slow cost increases for hospital services.34 Medicare reimbursement is determined prospectively. It is based on diagnosis-related groups (DRGs), which tie the payment from the federal government for Medicare patients to a hospitals case mix. Since the mid-1970s, state governments concerns about rising health services costs resulted in certicate of need (CON) and rate review laws. In addition, states have reduced reimbursement for Medicaid such that providers typically incur nancial loss providing them. These federal legislative initiatives forced hospitals and other providers, such as nursing facilities, to become more efcient. Providers cannot control their environments, however. In addition, they may have to provide signicant levels of uncompensated care. In such circumstances, providersespecially hospitalscan survive only if they nd other revenue sources. Previously, unpaid costs were shifted to Blue Cross, commercial insurance companies, and
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rivate-pay patients. Third-party payers have become less willing to bear these shifted costs. p This left only private-pay patientsa group too small to make up the difference. Beyond the issue of fairness, cost shifting is a major political issue, especially with regard to the uninsured and the costs of medical education. To protect themselves nancially, hospitals and other HSOs are developing new organizational entities and relationships through corporate restructuring, joint ventures, and participation in HSs. The result is a mix of not-for-prot and for-prot organizations that, it is hoped, will produce an enhanced revenue stream to offset decits. These developments are discussed in Chapter 2. MCOs, the most common of which is the health maintenance organization (HMO), have helped moderate the rate of increase in healthcare costs, but the results have been mixed. Evidence for this includes a need for MCOs to recoup losses, the higher costs of prescription drugs, the difculty of wresting additional price concessions from physicians and hospitals, and the fact that all the one-time savings that resulted from employees changing to managed care have been realized. HMO costs are estimated to be growing like those of traditional health insurance.35 In addition, anecdotes asserting that economics drive certain physician decision making may be overstated, as seen when equalizing payments to physicians for caesarean sections and vaginal deliveries did not decrease the number of caesarean sections. The opportunity costs of waiting out a difcult labor, the fear of malpractice suits, and the effects of a bad outcome on physicians self-respect, reputation, and long-term prots may be more important in caesarean delivery decisions than current fees.36
Other Western Systems

Western Europe, notably Germany and England, had government involvement in nancing health services much earlier than did the United States. In 1883, Chancellor Otto von Bismarck achieved passage of a social insurance scheme, including a health services component, for certain working-class Germans. In 1911, England adopted a national health insurance program, and in 1948, the United Kingdom established the National Health Service, which included government ownership of the health services system. Historically, Western European and Canadian healthcare systems have had more governmental control and nancing than did the healthcare system in the United States. In the past, many of these countries experienced ination in health services costs similar to that in the United States, despite greater government involvement in planning and nancing. However, since about 1985, the United States has the highest growth rate in healthcare spending.37 Countries whose public budgets allocate expenditures for health services prospectively spend substantially less than the United States. In 2010, as a percentage of GDP, the United States spent 17.6% ($8,233 per capita), Germany spent 11.6% ($4,338 per capita), Canada spent 11.4% ($4,445 per capita), and the United Kingdom spent 9.6% ($3,433 per capita).38,39 One reason for this difference is that the United Kingdom and Canada spend much less on technology. Furthermore, elective and nonemergent procedures may be available only after long waiting periods, known as queues. An important difference in expenditures for health in various countries is the source of funds. In 2000, public sources in the United States accounted for spending of 5.8% of GDP. This is virtually identical to public spending in Italy, Japan, and the United Kingdom (5.9% each) and very similar to that in Canada (6.5%). It is private health spending that distinguishes these comparison countries from the United States. In 2011, private healthcare spending as a percentage of total healthcare spending was 22.4% in Italy, 17.5% in Japan, and 16.1% in the United Kingdom. In the United States, however, private spending for healthcare was 46.9%.40
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Structure of the Health Services System

Various types of HSOs are found in the private (owned by individuals or groups) and public (owned by government) sectors. HSOs may be institutionsthe most important and numerous are hospitals and nursing facilitiesor they may be agencies and programs such as public health departments and visiting nurse associations. Information about selected HSOs is found in Chapter 2. Various HSOs are aggregated into HSs for greater efciency and to provide a connected network of services. In this regard, HSOs are orienting their activities toward the health of populations and communities. HSOs depend on their environments (see Figure 5.7). The range of health services delivery and various providers is shown in Figure 1.4. One way HSOs/HSs can improve their focus on populations and communities is to develop community care networks, which have the following objectives: increasing access and coverage, enhancing accountability to the community, imbuing the healthcare system with a community health focus, improving coordination among the many parts of the healthcare system, and using healthcare resources more efciently. Participants include insurers, business alliances, schools, religious organizations, social services agencies, public health departments, local governments, and community-based organizations, in addition to HSs, hospitals, clinics, and physician groups. An estimated 26% of hospitals participated in community care networks in the late 1990s.41 Health departments can and should take a leading role in coordinating disparate providers and minimizing political and competitive issues to deliver integrated and comprehensive health services to the community.42 Delivery of integrated services is discussed in Chapter 2, and community health information networks are discussed in Chapter 3. Preventive care is an essential part of meeting the health needs of a population. It comprises two parts, education and prevention. Health education is a long-standing part of K-12 education. It is an increasingly important part of health services delivery. Prevention has three parts: primary, secondary, and tertiary. Primary prevention is prevention of disease or injury. Examples include improved design of roadways, school education programs about tobacco use and substance abuse, and immunizing against poliomyelitis or measles. Secondary prevention slows or blocks progression of a disease or injury from an impairment to a disability. Using the Papanicolaou smear (Pap test) to identify early cellular changes that are precursors of cervical cancer is a type of secondary prevention. If impairment has already occurred, disability (or death) may be prevented through early intervention. Treating certain streptococcal infections with penicillin can prevent the occasional development of rheumatic fever and serious heart disease. Early detection and treatment of high blood pressure reduces the probability of heart attack or stroke. Tertiary prevention blocks or retards progression of disability to a state of dependence. Early detection and effective management of diabetes can prevent some dependencies associated with the disease, or at least slow or stop progression. Prompt medical care followed by rehabilitation can limit damage caused by a cerebrovascular accident (stroke); damage from heart attacks can be limited in the same way. Good vehicular design can reduce the dependency that might otherwise result from an accident.43 HSOs such as state and local public health departments have programs at all three levels of prevention. Hospitals and nursing facilities are more likely to engage in secondary and tertiary prevention than primary prevention. Figure 1.4 shows that primary care is delivered in various settingsmost common are physicians ofces, clinics, and the outpatient units of acute care hospitals. Primary care is routine care, a part of which is primary prevention. Primary care may also be part of secondary and tertiary prevention.44 In addition, acute care hospitals provide secondary and tertiary acute care services through emergency treatment and inpatient services. Restorative care (rehabilitation)
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Level of Care: Education Prevention

School and college health units Freestanding ambulatory surgery centers Doctors in officebased practice Neighborhood health centers Migrant health centers Communicable disease education Family planning clinics Poison information & control centers Well-baby clinics School health education Screening and vaccination programs
Description:
Provider Groups:
Forms of Integration of System:
PREVENTIVE CARE
PRIMARY CARE Early Detection and Routine Care Emergency Treatment Critical Care (intense and elaborate diagnosis and treatment)
Specialty hospitals (psychiatric, childrens, womens) and general hospitals with highly specialized facilities Freestanding urgicenters Hospital emergency departments Hospital ambulatory services for patients requiring hospital equipment Inpatient services in general medical and surgical hospitals Physicians office Hospital outpatient departments Community mental health centers Industrial health units
SECONDARY CARE (acute care)
HEALTH SERVICES SYSTEM
TERTIARY/ QUATERNARY CARE (special care) Special Care (highly technical services for patients in a large geographic area)
Some are teaching hospitals
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Intermediate Follow-up Care (surgical postoperative routine care, routine medical care) Rehabilitation Home Care
Home health agencies Progressive care, extended care Rehabilitation and step-down units in hospitals Halfway houses for psychiatric patients Rehabilitation hospitals Long-term care hospitals
RESTORATIVE CARE
HMOs, PPOs, ACOs Shared services Managed care Multiorganizational systems Vertical and horizontal integration Formal affiliations Mergers and consolidations
CONTINUING CARE Long-term Care Chronic Care Personal Care Hospice/Palliative Care
Nursing facilities Continuing care retirement communities Inpatient health facilities for people with mental retardation, emotional disturbances Geriatric day services centers
Nursing facilities, inpatient health facilities for alcoholics & drug abusers, deaf & blind, physically handicapped
Figure 1.4. Spectrum of health services delivery. (From Cambridge Research Institute. Trends Affecting the U.S. Health Care System [Health Planning Information Series], 262. Figure 1.4. Spectrum of health services delivery. (From Cambridge Research Institute. Trends Affecting the U.S. Health Care System, [Health Planning Information Washington, DC: Human Resources Administration, 1976. Revised and updated by the authors, 2013.)
Series], 262. Washington, DC: Human Resources Adminstration, 1976. Revised and updated by the authors, 2013.)
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may be provided in acute care hospitals. It is also available in specialized hospitals, in nursing facilities, and in the home through home health services. Continuing care is available in settings such as the home, nursing facilities, and hospice. Holistic, complementary, and alternative medicine are similar concepts that greatly broaden the theories about disease prevention, causation, and treatment. They focus on nontraditional medicine, with special emphasis on self-help and on interventions less dramatic than chemicals and surgery, and they stress health promotion and prevention. Increasingly, such measures are adjuncts to allopathytraditional Western medicine that emphasizes dramatic interventions such as chemicals and surgery to return the body to normal functioning.45 Use of nontraditional medicine will signicantly affect HSOs, physician (allopathic) practice, and healthcare nancing. It is likely that using alternative sources will only shift where payment is made and not reduce costs to the system. In fact, costs may increase, at least in proportion to increases in the alternate sources of care. Issues of third-party coverage and payment and effects on total costs and delivery of care are beginning to be addressed. Most physicianpatient interactions (visits) occur in physician ofces. In 2009 and 2010, over one billion physicianpatient interactions occurred in physicians ofces; another 231 million occurred in hospital outpatient clinics and emergency departments (EDs).46 Despite increasing numbers of physicians employed by HSOs, most are self-employed entrepreneurs who may share a receptionist, billing services, patient coverage, and perhaps diagnostic equipment with other physicians, or they may be in a partnership or may be employees of a physician (professional) corporation such as a multi- or single-specialty group practice. A physician ofce practice is not considered an HSO unless it is part of a clinic or group practice.
Classication and Types of HSOs

Prot or Not For Prot
HSOs/HSs may be classied as prot seeking (for prot or investor owned) or not for prot. The former pay the owners (investors) a return on investment. In the latter, any excess of income over expense is not available to any person or corporation and is used by the HSO/HS to enhance the content or quality of health services or to reduce charges. Government-sponsored HSOs/HSs are classied as not for prot, while privately owned corporations may be for prot or not for prot. For-prot and not-for-prot HSOs/HSs may be converted to the opposite status. This is done for tax and other strategic reasons. Converting for-prot HSOs/HSs to not-for-prot status may result in provision of more uncompensated care in the service area, but it simultaneously decreases property and other tax revenues to local jurisdictions. Conversely, changing not-for-prot HSOs/HSs to for-prot status raises issues of valuing assets, charitable mission, private inurement, and the mission and activities of the charitable foundation usually established with proceeds of the sale.
Ownership
HSOs/HSs may be classied by ownership. Privately owned corporations are two types: sectarian (faith based) and nonsectarian that are organized as not-for-prot corporations; and for-prot corporations that issue stock to either an identied group of investors (closely held corporations) or to the general public, in which case the stock is traded on stock exchanges. Government-owned HSO/HSs are owned by a public entity and classied as not for prot. All
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levels of government own and operate acute care hospitals and other types of HSOs or HSs. Cities and counties own acute care hospitals, some of which are nanced by special tax districts. Cities and counties establish, fund, and control public health departments. HSOs/HSs owned by state government include health departments and psychiatric hospitals or HSOs for persons with mental disabilities. Many states own academic health (medical) centers, which are often university-afliated teaching hospitals that treat acute illness, conduct research, and educate those in the health occupations. The federal government has a long history of limited involvement in nancing health services. To a lesser extent, it has delivered preventive, acute, and long-term health services to special groups. U.S. Public Health Service (USPHS) hospitals were established in the late 18th century to care for merchant seamen. USPHS hospitals serving general acute care patients operated until 1981, when the few remaining hospitals closed or converted to other uses. The only facility in the United States devoted to Hansens disease (leprosy) is the National Hansens Disease Clinical Center at the Ochsner Medical Center in Baton Rouge, LA.47 In 2012, the Indian Health Service, an agency of the Department of Health and Human Services (DHHS), operated 29 hospitals, 68 health centers, and 41 health stations. In addition, through self-determination contracts, American Indian and Alaska Native corporations administer 16 hospitals, 258 health centers, 74 health stations, and 166 Alaska village clinics.48 In 2010, the DVA operated 153 medical centers (hospitals), 956 outpatient clinics, 134 nursing homes, 90 residential rehabilitation treatment programs, 232 readjustment counseling centers, 57 veterans benets regional ofces, and 131 national cemeteries.49 In addition, acute care hospitals and clinics operated by the U.S. Army, Navy, and Air Force serve active-duty and retired military personnel and their dependents.
Length of Patient Stay

A third way to classify HSOs is by the length of time care is provided. A general dichotomy divides HSOs by whether services are provided to inpatientsthose treated 24 hours or longeror to outpatientsthose treated for less than 24 hours. Outpatient (ambulatory) services are provided in hospital EDs and clinics, physicians ofces, and freestanding HSOs such as surgery centers and imaging centers. Home health services are a unique blend of inpatient and outpatient services because care is provided in patients homes over months or years. Hospice care is also a blend of inpatient care and care delivered in patients homes. Hospice is available to the terminally illtypically those with fewer than 6 months to live. Chapter 2 discusses several types of HSOs in detail. HSOs that provide inpatient care are divided into short term (acute) and long term. The American Hospital Association (AHA) denes a short-term hospital as one in which the average length of stay (ALOS) is less than 30 days; a long-term hospital has patient stays that average 30 days or longer. The ALOS in community (short-term [acute care]) hospitals has declined steadily from 7.6 days in 1981 to 5.4 days in 2010.50 In the continuum of care measured by length of stay (LOS), long-term care hospitals (LTCHs) are sited between acute care hospitals and nursing facilities. LTCHs provide extended medical and rehabilitative services to patients who are clinically complex because of multiple acute or chronic conditions. Federal regulations dene LTCHs as hospitals whose ALOS is longer than 25 days.51 Further along the LOS continuum are nursing facilities (NFs). NFs typically treat only inpatients, who are called residents. Some rehabilitation services may be provided, but the level of care is typically custodial. The LOS in an NF is measured in months or years.
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Role in the Health Services System

A fourth way to classify HSOs/HSs is by their role in delivery of services. Health or healthrelated services may be provided in public health department screening programs, in family planning and substance abuse treatment centers, or through sanitation efforts that protect food and water. There are thousands of privately and publicly owned and operated emergency medical units, such as rescue squads and ambulance services, often organized into emergency medical services systems. In addition, there are programs more oriented to social welfare activities; some only raise funds, others deliver specialized services. Depending on their activities, they may or may not be considered HSOs. The total number of HSOs in the United States is in the tens of thousands. Chapter 2 describes the history, numbers, functions, and organization of several types.
Unique Institutional Providers

In addition to inpatient HSOs such as hospitals and NFs, many other types of inpatient facilities provide health and health-related services. Data about them are sparse. They include residential facilities or schools for special groups such as the blind or deaf, persons with emotional or physical disabilities, persons with mental disabilities, dependent children, unwed mothers, alcoholics, drug abusers, and persons with multiple physical and mental disorders. In 2011, for example, there were 87,400 persons with intellectual disabilities, developmental disabilities, or both who received training and support in 6,465 facilities52; this is a substantial decline in the number of similar persons and facilities reported 2 decades earlier.53 Privately operated facilities numbering 5,594 accounted for 87% of all facilities and served 62% of clients. Thirty-eight percent of clients resided in 843 state-owned/operated facilities. A few clients were served by city-, county-, or town-based facilities. The trend has been away from care in large state-operated institutions toward smaller, privately operated facilities with fewer than eight beds.54 Community services may reduce the need for long-term inpatient care for patients of all types. Examples include diagnostic and evaluation clinics, day care centers, early childhood education facilities, rehabilitation programs, and summer camps and recreational facilities. All offer alternatives to institutional placement. Community-sponsored educational services are provided by local school districts directed by state special education programs. Programs for the developmentally disabled are typically operated at the local level and supported by state funding.
Mental Health Organizations

Mental health organizations are dened as HSOs that primarily provide mental health services to persons with mental illness or emotional disturbances. Included are public or private psychiatric hospitals, psychiatric services in general acute care hospitals, outpatient psychiatric clinics, and mental health day/night facilities. Since 1955, the locus of delivering mental health services has changed markedly. In the mid-1950s, state and county mental hospitals accounted for 77% of inpatient services; 23% were outpatient. By 1975, a reversal had occurred, and 76% of mental health services were outpatient.55 Inpatient treatment continues to be a major type of care. There were 3,130 inpatient and residential mental health organizations with more than 230,000 beds in 2008, the latest year data are available.56
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Teaching Hospitals
In 2012, 464 hospitals participated in graduate medical education as dened by the Council of Teaching Hospitals and Health Systems,57 a decline of 850 since 1990. They fall under the general rubric of teaching hospital and offer a wide range of secondary, tertiary, and some quaternary medical services. These 464, plus a large number of other hospitals, participate in training a wide variety of students in the health occupations. Many teaching hospitals are part of a medical center complex that includes a medical school. Those having no medical school are likely afliated with one. Prominence in medical education, plus their research and resulting publications in the medical and scientic literature, make teaching hospitals a vital resource in healthcare. A unique HSO that ts into more than one of the categories described earlier merits special mention. The premier institution among all HSOs is the academic health (medical) center hospital, which is a subset of teaching hospitals. An academic health center hospital is one in which a majority of the chiefs of service at the hospital are chairs of the academic departments in a medical school. In 2012, there were 119 academic health center hospitals.58
Local, State, and Federal Regulation of HSOs/HSs

When the original colonies delegated specic powers to a national government and ratied the U.S. Constitution, they retained a wide range of authority traditionally held by the sovereign. These are known as the police power, generally dened as the authority to protect the publics health, safety, order, and welfare. State laws and regulations implement the police power, many of which may be delegated to, or shared with, local governments. It is common for state departments of health to regulate licensure of HSOs, for example. The typical regulatory authority delegated to local governments, reected in city and county ordinances and exercised by local health departments, includes food, re, radiation, and environmental safety; air and water quality; waste and trash disposal; sanitation and pest control; and workplace hazards. These activities affect HSOs.
Licensure and Regulation

HSOs/HSs are subject to state laws and local ordinances, an important dimension of which is the group of inspections linked to licensure for specic types of HSOs. States may accept accreditation by a private organization in lieu of some types of regulation. For example, accreditation by the Joint Commission on Accreditation of Healthcare Organizations (The Joint Commission) is recognized for hospital licensure by 48 states. Similarly, many states recognize The Joint Commissions accreditation throughout the range of its accreditation programs.59 State and local government regulation focuses on physical plant and safety. Scant attention is paid clinical quality issues in patient care. The Fire Prevention Code, National Fuel Gas Code, National Electrical Code, and Life Safety Code published by the National Fire Protection Association, an international, not-for-prot organization, are prominent sources of environmental standards used by state and local government in regulating HSOs.60
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Conditions of Participation
The 1965 Medicare law (1965 amendments to the Social Security Act of 1935) stated that Joint Commissionaccredited hospitals were in deemed status (eligible) for purposes of reimbursement. In response to concerns about delegating government authority to a private group, the DHHS promulgated the conditions of participation (COPs) in 1966.61 Federal legislation in 1972 mandated oversight of Joint Commission accreditation and review of accredited hospitals on the basis of random sampling or complaints. Originally, COPs emphasized physical plant and safety (e.g., the Life Safety Code) and minimized attention to the content and processes of clinical practice and organization; The Joint Commission emphases were the opposite. The private and public programs have evolved toward each other; COPs changed the most. Several other private accrediting organizations have been recognized by the Centers for Medicare and Medicaid Services (CMS) as able to confer deeming status, Among them are the Community Health Accreditation Program (CHAP), the American Osteopathic Association (AOA), and, more recently, Det Norske Veritas Healthcare, Inc. (DNVHC), which uses a combination of the COPs and ISO 9000-2000 quality standards. HSOs not in deemed status must meet the applicable COPs to receive payments from federal programs.
Planning and Rate Regulation

Much of what happens in the states is stimulated by the federal government, and because hospitals consume disproportionate resources, policy makers have given them a great deal of attention. The Hill-Burton Act of 1946 included statewide planning for hospital services. The Comprehensive Health Planning and Public Health Service Amendments Act of 196662 encouraged use of planning methodologies to allocate resources, improve access, and contain costs. In the late 1960s, states began enacting laws to control health services costs. A special concern was Medicaid, whose funding they shared. The laws used rate review to control capital expenditures and costs of health services. New York and Maryland were among the rst to enact capital expenditure review. Other states were prompted by the Social Security Amendments of 1972 (PL 92-603),63 which established PSROs to review the quantity and quality of care for Medicare patients in hospitals. PSROs complemented the planning laws by controlling use of health services to reduce costs. Section 1122 required capital expenditure review to enhance planning agency control. The National Health Planning and Resources Development Act of 1974 (PL 93-641)64 required states to establish a health planning and development agency and a network of health systems agencies (HSAs). HSAs superseded the areawide health planning agencies (b agencies) required by the 1966 law. Planning laws sought to control costs by focusing on the supply of services. CON (certicate-of-need) laws required HSOs/HSs to have approval for a new service or construction or a renovation project exceeding a certain cost, usually several hundred thousand dollars. The purpose was to ration the supply of health services by controlling capital expenditures and preventing unneeded expansion. Critics of CON argued that this articial limitation on the supply of services caused ination. In the late 1970s, criticism about the usefulness of mandated planning grew. The antiregulatory mood in health services t with the movement toward deregulation elsewhere in the economy. In 1987, the National Health Planning and Resources Development Act was repealed.65 In the years since, states have scaled back their involvement in planning. In 2012, the District of Columbia and 35 states had CON laws; Maines were the most restrictive, with review of 25 types of services. Ohios were the least restrictive, with review of only 2 types of services.66
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In addition to CON, states began enacting health services rate review (cost review) laws. By 1983, mandatory programs had been enacted in six states,67 and there were more than 20 voluntary programs. By regulating how much HSOs (primarily hospitals) charged or were paid, the states were treating them as public utilities. States with rates of increase in health services costs below the national average were exempt from the federal DRG system for Medicare patients. In the mid-1980s, exempt states included New York, New Jersey, Maryland, and Massachusetts.68 By 2008, only Maryland was exempt. This status has continued because Maryland has had a highly regulated, all-payer system to pay for hospital-based inpatient and outpatient care since 1971. The system allows only limited discounts; this inhibits Maryland hospitals ability to compete, especially in border areas.
UR, PSROs, and PROs69

Utilization review (UR) was a mandated part of hospital participation in the original Medicare law. Hospitals had to certify the necessity of admission, continued stay, and professional services rendered to Medicare beneciaries. Review was delegated to hospitals. Rapid Medicare cost increases in the late 1960s showed that hospital-based UR was ineffective. Consequently, PSROs were mandated by the Social Security Amendments of 1972 (PL 92-603)70 as federally funded physician organizations responsible for ensuring the appropriateness, medical necessity, and quality of care furnished to Medicare beneciaries. As with UR, emphasis in the PSRO program was on hospital review. The three functions of PSRO were admission and continuedstay review, quality assurance, and prole analysis (patterns of care). Ten years later, PSROs had proved neither cost effective nor able to signicantly improve quality. As a remedy, Congress established professional review organizations (PROs) as part of the Tax Equity and Fiscal Responsibility Act of 1982.71 PROs were outcome rather than process and structure oriented, and outcomes were measured against performance standards. The core of PRO activities was to deny Medicare payment for medically unnecessary care, care rendered in an inappropriate setting, or care of substandard quality. PROs also educated problem providers, reviewed 100% of problem cases, and exerted peer pressure. If correction was not achieved or if a gross and agrant quality problem occurred, PROs recommended excluding the provider from Medicare. Since the inception of PROs, their work has expanded to include all federal payments for medical services, including those in physicians ofces. A major initiative in the early 1990s was implementing a uniform clinical data set that enabled PROs to consistently select cases that required review. This database allowed epidemiological studies and inter-PRO comparisons. Critics of PROs have noted that few physicians and hospitals have been disciplined. The inspector general of the DHHS estimated that, beyond the few sanctions against providers, far more hospital admissions were inappropriate than were found by PROs.72 In 2001, PROs were ofcially renamed quality improvement organizations (QIOs). Like PROs, the QIOs provide their services under contract with the Centers for Medicare and Medicaid Services (CMS), formerly the Health Care Financing Administration (HCFA), which is part of the DHHS. The name change is largely symbolic, however, and although QIOs have been charged with quality improvement initiatives in numerous clinical areas and across healthcare settings, there have been no published assessments of whether hospitals believe QIO interventions are improving the quality of care.73 In 2012, there were 53 QIOs operational in the United States.74
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Other Regulators of HSOs/HSs

In addition to the CMS, a multitude of federal regulators affect HSOs/HSs. Their activities are based on authority in the U.S. Constitution, as interpreted by the U.S. Supreme Court, to regulate interstate commerce and to provide for the general welfare. Regulators include independent agencies and various other executive branch departments and bureaus. The Department of Justice and the FTC enforce the Sherman Antitrust Act (1890)75 and the Clayton Act (1914)76 and their various amendments prohibiting anticompetitive practices. The National Labor Relations Board applies provisions of the National Labor Relations Act (1935)77 and its amendments to the process of union organizing and collective bargaining. The Occupational Safety and Health Administration enforces provisions of the Occupational Safety and Health Act (1970)78 to safeguard the work environment. The Food and Drug Administration enforces provisions of the Food, Drug, and Cosmetic Act of 190679 and its amendments and regulates drugs and medical devices. The Securities and Exchange Commission enforces the Securities Exchange Act of 1934, as amended,80 and affects how investor-owned HSOs/HSs market, sell, and trade stock. The Nuclear Regulatory Commission enforces provisions of the Atomic Energy Act (1954)81 and regulates and licenses the nuclear industry, thus regulating hazards arising from storage, handling, and transportation of radioactive materials. The Equal Employment Opportunity Commission enforces the Equal Pay Act of 1963,82 Title VII of the Civil Rights Act of 1964,83 and the Age Discrimination in Employment Act of 1967,84 among others, and investigates complaints about treatment of employees and prospective employees. The Bureau of Alcohol, Tobacco, Firearms and Explosives of the Justice Department enforces the alcohol and tobacco tax provisions of the Internal Revenue Code85 and the Alcohol Administration Act of 193586 and regulates the use of tax-free alcohol. It is noteworthy that many federal regulatory, review, and control activities have applied to HSOs only since the early 1970s.
Accreditation in Healthcare
Accreditors of HSOs/HSs
The Joint Commission on Accreditation of Healthcare Organizations
No voluntary, private organization has affected HSOs, especially hospitals, as has The Joint Commission. Its lineage can be traced to the Hospital Standardization program established by the American College of Surgeons (ACS), which began surveying hospitals in 1918. ACS single-handedly worked to improve hospital-based medical practice until 1951. Its director during most of its formative period was Malcolm T. MacEachern, a physician and health services leader, whose book, Hospital Organization and Management,87 is a classic in the eld. The Joint Commission was formed in 1951 and began accrediting hospitals in 1953. As noted earlier, accreditation became much more important with designation of deemed status in the 1965 Medicare law. Since 1951, The Joint Commission has expanded its accreditation services far beyond hospitals. It accredits nine types of providers: ambulatory care, behavioral healthcare, critical access hospitals, home care, hospitals, laboratory services, long-term care, ofce-based surgery,
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and primary care medical home certication.88 Accreditation of networks (MCOs, managed behavioral healthcare organizations, and preferred provider organizations) ended in 2006.89 Each accreditation program has its own set of standards. Surveys of common standards such as physical plant, licensure, and corporate bylaws in multiprogram HSOs are combined to minimize duplication. Almost all hospitals are Joint Commission accredited. In 2012, there were over 19,000 healthcare organizations and programs accredited by The Joint Commission.90 The Joint Commission accreditation has the following benets: Strengthens community confidence in the quality and safety of care, treatment, and service Provides a competitive edge in the marketplace Improves risk management and risk reduction Helps organize and strengthen patient safety efforts Provides education on good practice to improve business operations Provides professional advice and counsel, enhancing staff education Provides a customized, intensive process of review grounded in the unique mission of the organization Enhances staff recruitment and development Provides deeming authority for Medicare certification Is recognized by insurers and other third parties May reduce liability insurance costs Provides a framework for organizational structure and management May fulfill regulatory requirements in select states91 Accreditation by The Joint Commission establishes the HSOs community and professional credibility. HSOs accredited by The Joint Commission meet the standards for patient safety, provide education on good practice to improve business operations, and hold a competitive edge in the marketplace. These HSOs maintain a framework for organizational structure and management that improves quality of care and patient safety. The Joint Commission will continue to be a major force in developing performance expectations for HSOs. Even those HSOs that choose not to be accredited by The Joint Commission will benet from considering its standards in developing and managing their programs. The Joint Commission emphasizes outcomes and continuous quality improvement, the theory and application of which are described in Chapters 7 and 8. The Joint Commission will remain viable only if its standards are state of the art, if HSOs and the public value accreditation, and if the survey is worth the thousands of dollars that it costs. In their evolution, the COPs developed by CMS pose a substantial risk to the continued need for The Joint Commission. In addition, competing private specialty and programmatic accreditation efforts, several of which are described later, will almost certainly challenge The Joint Commissions preeminent position as the accrediting body.
American Osteopathic Association

Osteopathic hospitals may be accredited by the AOA as well as by The Joint Commission. AOAs Bureau of Healthcare Facilities Accreditation accredits acute care hospitals, mental health centers, substance abuse centers, and physical rehabilitation centers. CMS recognizes
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AOA accreditation as granting deemed status.92 In 2013, AOA accredited 480 healthcare facilities.93
Community Health Accreditation Program

CHAP specializes in home care and community health. CHAP is a subsidiary of the National League for Nursing (NLN) and began accreditation activities in 1965.94 It accredits community nursing centers, home healthcare aide services, home health organizations, infusion therapy services, home medical equipment, hospice, private duty nursing, public health organizations, and supplemental stafng services.95 CHAP confers deemed status for home health.96 CHAP standards emphasize organizational structure and function; quality of services and products; adequacy of human, nancial, and physical resources; and long-term viability.97
International Organization for Standardization

The International Organization for Standardization (ISO) in Geneva is a nongovernmental organization established in 1947. ISO is a worldwide federation of national standards bodies from 164 countries.98 Its work results in international agreements published as international standards, to the obvious benet of consumers. ISO registers the organizations that meet its standards. Although it does not accredit, as that term is generally used, ISO registration has a similar effect. ISO 9000 and ISO 14000 are families of generic management system standards that focus on processes and not directly on the results of process activities, even though what happens in the process affects the outcome. This means that they can be applied to any organization in any sector of activity, including HSOs. ISO 9000 is concerned primarily with quality management, which means that the features of a product or of services conform to customer requirements. ISO 14000 is primarily concerned with environmental management, which is what an organization does to minimize harmful effects on the environment caused by its activities.99 Organizations or components of organizations that seek certication or registration using ISO 9000 or ISO 14000 standards are surveyed by independent, ISO-qualied auditors, not by ISO representatives.100 The certication or registration is not ofcially recognized by ISO, even though its standards are used. The ISO does not accredit organizations or components of organizations against its standards, as does The Joint Commission. Increasingly, HSOs are using the ISO 9000 and ISO 14000 families of standards to certify departments; Chapter 8 discusses their application. The National Integrated Accreditation for Healthcare Organizations program of Det Norske Veritas Healthcare, Inc. (DNVHC) uses a combination of the CMS COP and ISO 9000:2000 quality management standards to accredit healthcare providers. This is the rst healthcare accreditation program to combine the COP and ISO 9001:2000 Quality Management Systems.
National Committee for Quality Assurance

The National Committee for Quality Assurance (NCQA) began accrediting health plans in 1991. More than 500 of the nations MCOs (covering 33% of all MCO enrollees) participate in NCQAs review of healthcare quality.101 Of these, about 430 were accredited by NCQA in 2007.102 In 1992, NCQA began developing the Health Plan Employer Data and Information Set, which is widely used by employers and HMOs in judging and comparing quality. As part of accreditation, NCQA requires health plans to submit audited results of clinical quality and consumer survey measures. Clinical quality includes childhood and adolescent immunization status, breast cancer and cervical cancer screening, advice to smokers to quit, and postpartum checkups. Examples of consumer survey measures are giving care quickly, having doctors who communicate, having courteous and helpful ofce staff, giving needed care, claims processing,
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and customer service. Most health plans offer several different types of products, such as a Medicare plan, a Medicaid plan, an HMO, and a point-of-service plan; NCQA reports on these products separately.103
Educational Accreditors
Various accreditors review the quality of didactic and clinical programs that educate health services professionals. Typically, accreditors have boards (policy-making bodies) composed of representatives from professional groups in their elds.
Managers
Programs for a masters level education of health services managers are accredited by the Commission on Accreditation of Healthcare Management Education (CAHME). The CAHME comprises representatives from professional associations in the healthcare eld. In 2013, CAHME accredited 82 graduate programs in North America, 3 of which are in Canada.104,105 The accreditation process is similar to The Joint Commissions process.106 The Council on Education for Public Health (CEPH) accredits schools of public health and graduate public health programs. CEPH is composed of representatives from various groups in public health. In 2012, CEPH accredited 48 graduate schools of public health and 87 graduate public health programs.107
Physicians
Medical school and postgraduate medical education are accredited by various groups, most of them connected to the American Medical Association (AMA). The Council for Medical Affairs provides policy development and review activities. The Liaison Committee on Medical Education, the Accreditation Council for Graduate Medical Education, and the Accreditation Council for Continuing Medical Education accredit various levels of medical training and education. Continuing medical education is receiving increasing emphasis.
Nurses
Since 1917, the National League for Nursing has been a leading force in nursing education.108 The National League for Nursing Accrediting Commission (NLNAC) accredits registered nurse (RN) programs for masters, bachelors, and associates degrees and diplomas. In 2012, NLNAC accredited 961 basic RN programs in the United States, including 223 baccalaureate, 691 associate, and 47 diploma programs.109
Medical Specialization
Medical specialization for allopathic physicians did not occur in the United States until the early 20th century. The American Board of Ophthalmology, incorporated in 1917, was the rst certifying board; the American Board of Integrative Medicine was approved in 2013.110 Each board offers at least one general certication of specialization; most recognize subspecialization. In 2012, the 24 specialty boards in allopathic medicine and surgery that were members of the American Board of Medical Specialties (ABMS) certied more than 145 specialties and subspecialties.111 Specialty boards are vital in certifying training and in monitoring the continued competence of physicians in specialties. Through member boards, the ABMS is signicant in undergraduate, postgraduate, and continuing medical education. Specialty boards include representatives of the associations organized for that specialty.
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The Accreditation Council for Graduate Medical Education accredits residencies, but the content of residency education is largely determined by each medical specialty boards residency review committee. The Accreditation Council for Continuing Medical Education accredits the continuing medical education programs required by specialty boards for continued certication. The most recent iteration of medical specialty recertication is known as maintenance of certication. Developed by the ABMS and member boards, maintenance of certication is a program of continuous professional development that is used as a formal means of measuring a physicians continuing competency in a specialty or subspecialty.112 Approximately 85% of licensed specialty physicians are board certied by an ABMS board.113 HSOs and HSs must be vigilant about board certication. There are scores of self-designated medical specialty boards with no ABMS recognition. Some states have sought to protect the public by regulating use of the terms board certication and board certied.114 A proliferation of boards diminishes the publics ability to identify practitioners who have earned signicant, accepted formal recognition of skills in a specialty. Neither licensure nor board certication entitles a physician to clinical privileges in an HSO. Licensure is more basiclawful medical practice is impossible without it; specialty certication is only one indicator of competence. The HSO has an independent ethical and legal duty to determine competence initially and to continually monitor the care delivered in it by licensed independent practitioners, whether or not they are board certied. The credentialing process is detailed in Chapter 2.
Education and Regulation of Health Services Managers
Education
Hospital administration was identied as a distinct educational discipline when the University of Chicago established the rst professional masters program in 1934. This followed founding of the American College of Hospital Administrators, now the American College of Healthcare Executives (ACHE) in 1933. Graduate and undergraduate programs exist or are being developed worldwide. It is estimated that North American masters programs have more than 40,000 graduates. To meet the demands of a complex environment, education for health services managers is eclectic, with an emphasis on generic management education. Some programs offer specialty preparation in hospital, NF, or ambulatory services management. The didactic portion for accredited programs is at least 2 academic years, or four semesters. A eld experience requirement is common; a few programs require a 1-year, full-time residency to allow application of the academic preparation under the guidance of an on-site preceptor. The curricula of accredited masters degree programs must include knowledge of the healthcare system and healthcare management; aligned course competencies and program mission; communications and interpersonal effectiveness; critical thinking, analysis, and problem solving; competencies in management and leadership; and professionalism and ethics.115 Professional masters programs in health services management use various titles and are found in several different academic settings. As with graduate programs, rapid growth in the number of undergraduate programs that prepare health services management personnel occurred in the late 1960s and early 1970s. There are 84 undergraduate programs afliated with the Association of University Programs in Health Administration.116 In addition to the scores of other healthcare management education programs in the United States, there are health services curricula of various types. Foci of the two levels of education are different. Masters programs prepare graduates to become seniorlevel line or staff managers; baccalaureate programs train supervisors or department managers. Coordinating graduate and undergraduate programs is a continuing challenge.
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Regulation
In 2012, no state required licenses for hospital administrators; all states licensed NF administrators. Managers of long-term care facilities must pass the National Association of Long Term Care Administrator Boards examination and obtain a state license.117 Managers in other types of HSOs/HSs are rarely licensed. Regulation results when problems in an industry show that self-regulation and self-discipline have been ineffective.
Health Services Workers

In 2012, over 14 million people were employed by healthcare providers such as ambulatory healthcare services, physicians ofces, outpatient care centers, home health services, hospitals, residential care facilities, and NFs.118 Table 1.1 shows the numbers in healthcare practitioner and technical occupations in the United States. Most individuals in the occupations listed are employed by healthcare providers and are counted in the 14 million. Many, however, such as physicians, dentists, optometrists, and podiatrists, are predominantly self-employed or employed by organizations owned or controlled by them. To be meaningful, time series comparisons of the numbers in various healthcare occupations should use ratios of their numbers compared with the U.S. population. Ratios do not consider maldistribution of healthcare providers, who tend to be concentrated in metropolitan and urban areas, even to the point of surplus. The result is that rural and less populated areas are underserved. Physician and nonphysician clinicians who may independently treat patients are known as licensed independent practitioners (LIPs). Regulation and education of LIPs are discussed later in this chapter. Many types of LIPs are likely to be competitors because they provide similar or overlapping services, which has largely unknown implications for the cost of health services. Quality and productivity are less of an issue, however. For example, nurse practitioners (NPs) and physician assistants (PAs) provide care of equivalent quality as they perform many of the tasks of primary care physicians.119 Most physicians and many other types of LIPs are self-employed private entrepreneurs, even though employment may provide a portion of their incomes. In contrast, non-LIPs, or dependent caregivers, are employed in the practices of LIPs or in HSOs such as NFs or hospitals. Physicians in residencies are usually employed by their residency sites; their training status makes them unique and unlike employed physicians, however. These relationships are part of the context for human resources issues in HSOs/HSs.
Physicians
Allopathic medicinethe profession of the medical doctor (MD)traces its lineage to Hippocrates (460377 b.c.). It emerged as the dominant theory of treating disease at the beginning of the 20th century. As noted earlier, allopathy holds that interruptions of the bodys normal functioning must be treated with signicant interventions to restore that normal bodily functioning (health). Development of the germ theory of disease causation and increasingly efcacious surgery in the late 19th century gave allopathy a scientic basis, which secured its place and dominance in Western medical practice. The increase in effective chemical therapies early in the 20th century enhanced its stature, as did the scientic knowledge developed throughout the 20th century. Major competing theories of disease causation and cure in the mid- to late 19th century were naturopathy, homeopathy, osteopathy, and chiropractic. After being relegated to the
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Healthcare in the United States Numbers in Healthcare Practitioner and Technical Occupations, U.S., 2012
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Table 1.1
No. Professional Specialty Physicians and Surgeons Dentists Optometrists Pharmacists Podiatrists Registered Nurses Occupational Therapists Physical Therapists Respiratory Therapists Speech-Language Pathologists Audiologists Social Workers Dietitians and Nutritionists Service Home Health Aides Psychiatric Aides Nursing Assistants Physical Therapist Assistants Dental Assistants Medical Assistants Technicians Licensed Practical and Licensed Vocational Nurses Clinical Laboratory Technologists and Technicians Dental Hygienists Radiologic Technologists Medical Records and Health Information Technicians Surgical Technologists Emergency Medical Technicians and Paramedics Psychiatric Technicians Opticians, Dispensing 611,650 109,570 29,180 281,560 9,090 2,633,980 105,540 191,460 116,960 121,690 12,060 582,270 58,240 839,930 77,880 1,420,020 69,810 300,160 553,140 718,800 318,620 190,290 194,790 182,370 97,150 232,860 67,760 64,930
U.S. No./100,000 population* 2012 Population: 314,773,031 194.3 34.8 9.3 89.4 2.9 836.8 33.5 60.8 37.2 38.7 3.8 185.0 18.5 266.8 24.7 451.1 22.2 95.4 175.7 228.4 101.2 60.5 61.9 57.9 30.9 74.0 21.5 20.6
* U.S. & World Population Clocks, November 15, 2012. United States Census Bureau. http://www.census .gov/main/www/popclock.html. Retrieved November 15, 2012. Occupational Employment and Wages, May 2012: Healthcare Practitioner and Technical Occupations. Bureau of Labor: U.S. Department of Labor. http://www.bls.gov/oes/current/oes_nat.htm#b29-0000. Retrieved July 21, 2013
fringe of medical practice, naturopathy and homeopathy have seen a revival of interest, though they remain far from medicines mainstream. Osteopathy has largely merged with allopathy. Chiropractic is more accepted in the United States than at any time in its history; nevertheless, orthodox medicine still considers it a manipulative therapy with no clear scientic basis. Osteopathy evolved from the bonesetters of England, who practiced the craft of repositioning dislocated collar bones, cartilages, and other skeletal structureswork spurned by orthodox medicine.120 The philosophy and science of osteopathic medicine were rst described in 1874 by Virginian Andrew Taylor Still, a physician who founded the American School of Osteopathy in 1892. Osteopaths are educated in osteopathic medical schools and earn the doctor of osteopathy (DO) in an education that emphasizes structure and functioning of the
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musculoskeletal system and an appreciation for the bodys ability to heal itself when it is in its normal functional relationship and has a favorable environment and nutrition.121 Osteopathic healthcare emphasizes manipulative methods of detecting and correcting structural problems, but it also utilizes generally accepted conventional medical and surgical treatment. Osteopathic medical training is similar to that of allopathic medicine, and in most respects, osteopaths are the same as allopaths. Many osteopaths enter allopathic residency training programs and are licensed under the same state statutes. Chiropractic, an offshoot of osteopathy, emphasizes manipulation to correct anatomical faults that cause functional disturbances in the body. It is uniquely American. Daniel David Palmer established the rst school of chiropractic medicine in Iowa in 1895. Palmers theories stressed the importance of minor spinal displacements, or subluxations, as chiropractors later called them. Subluxations are less severe than dislocations but cause nerve irritation that leads to disturbances of the nervous system and eventually to illness. According to Palmer, medical orthodoxys mistake is that it treats disorders without understanding the sourcethe spinal columnand chiropractic can remedy that problem.122
Physician Numbers
Table 1.1 shows the physician and surgeon workforce in 2012. U.S. population growth to 2020 is projected to be 14%, which is almost the same as the projected growth rate for full-time equivalent physicians.123 This projection presumes a static need for allopathic physicians and holds productivity constant. In 2008, the Association of American Medical Colleges (AAMC) projected a need to increase the number of physicians by 30% to accommodate growth in demand to 2025. Aging of the population (and the physician workforce) and its need for more medical services, especially age-related medical specialties, was a major factor. The report noted that greater use of nonphysician providers such as physician assistants and nurse practitioners could reduce the effects of too few physicians. Complex changes such as improving efciency, reconguring the way some services are delivered and making better use of our physicians will also be needed.124 As already noted, however, even with an adequate ratio the major unresolved problem will continue to be maldistribution of physicians. Predictions of physician shortages or surpluses have caused federal support of medical education to wax and wane for several decades. In addition to federal and state government support, income from hospitals and clinics, nongovernmental grants and contracts, and endowment and philanthropy have been important revenue sources for medical schools. In 20112012, tuition and fees contributed only about 4% of revenues in both public and private medical schools. For both, the largest contributions came from practice plans (34% and 43%, respectively), hospital-purchased services and investments (18% and 15%, respectively), and federal research grants and contracts (18% and 19%, respectively).125 Out-of-state tuition at some public medical schools, like tuition at some private (nongovernmental) medical schools, exceeds $45,000 per year.126 In 2011, there were more than 110,000 residents in Accreditation Council for Graduate Medical Educationaccredited and combined special programs. Those residents included 73,472 U.S. medical graduates, 30,989 international medical graduates, 8,432 DOs, and 238 Canadian medical graduates.127 Historically, it was generally believed that a ratio of two thirds primary care physicians to one third specialists was desirable. In 1970, 40.9% of physicians were in primary care, dened by the AMA to include the general specialties of family medicine, general practice, internal medicine, obstetrics and gynecology, and pediatrics.128 Federal legislation in the 1970s sought to redress the imbalance between primary care and specialists. Impetus was added to efforts to reduce emphasis on specialization when specialty societies and boards reconsidered the number of specialty residencies that would be available. Third-party payers, including the federal government, MCOs, and HMOs, also decided to deemphasize specialists. Regardless, by
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1996, only 34.0% of physicians were classied as primary care practitioners.129 Only in the late 1990s did efforts to increase the number of primary care physicians begin to succeed. By 2010, 47.9% of physicians were in primary care, a percentage only slightly above that in 1970.130 It is predicted that the employment of physicians and surgeons will increase 24% from 2010 to 2020, which is faster than the average of all occupations.131 Even as the ratio of primary care physicians increased, there were signs that specialists had become too few in number. Driven by lack of attention to a need for specialists in delivery settings and by consumer demand for specialist services, the almost exclusive emphasis on primary care physicians subsided. Specialist physicians were once again in demand by the end of the 1990s.132 Such cycles will recur as more private and public efforts are made to manage delivery of services and the uses and availability of various types of clinical providers. Again, the focus on absolute numbers ignores the geographic maldistribution of physicians and nonphysician clinicians. The latter appear to be no more interested in underserved areasusually inner city and rural communitiesthan are physicians.133
Nonphysician Clinicians
Of concern, too, is that the number of nonphysician caregivers will increase to meet needs. The 2004 National Sample Survey of Registered Nurses showed an increasefrom 196,000 in 2000 to 240,461 in 2004in nurses who had completed additional courses and training to become advanced practice nurses, such as clinical nurse specialists, nurse practitioners, nurse midwives, and nurse anesthetists.134 The 2008 National Sample Survey of Registered Nurses found that, from 2004 to 2008, 444,668 RNs completed additional courses and training to become advanced practice nurses, such as clinical nurse specialists, NPs, nurse midwives, and nurse anesthetists.135 This trend is likely to continue. In its report Future of Nursing: Leading Change, Advancing Health, the Institute of Medicine (IOM) recommended higher levels of education in the nursing eld. This recommendation was made to prepare nurses for the more complex care needed by sicker patients and the sophisticated new technologies for providing care.136 The greatest growth is projected among nonphysician clinicians who provide primary care services; the greatest concentration will occur in states that already have an abundance of physicians.137 Growth in nonphysician practitioners is occurring even as it is generally agreed that the United States has too few physicians. A physician shortage suggests potential problems for HSO/HS managers, while concomitantly creating opportunities.
Regulation and Education of Selected Health Occupations

Licensure, Certication, and Registration
Licensing of the healthcare occupations is ubiquitous. All states and the District of Columbia require physicians (MDs and DOs) and RNs, licensed practical (vocational) nurses (LPNs), and NPs to take licensing examinations after completing the appropriate educational programs at accredited educational institutions.138 There is wide variation beyond these groups, however. The trend is toward greater regulation of the health occupations.139 For example, the Omnibus Budget Reconciliation Act of 1987 (PL 100-203; commonly known as OBRA 87) required states to register nursing assistants. Licensure, registration, and certication have important distinctions:
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Licensure: Approval granted by government that allows someone to engage in an occupation after a nding that the applicant has achieved minimum competency. Licensing is a state function under the police power. Physicians and dentists are always licensed, for example. Physicians and osteopaths are the only LIPs granted an unlimited license. Registration: Listing of qualied individuals on an ofcial roster maintained by a governmental or nongovernmental body. States may require registration for someone to engage in a health occupation. If so, registration has the effect of licensure. Persons who are registered may use that designation. Registered nurses and registered dietitians are examples. Certication: Process by which a nongovernmental agency or association grants recognition to someone who meets its qualications. States may require certication for someone to engage in a health occupation, thus giving certication the effect of licensure. Nurse midwives are certied, for example. In terms of regulation, nonphysician health services workers may generally be divided into two groups: LIPs, who are licensed to treat patients independently, and those who may or may not be licensed but who are dependent on an LIPs orders before they can deliver health services. Nonphysician LIPs have state licenses that limit their practice to certain parts of the body or specic medical problems; optometrists, podiatrists, dentists, and chiropractors are examples. In many states, nurse midwives and some types of NPs are LIPs. Some states allow RNs without specialty training to perform certain examinations and procedures. Applying the general principle of independent versus dependent practice is complicated because acute care hospitals and many other types of HSOs further limit the scope of practice of health services workers (even of physicians) to clinical activities in which they have demonstrated current competence. Similarly, HSOs may limit the licenses of nonphysician LIPs to activities ordered or supervised by physicians. Dependent caregivers may or may not be licensed, registered, or certied, but they provide services only after receiving an order from an LIP. Distinctions beyond this are blurred. Dependent caregivers include medical technologists, pharmacists, radiographers, LPNs, and nursing assistants. RNs and pharmacists use registered as a synonym for licensed. Dietitians are registered by a private association and are licensed or statutorily certied or registered in a number of states.140 Certication is a process of approval involving a professional association and oftentimes the AMA. Certicates are issued to those who pass an examination, the eligibility for which requires specied academic preparation. A confusing aspect of the process is that sometimes the certicate is issued by a body that uses the title registry. Often, a group of specialty physicians also certies. For example, the American Society of Clinical Pathologists certies medical technologists through its board of registry.141 Those who are unable to meet the private certifying groups standards are likely to be unemployable in HSOs; this gives certication the effect of licensure. Concomitantly, someone certied who does not continue to meet the groups standards loses certication; employment is likely forfeited.
Education of Clinicians
Physicians
The most important modern effort to improve allopathic medical education occurred in 1910 when Abraham Flexners study of medical education in the United States detailed its weaknesses. As a result, the science curriculum was enhanced, the didactic portion was lengthened,
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and the clinical component was strengthened. Weak allopathic medical schools failed when they could not meet the more stringent standards. In 1950 there were 79 U.S. allopathic medical schools, by 1970 there were 103. In 2012 there were 138 accredited allopathic medical schools142 with 75,000 students143 and 17,364 graduates annually.144 In 2011, there were 128,000 faculty involved in educating more than 210,000 medical students and residents.145 In 2012, Canadas 17 accredited medical schools (none osteopathic)146 graduated 2,573 MDs.147 Allopathic medical schools are accredited by the Liaison Committee on Medical Education, whose members include medical educators and administrators, practicing physicians, public members, and medical students.148 DOs are educated in 26 AOA-accredited colleges of osteopathic medicine, with 19,427 students in 2011. DOs may be board certied in 75 general medical specialties in addition to various subspecialties. In 2011 there were more than 73,000 DOs in the United States.149
Postgraduate Education
Following graduation from medical school with either a 4-year postbaccalaureate education or, less often, a 6- or 7-year combined baccalaureate-MD, the new allopathic physician begins a residency. Historically, intern was a designation for medical school graduates who were in the rst year of post-MD clinical training. Resident is the correct title, however; intern has not been used ofcially for allopaths in training since 1975.150 Residents are designated by postgraduate year (PGY) or graduate year (GY). For example, a PGY-2 has had 1 year of clinical experience after medical school and is in the second year. Clinical activities of residents are supervised by more senior residents, fellows (postresidency physicians in training), and teaching faculty (physicians) who have faculty appointments through a medical school or are active staff at the HSO, which is usually a hospital. Residencies are accredited by the Accreditation Council for Graduate Medical Education, which is composed of professional associations in the medical eld. Each specialty has a residency review committee that sets standards for specialty training and accredits the program. The specialty determines the number of PGYs and the specic clinical content of those years so that the program may be accredited and provide the basis for eligibility to be certied in that specialty. For example, anesthesiology requires 1 year of general residency, completion of an accredited anesthesiology residency, and at least 2 years in private practice.151 Family medicine requires 3 years of postgraduate training in an accredited family practice residency.152 Neurological surgery requires 1 year in an accredited general residency and 3 years of advanced specialty training in an accredited neurological surgery residency.153 In 2009, Veterans Administration (VA) medical centers had afliations with 114 of 136 allopathic medical schools and 15 of 26 osteopathic medical schools. Each year, about a third of the 100,000 U.S. medical residents rotate through a VA clinical training site. In addition, the VA has more than 5,000 afliations with associated health professions training programs.154 About 70% of VA staff physicians have medical school faculty appointments, and about 10% of medical residents training in the United States are funded by the VA.155 It has been estimated that more than half of practicing physicians have received some part of their professional training in a VA medical center.156
Licensure
U.S. and Canadian medical graduates are licensed in most states after passing the U.S. Medical Licensing Examination and completing 1 year of residency. Several states require 2 years of residency; a few require 3 years.157 In addition, all states and the District of Columbia require physicians to complete continuing medical education credits to remain licensed.158 State licenses are unlimited in terms of the medical activities that physicians may undertake.
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Thus, physicians may legally prescribe all medications (except some narcotics and experimental drugs) and perform all medical and surgical activities. It is only in HSOs that the scope of this otherwise unlimited legal right to practice medicine is modied. Limiting practice activities to those consistent with demonstrated current competence is especially important in acute care hospitals because of the acuity of illnesses and the signicant treatments provided. Protecting patients by ensuring the competence of physicians and other LIPs, such as podiatrists and clinical psychologists, is vital in all HSOs, however. Protection is achieved through the credentialing process, which includes a review of didactic and clinical experience, licensure, specialty certication, and health status, among other aspects. Periodic review of clinical performance is part of the recredentialing process that is necessary for the practitioner to continue to have privileges in an HSO. Credentialing and recredentialing are detailed in Chapter 2. Many state medical boards fail to discipline physicians with problems related to their professional activities. This continuing problem is addressed further in Chapter4.
Nonphysician Caregivers
Nowhere is there greater fragmentation and specialization of work than in HSOs. Apparently, each new technology requires a new category of technical expertise. In the early years of modern medicine, physicians usually worked with little need for other types of caregivers. Support became necessary, however, and some physician activities were performed by technicians. Nurses were the earliest example; sonographers are among the most recent. Changes in stafng will continue as old technologies evolve and others are introduced. The use of roentgen rays (x-rays), discovered by Wilhelm Roentgen in 1895, is instructive. Roentgenology became radiology, which bifurcated into diagnostic radiology and therapeutic radiology. Diagnostic radiology has added computers, analysis of cellular emissions, and use of sound waves and has become known as diagnostic imaging. Similarly, therapeutic radiology now includes linear accelerators added to x-ray equipment, and use of radioactive sources spawned the specialty of nuclear medicine. A specialized staff is needed to deliver this state-ofthe-art, high-technology medicine.
Podiatrists
Podiatrists are LIPs who provide services in ofces, clinics, and hospitals. Podiatrists employed by HSOs or members of their attending staffs should be subject to a credentialing process; credentialing is required in hospitals. Podiatry is the branch of the healing arts and sciences that treats the foot and its related or governing structures by medical, surgical, or other means. Applicants to the nine colleges of podiatric medicine in the United States should hold a baccalaureate, but exceptions are made.159 The rst 2 years of instruction emphasize basic medical sciences, such as anatomy, physiology, microbiology, biochemistry, pharmacology, and pathology. The second 2 years emphasize clinical sciences, including general diagnosis, therapeutics, surgery, anesthesia, and operative podiatric medicine. Graduates are awarded the degree of doctor of podiatric medicine. Most graduates complete a residency of 1 to 4 years. Podiatrists are licensed in all states. The American Podiatric Medical Association has approved two specialty boards: primary care and orthopedics, or surgery.160
Nurses
Early recognition and increased stature of nursing were achieved largely through the efforts of Florence Nightingale, an Englishwoman who worked to improve nursing in the mid-19th century. Until then, secular nursing had a poor reputation. Dorothea Dix was an early nursing
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leader and educator in the United States. As education and professional standards improved and licensing was introduced in the United States, RNs became second only to physicians in numbers and importance on the patient care team. Nurse licensing began in the early 1900s and initially concentrated on state registration. In 1903, North Carolina was the rst state to establish state registration for nurses, and only those found qualied by a board of examiners could be listed as RNs in a county and use the designation RN. Voluntary licensure (registration) has been superseded by mandatory licensure (registration).161 RNs may be LIPs, depending on specialty preparation. Of the 3.06 million licensed RNs in the United States in 2008, it was estimated that 2.6 million were employed in nursing.162 In 2012, the largest source of employment was acute care hospitals (62%), followed by ambulatory care settings (6%), home health and hospice (5%), and nursing home/extended care (4%). Other employment is in nursing education and public/ community health.163 Table 1.1 shows that there are over 2.6 million employed RNs. RNs are educated in programs of varying length in various educational settings: baccalaureate (4 years, university or college based, leading to a bachelor of science in nursing [BSN]), diploma (3 years, hospital based, leading to a diploma in nursing), and associates degree (2 years, junior or community college based, leading to an associate of arts [AA]). Graduates of all three programs may be licensed (registered) as RNs. BSN preparation is the gold standard and is preferred by organized nursing. It is considered a superior preparation in the practice setting. LPNs, sometimes known as licensed vocational nurses, are another type of nurse and are found in all types of HSOs. Other nursing personnel widely found in NFs and hospitals are nursing assistants (NAs), who are sometimes called nurse aides. NAs must be registered and may be certied. Certication is required by CMS for NAs working in NFs; they are then certied nursing assistants (CNAs). LPNs and NAs are clinically and usually administratively subordinate to the RN. Table 1.1 shows almost 720,000 employed LPNs in 2012. In the late 1970s, the American Nurses Association (ANA) began an RN certication program that became the American Nurses Credentialing Center. In 2012, RNs could take various certication examinations, depending on educational preparation.164 Advanced practice nurses (NPs, clinical nurse specialists, and those in other advanced practice specialties) must have a masters degree and can be certied in various specialties. RNs with bachelors or associates degrees or diplomas in nursing may take certication examinations in areas such as gerontology, pediatrics, perinatology, community/public health, and nursing administration.165 The 11,000 RNs certied by ANA in 1982166 increased to 77,000 by 1991167 and to 146,574 by 2011.168 Most states have categories of caregivers who become RNs rst and then prepare in a specialty. NPs, for example, have independent practice authority in 18 states and the District of Columbia.169 Some types of independent practice nurses are certied by private associations (e.g., certied registered nurse anesthetists [CRNAs], certied nurse midwives [CNMs]). A majority of states allow CRNAs to administer anesthesia without a physicians supervision. Use of CRNAs will increase because Medicare regulations no longer require an anesthesiologists supervision.170 CNMs are licensed as RNs, certied by the American College of NurseMidwives, and licensed in almost half the states as nurse midwives. Advanced practice nurses generally include NPs, clinical nurse specialists (CNSs), CRNAs, and CNMs, who are likely to be credentialed by HSOs, either as a group or individually. Such providers are LIPs. HSO managers will be challenged to recruit and retain RNs, as well as use RN resources effectively.171 Productivity is addressed in Chapters 8 and 11.
Pharmacists
The pharmacist is a type of nonphysician caregiver commonly found in HSOs, and always in hospitals. The profession of pharmacy emerged later than nursing. Historically, the pharmacists
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role in the spectrum of care was narrow and primarily limited to dispensing medications. Recently, hospital pharmacists have emerged as active members of the clinical care team. They monitor medication use and advise physicians in prescribing and nurses in administering medications. Pharmacists are educated in 129 accredited colleges of pharmacy in the United States.172 The baccalaureate in pharmacy has been replaced by the doctor of pharmacy, which is earned in a 6-year program that includes 2 years of postsecondary education and 4 years in pharmacy college. State licensure requires candidates to graduate from an accredited program, complete a variety of experiences in practice settings under the supervision of licensed pharmacists, and pass a state board examination. Pharmacists are not LIPs and dispense medications only on the orders of LIPs such as physicians, podiatrists, and dentists.173 Table 1.1 shows that there were 281,560 pharmacists employed in the United States in 2012.
Dietitians
A type of nonphysician caregiver almost always found in hospitals and NFs is the clinical or therapeutic dietitian, who plans therapeutic menus in consultation with a physician. Dietitians also provide nutritional counseling. Like pharmacists, dietitians emerged later than nurses, and their role is narrower. Historically, dietitians have been registered by the American Dietetic Association. In the mid-1980s, states began licensing or certifying dietitians. In 2006, there were 30 states and the District of Columbia that licensed dietitians; 13 states had statutory certication; and 1 state registered dietitians, nutritionists, or both.174 Minimum preparation to become a registered dietitian includes a baccalaureate, a minimum of 900 supervised practice hours of professional experience, and passing a national, written exam administered by the Commission on Dietetic Registration.175 Table 1.1 shows 58,240 employed dietitians and nutritionists in 2012.
Technologists
Radiologic technologists include radiographers, cardiovascular-interventional technologists, sonographers, radiation therapists, mammographers, nuclear medicine technologists, computerized tomography technologists, magnetic resonance imaging technologists, dosimetrists, and quality management technologists.176 The titles reect job responsibilities and the extent of specialization. Radiologic technologists are trained in 2-year academic or nonacademic programs or 4-year programs leading to a baccalaureate. They become registered by passing one of several national certifying examinations. Most states have specic licensing laws.177 Table 1.1 shows 194,790 employed radiologic technologists in 2011. More than half of clinical laboratory or medical technologists are employed in hospitals. Typically, they hold a baccalaureate in medical technology or one of the life sciences. They perform various laboratory tests and may specialize in clinical chemistry, blood bank technology, cytotechnology, hematology, histology, microbiology, or immunology. Training is offered by colleges, universities, and hospitals. Technologists are certied by various groups, including the Board of Registry of the American Society of Clinical Pathologists and the American Medical Technologists. Many states require medical technologists to be licensed or registered.178 Table 1.1 shows 318,620 employed clinical laboratory technologists and technicians in 2011. Both radiologic technologists and medical technologists are dependent nonphysician caregivers because they have no independent access to patients and perform services only in response to the order of an LIP.
Physician Assistants
Another type of dependent caregiver common to HSOs is the PA, the concept for which originated in the 1960s and was based on the army medic or navy corpsman. Typically, PAs are
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trained in a 2-year general medical (primary care) curriculum, approximately half of which is devoted to clinical rotations in a wide range of inpatient and outpatient settings. A number of programs award baccalaureates, and there is a trend to award masters degrees. In 2012, more than 130 accredited programs educated PAs.179 Historically, PAs worked under the direction or supervision of a physician, who was accountable for their activities. The trend is for PAs to be more independent, as reected by the fact that more states are regulating PAs, who may be licensed, registered, or certied. The National Commission on Certication of Physician Assistants awards a certication used by the states to regulate PAs. In 2012, more than 84,000 PAs were in active practice in the United States, with a majority in primary care. In addition, they may specialize in orthopedics, emergency medicine, and hospital operating rooms. Almost all states allow physicians to delegate the authority to write prescriptions to the PAs they supervise. Most PAs practice in ambulatory care settings. About 53% are employed by physician groups, many as house staff.180 The demand for PAs is expected to increase.181
Associations for Individuals and Organizations

The health services eld has numerous professional and trade associations for personal and institutional providers, both in generic groups and in an increasing number of subsets.
Professional Associations for Individual Managers

With more than 30,000 afliates, the ACHE is the leading professional association for HSO/ HS managers.182 It was established in 1933 as the American College of Hospital Administrators. Important categories of afliation are fellow and full, associate, and student member, all of which are separated by time and achievement requirements, including years in category and passing an examination.183 ACHE offers continuing education programs and publishes and enforces a code of ethics. The Medical Group Management Association (MGMA) was established in 1926. It has over 22,000 members, including administrators, CEOs, physicians in management, ofce managers, and others who manage medical ofces and ambulatory care organizations. MGMA promotes patient-focused care; sets standards of professional performance; supports continued learning for professional growth; and promotes evidence-based clinical and managerial decision making, physician and administrator teamwork, service to the community and profession, integrity, collegiality, and respect for the individual.184 Examples of other professional groups include those for specialized managerial personnel in HSOs: the Academy of Medical Group Management, the American College of Mental Health Administrators, the American College of Health Care Administrators (of NFs), the National Association of Healthcare Executives, and the College of Osteopathic Healthcare Executives. Some groups have levels of afliation and advancement requirements. All provide a forum and educational activities to improve the content and quality of professional practice. The American Public Health Association does not focus on managers but has a broad membership of those in public health and various provider settings.
Physicians
Preeminent among physician groups is the AMA, established in 1847. In 1998, the AMA had 290,917 members.185 In 2012, the AMA had about 225,000 members,186 including physicians, medical students, and residents. The AMA is synonymous with organized medicine; it has been both a conservative and a progressive force in healthcare. Conservatism is exemplied by historical
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opposition to government-sponsored health insurance and by resistance to salaried physician arrangements and innovations such as HMOs, which were seen as infringing on professional independence and total commitment to patients. The AMA has been a progressive force by embracing programs such as Medicare (once enacted) and by encouraging federal expenditures for basic and applied research and medical and paramedical education. Its involvement in establishing standards for medical education and licensure has contributed signicantly to the unequaled standards of American medicine. The AMA publishes and enforces a code of ethics. There are many other associations for physicians. The National Medical Association represents more than 30,000 African American physicians and has goals similar to the AMAs.187 In addition, medicine has numerous professional associations, called colleges or academies, whose memberships are based on medical and surgical specialties. Among the most prominent are the American College of Physicians and the ACS. Afliates are known as fellows or diplomates. These associations represent the interests of afliates and assist them in continuing education.
Nonphysician Providers
The list of associations for members of the health professions is almost endless. Each new type of provider considers it necessary to have a professional association to focus common interests. Some are old; the ANA was established in 1896.188 Other examples of nonphysician provider groups include the American Dental Association, the American Podiatry Association, the American Psychological Association, the Association of Operating Room Nurses, the National Association of Social Workers, the American Pharmaceutical Association, the National Federation of Licensed Practical Nurses, and the American Academy of Physician Assistants. The hundreds of professional associations for organizational and personal providers and managers reect the high degree of specialization and fragmentation in the healthcare eld.
Associations for HSOs/HSs

American Hospital Association
With approximately 5,000 institutional members, the AHA is the most prominent association for hospitals.189 Founded in 1898, AHA educates and represents its members. It is a focal point for hospital participation in the political process, a key element of which is lobbying federal government. In 1991, AHAs executive ofces were moved to Washington, D.C. Other activities remain in Chicago.
Federation of American Hospitals

The Federation of American Hospitals (FAH) is the investor-owned counterpart to AHA. Established in 1966, it had over 1,100 member hospitals in 2013.190 It monitors health legislation, regulatory and reimbursement matters, and developments in the healthcare industry at the state and national levels. In addition, FAH compiles statistics on the investor-owned hospital industry.191
Other Hospital Associations

The Catholic Health Association of the United States (CHA) represents a subset of hospitals with sectarian ownership and interests. CHA had over 2,000 members in 2013.192 In addition to national hospital associations, there are regional and state hospital associations that link hospitals to geographical or state communities of interest. State hospital associations gained importance as states became more involved in regulating hospitals.
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American Health Care Association

Founded in 1949, the American Health Care Association (AHCA) is a federation of 50 state health organizations that represent more than 11,000 not-for-prot and for-prot nursing, assisted-living, and subacute care providers.193 AHCAs objectives are to improve standards of service and administration of member nursing homes; to secure and merit public and ofcial recognition and approval of the work of nursing homes; and to adopt and promote programs of education, legislation, better understanding, and mutual cooperation.194
American Association of Homes and Services for the Aging

The American Association of Homes and Services for the Aging (AAHSA), also known as LeadingAge, is the trade association of not-for-prot adult day services, home health services, community services, senior housing, assisted living residences, continuing care retirement communities, and nursing homes. It had over 6,000 members in 2012.195 AAHSA lobbies Congress and federal agencies on members behalf; certies practitioners and facilities; and offers conferences, programs, and publications. Members may participate in group purchasing and insurance programs.196
Americas Health Insurance Plans

Americas Health Insurance Plans (AHIP) is the successor organization to the American Association of Health Plans, which was established in 1996 when the Group Health Association of America and the American Managed Care and Review Association merged.197 With 1,300 members, AHIP is a trade association for organizations that provide health insurance coverage to more than 200 million Americans. AHIP represents members in state and federal legislative and regulatory matters and in matters involving the media, consumers, and employers. It provides information to stakeholders and conducts education, research, and quality assurance.198
Paying for Health Services

Expenditure Trends
As noted, the percentage of U.S. GDP devoted to health expenditures has increased steadily since the 1960san interesting juxtaposition to the passage of Medicare and Medicaid. National health expenditures in 2011 consumed 17% of GDP, or about $2.7 trillion. CMS projects that healthcare will consume $3.5 trillion, or 18.3% of GDP, by 2016 and $4.8 trillion, or 19.6% of GDP, by 2021.199 The period of rapid ination occurred soon after the passage of Medicare and Medicaid in 1965; this demandpull stimulation is a likely cause of the initial and continuing cost increases. In turn, these signicant increases have been the stimulus for state and federal efforts to control healthcare costs, or at least limit what they will pay. Table 1.2 shows that, except for professional services (a category that has several elements), hospitals consume the largest amount of health expenditures. This has resulted in hospitals bearing the brunt of state and federal efforts to control costs. The perspective of regulators and politicians seems to be that hospitals are badly managed, and that excessive use of high technology, expensive tests, and treatments is a major source of the cost increases. Less time spent in hospitals has been posited as the best means of reducing costs; thus, there has been great emphasis on reducing both admission rates and average lengths of stay. It has been suggested, however, that a policy of single-mindedly emptying hospitals not only does not
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Table 1.2. National Health Expenditure Amounts, and Annual Percent Change by Type of Expenditure: Calendar Years 20062021.1
Projected Type of Expenditure National Health Expenditures Health Consumption Expenditures Personal Health Care Hospital Care Professional Services Physician and Clinical Services Other Professional Services Dental Services Other Health, Residential, and Personal Care Home Health Care Nursing Care Facilities and Continuing Care Retirement Communities Retail Outlet Sales of Medical Products Prescription Drugs Other Medical Products Durable Medical Equipment Other Non-Durable Medical Products Government Administration Net Cost of Private Health Insurance Government Public Health Activities Investment Research
2
2006 $2,162.4 2,031.5 1,804.9 651.9 585.6 438.8 55.4 91.4 101.7 52.6 117.3 295.8 224.2 71.6 32.9 38.7 29.5 134.5 62.5 130.9 41.4 89.6
2007 $2,297.1 2,153.4 1,914.6 692.5 618.6 461.8 59.5 97.3 107.7 57.8 126.4 311.5 236.2 75.3 34.3 41.0 30.2 139.7 69.0 143.7 41.9 101.7 6.2% 6.0 6.1 6.2 5.6 5.2 7.4 6.4 5.9 9.9 7.8 5.3 5.3 5.2 4.4 5.9 2.3 3.8 10.4 9.7 1.3 13.6
2008 $2,403.9 2,250.1 2,010.2 729.3 652.6 486.6 63.6 102.4 113.3 61.5 132.7 321.0 243.6 77.4 34.9 42.5 29.5 137.8 72.7 153.8 43.4 110.4 4.7% 4.5 5.0 5.3 5.5 5.4 6.9 5.2 5.2 6.4 4.9 3.0 3.1 2.8 1.7 3.7 -2.5 -1.4 5.3 7.1 3.4 8.6
2009 $2,495.8 2,349.5 2,109.0 776.1 671.2 502.7 66.0 102.5 122.0 66.1 138.7 334.9 256.1 78.8 35.2 43.6 29.6 134.7 76.2 146.3 45.7 100.6 3.8% 4.4 4.9 6.4 2.9 3.3 3.8 0.1 7.7 7.5 4.5 4.3 5.1 1.8 0.8 2.6 0.4 -2.2 4.9 -4.9 5.3 -8.9
2010 $2,593.6 2,444.6 2,186.0 814.0 688.6 515.5 68.4 104.8 128.5 70.2 143.1 341.6 259.1 82.5 37.7 44.8 30.1 146.0 82.5 149.0 49.3 99.8 3.9% 4.0 3.7 4.9 2.6 2.5 3.6 2.3 5.3 6.2 3.2 2.0 1.2 4.7 7.3 2.6 1.7 8.4 8.2 1.9 7.9 -0.8
2011 $2,695.0 2,543.2 2,270.4 848.9 708.0 529.2 70.9 107.9 134.3 72.9 151.3 355.0 269.2 85.8 39.7 46.1 33.8 152.3 86.7 151.9 50.2 101.7 3.9% 4.0 3.9 4.3 2.8 2.7 3.7 2.9 4.5 3.9 5.8 3.9 3.9 4.0 5.1 3.0 12.3 4.3 5.1 1.9 1.8 1.9
2012 $2,809.0 2,655.3 2,364.1 884.7 735.4 549.6 74.5 111.4 143.9 77.5 155.2 367.4 277.1 90.3 42.5 47.8 37.5 162.6 91.0 153.7 48.7 105.0 4.2% 4.4 4.1 4.2 3.9 3.8 5.0 3.3 7.1 6.4 2.6 3.5 2.9 5.3 7.2 3.6 11.0 6.8 5.0 1.2 -3.0 3.3
2013 $2,915.5 2,757.8 2,441.8 920.7 745.9 554.5 76.1 115.2 152.8 81.9 163.2 377.4 283.7 93.7 44.7 49.0 39.8 180.8 95.3 157.7 48.6 109.1 3.8% 3.9 3.3 4.1 1.4 0.9 2.1 3.5 6.2 5.7 5.1 2.7 2.4 3.8 5.0 2.7 6.3 11.2 4.6 2.6 -0.1 3.8
$3
Structures & Equipment National Health Expenditures Health Consumption Expenditures Personal Health Care Hospital Care Professional Services Physician and Clinical Services Other Professional Services Dental Services Other Health, Residential, and Personal Care Home Health Care Nursing Care Facilities and Continuing Care Retirement Communities Retail Outlet Sales of Medical Products Prescription Drugs Other Medical Products Durable Medical Equipment Other Non-Durable Medical Products Government Administration Net Cost of Private Health Insurance Government Public Health Activities Investment 2 Research Structures & Equipment
From Centers for Medicare & Medicaid Services, Ofce of the Actuary. 1. The health spending projections were based on the National Health Expenditures released in January 2012. The projections include effects of the Patient Protection and Affordable Care Act. 2. Research and development expenditures of drug companies and other manufacturers and providers of medical equipment and supplies are excluded from research expenditures. These research expenditures are implicitly included in the expenditure class in which the product falls, in that they are covered by the payment received for that product. Note: Numbers may not add to totals because of rounding.
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Projected 2008 2009 $2,495.8 2,349.5 2,109.0 776.1 671.2 502.7 66.0 102.5 122.0 66.1 138.7 334.9 256.1 78.8 35.2 43.6 29.6 134.7 76.2 146.3 45.7 100.6 3.8% 4.4 4.9 6.4 2.9 3.3 3.8 0.1 7.7 7.5 4.5 4.3 5.1 1.8 0.8 2.6 0.4 -2.2 4.9 -4.9 5.3 -8.9 2010 $2,593.6 2,444.6 2,186.0 814.0 688.6 515.5 68.4 104.8 128.5 70.2 143.1 341.6 259.1 82.5 37.7 44.8 30.1 146.0 82.5 149.0 49.3 99.8 3.9% 4.0 3.7 4.9 2.6 2.5 3.6 2.3 5.3 6.2 3.2 2.0 1.2 4.7 7.3 2.6 1.7 8.4 8.2 1.9 7.9 -0.8 2011 $2,695.0 2,543.2 2,270.4 848.9 708.0 529.2 70.9 107.9 134.3 72.9 151.3 355.0 269.2 85.8 39.7 46.1 33.8 152.3 86.7 151.9 50.2 101.7 3.9% 4.0 3.9 4.3 2.8 2.7 3.7 2.9 4.5 3.9 5.8 3.9 3.9 4.0 5.1 3.0 12.3 4.3 5.1 1.9 1.8 1.9 2012 $2,809.0 2,655.3 2,364.1 884.7 735.4 549.6 74.5 111.4 143.9 77.5 155.2 367.4 277.1 90.3 42.5 47.8 37.5 162.6 91.0 153.7 48.7 105.0 4.2% 4.4 4.1 4.2 3.9 3.8 5.0 3.3 7.1 6.4 2.6 3.5 2.9 5.3 7.2 3.6 11.0 6.8 5.0 1.2 -3.0 3.3 2013 $2,915.5 2,757.8 2,441.8 920.7 745.9 554.5 76.1 115.2 152.8 81.9 163.2 377.4 283.7 93.7 44.7 49.0 39.8 180.8 95.3 157.7 48.6 109.1 3.8% 3.9 3.3 4.1 1.4 0.9 2.1 3.5 6.2 5.7 5.1 2.7 2.4 3.8 5.0 2.7 6.3 11.2 4.6 2.6 -0.1 3.8 2014 $3,130.2 2,964.9 2,622.7 982.7 805.6 601.5 83.8 120.3 163.7 88.3 172.0 410.4 308.7 101.7 47.3 54.4 44.5 197.4 100.3 165.3 50.8 114.5 7.4% 7.5 7.4 6.7 8.0 8.5 10.1 4.4 7.1 7.8 5.4 8.7 8.8 8.5 6.0 10.8 11.7 9.2 5.3 4.8 4.4 5.0 2015 $3,307.6 3,132.7 2,774.1 1,038.3 849.9 633.4 89.7 126.8 175.3 94.5 181.1 435.0 327.3 107.6 50.1 57.5 47.4 205.6 105.7 174.9 53.7 121.2 5.7% 5.7 5.8 5.7 5.5 5.3 7.1 5.4 7.1 6.9 5.3 6.0 6.0 5.8 5.8 5.9 6.5 4.1 5.4 5.8 5.7 5.8 2016 $3,514.4 3,329.2 2,948.9 1,106.6 900.6 670.6 96.5 133.6 188.1 101.2 191.0 461.4 347.8 113.6 52.2 61.4 51.0 217.7 111.6 185.2 57.1 128.1 6.3% 6.3 6.3 6.6 6.0 5.9 7.5 5.4 7.3 7.1 5.5 6.1 6.2 5.6 4.2 6.7 7.6 5.9 5.6 5.9 6.4 5.7 2017 $3,723.3 3,526.5 3,130.4 1,170.7 956.5 712.4 103.1 141.1 201.8 108.4 201.7 491.2 371.1 120.1 55.2 64.9 52.9 225.1 118.1 196.8 60.9 136.0 5.9% 5.9 6.2 5.8 6.2 6.2 6.8 5.6 7.3 7.1 5.6 6.5 6.7 5.7 5.8 5.7 3.7 3.4 5.8 6.3 6.6 6.2 2018 $3,952.3 3,743.0 3,326.1 1,240.0 1,016.4 757.0 109.7 149.6 216.9 117.1 213.6 522.1 394.9 127.2 58.6 68.6 56.3 235.3 125.2 209.3 64.8 144.5 6.2% 6.1 6.3 5.9 6.3 6.3 6.5 6.1 7.5 8.1 5.9 6.3 6.4 5.9 6.1 5.7 6.4 4.5 6.1 6.3 6.5 6.3 2019 $4,207.3 3,985.3 3,544.2 1,317.7 1,084.3 807.3 117.6 159.5 233.1 126.6 226.2 556.3 420.9 135.4 62.4 73.0 59.9 248.4 132.7 221.9 68.9 153.0 6.5% 6.5 6.6 6.3 6.7 6.6 7.1 6.6 7.5 8.1 5.9 6.5 6.6 6.5 6.5 6.4 6.5 5.6 6.0 6.0 6.3 5.9 2020 $4,487.2 4,252.4 3,782.6 1,404.1 1,156.1 860.5 125.9 169.7 250.8 137.0 239.9 594.7 450.7 144.0 66.5 77.5 63.8 265.2 140.8 234.9 73.3 161.6 6.7% 6.7 6.7 6.6 6.6 6.6 7.1 6.4 7.6 8.2 6.0 6.9 7.1 6.3 6.5 6.2 6.5 6.7 6.1 5.8 6.3 5.6 2021 $4,781.0 4,532.7 4,034.0 1,495.7 1,229.1 914.9 134.5 179.8 269.9 148.3 255.0 635.9 483.2 152.7 70.7 82.0 68.0 281.3 149.4 248.2 77.8 170.4 6.5% 6.6 6.6 6.5 6.3 6.3 6.8 6.0 7.6 8.3 6.3 6.9 7.2 6.0 6.3 5.8 6.5 6.1 6.1 5.7 6.2 5.4
2,403.9 2,250.1 2,010.2 729.3 652.6 486.6 63.6 102.4 113.3 61.5 132.7 321.0 243.6 77.4 34.9 42.5 29.5 137.8 72.7 153.8 43.4 110.4 4.7% 4.5 5.0 5.3 5.5 5.4 6.9 5.2 5.2 6.4 4.9 3.0 3.1 2.8 1.7 3.7 -2.5 -1.4 5.3 7.1 3.4 8.6
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save any money, it might even add to total national health spending.200 More recently, rapid increases in Medicaid costs, both general costs and those for subacute and postacute services such as NFs and home health, are likely to redirect and broaden cost-control efforts.
Sources and Uses of Funds In Healthcare

As shown in Table 1.2, personal healthcare expenditures follow a similar trend of dramatic annual increases. In 2010, these expenditures total $2.2 trillion, compared with $1.8 trillion in 2006. It is forecast that by 2021, personal healthcare expenditures will total over $4.0 trillion. Table 1.2 shows other uses of funds expended on health from 2006 to 2010, with projections to 2021. Private nongovernmental sources continue to provide almost 60% of personal healthcare expenditures.201 As already noted, it is the willingness and ability of the American public (unlike those in systems in which private expenditures are illegal or purchasing power is limited) to spend personal funds on healthcare that makes expenditures high compared with other countries. Simultaneously, it shows the importance of freedom of choice in the United States. The charts in Figure 1.5 show the sources and expenditures of the U.S. healthcare dollar for 2010. It is notable that, despite the signicant growth of public expenditures since the enactment of Medicare in 1965, private sources provided almost 45% of funds in 2010. In terms of how the healthcare dollar is spent, hospital care expenditures predominate by consuming over 30% of funds. Inationary pressures in healthcare expenditures have moderated since 2000, although, with few exceptions, they continue to lead increases in the CPI.202 Hospital services have had very signicant cost increases since 1969. The contribution of physicians services has been signicant too, but less than that of hospital services. Data such as these caught the attention of federal policy makers. DRGs, resource utilization groups (RUGs), and resource-based relative value scales (RBRVS), which will be discussed later in the chapter, have been their response. Historically, much of the cost of health services has been borne by employers, and many have been instrumental in forming strategic alliances to control them. Strategic alliances bring together hospitals, physicians, employers, organized labor, insurers, and sometimes government to collect and exchange data and discuss how to nance and deliver health services in a community. Strategic alliances are discussed in Chapter12. Large increases in healthcare costs to employers have caused many to stop providing health insurance; narrow the range and content of health insurance product choices; and/or require employees to pay a larger share of costs through higher premiums, copays, and deductibles.
Private Payment under the Insurance Principle

The rst insurer to write sickness insurance did so in 1847, but the insurance industry paid little attention to health insurance until after World War II. Contributing to this lack of interest was a perception that sickness and paying for treatment were too unpredictable to t traditional actuarial concepts. It was not until 1929 that Blue Cross showed it could be done. Blue Cross began when a group of school teachers made an agreement with Baylor Hospital in Dallas to provide hospital room and board and certain diagnostic services for a monthly fee. In 1932, the rst citywide plan was established with a group of hospitals in Sacramento. The comparable plan for physicians services became known as Blue Shield and was established in California in 1939. Hospitals fostered development of Blue Cross to enhance their patients ability to pay the costs of
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Other Health Spending, $407.6 (15.7%) Other Personal Healthcare, $384.2 (14.8%) Home Health Care, $70.2 (2.7%) Nursing Care Facilities & Continuing Care Retirement Communities, $143.1 (5.5%) Prescription Drugs, $259.1 (10.0%)
Hospital care, $814.0 (31.4%)
Physicians/ Clinical Services, $515.5 (19.9%)
NHE Total Expenditures: $2,593.6 billion
Percent Distribution of National Health Expenditures, by Source of Funds, 19602010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
21.1% 20.6% 27.0% 32.3% 33.4% 34.6% 33.8% 33.2% 32.7% 47.7% 33.4% 22.8% 15.6% 6.2% 9.4% 10.4% 13.9% 4.4% 7.1% 10.3% 7.9% 13.7% 3.8% 10.2% 14.6% 6.7% 13.5% 3.0% 10.2% 15.2% 6.4% 12.2% 2.6% 14.6% 6.2% 11.0% 3.2% 15.3% 6.3% 11.1% 3.3% 14.2% 5.9% 10.5% 3.6% 15.0% 5.7% 10.6% 3.7% 15.5%
16.3%
16.7%
18.8%
20.0%
20.2%
19.1%
14.7%
13.0%
12.5%
11.8%
11.6%
1960
1970
1980
Medicaid
1990
Medicare
2000
2005
2007
Priv. Health Ins.
2009
2010
Investment
Other 3rd Party Payers/Public Health Out-of-Pocket
Other Pub. Ins. Programs
Figure 1.5. Distribution of national health expenditures, by type of service (in billions), 2010. Note: Other Personal Health Care includes, for example, dental and other professional health services, durable medical equipment, etc. Other Health Spending includes, for example, administration and net cost of private health insurance, public health activity, research, structures and equipment, etc. (From Kaiser Family Foundation calculations using National Health Expenditure data from the Centers for Medicare and Medicaid Services, Ofce of the Actuary, National Health Statistics Group [at http://www. cms.hhs.gov/NationalHealthExpendData/].)
hospitalization. After several mergers and reorganizations during the 1990s, by 2012, there were 38 Blue Cross and Blue Shield plans insuring more than 100 million people.203 Private health insurance coverage grew rapidly during the 1940s and 1950s. It received a boost during World War II, when wages and salaries were subjected to federal government controls but fringe benets were not. Commercial carriers began writing substantial amounts of health insurance. By 1955, they had more insureds than Blue Cross. By 1981, more than 1,000 commercial insurance companies were writing health insurance in the United States.204 The number of commercial insurance carriers writing healthcare coverage has remained relatively stable since the 1980s; however, the number is predicted to decline.205 Most private insurance coverage is available through the employment relationship.206 The number of persons uninsured was estimated to be more than 49 million in 2012.207 It is
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important to analyze the categories of persons who are uninsured. Some of the uninsured are self-pay; many choose not to pay for insurance through their employers or similar sources; most of the uninsured would be medically indigent in a major illness. The estimate of the uninsured does not indicate how many cannot get care when it is needed. About 54% of Americans (more than 180 million) had private (nongovernmental) health insurance coverage in 2010.208 Historically, Blue Cross has been a community-rated service plan; all insureds in the same geographic area paid the same rate. Blue Cross paid providers a negotiated fee pursuant to a contract. In contrast to service plans, indemnity insurancethe type usually written by commercial carriersindemnies (pays) the insured person a xed amount for each different diagnosis or treatment. A variation of indemnication is assignmentthe insured person assigns the payment to the provider, who is paid directly. Service plan limits are expressed in days of care and services covered. Blue Shield paid participating physicians according to a fee schedule, which was payment in full and which had the effect of assignment. Nonparticipating physicians billed the patient, who was reimbursed per the fee schedule. Another difference between Blue Cross/Blue Shield and the commercial carriers is that, historically, the former were notfor-prot corporations that prided themselves on providing consumer-oriented coverage with low overhead costs for plan administration.
Government Payment Schemes

Background
As noted, until 1965, the federal government concentrated on providing the wherewithal to support private delivery of services. The advent of Medicare and Medicaid brought federal and state governments into direct nancing of medical care. Historically and presently, federal programs provide services to veterans, military personnel, and Native Americans. State governments provide services for special health problems such as mental illness and disabilities and tuberculosis. States may also operate general acute care hospitals that are part of academic health centers connected with state medical schools. Other HSOs, usually general acute care hospitals, are owned by local governments. As noted, federal government has sought to control the increase in healthcare expenditures through programs such as PROs, DRGs, RUGs, and RBRVS. Also as noted, the states have used regulatory controls such as CON and rate review through rate-setting commissions to moderate the increase in healthcare costs. In addition, most have sought to slow the growth of Medicaid costs by hospital preadmission screening, limiting hospital days, reducing what is paid for each day of care or each service, paying months (or years) after bills are submitted by HSOs and physicians, requiring beneciaries to pay larger copayments for optional services, increasing eligibility (income) restrictions, and decreasing the range of services available. Oregon developed a priority list of services (based on a budget) for which its Medicaid program will pay. For many services, Medicaid pays only a fraction of the costs incurred by HSOs to provide them. Reducing what Medicaid pays has ripple effects. Other payers must make up the difference through cost shifting if the HSO is to be nancially viable. Government programs do not pay charges (the nonnegotiated fee charged by the HSO), nor does Blue Cross. Commercial insurers are almost certain not to pay charges, and indemnity plans have always paid only a xed fee to the beneciary regardless of what the beneciary is charged or pays. It is only the self-pay patients who pay charges. The small number of those who pay out of pocket makes cross subsidies infeasible.
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Cost shifting raises basic questions of fairness. Should any payer pay less than costs for services? Medicare is a case more politically difcult than Medicaid because Medicare is an exclusively federal program. Congress has been unwilling to cut benets, although it has increased copayments and deductibles (e.g., Medicare Part A, hospitalization) and the insurance premium (e.g., Medicare Part B, physicians services) several times since 1965. Medicare has been called uncontrollable because once beneciaries are eligible, all services are available. Meaningful savings will occur only if benet levels are controlled, which is politically unpalatable.
Diagnosis-Related Groups
Initially, Medicare reimbursement for hospital services was based on costs; the lack of incentives to be efcient caused runaway cost increases. By the early 1980s, a direct means of cost control was instituted when the Tax Equity and Fiscal Responsibility Act of 1982209 and the Social Security Amendments of 1983 (PL 98-21)210 mandated a prospective payment system for Medicare using DRGs. The CMS administers Medicare and Medicaid and establishes and reviews DRG rates for each Medicare inpatient admission. Discharged Medicare patients are assigned to one or more of the 751 DRGs, based on diagnosis, surgery, patient age, discharge destination, and sex.211 The weight of each DRG is based primarily on Medicare billing and cost data and reects the relative cost, across all hospitals, of treating cases that are classied in that DRG.212 Hospitals that can provide services at lower costs keep the difference. Those exceeding the DRG rate must recoup the loss elsewhere. The change from cost-based reimbursement to payment according to rates prospectively determined by CMS has had and will continue to have major effects on hospitals. One is that hospitals unbundled (separated) postacute services such as subacute, recuperative, and rehabilitative care from the acute episode hospital stay. For example, hospital-based NF beds were established to provide transitional care. Under prospective payment, hospitals must be certain that their average costs per DRG do not exceed CMS rates. Managers and physicians must collaborate to eliminate unnecessary tests and procedures and reduce LOS, and, in general, hospitals must become more efcient. Initially, the DRG payment system applied only to Medicare patients, but state Medicaid programs, Blue Cross, and other third-party payers have adopted it for inpatient services. Similar, DRG-like prospective payment system methodologies are being used for NFs and outpatient clinics, as well.
Resource Utilization Groups

DRGs are applied to hospitalized Medicare beneciaries. The classication system applied to long-term care puts NF residents with similar resource needs (utilization) into groups. Initially, these groups were based on the ability of NF residents to engage in activities of daily living, which are major explanatory factors in resource use. Since the mid-1980s, RUGs have undergone signicant derivation and validation and have evolved through RUG-II, which was used to determine NF payment for Medicaid in New York and Texas.213 RUG-III was mandated for Medicare residents by the Balanced Budget Act of 1997.214 The number of reimbursement levels based on resident condition and use of services was increased from 44 to 53 in 2005, and again from 53 to 66 in 2010. RUG-IV uses a daily rate based on the needs of individual residents, adjusted for local labor costs. The rate changes as the residents condition changes.215 As with other federal payment schemes, most payers are likely to adopt RUG-IV in determining payments to NFs.
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Ambulatory Patient Groups and Ambulatory Payment Categories

Other providers of services have drawn the attention of lawmakers and regulators. Research in the late 1980s led to development of ambulatory patient groups (APGs), a system of codes that explains the amount and type of resources used in an ambulatory visit. The variety of outpatient services settings, wide variation in the reasons for outpatient care, and the high percentage of costs associated with ancillary services necessitated a classication scheme that could reect the range of services rendered. As with DRGs, patients in each APG are assumed to have similarities in clinical characteristics, resource use, and costs. Also like DRGs, a primary APG or a signicant procedure is subdivided into groups by body systems. Unlike DRGs, variables for additional services are based on clinically similar classes, and multiple APGs can be applied per patient encounter. APGs encompass the full range of ambulatory settings, including sameday surgery units, hospital emergency rooms, and outpatient services. They do not address telephone contacts, home health visits, NF care, or inpatient services.216 HCFA (now the CMS) adapted ambulatory payment categories (APCs) from APGs. APCs cluster thousands of procedure and diagnosis codes into more than 300 categories, with separate classications for surgical, medical, and ancillary services. Each group includes clinically similar services that require comparable levels of resources. A relative weight based on median resource use is assigned to each classication. Payment for each APC is determined by multiplying the relative weight by a conversion factor, which is the average rate for all APC services.217
Resource-Based Relative Value Scale

In 1992, CMSs predecessor, HCFA, began implementing a fee schedule for physicians who participate in Medicare Part B, a change mandated by the Omnibus Budget Reconciliation Act of 1989 (PL 101-239, OBRA 89).218 Previously, physician payment under Part B was based on usual, customary, and reasonable charges. Among the most important effects of charge-based payment was that procedure-based specialties such as surgery were more highly paid than specialties such as internal medicine that use cognitive skills (e.g., evaluation, management). The new schedule used an RBRVS that resulted in dramatic changes in physician payment patterns. The prospectively set reimbursement is based on the resources that are used to produce physician services and is divided into three components: physician work, practice expenses, and malpractice insurance.219 Nonphysician practitioners whose services are paid under Medicare Part B will continue to have their fees tied to those of physicians, and their fees will move in the same direction.220 RBRVS increased reimbursement for family and general practice physicians by about 15%; payments to ophthalmologists and anesthesiologists declined the most (approximately 35%), but payments to other procedure-based specialists, such as surgeons, decreased as well.221 Since RBRVS was introduced, the inexorable trend in physicians fees has been downward. In addition, to prevent physicians who have not signed a Medicare participation agreement (accepting Medicare as full payment for services [sometimes called assignment]) from balance-billing patients (i.e., billing patients for the difference between what Medicare pays and what the physician charges), the statute imposed a cap on the amount that a nonparticipating physician may balance-bill a Medicare beneciary.222 Regulations developed pursuant to the Balanced Budget Act of 1997 allow physicians (and other healthcare practitioners) to opt out of Medicare and provide services through private contracts with patients. The federal application of RBRVS is only to Medicare. However, RBRVS is likely to be used by other third-party payers, as they have used RUGs and DRGs. The effect will be a
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major change in how physicians are paid. Other likely effects are that physicians employed in high-technology practices will generate less income for their employers; physicians will try to unbundle services and move more of them out of hospitals; physicians may seek to have lost income made up by hospitals; physicians may limit their willingness to treat Medicare beneciaries; and adjustments in how physicians are paid in rural areas as compared with urban areas will make it easier for rural hospitals to attract physicians, thus increasing access to care for rural beneciaries while potentially decreasing it for urban beneciaries.223
Summary
Incentives in DRGs, RUGs, and APG/APCs may lead to underuse of services and consequently to inappropriate treatment. The effect of DRGs is an incentive to discharge patients from hospitals as soon as possible. Early discharge has signicant implications for home health agencies, NFs, and hospitals, but most of all for the patients who may experience ill effects from too early a discharge. Incentives in RBRVS are to overuse services because physicians are paid for each treatment. Treatment by specialists is not necessarily more expensive. Interventions by specialists may be more effective, with lower total cost than the same diagnosis treated by a family practitioner, for example. A likely long-term effect of RBRVS is that changes in physician income will recongure the ratios of physicians by specialty.
System Trends
Signicant efforts by state and federal governments to control their health services programs costs will continue. Hospitals consume about one quarter of health expenditures.224 Thus, they will continue to receive disproportionate attention from government and other third-party payers. The large component of xed and semivariable costs will limit the savings that HSOs can achieve. Case-mix cost control through DRGs will cause hospitals to treat patients with the most remunerative diagnoses. There will be economic pressure to discharge patients quickly, perhaps earlier than sound practice warrants. In addition, treating the less ill with alternative regimens and in nonhospital HSOs leaves only the most ill in acute care hospitals. The result will be that costs per day of care will increase, ultimately putting even greater nancial pressure on hospitals. Unless hospitals close beds, discontinue services, and reduce the number of employees, the cost per case and the total cost per hospitalization will rise. Regulation was the watchword in the late 1960s and early 1970s. The competitive environment that emerged in the late 1970s and early 1980s has continued, especially among hospitals. Public and private payment sources are unwilling to subsidize the inefcient. The bankruptcies, mergers, and joint activities among HSOs/HSs that began in the 1980s have continued. Increasingly, hospitals will be connected to one another as part of systems and through shared services, group purchasing, and strategic alliances. As with politics, all healthcare delivery is local. HSs tend to be local or regional rather than national, a reality that is likely to continue. Predictions that the end of the 20th century would nd U.S. healthcare provided by a few national hospital systems, some large unafliated facilities, and few small freestanding hospitals proved to be incorrect. The widespread corporate restructuring undertaken by hospitals in the early 1980s was largely unsuccessful. Even as corporate restructuring protected and enhanced hospitals assets and reimbursement and expanded their range of activities, it caused management to lose sight of the core business. Consequently, hospitals have divested themselves of noncore
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businesses and are again focusing on their original raison detre. Restructuring is addressed in Chapter 2. Physicians have increasingly undertaken activities that compete with hospitals. As technology becomes more portable and as new medical interventions that do not require hospitalization are developed, hospitals will have sicker and sicker patients. The fragmentation and ultraspecialization of hospital clinical staff will continue. As a result, the problems of acquiring, retaining, and managing human resources and their appropriate roles in HSOs will be exacerbated in the future.
Discussion Questions
1. What are the ramications and implications for the health services system of the model developed by Blum? What are its strengths and weaknesses? 2. Select a disease problem and apply the Precede-Proceed model described in the chapter. How should HSO/HS governing bodies and managers use this model? 3. Describe and analyze the relationships among the various institutional and programmatic providers in the health services system. 4. Facilities and programs other than acute care hospitals are much more numerous and arguably have a greater effect on health status, but acute care hospitals remain the focus of attention. Why is this? What are the desirable and undesirable aspects of this attention from the standpoint of the acute care hospital and the consumer of health services? 5. Proliferation of the health professions continues unabated. What is desirable and undesirable about this fragmentation? If something should be done to slow or stop it, what should it be, and how can it be achieved? 6. Highlight the changes in reimbursement to HSOs that have occurred since 1965. What forces in the general environment were most important in causing these changes? Sketch and defend a scenario that suggests the likely developments in reimbursement during the rst part of the 21st century. 7. Federally supported state health planning has risen and fallen since the passage of Medicare and Medicaid. Identify the advantages and disadvantages of statewide or areawide health planning from the standpoints of providers and consumers. 8. Describe how licensure, registration, and certication are different. What are the advantages and disadvantages of each from the standpoint of providers and consumers? How do they facilitate and inhibit the availability of health services occupations?
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9. Resources consumed by the health services system have soared since the late 1960s. What factors contributed to the increases? Identify actions that have been taken. What else might be done to control costs? 10. Identify the advantages and disadvantages of excess numbers of physicians and nonphysician clinicians from the perspective of health services managers. What are the advantages and disadvantages to society?
Case Study 1
Gourmand and FoodA Fable225

The people of Gourmand loved good food. They ate in good restaurants, donated money for cooking research, and instructed their government to safeguard all matters having to do with food. Long ago, the food industry had been in total chaos. There were many restaurants, some very small. Anyone could call himself or herself a chef or open a restaurant. In choosing a restaurant, one could never be sure that the meal would be good. A commission of distinguished chefs studied the situation and recommended that no one be allowed to touch food except for qualied chefs. Food is too important to be left to amateurs, they said. Qualied chefs were licensed by the state, and there were severe penalties for anyone else who engaged in cooking. Certain exceptions were made for food preparation in the home, but those meals could be served only to the family. Furthermore, a qualied chef had to complete at least 21 years of training (including 4 years of college, 4 years of cooking school, and a 1-year apprenticeship). All cooking schools had to be rst class. These reforms did succeed in raising the quality of cooking, but a restaurant meal became substantially more expensive. A second commission observed that not everyone could afford to eat out. No one, they said, should be denied a good meal because of income. Furthermore, they argued that chefs should work toward the goal of giving everyone complete physical and psychological satisfaction. The government declared that those people who could not afford to eat out should be allowed to do so as often as they liked, and the government would pay. For others, it was recommended that they organize themselves into groups and pay part of their income into a pool that would be used to pay the costs incurred by members in dining out. To ensure the greatest satisfaction, the groups were set up so that members could eat out anywhere and as often as they liked, their meals could be as elaborate as they desired, and they would have to pay nothing or only a small percentage of the cost. The cost of joining such prepaid dining clubs rose sharply. Long before this, most restaurants had employed only one chef to prepare the food. A few restaurants had been more elaborate, with chefs specializing in roasting, sh, salads, sauces, and many other things. People had rarely gone to these elaborate restaurants because they had been so expensive. With the establishment of prepaid dining clubs, everyone wanted to eat at these fancy restaurants. At the same time, young chefs in school disdained going to cook in a small restaurant where they would have to cook everything. Specializing and cooking at a very fancy restaurant paid much better, and it was much more prestigious. Soon there were not enough chefs to keep the small restaurants open. With prepaid clubs and free meals for the poor, many people started eating three-course meals at the elaborate restaurants. Then restaurants began to increase the number of courses, directing the chefs to serve the best with no thought for the bill. (Eventually, a meal was served that had 317 courses.)
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The costs of eating out rose faster and faster. A new government commission reported as follows: 1. Noting that licensed chefs were being used to peel potatoes and wash lettuce, the commission recommended that these tasks be handed over to licensed dishwashers (whose 3 years of dishwashing training included simple cooking courses) or to some new category of personnel. 2. Concluding that many licensed chefs were overworked, the commission recommended that cooking schools be expanded, that the length of training be shortened, and that applicants with lesser qualications be admitted. 3. The commission also observed that chefs were unhappy because people seemed to be more concerned about the decor and service than about the food. (In a recent taste test, not only could one patron not tell the difference between a 1930 and a 1970 vintage, but he also could not distinguish between white and red wines. He explained that he always ordered the 1930 vintage because he knew that only a very good restaurant would stock such an expensive wine.) The commission agreed that weighty problems faced the nation. They recommended that a national prepayment group be established, which everyone must join. They recommended that chefs continue to be paid on the basis of the number of dishes they prepared. They recommended that the Gourmandese be given the right to eat anywhere they chose and as elaborately as they chose and pay nothing. These recommendations were adopted. Large numbers of people spent all of their time ordering incredibly elaborate meals. Kitchens became marvels of new, expensive equipment. All those who were not consuming restaurant food were in the kitchen preparing it. Because no one in Gourmand did anything except prepare or eat meals, the country collapsed.
Questions
1. Read and analyze the fable of Gourmand. How well does the allegory t delivery of healthcare in the United States? 2. What is, and what should be, the role of the consumer in healthcare?
Case Study 2
Wheres My Organ?
Organizations that support and encourage transplantation of human organs estimate that tens of thousands of persons with end-stage renal disease, who are now maintained on dialysis, could resume a relatively normal life with a kidney transplant. The supply of cadaver kidneys, however, falls far short of demand. To encourage persons to sign organ donor cards and to encourage families to consent to organ donation, a member of the U.S. House of Representatives introduced a bill to provide tax incentives for what is often called the gift of life. Here, the gift is vascularized organs, including the heart, liver, pancreas, lungs, and kidneys. Tax incentives would be twofold: a $25,000 deduction per organ in the individuals last taxable year, plus a $25,000 exclusion per organ from estate taxes. To qualify, the organ must be in a condition suitable for transplantation. The same tax incentives would be granted for donations by dependents as dened by the federal tax code. When introducing the bill, the
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representative stated, Thus, a minor with signicant income would reduce the familys tax liability with a posthumous donation that would benet both the minors loved ones and the loved ones of the recipient of the life-saving organ. The representative noted, too, that enactment of his bill would result in signicant cost savings to the federal government, which pays for the dialysis of persons with end-stage renal disease under Medicare. Assuming a 50% income tax bracket and an average of two organs per taxpayer, the deductions for 10,000 donors would reduce tax collections by $250 million. Renal dialysis is projected to cost the federal government almost $12 billion by scal year 2015.
Questions
1. Identify the issues that this proposed legislation raises. 2. Choose to support or oppose the bill. Develop a set of arguments that justies your position. 3. Develop an alternative proposal that would be more effective in encouraging organ donation.
Case Study 3
Dental Van Shenanigans226

Use of vans to take healthcare services to the medically underserved is common in rural areas and inner cities. One midwestern city had a federally funded community health center (CHC) that provided some dental clinic services to the needy. The CHC was well qualied but was known for an aggressive management style and creating self-serving alliances. This questionable management style was seen by CHC managers as the most savvy and efcient path to nancial success. Unilaterally, the CHC developed a proposal for a van with two dental treatment areas to take primary care dental services to underserved inner-city school children. Then the CHC worked behind the scenes at other local agencies to get some of their funds to support the van. The effort included colluding with board members from other agencies on matters of those board members personal interests in exchange for the board members putting nancial support of the dental van on their organizations meeting agendas. Of course, these differing interests or actual conicts of interest were not disclosed when dental van support was included on the agendas. The staffs of the other agencies were not consulted in advance, because CHC management thought it was unlikely that those staffs would support allocating funds for the CHCs big public relations initiative. One agency learned about the dental van and the CHCs effort to obtain some of their budget when the van appeared as an agenda item that was added at the last minute. The proposal did not pass, however, because the board members who had conspired with the CHC were unable to answer the other board members questions about how support of the CHCs dental van furthered their agencys mission. The dental van was badly needed in the community, but it was about to lose its funding. Only if the staff from the other agency argued in support of the CHCs effort would it pass. Supporting the dental van, however, required that the agencys staff overcome its anger that the CHCs efforts had been surreptitious and had sought to gain support in a devious manner.
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Questions
1. Make the assumption that your agencys budget had funds available. Should your staff have spoken in support of the dental van project even though it was outside your agencys mission and it was put on the agenda through questionable means? 2. Competitiveness or a desire for preeminence and public relations advantage may cause agencies providing public health services to act unethically or dishonestly. What is the best way to work to improve public health when this occurs? 3. In many states, dentists provide services to the economically disadvantaged who qualify for Medicaid. How should the CHC respond to protests from area dentists that sending a dental van into the inner city will disrupt their existing dentistpatient relationships (and, incidentally, reduce their incomes)?
Notes
1. Centers for Medicare and Medicaid Services. National Health Expenditure Projects 2011-2012, Forecasted Summary and Selected Tables. http://www.cms.gov/Research-Statistics-Data-and- Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf, retrieved July 21, 2013. 2. Sean Keehan, Andrea Sisko, Christopher Truffer, John Poisal, Gigi Cuckler, Andrew Madison, Joseph Lizonitz, and Sheila Smith. National Health Spending Projections Through 2020: Economic Recovery and Reform Drive Faster Spending Growth. Health Affairs (July 2011). http:// content.healthaffairs.org/content/early/2011/07/27/hlthaff.2011.0662.full, retrieved July 21, 2013. 3. Health Care Financing Administration. Highlights: National Health Expenditures, 1998. http:// www.hcfa.gov/stats/NHE-OAct/hilites.htm, retrieved March 21, 2000. 4. U.S. Census Bureau. Prole of General Population and Housing Characteristics: 2010. http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=DEC_10_DP_ DPDP1&prodType=table, retrieved September 14, 2012. 5. National Institutes of Health, Institutes, Centers & Ofces. Updated August 14, 2012. http:www.nih.gov/icd/, retrieved September 14, 2012. 6. Ricardo Alonso-Zaldivar. Report: Health System Wastes $750 B Each Year. The Washington Times, September 7, 2012, A10. 7. Blum, Henrik L. Expanding Health Care Horizons: From a General Systems Concept of Health to a National Health Policy, 2nd ed., 34. Oakland, CA: Third Party Publishing, 1983. 8. Blum, Henrik L. Planning for Health: Development and Application of Social Change Theory, 96 100. New York: Human Sciences Press, 1974. 9. The discussion of the Precede-Proceed model for health planning and evaluation is adapted from Lawrence W. Green and Marshall W. Kreuter. Health Program Planning: An Educational and Ecological Approach, 4th ed., 917. New York: McGraw Hill, 2004. 10. Health Care Financing Administration. Trends in Medicare Skilled Nursing Facility Utilization: CYs 19671994. Health Care Financing Review, Statistical Supplement (1996): 64. 11. Data from the National Center for Health Statistics, 1987 and 1988; Thompson-Hoffman, Susan, and Inez Fitzgerald Storck. Disability in the United States: A Portrait from National Data, 37. New York: Springer-Verlag, 1991. 12. Administrative Procedure Act of 1946, PL 79-404, 60 Stat. 993 (1946). 13. As recently as 1932, the U.S. Supreme Court held that the delegation of legislative authority by the Congress was unconstitutional. United States v. Shreveport Grain and Elevator Company, 287 U.S. 77 (1932). 14. Blacks Law Dictionary, 6th ed., 1406. St. Paul, MN: West Publishing, 1990. 15. Blacks Law Dictionary, 1305. 16. Pickett, George, and John J. Hanlon. Public Health: Administration and Practice, 9th ed., 2832. St. Louis: Times Mirror/Mosby College Publishing, 1990. 17. David Brown. Longer lives shift landscape of disease. The Washington Post. December 14, 2012, 1, reporting the results of the Global Burden of Disease Study. 18. Sherry L. Murphy; Jiaquan Xu; and Kenneth D. Kochanek. Deaths: Final Data for 2010.
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224. Centers of Medicare and Medicaid. National Health Expenditures Projections 20102020. http:// www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealth ExpendData/Downloads/proj2010.pdf, retrieved September 23, 2012. 225. Lave, Judith R., and Lester B. Lave. Health Care: Part I. Law and Contemporary Problems, 35. (Spring 1970); reprinted by permission. Copyright 1970, 1971 by Duke University. 226. Written by Gary E. Crum, Ph.D., M.P.H., District Director of Health (retired), Northern Kentucky Independent District Health Department. Used with permission.
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Learning Objectives
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Discussion Questions
1. What are the ramications and implications for the health services system of the model developed by Blum? What are its strengths and weaknesses? The ramications and implications of Blums model (see Figure 1.1) result primarily from the weights that are assigned to various aspects. The widths of the arrows suggest that environment has the most signicant effect on well-being. Blum identies medical care services (health services delivery) as the least important factor. The disproportionately high costs of health services relative to other components give one pause to consider the role and true value of health services. If one accepts the models weighting, rational planning requires commitment of additional resources to make the environment more healthful, for example. Societal perceptions of acute care and the education and orientation of physicians, especially allopaths, will cause this change to occur slowly, if at all. Even with more emphasis on the nondelivery segments of the model, HSOs or quasi-HSOs would be needed to perform the tasks required. Care for chronic diseases and those that are not preventable would continue to require at least the range of HSOs/HSs found in the health services system. A critique of the model identies its strengths and weaknesses: Strengths: Many of the factors affecting well-being are identied. The relative importance of factors is emphasized. Arrow size for environment seems appropriate. The health services system is shown as important to well-being, which is correct in many respects. Psychological and sociological components of well-being are identied. Weaknesses: It does not recognize that persons are unlikely to consider the long-term results of their actions. The effects of lifestyle (personal habits and nutrition) are understated. Individual responsibility for achieving and maintaining health is not specically stated. Science has not veried the weighting of the elements. Prevention may improve quality of life and increase longevity, but reducing acute diseases leaves chronic, degenerative diseases that may prolong lives of marginal quality at signicant cost. Emphases and components vary by socioeconomic class, which is not shown. 2. Select a disease problem and apply the Precede-Proceed model described in the chapter. How should HSO/HS governing bodies and managers use this model? The model for health promotion planning and evaluation (Precede-Proceed model) shown in Figure 1.2 ts best with the role and scope of community hospitals, public health departments, substance abuse centers, mental health facilities, and integrated HSs, but it could be applied
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to any HSO that seeks a broader understanding of its activities and the link to its community. Students are likely to suggest an acute care medical condition, but discussion should emphasize that the Precede-Proceed model can be applied to all health services, from prevention to continuing care. Figure 1.4 shows the spectrum of health services delivery and should be referenced as necessary. An important result of this exercise is that students should have an appreciation for the social, behavioral, economic, cultural, and environmental factors that affect health and health status. Governing bodies (GBs) and managers should use the model to understand, analyze, and intervene to improve community health status, or population health, which is an increasingly important focus. This intervention can be done as an individual HSO or as part of an HS. Given that virtually all health problems are affected by the factors considered in the PrecedeProceed model, it is a vital template for interventions that improve community health. The model can focus measures of community beneta concept important to both not-for-prot and for-prot health services providers, but especially important to justify the tax-exempt status of the former. 3. Describe and analyze the relationships among the various institutional and programmatic providers in the health services system. Figure 1.4 should be reviewed in analyzing the interactions of various system components. Typical interactions include links between an internists ofce-based practice and the diagnostic services offered by a radiology group. The internist is likely to use at least part of a hospitals specialized laboratory and imaging services for diagnostic workups. Nursing facilities have transfer agreements with acute care hospitals, and patients are moved between the two as their medical conditions require. State health departments often participate in applying the conditions of participation established by the Centers for Medicare and Medicaid Services (CMS) to determine eligibility for Medicare reimbursement. This occurs if, for example, a hospital is not accredited by The Joint Commission or as part of a validation survey. State and local health departments inspect HSOs for radiation safety, food services, disposal of medical wastes, and sanitation. Some communicable diseases are reportable to state or local health departments or both. HMOs have agreements with acute care hospitals (and other HSOs) to provide inpatient care. Hospice may use visiting nurse associations for home nursing services to people who are terminally ill. It is useful to ask students to trace patients through various elements in the system, based on human development (from infancy to old age) or after an event such as an automobile accident. 4. Facilities and programs other than acute care hospitals are much more numerous and arguably have a greater effect on health status, but acute care hospitals remain the focus of attention. Why is this? What are the desirable and undesirable aspects of this attention from the standpoints of the acute care hospital and the consumer of health services? Acute care hospitals have received the most attention because they are often dramatic settings in which technically skilled, highly ranked professionals save patients from dying. are a focus for the miracles of medical technology. are the most expensive component of the health services system. have received major media attention that publicizes successes, as well as failings. treat critically ill people and often achieve miraculous cures.
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From the standpoints of the acute care hospital and the consumer of services, the desirable and undesirable aspects of this attention are as follows: For the acute care hospital provider Desirable They have high prestige/status. Professionals want to be part of the team; recruitment and retention are eased. Prestige, status, and medical miracles justify high costs/salaries. Managers have a large say or much inuence. For consumers of services Desirable Consumers are aware of new treatments and technology and where to receive them. Consumers are condent the hospital will assist in recovery of their health. Consumers know where to go for emergency services. It is convenient to have many services in one place. Undesirable High overhead and standby costs result in high costs. The hospital is expected to do more than it can do, in fact. Bureaucracy dehumanizes; it may cause poor responses. Technological imperative causes unnecessary or inappropriate testing and treatment. Undesirable There is great pressure on managers to perform. The hospital is in the spotlighteven minor problems are highly publicized. The public expects more than the hospital may be able to deliver. Cost pressures will cause many to fail.
5. Proliferation of the health professions continues unabated. What is desirable and undesirable about this fragmentation? If something should be done to slow or stop it, what should it be, and how can it be achieved? The desirable effects of the proliferation of types of health services personnel include the following: Specially trained people are available to provide technical services. Specializing enhances qualifications and depth of preparation in discrete activities. Such proliferation allows HSOs/HSs and clinical staff to deliver high-tech medical care. Proliferation can also have the following undesirable effects: It produces human resources problems, such as recruiting, staffing, and benefits management. It complicates union organizing (desirable for management) and collective bargaining. It increases cost of services. It causes turf battles among provider groups, which lessen HSO/HS effectiveness. It seems, however, that little can be done to stop the proliferation of types of health personnel. Perhaps nothing should be done; high-tech services are impossible without them. One solution to the problem of proliferation is cross-training and cross-certifying. Another is to resist further fragmentation. For example, primary nursing is more expensive than team nursing, but it provides a wider range of services and decreases fragmentation. Job enrichment reduces
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fragmentation with the further benet of employee fulllment and motivation. Managers can slow proliferation by resisting the establishment of new types of personnel and seeking less fragmenting ways to provide services. 6. Highlight the changes in reimbursement to HSOs that have occurred since 1965. What forces in the general environment were most important in causing these changes? Sketch and defend a scenario that suggests the likely developments in reimbursement during the rst part of the 21st century. The major changes in reimbursing HSOs since 1965 have occurred through federal initiatives in Medicare and, to a lesser extent, Medicaid. When enacted, Medicare reimbursed hospitals on a cost basis. In 1983, however, the Health Care Financing Administration (HCFA) began to pay hospitals using diagnosis-related group (DRGs), which pay a xed fee (determined prospectively) per admission. Care provided at lower cost produces a surplus; care provided at higher cost results in a loss on that DRG. Many third-party payers have adopted similar schemes. Resource utilization groups (RUGs) have been applied to nursing facilities. Managed care, capitation, preferred provider organizations (PPOs), and physician case management accentuate the economics of services, perhaps to the detriment of quality. The environmental forces that were most important in causing these changes are shown in Figure 5.7 . They include the general environment [8]. The healthcare environment should be considered in conjunction with Figure 1.3, which details those external forces. A scenario for developments in reimbursement early in the 21st century includes payment for disease prevention and health promotion; coverage of physician-assisted suicide (PAS); coverage limits on care determined to be futile; case and disease management; capitation; use of preferred (lower-cost) providers; spreading costs using coinsurance, deductibles, and copayment; and more salaried physicians. 7. Federally supported state health planning has risen and fallen since the passage of Medicare and Medicaid. Identify the advantages and disadvantages of statewide or areawide health planning from the standpoints of providers and consumers. The advantages of statewide or areawide health planning include the following: For providers (HSOs/HSs) Limited competitor market entry Saved HSOs/HSs from themselves (their own bad judgment) Reduced/eliminated risks of market competition Gave those who obtained technology rst a competitive advantage For consumers May have reduced costs Sought to rationalize the system Gave consumers a voice in how/where services would be available Publicized processes, which made consumers more aware of health and health services
The disadvantages of statewide or areawide health planning include the following: For providers (HSOs/HSs) Restricted the range of action Slowed acquisition of new technology Made HSOs/HSs less successful in getting approval were at a competitive disadvantage Added costs/uncertainty because of planning and delays For consumers Reduced access to services/technology by reducing alternatives May have increased costs of obtaining care Delayed availability of services Increased the cost of government and added bureaucracy
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8. Describe how licensure, registration, and certication are different. What are the advantages and disadvantages of each from the standpoints of providers and consumers? How do they facilitate and inhibit the availability of health services occupations? Licensure is a government function (based on the police power of the state) that allows people to engage in a health occupation after they are found to have minimum competence. Registration lists qualied people on a roster developed by government, a government-sanctioned nongovernmental body, or a nongovernmental body. States may require registration of persons engaging in a health occupation, thus giving registration the effect of licensure. People who are registered may use that designation (e.g., registered dietitian [RD], registered nurse [RN]). Certication is a process by which a nongovernmental organization or association recognizes someone who meets its qualications. States may require certication of persons engaging in a health occupation, thus giving certication the effect of licensure. HSOs/HSs commonly require certication as a qualication for clinical privileges and/or employment. The advantages and disadvantages from the standpoints of providers and consumers are as follows: For consumers Advantages Enhances quality of care Informed consumers can choose the services needed High technology is available Reduces risk of quacks and charlatans in healthcare Helps ensure competence For providers (HSOs/HSs) Advantages Helps ensure competence Reduces need for in-house training Enhances quality of care Allows delivery of high-tech medicine May provide competitive advantage Disadvantages Limits stafng exibility Promotes efdoms Raises salary costs Adds complexity to managing Adds to proliferation/fragmentation ofhealth services personnel (See Question 5.) Disadvantages Limits the range of choice of providers Fragments care Range and roles of providers are confusing to consumers Raises costs of care Consumers forced to accept some state paternalism
9. Resources consumed by the health services system have soared since the late 1960s. What factors contributed to the increases? Identify actions that have been taken. What else might be done to control costs?
Contributing Factors
Table 1.2 in the text should be reviewed. The coincidence of a rapid rise in health services expenditures and ination in health services is apparent and instructive, but it does not prove cause and effect. However, large amounts of new money for Medicare and Medicaid were likely major factors, especially because, for almost 20 years, reimbursement for Medicare was cost based. Medicare and Medicaid also paid HSOs/HSs for services for which they may not have been paid previously. Some ination resulted from provider greed, fraud, and abuse. General
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ination in the economy was also a factor, as was greater demand for services because of population growth and aging. Providers claim (and it is almost certainly true) that the content of services has increased and that services have become qualitatively superior since the 1960s. Fair comparisons must consider these changes as well.
Proposals Applied and Under Consideration

DRGs were the rst effort to move from cost-based to xed-sum payment for services. The resource-based relative value scale puts greater weight on cognitive medical services, such as internal medicine, compared with procedure-based services, such as surgery. Developing and implementing RUGs, ambulatory patient groups, and ambulatory payment categories have been a natural evolution. Managed care and capitation are recent suggestions, although both are old concepts. There are efforts to use lower cost alternatives to institutional care, especially in acute care hospitals. PPO and case and disease management by physicians and specialized organizations are part of the competitive environment. State and federal governments will continue to try to squeeze the fat out of HSO/ HS budgets, especially the costs in acute care hospitals, by monitoring utilization, decreasing lengths of stay, and paying a per diem or capitated rate. Likely, the results will be more bankruptcies, mergers, and aggregation into integrated delivery systems. Raising capital to replace old facilities and buy new equipment has become much more difcult and will be an additional force that causes consolidations, mergers, and affiliations. Whether these changes and pressures reduce costs and ination is problematic. Driving technologies and patients out of acute care hospitals changes the location of care (and costs) but, as in the case of home healthcare, does not eliminate them. One answer lies in encouraging less use of services, especially technology. Wellness programs, holistic medicine, and prevention activities reduceor, more accurately, shift to a later point in the human life cycleuse and costs of acute care and high-technology services. Some efforts have succeeded and are succeeding. They must be judged case by case. The biggest inhibitor to change and cost reduction will be the consumers, especially those insulated from the costs of care by rst-dollar third-party coverage. 10. Identify the advantages and disadvantages of excess numbers of physicians and nonphysician clinicians from the perspective of health services managers. What are the advantages and disadvantages to society? The advantages of excess physicians and nonphysician clinicians to both health services managers and society include the following: More choice of whom to hire/credential Greater choice of providers Lower payroll costs of those employed Likelihood of greater geographic dispersion Greater opportunity to serve underserved areas and meet customers expectations for services Better access to a broad range of providers Greater ability to control content of services Possibly lower-priced services
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The disadvantages of excess physicians and nonphysician clinicians to health services managers can include the following: Numerous turf battles and political issues in HSOs/HSs GB pressures to control types and numbers More difficulty managing and planning professional staff organizations The disadvantages of excess physicians and nonphysician clinicians to society include the following: Inefficient use of societal resourceshigh training costs and underutilization Possibly fewer and poorer quality applicants for training Bad publicity possibly causing consumers to lose confidence in HSOs/HSs Overall cost increase from overutilization of services by professional groups and ordering services to maintain income
Case Study 1
Gourmand and FoodA Fable1

This case should cause students to think critically about the issues in developing national health policy. The discussion is likely to raise more questions than can be answered, but the case can be referenced again in later chapters. For example, Chapter 2 focuses on various types of HSOs in terms of coverage and services; Chapter 4 discusses ethical theories that permit a more thorough assessment of the micro- and macroallocation issues in the case of Gourmand. 1. Read and analyze the fable of Gourmand. How well does the allegory t delivery of healthcare in the United States? The fable is a parody of the historical development of the U.S. healthcare system. It describes what the authors believe occurred: initial licensing and educational requirements led to expansion and increased availability of services, specialization, a decreased number of general practitioners, and increased costs. It is a satire showing that the ultimate result of adding money and regulation without basic system reforms was that the country collapsed. The allegory is somewhat flawed because the healthcare system does not give consumers the level of control (or knowledge) to be able to order the tests, procedures, and interventions that someone ordering and consuming a restaurant meal has. The physician is the gatekeeper for access to almost all significant aspects of the healthcare system. Educating physicians and giving them incentives to be judicious but appropriate users of healthcare resources will provide the most effective way to control costs. The extreme result described in the case cannot occur in the United States. There will continue to be inequalities in treatment of various diseases. Consider, for example, end-stage renal disease, the dialysis for which is paid for by federal dollars, and the disproportionate focus on HIV and AIDS, in terms of both research expenditures and treatment. It is argued that an arbitrary limit should be put on the percentage of the gross domestic product spent on health services. This could occur only with centralized government decision makingsomething the public is unlikely to countenance in the foreseeable future, which is shown by the failed Clinton health proposal and the initial negative reaction to the federal Patient Protection and Affordable Care Act (Obamacare).
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2. What is, and what should be, the role of the consumer in healthcare? Consumers have an obligation to be informed users of health services. This means undertaking health promotion and disease prevention activities and becoming knowledgeable about the health system and using it with special attention to costs and efficaciousness. Consumers have an obligation to understand the limits of medicine and technology so that unrealistic expectations are not placed on HSOs/HSs and the system as a whole. Just as consumers have an obligation to be informed users, responsible adults have an obligation to provide a means to pay for the services they require to the extent that they are financially able to do so. Typically this means insurance or a mechanism such as medical savings accounts.
Case Study 2
Wheres My Organ?
This case considers the effect of public policy on highly personal, private decisions such as organ donation. Further, the case raises the issue of payment for organs. 1. Identify the issues that this proposed legislation raises. he following issues are raised: Are there adequate protections for conflicts of interest, such as when a patient with transplantable organs is on life support and the decision is made by someone who might benefit from estate tax consequences of a donation? Is the proposal fair to people with no taxable estate? The financial incentives are ineffective for the poor. (Perhaps they should be allowed to sell organs, which is now illegal.) The proposal would tend to reduce the redistributive aspect of previous estate tax policy. Is encouraging organ donation the proper role of government? Are there more effective ways to obtain organs? 2. Choose to support or oppose the bill. Develop a set of arguments that justies your position. Responses will vary. Key aspects of responses should include clarity and certainty of position, supporting arguments and data/information, and appeals to reason, emotion, or both. 3. Develop an alternative proposal that would be more effective in encouraging organ donation. Responses might include the following: Implied consent to harvest organs from beneficiaries of federal programs Implied consent to harvest organs of those who die in certain venues (federal prisons or military service) or from certain causes National promotion or advertising campaigns Repeal of federal laws that prohibit interstate transportation of organs procured through sale More donor control of where and by whom organs are used Organizing and encouraging organ trading among compatible donors
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Case Study 3
Dental Van Shenanigans2

This case considers issues that might arise out of public view in developing, implementing, and funding public health programs. 1. Make the assumption that your agencys budget had funds available. Should your staff have spoken in support of the dental van project even though it was outside your agencys mission and it was put on the agenda through questionable means? It is very undesirable to encourage the behavior described in this case. It is likely, however, that despite the staffs lack of knowledge about the project the blame for failure will fall on them. Also, the van is a reasonably good idea, even though the idea came about in a bad way. Avoid overreacting, and make at least one comment about the advantages of having the dental van. In other words, go on record as saying something positive about it. Connect the comment with your organizations mission, while avoiding a specific reference to the vans apparent inconsistency with the mission. Then leave it to those who have a vote to make the final decision. 2. Competitiveness or a desire for preeminence and public relations advantage may cause agencies providing public health services to act unethically or dishonestly. What is the best way to work to improve public health when this occurs? You can fight back in the same vein, and perhaps lose credibility with your more honorable colleagues or yourself (an even worse result). Or you can say naughty, naughty without joining the disputetake the high road, while at the same time remaining watchful for more end-runs or flanking maneuvers by competing organizations. Regardless, you need good intelligence about what your competitors are doing. Never make the mistake of ignoring them. Watch their decisions closely to find out how they think, what motivates them, and what their tendencies are. Remember the aphorism: Keep your friends close, but your enemies closer. If you learn about an initiative that might affect your organization, take the steps necessary to reduce the likelihood of a negative effectbut always do so ethically. For example, if as a hospital administrator you learn that a competitor is planning to buy land near each of its competitors, move quickly to acquire any land that is important to your own plans. An actual case involves a hospital in the Midwest that allegedly purchased the last piece of land in the middle of another hospitals campus just to prevent that hospital from being able to legally close a city street. Such organizational and planning vulnerabilities must be removed quickly if the HSO is in an aggressively competitive environment. 3. In many states, dentists provide services to the economically disadvantaged who qualify for Medicaid. How should the CHC respond to protests from area dentists that sending a dental van into the inner city will disrupt their existing dentistpatient relationships (and, incidentally, reduce their incomes)? In the final analysis, area dentists should not be allowed to prevent a needed service from being offered. One way to finesse their opposition is to give them a limited period of time to develop their own alternative to the dental van, such as offering low-cost or no-cost in-office services to uninsured indigent persons in the inner city. Public health constituencies are primarily medically indigent persons who will never be as affluent and as organized as those of a medical or dental professional group. As a commissioner of public health, you are their spokesperson and should expect to receive complaints from establishment providers. If a furor is expected, be sure to educate your GB about the issue and the implications before moving too far. With GB support and clearly documented need for the service, your continued em-
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ployment should not become an issue, even if a furor arises. It is helpful to have some genuine media interest and support for a program of this type.
Additional Case Study 1: Stakeholders

This case addresses the role(s) of health services executives in the political process. Clearly there are limits, but like conflicts of interest and fiduciary duty, the issues can be subtle, and managers can find themselves in ethical (and possibly legal) difficulty before they fully appreciate the situation. Complete awareness of the legal limits of influencing the political process is the first principle to impress on students. The ethical dimensions are more subtle and require more attention. A good test of the acceptability of an action is whether one would feel comfortable if the story were reported on the front page of the local newspaperthe light of day test.
A small-town attorney named Franklin Jones was first elected to the Virginia state senate in 1985. Jones served his constituents well, performed his committee assignments diligently, and enjoyed a good reputation among members of his party as well as his political opponents. Jones was reelected to each 4-year term by substantial margins. Healthcare issues were an area of special interest for Jones, and by the late 1990s, he had sufficient seniority to be appointed chair of the powerful subcommittee on health. Soon after, the president of the senate, who was a member of Joness political party, was told by reliable, unnamed sources that Jones was enjoying a lifestyle beyond his means. He owned several upscale automobiles and a large pleasure boat, lived in a very affluent neighborhood by the ocean, and often was seen dining at expensive restaurants. Reluctantly, the senate president ordered a confidential investigation of the matter. Several months later, the report showed the following about Jones: 1. Jones was asked to join the boards of several not-for-profit health groups that subsequently received tens of thousands of dollars in grants and gifts from organizations that are subject to the purview of the subcommittee on health. 2. Jones owned small amounts of stock in several publicly traded for-profit health services companies, which had received advance information on new regulations that were being developed by the state Medicaid office. 3. A letter from a constituent, who was the president of a large Medicaid managed care company, had prompted Jones to hold hearings on Medicaid reimbursement rates. The subcommittee on health concluded that reimbursement was too low and issued a report that recommended a new payment schedule. The president of the senate was very distressed. There seemed to be enough questions to warrant a criminal investigation, but he was not sure what to do.
1. Describe the role of health services managers in the political process. Identify the limits in their professional and personal activities. In general, HSO/HS managers have a responsibility to be community health leaders. In a sense, the response in this case is idiosyncratic in that individual personalities are important. Many duties of CEOs of larger HSOs/HSs are focused outside the organization. This means involvement in local, regional, and state political processes. Health services managers in smaller communities are among the educated and job elite and will be seen as leaders simply by reason of their importance to the local health and welfare. Health services managers elected or appointed to national trade association posts will have influence at the national level as well. States will likely have laws and regulations that affect the interactions of HSO managers with politicians and bureaucrats, especially in terms of monetary gifts and other gratuities. These laws should be known by managers and followed scrupulously. Managers act
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unethically if they use their influence and position to further personal interests, such as selfaggrandizement or financial gain, and not for community benefit. They must be honest and forthright in all personal and professional dealings and lead the community to better health status through action and words. 2. Distinguish the investigations three ndings in terms of ethics and the law. (See Chapter 4.)
Finding 1
Jones was asked to join the boards of several not-for-profit health groups that subsequently received tens of thousands of dollars in grants and gifts from organizations that were subject to the purview of the subcommittee on health. Objective analysis of this situation would identify potential conflicts of interest. The profit status of the organizations is not relevant. To argue that achieving a good result makes the conflict acceptable is to apply utilitarian reasoningthe end justifies the means. Students should be reminded that a conflict can be present even when there is no financial benefit. In this case, Jones might have been lauded for his efforts on behalf of the organizations, winning awards and public recognition. This suggests personal aggrandizement and public adulation. In addition, organizations or activities that were more worthy might have been deprived of funding because of Joness personal interests.
Finding 2
Jones owned small amounts of stock in several publicly traded for-profit health services companies, which had received advance information on new regulations being developed by the state Medicaid office. The response is fact dependent. It is unclear from whom or by what means the for-profit health services companies obtained the information about Medicaid regulations. If the information is traced to Jones, the suspicion is raised that he provided it to benefit his position as a shareholder. Regardless of Joness ownership interest, however, and regardless of the profit status of the organizations, leaking such information is unethicalbreaching a fiduciary duty and the duty of confidentiality. In addition, it is almost certainly illegal. Assuming, however, that Jones did provide the information and that it is not illegal to do so, a conflict of interest arises if his financial investment in the companies is large. If it is remote (e.g., a few hundred shares in organizations with hundreds of thousands or millions of publicly held shares of stock), then it is questionable that this benefit is such that it constitutes a conflict of interest. However, it is certainly poor judgment on his part and will be seized upon by political enemies as emblematic of his character.
Finding 3
A letter from a constituent, the president of a large Medicaid managed care company, prompted Jones to hold hearings on reimbursement rates in that program. The subcommittee on health concluded that reimbursement was too low and issued a report that recommended a new payment schedule. Constituents have a constitutional right to petition (contact) their legislators and government. Petitioning government is equally available for CEOs and representatives of for-profit corporations. On the face of it, there is no legal (or ethical) problem with what is described in this case. Obviously, evidence of bribes to Jones would alter the facts and cast suspicion on the subcommittees recommendation, as well as on Joness role. 3. Apply the American College of Healthcare Executives code of ethics (see Chapter 4) in analyzing the investigations ndings. Although Jones is not an affiliate of the ACHE, this case study allows students to apply its code of ethics to a situation similar to one in which healthcare executives might find themselves.
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The ACHE code of ethics states only that the healthcare executive shall avoid financial and other conflicts of interest, an admonition that provides scant guidance. Students will benefit from reading the discussion on conflicts of interest in Chapter 4. The ACHE code requires affiliates to report circumstances of suspected unethical behavior. If applied to Jones, this provision would require colleagues of Jones to report suspected unethical behavior. The ACHEs committee on ethics would investigate and make a determination. 4. Propose ways in which the problems suggested by the ndings could (or should) be prevented.
Finding 1
Jones should have declined to participate in any official capacity with the not-for-profit organizations. Each of us has preferences and biases as to how and by what means, if any, entities should benefit from public monies. However, lawmakers have a special responsibility to minimize these preferences and biases and work in the best interests of their constituencies at large. Even acting unofficially diminishes objectivity and risks the common good.
Finding 2
Absent Joness involvement in leaking the new Medicaid regulations, there is no action to take in this case, nor is there anything that should have been done. It is not unethical for politicians to hold investments. Problems arise when they have regulatory control over organizations in which they have a significant financial interest. The issue of conflict of interest is diminished when these investments are small and financially remote, but such situations suggest poor judgment, nonetheless. It is common for prominent politicians or political appointees to put their assets in blind trusts, which means that their assets are managed so that the politicians have neither direct knowledge nor involvement in managing the investment. State law may have similar requirements for legislators, and this should be noted. It is not, however, part of the scenario of this case.
Finding 3
This finding raises no ethical issues that could or should have been prevented. Students may wish to speculate, however, on how small changes in the facts presented would significantly affect the analysis.
Additional Case Study 2: Demarketing to Avoid Bankruptcy3

This case describes a problem faced by many hospitals at which emergency departments are a major source of inpatients. If the patients admitted to the ED are uninsured, underinsured, or covered by underfunded state and federal programs, hospitals are at double riskboth ED and inpatient services are a financial loss to the hospital. Notably, a number of hospitals have had to close their EDs because of problems similar to those described here. The Emergency Medical Treatment and Active Labor Act (EMTALA) is a classic example of an unfunded federal mandate.
Chris Hines had finally gotten far enough into the stack of papers on her desk to see last months emergency department (ED) activity report. She had already digested the grim news about the continued financial losses at Community Hospital. The total deficit was $500,000, and it was only the fourth month of the fiscal year. Because Community Hospital served a largely inner-city population, with many uninsured or with care paid for by a chronically underfunded Medicaid program, there seemed little hope that the financial situation would improve.
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As CEO, Hines knew that over 40% of Community Hospital admissions came through the ED and that about one half of these arrived by taxi, by private automobile, or on foot. The other half were brought in by the city-run ambulance service. A few years earlier, Hines had tried to implement a plan to increase the number of elective admissions (and thus improve the payer mix) by encouraging physicians to bring their private patients to Community Hospital. It failed, however, largely because the physicians had difficulty getting their patients admittedER admissions were taking too many beds. Next, Hines tried to work with city officials to implement a new ambulance routing system that would send more patients to other hospitals and give Community Hospital a chance to improve its financial condition. They were unsympathetic. Hines knew that Community Hospitals endowment would carry the hospital about 3 years, but if they were not breaking even by then, the hospital would close. Since there was nothing that could be done through the city, the key to survival, she concluded, lay in reducing the number of uninsured and Medicaid admissions through the ED. Hines spoke with several marketing consultants, one of whom offered to work without a fee. The consultant recommended a plan to demarket the ED. He argued that it was the EDs fine reputation in the community that was responsible for the 50% of patients who came to the ED other than by city ambulance. He listed ways to make the ED less desirable: reducing ED staffing to a minimum; closing the parking lot near the ED; reducing housekeeping coverage, so the physical plant would be dirty and unkempt; deferring nonsafety-related maintenance; changing triage policies and procedures and staffing to increase waiting time for nonemergency patients; using staff who were most likely to be rude and inconsiderate; and encouraging rumors that the closure of the ED was imminent. Demarketing would cause repercussions beyond the ED, but the hospital was in desperate straits. Extreme actions seemed justified.
1. Identify the policy issues in the case. Who bears major responsibility for their presence? Their solution? Policy issues raise ethical issues, including 1) unjust (unfair) responses by government to the hospitals plight, 2) the hospitals general duty of beneficence to the community (which will be unmet if the demarketing plan is used and if it closes), and 3) a duty of nonmaleficence to patients who present at the ED but are not seriously ill. The responsibility for these ethical problems can be assigned as follows: Bureaucratic (city) intransigence may be a factor. It is possible that Hines was ineffective. This is a no-win situation. The hospital fails its general duty of beneficence by demarketing the ED. By keeping the ED open, the hospital meets a general duty of beneficence to the community and a specific duty of beneficence to patients under treatment, with the result that it may go bankrupt. Patients not seriously ill are minimally harmed by waiting or going elsewhere; however, successful demarketing may cause seriously ill patients to try to go elsewhere, to their detriment. 2. Outline a strategy that would save Community Hospital without using the plan developed by the marketing consultant. How is it superior? Inferior? Possible strategies include the following: Hines could appeal again to the city and to the physicians. Using the bureaucracy may be useless; working with politicians through the community is probably more effective. Arguments include access to healthcare, lost jobs, and community pride. There may be a core of physicians for whom Community Hospital is important because of loyalty and/or economics. Identify them. Develop a strategy. Close the ED, if the health planning agency allows it. Develop activities/initiatives whose income will offset losses. Open primary care clinics to treat those who inappropriately use the ED.
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3. Critique the marketing consultants suggested plan from a public policy perspective. From a utilitarian perspective, that is, the greatest good for the greatest number, demarketing causes inconvenience and less access for persons with minor problems; emergencies get care. The greatest good for the greatest number is produced by demarketing to keep Community Hospital open. From a Kantian perspective, that is, respect for persons, the hospital has a perfect moral duty to treat emergencies, but an imperfect moral duty to treat minor, nonemergency problems. Meeting a perfect duty by demarketing is the morally superior action. (Note: Perfect and imperfect duties are not discussed in the text.) 4. Identify the impacts on its service area if Community Hospital closes. Patients who use the Community Hospital ED for primary healthcare will have less access. Patients with true emergencies will be at greater risk if they have to travel farther to receive treatment. It is likely that family and friends of community members hospitalized elsewhere will have to travel farther to visit. Community pride will be lessened because hospitals are an integral part of community services and activities. Many in the community will lose their jobs. The hospitals cafeteria will no longer be a source of nourishment and fellowship for members of the community.
Additional Case Study 3: Marketing TurmoilPharmaceuticals4

George Hinton was a local pharmacist in rural Alabama. He had served his community of 900-plus people for more than 40 years. He was also an officer in the local Rotary Club, and his business co-sponsored several community events such as the annual Girl Scout picnic. In addition to drugs, his little shop sold cosmetics and nostrums, and it had a restaurant counter where a waitress would bring you the latest blue plate special each weekday noon, if you had $5. It was Monday (meatloaf day) when Mrs. Olive Murden, age 63, entered the establishment and, using her cane, shuffled back to the pharmaceutical area in the rear. She called to George as he counted pills in the side room. How do you do, Mrs. Murden? George amiably inquired as he walked over to speak with her. I am still fighting my arthritis, she offered with a half smile. What brings you in today? You still have some of your prescriptions, dont you? George asked. Yes, I do, and I really appreciate your driving in and opening up your store for me last Sunday at midnight when I found myself out of the expensive pill. I was really hurting. Well, weve been doing business together for a long time, and you are still my number one customer for Brinklies Magnolia Blossom Perfume, he said with a smile. Mrs. Murdens face grew darker as she told George what she had come to say. I will be needing my prescriptions transferred, I am afraid. George was disturbed but not surprised. Moving to that special discount drug program the big chain department store is offering, are you, Mrs. Murden? No, though I considered it until I learned my expensive pill was not on their list. Mrs. Murden shifted her feet, plainly uncomfortable with the news she was giving her old friend. The local chamber of commerce is offering a no-cost drug discount card, and by using it, I can save a lot of money on my expensive pill. Well, I can fill that for you here with that card and get you the same discount, George said, although he knew what she was going to say next. Well, yes, but they say I can save even more if I use the card and order my pills by mail from someplace in Delaware. I see. Many people are buying their pills by mail nowadays. The drug companies can reduce overhead and middlemen, and you can get more for the dollar, but of course it is hurting us local pharmacies. George was plainly upset. Mrs. Murden was the 10th customer
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16

that month he had lost to the marketing initiatives of his huge competitors, and the expensive pills that she and other customers needed were major sources of his income. His bottom line was getting thinner every day. In the months that followed, Mrs. Murden came to Georges store once for some of her special perfume but then stopped coming altogether.
1. The largest company doing business in Alabama during 2007 was a company offering discount cards for pharmaceuticals. It is clear that the money Mrs. Murden is saving is only a fraction of what these discount mail housesand the manufacturers who work with themsave when they bypass people like George. Is there some way we could share those funds with local pharmacies to help keep them in business? Should we? The savings could be shared, especially if the small town pharmacies could add some value to the transactions, but it is unlikely that they could do much. The kind of personal services they can offer (opening up on the weekend or at night for a valued customer) are hard to quantify and are not likely to be equated with dollars and cents by either the customer, the pharmaceutical company, or the discounters. 2. George came down and opened his store at midnight for his long-time clientbut the big chain stores have pharmacies that are open 24 hours, 7 days a week, and if you mail your orders on time, you will never even need to drive to the pharmacy again. Would you stay with your old friend George if you were on a pension and it cost you 5% of your disposable income in increased drug costs to do so? Unless you were extremely loyal, it would be difficult to stay with George, as was noted in the answer to the first question, and to put his personal services and friendship before your pocketbook. This is especially true when affording drugs is literally a life and death item for some people on fixed incomes. Medicare drug benefits have recently increased, but there is a no-coverage zone (the so-called Medicare doughnut hole) that represents a challenge for elderly patients. Some common drugs are better not started if there is a chance you will not be able to continue them for the rest of your lifea chilling prospect when you have a drug coverage that comes and goes, as do millions of Americans. 3. How could you market Georges products and services to maintain/increase his market share and keep him in business? The marketing approach of improving your product and services may be difficult because everyone is selling the same drug. You might, however, be able to make drug interaction information easier to access locally, or use a special pill holder for your drugs. However, such efforts may be slight increases in the quality or product or service given the large amounts your customers can save elsewhere. The marketing approach of improving your location or accessibility could be taken. George can mention the personal touch and friendly availability, but it needs to be made explicit, not just word of mouth, so that everyone knows they can call him 24/7. George may find himself unable to offer such a service to everyone, however, and this kind of advertising would be a dead end. A better approach would perhaps be to operate 24 hours at the store and use a drive-through window, if the cost can be borne, in order to keep clients. Such an approach must bear fruit by stopping client defections quickly, or the additional costs involved may be unaffordable. The marketing approach of improving your costs may be another option, but it can be risky if you are on a tight margin, and it will usually run afoul of health insurance policies. For instance, you might try to offer to pay your patients copayments. Unfortunately, this is a violation of health insurer agreements and expectations. Insurers insist on certain specific copayments by patients in order to discourage them from excessive utilization/demand. If the local pharmacists pay this copayment, they throw off the insurers incentive planning and violate their agreements with the insurers that send them their payments for the pills. Patients give the pharmacist only the small copayments.
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CHAPTER 1
17
If, instead, George provides free itemssuch as perfumeto everyone who gets their drugs from him, it has the same effect and will result in sanctions from insurers. Finding something besides drugs as the main money maker is another option, but these areas have new problems. Selling alcoholic beverages may fill the gap, but licenses are hard to obtain or impossible to get in some jurisdictions, and there may be moral barriers. Selling tobacco may provide similar income, but it has moral problems tooespecially for health advocates, many of whom are pharmacists. Perfumes, jewelry, and the like may fill the gap, but top prices in such items are more likely to be obtained from specialty stores with reputations for fashion not the local drug store. The final answer might be if you cant beat them join them. George may have to go to work for the big chain store. The day of the corner drugstore owned and operated by an independent pharmacist may have passed.
Notes
1. From Lave, Judith R., and Lester B. Lave. Health Care: Part I. Law and Contemporary Problems, 35 (Spring 1970); reprinted by permission. Copyright 1970, 1971 by Duke University. 2. Case study and answers to the questions were written by Gary E. Crum, Ph.D., M.P.H., District Director of Health (retired), Northern Kentucky Independent District Health Department. Used with permission. 3. Adapted from Darr, Kurt. Ethics in Health Services Management, 5th ed., 293295. Baltimore: Health Professions Press, 2011; used by permission. 4. Case study and answers to the questions were written by Gary E. Crum, Ph.D., M.P.H., District Director of Health (retired), Northern Kentucky Independent District Health Department. Used with permission.
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HEALTHCARE IN THE UNITED STATES
Managing Health Services Organizations & Systems Chapter 1
CHAPTER 1, LEARNING OBJECTIVES

Copyright 2014 by Health Professions Press, Inc. All rights reserved. Based on Managing Health Services Organizations and Systems, Sixth Edition, by Beaufort B. Longest, Jr., and Kurt Darr (Copyright 2014 by Beaufort B. Longest, Jr., and Kurt Darr).
HEALTH & SYSTEM GOALS

Health services managers must understand the distinctions and connections between the health care system and the health services system. Blum s Model Identifies factors that affect health The size of the arrows indicates the degree each factor affects a person s health The model shows factors like prevention care and rehab care have much less of an effect on health than environmental factors, and somewhat less of an effect than heredity and lifestyle
HEALTH & SYSTEM GOALS (CONT.)

Blum s Model states, One s own behavior, in great part derived from one s experience with one s environment, is seen as the next largest force affecting health. Effective managers understand that the many influences on health status include
Factors that lead to episodes of illness Effects on recovery and long-term absence of illness and immunization of disability
HSO/HS managers must have a broad view of illness and health

Blum s Model suggests several goals for a health system:
1. 2. 3. 4. 5. 6. 7. 8. Prolonging life and preventing premature death Minimizing departures from physiological or functional norms by focusing attention on precursors of illness Minimizing discomfort (illness) Minimizing disability (incapacity) Promoting high-level wellness or self-fulfillment Promoting high-level satisfaction with the environment Extending resistance to ill health and creating reserve capacity Increasing opportunities for consumers to participate in health matters

The Precede-Proceed planning model
Applied conceptualization of the relationships among activities that
Are a part of health promotion planning and evaluation Should be part of the efforts to deliver comprehensive healthcare

Phases of the Precede-Proceed planning Model
Phase 1: Social assessment
Recognizes the relationships among various issues
Health and Social issues Target population Economic, cultural, and other nonmedical concerns and goals
Phase 2: Epidemiological assessment

Goal of identifying specific health goals or problems
Morbidity/mortality Disability Demographic patterns Genetic, behavioral, and environmental indicators
Phase 3: Educational and ecological assessment

Groups factors associated with health concerns
Predisposing factors Reinforcing factors Enabling factors

Phases of the Precede-Proceed Planning Model (cont.)
Phase 4: Administrative and policy assessment
Includes intervention alignment Interventions lead to the Proceed portion of the model
Policy Organization Resources
Phase 5: Implementation Phases 6 8: Evaluation

Among the most important in the model Evaluation of program in terms of process, impact, and outcome Evaluation criteria are linked to objectives defined in the corresponding steps of the Precede portion of the model
Increasing emphasis on health promotion and prevention makes this model a useful tool in planning and delivering comprehensive healthcare, especially in integrated delivery systems
LACK OF SYNCHRONY
Explanations for lack of synchrony
Hospitals are chosen based on their available technology Hospitalization may be inappropriate to treat the medical condition that causes death or limits activity Some medical conditions require more attention to prevention
Historically, there is a deficit of acute care hospitals
Achieving synchrony suggests that services provided by HSOs and their use are in harmony with health needs
10
LACK OF SYNCHRONY (CONT.)

Important distinctions between the need and the demand for health services
Need
Measured by morbidity and mortality data, and by disability that limits activity More objective than demand Value invariability underpins conclusions about need
Demand
Occurs when need is converted into demand for services Providers, like hospitals and physicians, influence demand The availability of third-party payment for services influences demand
Need and demand do not have a one-to-one relationship
11
PROCESSES THAT PRODUCE HEALTH POLICY

Public Processes
Statutes are enacted by state legislatures and the U.S. Congress The legislative branch relies on the executive branch to implement and enforce the laws A bill approved by the Senate and the House and signed by the president becomes law
Judicial Process
State and federal court systems are similar
Trial courts (county and district courts) Intermediate courts (appeals courts) Supreme courts
Judges are appointed, which insulates them somewhat from politics
12
PROCESSES THAT PRODUCE HEALTH POLICY

Executive Orders
Formal law results from executive orders issued by the president through the executive branch of the federal government An executive order that declares a disaster will enable an HSO/HS to qualify for federal assistance
Private Processes
Healthcare became highly politicized after massive federal financing of health services began in the mid-1960s with enactment of Medicare and Medicaid The legislative and regulatory processes affecting health services were increasingly subject to the influence of lobbyists, political action committees (PACs), and other interest groups Associations and interested parties make their positions known at various points in the legislative and regulatory processes
13
A BRIEF HISTORY OF HEALTH SERVICES IN THE U.S.

For trends in U.S. health services since 1945, see Figure 1.3 Let s review a useful context for understanding the evolution and current status of healthcare and health services through trends in
Technology Mortality and morbidity Social welfare Federal initiatives
14
A BRIEF HISTORY OF HEALTH SERVICES IN THE U.S. (CONT.)

TECHNOLOGY The great sanitary awakening of the mid-19th century called for new technology to purify food and water New medical technology in the late 19th century permitted efficacious surgical interventions with greatly reduced rates of mortality and morbidity
Radiographs Inhalation aesthesia Blood typing Improved clinical laboratories Religious groups Concerned citizens Wealthy benefactors Local governments
Hospitals were often sponsored by private not-for-profit corporations that had been formed by
15

TECHNOLOGY Many small hospitals were established as for-profit corporations
Often established by individual physicians who needed a place to care for patients following surgery
Long-term care facilities were rare because extended families cared for one another People with mental illnesses were kept away from society in facilities owned almost exclusively by state governments Local and state health departments were created at this time
16

Mortality and Morbidity Low incidence of chronic diseases before the 20th century
Exceptions
Tuberculosis, the incidence of which declined rapidly at the end of the 19th century (mainly because of improved nutrition and housing) Leprosy, which has never been a major medical problem in the U.S.
Most people died of acute GIs and RTIs, like pneumonia

Usually occurred before people could develop chronic diseases
Many communicable health problems common in the mid-19th century were solved through preventative measures taken by health departments
Clean food and water Improved sanitation
17

Mortality and Morbidity
Life expectancy in U.S. in 2010 was 78.7 years Heart disease and cancer continue to be the leading causes of death Several current leading causes of death reinforce the connection between lifestyle choices and medical conditions that result in death Prevention often requires changes in behavior Efforts to effect these changes raise issues of individual choice and liberty rights
18

SOCIAL WELFARE Social Security Act of 1935 shifts responsibility of social welfare from local to federal government Government-sponsored national health insurance programs
Seriously considered in the late 1940s, late 1960s, and early 1990s Ranged in scope from modest to all-encompassing Factors contributing to disinterest
Lack of voter interest Cost Fear of government control Widely available employer-provided health insurance Medicare and Medicaid
Affordable Care Act in 2010 increased the federal government s role in organizing, controlling, and financing delivery of health services Anticipated increased demand for geriatric healthcare
13% of population aged 65 or older in 2010 Expected to be 20% by 2050 Increasing demand for services in geriatrics, chronic diseases, rehab, and institutional long-term care
19
OTHER WESTERN SYSTEMS

In Western European countries like Germany and England, the government started financing health services much earlier than in the U.S.
1911, England adopts national health insurance program 1948, UK establishes the National Health Service
Compared to other countries with public budgets for health services, U.S. has the highest growth rate in healthcare spending
Difference is explained by very high private health spending in U.S.
20
STRUCTURE OF THE HEALTH SERVICES SYSTEM

The Health Services System consists of: Preventive Care Prevention Education Primary Care Early Detection Routine Care Secondary Care (acute care) Emergency Treatment Critical Care Tertiary/Quaternary Care (special care) Restorative Care Rehabilitation Home Care Intermediate/Follow-up Care Continuing Care Long-term care Chronic Care Personal Care Hospice/Palliative Care
21
CLASSIFICATION AND TYPES OF HSOs

Major beneficiaries of early federal programs were not-forprofit acute care hospitals
Includes those operated by state and local governments
Profit statuses converted for tax and strategic reasons

Conversion of for-profit HSOs and HSs to not-for-profit status typically results in provision of more uncompensated care in the service areas
Ownership
Two types of privately owned corporations
Faith-based and nonsectarian that are organized as non-for-profits For-profit corporations that issue stock to investors or to general public
Government-owned HSOs/HSs are publicly-owned and not-for-profit
22
CLASSIFICATION AND TYPES OF HSOs (CONT.)

Length of patient stay (LOS)
Inpatient vs. outpatient services ALOS if less than 30 days for short-term care, more than 30 days for long-term care
Role in the health services system

HSOs/HSs are classified by their role in delivery services
Unique institutional providers

Many other types of inpatient facilities provide health and healthrelated services Examples are residential facilities and schools for special groups such as blind or deaf
23
CLASSIFICATION AND TYPES OF HSOs (CONT.)

Mental Health Organizations
Defined as HSOs that primarily provide mental health services to people with mental illness or emotional disturbances
Teaching Hospitals
Many states own academic health (medical) centers, which are often university-affiliated teaching hospitals that treat acute illness, conduct research, and educate those in the health occupations
24
LOCAL STATE AND FEDERAL REGULATION OF HSOs/HSs

Licensure and Regulation
HSOs/HSs are subject to state laws and local ordinances Licensure is liked to regulatory inspections for specific types of HSOs
Conditions of Participation (COP)

The 1965 Medicare law allowed deemed hospitals to receive reimbursements. COP was established in response to concerns about delegating government authority to a private group
Planning and Rate Regulation

Much of what happens in the states is stimulated by federal government Because hospitals consume disproportionate resources, policy makers have given them a great deal of attention
UR, PSROs, and PROs

As with UR, emphasis in the PSRO program was on hospital review In 2001, PROs were officially renamed quality improvement organizations (QIOs)
25
LICENSURE AND REGULATION

HSOs/HSs are subject to state laws and local ordinances
Includes the group of inspections linked to licensure for specific types of HSOs
Physical plant Safety
Pays little attention to clinical quality issues in patient care Includes Fire Prevention Code, National Fuel Gas Code, National Electrical Code, and Life Safety Code
26
CONDITIONS OF PARTICIPATION (COP)

Medicare Law of 1965 and Social Security Act of 1935
Stated that JCAHO hospitals were in deemed status (eligible) for purposes of reimbursement that will delegate government authority to a private group, where DHHS promulgated COP in 1966
Other private accrediting groups have also achieved deemed status from HSOs
Community Health Accreditation Program (CHAP) American Osteopathic Association (AOA) Det Norske Veritas Healthcare, Inc. (DNVHC)
HSOs not in deemed status must meet the applicable COPs to receive payments from federal programs
27
PLANNING AND RATE REGULATION

Stimulated by the federal government
Hospitals consume disproportional resources
Hill-Burton Act of 1946

Included statewide planning for hospital services
Comprehensive Health Planning and Public Health Amendments Act of 1966

Encouraged use of planning methodologies to allocate resources, improve access, and contain costs
National Health Planning and Resources Development Act of 1974

Required states to establish a health planning and development agency and a network of health systems agencies (HSAs)
28
UTILIZATION REVIEW (UR)

A mandated part of hospital participation in the hospital Medicare laws
Hospitals had to certify the necessity of admission
Rapid Medicare cost increases in the late 1960s shows that hospital-based UR was ineffective
29
PROFESSIONAL STANDARDS REVIEW ORGANIZATIONS (PSROs)

PSROs were mandated by the Social Security Amendments Act of 1972 Federally funded physician organizations were responsible for ensuring the appropriateness, medical necessity, and quality of care furnished by Medicare beneficiaries The three functions of PSROs
Admission and continued-stay review Quality assurance Profile analysis (patterns of care)
30
PROFESSIONAL REVIEW ORGANIZATIONS (PROs)

Established by Congress as part of the Tax Equity and Fiscal Responsibility Act of 1982
Outcomes were measured against performance standards Officially renamed Quality Improvement of Organization (QIO) in 2001
PROs denied Medicare payment for

Medically unnecessary care Care rendered in an inappropriate setting Care of substandard quality
31
OTHER REGULATORS OF HSOs/HSs

HSO/HS activity is based on the authority in the U.S. Constitution as interpreted by the U.S. Supreme Court to regulate interstate commerce and to provide for the general welfare Regulators include independent agencies and various other executive branch departments and bureaus The Department of Justice and the FTC enforce the Sherman Antitrust Act (1890) and the Clayton Act (1914), as well as their various amendments prohibiting anticompetitive practices The National Labor Relations Board applies provisions of the National Labor Relations Act (1953) and its amendments to the process of union organizing and collective bargaining
32
OTHER REGULATORS OF HSOs/HSs (CONT.)

The Occupational Safety and Health Administration enforces provisions of the Occupational Safety and Health Act of 1970 to safeguard the work environment The Food and Drug Administration enforces provisions of the Food, Drug, and Cosmetic Act of 1906 and its amendments, as well as regulates drugs and medical devices The Securities and Exchange Commission enforces the Securities Exchange Act of 1934 as amended and affects how investor-owned HSOs/HSs market, sell, and trade stock The Nuclear Regulatory Commission enforces provisions of the Atomic Energy Act (1954) and regulates and licenses the nuclear industry, thus regulating hazards arising from storage, handling, and transportation of radioactive materials
33
OTHER REGULATORS OF HSOs/HSs (CONT.)

The Equal Employee Opportunity Commission enforces the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, among others, and investigates complaints about treatment of employees and prospective employees The Bureau of Alcohol, Tobacco, Firearms and Explosives of the Justice Department enforces the alcohol and tobacco tax provisions of the Internal Revenue Code
The Alcohol Administration Act of 1935 regulates the use of tax-free alcohol
34
ACCREDITATION IN HEALTHCARE
The Joint Commission
Began accrediting hospitals in 1953 Accredits many types of providers, including ambulatory care, behavioral healthcare, home care, etc. Benefits of accreditation include community confidence in care, competitiveness in marketplace, increases patient safety etc.
American Osteopathic Association(AOA)

Acute care, mental health, substance abuse, physical rehab
Community Health Accreditation Program

Home care and community health
International Organization for Standardization (ISO)

Nongovernmental organization established in 1947 Standards from 164 countries Does not accredit but ISO registration has similar effect
35
ACCREDITATION IN HEALTHCARE
Educational Accreditors
Boards of professionals review the quality of didactic and clinical programs for health services professionals Boards are composed of managers, physicians, nurses
Medical Specialization
These boards offer certification in specializations
36
REGULATION AND EDUCATION OF SELECTED HEALTH OCCUPATIONS

Licensure approval from the government for someone to engage in an occupation after the applicant achieves minimum competency Registration listing of qualified individuals on an official roster maintained by a governmental or nongovernmental body Certification process by which a nongovernmental agency or association grants recognition to someone who meets its qualifications.
37
REGULATION AND EDUCATION OF SELECTED HEALTH OCCUPATIONS

1910 study by Abraham Flexner detailed weaknesses of U.S. medical education
Led to more stringent standards Weak allopathic medical schools failed new standards
U.S. and Canadian medical graduates are licensed in most states after passing the U.S. Medical Licensing Exam and completing the first year of residency Nursing
Early recognition of nursing through efforts of Florence Nightingale in the mid-19 th century Nursing licensing began in early 1900s Nurses and RNs have various educational backgrounds
38
PAYING FOR HEALTH SERVICES

U.S. GDP for health expenditures has increased steadily since 1960s This period of inflation occurred after Medicare and Medicaid were passed in 1965 Hospitals consume the largest amount of health expenditures
39
GOVERNMENT PAYMENT SCHEMES

By the early 1980s, a direct means of cost control was instituted when the Tax Equity and Fiscal Responsibility Act of 1982 and the Social Security Amendments of 1983 mandated a prospective payment system for Medicare using DRGs
40
GOVERNMENT PAYMENT SCHEMES (CONT.)

Resource Utilization Groups (RUG) are applied to hospitalized Medicare beneficiaries
Based on the ability to perform ADLs, the classification system when applied to long-term care puts nursing facility residents with similar resource needs into groups
RUG-II was used to determine nursing facility payment for Medicaid in New York and Texas RUG III was mandated to Medicare residents by the Balanced Budget Act of 1997
Also used as a daily rate based on the needs of individual residents, adjusted for local labor costs It may also change as the resident s condition changes
41
GOVERNMENT PAYMENT SCHEMES (CONT.)

Resource-Based Relative Value Scale (RBRVS)
In 1992, CMS s predecessor HCFA began implementing a fee schedule for physicians who participate in Medicare Part B, a change mandated by the Omnibus Budget Reconciliation Act of 1989
Physician payment under Part B was based on usual customary and reasonable charges
Among the most important effects of charge-based payment was that procedure-based specialties such as surgery were more highly paid than specialties such as internal medicine that use cognitive skills
42
SUMMARY
Incentives in DRGs, RUGs, and APG/APCs may lead to underuse of services and consequently to inappropriate treatment The effect of DRGs is an incentive to discharge patients from hospitals as soon as possible Early discharge has significance for home health agencies, nursing facilities and hospitals, but most of all for patients
43
POPULATION (size, distribution, growth rate, gene pool)
RC OU ES R AL UR AT
ES
HEREDITY
CU LTU RA
LS YS TE
M S
Internal Satisfaction ENVIRONMENT Fetal, physical (natural and man made), sociocultural (economics, education, employment, etc.) External Satisfaction Reserve
l cia
Life Expectancy Impairment

so m at ic
Discomfort
HEALTH (well-being)
Disability
MEDICAL CARE SERVICES prevention, cure, care, rehabilitation
so
Interpersonal Behavior Social Behavior
psychic Ecologic Behavior
Participation in Health Care Health Behavior

N TIO AC F IS SAT
S
O LO
Figure1.1. 1.1. The The force-field and and well-being well-being paradigms of health. (From Blum, Henrik K. Expanding Health Figure force-eld paradigms of health (From Blum, Henrik K. Expanding Health Care Horizons: From General Systems Concept of Healthof to Health a National Policy, 2nd ed.,Policy 37. Oakland, CA: 37. Care Horizons: From General Systems Concept to Health a National Health , 2nd ed., Third Party Publishing, 1983; reprinted 1983; by permission.) Oakland, CA: Third Party Publishing, reprinted by permission.)
EC
GI
CA LB
AL AN CE
LIFESTYLES attitudes, behaviors
A HUM
PHASE 4 Administrative & policy assessment and intervention alignment
PHASE 3 Educational & ecological assessment
PHASE 2 Epidemiological assessment
PHASE 1 Social assessment
HEALTH PROGRAM Educational strategies
Predisposing
Genetics
Reinforcing
Behavior
Health Policy regulation organization
Quality of life
Enabling
Environment
PHASE 5 Implementation
PHASE 6 Process evaluation
PHASE 7 Impact evaluation
PHASE 8 Outcome evaluation
Figure1.2. 1.2. The The model health promotion planning and evaluation. (From Health Program Planning: An Figure model forfor health promotion planning and evaluation (From Health Program Planning: An Educational Ecological Approach. 4th Lawrence ed. Lawrence W. Green and Marshal Kreuter. New York: Educational andand Ecological Approach. 4th ed. W. Green and Marshall W.W. Kreuter. New York: McGrawMcGraw-Hill, 2005, With permission of the McGraw-Hill Companies, Inc. Hill, 2005, 10.) With10.) permission of the McGraw-Hill Companies, Inc.
THESE FORCES
THESE TRENDS
THESE EFFECTS
THESE REACTIONS
THESE RESULTS ON HEALTH SERVICES PROVIDERS Defensive strategies Higher risk
Deregulation Excess capacity Greater competition
Closures Multiorganizational arrangements More acute illness Increase in uncompensated care Cost shifting by providers HSOs at financial risk Higher cost care
High cost of healthcare Under/uninsured
Lessened access Personal financial risk
Increased bankruptcies/ fewer providers willing to treat uninsured Modified direction of technological change in medicine
Medicare Medicaid ESCALATION IN HEALTHCARE COSTS
More federal regulation: PROs, DRGs, RBRVS, RUGS Cost controls by public and private health insurers Better insurance coverage for ambulatory care and extended care Growth of managed care
Growing health insurance (especially for hospitalization) EMPHASIS ON SECONDARY AND TERTIARY CARE AND INADEQUATE ATTENTION TO OTHER LEVELS OF CARE
Changing balance of power: MDs MCOs HSOs
Hill-Burton Growth of wellequipped community hospitals Growing specialization of doctors Geographic maldistribution of doctors
Growth of suburbs
Trend toward group medical practices
Cooperation among HSOsmergers, shared services, integration, etc.
Growth of nonphysician providers Neighborhood health centers National Health Service Corps Loan forgiveness for MDs working in shortage areas
Government funding of research, and development of medical technology Growing power of medical schools Growth of hospital salaried MDs Growing influence of teaching hospitals Growth in numbers and influence of nondoctors in health system
Emphasis on home health, ambulatory care, palliation, and hospice
Trend toward institutional rather than physician referrals
Figure in the theU.S. U.S. healthcare system since 1945. Cambridge Research Trendsthe Affecting theCare U.S. Health Care Planning System, Information [Health Planning Figure 1.3. 1.3. Trends Trends in healthcare system since 1945. (From(From Cambridge Research Institute.Institute. Trends Affecting U.S. Health System [Health Information 409. DC: Washington, DC: Human Resources 1976. Adminstration, 1976. Revised and updated by the authors, 2013.) Series], 409. Series], Washington, Human Resources Administration, Revised and updated by the authors, 2013.)
Level of Care: Education Prevention

School and college health units Freestanding ambulatory surgery centers Doctors in officebased practice Neighborhood health centers Migrant health centers Communicable disease education Family planning clinics Poison information & control centers Well-baby clinics School health education Screening and vaccination programs
Description:
Provider Groups:
Forms of Integration of System:
PREVENTIVE CARE
PRIMARY CARE Early Detection and Routine Care Emergency Treatment Critical Care (intense and elaborate diagnosis and treatment)
Specialty hospitals (psychiatric, childrens, womens) and general hospitals with highly specialized facilities Freestanding urgicenters Hospital emergency departments Hospital ambulatory services for patients requiring hospital equipment Inpatient services in general medical and surgical hospitals Physicians office Hospital outpatient departments Community mental health centers Industrial health units
SECONDARY CARE (acute care)
HEALTH SERVICES SYSTEM
TERTIARY/ QUATERNARY CARE (special care) Special Care (highly technical services for patients in a large geographic area)
Some are teaching hospitals
RESTORATIVE CARE Intermediate Follow-up Care (surgical postoperative routine care, routine medical care) Rehabilitation Home Care
Home health agencies Progressive care, extended care Rehabilitation and step-down units in hospitals Halfway houses for psychiatric patients Rehabilitation hospitals Long-term care hospitals
HMOs, PPOs, ACOs Shared services Managed care Multiorganizational systems Vertical and horizontal integration Formal affiliations Mergers and consolidations
CONTINUING CARE Long-term Care Chronic Care Personal Care Hospice/Palliative Care
Nursing facilities Continuing care retirement communities Inpatient health facilities for people with mental retardation, emotional disturbances Geriatric day services centers
Nursing facilities, inpatient health facilities for alcoholics & drug abusers, deaf & blind, physically handicapped
Figure 1.4. Spectrum of health services delivery. (From Cambridge Research Institute. Trends Affecting the U.S. Health Care System [Health Planning Information Series], 262. Figure 1.4. Spectrum of health services delivery. (From Cambridge Research Institute. Trends Affecting the U.S. Health Care System, [Health Planning Information Washington, DC: Human Resources Administration, 1976. Revised and updated by the authors, 2013.)
Series], 262. Washington, DC: Human Resources Adminstration, 1976. Revised and updated by the authors, 2013.)
Other Health Spending, $407.6 (15.7%) Other Personal Healthcare, $384.2 (14.8%) Home Health Care, $70.2 (2.7%) Nursing Care Facilities & Continuing Care Retirement Communities, $143.1 (5.5%) Prescription Drugs, $259.1 (10.0%)
Hospital care, $814.0 (31.4%)
Physicians/ Clinical Services, $515.5 (19.9%)
NHE Total Expenditures: $2,593.6 billion
Percent Distribution of National Health Expenditures, by Source of Funds, 19602010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
21.1% 20.6% 27.0% 32.3% 33.4% 34.6% 33.8% 33.2% 32.7% 47.7% 33.4% 22.8% 15.6% 6.2% 9.4% 10.4% 13.9% 4.4% 7.1% 10.3% 7.9% 13.7% 3.8% 10.2% 14.6% 6.7% 13.5% 3.0% 10.2% 15.2% 6.4% 12.2% 2.6% 14.6% 6.2% 11.0% 3.2% 15.3% 6.3% 11.1% 3.3% 14.2% 5.9% 10.5% 3.6% 15.0% 5.7% 10.6% 3.7% 15.5%
16.3%
16.7%
18.8%
20.0%
20.2%
19.1%
14.7%
13.0%
12.5%
11.8%
11.6%
1960
1970
1980
Medicaid
1990
Medicare
2000
2005
2007
Priv. Health Ins.
2009
2010
Investment
Other 3rd Party Payers/Public Health Out-of-Pocket
Other Pub. Ins. Programs
Figure 1.5. Distribution of national health expenditures, by type of service (in billions), 2010. Note: Other Personal Health Care includes, for example, dental and other professional health services, durable medical equipment, etc. Other Health Spending includes, for example, administration and net cost of private health insurance, public health activity, research, structures and equipment, etc. (From Kaiser Family Foundation calculations using National Health Expenditure data from the Centers for Medicare and Medicaid Services, Ofce of the Actuary, National Health Statistics Group [at http://www. cms.hhs.gov/NationalHealthExpendData/].)
Table 1.1 Numbers in Healthcare Practitioner and Technical Occupations, U.S., 2012 U.S. No./100,000 population* 2012 Population: 314,773,031 194.3 34.8 9.3 89.4 2.9 836.8 33.5 60.8 37.2 38.7 3.8 185.0 18.5 266.8 24.7 451.1 22.2 95.4 175.7 228.4 101.2 60.5 61.9 57.9 30.9 74.0 21.5 20.6
No. Professional Specialty Physicians and Surgeons Dentists Optometrists Pharmacists Podiatrists Registered Nurses Occupational Therapists Physical Therapists Respiratory Therapists Speech-Language Pathologists Audiologists Social Workers Dietitians and Nutritionists Service Home Health Aides Psychiatric Aides Nursing Assistants Physical Therapist Assistants Dental Assistants Medical Assistants Technicians Licensed Practical and Licensed Vocational Nurses Clinical Laboratory Technologists and Technicians Dental Hygienists Radiologic Technologists Medical Records and Health Information Technicians Surgical Technologists Emergency Medical Technicians and Paramedics Psychiatric Technicians Opticians, Dispensing 611,650 109,570 29,180 281,560 9,090 2,633,980 105,540 191,460 116,960 121,690 12,060 582,270 58,240 839,930 77,880 1,420,020 69,810 300,160 553,140 718,800 318,620 190,290 194,790 182,370 97,150 232,860 67,760 64,930
* U.S. & World Population Clocks, November 15, 2012. United States Census Bureau. http://www.census .gov/main/www/popclock.html. Retrieved November 15, 2012. Occupational Employment and Wages, May 2012: Healthcare Practitioner and Technical Occupations. Bureau of Labor: U.S. Department of Labor. http://www.bls.gov/oes/current/oes_nat.htm#b29-0000. Retrieved July 21, 2013
Table 1.2. National Health Expenditure Amounts, and Annual Percent Change by Type of Expenditure: Calendar Years 20062021.1
Projected Type of Expenditure National Health Expenditures Health Consumption Expenditures Personal Health Care Hospital Care Professional Services Physician and Clinical Services Other Professional Services Dental Services Other Health, Residential, and Personal Care Home Health Care Nursing Care Facilities and Continuing Care Retirement Communities Retail Outlet Sales of Medical Products Prescription Drugs Other Medical Products Durable Medical Equipment Other Non-Durable Medical Products Government Administration Net Cost of Private Health Insurance Government Public Health Activities Investment Research
2
2006 $2,162.4 2,031.5 1,804.9 651.9 585.6 438.8 55.4 91.4 101.7 52.6 117.3 295.8 224.2 71.6 32.9 38.7 29.5 134.5 62.5 130.9 41.4 89.6
2007 $2,297.1 2,153.4 1,914.6 692.5 618.6 461.8 59.5 97.3 107.7 57.8 126.4 311.5 236.2 75.3 34.3 41.0 30.2 139.7 69.0 143.7 41.9 101.7 6.2% 6.0 6.1 6.2 5.6 5.2 7.4 6.4 5.9 9.9 7.8 5.3 5.3 5.2 4.4 5.9 2.3 3.8 10.4 9.7 1.3 13.6
2008 $2,403.9 2,250.1 2,010.2 729.3 652.6 486.6 63.6 102.4 113.3 61.5 132.7 321.0 243.6 77.4 34.9 42.5 29.5 137.8 72.7 153.8 43.4 110.4 4.7% 4.5 5.0 5.3 5.5 5.4 6.9 5.2 5.2 6.4 4.9 3.0 3.1 2.8 1.7 3.7 -2.5 -1.4 5.3 7.1 3.4 8.6
2009 $2,495.8 2,349.5 2,109.0 776.1 671.2 502.7 66.0 102.5 122.0 66.1 138.7 334.9 256.1 78.8 35.2 43.6 29.6 134.7 76.2 146.3 45.7 100.6 3.8% 4.4 4.9 6.4 2.9 3.3 3.8 0.1 7.7 7.5 4.5 4.3 5.1 1.8 0.8 2.6 0.4 -2.2 4.9 -4.9 5.3 -8.9
2010 $2,593.6 2,444.6 2,186.0 814.0 688.6 515.5 68.4 104.8 128.5 70.2 143.1 341.6 259.1 82.5 37.7 44.8 30.1 146.0 82.5 149.0 49.3 99.8 3.9% 4.0 3.7 4.9 2.6 2.5 3.6 2.3 5.3 6.2 3.2 2.0 1.2 4.7 7.3 2.6 1.7 8.4 8.2 1.9 7.9 -0.8
2011 $2,695.0 2,543.2 2,270.4 848.9 708.0 529.2 70.9 107.9 134.3 72.9 151.3 355.0 269.2 85.8 39.7 46.1 33.8 152.3 86.7 151.9 50.2 101.7 3.9% 4.0 3.9 4.3 2.8 2.7 3.7 2.9 4.5 3.9 5.8 3.9 3.9 4.0 5.1 3.0 12.3 4.3 5.1 1.9 1.8 1.9
2012 $2,809.0 2,655.3 2,364.1 884.7 735.4 549.6 74.5 111.4 143.9 77.5 155.2 367.4 277.1 90.3 42.5 47.8 37.5 162.6 91.0 153.7 48.7 105.0 4.2% 4.4 4.1 4.2 3.9 3.8 5.0 3.3 7.1 6.4 2.6 3.5 2.9 5.3 7.2 3.6 11.0 6.8 5.0 1.2 -3.0 3.3
2013 $2,915.5 2,757.8 2,441.8 920.7 745.9 554.5 76.1 115.2 152.8 81.9 163.2 377.4 283.7 93.7 44.7 49.0 39.8 180.8 95.3 157.7 48.6 109.1 3.8% 3.9 3.3 4.1 1.4 0.9 2.1 3.5 6.2 5.7 5.1 2.7 2.4 3.8 5.0 2.7 6.3 11.2 4.6 2.6 -0.1 3.8
Structures & Equipment National Health Expenditures Health Consumption Expenditures Personal Health Care Hospital Care Professional Services Physician and Clinical Services Other Professional Services Dental Services Other Health, Residential, and Personal Care Home Health Care Nursing Care Facilities and Continuing Care Retirement Communities Retail Outlet Sales of Medical Products Prescription Drugs Other Medical Products Durable Medical Equipment Other Non-Durable Medical Products Government Administration Net Cost of Private Health Insurance Government Public Health Activities Investment 2 Research Structures & Equipment
From Centers for Medicare & Medicaid Services, Ofce of the Actuary. 1. The health spending projections were based on the National Health Expenditures released in January 2012. The projections include effects of the Patient Protection and Affordable Care Act. 2. Research and development expenditures of drug companies and other manufacturers and providers of medical equipment and supplies are excluded from research expenditures. These research expenditures are implicitly included in the expenditure class in which the product falls, in that they are covered by the payment received for that product. Note: Numbers may not add to totals because of rounding.
Projected 2008 $2,403.9 2,250.1 2,010.2 729.3 652.6 486.6 63.6 102.4 113.3 61.5 132.7 321.0 243.6 77.4 34.9 42.5 29.5 137.8 72.7 153.8 43.4 110.4 4.7% 4.5 5.0 5.3 5.5 5.4 6.9 5.2 5.2 6.4 4.9 3.0 3.1 2.8 1.7 3.7 -2.5 -1.4 5.3 7.1 3.4 8.6 2009 $2,495.8 2,349.5 2,109.0 776.1 671.2 502.7 66.0 102.5 122.0 66.1 138.7 334.9 256.1 78.8 35.2 43.6 29.6 134.7 76.2 146.3 45.7 100.6 3.8% 4.4 4.9 6.4 2.9 3.3 3.8 0.1 7.7 7.5 4.5 4.3 5.1 1.8 0.8 2.6 0.4 -2.2 4.9 -4.9 5.3 -8.9 2010 $2,593.6 2,444.6 2,186.0 814.0 688.6 515.5 68.4 104.8 128.5 70.2 143.1 341.6 259.1 82.5 37.7 44.8 30.1 146.0 82.5 149.0 49.3 99.8 3.9% 4.0 3.7 4.9 2.6 2.5 3.6 2.3 5.3 6.2 3.2 2.0 1.2 4.7 7.3 2.6 1.7 8.4 8.2 1.9 7.9 -0.8 2011 $2,695.0 2,543.2 2,270.4 848.9 708.0 529.2 70.9 107.9 134.3 72.9 151.3 355.0 269.2 85.8 39.7 46.1 33.8 152.3 86.7 151.9 50.2 101.7 3.9% 4.0 3.9 4.3 2.8 2.7 3.7 2.9 4.5 3.9 5.8 3.9 3.9 4.0 5.1 3.0 12.3 4.3 5.1 1.9 1.8 1.9 2012 $2,809.0 2,655.3 2,364.1 884.7 735.4 549.6 74.5 111.4 143.9 77.5 155.2 367.4 277.1 90.3 42.5 47.8 37.5 162.6 91.0 153.7 48.7 105.0 4.2% 4.4 4.1 4.2 3.9 3.8 5.0 3.3 7.1 6.4 2.6 3.5 2.9 5.3 7.2 3.6 11.0 6.8 5.0 1.2 -3.0 3.3 2013 $2,915.5 2,757.8 2,441.8 920.7 745.9 554.5 76.1 115.2 152.8 81.9 163.2 377.4 283.7 93.7 44.7 49.0 39.8 180.8 95.3 157.7 48.6 109.1 3.8% 3.9 3.3 4.1 1.4 0.9 2.1 3.5 6.2 5.7 5.1 2.7 2.4 3.8 5.0 2.7 6.3 11.2 4.6 2.6 -0.1 3.8 2014 $3,130.2 2,964.9 2,622.7 982.7 805.6 601.5 83.8 120.3 163.7 88.3 172.0 410.4 308.7 101.7 47.3 54.4 44.5 197.4 100.3 165.3 50.8 114.5 7.4% 7.5 7.4 6.7 8.0 8.5 10.1 4.4 7.1 7.8 5.4 8.7 8.8 8.5 6.0 10.8 11.7 9.2 5.3 4.8 4.4 5.0 2015 $3,307.6 3,132.7 2,774.1 1,038.3 849.9 633.4 89.7 126.8 175.3 94.5 181.1 435.0 327.3 107.6 50.1 57.5 47.4 205.6 105.7 174.9 53.7 121.2 5.7% 5.7 5.8 5.7 5.5 5.3 7.1 5.4 7.1 6.9 5.3 6.0 6.0 5.8 5.8 5.9 6.5 4.1 5.4 5.8 5.7 5.8 2016 $3,514.4 3,329.2 2,948.9 1,106.6 900.6 670.6 96.5 133.6 188.1 101.2 191.0 461.4 347.8 113.6 52.2 61.4 51.0 217.7 111.6 185.2 57.1 128.1 6.3% 6.3 6.3 6.6 6.0 5.9 7.5 5.4 7.3 7.1 5.5 6.1 6.2 5.6 4.2 6.7 7.6 5.9 5.6 5.9 6.4 5.7 2017 $3,723.3 3,526.5 3,130.4 1,170.7 956.5 712.4 103.1 141.1 201.8 108.4 201.7 491.2 371.1 120.1 55.2 64.9 52.9 225.1 118.1 196.8 60.9 136.0 5.9% 5.9 6.2 5.8 6.2 6.2 6.8 5.6 7.3 7.1 5.6 6.5 6.7 5.7 5.8 5.7 3.7 3.4 5.8 6.3 6.6 6.2 2018 $3,952.3 3,743.0 3,326.1 1,240.0 1,016.4 757.0 109.7 149.6 216.9 117.1 213.6 522.1 394.9 127.2 58.6 68.6 56.3 235.3 125.2 209.3 64.8 144.5 6.2% 6.1 6.3 5.9 6.3 6.3 6.5 6.1 7.5 8.1 5.9 6.3 6.4 5.9 6.1 5.7 6.4 4.5 6.1 6.3 6.5 6.3 2019 $4,207.3 3,985.3 3,544.2 1,317.7 1,084.3 807.3 117.6 159.5 233.1 126.6 226.2 556.3 420.9 135.4 62.4 73.0 59.9 248.4 132.7 221.9 68.9 153.0 6.5% 6.5 6.6 6.3 6.7 6.6 7.1 6.6 7.5 8.1 5.9 6.5 6.6 6.5 6.5 6.4 6.5 5.6 6.0 6.0 6.3 5.9 2020 $4,487.2 4,252.4 3,782.6 1,404.1 1,156.1 860.5 125.9 169.7 250.8 137.0 239.9 594.7 450.7 144.0 66.5 77.5 63.8 265.2 140.8 234.9 73.3 161.6 6.7% 6.7 6.7 6.6 6.6 6.6 7.1 6.4 7.6 8.2 6.0 6.9 7.1 6.3 6.5 6.2 6.5 6.7 6.1 5.8 6.3 5.6 2021 $4,781.0 4,532.7 4,034.0 1,495.7 1,229.1 914.9 134.5 179.8 269.9 148.3 255.0 635.9 483.2 152.7 70.7 82.0 68.0 281.3 149.4 248.2 77.8 170.4 6.5% 6.6 6.6 6.5 6.3 6.3 6.8 6.0 7.6 8.3 6.3 6.9 7.2 6.0 6.3 5.8 6.5 6.1 6.1 5.7 6.2 5.4
1 4 6 5 6 8 5 3 7 8
4 5 2 3 3 0 2 7 0 7 9 7

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Managing Health Services Organizations and Systems

Managing Health Services Organizations and Systems

Baltimore London Sydney

Part I. The Healthcare Setting

Managing Health Services Organizations and Systems

235 236 237 238 238

Part II. Managing Health Services Organizations and Systems

Managing Health Services Organizations and Systems

Managing Health Services Organizations and Systems

618 619 619 620 621 622

About the Authors

About this Edition

Managing Health Services Organizations and Systems

Acronyms Used in Text

Managing Health Services Organizations and Systems

ACRONYMS USED IN TEXT xxi

Managing Health Services Organizations and Systems

ACRONYMS USED IN TEXT xxiii

Managing Health Services Organizations and Systems

The Healthcare Setting

Healthcare in theUnited States

Managing Health Services Organizations and Systems

Health and System Goals

Healthcare in the United States

Life Expectancy Impairment

MEDICAL CARE SERVICES prevention, cure, care, rehabilitation

Interpersonal Behavior Social Behavior

psychic Ecologic Behavior

Participation in Health Care Health Behavior

LIFESTYLES attitudes, behaviors

Managing Health Services Organizations and Systems

HEALTH PROGRAM Educational strategies

Health Policy regulation organization

PHASE 6 Process evaluation

PHASE 7 Impact evaluation

PHASE 8 Outcome evaluation

Healthcare in the United States

Processes That Produce Health Policy

Managing Health Services Organizations and Systems

Multiple Functions of the Regulatory Process

Healthcare in the United States

Stare Decisis and Res Judicata

Managing Health Services Organizations and Systems

Trade Associations and Interested Parties

Healthcare in the United States

A Brief History of Health Services in the United States

Mortality and Morbidity

THESE RESULTS ON HEALTH SERVICES PROVIDERS Defensive strategies Higher risk

Deregulation Greater competition

High cost of healthcare

Lessened access Personal financial risk

More federal regulation: PROs, DRGs, RBRVS, RUGS

Growing health insurance (especially for hospitalization)

Changing balance of power: MDs MCOs HSOs

Managing Health Services Organizations and Systems

Growth of wellequipped community hospitals

Trend toward group medical practices

Cooperation among HSOsmergers, shared services, integration, etc.

Growing specialization of doctors

Government funding of research, and development of medical technology