Health Care Essay
Chapter 1
Identify 5 of the 10 characteristics of the U.S. Health Care system (Note Grade Penalty: responses must be “bulleted or numbered”.
What is the difference between national health insurance (NHI), national health system (NHS), socialized health insurance (SHI)?
Discuss the intermediary role of insurance in the delivery of health care.
Chapter 2
What are the three classifications of disease? Define them. (bulleted/numbered responses required)
What are the four major determinants of health? Explain each. (bulleted/number responses required)
Why is
WHO
considered to be “global guardians of public health” – Visit WHO
E S S E NT I A LS O F TH E
F I F TH E D I T I O N
LEIYU SHI, DrPH, MBA, MPA
Professor, Bloomberg School of Public Health
Director, Johns Hopkins Primary Care Policy Center
Johns Hopkins University
Baltimore, Maryland
DOUGLAS A. SINGH, PhD, MBA
Associate Professor Emeritus of Management
Judd Leighton School of Business and Economics
Indiana University, South Bend
South Bend, Indiana
U.S. Health
Care System
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Title: Essentials of the U.S. health care system / Leiyu Shi, Douglas A. Singh.
Description: Fifth edition. | Burlington, Massachusetts: Jones & Bartlett Learning, [2019] |
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iii
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Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
Acknowledgments . . . . . . . . . . . . . . . . xiii
List of Exhibits . . . . . . . . . . . . . . . . . . . . xiv
List of Tables . . . . . . . . . . . . . . . . . . . . . xvi
List of Figures . . . . . . . . . . . . . . . . . . . . xvii
Chapter 1 Major Characteristics
of U.S. Health Care
Delivery . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Subsystems of U .S . Health Care
Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Managed Care . . . . . . . . . . . . . . . . . . . . .3
Military Medical Care . . . . . . . . . . . . . .4
Subsystems for Special
Populations . . . . . . . . . . . . . . . . . . . . .5
Integrated Systems . . . . . . . . . . . . . . . .6
Long-Term Care Delivery . . . . . . . . . . .7
Public Health System . . . . . . . . . . . . . .7
Health Care Reform . . . . . . . . . . . . . . . . . . . . .8
Characteristics of the U .S . Health Care
System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
No Central Governing Agency;
Little Integration and
Coordination . . . . . . . . . . . . . . . . . . 10
Technology Driven and Focused
on Acute Care . . . . . . . . . . . . . . . . . 10
High in Cost, Unequal in Access,
and Average in Outcome . . . . . 11
Imperfect Market Conditions . . . . 12
Government as Subsidiary to
the Private Sector . . . . . . . . . . . . . 14
Fusion of Market Justice and
Social Justice . . . . . . . . . . . . . . . . . . 14
Multiple Players and Balance of
Power . . . . . . . . . . . . . . . . . . . . . . . . . 15
Quest for Integration and
Accountability . . . . . . . . . . . . . . . . 15
Access to Health Care Services
Selectively Based on
Insurance Coverage . . . . . . . . . . . 16
Legal Risks Influence Practice
Behaviors . . . . . . . . . . . . . . . . . . . . . 16
Health Care Systems of Other
Developed Countries . . . . . . . . . . . . . . 16
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Germany . . . . . . . . . . . . . . . . . . . . . . . . 18
United Kingdom . . . . . . . . . . . . . . . . . 19
Systems Framework . . . . . . . . . . . . . . . . . . 21
System Foundations . . . . . . . . . . . . . 21
System Resources . . . . . . . . . . . . . . . 22
System Processes . . . . . . . . . . . . . . . . 22
System Outcomes . . . . . . . . . . . . . . . 22
System Outlook . . . . . . . . . . . . . . . . . 22
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
References . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Chapter 2 Foundations of U.S.
Health Care
Delivery . . . . . . . . . . . 26
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 26
What Is Health? . . . . . . . . . . . . . . . . . . . . . . . 27
Illness and Disease . . . . . . . . . . . . . . . 29
Acute and Chronic
Conditions . . . . . . . . . . . . . . . . . . . . .29
Quality of Life . . . . . . . . . . . . . . . . . . . . 29
Determinants of Health . . . . . . . . . . . . . . . 30
Environment . . . . . . . . . . . . . . . . . . . . 31
Behavior and Lifestyle . . . . . . . . . . . 31
Heredity . . . . . . . . . . . . . . . . . . . . . . . . . 31
Medical Care . . . . . . . . . . . . . . . . . . . . 32
Cultural Beliefs and Values . . . . . . . . . . . . 32
iv Contents
Distribution of Health Care . . . . . . . . . . . . 32
Market Justice . . . . . . . . . . . . . . . . . . . 33
Social Justice . . . . . . . . . . . . . . . . . . . . 35
Justice in the U .S . Health Care
System . . . . . . . . . . . . . . . . . . . . . . . . 36
Strategies to Improve Health . . . . . . . . . . 36
Healthy People Initiatives . . . . . . . . . 36
Public Health . . . . . . . . . . . . . . . . . . . . 40
Focus on Determinants . . . . . . . . . . 40
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
References . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Chapter 3 Historical Overview
of U.S. Health Care
Delivery . . . . . . . . . . . 50
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Medical Services in Preindustrial
America . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Medical Training . . . . . . . . . . . . . . . . . 52
Medical Practice . . . . . . . . . . . . . . . . . 53
Medical Institutions . . . . . . . . . . . . . . 55
Medical Services in Postindustrial
America . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Medical Profession . . . . . . . . . . . . . . . 56
The American Medical
Association . . . . . . . . . . . . . . . . . . . 58
Educational Reform . . . . . . . . . . . . . . 59
Development of Hospitals . . . . . . . 60
Reform of Mental Health Care . . . . 60
History of Health Insurance . . . . . . . . . . . 61
Worker’s Compensation . . . . . . . . . 61
Emergence and Rise of Private
Health Insurance . . . . . . . . . . . . . . 61
First Hospital Plan and the
Birth of Blue Cross . . . . . . . . . . . . . 61
First Physician Plan and the
Birth of Blue Shield . . . . . . . . . . . . 62
Employment-Based Health
Insurance . . . . . . . . . . . . . . . . . . . . . 62
Failure of National Health
Insurance in the United
States . . . . . . . . . . . . . . . . . . . . . . . . . 63
Creation of Medicare and
Medicaid . . . . . . . . . . . . . . . . . . . . . . 64
Medical Services in the
Corporate Era . . . . . . . . . . . . . . . . . . . . . . 68
Corporatization of Health Care
Delivery . . . . . . . . . . . . . . . . . . . . . . . 68
Information Revolution . . . . . . . . . . 69
Globalization . . . . . . . . . . . . . . . . . . . . 69
Era of Health Care Reform . . . . . . . . . . . . . 70
Health Care Reform in a Flux . . . . . 71
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
References . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Chapter 4 Health Care Providers
and Professionals . . . 75
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Similarities and Differences
Between MDs and DOs . . . . . . . 78
Generalists and Specialists . . . . . . . 79
Hospitalists . . . . . . . . . . . . . . . . . . . . . . 79
Differences Between Primary
and Specialty Care . . . . . . . . . . . . 80
Work Settings and Practice
Patterns . . . . . . . . . . . . . . . . . . . . . . . 80
Imbalance and Maldistribution
of Physicians . . . . . . . . . . . . . . . . . . 81
Dentists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Pharmacists . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Other Doctoral-Level Health
Professionals . . . . . . . . . . . . . . . . . . . . . . . 87
Nurses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Advanced-Practice Nurses . . . . . . . 89
Nonphysician Practitioners . . . . . . . . . . . . 90
Value of NPP Services . . . . . . . . . . . . 91
Allied Health Professionals . . . . . . . . . . . . 91
Technicians and Assistants . . . . . . . 92
Technologists and Therapists . . . . 92
Public Health Professionals . . . . . . . . . . . . 93
Community Health Workers . . . . . . . . . . . 94
Health Services Administrators . . . . . . . . 95
Patient-Centered Care . . . . . . . . . . . . . . . . 96
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
References . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Contents v
Chapter 5 Technology and Its
Effects . . . . . . . . . . . . 101
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 101
What Is Medical Technology? . . . . . . . . 103
Health Information Technology . . . . . . 103
Major Categories . . . . . . . . . . . . . . . 104
Electronic Health Records . . . . . . . 105
The Internet, E-Health, and
E-Therapy . . . . . . . . . . . . . . . . . . . . 106
Telemedicine and Remote
Monitoring . . . . . . . . . . . . . . . . . . 107
Diffusion and Utilization of Medical
Technology . . . . . . . . . . . . . . . . . . . . . . . 108
Cultural Beliefs and Values . . . . . . 109
Medical Training and Practice . . . .110
Insurance Coverage . . . . . . . . . . . . 110
Competition Among Providers . 110
The Government’s Role in
Technology Diffusion . . . . . . . . . . . . . . 111
Regulation of Drugs, Devices,
and Biologics . . . . . . . . . . . . . . . . 111
The Affordable Care Act and
Medical Technology . . . . . . . . . . 115
Research on Technology . . . . . . . . 115
Impact of Medical Technology . . . . . . . 115
Impact on Quality of Care . . . . . . . 116
Impact on Quality of Life . . . . . . . . 117
Impact on Health Care Costs . . . . 117
Impact on Access . . . . . . . . . . . . . . . 119
Impact on the Structure
and Processes of
Health Care Delivery . . . . . . . . . 119
Impact on Global Medical
Practice . . . . . . . . . . . . . . . . . . . . . . 119
Impact on Bioethics . . . . . . . . . . . . 120
Assessment of Medical
Technology . . . . . . . . . . . . . . . . . . . . . . . 120
Efficacy . . . . . . . . . . . . . . . . . . . . . . . . . 120
Safety . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Cost-Effectiveness . . . . . . . . . . . . . . 121
Benefits of Technology
Assessment . . . . . . . . . . . . . . . . . . . . . . . 122
Delivering Value . . . . . . . . . . . . . . . . 122
Cost Containment . . . . . . . . . . . . . . 122
Standardized Practice
Protocols . . . . . . . . . . . . . . . . . . . . 122
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 123
References . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Chapter 6 Financing and
Reimbursement
Methods . . . . . . . . . . 126
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 126
Effects of Health Care Financing
and Insurance . . . . . . . . . . . . . . . . . . . . . 128
Insurance: Its Nature and Purpose . . . . 130
Basic Insurance Concepts . . . . . . . 130
Cost Sharing . . . . . . . . . . . . . . . . . . . . 130
Private Insurance . . . . . . . . . . . . . . . . . . . . 132
Group Insurance . . . . . . . . . . . . . . . . 133
Self-Insurance . . . . . . . . . . . . . . . . . . 133
Direct-Purchase Private
Insurance . . . . . . . . . . . . . . . . . . . . 134
Managed Care Plans . . . . . . . . . . . . 134
High-Deductible Health
Plans . . . . . . . . . . . . . . . . . . . . . . . . . .134
The Affordable Care Act and Private
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 135
Public Insurance . . . . . . . . . . . . . . . . . . . . . 136
Medicare . . . . . . . . . . . . . . . . . . . . . . . 137
Medicaid . . . . . . . . . . . . . . . . . . . . . . . 141
Children’s Health Insurance
Program . . . . . . . . . . . . . . . . . . . . . 141
Issues with Medicaid . . . . . . . . . . . . . . . . . 142
Reimbursement Methods . . . . . . . . . . . . 143
Fee for Service . . . . . . . . . . . . . . . . . . 143
Bundled Payments . . . . . . . . . . . . . 144
Resource-Based Relative
Value Scale . . . . . . . . . . . . . . . . . . . 144
Reimbursement Under
Managed Care . . . . . . . . . . . . . . . 144
From Retrospective to
Prospective Reimbursement . . . .145
Payment Reform Initiatives . . . . . . . . . . . 148
National Health Expenditures . . . . . . . . 148
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 151
References . . . . . . . . . . . . . . . . . . . . . . . . . . 151
vi Contents
Chapter 7 Outpatient Services and
Primary Care . . . . . . 154
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 154
What Is Outpatient Care? . . . . . . . . . . . . 155
Scope of Outpatient Services . . . . . . . . 155
Reimbursement . . . . . . . . . . . . . . . . 156
Technological Factors . . . . . . . . . . . 158
Utilization Control Factors . . . . . . 158
Social Factors . . . . . . . . . . . . . . . . . . . 158
Outpatient Care Settings and
Methods of Delivery . . . . . . . . . . . . . . 158
Private Practice . . . . . . . . . . . . . . . . . 158
Hospital Outpatient Clinics . . . . . 159
Freestanding Facilities . . . . . . . . . . 159
Mobile Facilities for Medical,
Diagnostic, and Screening
Services . . . . . . . . . . . . . . . . . . . . . . 160
Telephone or Internet Triage . . . . 160
Home Care . . . . . . . . . . . . . . . . . . . . . 160
Hospice Care . . . . . . . . . . . . . . . . . . . 161
Outpatient Long-Term Care
Services . . . . . . . . . . . . . . . . . . . . . . 161
Public Health Services . . . . . . . . . . 161
Community Health Centers . . . . . 161
Free Clinics . . . . . . . . . . . . . . . . . . . . . 162
Alternative Medicine Clinics . . . . 162
Primary Care . . . . . . . . . . . . . . . . . . . . . . . . . 163
What Is Primary Care? . . . . . . . . . . . 163
WHO Definition . . . . . . . . . . . . . . . . 164
IOM Definition . . . . . . . . . . . . . . . . . . 164
Domains of Primary Care . . . . . . . 164
Community-Oriented
Primary Care . . . . . . . . . . . . . . . . . 167
Primary Care Around the World . . . . . . 167
Effectiveness of Primary Care . . . . . . . . . 168
Hospitalizations and Use of
Emergency Care . . . . . . . . . . . . . 169
Cost of Care . . . . . . . . . . . . . . . . . . . . 170
Morbidity . . . . . . . . . . . . . . . . . . . . . . . 170
Mortality . . . . . . . . . . . . . . . . . . . . . . . 171
The Medical Home Strategy . . . . . . . . . 171
Use of Information Technology
in Primary Care . . . . . . . . . . . . . . . . . . . . 172
Assessment of Community Health
Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
CHCs’ Quality of Care . . . . . . . . . . . 175
CHCs’ Access to Care . . . . . . . . . . . . 176
CHCs’ Cost-Effectiveness . . . . . . . . 177
CHCs and the Affordable Care
Act . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 177
References . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Chapter 8 Hospitals . . . . . . . . . . 182
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 182
Evolution of the Hospital in the
United States . . . . . . . . . . . . . . . . . . . . . 183
Stage 1 . . . . . . . . . . . . . . . . . . . . . . . . . 183
Stage 2 . . . . . . . . . . . . . . . . . . . . . . . . . 184
Stage 3 . . . . . . . . . . . . . . . . . . . . . . . . . 184
Stage 4 . . . . . . . . . . . . . . . . . . . . . . . . . 184
Stage 5 . . . . . . . . . . . . . . . . . . . . . . . . . 185
Stage 6 . . . . . . . . . . . . . . . . . . . . . . . . . 185
Expansion and Downsizing of
Hospitals in the United States . . . . . 185
Access and Utilization Measures . . . . . 188
Measures of Access . . . . . . . . . . . . . 188
Measures of Utilization . . . . . . . . . 189
Utilization of Hospital
Capacity . . . . . . . . . . . . . . . . . . . . . 189
Hospital Employment . . . . . . . . . . . . . . . . 190
Types of Hospitals . . . . . . . . . . . . . . . . . . . 191
Community Hospitals . . . . . . . . . . 192
Public Hospitals . . . . . . . . . . . . . . . . 192
Private Nonprofit Hospitals . . . . . 193
Private For-Profit Hospitals . . . . . . 194
General Hospitals . . . . . . . . . . . . . . . 195
Specialty Hospitals . . . . . . . . . . . . . 195
Psychiatric Hospitals . . . . . . . . . . . . 196
Rehabilitation Hospitals . . . . . . . . . 196
Children’s Hospitals . . . . . . . . . . . . . 196
Rural Hospitals . . . . . . . . . . . . . . . . . . 197
Teaching Hospitals . . . . . . . . . . . . . 197
Osteopathic Hospitals . . . . . . . . . . 198
Licensure, Certification, and
Accreditation . . . . . . . . . . . . . . . . . . . . . 198
Contents vii
Hospital Organization . . . . . . . . . . . . . . . . 199
Ethics and Public Trust . . . . . . . . . . . . . . . 200
Ethical Challenges . . . . . . . . . . . . . . 200
Addressing Ethical Issues . . . . . . . 201
Public Trust . . . . . . . . . . . . . . . . . . . . . 202
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 202
References . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Chapter 9 Managed Care
and Integrated
Systems . . . . . . . . . . . 205
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 205
What Is Managed Care? . . . . . . . . . . . . . . 206
Accreditation and Quality
Indicators . . . . . . . . . . . . . . . . . . . . 207
Evolution of Managed Care . . . . . . . . . . 208
Growth and Transformation of
Managed Care . . . . . . . . . . . . . . . . . . . . 210
Private Insurance Enrollment . . . 211
Medicare Enrollment . . . . . . . . . . . 211
Medicaid Enrollment . . . . . . . . . . . 211
Managed Care Backlash . . . . . . . . 211
Transformation of Managed
Care . . . . . . . . . . . . . . . . . . . . . . . . . 212
Utilization Control Methods in
Managed Care . . . . . . . . . . . . . . . . . . . . 212
Gatekeeping . . . . . . . . . . . . . . . . . . . 213
Utilization Review . . . . . . . . . . . . . . 213
Types of Managed Care Plans . . . . . . . . 214
HMO Plans . . . . . . . . . . . . . . . . . . . . . 215
PPO Plans . . . . . . . . . . . . . . . . . . . . . . 218
Point-of-Service Plans . . . . . . . . . . 218
Impact on Cost, Access, and
Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Influence on Cost
Containment . . . . . . . . . . . . . . . . 219
Impact on Access . . . . . . . . . . . . . . . 219
Influence on Quality of Care . . . . 220
Integrated Systems . . . . . . . . . . . . . . . . . . 221
Integrated Delivery Systems . . . . 221
Accountable Care
Organizations . . . . . . . . . . . . . . . . 222
Types of Integration . . . . . . . . . . . . . . . . . 223
Integration Based on Major
Participants . . . . . . . . . . . . . . . . . . 223
Integration Based on Type of
Ownership or Affiliation . . . . . . 223
Integration Based on Service
Consolidation . . . . . . . . . . . . . . . . 225
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 226
References . . . . . . . . . . . . . . . . . . . . . . . . . . 226
Chapter 10 Long-Term Care
Services . . . . . . . . . 229
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 229
What Is Long-Term Care? . . . . . . . . . . . . . 231
A Variety of Health Care
Services . . . . . . . . . . . . . . . . . . . . . . 232
Individualized Services . . . . . . . . . . 233
Coordination of Services . . . . . . . . 233
Maximum Possible Functional
Independence . . . . . . . . . . . . . . . 233
Extended Period of Time . . . . . . . . 235
Holistic Approach . . . . . . . . . . . . . . 235
Quality of Life . . . . . . . . . . . . . . . . . . . 236
Community-Based Long-Term
Care Services . . . . . . . . . . . . . . . . . . . . . . 236
Home Health Care . . . . . . . . . . . . . . 237
Adult Day Care . . . . . . . . . . . . . . . . . 238
Adult Foster Care . . . . . . . . . . . . . . . 238
Senior Centers . . . . . . . . . . . . . . . . . . 238
Home-Delivered and
Congregate Meals . . . . . . . . . . . 239
Homemaker and Handyman
Services . . . . . . . . . . . . . . . . . . . . . . 239
Emergency Response
Systems . . . . . . . . . . . . . . . . . . . . . . 239
Case Management . . . . . . . . . . . . . 240
Institutional Long-Term Care . . . . . . . . . 240
Retirement Facilities . . . . . . . . . . . . 240
Personal Care Facilities . . . . . . . . . . 241
Assisted Living Facilities . . . . . . . . . 242
Skilled Nursing Facilities . . . . . . . . 242
Subacute Care Facilities . . . . . . . . . 243
Specialized Care Facilities . . . . . . . 243
viii Contents
Licensing and Certification of
Nursing Homes . . . . . . . . . . . . . . . . . . . 244
Licensing . . . . . . . . . . . . . . . . . . . . . . . 244
Certification . . . . . . . . . . . . . . . . . . . . 244
Other Long-Term Care Services . . . . . . 246
Respite Care . . . . . . . . . . . . . . . . . . . . 246
Restorative Care . . . . . . . . . . . . . . . . 246
Hospice Care . . . . . . . . . . . . . . . . . . . 246
The Affordable Care Act and
Long-Term Care . . . . . . . . . . . . . . . . . . . 247
Nursing Home Industry and
Expenditures . . . . . . . . . . . . . . . . . . . . . . 247
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 249
References . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Chapter 11 Populations with
Special Health
Needs . . . . . . . . . . . 251
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 251
Framework to Study Vulnerable
Populations . . . . . . . . . . . . . . . . . . . . . . . 252
Predisposing Characteristics . . . . . . . . . 253
Racial/Ethnic Minorities . . . . . . . . . 254
Women and Children . . . . . . . . . . . 258
Geographic Distribution:
Rural Health . . . . . . . . . . . . . . . . . . 259
Enabling Characteristics . . . . . . . . . . . . . 261
The Uninsured . . . . . . . . . . . . . . . . . . 261
Homelessness . . . . . . . . . . . . . . . . . . 262
Need Characteristics . . . . . . . . . . . . . . . . . 263
Mental Health . . . . . . . . . . . . . . . . . . 263
Chronic Illness/Disability . . . . . . . . 264
HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . 266
Eliminating Disparities . . . . . . . . . . . . . . . 266
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 270
References . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Chapter 12 Cost, Access, and
Quality . . . . . . . . . . 275
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 275
Cost of Health Care . . . . . . . . . . . . . . . . . . 276
The High Cost of U .S . Health Care . . . . 277
Reasons for High Health
Care Costs . . . . . . . . . . . . . . . . . . . . . . . . 281
Third-Party Payment . . . . . . . . . . . . 281
Growth of Technology . . . . . . . . . . 281
Increase in the Elderly
Population . . . . . . . . . . . . . . . . . . . 282
Medical Model of Health
Care Delivery . . . . . . . . . . . . . . . . . 282
Multipayer System and
Administrative Costs . . . . . . . . . 282
Defensive Medicine . . . . . . . . . . . . 283
Waste and Abuse . . . . . . . . . . . . . . . 283
Practice Variations . . . . . . . . . . . . . . 283
Cost Containment . . . . . . . . . . . . . . . . . . . 283
Health Planning . . . . . . . . . . . . . . . . 284
Price Controls . . . . . . . . . . . . . . . . . . 284
Peer Review . . . . . . . . . . . . . . . . . . . . 285
Competitive Approaches . . . . . . . 285
Chronic Disease Prevention
and Management . . . . . . . . . . . . 286
Unequal Access to Health Care . . . . . . 286
Data on Access . . . . . . . . . . . . . . . . . 286
Access Disparities . . . . . . . . . . . . . . . 289
Access Initiatives . . . . . . . . . . . . . . . 290
Health Care Quality . . . . . . . . . . . . . . . . . . 291
Structure . . . . . . . . . . . . . . . . . . . . . . . 292
Process . . . . . . . . . . . . . . . . . . . . . . . . . 293
Outcome . . . . . . . . . . . . . . . . . . . . . . . 294
Quality Strategies and Initiatives . . . . . 294
Developments in Process
Improvement . . . . . . . . . . . . . . . . . . . . . 298
Clinical Practice Guidelines . . . . . 298
Cost-Efficiency . . . . . . . . . . . . . . . . . . 298
Critical Pathways . . . . . . . . . . . . . . . 299
Risk Management . . . . . . . . . . . . . . 299
Patient Safety . . . . . . . . . . . . . . . . . . . . . . . . 299
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 303
References . . . . . . . . . . . . . . . . . . . . . . . . . . 303
Chapter 13 Health Policy . . . . . 307
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 307
What Is Health Policy? . . . . . . . . . . . . . . . 308
Different Forms of Health
Policies . . . . . . . . . . . . . . . . . . . . . . 308
Contents ix
Regulatory Tools . . . . . . . . . . . . . . . . 309
Allocative Tools . . . . . . . . . . . . . . . . . 309
Principal Features of U .S .
Health Policy . . . . . . . . . . . . . . . . . . . . . . 310
Government as Subsidiary
to the Private Sector . . . . . . . . . 310
Fragmented, Incremental, and
Piecemeal Reform . . . . . . . . . . . . 311
Pluralistic and Interest Group
Politics . . . . . . . . . . . . . . . . . . . . . . . 313
Decentralized Role of the
States . . . . . . . . . . . . . . . . . . . . . . . . 315
Impact of Presidential
Leadership . . . . . . . . . . . . . . . . . . . 317
Research and Policy
Development . . . . . . . . . . . . . . . . 318
Development of Legislative
Health Policy . . . . . . . . . . . . . . . . . . . . . . 318
Policy Cycle . . . . . . . . . . . . . . . . . . . . . 318
Legislative Process . . . . . . . . . . . . . . 319
Critical Policy Issues . . . . . . . . . . . . . . . . . . 320
Access to Care . . . . . . . . . . . . . . . . . . 320
Providers . . . . . . . . . . . . . . . . . . . . . . . 321
Public Financing . . . . . . . . . . . . . . . . 321
Access and the Elderly . . . . . . . . . . 321
Access and Minorities . . . . . . . . . . 322
Access in Rural Areas . . . . . . . . . . . 322
Access and Low Income . . . . . . . . 322
Smoking and Tobacco Use . . . . . . 322
Cost Containment . . . . . . . . . . . . . . 323
Quality of Care . . . . . . . . . . . . . . . . . . 325
Mental Health . . . . . . . . . . . . . . . . . . 325
National Health Reform . . . . . . . . . . . . . . 328
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 330
References . . . . . . . . . . . . . . . . . . . . . . . . . . 330
Chapter 14 The Future of
Health Services
Delivery . . . . . . . . . 333
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 333
Forces of Future Change . . . . . . . . . . . . . 334
Social, Demographic, and
Cultural Trends . . . . . . . . . . . . . . . 334
Economic Forces . . . . . . . . . . . . . . . 335
Political Will, Ideologies,
and Legal Rulings . . . . . . . . . . . . 336
Technological Innovation . . . . . . . 336
Global Health Issues . . . . . . . . . . . . 337
Ecological Events . . . . . . . . . . . . . . . 338
Coverage, Cost, and Access
Dilemmas . . . . . . . . . . . . . . . . . . . . . . . . . 338
The Future of Health Care
Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340
The American Health
Care Act . . . . . . . . . . . . . . . . . . . . . 340
Will a Single-Payer System
Emerge? . . . . . . . . . . . . . . . . . . . . . 341
The Cost-Control Imperative . . . . 342
National Debt . . . . . . . . . . . . . . . . . . 343
Medicare’s Generational
Impact . . . . . . . . . . . . . . . . . . . . . . . 343
Future Models of Care Delivery . . . . . . 345
Value-Based Shared Savings
Payments . . . . . . . . . . . . . . . . . . . . 345
Population Health . . . . . . . . . . . . . . 345
Community Outreach . . . . . . . . . . 346
Virtual Care . . . . . . . . . . . . . . . . . . . . . 346
Technology-Driven Home
Visits . . . . . . . . . . . . . . . . . . . . . . . . . 346
Future Workforce Challenges . . . . . . . . 346
Global Challenges . . . . . . . . . . . . . . . . . . . 348
New Frontiers in Clinical
Technology . . . . . . . . . . . . . . . . . . . . . . . 349
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 350
References . . . . . . . . . . . . . . . . . . . . . . . . . . 351
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . 355
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
© ninjaMonkeyStudio/Getty Images
Preface
This text is a condensed and simplified version of our standard text on the U.S. health care system, Delivering Health Care in America: A Systems Approach, Seventh Edition. Nevertheless, each new edi-
tion of this text is independently revised, with new materials that may
not be found in the larger text.
This text retains the systems model to organize the major themes of
U.S. health care delivery. The first three chapters lay the foundation that is
necessary for understanding the U.S. health care delivery system, which
is distinct from any other system in the world. Major Characteristics of
U.S. Health Care Delivery (Chapter 1) gives an overview of U.S. health
care and contrasts the American system with the three most commonly
used models of health care delivery in other advanced nations, such as
Canada, the United Kingdom, and Germany. Foundations of U.S. Health
Care Delivery (Chapter 2) explains the different models for understand-
ing health and its determinants. In the context of American beliefs and
values, this chapter also discusses the issue of equity using the concepts
of market justice and social justice and explains how health services are
rationed in both market justice– and social justice–based systems. His-
torical Overview of U.S. Health Care Delivery (Chapter 3) traces the his-
tory of U.S. health care from colonial times to the present and includes
an added section on health care reform. The key to understanding the
nature of the current health care system and its likely future direction is
to understand its evolutionary past. This chapter also describes current
trends in corporatization, information revolution, and globalization as
they pertain to health care delivery.
The next three chapters are about the resources—both human and
nonhuman—employed in delivering health care. Health Care Providers
and Professionals (Chapter 4) addresses the roles played by some of the
major types of personnel in health care delivery. It also discusses some
key issues pertaining to the number and distribution of physicians and
the effect these factors have on the delivery of health care. Technology
and Its Effects (Chapter 5) focuses on medical technology and the various
issues related to its development and dissemination. Financing and Reim-
bursement Methods (Chapter 6) explains the concept of health insurance,
x
Preface xi
the major private and public health insurance programs in the United
States, and methods of reimbursing providers.
The next five chapters describe the system processes, beginning with
outpatient and primary care services (discussed in Chapter 7) and hos-
pitals ( discussed in Chapter 8). Managed Care and Integrated Systems
(Chapter 9) examines managed care and integrated organizations, such
as integrated delivery systems and accountable care organizations, as well
as the different types of arrangements found in integrated organizations.
Long-Term Care Services (Chapter 10) explores the meaning and scope
of long-term care and provides an overview of community-based and in-
stitution-based long-term care services. Populations with Special Health
Needs (Chapter 11) highlights vulnerable populations and their special
health care needs, including populations with mental health issues.
The next two chapters deal with the main outcomes of the health
care system and the ways in which those outcomes are addressed through
health policy. The main outcomes associated with health care are pre-
sented in the Cost, Access, and Quality chapter (Chapter 12). Health Pol-
icy (Chapter 13) gives an overview of health policy, including the major
participants in its development and the process by which it is created, in
the United States.
Finally, The Future of Health Services Delivery (Chapter 14) explores
the future of health care in the United States in the context of forces of
future change, health care reform, conflicting issues of cost and access,
future models of care delivery, global challenges, and technological in-
novations.
Leiyu Shi
Douglas A. Singh
▸ New in the Fifth Edition
This edition has been updated with the latest health statistics and per-
tinent information available at the time the manuscript was prepared.
Some key additions to the text include the following:
■ Chapter 1: Current status of managed care and integrated delivery
system under the Affordable Care Act; current status of health care
reform; health care systems in selected countries.
■ Chapter 2: Implementation of Healthy People 2020; assessment of the
Healthy People initiative; preparation for Healthy People 2030; the
concept of value-based practice.
xii Preface
■ Chapter 3: Coverage of mental health care in its historical context,
including a new section “Reform of Mental Health Care.” New sec-
tion: “Health Care Reform in a Flux.”
■ Chapter 4: Current development of the U.S. physician and health
care workforce and challenges; the transition from patient-centered
care to population health; the need for chronic disease managers.
■ Chapter 5: Introduction to the Drug Supply Chain Security Act of
2013 and the 21st Century Cures Act of 2016. New section: “The
FDA in a Global Environment.”
■ Chapter 6: New sections: “Issues with Medicaid”; “Payment Reform
Initiatives.”
■ Chapter 7: Community health centers’ current scope, efficacy and
value, and challenges; status of the primary care workforce around
the world.
■ Chapter 8: Updated section on hospital employment and staffing.
■ Chapter 9: Updated sections on integrated delivery systems and
accountable care organizations.
■ Chapter 10: Updated section on the nursing home industry and
expenditures on long-term care.
■ Chapter 11: Current disparities described in the literature (racial,
socioeconomic status) in terms of access to care, quality of care, and
health outcomes; programs (national, regional, local) that address
disparities ( racial, socioeconomic status) in terms of access to care,
quality of care, and health outcomes; the chronically ill; patient
safety.
■ Chapter 12: Quality initiatives both from the government (e.g., the
Agency for Healthcare Research and Quality) and from the private
sector; programs to contain health care costs.
■ Chapter 13: Updated information on health policy issues and chal-
lenges after the ACA.
■ Chapter 14: Updated sections on the health care coverage, cost, and
access dilemmas; the future of health care reform; movement toward
a single- payer system; the cost-control imperative; Medicare’s gener-
ational impact; and future models of care delivery.
xiii
© ninjaMonkeyStudio/Getty Images
We gratefully acknowledge Sylvia Shi for creating the cartoons for this
text. We are also grateful for the valuable assistance of Hailun Liang. Of
course, all errors and omissions remain the responsibility of the authors.
Acknowledgments
© ninjaMonkeyStudio/Getty Images
List of Exhibits
Exhibit 1.1 Main Characteristics of the U.S. Health Care System 10
Exhibit 2.1 Indicators of Health 28
Exhibit 2.2 Examples of Health Determinants 30
Exhibit 2.3 Strategies to Improve Health and Reduce Disparities 44
Exhibit 3.1 Major Forces of Change in U.S. Health Care Delivery 51
Exhibit 3.2 Health Care Delivery in Preindustrial America 53
Exhibit 3.3 Notable Developments During the Postindustrial Era 57
Exhibit 3.4 Groundbreaking Medical Discoveries 58
Exhibit 3.5 Reasons Why National Health Insurance Has
Historically Failed in the United States 65
Exhibit 3.6 Comparisons Between Medicare and Medicaid 67
Exhibit 5.1 Examples of Medical Technology 104
Exhibit 5.2 Mechanisms to Control the Growth of Technology 109
Exhibit 5.3 Summary of FDA Legislation 112
Exhibit 5.4 Criteria for Quality of Care 116
Exhibit 5.5 Cost Increases Associated with New Medical
Technology 118
Exhibit 5.6 Cost-Saving Medical Technology 118
Exhibit 6.1 Health Care Financing and Its Effects 129
Exhibit 6.2 Employer Characteristics That Influence Health
Insurance Offer Rates 133
Exhibit 6.3 Federally Mandated Services for State Medicaid
Programs 142
Exhibit 7.1 Outpatient Settings and Services 155
Exhibit 7.2 Access to Primary Care 157
Exhibit 7.3 Domains of Primary Care 164
Exhibit 7.4 Patient-Centered Medical Home Accreditation
Criteria 173
Exhibit 8.1 Major Stages of Hospital Evolution 183
Exhibit 8.2 Factors Contributing to the Growth of Hospitals 186
Exhibit 8.3 Factors Contributing to the Downsizing of
Hospitals 188
Exhibit 8.4 Characteristics of a Community Hospital 192
xiv
List of Exhibits xv
Exhibit 9.1 Main Characteristics of Managed Care 208
Exhibit 9.2 Differences Among the Three Main Types of Managed
Care Plans 215
Exhibit 10.1 Seven Essential Characteristics of Long-Term Care 232
Exhibit 10.2 Activities of Daily Living 234
Exhibit 10.3 Age-Related Progression of Long-Term Care
Intensity 234
Exhibit 11.1 Predisposing, Enabling, and Need Characteristics of
Vulnerability 253
Exhibit 11.2 Racial and Ethnic Disparities 254
Exhibit 11.3 Selected Federal Programs to Eliminate Racial and
Ethnic Disparities 257
Exhibit 12.1 Main Reasons for the High Cost of Health Care 281
Exhibit 12.2 Selected Quality Indicators 291
© ninjaMonkeyStudio/Getty Images
List of Tables
Table 1.1 Health Care Systems of Selected Industrialized
Countries 20
Table 2.1 Comparison of Market Justice and Social Justice 34
Table 2.2 Evolution of Healthy People Initiatives 37
Table 3.1 Average Annual Percent Increase in Gross Domestic
Product and Federal and State Expenditures Between
1965 and 1970 68
Table 4.1 Persons Employed at Health Services Sites 76
Table 4.2 Active Physicians: Type and Number per 10,000
Population 78
Table 4.3 Ambulatory Visits by Generalists and Specialists in the
United States, 2013 81
Table 4.4 Specialties for Dentists, 2016 85
Table 4.5 Sites of Employment for Pharmacists, 2016 86
Table 4.6 Employment Levels of Doctoral-Level Health Professionals
in the United States, 2016 87
Table 6.1 Hospital Days of Stay and Costs for a Given DRG 146
Table 6.2 National Health Expenditures, Selected Years 149
Table 6.3 Growth Comparisons of National Health Expenditures to
the GDP and CPI, 2000–2015 150
Table 8.1 Relationship Between the Selected Measures of Capacity
Utilization 190
Table 10.1 Nursing Home Trends (Selected Years) 248
Table 10.2 Sources of National Health Expenditures for Nursing
Care Facilities and Continuing Care Retirement Centers,
2016 248
Table 12.1 Health Spending in Organization for Economic
Cooperation and Development Countries 278
Table 12.2 Selected National Surveys of Health Care 288
Table 14.1 Deficits and Surpluses in Medicare Funding:
2014–2016 344
xvi
xvii
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List of Figures
Figure 1.1 Managed Care: Integration of Functions 2
Figure 1.2 Total Health Expenditure per Capita and Share of GDP,
United States and Selected Countries, 2016 11
Figure 1.3 Life Expectancy at Birth 12
Figure 1.4 Death Rates Among Children 1–19 Years of Age, by
OECD Country 13
Figure 1.5 Systems Framework 21
Figure 2.1 Age and Causes of Deaths for 2015 27
Figure 2.2 Schematic Definition of Population Health 30
Figure 2.3 Action Model to Achieve Healthy People 2020
Overarching Goals 39
Figure 2.4 Social Determinants of Health 41
Figure 4.1 Evolution of the Focus of Health Care Delivery 97
Figure 6.1 Relationships Among Health Care Financing, Insurance,
Access, Payment, and Expenditures 128
Figure 6.2 Distribution of Health Plan Enrollments 132
Figure 6.3 Medicare Part A Expenditures, 2015 138
Figure 6.4 Medicaid Recipient Categories, 2013 141
Figure 6.5 Breakdown of National Health Expenditures, 2015 150
Figure 7.1 Coordination Role of Primary Care in Health
Delivery 166
Figure 8.1 Medicare’s Share of Hospital Expenses 187
Figure 8.2 Comparison of Growth in Hospital and National Health
Expenditures 188
Figure 8.3 Types of Hospitals, 2016 191
Figure 8.4 Hospital Governance and Operational Structure 200
Figure 9.1 Average Annual Rates of Increase in National Health
Expenditures (NHE), Gross Domestic Product (GDP),
and Consumer Price Index (CPI), 1966–1971 209
Figure 9.2 Enrollment of Workers in Employer-Sponsored Health
Plans, Selected Years 210
Figure 10.1 Progressive Steps Toward the Need for Long-Term Care
Among the Elderly 231
Figure 10.2 Long-Term Care Institutions for the Elderly 241
xviii List of Figures
Figure 11.1 General Framework to Study Vulnerable Populations 252
Figure 11.2 High Serum Total Cholesterol: Men Versus Women 259
Figure 11.3 Obesity Among Children 260
Figure 11.4 Delay in Seeking Needed Medical Care by Insurance
Status 261
Figure 11.5 Delay in Seeking Needed Dental Care by Insurance
Status 262
Figure 11.6 Diabetes Prevalence in the United States 265
Figure 12.1 Determinants of Access 287
Figure 12.2 The Three Domains of Health Care Quality 293
© ninjaMonkeyStudio/Getty Images
CHAPTER 1
Major Characteristics of
U.S. Health Care Delivery
▸ Introduction
The United States has a unique health care delivery system. Nearly all developed countries offer universal health insurance programs, and the government plays a central role in them. Almost all citizens
are entitled to routine, basic, and other health care services. In the United
States, the Affordable Care Act1 (ACA) has expanded health insurance
but not achieved universal coverage. Furthermore, access to affordable
1 The Affordable Care Act, also known as Obamacare, refers to the Patient
Protection and Affordable Care Act of 2010 as amended by the Health Care
and Education Reconciliation Act of 2010.
1
health care is inadequate at both individual and national levels—a chal-
lenge for academics, health care professionals, and politicians alike.
This chapter provides a general understanding of health care deliv-
ery in the United States. The U.S. health care delivery system is complex
and massive, with many loosely coordinated components (FIGURE 1.1).
Organizations and individuals involved in health care delivery
include educational and research institutions, medical suppliers, insurers,
payers, and claims processors as well as health care providers. Nearly 12.3
million people work in health care delivery settings, including doctors
of medicine (MDs), doctors of osteopathy (DOs), nurses, dentists, phar-
macists, and administrators, and about 451,500 physical, occupational,
and speech therapists in rehabilitation services. The institutions where
health care is delivered include 5,627 hospitals, 15,656 nursing homes,
nearly 2,806 inpatient mental health facilities, and 12,400 home health
agencies and hospices. Nearly 1,200 programs support basic health ser-
vices for migrant workers and the homeless, community health centers,
black lung clinics, human immunodeficiency virus (HIV) early interven-
tion services, and integrated primary care and substance abuse treatment
programs. Various health care professionals are trained in 172 medical
FIGURE 1.1 Managed Care: Integration of Functions
Employers
Government–Medicare, Medicaid
Individual self-funding
FINANCING
DELIVERY (Providers)
Access Physicians
Hospitals
Nursing homes
Diagnostic centers
Medical equipment vendors
Community health centers
INSURANCE
PAYMENT
Insurance companies
Blue Cross/Blue Shield
Self-insurance
Insurance companies
Blue Cross/Blue Shield
Third-party claims processors
Utilization
controls
Capitation
or
discounts
Risk
underwriting
Integration of functions through managed care (HMOs, PPOs)
2 Chapter 1 Major Characteristics of U.S. Health Care Delivery
and osteopathic schools, 66 dental schools, 133 schools of pharmacy, and
over 1,869 nursing programs throughout the U.S. (Bureau of Labor Sta-
tistics, 2016; Bureau of Primary Health Care, 2011; National Center for
Health Statistics, 2017).
176.6 million Americans younger than age 65 have private health
insurance coverage, with most covered through their employers. Another
110.7 million are covered by two major public health insurance programs,
Medicare and Medicaid. Medicare is managed by the U.S. federal govern-
ment whereas Medicaid is jointly managed by the federal and state gov-
ernments. Private health insurance can be purchased from roughly 1,000
health insurance companies. The private managed care sector includes
approximately 470 licensed health maintenance organizations (HMOs)
and 934 preferred provider organizations (PPOs). Multiple government
agencies are involved in health care financing, medical and health ser-
vices research, and regulatory oversight of the health care delivery system
(Aventis Pharmaceuticals, 2002; Bureau of Primary Health Care, 2011;
Kaiser Family Foundation, 2011, 2016a; National Center for Health Statis-
tics, 2007, 2017; U.S. Bureau of the Census, 1998, 2007).
▸ Subsystems of U.S. Health Care Delivery
In the U.S., multiple subsystems of health care delivery serve to address
the health needs of certain populations, through market forces or
government action.
Managed Care
As shown in Figure 1.1, managed care is the dominant health care deliv-
ery system in the United States. Managed care covers most Americans in
private and public health insurance programs through contracts with a
managed care organization (MCO), such as an HMO or a PPO. The MCO,
in turn, contracts with selected health care providers—physicians, hospi-
tals, and others—to deliver health care services to its enrollees. An enrollee
(member) is an individual covered under a managed care plan. The con-
tract between the MCO and the enrollee—with descriptions of health ser-
vices for enrollees—is referred to as the health plan or simply the plan.
Managed care strives for efficiency by integrating basic functions
of health care delivery and seeks to control (manage) the utilization
and cost of medical services. The MCO pays providers either through
a capitation (per head) arrangement, in which providers receive a fixed
payment for each enrollee under their care, or through a discounted
fee arrangement. Providers are willing to discount services for MCO
patients to be included in the MCO network and be guaranteed a patient
Subsystems of U.S. Health Care Delivery 3
population. Health plans depend on the expected cost of health care uti-
lization, which often can cost more than the insurance premiums col-
lected. By underwriting this risk, the plan assumes the role of insurer.
Figure 1.1 illustrates the functions and mechanisms necessary for
health care delivery in a managed care environment. The four key func-
tions of financing, insurance, delivery, and payment constitute the quad-
function model and are integrated in managed care to varying degrees.
Military Medical Care
The military medical care system is available, mostly free of charge, to
active-duty military personnel of the U.S. Army, Navy, Air Force, and
Coast Guard, as well as members of certain uniformed nonmilitary ser-
vices such as the Public Health Service and the National Oceanographic
and Atmospheric Association. This organized system offers compre-
hensive services, both preventive and treatment- oriented. Services are
largely provided by salaried health care personnel. Various basic services
are provided at dispensaries, sick bays aboard ships, first aid stations,
medical stations, and base hospitals, and advanced medical care is pro-
vided in regional military hospitals.
Families and dependents of active-duty or retired career military
personnel are treated at these hospitals or dispensaries or covered by Tri-
Care, a program financed by the Department of Defense. This permits
beneficiaries to receive care from both private and military medical care
facilities.
The Veterans Administration (VA) health care system is provided
to retired veterans who have served in the military, with priority given
to those who are disabled. The VA system focuses on hospital care,
mental health services, and long-term care and is one of the largest
and oldest (dating back to 1930s) formally organized health care sys-
tems in the world. Its mission is to provide medical care, education
and training, research, contingency support, and emergency manage-
ment for the Department of Defense medical care system. It provides
health care to more than 9.6 million individuals at over 1,100 sites,
including 153 hospitals, 807 ambulatory and community-based clinics,
135 nursing homes, 209 counseling centers, 47 domiciliaries (residential
care facilities), 73 home health care programs, and various contract care
programs. The VA budget included $68.6 billion for veterans’ medical
care in 2017—an increase of 6% from 2016—and VA staff numbered
over 360,000 in 2017 (Department of Veterans Affairs, 2017; National
Center for Veterans Analysis and Statistics, 2007).
The VA system is organized into 21 Veterans Integrated Service Networks
(VISNs). Each VISN is responsible for coordinating the activities of hospi-
tals and other facilities in its jurisdiction. Each VISN is allocated federal
4 Chapter 1 Major Characteristics of U.S. Health Care Delivery
funds and is responsible for its equitable distribution among its hospitals
and other providers as well as for improved efficiency and cost containment.
Subsystems for Special Populations
Special populations, or vulnerable populations, are persons with health
needs but inadequate resources to address them, including individuals
who are poor and uninsured, belong to a certain minority group or are
of a certain immigration status, or live in geographically or economi-
cally disadvantaged communities. This population typically receives care
through the nation’s safety net, including public health insurance pro-
grams such as Medicare and Medicaid, and safety net providers such as
community health centers, migrant health centers, free clinics, hospital
emergency departments, and public hospitals. Many safety net providers
offer comprehensive medical and enabling services according to indi-
vidual needs—such as language assistance, transportation, nutrition and
health education, social support services, and child care.
For example, federally qualified health centers have provided pri-
mary and preventive health services to rural and urban underserved
populations for over 50 years. The Bureau of Primary Health Care
(BPHC), under the Health Resources and Services Administration in the
Department of Health and Human Services (DHHS), provides federal
support for community health centers, including programs for migrant
and seasonal farm workers and their families, homeless persons, public
housing residents, and school-age children. These facilitate access to care
for patients who are predominantly minority, low-income, uninsured, or
enrolled in Medicaid, the public insurance program for the poor. In 2016,
1,367 community health organizations nationwide served 26 million
people across 10,400 service sites and handled 104.1 million patient vis-
its. Roughly 92% of this population had incomes under 200% of the fed-
eral poverty level, and 23% were uninsured (Bureau of Primary Health
Care, 2017). Health centers have contributed to great improvements in
health outcomes for the uninsured and for Medicaid populations and
reduced disparities in health care and health status across socioeconomic
and racial and ethnic groups (Politzer et al., 2003; Shi et al., 2001).
Medicare is one of the largest sources of public health insurance in
the U.S., serving the elderly, the disabled, and those with end-stage renal
disease. Managed by the Centers for Medicare and Medicaid Services
(CMS) within the DHHS, Medicare offers coverage for hospital care,
postdischarge nursing care, hospice care, outpatient services, and pre-
scription drugs.
Medicaid is the third largest source of health insurance in the U.S.,
insuring approximately 19% of the U.S. population and providing cover-
age for low-income adults, children, the elderly, and the disabled (Kaiser
Subsystems of U.S. Health Care Delivery 5
Family Foundation, 2016a). Medicaid is also the largest provider of long-
term care to the elderly and the disabled, and has significantly expanded
under the ACA.
In 1997, the government created the Children’s Health Insurance
Program (CHIP) to provide insurance to children in uninsured families.
This program expanded coverage to children in families that have mod-
est incomes but do not qualify for Medicaid. In 2016, the CHIP program
spent $15.6 billion to cover approximately 5.9 million children (Kaiser
Family Foundation, 2016b).
Although the U.S. offers government-funded health insurance, the
safety net is by no means secure. The availability of safety net services
varies by community. Vulnerable populations in communities without
safety net providers often must forgo care or seek services from emer-
gency departments where available. Safety net providers, in turn, face
pressure from the increase in the number of poor and Medicaid-insured
individuals in their communities.
Integrated Systems
Integrated delivery systems (IDSs), or health networks, were established
through organizational integration beginning in the early 2000s. An IDS
is a network of health care providers and organizations that provides
coordinated health care to a population and is responsible for the health
outcomes and health status of the population (Shortell et al., 1996). By
owning or partnering with hospitals, physicians, and insurers, IDSs aim
to deliver a range of services. The ACA encourages physicians and hos-
pitals to integrate and coordinate services, which is expected to make
health care more cost-effective and of higher quality.
An accountable care organization (ACO), a new model of integrated
organization, is expected to respond to new payment incentives and be
held accountable for better quality outcomes at lower cost under the new
Medicare Shared Savings Program. Approximately 6 million Medicare ben-
eficiaries receive care in an ACO, and since 2011 at least 744 organizations
including those in the private sector have become ACOs. An estimated
23.5 million Americans are now served by an ACO. Medicare and com-
mercial ACO initiatives demonstrate that ACOs can improve the quality of
care, the patient experience, and even constrain costs (Yasaitis et al., 2016).
States are also turning to integrated Medicaid models to manage costs
and encourage innovation in health care delivery. Medicaid ACOs are
integrating primary care and behavioral health services, and some ACOs
are exploring innovative financing models, such as cross-sectoral shared-
savings models. So far, 42 states have implemented Medicaid managed
care programs with risk-based reimbursements, and at least 10 states plan
to expand managed care programs (Kaiser Family Foundation, 2015).
6 Chapter 1 Major Characteristics of U.S. Health Care Delivery
Due to the ACA and a focus on the triple aim of improved health,
improved health care, and lower costs, health care is experiencing a par-
adigm shift to integrated, patient-centered care. The growing burden
of chronic disease and the increasing number of people with complex
health care needs require delivery systems that bring together various
professionals and skills from the cure (health care) and care (long-term
and social care) sectors.
The integration of primary care and behavioral health exemplifies
this innovative team approach. Collaboration is challenging due to cul-
tural and clinical differences between primary and behavioral health pro-
viders, but a team approach to care has proved to be a powerful means
to develop this integrated model. Various health care professionals—
including psychiatrists, physicians, nurse practitioners, social workers,
psychologists, addiction counselors, care managers, community health
workers, peers, medical assistants, nurse aides, and representatives from
community agencies—comprise the integrated care team (SAMHSA-
HRSA Center for Integrated Health Solutions, 2014).
Long-Term Care Delivery
Long-term care (LTC) consists of medical and nonmedical care for indi-
viduals with chronic health issues and disabilities that prevent them
from performing regular daily tasks and includes both health care and
support services for daily living. LTC is delivered in various settings,
including patients’ homes, assisted living facilities, and nursing homes.
Most LTC services are provided by family members and friends without
pay, and not covered by Medicare, so costs for LTC can impose a burden
on families. Medicaid covers several levels of LTC services, but a person
must be indigent to qualify. LTC insurance plans are also offered sepa-
rately by insurance companies, but most people do not purchase them
because premiums can be unaffordable. By 2020, it is estimated that over
12 million Americans will require LTC, which will impose a strain on the
nation’s financial resources (CMS, 2011).
Public Health System
The mission of the U.S. public health system is to improve and protect
community health. The Institute of Medicine’s2 Future of Public Health in
the 21st Century report outlined the need for a more robust public health
infrastructure and a population-based health approach (Centers for Dis-
ease Control and Prevention [CDC], 2013). The National Public Health
2 The Institute of Medicine was renamed the National Academy of Medicine
in 2015.
Subsystems of U.S. Health Care Delivery 7
Performance Standards Program identifies 10 essential public health ser-
vices that this system must deliver:
1. Monitor health status to identify and solve community health
problems
2. Diagnose and investigate health problems and hazards
3. Inform, educate, and empower people about health problems
and hazards
4. Mobilize the community to identify and solve health problems
5. Develop policies and plans to support individual and commu-
nity health efforts
6. Enforce laws and regulations to protect health and safety
7. Provide people with access to necessary care
8. Ensure a competent, professional health workforce
9. Evaluate the effectiveness, accessibility, and quality of personal
and population-based health services
10. Perform research to discover innovative solutions to health
problems
Public health constituted 4.3% of total U.S. health care expenditures
of $3.3 trillion in 2016 (CMS, 2017). Federal funding for preventing dis-
ease and improving community health varied widely by state in 2013,
from $13.67 per capita in Indiana to $46.48 per capita in Alaska (Trust
for America’s Health & Robert Wood Johnson Foundation, 2014). To
bolster public health efforts, the ACA created the Prevention and Pub-
lic Health Fund to provide expanded, sustained national investments in
prevention and public health, improve health outcomes, and enhance
the quality of health care.
Expanded efforts are required in the fight against antibiotic resis-
tance, obesity and heart disease, prescription drug overdose, and emerg-
ing health issues such as Chikungunya (an infectious disease) and the
risks posed by e-cigarettes. Advanced information systems and data
sharing have become more important in ensuring a strong public health
system.
▸ Health Care Reform
A primary goal of health care reform efforts such as the ACA is to expand
coverage and increase access to care. The ACA expanded Medicaid cov-
erage in participating states to all nonelderly adults with incomes less
than 138% of the federal poverty level (FPL), and subsidized insurance
on the health care marketplace for small businesses and persons without
employment-based insurance. As of November 2017, 33 states including
8 Chapter 1 Major Characteristics of U.S. Health Care Delivery
the District of Columbia expanded their Medicaid programs in keeping
with ACA provisions (Kaiser Family Foundation, 2017a). As of August
2016, 15 states operated their own exchanges. Other states used the fed-
eral exchange or operated an exchange with support from the federal
government.
When the ACA’s first open enrollment period began in 2013, 41
million Americans lacked insurance; by 2016, the number of uninsured
Americans fell to 27 million (Commonwealth Foundation, 2017). The
expansion of Medicaid increased coverage, improved access and fami-
lies’ financial security, and economically benefitted states and providers
(Kaiser Family Foundation, 2017b). The Congressional Budget Office
(CBO) reported that approximately 12 million people were covered by
the exchanges in March 2016, 10 million of whom received subsidies to
pay for insurance (CBO, 2017).
Another key provision of the ACA requires that private insurance
plans cover recommended preventive services without any patient cost-
sharing and, since this policy went into effect, an estimated 137 million
people—55.6 million women, 53.5 million men, and 28.5 million
children—have received no-cost coverage for preventive services (ASPE,
2015).
President Donald Trump and Republicans in Congress attempted
to repeal and replace the ACA in 2017 but to date have been unable to
pass a bill through the U.S. Senate. In 2017, the Senate voted to approve
a “budget blueprint” to let Republicans repeal parts of the law. House
Republicans announced their proposed replacement for the ACA, the
American Health Care Act, but this failed amid a revolt among Repub-
licans. The U.S. House of Representatives voted for the replacement by
a narrow margin, sending the bill to the Senate for deliberation, but the
repeal legislation failed to gain a simple majority in the Senate. Some
Congress members suggested smaller bipartisan modifications to stabi-
lize the ACA individual insurance marketplaces.
▸ Characteristics of the U.S.
Health Care System
A nation’s health care system is influenced by a host of factors, including
politics, economics, technology, society and culture, physical environ-
ment, and demographic and other population characteristics. Together,
these external forces have shaped the course of health care delivery in
the U.S. This section summarizes the characteristics that distinguish the
U.S. health care delivery system from those of other countries, with 10
primary differences listed below (EXHIBIT 1.1).
Characteristics of the U.S. Health Care System 9
No Central Governing Agency; Little Integration
and Coordination
The U.S. health care system stands in stark contrast to the health care sys-
tems of other developed nations, which have centrally controlled universal
health care systems that authorize health care financing, payment, and deliv-
ery to all residents. The health care system in the U.S. is not centrally con-
trolled; rather, it is financed publicly and privately and thus features various
payment, insurance, and delivery mechanisms. Private financing, mostly
through employers, accounts for about 55% of total U.S. health care expen-
ditures, and the government finances the remaining 45% (CMS, 2017).
Centrally controlled health care systems are less complex and less
costly, managing total expenditures with global budgets and with the
ability to govern the availability and utilization of services. The U.S. has
a large private infrastructure in which hospitals and physician clinics
operate as private businesses, independently of the government. Even
so, U.S. federal and state governments play an important role in health
care delivery, determining public-sector expenditures and reimburse-
ment for Medicaid and Medicare services. The government also estab-
lishes standards for participation through policy and regulation, and
providers must comply with these standards to care for Medicaid and
Medicare patients. Certification standards are also regarded as mini-
mum quality standards in most health care industry sectors.
Technology Driven and Focused on Acute Care
The United States is a hotbed of research and innovation in medical
technology. Scientific and technological advances often create a demand
for new services, despite shrinking financial resources. Other factors
also contribute to increased demand for expensive high technology care.
Patients often assume the newest innovations represent the best quality
care, and physicians often seek to use the newest technology. Hospitals
EXHIBIT 1.1 Main Characteristics of the U.S. Health Care System
■ No central governing agency and little integration and coordination
■ Technology-driven delivery system focusing on acute care
■ High cost, unequal access, and average outcome
■ Delivery of health care under imperfect market conditions
■ Government as subsidiary to the private sector
■ Fusion of market justice and social justice
■ Multiple players and balance of power
■ Quest for integration and accountability
■ Access to health care services selectively based on insurance coverage
■ Legal risks influencing practice behaviors
10 Chapter 1 Major Characteristics of U.S. Health Care Delivery
FIGURE 1.2 Total Health Expenditure per Capita and Share of GDP, United States and
Selected Countries, 2016
Data from Organization for Economic Cooperation and Development. OECD health data. OECD Health Statistics [database], 2016. Accessed February 5, 2018.
compete for having the most modern medical equipment and face pres-
sure to recoup capital investments made in technology. Legal risks for
providers and health plans may also encourage the use of new technology.
Although technology has ushered in a new generation of clinical
interventions, negative outcomes result from overuse. The use of new
technology contributes to rising health care costs. Technological inno-
vation has its place in medicine but, with limited resources, there is
insufficient emphasis on primary care and public health, which lead to
better population-level outcomes and are more cost-effective.
High in Cost, Unequal in Access, and Average in Outcome
Of all developed countries, the United States spends the most on
health care services, which constituted nearly 17% of the gross domes-
tic product [GDP] in 2016 (FIGURE 1.2), and many U.S. residents have
limited access to even the most basic care.
Access is the ability of an individual to obtain health care when needed.
In the U.S., access is restricted to persons who (1) have employer-based
health insurance, (2) are covered under a government- sponsored health care
program (including health coverage under the ACA), (3) can buy insurance
with their own funds, (4) can pay for services privately, or (5) can obtain ser-
vices through safety net providers. Health insurance is the primary—but not
necessarily a sufficient—means for obtaining access to care. Despite expan-
sion of health insurance, some people still face barriers to access. One-third
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Characteristics of the U.S. Health Care System 11
of physicians do not take new Medicaid- insured patients (Decker 2012).
For primary care—consistent basic and routine care— uninsured individu-
als cannot visit a physician without making out-of-pocket payments. Those
who cannot afford to pay usually wait until developing health problems,
when they may be cared for in a hospital emergency department.
Experts believe that inadequacy and disparity in access to primary care
services are the main reasons that the U.S. lags behind other developed
nations in population health. FIGURE 1.3 shows the U.S. racial disparities in
life expectancy, and FIGURE 1.4 summarizes death rates among children in
the Organization for Economic Cooperation and Development (OECD).
Imperfect Market Conditions
Under national health care programs, patients can select their providers, but
true economic market forces are virtually nonexistent. In the U.S., health
care delivery is largely in private hands, but health care is only partially
governed by free market forces. Hence, the system is a quasi-market or an
imperfect market system. The following key characteristics of free markets
help explain why the U.S. health care system is not a true free market.
In a free market, many patients (buyers) and providers (sellers) act
independently, and patients can choose providers based on price and qual-
ity of services. In reality, however, the payer is an MCO, Medicare, or Med-
icaid, not the patient. Prices are set by agencies outside the market and thus
are not freely governed by the simple market forces of supply and demand.
A free health care market requires free competition among providers
based on price and quality of services. Generally, free competition exists
among providers in the U.S., but the consolidation of buying power into
the hands of MCOs forces providers to form alliances and IDSs on the
FIGURE 1.3 Life Expectancy at Birth
National Center for Health Statistics. Health, United States, 2016: In Brief. Hyattsville, MD. 2017, p 116. https://www.cdc.gov/nchs/data/hus/hus16
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12 Chapter 1 Major Characteristics of U.S. Health Care Delivery
https://www.cdc.gov/nchs/data/hus/hus16
supply side. In certain regions, a single medical system becomes the sole
provider of major health care services. As the U.S. health care system con-
tinues to develop in this direction, it seems that only large metropolitan
areas will have more than one large integrated system competing for the
business of health plans.
Free markets work best when consumers are educated about products,
but patients are not always well informed about their choices for health
care. Direct-to-consumer advertising for pharmaceuticals and other prod-
ucts often complicates the decision of what is best for a patient. Choices
of technologies, diagnostic methods, interventions, and medicines can be
complex and require physician input. As an advocate, physicians can help
educate their patients. Increasingly, consumers are taking initiative to edu-
cate themselves with resources on the Internet for gathering medical infor-
mation, although such information is not necessarily reliable.
In a free market, patients are provided with information on the price
and quality of services offered by each provider. In the U.S., however,
FIGURE 1.4 Death Rates Among Children 1–19 Years of Age, by OECD Country
Data from the year 2006 or most recent year. Doing Better for Children. Chapter 2: Comparative Child Well-being across the OECD; p. 51
41
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Characteristics of the U.S. Health Care System 13
pricing methods for health care confound free market mechanisms. Hid-
den costs make it difficult to gauge the full expense of services beforehand.
Item-based pricing, for example, refers to the costs of ancillary services that
tend to accompany surgeries and other major procedures. Patients may
be informed of the cost ahead of time but cannot anticipate the additional
cost of specialists and of supplies and facilities, and thus have difficulty
ascertaining the total price before services are received. Package pricing
and capitated fees can help overcome these challenges by bundling fees for
packages of related services. Package pricing covers services bundled for
an episode of care. This encompasses less than capitation, which covers all
services that a health plan enrollee may need for a year.
Patients directly bear the cost of services received in a free market
system. The purpose of insurance is to cover major expenses for unlikely
events—but insurance covers basic and routine services, which undermines
this principle. Coverage for minor events such as colds or coughs is equiva-
lent to prepayment for such services. There is a moral hazard, namely, that
enrollees typically use more services after purchasing insurance.
In a free market, demand for services is determined by market forces—
when many individuals independently determine what to buy and when to
buy products or services. But health care is different. First, decisions about
utilizing health care are often determined by need, not by price-based
demand. Need can be self-assessed or determined by a medical expert.
Nevertheless, many factors discussed previously affect whether the per-
son actually obtains care. Second, health care delivery can actually create
demand. For example, practitioners with a financial interest in ordering
further treatments may create artificial demand—commonly referred to as
provider- induced demand.
Government as Subsidiary to the Private Sector
In most developed countries, the government plays a central role in
health care delivery. But in the United States, the private sector has the
dominant role. This can partially be explained by the American tradition
of individual responsibility and a commitment to limiting government
power. Government spending for health care is largely confined to filling
in the gaps left unaddressed by the private sector, including public health
functions such as clean water and sanitation, research and training sup-
port, and care for vulnerable populations.
Fusion of Market Justice and Social Justice
Market justice and social justice are contrasting theories governing how
health care services are produced and distributed. The principle of mar-
ket justice places the responsibility for fair distribution of health care
14 Chapter 1 Major Characteristics of U.S. Health Care Delivery
on market forces in a free economy. Medical care and benefits are dis-
tributed according to people’s willingness and ability to pay (Santerre &
Neun, 1996, p. 7). In contrast, social justice emphasizes the well-being of
the community over that of the individual; the inability to obtain medical
services due to a lack of financial resources is considered unjust. In a sys-
tem that blends public and private resources, the two theories often work
well together, and both contribute their ideals to the overall system. For
example, individuals who are employed and have middle-class incomes
obtain employer-sponsored health insurance, whereas the most needy
members of society depend on government- sponsored programs. At the
same time, these two principles of justice create conflicts. For example,
many small employers in the U.S. do not offer insurance, or else pro-
vide insurance that their employees cannot afford. Yet, these employees
do not qualify for government assistance because their income exceeds
a certain threshold. The ACA is intended to address this situation, but
doing so may take years.
Multiple Players and Balance of Power
The U.S. health care system involves multiple players including physi-
cians, administrators of health service institutions, insurance compa-
nies, large employers, and the government. Big business, labor, insurance
companies, physicians, and hospitals form politically powerful special-
interest groups represented before lawmakers by lobbyists. Each player
has an economic interest to protect, but problems arise when players’
interests are at odds. Providers seek to maximize government reimburse-
ment for Medicare and Medicaid services, but the government strives
to contain cost increases. Different interests produce counteracting
forces in the U.S. health care system. One benefit is that they prevent
any single entity from dominating the system. However, given so many
conflicting interests, comprehensive, system-wide health care reform is
nearly impossible, and cost containment is a challenge. Thus, health care
reform is incremental or piecemeal and can be regressive as presidential
administrations change. (Note: The ACA is an example of incremental,
not comprehensive, reform that primarily addresses coverage.)
Quest for Integration and Accountability
Primary care in the U.S. makes for an ideal organizing hub for continu-
ous, coordinated health care services. Although this model became popu-
lar as managed care was expanded, it is still undeveloped. Ideally, primary
care integrates health care in comprehensive, coordinated, and continu-
ous health care services through a seamless delivery—also referred to as
a medical home or health home for patients. This model emphasizes the
patient–provider relationship in improving the health of each person,
Characteristics of the U.S. Health Care System 15
thereby improving the health of the population. Key to this relationship is
accountability. Provider accountability means providing quality care effi-
ciently, while patient accountability means taking responsibility for one’s
health and using resources sensibly.
Access to Health Care Services Selectively Based on
Insurance Coverage
The U.S. offers some of the best medical care in the world, yet this care
is generally available only to individuals with insurance that provides
adequate coverage or with sufficient resources to pay for services them-
selves. The uninsured have limited options for medical care. They can
(1) pay physicians out of pocket at rates typically higher than those under
insurance plans, (2) seek care from safety net providers, or (3) obtain
treatment for acute illnesses at a hospital emergency department, for
which hospitals do not receive direct payments unless patients can afford
them. The Emergency Medical Treatment and Labor Act of 1986 requires
screening and evaluation of all patients, provision of necessary stabilizing
treatment, and hospital admission when necessary, regardless of ability to
pay. Unfortunately, the misuse of emergency departments results in cost
shifting, in which the costs of emergency room care to the uninsured are
covered by patients with the ability to pay for services, privately insured
individuals, employers, and the government (i.e., taxpayers).
Legal Risks Influence Practice Behaviors
As a society, Americans are quick to file lawsuits. With the prospects of
great financial awards, many people bring alleged offenders to court at
the slightest perceived harm. Private health care providers are suscepti-
ble to litigation, and medical malpractice lawsuits are a serious risk in
the practice of medicine. For protection, most providers engage in defen-
sive medicine—that is, prescribing additional diagnostic tests, scheduling
checkup appointments, and maintaining abundant case documentation.
Many such efforts are unnecessary and raise costs and inefficiency.
▸ Health Care Systems of Other
Developed Countries
Three basic models for structuring national health care systems pre-
vail in Western European countries and Canada. In Canada, health
care is financed by the government through general taxes, but health
care itself is delivered by private providers. In the quad-function model
(see Figure 1.1), the Canadian system requires tighter consolidation of
16 Chapter 1 Major Characteristics of U.S. Health Care Delivery
financing, insurance, and payment coordinated by the government, and
delivery is characterized by detached private arrangements.
In Germany, health care is financed by government-mandated
employer and employee contributions, and health care is also delivered
by private providers. Private not-for-profit insurance companies—called
sickness funds—collect the contributions and pay physicians and hospi-
tals (Santerre & Neun, 2013). In this socialized health insurance system,
insurance and payment functions are integrated, and financing is bet-
ter coordinated with insurance and payment functions than in the U.S.
Delivery is characterized by independent private arrangements, and the
government has overall control.
In the United Kingdom, the infrastructure of health care delivery
is managed by the government, as is the financing of a tax-supported
national health insurance program. Most medical institutions are run by
the government and most providers, including physicians, are govern-
ment employees or organized in a publicly managed infrastructure. In the
quad-function model, the British system requires tighter consolidation
of all four functions, typically by the government.
Canada
In Canada, there have been several initiatives to integrate and coordi-
nate care for chronically ill patients with complex health care needs. In
2004, as part of the 10-Year Plan to Strengthen Health Care, all provin-
cial and territorial governments in Canada agreed to provide at least
half of their populations with access to multidisciplinary primary care
teams. By 2007, approximately three-fourths of family physicians were
working in physician-led, multiprofessional practices (Marchildon &
Mou, 2013). 60% of primary care physicians use computerized medical
records throughout Canada (Health Council of Canada, 2013; Mossialos
et al., 2015).
As of 2014, federal funding through the Canada Health Transfer was
modified to be distributed to provinces on a per-capita basis, ending com-
pensation from tax base variations that had benefited less wealthy provinces
(Mossialos et al., 2015). The new funding policy seeks to improve equity,
although it was criticized for reducing funding to less populated provinces
where people are older and health care costs are higher (Marchildon & Mou,
2013). All provinces have sought to reduce generic drug prices, with several
provinces greatly reducing these prices in recent years; in Ontario, in 2010,
the price ceiling for a generic drug was lowered to 25% of the price of the
corresponding brand-name drug, and British Columbia lowered its price
ceiling to 20% in 2014 ( Mossialos et al., 2015).
Primary care reform has been under way in Canada since 2000, when
the federal government invested CA$800 million (US$647 million) over
Health Care Systems of Other Developed Countries 17
6 years into the Primary Care Transition Fund. Provinces continue to
reform their primary care systems, including provider payment meth-
ods, to incentivize movement to team-based practice, chronic disease
management, and coordination of care with other providers, as well as to
integrate primary care and public health (Hutchison et al., 2011; Mossia-
los et al., 2017; Sweetman & Buckley, 2014).
Moreover, there have been many initiatives to ensure quality of
care. The federally-funded Canadian Patient Safety Institute is respon-
sible for promoting best practices and developing tools, strategies, and
standards for quality of care ( Mossialos et al., 2017). Another federally
funded institute, the Canadian Foundation for Healthcare Improvement,
helps implement initiatives to improve performance and created an ini-
tiative to reduce inappropriate prescribing in long-term care facilities
(Canadian Foundation for Healthcare Improvement, 2017).
Germany
Germany implemented the General Law on Patients’ Rights in 2013,
which includes measures to strengthen patients’ rights, the most import-
ant of which is the incorporation into the Civil Code of rights, duties,
and forms of etiquette pertaining to provider-patient relationships.
The federal cabinet passed the Bill of the First Act to Strengthen Long-
Term Care in 2014, to support families who provide care to a family mem-
ber at home and improve adult day care and short-term care by increasing
the number of caregivers. Benefits and services are set to increase by 20%
under this act. The Second Act to Strengthen Long-Term Care aims to
redefine the need for care with the growing number of dementia patients
and to expand long-term care eligibility, to include individuals with physi-
cal, mental, and psychological impairments (Backer, 2016).
The coalition agreement plan from 2013 includes proposals for mea-
sures to promote quality of care. The Federal Joint Committee was com-
missioned in 2014 to establish the Institute for Quality Assurance and
Transparency in Health Care, and the Hospital Care Structure Reform
Act introduced a focus on quality-related accreditation and payment of
hospitals in 2016. In Germany, providers must also have a quality manage-
ment system. All physicians are required to continue medical education,
and drugs and procedures must receive health technology assessments
before being reimbursed by sickness funds (Mossialos et al., 2017).
A new bill changes how Social Health Insurance contribution rates are
determined and shared between employer and employee in an effort to
contain indirect labor costs. Beginning in 2016, the general contribution
rate (14.6%) was retained, but the special contribution rate for employ-
ees only (0.9%) and the supplementary premiums (and necessary specific
social protection mechanisms) were abolished (Mossialos et al., 2017),
18 Chapter 1 Major Characteristics of U.S. Health Care Delivery
replaced by a supplementary income-dependent contribution rate to be
determined by each sickness fund on an individual basis. The average rate
was 0.83% in 2015—that is, the insured paid less than they did in 2014
( Mossialos et al., 2017).
The Federal Cabinet passed the E-Health Act in 2015 to improve
health care applications, providing deadlines to implement electronic
applications and introducing related incentives and sanctions. Begin-
ning in July 2018, statutory health insurance (SHI) physicians who do
not participate in the national online claims data program will receive
reduced pay (Busse et al., 2016).
United Kingdom
The purchasing and regulatory structures of the National Health Ser-
vice (NHS) in England were significantly reformed under the Health and
Social Care Act of 2012, which replaced 150 primary care trusts with
clinical commissioning groups (of which there are now 211 in England)
to make better use of resources in planning and purchasing decisions
for a range of services. Clinical commissioning groups differ from pri-
mary care trusts in their governance. General practices must belong to
a clinical commissioning group, whose governing body must be chaired
by a general practitioner and include other clinicians alongside manag-
ers. Clinical commissioning groups controlled approximately half of the
total NHS budget from 2013 to 2014.
NHS England was created to oversee clinical commissioning groups.
Reforms have envisioned all hospitals becoming semi- autonomous
foundation trusts; clinical commissioning groups would have greater
freedom to commission different providers and enhance public scru-
tiny. But evaluating their impact on cost, health outcomes, and quality
of care may be complex due to financial pressures on health care and
social care services (National Audit Office, 2013).
The Five Year Forward View, published in 2014, outlined challenges
facing the NHS and wide-ranging strategies to address them (NHS
England, 2014). It covered themes from empowering patients and com-
munities to testing new vanguard care models. To date, 50 vanguard sites
have been established to test innovations in health care delivery including
enhanced long-term care homes, vertically integrated hospital and com-
munity care, and networks for improved emergency care (NHS England,
2015). NHS England published Next Steps on the Five Year Forward
View in 2017, which took stock of progress at the halfway point of the
5-year view and set priorities for future reforms (NHS England, 2017).
TABLE 1.1 presents selected features of the national health care pro-
grams and health outcomes of Canada, Germany, and the United King-
dom, as compared with the United States.
Health Care Systems of Other Developed Countries 19
United
States Canada
United
Kingdom Germany
Type Pluralistic National
health
insurance
National
health
system
Socialized
health
insurance
Ownership Private Public/
private
Public Private
Financing Voluntary,
multipayer
system
(premiums
or general
taxes)
Single
payer
(general
taxes)
Single payer
(general
taxes)
Employer–
employee
(mandated
payroll
contributions
and general
taxes)
Reimbursement
(hospital)
Varies
(DRGs,
negotiated
fee-for-
service,
per diem,
capitation)
Global
budgets
Global
budgets
Per diem
payments
Reimbursement
(physicians)
RBRVS, fee-
for-service
Negotiated
fee-for-
service
Salaries and
capitation
payments
Negotiated
fee-for-service
Consumer
copayment
Small to
significant
Negligible Negligible Negligible
Life expectancy
for women
(years)
78.8 81.7 81.0 80.7
Infant mortality
per 1,000 live
births
5.8 4.8 3.9 3.3
Expenditures as
a percentage of
GDP (%)
17.2 10.6 9.7 11.3
Abbreviations: DRGs, diagnosis-related groups; RBRVS, resource-based relative value scale
Data from Organization for Economic Cooperation and Development. OECD health data. OECD Health Statistics [database], 2017,
https://data.oecd.org/healthstat/life-expectancy-at-birth.htm. Accessed February18, 2018.
TABLE 1.1 Health Care Systems of Selected Industrialized Countries
20 Chapter 1 Major Characteristics of U.S. Health Care Delivery
https://data.oecd.org/healthstat/life-expectancy-at-birth.htm
▸ Systems Framework
A system is a set of interrelated, interdependent components designed
to achieve some common goals, with logically coordinated components.
While the various components of the health care delivery system in the
United States are only loosely coordinated, the main components can be
identified in the framework of a systems model (FIGURE 1.5). The systems
framework shows how the structure of health care services in the U.S.
is based on fundamental principles and provides a logical arrangement
of the various components with a progression from inputs to outputs.
The main elements are system inputs (resources), structure, processes,
and outputs (outcomes). Outlook (future directions) is also a necessary
element of a dynamic system. This framework has been used as the con-
ceptual basis for organizing the chapters in this text.
System Foundations
The structure of the current health care system is not random, but
rather explained by historical, cultural, social, and economic factors.
FIGURE 1.5 Systems Framework
II. SYSTEM RESOURCES
Human Resources
Nonhuman Resources
IV. SYSTEM OUTCOMES
Issues and Concerns
Change and Reform
III. SYSTEM PROCESSES
The Continuum of Care
Special Populations
V. SYSTEM OUTLOOK
“The Future of Health Services Delivery”
(Chapter 14)
I. SYSTEM FOUNDATIONS
Cultural Beliefs and Values, Historical Developments
System Features
“Foundations of U.S. Health Care Delivery”
(Chapter 2)
“Historical Overview of U.S. Health Care Delivery”
(Chapter 3)
ENVIRONMENT
“Health Care Providers
and Professionals”
(Chapter 4)
“Technology and Its Effects”
(Chapter 5)
“Financing and Reimbursement
Methods”
(Chapter 6)
“Outpatient Services and Primary Care”
(Chapter 7)
“Hospitals”
(Chapter 8)
“Managed Care and Integrated Systems”
(Chapter 9)
“Cost, Access, and Quality”
(Chapter 12)
“Health Policy”
(Chapter 13)
“Long-term Care Services”
(Chapter 10)
“Populations with Special Health Needs”
(Chapter 11)
FUTURE TRENDS
Systems Framework 21
As discussed elsewhere in this text, these factors also affect both forces
shaping new trends and developments and those impeding change.
System Resources
Both human and nonhuman resources are essential for health care deliv-
ery. Human resources consist of the various types of workers directly
engaged in the delivery of health care to patients. Such personnel—
including physicians, nurses, dentists, pharmacists, other profes-
sionals trained at the doctoral level, and many kinds of allied health
professionals— usually have direct patient contact. Numerous ancillary
workers, such as those involved in billing and collection, marketing and
public relations, and building maintenance, often play important but
indirect supportive roles in health care delivery. Health care managers
are needed to manage and coordinate the various types of services.
System Processes
System processes are carried out mainly through the health care deliv-
ery infrastructure, which consists of hospitals, clinics, long-term care
providers, and other settings. Most health care services are delivered in
non-institutional settings, mainly associated with outpatient care. Insti-
tutional health services (inpatient care) are predominantly associated
with acute care hospitals. Managed care organizations are responsible for
actual health care delivery, apart from their role in financing, insurance,
and payment. Integrated systems deliver a range of health care services.
Special institutional and community-based settings have been developed
for long-term care and mental health, and the health care infrastructure
must also support and accommodate special populations.
System Outcomes
System outcomes refer to critical issues and concerns surrounding what
the health services system is able or unable to accomplish with regards
to its primary objective—to provide cost-effective health services that
meet quality standards to a nation. The aforementioned elements of the
systems model—foundations, resources, and processes—play a critical
role in achieving this objective. Access, cost, and quality are the main
outcome criteria for evaluating a health care delivery system. Issues and
concerns regarding these criteria can lead to initiatives for system reform
through health policy.
System Outlook
Dynamic health care systems must look forward and consider future
outcomes in the context of social, cultural, economic, and other forces.
22 Chapter 1 Major Characteristics of U.S. Health Care Delivery
▸ Conclusion
The United States has a unique health care delivery system, but it
does not provide universal access, so not all Americans enjoy contin-
uous, comprehensive health care. Health care delivery in the U.S. is
characterized by a patchwork of subsystems developed through mar-
ket forces or based on the need to care for certain populations. These
components include managed care, the military medical care and
VA systems, the system for vulnerable populations, and the emerg-
ing IDSs. Most countries with a national health care program have a
private sector of varying size. The systems framework helps explain
the roles of the various components of the U.S. health care delivery
system in an organized fashion.
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Medicaid Enrollment in Comprehensive Risk-Based Managed Care
Medicaid Enrollment in Comprehensive Risk-Based Managed Care
Medicaid Enrollment in Comprehensive Risk-Based Managed Care
https://www.kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/?currentTimeframe=0&sortModel=%7B%22colId%22:%22 Location %22,%22sort%22:%22asc%22%7D
29. National Center for Health Statistics. 2017. Health, United States, 2016: With
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Human Services.
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/wp-content/uploads/2014/10/5yfv-web . Accessed February 2018.
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.nhs.uk/wp-content/uploads/2015/06/5yfv-time-to-deliver-25-06 . Accessed
February 2018.
33. NHS England. 2017. Next steps on the NHS Five Year Forward View. https://www
.england.nhs.uk/wp-content/uploads/2017/03/NEXT-STEPS-ON-THE-NHS-FIVE
-YEAR-FORWARD-VIEW . Accessed February 2018.
34. Politzer RM, et al. 2003. The future role of health centers in improving national
health. J Public Health Policy. 24(3):296–306.
35. SAMHSA-HRSA Center for Integrated Health Solutions. 2014. Essential elements of
effective integrated primary care and behavioral health teams. https://www.integration
.samhsa.gov/workforce/team-members/Essential_Elements_of_an_Integrated_Team
. Accessed December 10, 2017.
36. Santerre RE, Neun SP. 2013. Health economics: Theories, insights, and industry studies.
Chicago, IL: Irwin.
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community health centers. J Ambul Care Manage. 24(1):51–66.
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America: Building organized delivery systems. Hoboken, NJ: Jossey-Bass.
39. Sweetman A, Buckley G. 2014. Ontario’s experiment with primary care reform.
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.policyschool.ca/wp-content/uploads/2016/03/ontario-health-care-reform .
Accessed March 28, 2018.
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Accessed August 2014.
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.2015.1635.
References 25
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https://www.england.nhs.uk/wp-content/uploads/2015/06/5yfv-time-to-deliver-25-06
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https://www.england.nhs.uk/wp-content/uploads/2017/03/NEXT-STEPS-ON-THE-NHS-FIVE-YEAR-FORWARD-VIEW
https://www.england.nhs.uk/wp-content/uploads/2017/03/NEXT-STEPS-ON-THE-NHS-FIVE-YEAR-FORWARD-VIEW
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© ninjaMonkeyStudio/Getty Images
CHAPTER 2
Foundations of U.S.
Health Care Delivery
▸ Introduction
Curative medicine in the U.S. appears to yield diminishing returns on health improvement even as expenditures increase (Saward and Sorensen, 1980). Society benefits from the promotion of
health and the prevention of disease, disability, and premature death.
However, although curative medicine has been the focus of health care
financing, progress has been slow toward an emphasis on health promo-
tion, disease prevention, and health maintenance for individuals with
chronic conditions. This is due to the U.S. health insurance system, cul-
tural values, and medical practices that emphasize disease rather than
health. Common definitions of health and measures of health status
reflect these inclinations.
26
This chapter explores various aspects of health, major determinants
of health, contrasting principles of market justice and social justice
in health care delivery, and public health interventions for population
health. Beliefs and values ingrained in American culture have been
instrumental in laying the foundation of the current system, which is
predominantly private, as opposed to a tax-financed national health
care program. In recent years, however, societal values have shifted to
a social justice mindset, and traditional values of self-reliance may be
giving way to greater dependence on the government. Passage of the
Affordable Care Act (ACA) presages a gradual shift away from market
justice and toward social justice in the U.S. health care system.
▸ What Is Health?
In the United States, the concepts of health and health care have largely
been governed by the medical model or, specifically, the biomedical
model. Under the medical model, health is defined as the absence of ill-
ness or disease. This perspective emphasizes diagnosis and intervention
to treat disease or symptoms. Optimal health exists when a person is free
of symptoms and does not require treatment. Thus, health care delivery
refers to the delivery of medical care or illness care. Prevention of disease
and promotion of health are relegated to a secondary status; a measure
often used to indicate lack of health in a population is mortality or death
(see FIGURE 2.1 for death rates by gender and cause in the United States).
FIGURE 2.1 Age and Causes of Deaths for 2015
National Center for Health Statistics. Deaths: Final Data for 2015. https://www.cdc.gov/nchs/data/nvsr/nvsr66/nvsr66_06
Age at death Cause of death
Diabetes
5.4% CLRD
5.7%
Cancer
22%
Heart
disease
23.4%
All other
causes
31.3%
Alzheimer’s
Unintentional
injuries
Cerebrovascular
diseases
0−24 years
2.33% 25−44 years
4.59%
85 years
and over
31.69%
75−84 years
23.50%
45−64
years
19.62%
65−74 years
18.25%
5.2%
4.1%
2.9%
What Is Health? 27
https://www.cdc.gov/nchs/data/nvsr/nvsr66/nvsr66_06
Medical sociologists further define health as the state of optimal
capacity of an individual to perform expected social roles and tasks, such
as work, school, and household chores (Parsons, 1972). A person who
is unable (as opposed to unwilling) to perform his or her social roles is
considered sick—even though many people continue to engage in such
obligations despite pain, cough, colds, and other disabilities, including
mental distress. Hence, engagement in social roles does not necessarily
signify optimal health.
The Society for Academic Emergency Medicine (SAEM) emphasizes
both physical and mental health, defining health as “a state of physical and
mental well-being that facilitates the achievement of individual and socie-
tal goals” (SAEM, 1992, p. 1386).
The World Health Organization’s (WHO’s) definition of health is
most often cited as the ideal for health care delivery systems. The WHO
(1948) defines health as “a complete state of physical, mental, and social
well-being, and not merely the absence of disease or infirmity” (p. 100).
This includes physical, mental, and social dimensions, and constitutes
the biopsychosocial model of health. The WHO defines a health care sys-
tem as all activities aimed at promoting, restoring, or maintaining health
(McKee, 2001). Health care includes more than medical care.
In recent decades, there has been a growing interest in holistic or com-
prehensive health, which emphasizes the well-being of every aspect of
what makes a person whole and complete. Holistic medicine seeks to treat
the whole person (Ward, 1995). Holistic health incorporates the spiritual
dimension in addition to the physical, mental, and social aspects of opti-
mal health, and thus provides the most complete understanding of health
(see EXHIBIT 2.1 for key examples of health indicators). A growing volume
of medical literature illustrates the healing effects of religion and spiritu-
ality on morbidity and mortality (Levin, 1994). Studies have identified an
inverse association between religious involvement and all-cause mortality
(McCullough et al., 2000). Religious and spiritual beliefs and practices pos-
itively influence physical, mental, and social well- being and may affect the
EXHIBIT 2.1 Indicators of Health
■ Self-reported health status
■ Life expectancy
■ Morbidity (disease)
■ Mental well-being
■ Social functioning
■ Functional limitations
■ Disability
■ Spiritual well-being
28 Chapter 2 Foundations of U.S. Health Care Delivery
incidences, experiences, and outcomes of many medical problems (Bauer
et al., 2017; Loureiro et al., 2017; Maugans, 1996; Rainville, 2017).
The spiritual dimension is often related to religious beliefs, values,
and practices, and is described as meaning, purpose, and fulfillment in
life, the hope and will to live, faith, and a relationship with God (Bauer
et al., 2017; Loureiro et al., 2017; Marwick, 1995; Rainville, 2017; Ross,
1995; Swanson, 1995). The holistic health approach also incorporates
alternative therapies into the predominant medical model.
Illness and Disease
The terms illness and disease are not synonymous, but are often used
interchangeably as in this text. Illness is recognized by a person’s percep-
tions and evaluation of how he or she feels. An individual may feel pain,
discomfort, weakness, depression, or anxiety, whether or not a disease
is present, but the presence or absence of a disease is determined by a
medical professional’s evaluation, not the patient’s assessment. Certain
diseases, such as hypertension (high blood pressure), are asymptomatic
and do not always manifest in illness. In other words, a hypertensive
person has a disease but may be unaware. It is possible to have disease
without feeling ill or feel ill without having a disease.
Acute and Chronic Conditions
Diseases can be classified as acute, subacute, or chronic. An acute condi-
tion is relatively severe, episodic (of short duration), and often treatable
(Timmreck, 1994, p. 26). It is subject to recovery, and treatment is gen-
erally provided in a hospital. Examples include a sudden interruption of
kidney function or a myocardial infarction (heart attack).
A subacute condition lies between the acute and chronic extremes
on the disease severity continuum, but also has acute features. Subacute
conditions can be postacute, requiring further treatment after a stay in
the hospital. Examples include ventilator and head trauma care.
A chronic condition is less severe but of long, continuous duration
(Timmreck, 1994, p. 26). The patient may not fully recover. A chronic
condition may be kept under control through appropriate medical treat-
ment but, if left untreated, may lead to severe, life-threatening health
problems. Examples include asthma, diabetes, and hypertension.
Quality of Life
The term quality of life, used in a denotative sense, indicates overall
patient satisfaction with life during and after an encounter with the
health care delivery system. The term is used in two ways: First, it indi-
cates how satisfied a person is with his or her experiences while receiving
What Is Health? 29
services. Factors including comfort, dignity, privacy, security, degree of
independence, decision-making autonomy, and attention to preferences
are significant to most people, and are regarded as patient rights. Sec-
ond, quality of life can refer to overall satisfaction with life and with
self- perceptions of health, particularly after an intervention. Desirable
processes during treatment and successful outcomes have a positive
effect on an individual’s ability to function and carry out social roles.
▸ Determinants of Health
Identification of determinants of health has contributed greatly to
the understanding that a singular focus on care delivery is unlikely to
improve population health. Because multiple factors determine health
and well-being, a more balanced approach must emphasize health deter-
minants at an individual level and policy interventions at the population
level (FIGURE 2.2).
The major determinants of health (see examples in EXHIBIT 2.2) can
be classified into four categories: environment, behavior and lifestyle,
heredity, and medical care.
EXHIBIT 2.2 Examples of Health Determinants
■ Physical activity
■ Overweight/obesity
■ Tobacco use
■ Substance abuse
■ Responsible sexual behavior
■ Mental health
■ Injury and violence
■ Environmental quality
■ Immunization
■ Access to health care
FIGURE 2.2 Schematic Definition of Population Health
Reproduced from Kindig D, Stoddart G. What is Population Health? Am J Public Health. 2003; 93 (3): 380-833
Health outcomes and
distribution in a population
(dependent variables)
Patterns of health
determinants over
the life course
(independent variables)
Policies and interventions
at the individual and
social levels
30 Chapter 2 Foundations of U.S. Health Care Delivery
Environment
Environmental factors encompass the physical, socioeconomic, socio-
political, and sociocultural dimensions of life. Physical environmental
factors such as air pollution, food and water contaminants, radiation,
and toxic chemicals can significantly affect health; however, the influ-
ence of other environmental factors on health may not be so obvious.
For example, socioeconomic status is related to health and well-being,
and people with higher incomes often live in areas with less exposure to
environmental risks and enjoy better access to care. Income inequality
is associated with a variety of health indicators, such as life expectancy,
age-adjusted mortality rates, and leading causes of death (Kaplan et al.,
1996; Kawachi et al., 1997; Kennedy et al., 1996; Mackenbach, 1997;
Peykari et al., 2015; Syden & Landberg, 2017). The greater the economic
gap between the rich and the poor in a given geographic area, the worse
the overall health of the population in that area.
The relationship between education level and health status is also
well established. Less-educated Americans die earlier than their better-
educated counterparts (Peykari et al., 2015; Syden & Landberg, 2017).
One possible explanation is that better-educated people are more likely
to avoid risky behaviors such as smoking and drug abuse (Peykari et al.,
2015; Syden & Landberg, 2017).
The environment can also significantly influence developmental
health. Good nurturing and stimulation during the first 3 years of life—a
critical period for brain development— activate the brain’s neural pathways
and may permanently increase the number of brain cells. Early childhood
development has an enormous influence on a person’s future health.
Behavior and Lifestyle
Individual lifestyle, or behavioral factors, include diet, exercise, stress,
risky or unhealthy behaviors, and other choices that may contribute to
significant health problems. Heart disease, diabetes, stroke, sexually
transmitted diseases, and cancer are some of the ailments directly linked
to individual choice and lifestyle.
Heredity
Heredity is a key determinant of health because genetic factors pre-
dispose individuals to certain diseases. Little can be done to alter the
genetic makeup a person has already inherited, but a healthy lifestyle and
health-promoting behaviors can significantly influence the development
and severity of inherited disease in those predisposed to it, as well as its
risk for future generations.
Determinants of Health 31
Medical Care
Although environment, behavior and lifestyle, and heredity are more
important determinants of health, well-being, and susceptibility to pre-
mature death, access to care is also a key factor influencing health. Both
individual health and population health are closely related to access to
adequate services for preventive and curative health. Nevertheless, med-
ical care alone cannot ensure optimal health, and preventive interven-
tions are not adequate unless individuals take responsibility for their
health and well-being.
▸ Cultural Beliefs and Values
A value system helps define a society’s ideals. The traditional cultural
beliefs and values in the U.S. have been based on conservative princi-
ples of market justice, with social justice principles (discussed in the next
section) taking a secondary place. In recent years, American society has
become increasingly defined by various subcultures due to the steady
influx of immigrants from different parts of the world. Such diver-
sity promotes sociocultural variations in how people view their health
and their attitudes and behaviors concerning health, illness, and death
(Wolinsky, 1998, p. 39). Driven by these changing demographics, the
foundational beliefs and values of U.S. culture are in a state of flux.
According to a survey conducted by the U.S. Census Bureau from
2009 to 2013, young adults today—labeled the millennial generation1
by sociologists— differ greatly from previous generations, who are
referred to as generation X and the baby boomers. A higher proportion
of millennials are foreign born, one in four speaks a language other
than English at home, and one in five lives in poverty even though a
higher proportion have college degrees (U.S. Census Bureau, 2014).
Millennials are more inclined toward social justice, for example, view-
ing the term socialism more positively and the term capitalism more
negatively than the general population (Pew Research Center, 2011).
A gradual transformation in traditional American beliefs and values
is already changing the way Americans will receive care in the future.
▸ Distribution of Health Care
In a perfect world, health care production, distribution, and consump-
tion have an equal impact on all members of a society. Unfortunately, no
1 The millennial generation, or millennials, commonly includes those persons
born between 1982 and 2000, and numbers approximately 73 million people.
32 Chapter 2 Foundations of U.S. Health Care Delivery
society has found a perfectly equitable method to distribute limited eco-
nomic resources, and inequalities are inevitable. Societies, therefore, try
to allocate resources according to guiding principles, guided by their val-
ues and belief systems. The fundamental question of distributive justice
or equity is how a health care system can make essential services available
to all members of society. This concern about equitable access to health
care services is addressed by theories of market justice and social justice.
Market Justice
According to the principle of market justice, market forces can best
achieve a fair distribution of health care services in a free economy. In
such a system, medical care and benefits are distributed on the basis of
people’s willingness and ability to pay (Santerre & Neun, 1996, p. 7).
People are entitled to purchase a share of available goods and services
of interest. They must purchase these goods and services with financial
resources acquired through their own legitimate efforts. This is how
most goods and services are distributed in a free market. To give peo-
ple something they did not earn is considered morally and economically
wrong. Thus, the principle of market justice makes the following key
assumptions:
■ Health care, like any other economic good or service, can be gov-
erned by the free market forces of supply and demand.
■ Individuals are responsible for their own achievements. When indi-
viduals pursue their own interests, the interests of society as a whole
are best served ( Ferguson & Maurice, 1970).
■ People make rational choices in their decisions to purchase health
care products and services to rectify their health problems and
restore their health.
■ People, in consultation with their physicians, know what is best for
themselves. This implies that people place a certain degree of trust
in their physicians.
■ A free market, rather than the government, can allocate health care
resources most efficiently and equitably.
Under a system characterized by market justice, health care produc-
tion is determined by how willing and able customers are to purchase
health care products and services at prevailing market prices. In a free
market system, those with insufficient income or who are uninsured
face financial barriers to access (Santerre & Neun, 1996, p. 7). Together,
prices and ability to pay limit or ration the quantity and type of services
consumed, and these limitations to access are referred to as demand-side
rationing or price rationing. The key characteristics of market justice and
their implications are summarized in TABLE 2.1.
Distribution of Health Care 33
TABLE 2.1 Comparison of Market Justice and Social Justice
Market Justice Social Justice
Characteristics
■ Views health care as an economic
good
■ Views health care as a social
resource
■ Assumes free market conditions for
health services delivery
■ Requires active government
involvement in health services
delivery
■ Assumes that markets are more
efficient in allocating health
resources equitably
■ Assumes that the government is
more efficient in allocating health
resources equitably
■ Production and distribution of
health care are determined by
market-based demand
■ Medical resource allocation is
determined by central planning
■ Medical care distribution is based
on people’s ability to pay
■ Ability to pay is inconsequential for
receiving medical care
■ Access to medical care is viewed
as an economic reward of personal
effort and achievement
■ Equal access to medical services is
viewed as a basic right
Implications
■ Individual responsibility for health ■ Collective responsibility for health
■ Benefits are based on individual
purchasing power
■ Everyone is entitled to a basic
package of benefits
■ Limited obligation to the collective
good
■ Strong obligation to the collective
good
■ Emphasis on individual well-being ■ Community well-being supersedes
that of the individual
■ Private solutions to social problems ■ Public solutions to social problems
■ Rationing based on ability to pay ■ Planned rationing of health care
Data from National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD: U.S. Department of Health
and Human Services; 2017:348
34 Chapter 2 Foundations of U.S. Health Care Delivery
Market justice emphasizes individual, rather than collective, respon-
sibility for health and proposes private, rather than government, solu-
tions to social problems of health.
The principles of market justice work well in allocating economic
goods when their unequal distribution does not affect the greater society.
People live in different sizes and styles of homes, drive different types of
automobiles, and spend money on different things based on individual
success. However, market justice principles fail to rectify critical concerns
such as crime, illiteracy, and homelessness, which significantly weaken
the fabric of society. Recognizing the shortcomings of a free market sys-
tem, many Americans suggest that health care is also a social concern.
Social Justice
The idea of social justice is at odds with the principles of capitalism and
market justice. According to the principle of social justice, the equita-
ble distribution of health care is a societal, rather than an individual,
responsibility. This goal is best achieved when a central agency—usually
the government—takes over the production and distribution functions.
Social justice regards health care as a social good—not an economic
good—to be collectively financed and available to all citizens regard-
less of individual ability to pay. Most industrialized countries long ago
reached a consensus that health care is a social good (Reinhardt, 1994).
Public health is also oriented towards social justice (Hart et al., 2017;
Stoddard-Dare et al., 2017; Turnock, 1997). In a social justice system,
the inability to obtain care due to a lack of financial resources is con-
sidered unjust. The principle of social justice is based on the following
assumptions:
■ Health care is different from most other goods and services.
■ Responsibility for health is shared. Individuals are not totally respon-
sible for their ill health because they do not control factors such as
economic inequalities, unemployment, unsanitary conditions, or air
pollution.
■ Society has an obligation to the collective good. An unhealthy indi-
vidual is a burden on society; a person carrying a deadly infection,
for example, poses a threat to society. Society is obligated to elimi-
nate (cure) the problem by providing health care to the individual,
because this benefits society as a whole.
■ The government, not the market, can make rational plans and better
decide the quantity of health care to produce and how to make it
available to all citizens.
In a social justice–based system, no country can afford to provide
unlimited amounts of health care to all citizens. The government must
Distribution of Health Care 35
limit the availability of certain services by deciding, for instance, how
technology is distributed and who has access to certain high-tech services,
even as basic services may be available to all. This concept is referred to
as planned rationing or supply-side rationing. The main characteristics of
social justice and their implications are summarized in Table 2.1.
Justice in the U.S. Health Care System
The current U.S. health care system is not a market justice–based sys-
tem, because U.S. health care delivery does not follow principles of a
free market system. A significant shift away from market justice began
in 1965 with the creation of Medicare and Medicaid. Since then, the
move toward social justice has been gradual, as most recently espoused
in the ACA. Currently, less than half of health care financing in the U.S.
comes from the government. The government also plays a major role in
exercising control over the health care system through various policies
for insurance, provider payment, availability of new drugs and proce-
dures, use of information systems, medical research funding, quality
initiatives, and other regulated areas.
In the U.S., the principles of market justice and social justice com-
plement each other. Market justice drives private, employer-based health
insurance, mainly for middle-income Americans. In contrast, social jus-
tice is the basis for publicly financed Medicaid, Medicare, and Children’s
Health Insurance Program coverage and worker’s compensation pro-
grams. The two principles collide, however, when a significant number
of uninsured are unable to afford insurance and are ineligible for Medic-
aid, Medicare, or other public programs.
▸ Strategies to Improve Health
Healthy People Initiatives
Since 1979, the United States has undertaken a series of 10-year plans
outlining key national health objectives; TABLE 2.2 outlines the evolution
of these Healthy People initiatives. These initiatives were founded on the
integration of medical care with preventive services, health promotion,
and education; integration of personal and community health care; and
increased access to integrated care services. The Healthy People initiatives
established benchmarks for and monitored progress towards the follow-
ing goals: (1) to encourage collaborations across communities and sectors;
(2) to empower individuals to make informed health decisions; and (3) to
measure the impact of prevention activities (Office of Disease Prevention
and Promotion, 2015a).
36 Chapter 2 Foundations of U.S. Health Care Delivery
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Strategies to Improve Health 37
https://www.healthypeople.gov/sites/default/files/healthy-people-overview
The current initiative, Healthy People 2020, launched in 2010 and
building on the work of Healthy People 2010, takes into account achieve-
ments in the past decade, such as increased life expectancy and decreased
death rate from coronary heart disease and stroke, and identifies areas for
improvement in the next decade. The objectives of Healthy People 2020
include identifying nationwide health priorities; increasing awareness
and understanding of the determinants of health, disability, and disease;
providing measurable objectives that apply at all levels; engaging multi-
ple sectors to strengthen policies and improve practices driven by evi-
dence and knowledge; and identifying critical research, evaluation, and
data collection methods. Healthy People 2020 will measure general health
status, quality of life and well-being, determinants of health, and dispar-
ities (U.S. Department of Health and Human Services [DHHS], 2011).
The overarching goals of Healthy People 2020 include the following:
■ Attaining high-quality, longer lives free of preventable disease,
injury, and premature death
■ Achieving health equity, eliminating disparities, and improving the
health of all groups
■ Creating social and physical environments that promote good health
for all
■ Promoting quality of life, healthy development, and health behaviors
across all life stages (Office of Disease Prevention and Promotion,
2015a)
The framework for Healthy People 2020 is presented in FIGURE 2.3.
Four foundational health measures serve as indicators of progress
toward achieving the aforementioned goals: general health status, quality
of life and well- being, determinants of health, and disparities among the
population (Office of Disease Prevention and Promotion, 2015a). Over-
all progress will include fewer adults smoking cigarettes, fewer children
exposed to secondhand smoke, more adults being physically active, and
fewer adolescents using alcohol or illicit drugs (DHHS, 2014; Greenberg
et al., 2017).
The Healthy People Consortium is a group of organizations com-
mitted to promoting Healthy People 2020, and members work to ensure
that the Healthy People initiatives meet the needs of their region, state,
or community; share how their organization carries out the program;
champion the goals and objectives; and participate in the program
(Office of Disease Prevention and Health Promotion, 2015b).
The National Association of County and City Health Officials (NAC-
CHO) established a partnership with Healthy People 2020 to support and
increase the use of the program among local health departments, non-
profit hospitals, and other organizations involved in community health
38 Chapter 2 Foundations of U.S. Health Care Delivery
assessment and improvement planning (NACCHO, 2015, 2017). NAC-
CHO activities identify barriers and challenges, assess uptake at the local
level, share examples of local use, promote use of the program through
webinars and other means, offer training and technical assistance, and
encourage collaborative efforts (DHHS, 2012).
In implementation, stakeholders in both public and private agen-
cies play a crucial role. The MAP-IT Guide tool has been used to assem-
ble partners, identify community needs, execute a plan, and evaluate
progress. The Healthy People 2020 state and territory coordinators serve
as liaisons to ensure that the state and/or territorial health plan aligns
with the Healthy People goals and objectives. The Healthy People 2020
Evidence- Based Resources Tool allows users to search for interventions
and resources by topic, objective, resource or intervention type, popula-
tion, setting, and other characteristics. The Stories from the Field library
of examples demonstrates how communities are implementing Healthy
People 2020 (DHHS, 2015a).
In terms of progress, the Healthy People 2020 Leading Health Indica-
tors (LHIs) are a subset of the Healthy People objectives chosen to com-
municate high-priority health issues and actions to address them. The 26
LHIs are organized into 12 topics. As of 2014, progress was made toward
FIGURE 2.3 Action Model to Achieve Healthy People 2020 Overarching Goals
Liv
ing
and
working conditions
S
oc
ia
l,
fam
ily,
and community netw
orks
Ind
ividu
al behavior• Policies
• Programs
• Information
Innate individual
traits: age, sex,
race, and
biological
factors
Across life course
Assessment, Monitoring,
Evaluation, & Dissemination
Interventions
• Behavioral outcomes
• Specfic risk factors,
diseases, and
conditions
• Injuries
• Well-being and health-
related quality of life
• Health equity
Outcomes
Determinants of Health
Action Model to Achieve Healthy People 2020 Overarching Goals
Bro
ad
so
ci
al
, e
co
no
m
ic
, c
ul
tu
ra
l,
he
al
th
, a
nd
en
viro
nme
ntal conditions and policies at the global, national, state, and local levels
Strategies to Improve Health 39
achieving the Healthy People 2020 targets for the 26 LHIs, with 14 indicators
(53.9%) either meeting their target or showing improvement. Noteworthy
progress was made for the following indicators: fewer adults smoking cig-
arettes; fewer children exposed to secondhand smoke; more adults being
active; and fewer adolescents using alcohol or illicit drugs (DHHS, 2015b).
Healthy People 2030, the fifth edition of the Healthy People pro-
gram, addresses new challenges and builds on lessons learned from the
initiatives’ first four decades. Although progress has been made, the
United States still lags behind other Organization for Economic Coop-
eration and Development (OECD) countries in key measures of health
and well-being, including life expectancy, infant mortality, and obesity,
despite spending the highest percentage of GDP on health. A challenge
for Healthy People 2030 is to guide the United States in achieving the
population’s potential for health and well-being (DHHS, 2017).
As Healthy People 2030 is being developed, an overall framework
with new objectives will be established. Although still in draft form,
the overarching goals of the 2030 initiative include the following: (1) to
attain healthy, purposeful lives and well-being; (2) attain health literacy,
achieve health equity, eliminate disparities, and improve the health and
well-being of all populations; (3) create social and physical environ-
ments that nurture the full potential for the health and well-being for
all; (4) promote healthy development, healthy behaviors, and well-being
throughout all life stages; and (5) engage with stakeholders and key con-
stituents across sectors to take action and design policies to improve the
health and well-being of all populations (DHHS, 2017).
Public Health
In contrast to individual health, public health focuses on improving
population health and well-being. As an example of social justice, gov-
ernment plays the central role in developing and enhancing the public
health infrastructure—at the national, state, and local levels—through
tax dollars. Health indicators are developed to evaluate the effectiveness
of the public health system, along with a national surveillance system to
consistently track these indicators. Determinants of population health
play a major role in evaluation.
Focus on Determinants
To improve the nation’s health and minimize health disparities among
its vulnerable populations, a framework embodying social and medical
determinants must be developed. This framework, presented in FIGURE 2.4,
places a balanced emphasis on both types of determinants, because it is
the combination of these factors that shapes health and well-being. This
40 Chapter 2 Foundations of U.S. Health Care Delivery
model synthesizes multiple influences and highlights points for interven-
tion. In this model, health is not merely a state of being free of disease
and disability, but it also includes the positive concept of well-being and
encompasses the physical, mental, social, and spiritual aspects of health.
Social Determinants of Health
The framework presented in Figure 2.4 acknowledges the effects of
demographics, socioeconomic status, individual behavior, and commu-
nity inequalities and their influence on health. Personal demographics
(e.g., race/ethnicity or age) directly affect vulnerability. Social and income
inequalities also influence health disparities. Whether socioeconomic
FIGURE 2.4 Social Determinants of Health
Secretary’s Advisory Committee on Health Promotion and Disease Prevention Objectives for 2020. Phase I report recommendations for the framework and format of Healthy
People 2010, p. 8, Exhibit A. http://www.healthypeople.gov/2010/hp2020/Advisory/Phasel/Phasel .
Social/Public Policy Programs
(Income, Education,
Employment)
Behavior Change
Community/Nonprofit
Initiatives
Vulnerable Populations
Insurance Technology Balance
Distribution Service/Provider Integration
Quality Safety-Net Providers
Cultural/
Linguistic
Consumer Participation
Alternative
Medicine
Community Partnership
Public
Health
Preventive
Health
Primary
Care
Specialty
Care
Mental
Health
Chronic
Care
Long-term
Care
SOCIAL DETERMINANTS
HEALTH AND WELL-BEING
(Physical, Mental, Social, Spiritual)
HEALTH CARE DELIVERY
Continuum of Care
SES Behavioral Demographic Inequality
Strategies to Improve Health 41
http://www.healthypeople.gov/2010/hp2020/Advisory/Phasel/Phasel
status is defined by education, employment, or income, both individual –
and community-level socioeconomic status independently affect health.
The health impact of individual behavior—such as smoking or exercise—
is rarely isolated from its social and environmental contexts. Accordingly,
the WHO Commission on Social Determinants of Health (2007) con-
cluded that the social conditions in which people are born, live, and work
are the single most important determinant of health status.
Medical Care Determinants of Health
Although social determinants affect health status, the medical care sys-
tem focuses primarily on treating illness or poor health. Preventive care
is an exception, and understanding the effects of care on health should
include considering disparities in basic health care access and quality.
The framework includes a broad spectrum of medical care services and
health interventions. Whereas some services (preventive and primary
care) contribute to overall health status, others are more influential in
end-of-life situations (hospice and long-term care). As patients move
across the spectrum, they may contend with fragmentation, poor con-
tinuity of care, and insufficient coordination of care for multiple health
needs. In recent years, the Pan- American Health Organization (PAHO)
and WHO updated their primary health care strategy to focus on
improving countries’ capacity to implement coordinated, effective, and
sustainable strategies. Based on the concept of universal coverage and
access to services, these strategies aim to sustainably improve population
health and reduce health inequalities (PAHO, 2015, 2016). Services for
mental health and chronic diseases are included in the primary health
care framework (PAHO, 2015).
The relative value of health services in the spectrum should be eval-
uated when determining health policy. For example, should equal invest-
ments be made in each service, or are some investments better than
others (e.g., primary care versus specialty care)? How can we optimize
the medical system’s potential for eliminating disparities using limited
resources (e.g., focusing on primary care for all versus high- technology
care for certain populations)? Other factors, such as quality of care,
access to alternative therapies, and technology, also affect patient experi-
ence and health outcomes.
Social and Medical Points of Intervention
Considering that social and medical determinants respond to numerous
forces, the framework highlights important points for health interven-
tions. Dramatic reductions in health disparities can be attained through
interventions in both the social and medical domains, according to four
42 Chapter 2 Foundations of U.S. Health Care Delivery
main strategies: (1) social or public policy interventions, (2) community-
based interventions, (3) health care interventions, and (4) individual
interventions.
Policy Interventions. Public policy directly guards the welfare of the
nation through product safety regulations, screening food and water
sources, enforcing safe work environments, and other ways. With fewer
resources, however, vulnerable populations are uniquely dependent on
social and public policy for programs that address basic nutritional,
safety, social service, and health care needs.
One example of policy intervention is the Occupation Safety and
Health Act of 1970, which created the Occupational Safety and Health
Administration (OSHA) to protect employees from the potential dan-
gers of an unsafe environment at the workplace. OSHA established the
Injury and Illness Prevention Program, which requires employers to
implement a system that ensures employees’ compliance with a safe and
healthy work environment. OSHA also provides on-site consultation to
help small businesses establish occupational health and safety manage-
ment systems (Autenrieth et al., 2015). This work is part of an overall
effort to effectively identify workplace hazards and protect employees
who otherwise may work in dangerous environments (Autenrieth et al.,
2015; U.S. Department of Labor, 2011).
Health care reform also constitutes a policy intervention. The
ACA, when it was enacted in 2010, made major changes to the U.S.
health care and health insurance systems, significantly reducing the
number and percentage of people without insurance. Coverage helps
save lives, by encouraging early detection and prevention of serious
medical conditions. More than 9.2 million people signed up for care
on the national exchange in 2017, down by about 400,000 from 2016,
but the fate of the ACA remains uncertain under the Trump admin-
istration. With the individual mandate to purchase health care insur-
ance being repealed in 2019, the Congressional Budget Office (CBO)
estimates that 13 million people will lose their insurance by 2027. An
estimated 5 million of them previously bought health insurance as
individuals either within or outside the ACA’s marketplaces. Some will
choose not to buy insurance, because the penalty has been lifted. Oth-
ers, especially higher-income individuals ineligible for subsidies under
the ACA, will likely drop their insurance because of increases in the
average premiums predicted by the CBO. These premium increases
will occur because, as the mandate is repealed, many young, healthy
people will exit the health care markets, leaving behind a sicker, more
costly insurance pool, and older individuals will be most affected
(CBO, 2017).
Strategies to Improve Health 43
Community-Based Interventions. Many sources of health dispari-
ties may be addressed at the community or local level. Neighborhood
poverty, lack of health and social welfare resources, and lack of societal
cohesion can contribute to inequalities in a community. Understand-
ing the multidimensional risks and needs in a community can better
equip the local agencies that are responsible for designing interventions
to address health disparities in their communities; EXHIBIT 2.3 provides
some examples of the interventions that may be developed. Community
partnerships reflect the priorities of a population and are often managed
by community members, and minimize cultural barriers and improve
community buy-in to health improvement programs.
Addressing disparities using community approaches has several
other advantages. Local businesses and other partners often have a
stake in local health causes that help needy members of the community.
Community leaders can play a central role in planning and managing
strategies to improve health, and community solutions benefit from par-
ticipatory decision-making in which community members are involved.
Moreover, many community programs are run by nonprofit organiza-
tions, which are subsidized through federal, state, or local funds, and
receive tax exemptions for their services. Thus, they offer services at
lower cost than private health organizations, which are obligated to their
shareholders to price services competitively.
For example, to counteract the rise in childhood obesity, many
schools are beginning school-based nutritional programs. These mul-
ticomponent interventions involve administrators, food services staff,
teachers, parents, and students. Teaching students proper nutrition in
the classroom while educating parents makes the program more likely to
succeed in curbing childhood obesity (Black et al., 2017).
Health Care Interventions. Health care interventions such as inte-
grated electronic medical records systems can improve patient care and
prevent safety events while simultaneously reducing waste in the health
care system (Bae et al., 2017; Dorman & Miller, 2011; Hillestad et al.,
EXHIBIT 2.3 Strategies to Improve Health and Reduce Disparities
■ Nutrition programs
■ Work/environment safety efforts
■ Community-based partnerships
■ Culturally appropriate care
■ Patient safety/medical error reduction
■ Prevention-oriented effort
■ Coordinated care for chronically ill persons
44 Chapter 2 Foundations of U.S. Health Care Delivery
2005; Karafin et al., 2017; Kruse et al., 2017; Ratanawongsa et al., 2017;
Sperl-Hillen et al., 2011). Electronic health records also promise to
improve health care quality through better coordination and integration
of care among providers. Coordinated, integrated care is particularly
important in light of the increasing burden of chronic disease. For exam-
ple, coordination of care and counseling for type 2 diabetes patients has
been shown to improve blood glucose management.
Another example of a health care intervention is “value-based care.”
As health care delivery evolves rapidly worldwide and in the United States,
there has been a rapid shift in reimbursement in the past few years, from a
simple fee-for-service model to complex models that link payment to qual-
ity and value. Change in any large system can be difficult, but the transition
to a value-based system is particularly challenging in health care, because
both quality and cost are difficult to quantify. Professional societies and
other medical groups are developing programs to define high-value care.
Transitioning from a volume-based to a value-based care delivery and
payment model of health care will be one of the most important efforts in
health care delivery in the coming decade.
Value is defined as the quality of care achieved (numerator) divided
by the cost of care (denominator) (Porter, 2010; Porter & Teisberg, 2006).
In pragmatic terms, value is patient health outcomes achieved per dollar
spent. Value is created through the quality of care delivered, not strictly
by the volume of services provided (Institute for Healthcare Improve-
ment, 2016). This value-based care movement recognizes what patients
value in the context of defining health and health care outcomes and
allocating limited resources.
The American Society of Clinical Oncology (ASCO) published a con-
ceptual framework in 2015 to help physicians and patients make treatment
decisions: the ASCO framework considers cost, along with more tradi-
tional clinical outcomes (Schnipper et al., 2015). In addition, the Centers
for Medicare and Medicaid Services (CMS) has begun to change how hos-
pitals and physicians are paid, with payments increasingly being tied to
measures of quality (Burwell, 2015). The Medicare Access and CHIP Reau-
thorization Act (MACRA) eliminated the sustainable growth-rate (SGR)
formula and directed the U.S. Department of Health and Human Services
to develop infrastructure for quality measurement instead, as part of the
government’s attempt to transition from fee-for-service systems to reim-
bursement based on quality of care.
Individual-Level Interventions. Individual-level initiatives are criti-
cal in counteracting the effects of negative social determinants on health
status. Altering individual health behaviors (e.g., reducing smoking and
increasing exercise) is often the focus of individual-targeted interventions,
Strategies to Improve Health 45
and numerous theories have been promulgated to identify the complex
pathways and barriers to changes or improvements in behavior. Integrat-
ing behavioral science into public health has been a valuable contribu-
tion, providing a toolbox of behavior-changing strategies for health.
▸ Conclusion
Health and health determinants are multifactorial. Medical care, while
important, is only one factor that contributes to health and well-being.
Factors such as physical, social, cultural, and economic environments;
behaviors and lifestyles; and heredity all play roles in determining health
and well-being for individuals and populations. Nowadays, health care
delivery is primarily driven by the medical model, which emphasizes ill-
ness rather than wellness. Many efforts to improve health care delivery
have failed to produce a proportionate impact on the improvement of
health status. Applying holistic concepts of care, and integrating medical
care with preventive and health promotion efforts, could significantly
improve health, although it would require a fundamental change in how
Americans think of health. It would also require individual responsibility
for behavior and community partnerships to improve both personal and
community health. Understanding the determinants of health, health
education, community health assessment, and national initiatives such
as Healthy People 2020 is essential for accomplishing such goals.
Over the years, the U.S. health care system has gradually transi-
tioned toward an emphasis on social justice, yet not all Americans enjoy
equal access to care. To improve the nation’s health and reduce dispari-
ties among its vulnerable populations, both the social and medical deter-
minants of health must be addressed.
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© ninjaMonkeyStudio/Getty Images
CHAPTER 3
Historical Overview of
U.S. Health Care Delivery
▸ Introduction
Knowledge of the history of health care is essential for understand-ing the main characteristics of the medical delivery system as it exists today. For example, the system’s historical foundations
explain why a government-run national health care system has not
materialized in the United States. This is unlike what exists in Canada
and Great Britain, for instance. Instead, the United States has predomi-
nantly a private health care industry that also receives a fairly substantial
amount of financing from the government.
Traditionally held American cultural beliefs and values, the social fab-
ric of the American society, technological advances, economic constraints,
political opportunism, and ecological forces are the main historical factors
50
that have continued to shape U.S. health care delivery; examples are pro-
vided in EXHIBIT 3.1. The ebb and flow of the same forces will shape health
care’s future direction.
The agents of change just mentioned often interact in a complex man-
ner. For example, President Barack Obama’s political agenda trumped
economic constraints and led to the enactment of the Affordable Care
Act (ACA; nicknamed “Obamacare”) in 2010 through ideological and
political maneuvering. Historically, the beliefs and values espoused by
the majority of Americans—such as capitalism, self-reliance, and lim-
ited government—have been primarily responsible for shielding the U.S.
health care system from a major overhaul. Conversely, social, political,
and economic forces led to certain compromises, as seen in the creation
of Medicare and Medicaid and other public programs to extend health
care to certain defined groups of people. The growing political clout of
EXHIBIT 3.1 Major Forces of Change in U.S. Health Care Delivery
■ Cultural beliefs and values
• Self-reliance
• Welfare assistance for the needy
■ Social makeup
• Demographic shifts
• Immigration
• Health status
• Urbanization
■ Technological advances
• Scientific research
• New treatments
• Training of health professionals
• Facilities and equipment
• Information technology
■ Economic constraints
• Health care costs
• Private and public health insurance
• Family incomes
■ Political opportunism
• President’s agenda
• Political party ideology
• Political maneuvers
• Power of interest groups
• Laws and regulations
■ Ecological forces
• New diseases
• Drug-resistant infections
• Global travel and transport
Introduction 51
the elderly population in the United States, for example, was instrumen-
tal in the addition of a prescription drug benefit to Medicare in 2003.
Advancements in science and technology have played a major role in
shaping the U.S. health care delivery system. As a result, medical practice
in the United States is highly specialized, while basic and routine pri-
mary care is given only secondary importance.
This chapter traces the evolution of health care delivery through
four recognizable historical periods, each demarcating a major change
in the structure of the medical delivery system. The first phase is the
preindustrial era, which lasted from the middle of the 18th century until
the latter part of the 19th century. The second phase is the postindustrial
era, which began in the late 19th century. The third phase—called the
corporate era—includes developments that started around 1970 and con-
tinue into the 21st century. The fourth phase, which is still in its infancy,
is characterized by health care reform—namely, the passage of the ACA
and its potential repeal and replacement.
▸ Medical Services in Preindustrial America
From colonial times to the late 1800s, medical education and practice
were far more advanced in Great Britain, France, and Germany than they
were in the United States. The practice of medicine in the United States
had a strong domestic—rather than professional—character because
medical procedures were rather primitive. The nation had only a handful
of hospitals. There was no health insurance, private or public. Therefore,
health care had to be purchased using personal funds, and health care
was delivered in a free market. The main characteristics of health care
delivery during this period are summarized in EXHIBIT 3.2.
Medical Training
Until around 1870, medical training was largely received through indi-
vidual apprenticeship with a practicing physician rather than through
university education. It is ironic that many of the preceptors under whom
medical students apprenticed were themselves poorly trained (Rothstein,
1972, p. 86). Only a small number of medical schools existed at that time.
To train a larger number of students than was possible through appren-
ticeship, American physicians began opening medical schools, albeit
mainly to supplement their incomes by collecting student fees that were
paid directly to the physicians.
These physicians did not have classroom facilities at their disposal,
however, nor did they have the authority to confer the doctor of medi-
cine (MD) degree. Hence, they had to affiliate with local colleges to use
52 Chapter 3 Historical Overview of U.S. Health Care Delivery
EXHIBIT 3.2 Health Care Delivery in Preindustrial America
■ Medical training and education were not grounded in science.
■ Primitive medical procedures were practiced.
■ Intense competition existed because any tradesman could practice medicine.
■ People relied on family members, neighbors, and publications for domestic
remedies.
■ Physicians’ fees were paid out of personal funds.
■ Health care was delivered in a free market.
■ Hospitals were few in number and located only in big cities.
■ Hospitals had poor sanitation and unskilled staff.
■ Almshouses served the destitute and disruptive elements of society and
provided some basic nursing care.
■ State governments operated asylums for patients with untreatable, chronic
mental illness.
■ Pesthouses quarantined people with contagious diseases.
■ Dispensaries delivered outpatient charity care in urban areas.
their facilities and confer degrees. As part of this approach, four or more
physicians would get together to form a faculty. Medical schools were
inexpensive to operate and often quite profitable. It is estimated that 42
such schools were in operation in the United States in 1850 (Rothstein,
1972, p. 91).
Medical education at this point was still seriously lacking in science.
The 2-year MD degree required attending courses for 3 to 4 months
during the first year and then essentially repeating the same coursework
during the second year. Because fees were paid only as the student passed
each course, low standards and a less-than-rigorous curriculum were
necessary to attract and retain students. Even the best medical schools
admitted students without a high school diploma. Training in the biolog-
ical sciences was considered useful but not essential. Laboratories were
nonexistent. Library facilities were inadequate, and clinical observation
and practice were not part of the curriculum (Starr, 1982).
Medical Practice
The early practice of medicine can be regarded more as a trade than as
a profession, because medical education was not grounded in science. It
most assuredly lacked the prestige it has today. First, it did not require a
rigorous course of study, clinical practice, residency training, board exams,
and licensing, without all of which it is impossible to practice medicine
today. Second, medical procedures were primitive because medical science
was still in its infancy. Bleeding, use of emetics, and purging with enemas
and purgatives were popular forms of clinical therapy in early medicine.
Medical Services in Preindustrial America 53
Treatment of mentally ill patients was even more inhumane compared
to current practices. Mental illness was often viewed as aberrant behavior,
for which the treatment was to apply penal methods to restore sanity.
Dr. Benjamin Rush (1749–1813), known as the father of American psy-
chiatry, believed that mental illness was caused by irritation of the blood
vessels in the brain. His treatment methods included bleeding, purging,
hot and cold baths, and mercury (National Library of Medicine, 2014).
Surgery was limited because anesthesia had not yet been devel-
oped, and antiseptic techniques were not known. The stethoscope and
x-rays had not been discovered. The clinical thermometer was not in
use, and the microscope was not available for medical diagnosis. Physi-
cians mainly relied on their five senses and experience to diagnose and
treat medical problems. Hence, in most cases, physicians did not possess
technical expertise any greater than that possessed by family members at
home and experienced neighbors in the local community.
One of the main consequences of nonprofessional medicine was that
anyone—trained or untrained—could practice as a physician. The clergy,
for example, often combined medical services and religious duties. The
generally well-educated clergymen and government officials were actually
more learned in medicine than many physicians (Shryock, 1966, p. 252).
Tradesmen such as tailors, barbers, commodity merchants, and those
engaged in numerous other trades also practiced the healing arts by selling
herbal prescriptions, nostrums, elixirs, and cathartics. The red-and-white
striped poles (symbolizing blood and bandages) outside barber shops
today are reminders that barbers also functioned as surgeons at one time,
using the same blade to cut hair, shave beards, and perform bloodletting.
This system of free entry into medical practice created intense com-
petition. Physicians did not enjoy the status, influence, and income that
they do today. Indeed, many physicians found it necessary to engage in
a second occupation because income from their medical practice alone
was inadequate to support a family. It is estimated that most physicians’
incomes in the mid-1800s put them in the lower echelon of the middle
class (Starr, 1982, p. 84).
In the small communities of rural America, a spirit of strong self-
reliance prevailed. Families and communities treated the sick using folk
remedies that were passed on from one generation to the next. It was
common for people to consult published books and pamphlets on home
remedies (Rosen, 1983, p. 2). The market for physicians’ services was also
limited by affordability. Most families simply could not afford the cost
because they had to pay for services out of pocket, without the help of
health insurance. Also, most Americans resided in small rural communi-
ties, and summoning a physician could require traveling for several hours,
and sometimes an entire day, which resulted in loss of work and income.
54 Chapter 3 Historical Overview of U.S. Health Care Delivery
Medical Institutions
Before the 1880s, the United States had only a few isolated hospitals, which
were found in large cities such as New York, Boston, New Orleans, St. Louis,
and Philadelphia. In France and Great Britain, in contrast, general hos-
pital expansion began long before the 1800s (Stevens, 1971, pp. 9–10).
In Europe, medical professionals were closely associated with hospitals
and readily adopted new advances in medical science. The situation was
much different in the United States, where hospitals were characterized by
deplorable sanitary conditions and poor ventilation. Unhygienic practices
prevailed because nurses were generally unskilled and untrained. It was far
more dangerous to receive care in a hospital than at home. Hospitals had a
popular image as houses of death and institutions of welfare. People went
to hospitals only because of dire circumstances, not by personal choice.
The forerunner of today’s hospitals and nursing homes in the United
States was the almshouse (also called a poorhouse). Almshouses existed in
almost all cities of moderate size and were run by the local government.
The almshouse was not a health care institution in the true sense, but rather
a place where the destitute and disruptive elements of society were con-
fined. The inmates, as they were called, included many of the elderly, the
homeless, orphans, the ill, and the disabled of the community. They were
given food, shelter, and some basic nursing care if needed. In many cases,
the almshouse was an infirmary, old-age facility, mental asylum, homeless
shelter, and orphanage all rolled into one institution. Living conditions in
these institutions were squalid, and they were a far cry from today’s health
care facilities. Thus the early health care institutions emerged mainly to take
care of indigent people who could not be cared for by their own families.
An asylum—commonly referred to as a lunatic asylum—was the
forerunner of today’s inpatient psychiatric facilities. Although alms-
houses were used to accommodate some mental patients, asylums were
built by state governments for patients with untreatable, chronic mental
illness. Actually, asylums were established out of humanitarian consid-
erations; they were intended to prevent aimlessly wandering people with
serious mental illness from being put in jail (Norris, 2017). Attendants
in these asylums employed physical and psychological techniques in an
effort to return patients to some level of rational thinking. Dr. Benjamin
Rush, for example, invented a tranquilizer chair1 and a spinning gyrator
for psychiatric patients that induced vertigo, perspiration, and nausea.
1 The online Psychology Dictionary describes it as a heavy wooden chair in
which the patient would be strapped across his or her chest, abdomen,
knees, and ankles, with his or her head inserted into a wooden box
(https://psychologydictionary.org/tranquilizer-chair/).
Medical Services in Preindustrial America 55
Another type of institution, the pesthouse, was operated by local gov-
ernments to isolate people who had contracted a contagious disease such
as cholera, smallpox, typhoid, or yellow fever. Their main function was
to contain the spread of communicable disease and protect the inhabi-
tants of a city.
Dispensaries were established as outpatient clinics to provide free
care to those who could not afford to pay. They provided basic medical
care and dispensed drugs to ambulatory patients (Raffel, 1980, p. 239).
Around 1900 in the United States, approximately 100 dispensaries were
located in large cities (Madison, 1990). Generally, young physicians and
medical students desiring clinical experience staffed the dispensaries
(as well as hospital wards) on a part-time basis for little or no income
(Martensen, 1996). The dispensary can be regarded as the forerunner
of today’s more than 1,200 free and charitable clinics where services are
delivered mainly by trained volunteer staff to the poor, the homeless, and
the uninsured.
▸ Medical Services in Postindustrial America
The postindustrial era was marked by the growth and development
of a medical profession that benefited from urbanization, new scien-
tific discoveries, and reforms in medical education. American physi-
cians formed professional organizations that acted as a powerful force
in resisting proposals for a national health care program. The private
practice of medicine, free from employment by hospitals and corpora-
tions, became firmly entrenched as physicians organized into a cohesive
profession, opted for specialization, and gained power and prestige. The
hospital emerged as a repository for high-tech facilities and equipment.
Private and public health insurance took roots. Notable developments of
this era are summarized in EXHIBIT 3.3.
Medical Profession
Notably, much of the transformation in U.S. medicine occurred in the
aftermath of the American Civil War (1861–1865), as the country tran-
sitioned from a rural agricultural economy to a system of industrial capi-
talism. Urban development attracted increasingly more Americans to the
growing towns and cities. In 1840, only 11% of the U.S. population lived in
urban areas; by 1900, that share had increased to 40% (Stevens, 1971, p. 34).
Urbanization created increased reliance on the specialized skills of
paid professionals, as this trend distanced people from family-based
care. At the same time, urbanization led to the concentration of med-
ical practice in cities and towns, where office-based practice began
56 Chapter 3 Historical Overview of U.S. Health Care Delivery
EXHIBIT 3.3 Notable Developments During the Postindustrial Era
■ Urbanization
■ Scientific discoveries and their applications in medicine
• Advanced science-based treatments
• Rising health care costs
• Imbalance between specialists and generalists
■ Medical education reform
■ Power and prestige of physicians
■ Organized medicine
• Control over medical training
• Powerful political interest group
• Support of licensing laws
• Opposition to national health insurance proposals
• Support of private entrepreneurship in medical practice
■ Hospitals became true medical care institutions
■ Reform of mental health care
■ Growth of private health insurance
■ Creation of Medicare and Medicaid
to replace house calls. Closer geographic proximity to their patients
enabled physicians to see more patients in a given amount of time.
Their greater productivity, in turn, produced higher incomes for the
physicians.
As medicine became increasingly driven by science and technology,
lay people could no longer deliver legitimate medical care. Science-based
medicine also created an increased demand for the advanced services
that only trained professionals could provide. Developments in bacteri-
ology, antiseptic surgery, anesthesia, immunology, and diagnostic tech-
niques, along with a growing array of new drugs, helped bring medical
practice into the category of a legitimate profession. EXHIBIT 3.4 summa-
rizes some of the groundbreaking early scientific discoveries in medicine
made during this era.
The preoccupation with science and technology in the American
culture brought numerous benefits, but also produced some undesirable
effects. For example, an overemphasis on the use of technology in medi-
cal care delivery created a bias toward specialization in medical training,
which ultimately ended up creating far too many specialists in relation
to generalists. Technology and specialization also increased the cost of
medical care, but without significantly improving the health status of
Americans. In contrast, other developed nations emphasized primary
care in which, apart from delivering routine and basic care, a primary
care physician and trained nurses ensured the continuity, coordination,
and appropriateness of medical services received by a patient.
Medical Services in Postindustrial America 57
The American Medical Association
The American Medical Association (AMA) historically played a critical
role in galvanizing the medical profession and in protecting the interests
of physicians. The concerted activities of physicians through the AMA
have been collectively referred to as organized medicine to distinguish
them from the uncoordinated actions of individual physicians com-
peting in the marketplace (Goodman & Musgrave, 1992, pp. 137, 139).
Although it was founded in 1847, the AMA did not attain real strength
until it delegated regional control by organizing its members into county
and state medical societies. It first consolidated its power by controlling
medical education. The AMA also vigorously pursued its objectives by
supporting states in the establishment of medical licensing laws that
made it illegal to practice medicine without a state-issued license.
EXHIBIT 3.4 Groundbreaking Medical Discoveries
■ The discovery of anesthesia was instrumental in advancing the practice of
surgery. Nitrous oxide (laughing gas) was first employed as an anesthetic
around 1846 for tooth extraction by Horace Wells, a dentist. Later, ether and
chloroform were used as anesthetics. Before the anesthetic properties of
certain gases were discovered, strong doses of alcohol were used to dull the
sensations. The surgeon who could do procedures, such as limb amputations,
in the shortest length of time was held in high regard.
■ Around 1847, Ignaz Semmelweis, a Hungarian physician practicing in a
hospital in Vienna, implemented the policy of hand washing. Thus an aseptic
technique was born. Semmelweis was concerned about the high death rate
from puerperal fever among women after childbirth. Even though the germ
theory of disease was unknown at this time, Semmelweis surmised that there
might be a connection between puerperal fever and the common practice by
medical students of not washing their hands before delivering babies and right
after doing dissections. Semmelweis’s hunch was right.
■ Louis Pasteur is generally credited with pioneering the germ theory of disease
and microbiology around 1860. Pasteur demonstrated sterilization techniques,
such as boiling to kill microorganisms and withholding exposure to air to
prevent contamination.
■ Joseph Lister is often referred to as the father of antiseptic surgery. Around
1865, he used carbolic acid to wash wounds and popularized the chemical
inhibition of infection (antisepsis) during surgery.
■ Advances in diagnostics and imaging can be traced to the discovery of x-rays in
1895 by Wilhelm Roentgen, a German professor of physics. Radiology became
the first machine-based medical specialty. Some of the first training schools in
x-ray therapy and radiography in the United States attracted photographers
and electricians to become doctors in roentgenology (a term derived from the
inventor’s name).
■ Alexander Fleming discovered the antibacterial properties of penicillin in 1929.
58 Chapter 3 Historical Overview of U.S. Health Care Delivery
In the postindustrial era, employment of physicians by hospitals and
insurance companies was frowned upon. Physicians who attempted to
seek salaried employment in a corporate setting were chastised by the
medical profession and pressured into abandoning such practices. Inde-
pendence from corporate control promoted private entrepreneurship
and put American physicians in an enviable strategic position in relation
to organizations such as hospitals and insurance companies.
Thanks to the AMA’s concerted activities, physicians’ incomes grew
dramatically, and the supremacy of the profession was fully realized. The
sphere of physicians’ influence expanded into nearly all aspects of health
care delivery. For example, laws were passed that prohibited individuals
from obtaining certain classes of drugs without a physician’s prescrip-
tion. In addition, health insurance paid for treatments only when they
were rendered or prescribed by physicians.
Educational Reform
Advances in medical science necessitated the reform of medical edu-
cation, which started around 1870 when medical schools began affili-
ating with universities. In 1871, Harvard Medical School completely
revolutionized the system of medical education. The academic year was
extended from 4 to 9 months, and the length of medical education was
increased from 2 to 3 years. Following the European model, laboratory
instruction and clinical courses such as chemistry, physiology, anatomy,
and pathology were added to the curriculum.
Johns Hopkins University took the lead in further reforming medi-
cal education when it opened its medical school in Baltimore, Maryland,
in 1893. For the first time, medical education became a graduate train-
ing program requiring a college degree—not a high school diploma—as
an entrance requirement. Johns Hopkins also pioneered the practice of
complementing classroom education with residency training in its own
teaching hospital. Standards at Johns Hopkins became the model of
medical education in other leading institutions around the country. Even
so, in the early 1900s, fewer than half of the medical schools provided
acceptable levels of training.
In 1910, a widely acclaimed report was published by Abraham Flex-
ner under the auspices of the Carnegie Foundation for the Advancement
of Teaching. The Flexner Report, as it came to be known, was based on
an inspection of medical schools. It found widespread inconsistencies
in medical education. By this time, the AMA had gained a firm foot-
hold in medical training by creating the Council on Medical Education.
It pushed for state laws that required graduation from a medical school
accredited by the AMA as the basis for a license to practice medicine
Medical Services in Postindustrial America 59
(Haglund & Dowling, 1993). Educational standards were formalized,
and schools that did not meet the proposed standards were forced to
close.
As a note of interest, Howard University School of Medicine (1869)
and the Meharry Medical College (1876) were established at the end of
the American Civil War specifically to prepare black physicians to prac-
tice medicine.
Development of Hospitals
As had already occurred in Europe, the growth of hospitals in the United
States came to symbolize the institutionalization of health care (Torrens,
1993). The hospital became the center around which other medical ser-
vices were organized.
Advancements in medical science created the need to centralize
expensive facilities and equipment in a medical institution, reflecting the
reality that physicians could no longer afford to have the needed equip-
ment and facilities in their own offices. The hospital became the center
for advanced technology used in medical diagnosis and treatment and
for the training of various types of health care personnel. The expansion
of surgery also became centered in the hospital. Alongside these develop-
ments came remarkable progress in sanitation practices. The profession-
alization of nursing promoted healing and improved patient recovery. As
a result of these changes, the growing appeal of hospital services in com-
munities, sick patients’ increasing need for hospital care, and the increas-
ing professionalization of medical practice became closely intertwined.
Physicians began to play a dominant role in hospital affairs, even though
they were not employees of the hospitals. Employment of physicians as
hospitalists is a recent phenomenon.
Reform of Mental Health Care
At the turn of the 20th century, federal policy in the United States pro-
moted education and research in psychiatry. By the 1960s, the concept of
community mental health was born, and deinstitutionalization became a
major thrust of mental health reform. This trend coincided with not only
a better understanding of mental health, but also the availability of new
drug therapies. Thus, the core of mental health care shifted from mental
asylums to community-based mental health services. The deinstitution-
alization movement further intensified after the U.S. Supreme Court’s
1999 decision in Olmstead v. L.C., which directed the states to provide
community-based services, wherever appropriate, to people with mental
illness. Today, mental institutions deliver services mainly for those with
severe and persistent mental illness (Patrick et al., 2006).
60 Chapter 3 Historical Overview of U.S. Health Care Delivery
▸ History of Health Insurance
There are several reasons why private health insurance (also called volun-
tary health insurance) took root and expanded in the United States. Much
later, the struggle to meet the medical needs of the elderly and the poor in
an environment of rising health care costs prompted the U.S. Congress to
create the publicly financed Medicare and Medicaid programs in the 1960s.
Worker’s Compensation
The first broad-coverage health insurance in the United States emerged in
the form of worker’s compensation. This system was originally designed
to make cash payments to workers for wages lost because of job-related
injuries and disease. Later, compensation for medical expenses and death
benefits for survivors were added.
Between 1910 and 1915, worker’s compensation laws made rapid
progress in the United States (Stevens, 1971, p. 136). In view of its wide-
spread acceptance, some reformers believed that because Americans
had been persuaded to adopt compulsory insurance against industrial
accidents, they could also be persuaded to adopt compulsory insurance
against sickness. Worker’s compensation served as a trial balloon for the
idea of government-sponsored health insurance. However, the growth
of private health insurance, along with other key factors discussed here,
prevented any proposals for a national health care program from taking
hold in the United States.
Emergence and Rise of Private Health Insurance
During the early 1900s, medical treatments and hospital care became a
more entrenched part of American life. At the same time, they became
increasingly more expensive. Because people could not predict their future
needs for medical care or its costs, some kind of insurance was needed
to spread an individual’s financial risk over a large number of people.
Between 1916 and 1918, 16 state legislatures, including those in New York
and California, attempted to enact legislation compelling employers to
provide health insurance, but their efforts were unsuccessful (Davis, 1996).
First Hospital Plan and the Birth of Blue Cross
The dire economic conditions of the Great Depression set the stage for
innovation in health insurance to cover hospitalization costs. On the one
hand, hospitals were vulnerable to economic instability when they relied
too much on philanthropic donations. On the other hand, individual
patients faced not only loss of income from illness but also burdensome
debt from medical care costs when they needed hospitalization.
History of Health Insurance 61
In 1929, the blueprint for modern health insurance was conceived when
Justin F. Kimball began a hospital insurance plan for teachers at Baylor Uni-
versity Hospital in Dallas, Texas. Within a few years, it became the model
for Blue Cross plans around the country (Raffel, 1980, p. 394). At first, other
independent hospitals copied Baylor and started to offer single-hospital
plans. Within a few years, plans sponsored by groups of hospitals became
more popular because they offered consumers a choice of hospitals. The
American Hospital Association supported these hospital plans and became
the coordinating agency that united the plans into the Blue Cross network.
The Blue Cross plans were nonprofit; that is, they had no shareholders to
receive profit distributions. Later, control of the plans was transferred to a
completely independent body, the Blue Cross Commission, which subse-
quently became the Blue Cross Association (Raffel, 1980, p. 395).
Hospital insurance quickly grew in popularity. In 1946, Blue Cross
plans in 43 states served 20 million members. Within a few years, lured by
the success of the Blue Cross plans, commercial insurance companies also
started offering hospital insurance. Between 1940 and 1950 alone, the pro-
portion of the U.S. population covered by hospital insurance increased from
9% to 57% (Anderson, 1990, p. 128). Private health insurance had received
the AMA’s endorsement, but the AMA had also made it clear that health
insurance plans should include only hospital care, not physicians’ fees.
First Physician Plan and the Birth of Blue Shield
In 1939, the California Medical Association started the first Blue Shield
plan, which was designed to pay physicians’ fees. By endorsing hospital
insurance and by actively developing the first plans that covered physi-
cians’ services, the medical profession protected its own financial inter-
ests. The AMA ensured that private health insurance would be preserved,
and the organization remained adamantly opposed to government-run
national health insurance.
Starting in 1974, Blue Cross and Blue Shield plans began to merge.
Now, in nearly every state, Blue Cross and Blue Shield plans are joint
corporations or have close working relationships (Davis, 1996).
Employment-Based Health Insurance
Three main factors explain how health insurance in the United States
became employer based:
■ During the World War II period, the U.S. Congress imposed wage
freezes in an attempt to control wartime inflation. In response, many
employers started offering health insurance to their workers to com-
pensate for the loss of raises in their salaries.
62 Chapter 3 Historical Overview of U.S. Health Care Delivery
■ In 1948, the U.S. Supreme Court ruled that employee benefits were
a legitimate part of union–management negotiations. Health insur-
ance, in turn, became an important component of collective bar-
gaining between unions and employers.
■ In 1954, Congress amended the Internal Revenue Code to make
employer-paid health coverage nontaxable. In economic value,
employer-paid health insurance was equivalent to getting additional
salary without having to pay taxes on it, which provided an incentive
to obtain health insurance as an employer- furnished benefit.
In subsequent years, employment-based health insurance expanded
rapidly, and private health insurance became the primary vehicle for the
delivery of health care services in the United States.
Failure of National Health Insurance in the United States
Industrialization of Western Europe meant that a large segment of the
populations worked as hired laborers, in countries such as England, and
later in Germany. Unification of Germany under Otto von Bismarck led
to rapid industrialization, but labor unrest threatened political stability.
Universal health insurance for all citizens was seen as a means to obtain
workers’ loyalty and thwart any labor uprisings.
By 1912, national health insurance had spread throughout Europe,
but political conditions in the United States were quite different. Unlike
the situation in European countries, the American government was
highly decentralized and engaged in little direct regulation of social wel-
fare. Despite this fact, Theodore Roosevelt ran for the U.S. presidency
in 1912 on a platform of social reform—and, perhaps not surprisingly,
was defeated by Woodrow Wilson. Even so, the Progressive movement
favoring national health insurance remained alive for several more years.
The entry of the United States into World War I in 1917 dealt a polit-
ical blow to the national health care movement, as anti-German feelings
were aroused and the U.S. government denounced German social insur-
ance. Opponents of national health care disparaged it as a Prussian menace
that was inconsistent with American values (Starr, 1982, pp. 240, 253). Any
subsequent attempts to introduce national health insurance were met with
the stigmatizing label of socialized medicine—a term that has since become
synonymous with any large-scale government-sponsored expansion of
health insurance. The traditional American values based on capitalism, self-
determination, distrust of big government, and reliance on the private sector
to address social concerns stood as a bulwark against broad-based govern-
ment interventions. Conversely, during times of national distress, such as the
Great Depression, pure necessity may have legitimized the advancement of
social programs, such as Social Security and unemployment compensation.
History of Health Insurance 63
The AMA played a leading role in opposing national health care, see-
ing it as a potential threat to the private practice of medicine. For exam-
ple, the AMA was instrumental in the demise of several bills related to
national health insurance that were introduced in Congress in the early
1940s during Franklin Roosevelt’s presidency. In 1946, Harry Truman
became the first president to make a direct appeal for a national health
care program (Anderson, 1990, p. 119). Initial public reaction to Tru-
man’s plan was positive, but when a government-controlled medical plan
was compared with privately obtained insurance, polls showed a dras-
tic decline in public support. The AMA was once again vehement in
denouncing the plan. Other powerful health care interest groups, such as
the American Hospital Association, also opposed the proposal. In 1948,
Truman was reelected while promising national health insurance, which
actually came as a surprise to many political observers. This time, the
AMA launched what was to become one of the most expensive lobbying
efforts in U.S. history. Its campaign directly linked national health insur-
ance with communism until the idea of socialized medicine was firmly
implanted in the public’s minds. By 1950, national health insurance was a
dead issue, and it remained so for several decades.
In 1993, President Bill Clinton made national health insurance one
of his top priorities, but his proposal was largely rejected by the Amer-
ican people. Defeat of the Clinton plan furnished another lesson on the
power of beliefs and values prevalent in the United States. As a matter of
principle, Americans have endorsed tax- supported health insurance to
help needy citizens, but they also have been unwilling to pay, in the form
of higher taxes, for what a universal health insurance program could
realistically cost. Moreover, Americans have been uneasy about more
government regulation and interference with employment-based private
health insurance. EXHIBIT 3.5 provides a summary of the main historical
reasons for the failure of national health insurance in the United States.
Creation of Medicare and Medicaid
Before 1965, private health insurance was the only widely available source
of payment for health care, and it was available primarily to middle-class
working people and their families. The elderly, the unemployed, and the
poor had to rely on their own resources, on limited public programs, or
on charity from hospitals, clinics, and individual physicians.
The earlier debates over national health insurance had made one
thing clear: Most Americans did not desire government intervention
in how they received health care, with one exception—they would
be less opposed to reform initiatives for the underprivileged classes.
In principle, the poor were considered a special class who could be
served through a government-sponsored program. The elderly—those
64 Chapter 3 Historical Overview of U.S. Health Care Delivery
65 years of age and older—were another group that started to receive
increased attention in the 1950s. On their own, most of the poor and
the elderly could not afford the increasing cost of health care. Also,
because the health status of these population groups was significantly
worse than that of the general population, their medical needs were
more critical. The elderly, in particular, had a higher incidence and
prevalence of disease than did younger age groups. Despite their
greater need for health care, fewer than half of all elderly persons were
covered by private health insurance. Even if they could afford it, many
of them were unable to obtain private health insurance because of their
poor health status. At the same time, the growing elderly middle class
was becoming a politically active force.
A bill introduced in Congress by Aime Forand in 1957 started the
momentum for including necessary hospital and nursing home care as an
extension of Social Security benefits (Stevens, 1971, p. 434). The AMA,
however, undertook a massive campaign to portray a government-run
plan as a threat to the physician–patient relationship. The bill stalled ini-
tially, but public hearings around the country, which were packed by the
elderly, produced an intense grassroots support to push the issue onto the
national agenda (Starr, 1982, p. 368). Compromise legislation, the Medical
Assistance Act, also known as the Kerr-Mills Act, was passed and went into
effect in 1960. Under this act, federal grants were given to the states so they
could extend health services under their welfare programs to low- income
elderly persons. However, enrolling the elderly in a welfare program
became controversial, as liberal congressional representatives voiced their
opposition by claiming that it was a source of humiliation to the elderly
(Starr, 1982, p. 369). Within 3 years, the program was declared ineffective
because many states did not even implement it (Stevens, 1971, p. 438).
EXHIBIT 3.5 Reasons Why National Health Insurance Has Historically
Failed in the United States
■ Unlike in Europe, national health care failed to get an early footing because of
labor and political instability in the United States.
■ The decentralized American system gave the U.S. federal government little
direct control over social policy.
■ The German social insurance system was denounced during World War I. Since
then, the term “socialized medicine” has been used as a synonym for “national
health insurance.”
■ The AMA opposed national health care initiatives.
■ Middle-class Americans have traditionally espoused beliefs and values that are
consistent with capitalism, self-determination, and distrust of big government.
■ Middle-class Americans have been averse to higher taxes to pay for the
increased cost of a national health care program.
History of Health Insurance 65
In 1964, health insurance for the aged and the poor became a top pri-
ority of President Lyndon Johnson’s Great Society programs. Eventually,
Congress approved a three-part program that provided publicly financed
health insurance to all elderly individuals, regardless of their incomes. Part
A and Part B of Medicare (also known as Title 18 of the Social Security Act
of 1965) became the first two layers. Part A of Medicare was designed to use
Social Security funds to finance hospital insurance and short-term nurs-
ing home coverage after discharge from a hospital. Part B of Medicare was
designed to cover physicians’ bills through government-subsidized insur-
ance, for which the elderly would pay a small portion of the premiums. The
Medicaid program (Title 19 of the Social Security Act of 1965) was the third
layer. It covered the eligible poor and was based on the earlier Kerr-Mills
Act program. It would be financed through federal matching funds to the
states in accordance with each state’s per capita income.
Although adopted together, Medicare and Medicaid reflected sharply
different traditions. Medicare enjoyed broad grassroots support and,
being attached to Social Security, had no class distinction. Medicaid, in
contrast, carried the stigma of public welfare. As a federal program, Medi-
care had uniform national standards for eligibility and benefits; the state-
administered Medicaid programs, however, varied across states in terms of
eligibility and benefits. Medicare covered anyone age 65 or older, whereas
Medicaid became a means-tested program, which confined eligibility to
people below a predetermined income level. Consequently, many of the
poor did not qualify because their incomes exceeded the means-test limits.
Initially created to cover only the elderly, Medicare was expanded in
1973 to cover two other categories of people: (1) nonelderly disabled peo-
ple receiving Social Security for at least 24 months and (2) people with
end-stage renal disease who needed dialysis or a kidney transplant. In
1997, Medicare added coverage options under Part C, and in 2003 a pre-
scription drug benefit (Part D) was passed into law. The main distinctions
between Medicare and Medicaid are summarized in EXHIBIT 3.6.
Soon after their inception, Medicare and Medicaid became instrumen-
tal in covering millions of Americans. By 1970, 20.4 million individuals
received health care through Medicare and another 17.6 million through
Medicaid. The increased coverage, however, came at a high price—namely,
unrelenting government regulations and uncontrolled public expenditures.
The Medicare and Medicaid programs are financed by the govern-
ment, but most beneficiaries receive health care services from private
hospitals, physicians, and other providers. As a major payer of health
care services, the government has implemented numerous regulations
that govern the delivery of services and reimbursement to providers.
As a result, the regulatory powers of government have increasingly
encroached on the private sector. In 1977, the Health Care Financing
66 Chapter 3 Historical Overview of U.S. Health Care Delivery
Administration (now called the Centers for Medicare and Medicaid Ser-
vices) was created to manage Medicare and Medicaid separately from the
Social Security Administration.
The creation of Medicare and Medicaid had a drastic impact on both
federal and state budgets, but the federal government bore the brunt of
this burden. As shown in TABLE 3.1, the U.S. gross domestic product—
representing total economic consumption—grew at an average annual
rate of 7.6% between 1965 and 1970. By comparison, total state and
local government expenditures for health care grew at a rate of 12.5%.
In the case of the federal government, however, health care expenditures
increased at an average annual rate of 30%. Hence, the federal govern-
ment bore most of the expenditures for Medicare and Medicaid.
EXHIBIT 3.6 Comparisons Between Medicare and Medicaid
Medicare Medicaid
■ Covers all elderly persons,
nonelderly disabled persons on
Social Security, and nonelderly
persons with end-stage renal
disease
■ Covers only the very poor
■ No income/means test ■ Income criteria established by
states (means test)
■ No class distinction ■ Public welfare
■ Part A for hospitalization and short-
term nursing home stay; Part B for
physician and other outpatient
services; Part C for managed care;
and Part D for prescription drugs
■ All services are covered under one
program
■ Nationally uniform federal program ■ Program varies from state to state
■ Title 18 of the Social Security Act ■ Title 19 of the Social Security Act
■ Part A financed through a payroll tax
paid by employees, employers, and
the self-employed; Part B subsidized
through general taxes, but the
participants pay part of the premium
cost; cost-sharing in Parts C and D
■ Financed by the states, with
matching funds from the federal
government according to each
state’s per capita income
History of Health Insurance 67
▸ Medical Services in the Corporate Era
The latter part of the 20th century and the beginning of the 21st century
have been marked by the growth and consolidation of large business cor-
porations and tremendous advances in global communications, trans-
portation, and trade. These developments have changed the way health
care is delivered in the United States and, indeed, around the world. The
rise of medical corporations, the information revolution, and globaliza-
tion have been interdependent phenomena.
Corporatization of Health Care Delivery
Corporatization here refers to the ways in which health care delivery in
the United States has become the domain of large organizations. Since the
1990s, managed care has become the primary source for health insurance
and the delivery of medical services to the majority of Americans. The
emergent managed care organizations (MCOs) wielded their immense
purchasing power to obtain health care services at discounted prices and
used the strength accorded by their consolidation to implement various
types of controls to reduce the rising costs of health care. To counteract
this imbalance, providers began to consolidate as well, and larger, inte-
grated health care organizations began forming. Large integrated delivery
systems (IDSs) can provide a full array of health care services, including
hospital inpatient care, surgical services in both inpatient and outpatient
settings, primary care and multispecialty outpatient services, home health
care, long-term care, and specialized rehabilitation services. Together,
MCOs and IDSs have corporatized the delivery of health care in the
United States. At the same time, though, they have made the health care
system extremely complex.
TABLE 3.1 Average Annual Percent Increase in Gross Domestic Product
and Federal and State Expenditures Between 1965 and 1970
Total (%) Health Care (%)
Gross domestic product 7.6 —
Federal government expenditures 11.3 30.0
State and local government
expenditures
13.6 12.5
Data from National Center for Health Statistics. Health, United States, 1995, p. 235.
68 Chapter 3 Historical Overview of U.S. Health Care Delivery
In a health care landscape increasingly dominated by corpora-
tions, individual physicians have struggled to preserve their autonomy.
As a matter of survival, many physicians had to consolidate into larger
group practices, form strategic partnerships with hospitals, or start their
own specialty hospitals. A growing number of physicians have become
employees of hospitals and other large medical corporations.
Information Revolution
The delivery of health care is being transformed in unprecedented and
irreversible ways by telecommunications. For example, telemedicine and
e-health have been on the rise. Telemedicine came to the forefront in the
1990s with technological advances in the distant transmission of image
data. This technology has made it possible to provide health care at a
distance, such as real-time transmission of video examinations as well
as telesurgery. E-health refers to health care information and services
offered over the Internet by professionals and nonprofessionals alike
(Maheu et al., 2001). These services include medical information from
reliable sources such as the prestigious National Institutes of Health and
the world-renowned Mayo Clinic through their websites, online pur-
chase of health care products, online consultations with physicians, and
online interactions with other consumers about health-related matters.
The Internet revolution has put more decision-making power into the
hands of patients and their surrogates about what they may think is best
for them. Access to expert information is no longer strictly confined to
the physician’s domain, which in some ways has led the patient to be less
dependent on health care professionals.
Globalization
Globalization refers to various forms of cross-border economic activi-
ties. It is driven by the global exchange of information, the production of
goods and services more economically in developing countries, and the
increased interdependence of mature and emerging world economies. It
confers many advantages, but also has some downsides.
From the standpoint of cross-border trade in health services, Mutch-
nick and colleagues (2005) identified four different modes of economic
interrelationships:
■ Cross-country telemedicine and outsourcing of certain medical ser-
vices have been made possible by advanced telecommunications
technology. For example, teleradiology (the electronic transmission
of radiological images over a distance) enables physicians in the
United States to transmit radiological images overseas, where they are
Medical Services in the Corporate Era 69
interpreted and reported back either the same or the next day. The
radiologists residing overseas are licensed and credentialed in the
United States.
■ Consumers travel abroad to receive medical care (sometimes
referred to as medical tourism). For example, countries such as India
and Thailand offer surgeries in state-of-the-art medical facilities to
foreigners at a fraction of what it would cost to have the same proce-
dures done in the United States or Europe.
■ Foreign direct investment in health services enterprises has become
common. For example, Chindex International, a U.S. corporation,
provides medical equipment, supplies, and clinical care in China.
American providers such as Johns Hopkins Medicine International,
the Cleveland Clinic, and Duke University’s Global Health Institute
support innovation and delivery of quality medical services through
collaborative arrangements with other countries.
■ Health professionals are choosing to move to other countries that
offer high demand for their services and better economic oppor-
tunities than their native countries. Migration of physicians from
developing countries helps alleviate at least some of the shortage in
underserved locations in the developed world. On the downside, the
developing world pays a price when emigration leaves these coun-
tries with shortages of trained professionals.
▸ Era of Health Care Reform
Health care reform refers to major changes through government policy
to expand health insurance to the uninsured. Recent efforts to reform
health care were based on government intervention in the financing
and delivery of health care. Most notably, the ACA represents the most
sweeping reform undertaken since the creation of Medicare and Med-
icaid in 1965. At the time of the highly controversial ACA’s passage, the
presidency and the majority membership in both the U.S. House of Rep-
resentatives and Senate were in the hands of the Democratic Party, and
the legislation failed to win a single vote from Republicans. Perhaps sur-
prisingly, the AMA supported the legislation. Since its heyday in political
activism, the AMA has become a much weaker organization, supported
by only 17% of U.S. doctors (Scherz, 2010).
After the ACA’s enactment, more than half of the states and some
private parties filed lawsuits challenging the constitutionality of the
legislation. In 2012, the U.S. Supreme Court rendered a 5–4 decision,
which was split over the two main parts of the ACA. First, the law’s
mandate requiring all Americans to have health insurance was upheld
70 Chapter 3 Historical Overview of U.S. Health Care Delivery
as constitutional. In part, the majority opinion read, “The Affordable
Care Act’s requirement that certain individuals pay a financial penalty
for not obtaining health insurance may reasonably be characterized
as a tax” (Liptak, 2012). Thus, the Court’s decision on this issue was
based on Congress’s power to impose new taxes—in this case, for not
having health insurance. In the second part of the Court’s decision, it
struck down as unconstitutional the federal government’s attempt to
coerce states into expanding their Medicaid programs by threatening
to eliminate federal funding for those states that chose not to expand
Medicaid coverage under the ACA (Anderson & Health Policy Insti-
tute of Ohio, 2012).
In 2014, in Burwell v. Hobby Lobby Stores, Inc., the U.S. Supreme
Court ruled against a controversial ACA requirement that forced certain
employers to provide contraceptives that might be deemed to induce
abortions. In a 5–4 decision, the Court ruled that in the case of a closely
held corporation, the owners of which may have deeply held religious
convictions against providing drugs or devices that may destroy an
embryo, the ACA violated the Religious Freedom Restoration Act of 1993.
Hobby Lobby had claimed that it faced annual fines of $475 million for
failure to comply with the ACA (Liptak, 2014). The Court argued that
the ACA imposed a substantial burden on religious liberty.
Health Care Reform in a Flux
Even before the ACA was fully implemented, health policy researchers
Nardin and colleagues (2013) had stated:
Our finding … runs counter to the common perception that the
ACA will cover virtually all legal residents. The ACA will leave
tens of millions uncovered. It will do little to alter racial disparities
in coverage. … The ACA, whatever its merits, will fall well short
of its stated goal of providing affordable care for all Americans.
This insight largely proved correct, even though the number of
uninsured was markedly reduced under the ACA, particularly among
low-income people who became newly eligible for Medicaid2 and those
who became eligible for tax credits to purchase private health insur-
ance through government-established exchanges. Nevertheless, in 2017,
health care reform once again became an issue for national debate.
2 Thirty-one states and the District of Columbia expanded their Medicaid
programs, as intended under the ACA.
Era of Health Care Reform 71
Inability to obtain health insurance and affordability remained
thorny issues even after the ACA’s implementation. With each passing
year, fewer insurers have participated in the exchanges where people can
buy private insurance, and the cost of insurance has been rising sharply.
In the market for employer-based health insurance, fewer small employ-
ers with less than 50 workers were able to offer insurance to their work-
ers. For example, 59% were able to offer health insurance in 2012; by
2017, only 50% could do so (Claxton et al., 2017). The cost of insurance
and worker contributions toward that cost have also risen dramatically.
For example, between 2012 and 2017, total employment-based health
insurance costs rose 19%, whereas worker contributions increased by
32% for family coverage (Claxton et al., 2017).
Despite the issues just pointed out, and promises by politicians to
reform the system, the U.S. Congress failed to pass a broad health care
reform bill in 2017. However, the Tax Cuts and Jobs Act of 2017, passed
and signed into law in December 2017, effectively repealed the mandate
in the ACA that required all Americans to have health insurance. The
mandate to either have health insurance or pay a tax penalty was one of
the main anchors of the ACA, although this provision did not actually
promote the expected growth in the purchase of health insurance. The
second main anchor of the ACA, requiring employers to offer health
insurance to the workers, could not be repealed through the tax law.
At the time of this text’s writing, it was unclear how Congress would
address the lingering issues with health insurance, in terms of both cov-
erage and cost. With a partially repealed ACA, however, the urgency to
address health care reform in 2018 had only intensified.
▸ Conclusion
In a little more than 100 years, health care delivery has come a long way
in the United States, evolving from a primitive and family-oriented craft
to a technology-driven service and the largest industry in the country.
In the process, many medical procedures and services have become
increasingly unaffordable. Both private and public health insurance have
become firmly entrenched mechanisms to pay for costly health care.
Medicare, Medicaid, and other public programs, however, cover only
those individuals who meet established criteria for eligibility. Efforts to
create a national health insurance program have repeatedly failed.
The late 20th century and early 21st century have been characterized
as the corporate era in the delivery of medical care. Corporatization has
put the delivery of health care into the hands of large managed care and
integrated health care organizations, and it has turned the delivery of
72 Chapter 3 Historical Overview of U.S. Health Care Delivery
medical care into a complex enterprise. The information revolution has
created advanced telecommunication technologies, whose application in
medical care has made the distant delivery of certain health care services
possible. E-health has given consumers access to health care information
over the Internet. Globalization has added a worldwide dimension to the
delivery of medical care through telemedicine, outsourcing, and foreign
direct investment in health care delivery.
An era of health care reform was inaugurated in the United States
with the passage of the Affordable Care Act in 2010. However, contrary to
the promises made by its supporters, the law failed to provide affordable
coverage to millions of Americans, although it did significantly reduce
the number of uninsured. One major anchor of the ACA—the mandate
to have health insurance or pay a penalty tax—was repealed under the
Tax Cuts and Jobs Act of 2017. In contrast, nagging concerns regarding
coverage and costs have not been resolved and remain in a state of flux.
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Wiley & Sons.
18. Rosen G. 1983. The structure of American medical practice 1875–1941. Philadelphia,
PA: University of Pennsylvania Press.
19. Rothstein WG. 1972. American physicians in the nineteenth century: From sect to
science. Baltimore, MD: Johns Hopkins University Press.
20. Scherz H. May 7, 2010. Why the AMA wants to muzzle your doctor. Wall Street Journal.
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Accessed October 2011.
21. Shryock RH. 1966. Medicine in America: Historical essays. Baltimore, MD: Johns
Hopkins University Press
22. Starr P. 1982. The social transformation of American medicine. Cambridge, MA: Basic
Books.
23. Stevens R. 1971. American medicine and the public interest. New Haven, CT: Yale
University Press.
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York, NY: Delmar.
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http://healthaffairs.org/blog/2013/06/06/the-uninsured-after-implementation-of-the-affordable-care-act-a-demographic-and-geographic-analysis/
© ninjaMonkeyStudio/Getty Images
CHAPTER 4
Health Care Providers
and Professionals
▸ Introduction
The U.S. health care industry is the largest employer in the nation, employing about 13.6% of the nation’s total labor force (U.S. Bureau of Labor Statistics, 2016). The health care sector of the
U.S. economy will continue to grow because of (1) growth in the overall
population, mainly due to immigration; (2) aging of the population, as
the baby boomers continue to turn age 65 years and older through 2029;
and (3) increased life expectancies.
Health professionals are among the most well-educated and diverse of
all labor force groups. Almost all of the practitioner groups are now repre-
sented by professional associations, and health services professionals work
in a variety of health care settings. According to 2016 data (TABLE 4.1), the
75
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76 Chapter 4 Health Care Providers and Professionals
http://www.bls.gov/cps/cpsaat18.htm
https://www.bls.gov/cps/cpsaat18.htm
majority of health professionals are employed by hospitals (40.6%), fol-
lowed by nursing care facilities (10.4%), and physicians’ offices and clinics
(9.4%) (U.S. Bureau of Labor Statistics, 2016).
The demand for health services professionals closely follows demo-
graphic trends (mentioned previously), advances in research and tech-
nology, disease and illness trends, and changes in health insurance and
the delivery of services. Advances in scientific research contribute to new
methods of preventing, diagnosing, and treating illness. New sophisti-
cated medical techniques and machines are constantly being introduced,
creating the need to update skills. Specialization in medicine has contrib-
uted to the proliferation of various types of medical technicians. In addi-
tion, the trend in diseases from acute to chronic conditions has created a
greater need for health services professionals who are formally prepared
to address health risks and their consequences and prevention. Recent
expansion of health insurance coverage under the Affordable Care Act
(ACA) will lead to greater utilization of health care services and, in turn,
a greater demand for health care professionals. Delivery of health care
through managed care and a greater emphasis on prevention in the ACA
will require more primary care providers.
This chapter provides an overview of the large array of health services
professionals. It summarizes their training and practice requirements,
major roles, practice settings in which they are generally employed, and
critical issues concerning their professions. Emphasis is placed on phy-
sicians, who play a leading role in the delivery of health care. Nonphy-
sician practitioners with advanced training also fill a critical role in the
delivery of primary care services. In addition, the chapter describes the
imbalance between primary and specialty care services, the maldistribu-
tion of practitioners, and the looming personnel shortages.
▸ Physicians
Physicians play a central role in health care services by evaluating a
patient’s health condition, diagnosing abnormalities, and prescrib-
ing treatment. Some physicians are engaged in medical education and
research to find new and better ways to control and cure health problems.
All states require physicians to be licensed before they can practice
medicine. The licensure requirements include graduation from an accred-
ited medical school that awards a doctor of medicine (MD) or doctor of
osteopathic medicine (DO) degree, successful completion of a licensing
examination administered by either the National Board of Medical Exam-
iners or the National Board of Osteopathic Medical Examiners, and com-
pletion of a supervised internship/residency program (Stanfield, 1995,
pp. 102–104). Residency is graduate medical education in a specialty that
Physicians 77
takes the form of paid on-the-job training, usually in a hospital. Most phy-
sicians serve a 1-year rotating internship after graduation before entering a
residency, which may last 2 to 6 years.
The number of active physicians, both MDs and DOs, has steadily
increased in the United States, rising from 14.1 to 27.2 physicians per
10,000 people from 1950 to 2016 (TABLE 4.2). Of the 192 medical schools in
the United States, 163 teach allopathic medicine (defined in the next sec-
tion) and award the MD degree, and 29 teach osteopathic medicine and
award the DO degree.
Similarities and Differences Between MDs and DOs
Both MDs and DOs use traditional methods of treatment, including drugs
and surgery. The two differ mainly in their philosophies and approaches
to treatment. Osteopathic medicine, practiced by DOs, emphasizes the
musculoskeletal system (e.g., the correction of joints or tissues). In their
treatment plans, DOs stress preventive medicine such as diet and the envi-
ronment as factors that might influence natural resistance. They take a
holistic approach to patient care. In contrast, MDs are trained in allopathic
TABLE 4.2 Active Physicians: Type and Number per 10,000 Population
Year
All Active
Physicians
Doctors of
Medicine
Doctors of
Osteopathy
Active Physicians per
10,000 Population
1950 219,900 209,000 10,900 14.1
1960 259,500 247,300 12,200 14.0
1970 326,500 314,200 12,300 15.6
1980 457,500 440,400 17,100 19.7
1990 589,500 561,400 28,100 23.4
1995 672,859 637,192 35,667 25.6
2000 772,296 727,573 44,723 27.8
2012 826,001 763,000 63,000 28.3
2016 877,616 810,043 67,534 27.2
Data are from the National Center for Health Statistics 2014. Health, United States (p. 291); 2015. Health, United States (p. 292).
Hyattsville, MD: U.S. Department of Health and Human Services.
78 Chapter 4 Health Care Providers and Professionals
medicine, which views medical treatment as an active intervention to pro-
duce a counteracting reaction in an attempt to neutralize the effects of dis-
ease. MDs, particularly generalists, may also use preventive medicine along
with allopathic treatments. Approximately one-third of MDs and more
than one-half of DOs are generalists (U.S. Bureau of Labor Statistics, 2017).
Generalists and Specialists
Whereas most DOs are generalists, most MDs are specialists. In the United
States, physicians trained in family medicine/general practice, general
internal medicine, and general pediatrics are considered primary care phy-
sicians or generalists (Rich et al., 1994). Primary care physicians typically
provide preventive services (e.g., health examinations, immunizations,
mammograms, Pap smears) and treat frequently occurring and less severe
problems. Referrals are often made to specialists for problems that occur
less frequently or require complex diagnostic or therapeutic approaches.
Physicians in non-primary care specialties dealing with particular
diseases or organ systems are referred to as specialists. Specialists must be
certified in an area of medical specialization, which commonly requires
additional years of advanced residency training followed by several years
of practice. A specialty board examination is often required as the final
step for becoming a board-certified specialist. The most common medical
specialties include anesthesiology, cardiology, dermatology, specialized
internal medicine, neurology, obstetrics and gynecology, ophthalmology,
pathology, pediatrics, psychiatry, radiology, and surgery. These special-
ties can be divided into six major functional groups: (1) the subspecialties
of internal medicine; (2) a broad group of medical specialties; (3) obstet-
rics and gynecology; (4) surgery of all types; (5) hospital-based radiology,
anesthesiology, and pathology; and (6) psychiatry (Cooper, 1994).
Hospitalists
The specialty of a hospitalist is organized around the site of care—that is,
the hospital—instead of a specific organ, disease, or age. Hospitalists are
involved in inpatient medicine, and their roles parallel those of primary
care physicians in an outpatient setting, in that they manage the care of
hospitalized patients. This specialty has long served a significant role in
urban hospitals in Canada and the United Kingdom.
The hospitalist specialty appeared in the U.S. health care system to a
significant extent after managed care began to dominate the health care
system and place an emphasis on cost-efficiency. Hospitalists seek to
decrease overall cost and length of stay for patients, while maintaining
referring-physician satisfaction. Most practicing hospitalists train under
Physicians 79
various primary care concentrations such as general internal medicine,
family practice, or general pediatrics.
Differences Between Primary and Specialty Care
Primary care can be distinguished from specialty care by the time, focus,
and scope of services provided to patients. The five main areas of distinc-
tion are as follows:
1. In linear time sequence, primary care is first-contact care and
is regarded as the portal of entry to the health care system
(Kahn et al., 1994). Specialty care, when needed, generally fol-
lows primary care.
2. In managed care and integrated delivery environments, pri-
mary care physicians serve as gatekeepers—an important role
in controlling costs, utilization rates, and the rational allo-
cation of resources. In the gatekeeping model, specialty care
requires referral from a primary care physician.
3. Primary care is longitudinal, and primary care providers fol-
low a patient through the course of treatment and coordinate
various activities, including initial diagnosis, treatment, refer-
ral, consultation, monitoring, and follow-up. Specialty care is
episodic and, therefore, more focused and intense.
4. Primary care focuses on the whole person. The patient
may have multiple health issues—a condition referred to
as comorbidity. Primary care seeks to balance the patient’s
multiple health issues, including referrals to specialists when
needed. Specialty care deals with particular diseases or organ
systems of the body and is limited in scope to episodes of
illness, specific organ systems, or the disease process. Spe-
cialty care is also associated with secondary and tertiary lev-
els of services.
5. The difference in scope between primary and specialty care
is reflected in how providers are trained. Primary care medi-
cal students spend a significant amount of time in ambulatory
care settings, familiarizing themselves with a variety of patient
conditions and problems. Students in medical subspecialties
spend significant time in inpatient hospitals, where they are
exposed to state-of-the-art medical technology to diagnose
and treat diseases and perform surgeries.
Work Settings and Practice Patterns
Physicians work in a variety of settings including hospitals, where they
are employed as medical residents, staff physicians, or hospitalists, and
80 Chapter 4 Health Care Providers and Professionals
the public sector, in places such as federal government agencies, pub-
lic health clinics, community and migrant health centers, schools, and
prisons. Most physicians, however, are office-based practitioners in pri-
vate clinics, where they work as partners or salaried employees under
contractual arrangements. TABLE 4.3 shows that in 2013, physicians in
general family practice were involved in the highest proportion of ambu-
latory care visits in the United States (18.9%), followed by those in inter-
nal medicine (13.7%) and pediatrics (10.2%).
Imbalance and Maldistribution of Physicians
In 2016 there were, on average, 271.6 active physicians per 100,000 peo-
ple in the United States, ranging from a high of 443.5 in Massachusetts
to a low of 186.1 in Mississippi. States with the highest number of physi-
cians per 100,000 people are concentrated in the Northeast (Association
of American Medical Colleges [AAMC], 2017).
Looming Shortages and the Affordable Care Act
There is much debate about the U.S. physician workforce. Key factors
affecting the adequacy of the physician workforce include growth in the
insured population due to health care reform law, an aging U.S. popula-
tion, an aging health care workforce, workforce diversity, and the econ-
omy. Another important factor, the evolution of health care technology,
increases the likelihood of diagnosis and the breadth of treatable ailments
(Alliance for Health Reform & Robert Wood Johnson Foundation, 2011).
The ACA, enacted in March 2010, is expected to add 32 million pre-
viously uninsured persons to the pool of insured patients by 2019—and
they will need physicians. This growth of the insured population is one of
TABLE 4.3 Ambulatory Visits by Generalists and Specialists in the
United States, 2013
Obstetrics/gynecology 6.3%
Pediatrics 10.2%
Internal medicine 13.7%
General/family practice 18.9%
Specialists 50.9%
National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD; 2017:289–290.
Physicians 81
the key factors expected to worsen the current shortage of physicians for
at least another decade. By 2025, the deficit could grow by 25% (AAMC,
2008). Health professional shortages vary across fields of practice. To fill
the need for health care providers, the ACA establishes grant programs
for education and training for primary care, direct care, oral health spe-
cialists, geriatric education centers, behavioral health, cultural compe-
tency, nursing, nurse practitioners, public health, and underrepresented
minorities (American Public Health Association, 2011).
Another factor influencing the physician shortage is the aging of the
U.S. population and demands from the complex chronic care needs of older
persons. The first baby boomers turned 65 in January 2011, becoming eli-
gible for Medicare, and a total of 78 million baby boomers will turn 65 by
2030. Providers for this population are already in short supply. In recent
years, the greatest growth in utilization of health care services has been
among those 75 years of age and older. Geriatricians—that is, primary care
physicians for this population—number a mere 6,830 and are spread thinly,
with just one for every 1,900 seniors age 75 or older. According to an Insti-
tute of Medicine1 study, the United States will need 36,000 geriatricians by
2030 to meet the needs of the elderly.
The physician workforce itself is aging, with sources suggesting that
one-third of current physicians will retire in the next 10 years. Nearly
40% of doctors are above 55 years of age, and younger professionals have
different practice patterns than their predecessors. For example, health
professionals between the ages of 25 and 40 tend to work fewer hours
than previous generations did.
The United States has approximately 80 primary care physicians per
100,000 people—on average, 68 primary care physicians per 100,000 rural
residents, and 84 primary care physicians per 100,000 urban residents. With
this unequal distribution, many areas have relative primary care shortages,
especially rural communities and areas of measurable social deprivation
(American Academy of Family Physicians, 2013).
Both the literature and practice examples suggest promising strategies
that employers and policymakers can implement to address the needs and
challenges of the evolving health care workforce. Workforce assessment is
a critical first step for employers to map the demographics of their work-
force, identify skills gaps, plan for leadership succession, and facilitate the
transfer of knowledge from mature workers to entry-level hires.
Transitioning to a team-oriented approach to organizing health care
jobs may also allow health care professionals with varying strengths and
abilities to stay on the job longer. Peer mentoring and job shadowing are
1 The Institute of Medicine was renamed the National Academy of Medicine
in 2015.
82 Chapter 4 Health Care Providers and Professionals
other techniques that can enhance the skills of new workers while keep-
ing mature workers productive for longer.
Another strategy is to employ community health workers to take over
certain duties from primary care providers. Health workers frequently
come from the neighborhoods they serve. Most provide health educa-
tion, make follow-up calls, and visit patients in their homes. Because
their role is nonclinical, they are easier to train and less costly to hire, but
limited in versatility.
Geographic Maldistribution
Physicians often concentrate in larger numbers in metropolitan and sub-
urban areas rather than in rural and inner-city areas. The former gener-
ally offer better prospects for living standards, professional interaction,
access to modern facilities and technology, and professional growth.
The demand for physicians’ services is primarily determined by the
population’s health care needs. The actual delivery of services, however,
is based on people’s ability to pay for them, mainly through health insur-
ance. The need-based model assumes an even distribution of physicians,
whereas demand factors favor the distribution of physicians mostly in
metropolitan and suburban areas, where most of the well-insured pop-
ulations live. Together with physician preferences, the demand factor
leaves rural areas and inner cities with provider shortages.
Specialty Maldistribution
Besides the geographic maldistribution of physicians, an imbalance exists
between primary and specialty care in the United States. From 1965 to
1992, the number of primary care physicians increased by only 13%,
whereas the number of specialists increased by 121% (Rivo & Kindig,
1996). In the U.S., approximately 38% of physicians are generalists, while
the remaining 62% are specialists (National Center for Health Statistics,
2017). In other industrialized countries, generalists typically constitute
over 50% of the physician workforce.
Specialty maldistribution has become ingrained in the U.S. health
care delivery system for three main reasons: medical technology, reim-
bursement methods and remuneration, and specialty-oriented medi-
cal education. By comparison, the need for primary care physicians is
determined mainly by general population demographics. The popula-
tion grows at a slower rate than technological advancements, so the gap
between the primary care and specialty care physician workforce num-
bers continues to expand.
In the United States, the higher incomes of specialists relative to pri-
mary care physicians have contributed to the imbalance between the pri-
mary care and specialty physicians workforces. In addition, specialists have
Physicians 83
more predictable hours and enjoy higher prestige, both among their col-
leagues and by society in general (Rosenblatt & Lishner, 1991; Samuels &
Shi, 1993). High status and prestige are especially accorded to tertiary care
and specialties employing high technology. Unsurprisingly, these consid-
erations influence the career decisions of many medical students.
The imbalance between generalists and specialists has several unde-
sirable consequences. Having too many specialists has contributed to
the high volume of intensive, expensive, and invasive medical services
as well as to the rise in health care costs (Greenfield & Nelson, 1992;
Rosenblatt, 1992; Schroeder & Sandy, 1993; Wennberg et al., 1993). In
addition, having more surgeons increases the demand for initial contacts
and follow-up visits with surgeons. Seeking care directly from special-
ists is often less effective than with primary care physicians, who often
provide early intervention before complications develop (Starfield, 1992;
Starfield & Simpson, 1993). Notably, a health care workforce with higher
numbers of primary care professionals is associated with lower overall
mortality and death rates from cardiovascular disease and cancer (Shi,
1992, 1994). Primary care physicians have also been the major provid-
ers for minorities, the poor, and people in underserved areas (Ginzberg,
1994; Starr, 1982). Hence, underserved populations suffer the most from
shortages of primary care physicians.
▸ Dentists
Dentists are the major providers of dental care. Their main role is to
diagnose and treat problems related to the teeth, gums, and tissues of
the mouth. All dentists must be licensed to practice. Licensure require-
ments include graduation from an accredited dental school that awards
a doctor of dental surgery (DDS) or doctor of dental medicine (DMD)
degree, along with successful completion of both written and practical
examinations.
Eight dental specialty areas are recognized by the American Dental
Association: orthodontics (straightening teeth), oral and maxillofacial
surgery (operating on the mouth and jaws), pediatric dentistry (dental
care for children), periodontics (treating gums), prosthodontics (mak-
ing artificial teeth or dentures), endodontics (root canal therapy), public
health dentistry (community dental health), and oral pathology (dis-
eases of the mouth). TABLE 4.4 describes the distribution of these spe-
cialties. The growth of dental specialties is influenced by technological
advances, such as implant dentistry, laser-guided surgery, orthognathic
surgery to restore facial form and function, new metal combinations for
prosthetic devices, new bone graft materials in tissue-guided regenera-
tion techniques, and new materials and instruments.
84 Chapter 4 Health Care Providers and Professionals
Many dentists are involved in the prevention of dental decay and
gum disease, including regular cleaning of teeth and educating patients
on proper dental hygiene. Hence, dental offices generally employ dental
hygienists and assistants to perform many preventive and routine care ser-
vices. Dentists also spot symptoms that require treatment by a physician.
Most dentists practice in private offices, alone, or in groups. Dental
offices operate as private businesses, and dentists often perform busi-
ness tasks such as staffing, financing, purchasing, leasing, and work
scheduling. Some dentists work at dental clinics in private companies,
retail stores, franchised dental outlets, or managed care organizations
(MCOs). Group dental practices—which typically offer lower overhead
and increased productivity—have slowly grown. The federal government
also employs dentists, mainly in the Department of Veterans Affairs and
the U.S. Public Health Service hospitals and clinics.
Employer-sponsored dental insurance has increased the demand for
dental care by enabling a greater segment of the population to afford it.
The demand for dentists will continue to increase as populations with high
dental needs increase, such as the elderly, the handicapped, the homebound,
and patients with human immunodeficiency virus (HIV) infection. Other
factors contributing to the increased demand for dentists include greater
awareness of the importance of dental care for general health, the wide-
spread appeal of the cosmetic and aesthetic dentistry, and the inclusion of
dental care in many publicly funded programs (e.g., Head Start, Medicaid,
community and migrant health centers, maternal and infant care).
▸ Pharmacists
The traditional role of pharmacists has been to dispense medicines pre-
scribed by physicians, dentists, and podiatrists and to provide consul-
tation on the proper selection and use of medicines. All states require
TABLE 4.4 Specialties for Dentists, 2016
Dentists 153,500
Orthodontists 5,200
Oral surgeons 5,380
Dentists, all other 5,400
Total 169,480
Occupational employment and wages: national employment matrix. www.bls.gov. Accessed February 11, 2018.
Pharmacists 85
http://www.bls.gov
a license to practice pharmacy. Since 2005, the bachelor of pharmacy
degree has been phased out, and instead a PharmD degree requiring
6 years of postsecondary education has become the standard. Licensure
requirements include graduation from an accredited pharmacy pro-
gram as well as successful completion of a state board examination and
practical experience or completion of a supervised internship. The 2016
annual salary of pharmacists ranged between $87,120 and $157,950.
Most pharmacists are generalists—dispensing drugs and advis-
ing providers and patients—but some become specialists. Pharmaco-
therapists specialize in drug therapy and work closely with physicians.
Nutrition- support pharmacists determine and prepare drugs for nutri-
tional therapy. Radiopharmacists or nuclear pharmacists produce radio-
active drugs for patient diagnosis and therapy.
Most pharmacists hold salaried positions and work in community phar-
macies that are independently owned or are part of a national drugstore,
supermarket, or department store chain. Pharmacists are also employed by
hospitals, MCOs, home health agencies, clinics, government health services
organizations, and pharmaceutical manufacturers (TABLE 4.5).
The role of pharmacists has expanded over the last two decades from
the preparation and dispensing of prescriptions to drug product edu-
cation and expertise on specific drugs, drug interactions, and generic
drug substitution. In about half of U.S. states, pharmacists have authority
to initiate or modify drug treatment, as long as they have collaborative
agreements with physicians. Pharmacists play a critical role in informing
consumers, especially those with chronic conditions, about prescription
drugs and their potential misuse. This education and counseling role is
broadly referred to as pharmaceutical care. Including pharmacists in the
health care team is particularly important in the hospital and commu-
nity to ensure appropriate prescriptions and medication adherence.
TABLE 4.5 Sites of Employment for Pharmacists, 2016
Retail 134,610
Hospitals 71,390
Internet pharmacists, wholesalers,
physician offices
11,080
Other 3,300
Total 231,460
Occupational employment and wages: national employment matrix. www.bls.gov. Accessed February 11, 2018.
86 Chapter 4 Health Care Providers and Professionals
http://www.bls.gov
▸ Other Doctoral-Level Health Professionals
In addition to physicians, dentists, and some pharmacists, some other
health professionals have doctoral education, including optometrists,
psychologists, podiatrists, and chiropractors. TABLE 4.6 identifies the
numbers of these professionals in 2016.
Optometrists provide vision care, such as examination, diagnosis,
and correction of vision problems. They must be licensed to practice.
Licensure requirements include possession of a doctor of optometry
(OD) degree and successful completion of a written and a clinical state
board examination. Most optometrists work in solo or group practices,
while others work for the government, MCOs, optical stores, or vision
care centers as salaried employees.
Psychologists provide patients with mental health care. They must
be licensed or certified to practice. The ultimate recognition is the diplo-
mate in psychology, which requires a doctor of philosophy (PhD) or doc-
tor of psychology (PsyD) degree, a minimum of 5 years of postdoctoral
experience, and the successful completion of a professional psychology
examination administered by the American Board of Examiners. Psychol-
ogists may specialize in several areas, such as clinical, counseling, devel-
opmental, educational, engineering, personnel, experimental, industrial,
psychometric, rehabilitation, school, and social domains (Stanfield, 1995,
pp. 280–282). Considering the prevalence of mental health problems, the
demand for psychologists for all age groups is likely to continue to increase
for the foreseeable future.
Podiatrists treat patients with diseases or deformities of the feet by
performing surgical operations, prescribing medications and correc-
tive devices, and administering physiotherapy. They must be licensed.
Licensure requirements include graduation from an accredited program
that awards a doctor of podiatric medicine (DPM) degree and success-
ful completion of a national examination administered by the National
TABLE 4.6 Employment Levels of Doctoral-Level Health Professionals in
the United States, 2016
Optometrists 40,200
Psychologists 166,600
Podiatrists 11,000
Chiropractors 47,400
Occupational employment and wages: national employment matrix. www.bls.gov. Accessed February 11, 2018.
Other Doctoral-Level Health Professionals 87
http://www.bls.gov
Board of Podiatry. Most podiatrists work in private practice, although
some are salaried employees of health services organizations.
Chiropractors provide treatment to patients through chiropractic
(Greek for “done by hand”) manipulation, physiotherapy, and dietary
counseling, typically helping patients with neurologic, muscular, and vas-
cular disturbances. Chiropractic care is based on the belief that the body
is a self-healing organism; thus chiropractors do not prescribe drugs or
perform surgery. Chiropractors must be licensed to practice. Licensure
requirements include graduation from a 4-year accredited program that
awards a doctor of chiropractic (DC) degree and successful completion
of an examination by the state chiropractic board. Most chiropractors
work in a private solo or group practice. Due to a largely sedentary work
environment in the United States and the limitations of modern Western
medicine, chiropractors can play a significant role in addressing musculo-
skeletal disorders.
▸ Nurses
Nurses constitute the largest group of health care professionals. The nurs-
ing profession developed around hospitals after World War I and pri-
marily attracted women. Before World War I, more than 70% of nurses
worked in private duty, in patients’ homes, or for private-pay patients in
hospitals. Federal funding for nursing education increased after World
War II, in the Nursing Training Act of 1964, the Health Manpower Act
of 1968, and the Nursing Training Act of 1971. However, state funding
remains the primary source of support for nursing schools.
Nurses are the main caregivers for sick and injured patients and
address physical, mental, and emotional needs. All states require that
nurses be licensed to practice. Licensure requirements include grad-
uation from an approved nursing program and successful comple-
tion of a national examination. Educational preparation distinguishes
between two levels of nurses: registered nurses and licensed practical
nurses. Registered nurses (RNs) must complete an associate’s degree
(ADN), a diploma program, or a bachelor of science in nursing (BSN)
degree. ADN programs take about 2 to 3 years to complete and are
offered by community and junior colleges; diploma programs take
2 to 3 years to complete and are offered by hospitals; and BSN pro-
grams take 4 to 5 years to complete and are offered by colleges and
universities (Stanfield, 1995, pp. 126–199). Licensed practical nurses
(LPNs)—called licensed vocational nurses (LVNs) in some states—
must complete a state-approved program in practical nursing and
88 Chapter 4 Health Care Providers and Professionals
pass a national written examination. Most LPN programs last about
1 year and include both classroom study and supervised clinical practice.
Nurses work in a variety of health care settings, and many still
do private- duty nursing in patients’ homes. They are often classified
according to work settings—for example, hospital nurses, long-term
care nurses, public health nurses, private-duty nurses, office nurses, and
occupational health or industrial nurses. Head nurses supervise other
nurses; for example, RNs supervise LPNs.
With hospitals now treating much sicker patients than in the past,
patient-to-nurse staffing ratios have increased, and caregiving by nurses
has become more intensive. The remarkable growth in alternative settings
for care has created new employment opportunities for nurses. The grow-
ing opportunities for RNs in supportive roles such as case management,
utilization review, quality assurance, and prevention counseling have also
increased the demand for their services. The current national shortage of
nurses is likely to increase (Sochalski, 2002). Slow growth in wages, low
job satisfaction, and inadequate career mobility pose major impediments
to attracting and retaining nurses (Sochalski, 2002). Many U.S. hospitals
turn to developing countries (such as the Philippines and China) for their
nursing supply, and this trend is likely to continue.
Advanced-Practice Nurses
The term advanced-practice nurse (APN) refers to nurses who have edu-
cation and clinical experience beyond that required of an RN. There are
four areas of specialization for APNs (Cooper, 1998): clinical nurse spe-
cialists (CNSs), certified registered nurse anesthetists (CRNAs), nurse
practitioners (NPs), and certified nurse-midwives (CNMs). NPs and
CNMs are also classified as nonphysician practitioners; they are dis-
cussed in the next section. Besides being direct caregivers, APNs perform
other activities such as collaborating and consulting with other health
care professionals, educating patients and other nurses, collecting data
for clinical research projects, and participating in the development and
implementation of total quality management programs, critical path-
ways, case management, and standards of care (Grossman, 1995). There
are 206,800 APNs in the United States according to the 2012 National
Sample Survey of Registered Nurses.
The main difference between CNSs and NPs is that CNSs work in
hospitals, whereas NPs mainly work in primary care settings. CNSs can
specialize in specific fields such as oncology, neonatal health, cardiac
care, or psychiatric care.
Nurses 89
▸ Nonphysician Practitioners
The term nonphysician practitioner (NPP)—also called nonphysician cli-
nician, midlevel provider, and physician extender—refers to clinical pro-
fessionals who practice in many areas in which physicians practice but
who do not possess an MD or a DO degree. NPPs receive less advanced
training than physicians but more advanced training than RNs, and
typically include physician assistants (PAs), NPs, and CNMs. In many
instances of primary care, they can substitute for physicians. They do
not, however, engage in the entire range of primary care nor deal with
complex cases requiring physician expertise (Cooper, 1998). Hence,
NPPs often work in close consultation with physicians.
NPs work predominantly in primary care, whereas PAs are evenly
divided between primary care and specialty care. In 2017, there were
203,800 NPs, 106, 200 PAs, and 11,826 CNMs in the U.S. (U.S. Bureau of
Labor Statistics, 2017).
PAs are members of a health care team who work in a dependent
manner with a supervising physician (1986, p. 3). PAs may perform
procedures only under physician supervision. They assist onsite or off-
site physicians in the delivery of care to patients and perform services
including evaluation, monitoring, diagnostics, therapeutics, counseling,
and referral (Fitzgerald, 1995).
In 2017, there were 229 accredited PA training programs in the
United States, which were steadily growing in enrollment (Accreditation
Review Commission on Education for the Physician Assistant, 2017).
PA programs award bachelor’s degrees, certificates, associate degrees,
or master’s degrees. In most states, PAs have the authority to prescribe
medications.
NPs are individuals who have successfully completed a program of
study leading to competence as RNs in an expanded role. NPs constitute
the largest group of NPPs and have experienced the most growth ( Cooper,
1998); since 1997, however, enrollment in NP preparatory programs has
gradually declined. The training of NPs may take place in a certificate
program (at least 9 months in duration) or in a master’s degree program
(2 years of full-time study). States vary in NP licensure and accreditation
requirements. Most NPs are now trained in master’s-level or post-master’s–
level nursing programs. In addition, NPs must complete clinical training in
direct patient care. The primary function of NPs is to promote wellness and
health through patient education, and they spend time with patients to help
them understand the need to take responsibility for their own health; hence,
they are an important adjunct to the practice of primary care physicians.
They also provide service in nursing homes (Brody et al., 1976). NPs have
the authority to prescribe medications in almost all states.
90 Chapter 4 Health Care Providers and Professionals
CNMs are RNs with additional training from a nurse-midwifery pro-
gram in areas such as maternal and fetal procedures, maternal and child
nursing, and patient assessment (Endicott, 1976). CNMs deliver babies,
provide family planning education, and manage gynecologic and obstetric
care. They often substitute for obstetricians/gynecologists in prenatal and
postnatal care, but refer abnormal or high-risk patients to obstetricians or
jointly manage care of such patients. During childbirth, patients cared for
by CNMs are less likely to have continuous electronic monitoring, induced
labor, or anesthesia, which are associated with lower cesarean section rates
and less use of resources including length of hospital stay, operating room
costs, and use of anesthesia staff (Rosenblatt et al., 1997).
Value of NPP Services
Efforts to establish the roles of NPs, PAs, and CNMs as nonphysician health
care providers began in the late 1960s, when it was recognized that they
could improve access to primary care, especially in rural and underserved
areas. Their work helps alleviate some problems created by the geographic
maldistribution of physicians. Indeed, NPPs can provide both high-
quality and cost-effective medical care. Compared to physicians, NPPs
spend more time with patients and establish better rapport. NPs often
have better communication and interviewing skills than physicians—
skills that are particularly important in community and migrant health
centers in assessing patients who are predominantly of minority origin
and often have little education (Brody et al., 1976). Clients report greater
satisfaction with NPs because NPs are more likely to perform comprehen-
sive examinations. CNMs are considered effective in providing access to
obstetric and prenatal services in rural and poor communities.
Before NPPs can be used to their full potential, however, issues to be
resolved include legal restrictions on practice, reimbursement policies,
and relationships with physicians. The lack of autonomy to practice is
a noteworthy barrier facing midlevel providers, as many states require
physician supervision. NPPs also face financial barriers in reimburse-
ment, which is generally indirect—that is, made to the physicians with
whom they practice.
▸ Allied Health Professionals
In the early 20th century, the health care provider workforce consisted of
physicians, nurses, pharmacists, and optometrists. The growth in tech-
nology and specialized interventions placed greater demands on physi-
cians and nurses and limited the time they could spend with patients.
Allied Health Professionals 91
Such time constraints created a need to train other professionals as
adjuncts to or substitutes for physicians and nurses. Allied health profes-
sionals receive specialized training, and their clinical interventions are
meant to complement the work of physicians and nurses. Through their
assistance, physicians and nurses are relieved of time pressures and can
attend to functions that require their expertise and keep abreast of the
latest advances in their disciplines.
Allied health includes many areas and constitutes approximately
60% of the U.S. health care workforce. An allied health professional is a
person who has received a certificate or associate’s, bachelor’s, or master’s
degree; doctoral-level training; or post-baccalaureate training in a health
care-related science and who has responsibility for the delivery of health
or related services. These services may be associated with the identifica-
tion, evaluation, and prevention of diseases and disorders; dietary and
nutritional services; rehabilitation; or health system management. Fur-
thermore, allied health professionals differ from those with a degree in
medicine (MD or DO), dentistry, optometry, podiatry, chiropractic, or
pharmacy; a graduate degree in health administration; a degree in clini-
cal psychology; or a degree equivalent to one of these. Allied health pro-
fessionals can be divided into two broad categories: technicians and/or
assistants and therapists and/or technologists.
Technicians and Assistants
Typically, technicians and assistants receive less than 2 years of postsec-
ondary education and are trained to perform procedures. They require
supervision from therapists or technologists to ensure care plan evalua-
tion in the treatment process. Technicians and assistants include physi-
cal therapy assistants, certified occupational therapy assistants, medical
laboratory technicians, radiological technicians, and respiratory therapy
technicians.
Technologists and Therapists
Technologists and therapists receive more advanced training, including
education in evaluating patients, diagnosing problems, and developing
treatment plans. They must also be trained to evaluate the appropriate-
ness and potential side effects of therapy treatments and to teach proce-
dural skills to technicians.
Some key allied health professionals are graduates of programs accred-
ited by their respective professional bodies. For example, such programs
train physical therapists (PTs), who provide care for patients with move-
ment dysfunction. The bachelor’s degree program has been phased out for
PTs, replaced by master’s degree (MPT or MSPT) or doctoral degree (DPT)
92 Chapter 4 Health Care Providers and Professionals
programs in physical therapy. Passing an examination administered by the
American Physical Therapy Association is also required for licensure.
Occupational therapists (OTs) help people improve their ability to
perform tasks in their daily living and work environments. OTs help reha-
bilitate individuals with conditions that are mentally, physically, devel-
opmentally, or emotionally disabling. OT interventions help people live
independently or be more productive at their workplace. The minimum
requirements for entering the OT profession are possessing a bachelor’s or
master’s degree in occupational therapy and passing a certification exam-
ination administered by the National Board for Certification in Occupa-
tional Therapy.
Dietitians, or nutritionists and dietetic technicians, ensure that insti-
tutional foods and diets are prepared according to nutritional standards.
Dietitians are registered by the Commission on Dietetic Registration of the
American Dietetic Association.
Dispensing opticians fit eyeglasses and contact lenses. They are cer-
tified by the American Board of Opticianry and the National Contact
Lens Examiners.
Speech/language pathologists treat patients with speech and language
problems, whereas audiologists treat patients with hearing problems.
The American Speech-Language-Hearing Association is the credential-
ing association for audiologists and speech/language pathologists.
Social workers help patients and families cope with problems from
long-term illness, injury and rehabilitation, and other issues. Bachelor’s
and master’s degree programs in social work in the United States are
accredited by the Council on Social Work Education.
▸ Public Health Professionals
The field of public health employs diverse health professionals. Pub-
lic health professionals focus on the whole community, rather than on
the individual, and work to address issues such as access to health care,
infectious disease control, environmental health issues, and violence and
injury issues. Public health professionals include physicians, researchers,
administrators, lawyers, environmentalists, and social scientists. In addi-
tion to education in their primary profession, many public health pro-
fessionals possess a graduate degree from a school of public health. As
of 2017, there were 64 accredited schools of public health in the United
States. The five core disciplines in public health education are biosta-
tistics, epidemiology, health services administration, health education
/behavioral science, and environmental health (Association of Schools
and Programs of Public Health, 2017).
Public Health Professionals 93
▸ Community Health Workers
Health care providers are increasingly using a team-based approach
to deliver care. Indeed, the complexity of health problems of many
Americans, combined with the specialization of health professionals,
makes health care teamwork and team training essential. This is especially
true for addressing risk factors for chronic conditions and for treating
people with multiple chronic diseases, including one-fourth of Americans
and two-thirds of people age 65 or older (Graffunder & Sakurada, 2016).
Community health workers (CHWs) are integral to many health
care systems. Their roles vary and include both the socially oriented
tasks of natural helpers and the clinical tasks of physician extenders.
As natural helpers, CHWs play an important role in connecting public
and primary care to their communities. As primary health care becomes
patient- centered and community-oriented, the natural helper roles—
which emphasize trust, rapport, understanding, and the ability to com-
municate with the community—take on an increased significance.
In some states, the community health worker is a more formal mem-
ber of the integrated primary health care team. In this role, the CHW
provides structured linkages between the community, the patient, and
the health care system. In essence, CHWs act as the missing piece of the
primary health care puzzle. They connect health care services to the com-
munity and, when functioning as full members of the health care team,
help ground and contextualize primary care practices in the community.
Such community-oriented primary care leads to increased patient satis-
faction, better community acceptance, and improved health outcomes.
The most effective CHWs are strongly embedded in their communities;
they have clear supervision within the health care system, clearly defined
roles in the health care system, and rigorous training and a defined sys-
tem of advancing their education and roles within the health care system
(Herman, 2011).
CHWs often receive brief training and minimal supplies, and many
work on the periphery of health care service areas, usually at a dis-
tance from health facilities. For these reasons, key to success is strong
management and supportive supervision through the implementa-
tion of clear reporting structures and frequent consultations between
CHWs and other professionals who lead integrated health care teams
( Campbell et al., 2004). Without strong management, CHWs could
exceed the limits of their training and have poorly-defined job owner-
ship and accountability.
To work effectively, CHWs must be integrated into the mainstream
health care delivery system. In the patient-centered medical home
(PCMH) model, a health care team guided by a clinical primary care
94 Chapter 4 Health Care Providers and Professionals
provider such as a personal physician or nurse practitioner, provides
continuous, comprehensive, and coordinated care in a culturally and lin-
guistically sensitive manner throughout a patient’s lifetime. CHWs can
fill essential roles of care in this model.
In 2011, the Centers for Disease Control and Prevention (CDC)
and the Division for Heart Disease and Stroke Prevention published
Addressing Chronic Disease Through CHWs: A Policy and Systems-Level
Approach; this report recommended that states integrate CHWs in
high-risk communities to prevent chronic disease. Likewise, the Insti-
tute of Medicine (IOM) has recommended including CHWs in the stra-
tegic plan to prevent, control, and reduce the impact of hypertension
(CDC, 2014). The ACA identified the need to encourage CHW engage-
ment in health promotion and improving health for medically under-
served populations. Moreover, the CDC has called for stronger support
for CHW programs to help eliminate health disparities related to the
prevention and management of diabetes (CDC, 2014; IOM, 2001).
In today’s complex health care system, patient care can no lon-
ger be delivered within the silos of individual health professions.
The health care workforce must be redesigned to accommodate the
growing number of patients entering the health care system. As pri-
mary care teams develop within the PCMH movement, primary care
practices will become the hub of access to care. To meet patients’ needs, health
care policymakers, researchers, and clinicians must examine the feasi-
bility and value of integrating CHWs into primary care while preserving
their role as community advocates in community-related activities and
initiatives (Franklin et al., 2015).
▸ Health Services Administrators
Health services administrators are employed at the top, middle, and
entry levels of various organizations that deliver health services. Top-
level administrators provide leadership and strategic direction, work
closely with governing boards, and are responsible for the long-term suc-
cess of an organization. They are responsible for the operational, clinical,
and financial outcomes of the organization. Middle-level administrators
may have leadership roles in major centers such as outpatient, surgical
services, or nursing services, or they may be departmental managers in
charge of diagnostics, dietary, rehabilitation, social services, environ-
mental services, or medical records. They are involved in major planning
and coordinating functions, organizing human and physical resources,
direction and supervision of other employees, operational and financial
controls, and decision making. Midlevel administrators often have direct
Health Services Administrators 95
responsibility for implementing changes, enhancing efficiency, and
developing new procedures based on changes in the health care delivery
system. Entry-level administrators may function as assistants to midlevel
managers and supervise a small number of operatives. Their main func-
tion may be to oversee and assist with operations critical to the efficient
operation of a departmental unit.
Health services administration is taught at the bachelor’s and mas-
ter’s degree levels in a variety of settings, with programs leading to several
different degrees. There are academic programs in schools of medicine,
public health, public administration, business administration, and allied
health sciences. Bachelor’s degrees prepare students for entry-level posi-
tions, while midlevel and senior-level positions require a graduate degree.
The most common degrees held by health services administrators are
the master of health administration (MHA) or master of health services
administration (MHSA), master of business administration (MBA, with a
health care management emphasis), master of public health (MPH), and
master of public administration (or affairs; MPA) (Pew Health Professions
Commission, 1998). The U.S. graduate schools of public health that are
accredited by the Council on Education for Public Health help train health
services administrators in MHA/MHSA and MPH programs.
Growth of the elderly population, along with the current shortage of
qualified administrators, is creating opportunities for long-term care man-
agement. Training of nursing home administrators has been greatly influ-
enced by government licensing regulations. Passing a national examination
administered by the National Association of Boards of Examiners of Long-
Term Care Administrators is a standard requirement; however, the educa-
tional qualifications for a license vary significantly from one state to another.
Although the basic academic qualification required by most states is a bach-
elor’s degree, acquiring adequate skills in nursing home administration
requires a degree that specializes in long-term care administration or health
care management (Singh, 2005).
▸ Patient-Centered Care
As the health care system emphasizes high-value delivery, the terms
“population health” and “patient-centered care” have become common.
( FIGURE 4.1 illustrates the evolution of health care from an individual-
focused to a population-focused approach.) Patient-centered care refers to
care that is respectful of and responsive to individual patient preferences,
needs, and values, in which patient values guide all clinical decisions
(IOM, 2001). Population health refers to the health outcomes of a group
of individuals, including the distribution of outcomes within the group.
Population health outcomes are the product of multiple determinants of
96 Chapter 4 Health Care Providers and Professionals
health, including medical care, public health, genetics, behaviors, social
factors, and environmental factors (IOM, 2013). Already many disruptive
innovations that have a transformative influence on the health care system
are emerging—for example, novel payment strategies, new delivery mech-
anisms such as accountable care organizations, and the rapid expansion
of health information technology (Blumenthal, 2011). This new environ-
ment is transforming the volume-driven payment model to reward value,
improve the patient experience, and promote population health.
In a patient-centered care model, providers manage and coordinate
care and are accountable for disease prevention and wellness. Account-
able systems of care serve as organized, vertically integrated networks
that employ and contract with physician offices or community health
centers. They are responsible for facilitating cross-sector care manage-
ment and health information exchange, and for integrating health care
services over the continuum of care for their patients and populations.
Such accountable systems of care also link the provider network to com-
munity services systems and social and economic resources, including
public health and behavioral health services, by addressing the social
and economic determinants of health and upstream risk factors for the
community.
▸ Conclusion
Health services professionals in the United States constitute the largest
proportion of the health care labor force. The growth and development
FIGURE 4.1 Evolution of the Focus of Health Care Delivery
Before Present Future
Disease/Condition
Focused
Disease/Symptom
Dominant
Person/Family
Centered
Population/Health
Oriented
Person/Family
Focused
Community/
Population
Focused
Delivery Systems Are Evolving:
Patient-Centered Care to Population Care
Conclusion 97
of these professions are influenced by demographic trends, research and
technology advances, disease and illness trends, and the changing envi-
ronment of health care financing and delivery. Physicians play a leading
role in the delivery of health services, but are maldistributed by specialty
and geography in the United States. Shortages of physicians and other
health care professionals are foreseen in the future, as the number of
insured people has risen significantly since the Affordable Care Act
was implemented. In addition to physicians, many other health services
professionals contribute significantly to health care delivery, including
nurses, dentists, pharmacists, optometrists, psychologists, podiatrists,
chiropractors, nonphysician providers, and various allied health profes-
sionals. These professionals require different levels of training and work
in a variety of health care settings.
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© ninjaMonkeyStudio/Getty Images
CHAPTER 5
Technology and
Its Effects
▸ Introduction
Medical technology has brought numerous benefits to modern civilization. These benefits, however, have come at a price—a price that society has to pay. Research and development (R&D)
and the production of new technology are costly, although sophisticated
advanced diagnostic procedures have reduced health complications and
disability. New medical cures have increased longevity, and new drugs
have helped stabilize chronic conditions and given an improved quality
of life to many. The fact that life expectancy almost doubled from 1900
to 1965 was a result of advances in social conditions—improved sanita-
tion, nutrition, and living conditions—rather than advances in medical
treatment. The continuing increase in longevity since then, however, is
101
largely attributed to advances in medical technology as well as to better
nutrition and living conditions.
With the rising costs of medical care, at some point society will have
to face the conflict between a commitment to medical innovation and the
adoption of new technology on the one hand and cost containment on
the other hand. Reining in medical spending in the United States so that
it is on par with the spending in other advanced nations has remained an
elusive dream, despite various efforts to contain rising costs.
Canadians and residents of other industrialized nations in Europe,
who have enjoyed universal health insurance for several decades, have
been able to place limits on the availability and use of costly technology
through supply-side rationing. In contrast, the notion of medical rationing
has not proved palatable to Americans. Hence, the idea of extending
health care to all Americans has presented a major predicament.
During the postindustrial era, developments in science and technol-
ogy were instrumental in drastically changing the nature of health care
delivery. Since then, the ever-increasing proliferation of new technology
has continued to profoundly alter many facets of health care delivery.
Following are some of the major changes triggered by technology:
■ New technology has raised consumer expectations about what may
be possible. Patients’ expectations have considerable influence on
their health care–seeking behavior, leading to greater demand for
and utilization of the latest and best that technology can offer.
■ Technology influences the organization and financing of medical
services. Specialized services that previously could be offered only
in hospitals are now available in outpatient and community settings.
■ The introduction of advanced technology has influenced the scope
and content of medical training and shaped the practice of medicine,
fueling a trend toward specialization in medicine at the expense of
public health, preventive medicine, and primary care.
■ Although some medical technology may reduce costs, as a whole
technology has contributed to health care cost escalation. For both
the consumer and the provider, the cost of excessive treatment has
generally been of little concern as long as a third party—either an
insurance plan or the government—pays for it.
■ Technology has raised complex moral and ethical dilemmas in
medical research and decision making. For example, when critically
ill patients are put on life support with little hope of full recovery,
health care resources may be wasteful.
Economic globalization has also enveloped biomedical knowledge
and technology. This is particularly true for the developed and develop-
ing nations where leading physicians have access to the same scientific
knowledge through medical journals and the Internet. Most drugs and
102 Chapter 5 Technology and Its Effects
medical devices available in the United States are also available in many
other parts of the world.
▸ What Is Medical Technology?
Medical technology refers to the practical application of scientific knowl-
edge to improve people’s health and to create efficiencies in the delivery
of medical care. Medical science has greatly benefited from develop-
ments in other applied sciences, such as chemistry, physics, engineering,
and pharmacology. For example, advances in organic chemistry made
it possible to identify and extract the active ingredients found in natu-
ral plants to produce drugs and anesthetics. Developments in electrical
and mechanical engineering led to such medical advances as radiology,
cardiology, and encephalography (Bronzino et al., 1990, p. 11). Mag-
netic resonance imaging (MRI), a technology that had its origins in
basic research on the structure of the atom, was later transformed into
a major diagnostic tool (Gelijns & Rosenberg, 1994). The disciplines of
computer science and communication systems have found applications
in health information technology and telemedicine (Tan, 1995, p. 4).
Nanomedicine is an emerging area of medical technology that
requires manipulation of materials at the atomic and molecular levels.
Scientists are working on the use of nano1 materials as means for accu-
rate diagnosis and treatment of diseases, such as cancer.
In its narrow sense, medical technology includes sophisticated
machines, pharmaceuticals, and biological therapies. In a broader sense,
it also covers medical and surgical procedures used in rendering medical
care, ultramodern facilities and settings of care delivery, health infor-
mation systems, and management and operational systems that make
health care delivery more efficient (EXHIBIT 5.1).
▸ Health Information Technology
Information technology (IT) has become an integral part of health care
delivery. IT involves computer applications that transform massive
amounts of data into useful information. This technology is indispens-
able for managing the vast array of information that is used in patient care
delivery, quality improvement, cost containment, billing and collections,
and other aspects of operating health care organizations. Most large health
care organizations have information systems departments and managers
who are charged with maintaining and improving the flow of information.
In addition, IT applications are increasingly being used to link health care
1 A nanometer is one-billionth of a meter.
Health Information Technology 103
organizations to agencies outside those organizations. For example, it is a
common practice to electronically transmit billing information to payers.
Major Categories
Specific IT system applications in health services delivery fall into five
main areas.
First, clinical information systems are IT applications that support
patient care delivery. Electronic medical records, for example, can quickly
provide reliable information necessary to guide clinical decision making
and to produce timely reports on the quality of care delivered. Comput-
erized physician-order entry enables physicians to transmit orders elec-
tronically from the patient’s bedside or physician’s office. Telemedicine is
based on integrated applications of telecommunications and information
technologies. Health informatics is the term now used for IT applications
that are designed to improve clinical efficiency, accuracy, and reliability.
Second, administrative information systems are designed to assist in
carrying out financial and administrative support activities such as pay-
roll, patient accounting, staff scheduling, materials management, budget-
ing and cost control, and office automation.
■ Diagnostic equipment
• Computed tomography (CT) scanner
• Magnetic resonance imaging (MRI)
■ Equipment and devices to render treatment
• Lithotripter
• Heart and lung machine
• Kidney dialysis machine
• Pacemaker
■ Pharmaceuticals
■ Medical procedures
• Open-heart surgery
• Tissue transplants
• Hip and knee replacements
■ Facilities and organizational systems
• Medical centers and systems
• Laboratories
• Managed care networks
• Health information systems
• Patient care management
• E-health and e-therapy
• Telemedicine
• Distance education
• Electronic medical records
EXHIBIT 5.1 Examples of Medical Technology
104 Chapter 5 Technology and Its Effects
Third, decision support systems provide information and analytical
tools to support managerial decision making. Such tools are used to
forecast patient volume, project staffing requirements, evaluate financial
performance, analyze utilization, conduct clinical research, and improve
quality and productivity.
Fourth, clinical decision support systems (CDSSs) are interactive soft-
ware systems designed to help clinicians with decision-making tasks,
such as determining a diagnosis or recommending a treatment for a
patient (O’Sullivan et al., 2014). Their use, however, is not yet widespread.
Finally, Internet and e-health applications enable patients and prac-
titioners to access information, facilitate interaction between consumers
or between patients and providers, add certain conveniences for both
physicians and patients, and enable the possibility of virtual visits online
between a patient and physician.
Electronic Health Records
Electronic health records (EHRs) are IT applications that replace the
traditional paper medical records. In the United States, use of EHRs in
health delivery organizations is well under way, but little progress has
been made in the development of information-sharing networks. EHR
networks make it possible to access individual records online from many
separate, interoperable automated systems within an electronic network.
The ability to share and access patient information by various users is
referred to as interoperability. Some evidence indicates that EHR use
produces improved patient care by enabling physicians to have timely
access to patient records, alerting them to a potential for medical errors,
and making critical lab values available when needed (King et al., 2014).
On the downside, using EHRs may be time consuming, resulting in
decreased productivity (Palmer, 2014). Also, the U.S. health care system
has a long way to go in achieving interoperability because a significant
number of physicians who use EHRs still do not get all the needed infor-
mation electronically (Hsiao et al., 2015).
According to the Institute of Medicine2 (2003), a fully developed
EHR system includes four key components:
■ Collection and storage of health information on individual patients over
time, where health information is defined as information pertaining to
the health of an individual or health care provided to an individual
■ Immediate electronic access to individual- and population-level
information by authorized users
2 The Institute of Medicine was renamed the National Academy of Medicine
in 2015.
Health Information Technology 105
■ Provision of knowledge and decision support that enhance the qual-
ity, safety, and efficiency of patient care (health informatics)
■ Support of efficient processes for health care delivery
HITECH and MACRA Laws
U.S. health policy has promoted incentives to increase the use of EHRs
by health care providers. For example, the Health Information Tech-
nology for Economic and Clinical Health (HITECH) Act of 2009 pro-
vides financial incentives for adopting and making meaningful use of
EHRs. Meaningful use refers to specific criteria related to quality, safety,
efficiency, and other aspects of use that providers are required to meet.
Subsequently, the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA) combined certain quality and efficiency criteria into a
Merit-based Incentive Payment System (MIPS). For those providers who
meet the performance criteria in 2017, their payments will be adjusted
upward in 2019.
The Health Insurance Portability and Accountability Act
To alleviate concerns about the confidentiality of patient information,
the Health Insurance Portability and Accountability Act (HIPAA)
of 1996 restricted the legal use of personal medical information for
three main purposes: health care delivery to the patient, operation of
the health care organization, and reimbursement. The HIPAA legisla-
tion mandated strict controls on the transfer of personally identifiable
health data between two entities, provisions for disclosure of protected
information, and criminal penalties for violation (Clayton, 2001). It also
established certain patient rights, such as the right of patients to inspect
and have copies of their protected health information, to request correc-
tions to the records, and to restrict who may obtain the information. The
HITECH law strengthened the civil and criminal enforcement of HIPAA
by including increased penalties for violations.
The Internet, E-Health, and E-Therapy
The Internet has continued to revolutionize certain aspects of health care
delivery. E-health refers to “all forms of electronic health care delivered over
the Internet, ranging from informational, educational, and commercial
‘products’ to direct services offered by professionals, nonprofessionals, busi-
nesses, or consumers themselves” (Maheu et al., 2001). The use of e-health
has grown as many providers have created secure Internet portals to enable
patients to access their EHRs; allow patient–provider email messaging; and
use mobile apps for smartphones and tablets (Ricciardi et al., 2013).
106 Chapter 5 Technology and Its Effects
E-therapy has emerged as an alternative to face-to-face therapy for
behavioral health support and counseling (Skinner & Latchford, 2006).
Also referred to as online therapy, e-counseling, teletherapy, or cyber-
counseling, e-therapy refers to professional therapeutic interactions that
occur online between qualified mental health professionals and their cli-
ents. A growing body of evidence indicates that e-therapy is effective for a
variety of psychosocial problems (Barak et al., 2008). The main difference
between e-health and e-therapy is that the former is a self-help approach
for obtaining Web-based information; the latter involves interaction with
a health care professional.
By accessing self-help information from the Internet, patients have
become more active participants in their own health care. Of course,
while information empowers patients, it also has the potential to create
conflict between patients and their physicians. Using the right source
can provide valid and up-to-date information to both consumers and
practitioners. For instance, departments of the U.S. government offer a
wealth of research-based information.
The Internet is not merely a source of information, but also offers
new ways to create efficiency. In practice settings, the Internet is being
used to register patients, direct them to alternative care sites, transmit
diagnostic results, and order pharmaceuticals and other products. In
addition, by accessing patient information through the Internet from
their homes or hospital lounges, physicians can get a head start on their
hospital rounds (Morrissey, 2002).
Telemedicine and Remote Monitoring
Telemedicine, or distance medicine, employs telecommunications tech-
nology for medical diagnosis and patient care when the provider and
the client are separated by distance. It also enables a generalist to consult
a specialist when a patient’s illness and diagnosis are complex. Areas of
specialized medical services in telemedicine include teleradiology, telepa-
thology, and telesurgery. General adoption of telemedicine has been slow,
however. Some of the main barriers have been licensure of physicians and
other providers across state borders, concerns about legal liability, and lack
of reimbursement for services provided via telemedicine. Also, the cost-
effectiveness of most telemedicine applications remains unsubstantiated.
Diagnostic and consultative teleradiology, in contrast, is almost universally
reimbursed and has proved to be cost-effective (Field & Grigsby, 2002).
Remote in-home patient monitoring programs that monitor vital
signs, blood pressure, and blood glucose levels are proving to be cost-
effective (Haselkorn et al., 2007). Likewise, remote monitoring of cardiac
implantable electronic devices, such as pacemakers and cardioverter
Health Information Technology 107
defibrillators, has shown a high level of patient acceptance and satisfac-
tion (Morichelli et al., 2014). Remote monitoring may also reduce hospi-
tal utilization (White-Williams et al., 2015).
Tele-ICU is a relatively new development in telemedicine. It links
intensivists3 and other critical care professionals to a system network that
enables remote monitoring of intensive care units (ICUs). The system
provides real-time patient assessment capabilities and communication
with bedside teams through ongoing virtual rounds (Goran, 2012). Stud-
ies show that tele-ICU programs are linked to lower patient mortality,
shorter lengths of stay, and increased patient safety (Lilly et al., 2014).
▸ Diffusion and Utilization of
Medical Technology
The development and dissemination of technology is called technology
diffusion. This factor determines which new technology will be devel-
oped, when it will be made available for use, and where it can be accessed.
In general, high-tech procedures are more readily available in the
United States than they are in most other countries, and little is done to
limit the expansion of new medical technology. For example, compared
with most hospitals in industrialized countries, American hospitals per-
form a far greater number of catheterizations, angioplasties, and heart
bypass surgeries. The United States also has more high-tech equipment
available for its population than most countries do. For example, in 2015,
the United States had 39.0 MRI units per 1 million population, compared
with 33.6 units in Germany, 14.5 units in Australia, 9.5 units in Canada,
and 7.2 units in the United Kingdom. Only Japan had more MRI units:
51.7 per 1 million population (Organization for Economic Coopera-
tion and Development4 [OECD], 2017). To control medical costs, most
nations have tried to limit—mainly through central planning (supply-side
rationing)—the diffusion and utilization of high-tech procedures. For
instance, the National Institute for Health and Clinical Excellence (NICE)
of Great Britain decides whether the National Health Service should make
certain medical technologies available (Milewa, 2006). Consequently,
nations that employ central planning generally have “waiting lines” for spe-
cialized services. For example, in Canada, in 2017, patients could expect to
wait 10.8 weeks for an MRI, 4.1 weeks for a CT scan, and 3.9 weeks for an
ultrasound (Barua, 2017). The rationing of medical technology through
central planning curtails costs, but it also restricts access to care.
3 Physicians who specialize in the care of critically ill patients.
4 The Organization for Economic Cooperation and Development is a forum
of more than 30 countries.
108 Chapter 5 Technology and Its Effects
Spending on R&D drives innovation, which results in the develop-
ment of new technology. Once technology has been developed, its use is
almost ensured. In 2012, the United States spent $119.3 billion on bio-
medical R&D, of which 59% was spent by the private sector, such as the
pharmaceutical and biotechnology industry; the remaining 41% came
from the government (Chakma et al., 2014). Apart from private funding,
the federal government, through the National Institutes of Health (NIH),
is the largest source of funding biomedical research. The NIH invests
nearly $32.3 billion annually in medical research (NIH, 2017).
The United States leads the world in biomedical research spending.
For example, U.S. R&D spending in 2014 exceeded by 46% the amount
spent by all European countries on such efforts. However, some con-
cerns have been expressed that the share of U.S. spending has declined
from 50% of global spending on medical R&D in 2007 to 44.4% in 2012
(Chakma et al., 2014). Of course, if the spending, even at reduced levels,
is used more efficiently and productively than in the past, there should
be little reason for concern about this trend.
The major reasons that the United States leads all other nations
in the development and use of technology are (1) cultural beliefs and
values, (2) medical training and practice, (3) insurance coverage, and
(4) competition among providers. These factors are discussed in subse-
quent sections of this chapter. EXHIBIT 5.2 lists some steps that the United
States could undertake to curtail the growth of technology. Implement-
ing these measures, however, would go against the fundamental beliefs
and values of Americans and would generate much controversy.
Cultural Beliefs and Values
American beliefs and values have been instrumental in determining the
nature of health care delivery in the United States. Capitalism and limita-
tions on government intervention promote innovation. An economic and
political environment in which innovation thrives creates opportunities
EXHIBIT 5.2 Mechanisms to Control the Growth of Technology
■ Implement central planning to determine how much technology will be made
available and where
■ Withdraw federal funding for R&D
■ Change the patterns of medical training, placing greater emphasis on primary
care practice
■ Reduce the number of specialty residency slots for medical graduates
■ Curtail insurance payments for expensive medical treatments
■ Impose controls on pharmaceutical prices, which in turn will make less money
available for R&D and development of new drugs
Diffusion and Utilization of Medical Technology 109
for scientists and manufacturers to develop new technology. Americans
have high expectations of finding cures through science and technology,
and they equate use of advanced medical technology with high-quality
care. Consequently, Americans indicate overwhelmingly that advanced
tests, drugs, medical equipment, and procedures are critical for improv-
ing the quality of health care (Schur & Berk, 2008). The desire to have
state-of-the-art technology available, accompanied by the desire to use it
despite its cost, is called the technological imperative.
Medical Training and Practice
The emphasis on specialty care over primary care and preventive ser-
vices predominates in U.S. medical culture. This preference is reflected
in the training of physicians. American medical graduates consistently
choose to specialize rather than go into primary care practice. For exam-
ple, it was estimated that only 20% of all 22,934 U.S. medical school stu-
dents who graduated in 2012 would choose to practice primary care in
2015 (Schwartz, 2012). An oversupply of specialists has had important
consequences for the development and use of new technology, because
primary care physicians use less technology than specialists, even for
similar medical conditions.
Insurance Coverage
Both theory and empirical research have suggested that the generosity of
insurance coverage stimulates technological change (Smith et al., 2009).
In general, financing of health care through insurance, either private
or public, largely insulates both patients and providers from personal
accountability for the utilization of medical services. Because out-of-
pocket costs are of limited concern, patients expect their physicians to
provide all that medical technology has to offer. Knowing that the services
demanded by their patients are largely covered by insurance, providers
generally show little hesitation in delivering or referring to specialty ser-
vices. Other developed countries offer universal health insurance, but
they use supply-side rationing to limit the overutilization of technology.
Competition Among Providers
Technology-based specialization has been used by the medical establish-
ment as an enticement to attract insured patients. Many openly advertise
the availability of the latest technology in their practices, which creates
a perception of quality in the minds of consumers. State-of-the-art tech-
nology also plays a role in the ability of a hospital or clinic to recruit
specialists. When hospitals develop new services and invest heavily in
modernization programs, other hospitals in the area are generally forced
110 Chapter 5 Technology and Its Effects
to do the same, for competitive reasons. These trends have resulted in a
tremendous amount of duplication of services and equipment and have
further contributed to medical specialization.
▸ The Government’s Role in
Technology Diffusion
Technology diffusion has raised questions about cost, safety, benefit, and risk,
among other issues. Federal legislation, in turn, has attempted to address
these concerns. The government also plays a significant role in carrying out
research and providing funding for research, as mentioned earlier.
Regulation of Drugs, Devices, and Biologics
The Food and Drug Administration (FDA) is an agency of the U.S.
Department of Health and Human Services (DHHS) that is responsible
for ensuring that drugs and medical devices are safe and effective for
their intended use. The FDA also controls access to drugs by deciding
whether a certain drug will be available by prescription only or as an
over-the-counter purchase.
Legislation to Regulate Drugs
EXHIBIT 5.3 summarizes the main pieces of legislation that regulate
drugs and medical devices in the United States. In response to legisla-
tion, the regulatory functions of the FDA have evolved over time. Under
the Food and Drugs Act of 1906, the Bureau of Chemistry (predecessor
of the FDA) was authorized to take action only after drugs had been
marketed to consumers. It was assumed that the manufacturer would
conduct safety tests before marketing the product. If innocent consum-
ers were harmed, only then could the FDA take action (Bronzino et al.,
1990, p. 198). This drug law was subsequently strengthened by the pas-
sage of the Federal Food, Drug, and Cosmetic Act of 1938 in response
to the infamous Elixir Sulfanilamide disaster, which caused more than
100 deaths because of poisoning from a toxic solvent used in the liquid’s
preparation (Flannery, 1986). Under the revised law, drug manufactur-
ers were required to provide scientific evidence about the safety of new
products before putting them on the market.
The drug approval system was further transformed by the 1962
drug amendments (Kefauver-Harris Amendments) to the Federal Food,
Drug, and Cosmetic Act. The law was tightened after thalidomide was
distributed as an experimental drug to prevent morning sickness among
pregnant women. In Europe, thousands of deformed infants were born
The Government’s Role in Technology Diffusion 111
to mothers who had used this new drug, though thalidomide was never
approved for use in the United States. The 1962 drug amendments estab-
lished a premarket approval system, giving the FDA authority to review
the safety as well as the effectiveness of a new drug before it could be mar-
keted. This consumer protection role for the FDA was intended to ensure
that the agency could prevent harm before it occurred. The new rule, how-
ever, was criticized for slowing down the introduction of new drugs and,
consequently, denying patients the early benefit of the latest treatments.
In the 1980s, pressure on the FDA from those wanting rapid access
to new drugs for the treatment of human immunodeficiency virus (HIV)
infection called for a reconsideration of the drug review process (Rakich
et al., 1992, p. 186). The Orphan Drug Act of 1983 and subsequent amend-
ments were passed to provide incentives, such as grant funding, for phar-
maceutical firms to develop new drugs for rare diseases and conditions. As
a result, many such drug therapies, called orphan drugs, have become avail-
able for conditions that affect fewer than 200,000 people in the United States.
In 1992, Congress passed the Prescription Drug User Fee Act, which
authorized the FDA to collect fees from pharmaceutical companies to
EXHIBIT 5.3 Summary of FDA Legislation
1906 Food and Drugs Act: FDA is authorized to take action only after drugs sold to
consumers cause harm.
1938 Federal Food, Drug, and Cosmetic Act: Evidence of safety is required before new
drugs or devices can be marketed.
1962 Drug Amendments: FDA takes charge of reviewing efficacy and safety of new
drugs, which can be marketed only once approval is granted.
1976 Medical Devices Amendments: Premarket review of medical devices is
authorized; devices are grouped into three classes.
1983 Orphan Drug Act: Drug manufacturers are given incentives to produce new
drugs for rare diseases.
1990 Safe Medical Devices Act: Health care facilities must report device-related
injuries or illness of patients or employees to the manufacturer of the device
and, if death is involved, the incident must also be reported to the FDA.
1992 Prescription Drug User Fee Act: FDA receives the authority to collect application
fees from drug companies to provide additional resources to shorten the drug
approval process.
1997 Food and Drug Administration Modernization Act: Fast-track approvals for
life-saving drugs are permitted when their expected benefits exceed those of
existing therapies.
2013 Drug Supply Chain Security Act: Electronic systems are mandated to help
protect consumers from exposure to drugs that may be counterfeit, stolen,
contaminated, or otherwise harmful.
2016 21st Century Cures Act: Steps are designed to help accelerate medical product
devel opment and bring new innovations and advances to patients who need
them.
112 Chapter 5 Technology and Its Effects
review their drug applications. According to the U.S. General Account-
ing Office, these fees have allowed the FDA to make new drugs available
more quickly by shortening the time it takes for approvals to be issued.
On the flip side, there has been an increasing trend in the number of pre-
scription and over-the-counter drug recalls (Nagaich & Sadhna, 2015).
There is clearly a trade-off between accelerating the review process and
overlooking some potential safety risks.
In 1997, Congress passed the Food and Drug Administration Modern-
ization Act. This law provides for increased patient access to experimental
drugs and medical devices. It also permits fast-track approvals when the
potential benefits of new drugs for serious or life-threatening conditions are
considered significantly greater than those for currently available therapies.
The FDA’s drug approval process remains far from perfect, however.
The agency does not carry out its own testing of new drugs, but instead
evaluates the drug studies conducted by pharmaceutical companies.
Many times drug recalls are issued by the manufacturer or the FDA sev-
eral years after a drug has been on the market and further research or
use has shown the drug to be ineffective and/or unsafe. The FDA often
engages in a balancing act between the demand for faster approval of new
drugs on the one hand and the potential for safety recalls on the other
hand. Nevertheless, the 21st Century Cures Act of 2016 provides for
faster approval of new drugs and devices for life-threatening conditions.
Legislation to Regulate Devices
Medical devices include a wide range of products—from those as simple
as tongue depressors and bedpans to those as complex as pacemakers
and laser surgical equipment. Medical devices include general-purpose
lab equipment, reagents, and test kits. Other examples include diagnostic
ultrasound equipment, x-ray machines, and other imaging technology.
The FDA was first given jurisdiction over medical devices under
the Federal Food, Drug, and Cosmetic Act of 1938. Initially, its juris-
diction was confined to the sale of products that were believed to be
unsafe or that made misleading claims of effectiveness (Merrill, 1994).
In the 1970s, however, several deaths and miscarriages were attributed
to the Dalkon Shield, which had been marketed as a safe and effective
contraceptive device (Flannery, 1986). The Medical Devices Amend-
ments of 1976 extended the FDA’s authority to include premarket
review of medical devices divided into three classes:
■ Class I: Devices that pose the lowest risk and are generally simple
in design. These devices are subject to general controls regarding
misbranding— that is, fraudulent claims regarding their therapeutic
effects. Examples of Class I devices include enema kits and elastic
bandages.
The Government’s Role in Technology Diffusion 113
■ Class II: Devices subject to requirements for labeling, performance
standards, and postmarket surveillance. Examples include powered
wheelchairs and some pregnancy test kits.
■ Class III: Devices that come under the most stringent requirements
of premarket approval regarding safety and effectiveness. Devices
in this class support life, prevent health impairment, or present a
potential risk of illness or injury (Rakich et al., 1992). Examples
include implantable pacemakers and breast implants.
The Safe Medical Devices Act of 1990 has particular relevance for
health care providers, who are required by law to report to the manufac-
turer, and in some cases to the FDA as well, all injuries and deaths caused
by medical devices. Requirements under this act serve as an early warn-
ing system for any serious device-related problems that could potentially
become widespread.
Legislation to Regulate Biologics
Biologics are derived from living organisms and include a wide range
of products such as vaccines, blood and blood components, allergen-
ics, somatic cells, gene therapy, tissues, and therapeutic proteins that are
indicated for the prevention or treatment of a disease or health condi-
tion. Biologics are isolated from a variety of natural sources—human,
animal, or microorganism. In contrast to most drugs that are chemically
synthesized and have a known chemical structure, most biologics are
complex mixtures that are not easily identified or characterized (FDA,
2009). The FDA regulates the licensing of biologics under the Public
Health Service Act of 1944. Similar to drugs, the safety and effectiveness
of biologics are regulated according to the Food, Drug, and Cosmetic
Act of 1938, discussed previously.
The FDA in a Global Environment
A substantial quantity of drugs and devices are manufactured overseas
and brought into the United States. To protect the American public against
ineffective and/or harmful products, the FDA has been increasingly work-
ing in collaboration with its counterpart regulatory authorities in other
countries. The FDA’s involvement in developing countries to ensure the
quality of drugs and devices manufactured in these countries strengthens
their industries and protects the American public. Going forward, under-
standing the new requirements of a globalized world will become increas-
ingly more important given the ongoing interdependencies between
countries. To address global challenges, the FDA operates offices in many
regions of the world. It also sends inspectors and experts from the United
States to different parts of the world to conduct inspections and to partic-
ipate in meetings and training sessions (Steinbach, 2016).
114 Chapter 5 Technology and Its Effects
The Affordable Care Act and Medical Technology
In the area of medical technology, the Affordable Care Act (ACA)
mainly affects devices and biologics. A 2.3% excise tax on the sale of
certain medical devices by manufacturers and importers of these devices
became effective in 2013. The higher costs associated with such taxes are
passed on to the purchasers, mainly hospitals and physicians, and even-
tually filter down to consumers through higher health insurance premi-
ums. This tax was suspended for 2016 and 2017, but a permanent repeal
was still in the future at the time of this writing.
The Biologics Price Competition and Innovation Act of 2009
(incorporated into the ACA) authorized the FDA to approve biosimi-
lars under a process similar to the approval of generic drugs. Because of
their complexity, the term generic cannot apply to biologics; hence, the
term biosimilar was created to apply to products that are highly similar
to, or are interchangeable with, an already approved biological product.
The Biosimilar User Fee Act of 2012, passed subsequently to the ACA,
authorized the FDA to charge biopharmaceutical firms a user fee to pay
for the review of applications for biosimilar products. It is believed that
the introduction of biosimilars will create competition and drive down
the cost of biologics. The first biosimilar product to be approved in the
United States in March 2015 was Zarxio—biosimilar to Neupogen—
which can be prescribed for the treatment of certain cancers.
Research on Technology
The Agency for Healthcare Research and Quality (AHRQ), a division of
the DHHS, is the lead federal agency charged with supporting research to
improve the quality of health care, reduce health care costs, and improve
access to essential services. The agency’s reports on technology assess-
ment are made available to medical practitioners, consumers, and other
health care purchasers.
As previously discussed, the federal government is also a major pro-
vider of financial support to private and public institutions for biomed-
ical research. The AHRQ and the NIH support both basic and applied
biomedical research in the United States.
▸ Impact of Medical Technology
The effects of advances in scientific knowledge and medical technology
have been far-reaching and pervasive. These effects often overlap, mak-
ing it difficult to pinpoint the precise impact of technology on the deliv-
ery of health care.
Impact of Medical Technology 115
Impact on Quality of Care
Americans generally equate high-technology medicine to high-quality
care, but such an association is not always accurate. Quality is enhanced
only when new procedures can prevent or delay the onset of serious dis-
ease, provide better diagnosis, make quicker and more complete cures
possible, increase the safety of medical treatment, minimize undesirable
side effects, promote faster recovery from surgery, increase life expec-
tancy, and add to quality of life (EXHIBIT 5.4). Improvements in diagnos-
tic capabilities increase the likelihood that timely and more appropriate
treatments will be provided. Technology can provide new remedies
where none existed before, and can offer improved remedies that are
more effective, less invasive, or safer than existing treatments. The out-
comes in such cases can include increased longevity and decreased mor-
bidity, both of which are indicators of better quality of health care.
Numerous examples can be cited that illustrate the role of tech-
nology in enhancing the quality of care. Tiny cardiac pacemakers and
implantable cardioverter defibrillators can be placed in the human body
to prevent sudden cardiac death. Angioplasty has reduced the need for
open-heart bypass surgery. New imaging technologies such as positron
emission tomography and single-photon emission computed tomogra-
phy are available as advanced diagnostic tools to study brain function
and identify the sources of both physical and mental disorders. Laser
technology permits surgery to be performed with less trauma, better
precision, and quicker postsurgical recovery; advanced lasers are used
for high-precision eye surgery. Molecular and cell biology are being
employed to screen for genetic disorders and provide gene therapy. New
specialty drugs offer therapeutic advances for a number of conditions,
such as cancer, hepatitis C, rheumatoid arthritis, and multiple sclerosis
(Chambers et al., 2014).
EXHIBIT 5.4 Criteria for Quality of Care
■ Prevent or delay disease onset
■ Provide a more accurate diagnosis than is possible with currently available
options
■ Provide a quicker cure
■ Provide a more complete cure
■ Increase safety of treatment
■ Minimize side effects
■ Provide for faster recovery from surgery or illness
■ Increase life expectancy
■ Add to quality of life
116 Chapter 5 Technology and Its Effects
Amid all the enthusiasm that emerging technologies might
inspire, some degree of caution must prevail. Past experience shows
that greater proliferation of technology does not necessarily lead to
higher quality of care. Unless the effect of each individual technology
is appropriately assessed, some innovations may actually be wasteful,
and others may possibly be harmful.
Impact on Quality of Life
Quality of life indicates a patient’s overall satisfaction with life during and
after medical treatment. For example, quality of life is enhanced when
technology enables people to live normal lives despite disabling condi-
tions affecting speech, hearing, vision, and movement. Major technolog-
ical advances have furnished the clinical ability to help patients cope with
diabetes, heart disease, end-stage renal disease, and HIV/AIDS. Thanks
to modern treatments, HIV/AIDS has become a chronic disease, not a
death sentence (Komaroff, 2005). New categories of drugs are also instru-
mental in relieving pain and suffering. For example, for cancer pain man-
agement, new opioids have been developed for transdermal, nasal, and
nebulized administration that allow needleless means of controlling pain
(Davis, 2006). Finally, minimally invasive surgical procedures, such as
lithotripsy, which crushes kidney and bile stones by using shock waves,
have improved quality of life by reducing pain and suffering and allowing
a quicker return to normal life. Similarly, procedures such as coronary
artery bypass graft (CABG) surgery—an open-heart surgical procedure
to correct blockage of coronary arteries—have made it possible for peo-
ple with severe heart disease to return to normal activity within a few
weeks after surgery. Previously, such patients would have required life-
long medication and suffered prolonged disability (Nitzkin, 1996).
Impact on Health Care Costs
Technological innovations have been the single most important factor
in medical cost inflation (Institute of Medicine, 2002). In fact, they may
have accounted for as much as half of the total rise in health care spend-
ing in recent years (Congressional Budget Office [CBO], 2008). Unlike
other industries, in which new technology often reduces labor force and
production costs, the addition of new technology in health care usually
increases both labor and capital costs (Iglehart, 1982). EXHIBIT 5.5 summa-
rizes the main factors underlying this technology-driven cost escalation.
First, there is the cost of acquiring the new technology and equipment.
Second, special training for physicians and technicians to operate the
equipment and to analyze the results often leads to increases in labor
Impact of Medical Technology 117
costs. Third, new technology may require special space and facilities
(McGregor, 1989). Finally, the utilization of new technology is assured
when it is covered by insurance. From a systems perspective, the costs
associated with utilization of technology after it becomes available are
more important than the initial purchase price.
Although it is true that many new technologies increase costs, others
actually reduce costs when they replace treatments that are more expen-
sive. For example, breakthroughs in antidepressant and antipsychotic
drugs have saved money by reducing admissions for inpatient psychiat-
ric care. EXHIBIT 5.6 shows the main areas in which use of technology has
saved health care costs.
The cost-effectiveness of individual technologies is also being eval-
uated. For example, in comparing the costs of open partial nephrectomy
and robotic partial nephrectomy, Mano and colleagues (2015) discov-
ered that the robotic procedure resulted in shorter hospital stays.
On other fronts, hospitals are gaining leverage on price negotiations
and are clamping down on physician-preference items, such as expen-
sive joint implants and cardiac devices (Lee, 2014; Sandier, 2015). Man-
ufacturers from emerging economies are also increasing competitive
pressures in developed nations by producing and selling their medical
products at lower cost. For example, General Electric has established
a major research center in India to develop diagnostic and therapeutic
radiology equipment that is less costly and does not require the services
of highly skilled staff (Robinson, 2015).
EXHIBIT 5.5 Cost Increases Associated with New Medical Technology
■ Acquisition costs are often high because of R&D and precision manufacturing
■ Training or hiring of technicians with special skills
■ Facilities may require refurbishing or expansion to accommodate the new
technology
■ Utilization when covered by insurance (moral hazard and provider-induced
demand)
EXHIBIT 5.6 Cost-Saving Medical Technology
■ Replacement of earlier, more expensive procedures
■ Minimally invasive procedures that eliminate the need for overnight hospital
stays
■ Technologies that shorten hospital stays
■ Drugs that reduce inpatient psychiatric care
■ Technologies that enable services to be rendered in outpatient and home care
settings instead of hospitals
118 Chapter 5 Technology and Its Effects
Impact on Access
Geographic access to health care can be improved for many people by
providing mobile equipment or by using new communications technol-
ogies that allow remote access to centralized equipment and specialized
personnel. Mobile equipment can be transported to rural and remote
sites, making it accessible to those populations. Mobile cardiac catheter-
ization laboratories, for example, can make the benefits of high technol-
ogy available in rural settings.
Impact on the Structure and Processes of
Health Care Delivery
Medical technology has transformed large urban hospitals in the United
States into medical centers where the latest diagnostic and therapeu-
tic remedies are offered, but technology also takes modern medicine
to outpatient services and patients’ own homes. This trend has led to
reduced costs where similar technology was previously available only in
hospitals. Without technological innovations, extensive adaptations of
modern treatments in outpatient and home care would not have been
possible. For example, monitoring devices can permit cardiac implants
to transmit vital information over telephone lines, portable respirators
can maintain breathing in the home, and even kidney dialyzers are being
used for some patients at home. Surgical procedures now commonly per-
formed on an outpatient basis include hernia repair, surgery for kidney
and gallbladder stones, cataract removal, tonsillectomy, carpal tunnel
release, left heart catheterization, knee arthroscopy, and much gyneco-
logic surgery. Numerous diagnostic procedures, including some of the
latest imaging procedures, are also performed in outpatient settings.
Impact on Global Medical Practice
As mentioned earlier, the United States leads the world in R&D spending
and development of new medical technology. Many nations wait for the
United States to develop new technologies that can then be introduced
into their own health care systems in a more controlled and manageable
fashion. As a result of this practice, European and other economies get a
free ride on U.S. biomedical R&D and obtain nearly all of the benefits of
U.S. medical technology at much lower health care costs (Hay, 2006).
At the same time, research partnerships overseas are extending the
boundaries of knowledge about disease and strategies for diagnosis, treat-
ment, and prevention. Such collaborations will take on added significance
as global health will increasingly have repercussions for the health of
Americans (Glass, 2013). In the future, the U.S. home turf will no longer
be the sole domain for biomedical research and technological innovation.
Impact of Medical Technology 119
Impact on Bioethics
Increasingly, technological change is raising serious ethical and moral
issues. Gene mapping of humans, genetic cloning, stem cell research,
genetic engineering, genetic testing, and so forth may hold potential
benefits, but they also present serious ethical dilemmas. For example,
research on embryonic stem cells may lead one day to the discovery
of treatments and cures for diseases and other long-term degenerative
illnesses such as cardiac failure, Parkinson’s disease, spinal cord injury,
and diabetes. However, the use of human embryos for research is highly
controversial. Life support technology also raises serious ethical issues in
medical decisions, including whether life support should continue when
a patient may simply exist in a permanent vegetative state or whether life
support should be discontinued, and if so, at what point.
▸ Assessment of Medical Technology
Health technology assessment (HTA) refers to the evaluation of medical
technology to determine its efficacy, safety, and cost-effectiveness. HTA
also informs various stakeholders about the ethical, legal, and social
implications of medical technologies (Lehoux et al., 2009). The objective
of HTA is to establish the appropriateness of medical technology for wide-
spread use. Such assessment becomes essential because many technologies
have not produced health benefits; some may even be harmful. Hence,
HTA should govern decisions to adopt and disseminate new technology.
Efficacy and safety are the basic starting points in evaluating the over-
all usefulness of medical technology. Cost-effectiveness goes a step further
by evaluating the safety and efficacy of a technology in relation to its cost.
Efficacy and safety are evaluated through clinical trials. A clinical trial is
a carefully designed research study in which human subjects participate
under controlled observations. Cost-effectiveness is determined by using
economic models that compare the benefits of a treatment to its costs.
In the United States, it is primarily the private sector that conducts
HTA; in contrast, European countries and Canada have centralized
technology assessment agencies that perform this task. Since 2009,
European nations have been attempting to coordinate their HTA efforts.
The European Network for Health Technology Assessment was estab-
lished as a facilitating organization for HTA collaboration and joint
assessments in Europe.
Efficacy
Efficacy may be defined simply as the health benefit to be derived from
the use of technology, or how effective a given technology is in diagnosing
120 Chapter 5 Technology and Its Effects
or treating a condition. If a product or service actually produces some
health benefits, it can be considered efficacious or effective. Decisions
about efficacy, however, require that the right questions be asked. For
example, is the current diagnosis satisfactory? What is the likelihood that
a different procedure would result in a better diagnosis? If the problem is
more accurately diagnosed, what is the likelihood of a better cure? Apart
from evaluating the effects on mortality and morbidity, issues related to
quality of life are important when determining efficacy.
Safety
Safety refers to protection against unnecessary harm from the use of
technology. As a primary benchmark, the benefits of any intervention
must outweigh any negative consequences. After safety has been experi-
mentally determined, the outcomes from the wider use of a certain tech-
nology are closely monitored over time to identify any problems.
Cost-Effectiveness
Cost-effectiveness, or cost-efficiency, goes a step beyond the determina-
tion of efficacy and safety by weighing benefits against costs. When a
medical treatment is first introduced in caring for a patient, the bene-
fits generally exceed the costs, and the use of technology is regarded as
cost-effective. Over time, additional treatments then begin to lower these
benefits in relation to rising costs. At some point along the timeline, con-
tinued medical interventions yield benefits that are roughly equal to the
additional costs associated with their use. Optimal cost- effectiveness is
achieved when additional benefits equal the additional cost of treatment.
Beyond the optimal point, either additional interventions deliver no fur-
ther benefits or the cost of providing additional care begins to exceed
the benefits. In these cases, additional care becomes wasteful. In cost-
effectiveness analysis, the potential risk from medical treatment can also
be incorporated as a type of cost, recognizing that most medical proce-
dures are associated with varying degrees of risk or potential harm.
Experts believe that much of the medical care delivered in the
United States is wasteful because, after a certain point, additional care
adds little or no health benefits while the costs continue to accumulate.
One of the problems is that little is known about the cost-effectiveness
of even well-established medical technologies. As the overall health care
cost burden continues to mount, HTA will play a considerable role in
future health care planning, policy, financing, and delivery. Evidence
that compares the benefits and harms of various treatments (called com-
parative effectiveness research [CER]) can be helpful to consumers, cli-
nicians, payers, and policymakers in making informed decisions toward
Assessment of Medical Technology 121
improving the delivery of health care (Witt et al., 2017). It can also help
prevent controversies and legal battles over medical decisions made by
physicians and insurers.
▸ Benefits of Technology Assessment
From the previous section, some of the main benefits of HTA should be
obvious. For example, establishing the safety and efficacy of new technology
is essential to prevent potential harm to patients. Other beneficial effects
discussed earlier, such as improved quality of care, better quality of life, bet-
ter access, and control of costs, are all based on the use of technologies that
pass rigorous examinations of their safety, efficacy, and cost-effectiveness.
Delivering Value
Possibilities regarding what technology can achieve are limitless. How-
ever, health services decision making is increasingly being governed by
the answer to the question “What is appropriate?” rather than “What
is possible?” (Abele, 1995). The concept of value—improved benefits
at lower costs and health risks—is becoming important to those who
finance health care, including private employers, the government, and
managed care organizations. Value can be increased by improving qual-
ity, reducing cost, or doing both. The problem is that insured patients
often want to use all available medical resources, regardless of how little
health benefit is received in relation to their cost. Physicians often find
themselves in a precarious situation when they are required to withhold
treatment because of its cost-inefficiency. Payers generally get blamed as
uncaring profit mongers when they intervene in the delivery of medical
care based on costs. Eventually the government may find itself in a cen-
tral position of issuing practice guidelines based on cost-efficiency.
Cost Containment
Simply pointing to technology as the culprit for cost escalations and
putting arbitrary restraints on technology development and dissemina-
tion would be a misdirected strategy. As stated earlier, technology has
the potential to not only enhance health benefits but also reduce costs.
Demands for reducing costs without sacrificing quality must influence
technological change. Also, a greater emphasis should be placed on
developing technology specifically as a means of reducing costs.
Standardized Practice Protocols
Medical practice guidelines (or clinical practice guidelines) are systemati-
cally developed protocols to assist practitioners in delivering appropriate
122 Chapter 5 Technology and Its Effects
health care for specific clinical circumstances (Field & Lohr, 1990). HTA
plays a significant role in the development of clinical protocols. Unlike in
some other countries, however, cost- effectiveness has not taken central
stage in health care delivery in the United States. Rising health care costs
and excessive spending remain a top concern.
▸ Conclusion
Medical technology includes drugs, devices, procedures, facilities,
information systems, and organizational systems. Several factors have
engendered the mind-set among Americans that all available medical
technology must be used regardless of its cost. The United States has
the world’s foremost position in both the production and the utilization
of medical technology. Other countries may then adopt the technology
developed in the United States, thereby avoiding the high R&D costs nec-
essary to create the technology in the first place. In addition, these nations
use supply-side rationing to contain the diffusion and use of technology.
Such an approach has been deemed unacceptable by most Americans.
Consequently, medical technology has been one of the primary factors in
the growth of health care expenditures in the United States.
In the United States, the FDA regulates the introduction of new
drugs, devices, and biologics based on their efficacy and safety, but with-
out evaluating their cost- effectiveness. Under the Affordable Care Act,
the FDA has also been given the authority to assess biosimilars and issue
licenses for their adoption in medical practice. Experts believe that much
of the medical care delivered in the United States is actually wasteful, but
at this point, no one is quite sure how to contain Americans’ insatiable
demand for the almost indiscriminate use of technology.
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© ninjaMonkeyStudio/Getty Images
CHAPTER 6
Financing and
Reimbursement
Methods
▸ Introduction
F inancing refers to any mechanism that gives people the ability to pay for health care services. For most people, health insurance provides the financing to access health care. Some uncompen-
sated or charity care—mainly provided through free clinics, commu-
nity health centers, and hospital emergency departments—is delivered
to those who have little or no means to finance their health care. Such
services, however, are not available in all geographic locations. In 2013,
before the main insurance clauses of the Affordable Care Act (ACA)
went into effect, 13.4% of Americans (42 million people) did not have
126
health insurance for the entire calendar year (Smith & Medalia, 2015).
The number of Americans who gained health insurance through ACA
was estimated to be 20 million (Jost & Pollack, 2016), or 7.3% of the
nonelderly U.S. population.
The complexity of financing is one of the primary characteristics
of medical care delivery in the United States. Most health insurance is
privately financed. Certain categories of people, however, can become
eligible for tax-supported public health insurance. Almost all Americans
age 65 and older qualify for Medicare, which also covers some younger
adults with disabilities. Medicaid is another major public insurance pro-
gram that covers many of the poor, including children in low-income
households. Other public programs, such as the Department of Veterans
Affairs (VA) and the military health system, cover a relatively small num-
ber of people. Under the ACA, the public sector’s role in health insurance
has expanded significantly.
According to data compiled by the Office of the Actuary, Centers
for Medicare and Medicaid Services (CMS)—an agency under the U.S.
Department of Health and Human Services (DHHS)—in 2016, govern-
ment financing accounted for 45% of total U.S. health care expenditures.
The most notable shift from private share of national health expendi-
tures (NHE) to the government’s share of NHE occurred soon after the
Medicare and Medicaid programs were created in 1965. Since then, the
government has continued to liberalize benefits and has added new pro-
grams in a piecemeal fashion. As expected, under the ACA, there was an
uptick in government financing compared to private financing.
Financing also includes the various methods of paying providers for
the health care they deliver. Hence, the two functions encompassed in
financing are purchase of health insurance and payment for the services
delivered to insured patients.
The actual payments to providers of care are handled in numerous
ways. In most cases, patients directly pay a relatively small portion of the
total cost of the services they receive, although cost sharing by patients
has increased significantly in recent years. Various private and public
insurance plans pay the bulk of the costs of health care, and they use sev-
eral different types of payment mechanisms. The financing of health care
through the various private and public sources ultimately aggregates into
NHE, which comprise the total amount of money a nation spends on
health care delivery and other health-related activities. FIGURE 6.1 illus-
trates the relationships among financing, insurance, access, payment,
and total expenditures.
Private employers and the government are the primary financiers
of health care in the United States. From an economic perspective, one
Introduction 127
could argue that Americans, through employment and taxes, finance
their own health care and subsidize health care for those who cannot
afford it. For instance, employer-paid health insurance actually rep-
resents an exchange for salary. Working Americans also have a Medicare
tax deducted from their paychecks, which amounts to prepayment of
certain Medicare benefits they can expect to start receiving at age 65.
General taxes collected from working Americans subsidize health care
delivered to Medicaid recipients. Certain Medicare benefits are also sub-
sidized by taxpayers.
▸ Effects of Health Care Financing
and Insurance
Health care financing produces effects that go beyond merely providing
access and paying the providers of care (EXHIBIT 6.1). Notably, it also pro-
duces some undesirable effects.
Taken together, financing and insurance are instrumental in creating
the demand for health care services. Health insurance enables people to
pay for health care, but it also desensitizes both consumers and providers
to the price of those services. First, it creates excessive demand from con-
sumers who want to use their health insurance benefits. Consumers are
FIGURE 6.1 Relationships Among Health Care Financing, Insurance, Access, Payment,
and Expenditures
Moral hazard
Provider-induced
demand
Financing
Health insurance
Health care
expenditures
Access to
health care
services
Payment to
providers of
services
128 Chapter 6 Financing and Reimbursement Methods
EXHIBIT 6.1 Health Care Financing and Its Effects
■ Financing of private and public health insurance enables access to health care
■ Payment to providers
■ Moral hazard
■ Provider-induced demand—that is, providers deliver covered services more
liberally
■ Technology and services with liberal reimbursement proliferate
■ Total health care expenditures are greater than if the same services were to be
paid by the patients
driven to utilize more health care services than they would if they had to
pay the entire price out of their own pockets. Consumer behavior that leads
to a higher utilization of health care services when the services are covered
by insurance is referred to as moral hazard (Feldstein, 1993, p. 125).
Second, financing exerts powerful influences on supply-side fac-
tors, such as how much health care is delivered. Financing also indi-
rectly affects the growth of medical technology, in that technology and
services that are subject to more liberal reimbursement tend to pro-
liferate rapidly. Conversely, when reimbursement is constrained, the
supply of services is curtailed accordingly. Moreover, health insurance
desensitizes providers against the price of services, with the result
that providers deliver additional and more expensive services. Again,
if consumers had to pay for these services out of their own pockets,
many of them would not be used. The providers’ ability to create
demand is referred to as provider-induced demand. These additional
services often confer little or no additional health benefits, however.
Financing eventually affects the NHE (also referred to as total health
care costs or national health care spending) incurred by a health care deliv-
ery system. Both moral hazard and provider-induced demand waste health
care resources and add to the rising costs of health care. To counter these
effects, countries with national health insurance implement supply-side
rationing, which focuses on restricting the availability of expensive medi-
cal technology and specialty care. Otherwise, the health care expenditures
in these countries would be astronomical. Without a centrally managed
health care system, the United States cannot ration health care directly.
However, utilization of services is curtailed to some extent because not all
Americans have health insurance coverage, despite the ACA. This indirect
type of rationing is called demand-side rationing. When they lack insur-
ance, people face barriers to obtaining health care unless they can either
pay for the services out of pocket or receive charity care. If health insur-
ance is extended to everyone, without other restrictions, total health care
expenditures will rise at a much faster rate than they now do.
Effects of Health Care Financing and Insurance 129
▸ Insurance: Its Nature and Purpose
Basic Insurance Concepts
Insurance is a mechanism for protecting people and organizations
against risk. In the context of insurance, risk refers to the possibility
of a substantial financial loss from some event. In health care, illnesses
requiring expensive treatments and hospitalization pose substantial
financial risk to most people. Similarly, the cost of most surgeries and
subsequent treatment would be beyond the means of many people to
pay out of pocket. Insurance, in a general sense, is primarily designed
to protect people against such eventualities. Health care providers are
also subject to substantial risk when they are required to treat the sick
and injured people who cannot pay for their services.
An individual who is protected by insurance against the possi-
ble risk of financial loss is called the insured. The insured may also
be referred to as the enrollee or member (in a private health insur-
ance plan) or the beneficiary (in a public health insurance plan). The
insuring agency that assumes risk is called the insurer or underwriter.
Underwriting is a systematic technique for evaluating, selecting (or
rejecting), classifying, and rating risks. Four fundamental principles
underlie the concept of insurance (Health Insurance Institute, 1969,
p. 9; Vaughn & Elliott, 1987, p. 17):
■ Risk is unpredictable for the individual insured.
■ Risk can be predicted with a reasonable degree of accuracy for a
group or a population.
■ Insurance provides a mechanism for transferring or shifting risk
from the individual to the group through the pooling of resources.
■ Actual losses are shared on some equitable basis by all members of
the insured group.
Through the underwriting process, the insurer determines a fair
price to insure the member against specified risks. The amount charged
for insurance coverage is called a premium, which is usually paid every
month. Including both the employer’s and the employee’s share, the
average monthly cost of health insurance premiums in 2017 was $557
for an individual plan and $1,564 for a family plan (Claxton et al., 2017).
Cost Sharing
Insurance requires some type of cost sharing so that the insured assumes at
least part of the risk. The purpose of cost sharing is to reduce the misuse of
insurance benefits. Three main types of cost sharing are utilized in private
health insurance: premium cost sharing, deductibles, and copayments.
130 Chapter 6 Financing and Reimbursement Methods
In employer-sponsored health insurance, the employee is generally
required to share in the total cost of the premium. Of the premium costs
given previously for 2017, insured workers, on average, paid 18% of the
cost for individual plans and 30.5% of the cost for family plans (up from
28% in 2011) (Claxton et al., 2011, 2017). In addition to paying a share
of the costs of premiums through payroll deductions, insured individu-
als pay a portion of the actual costs of medical services out of their own
pockets. These out-of-pocket expenses take the form of deductibles and
copayments and are incurred only if and when medical care is used.
A deductible is the amount the insured must first pay before any
benefits by the plan are payable. In most cases, the deductible must be
paid annually. For example, in 2017, the average annual deductible for
an individual plan was $1,505 (Claxton et al., 2017). In this case, when
the insured receives medical care, the plan starts paying for benefits only
after the cost of medical services received by the insured has exceeded
$1,505. Deductible amounts vary considerably by the type of plan. A plan
may also have separate deductibles for hospitalization and outpatient
surgery. With few exceptions, all health insurance plans must provide
certain recommended preventive services and immunizations without
cost sharing, as mandated by the ACA.
Another type of shared cost is the copayment—the amount that the
insured has to pay out of pocket each time health services are received
after the deductible amount has been paid. For example, a plan may
require a copayment of $35 for a primary care visit and $50 for a visit to
a specialist. Copayment is cost sharing in the form of a dollar amount;
cost sharing in the form of a percent amount is called coinsurance. A plan
with an 80:20 coinsurance, for example, pays 80% of all covered medical
expenses after the deductible requirement has been met; the insured pays
the remaining 20%. Most plans include a stop-loss provision, which is the
maximum out-of-pocket liability an insured would incur in a given year.
In case of a catastrophic illness or injury, the copayment amount can add
up to a substantial sum. The purpose of the stop-loss provision is to limit
the total out-of-pocket costs for the insured. Once the stop-loss limit has
been reached, the plan pays 100% of any additional expenses. With some
exceptions, the ACA placed limits on total out-of-pocket costs per year.
Previously, $1 to $2 million lifetime limits on benefits were com-
mon. Under the ACA, lifetime limits have been prohibited.
The rationale for cost sharing is to control the utilization of health
care services. Because insurance creates moral hazard by insulating the
insured from the cost of health care, making the insured pay part of the
cost promotes more responsible behavior in health care utilization. A
comprehensive study employing a controlled experimental design con-
ducted in the 1970s, known as the Rand Health Insurance Experiment,
Insurance: Its Nature and Purpose 131
demonstrated that cost sharing had a material impact on lowering utili-
zation without any significant negative health consequences.
▸ Private Insurance
The modern health insurance industry is pluralistic; that is, private
insurance includes many different types of health plan providers, such as
commercial insurance companies (e.g., Aetna, Cigna, Metropolitan Life,
Prudential), Blue Cross/Blue Shield, self-insured employers, and managed
care organizations (MCOs). The nonprofit Blue Cross and Blue Shield
Associations function much like private health insurance companies.
Private insurance is generally available in the form of individual or
family plans. A family plan covers the spouse and children of the sub-
scriber in addition to the subscriber. In contrast, government programs
such as Medicare and Medicaid do not offer family plans; each individual
is an independent beneficiary. Five main types of private insurance are
available: group insurance, self-insurance, individual private insurance,
managed care plans, and high-deductible health plans (HDHPs). The
distribution of health plan enrollments in 2006 (when HDHPs became
available) and 2017 is illustrated in FIGURE 6.2.
Employment-based health insurance offer rates—that is, the percent-
ages of employers that offer insurance—vary quite significantly according
to employer characteristics (EXHIBIT 6.2). In 2014, 55% of all employers
in the United States offered health insurance benefits, though this was
before the ACA mandate for employers to provide health insurance
(which was pushed back to 2015). Despite the mandate, health insur-
ance offer rates dropped under the ACA. Whereas 98% to 99% of large
employers (200 or more workers) offered health insurance even before
FIGURE 6.2 Distribution of Health Plan Enrollments
2006
Managed care
93%
HDHPs
4%
Conventional
3%
2017
Conventional
<1%
Managed care
72%
HDHPs
28%
132 Chapter 6 Financing and Reimbursement Methods
the ACA, the offer rates among small employers (3 to 199 workers) actu-
ally dropped from 61% in 2012 to 53% in 2017 (Claxton et al., 2017). For
many employers, the cost of health insurance became prohibitive under
the ACA. In addition, the ACA incentivized employers to shift employees
from full-time to part-time status, so that those employees would not
necessarily qualify for health insurance benefits. Only 13% of employ-
ers offered health insurance to part-time workers in 2017 (Claxton et al.,
2017). Offer rates were also lower among employers that employ a large
percentage of low-wage earners, and those that employ a large percentage
of young workers age 26 years and younger. Some firms provide funds to
their workers so they can buy health insurance on their own.
Group Insurance
Group insurance can be obtained through an organization such as an
employer, a union, or a professional organization. A group insurance
program anticipates that a substantial number of people in the group will
participate in purchasing insurance through its sponsor. Risk and often
the cost of insurance are shared by the members of the group.
Earlier health insurance plans were designed to protect the insured
against financial hardships that could occur because of the high cost of
hospitalization, extended illness, and expensive surgery. These plans
were referred to as major medical plans. Since the 1970s, health insur-
ance plans have commonly combined major medical coverage with
all-inclusive comprehensive coverage that includes basic and routine
physician office visits and diagnostic services. More recently, preventive
care services have been added to the benefits.
Self-Insurance
A large employer often has a workforce that is big enough and suf-
ficiently well diversified in terms of risk to warrant offering its own
insurance. Rather than pay insurers a dividend to bear the risk, large
employers can simply assume the risk by budgeting funds to pay medi-
cal claims incurred by their employees. This practice, which is referred
to as self- insurance, gives employers better control over the health plan.
EXHIBIT 6.2 Employer Characteristics That Influence Health Insurance
Offer Rates
■ Large employers versus small employers
■ Number of high-wage earners versus low-wage earners
■ Full-time workers versus part-time workers
■ Percentage of young workers versus older workers
Private Insurance 133
Self-insured employers can protect themselves against any potential
risk of high losses by purchasing reinsurance from a private insurance
company. In 2017, 60% of workers were in self-insured employer plans
( Claxton et al., 2017).
Direct-Purchase Private Insurance
Although most Americans obtain health insurance coverage through
employer- sponsored group plans or government programs, directly
purchased (nongroup) private health insurance is an important source
of coverage for many Americans. The family farmer, the early retiree,
the employee of a business that does not offer health insurance, and
the self-employed make up the bulk of the people who rely on private
non-employer-related health insurance. In 2016, an estimated 52 million
people were covered under direct-purchase plans, compared to 178.5
million who were covered under employer-based plans (Barnett &
Berchick, 2017).
Managed Care Plans
Managed care plans are offered mainly by health maintenance organiza-
tions (HMOs) and preferred provider organizations (PPOs). Such plans
are a type of health insurance because they assume risk in exchange for
an insurance premium. Unlike traditional insurance, however, MCOs
assume the responsibility for obtaining health care services for their
enrollees by contracting with a network of providers. MCOs also use a
variety of mechanisms to monitor utilization of services, and use a vari-
ety of methods to reimburse providers for the services rendered. Man-
aged care plans are typically sold by the same insurers that sell traditional
plans. The majority of employer-sponsored plans are managed care plans.
High-Deductible Health Plans
HDHPs have grown in popularity because of their low premium costs. In
2017, 28% of employment-based health coverage was through an HDHP,
up from 4% in 2006 (Figure 6.2). Generally, health plans that carry at
least $1,000 deductible for individual coverage or $2,000 for family cov-
erage are considered HDHPs.
Two types of HDHP arrangements are available, both of which link a
savings account to high-deductible insurance. The savings accounts give
consumers greater control over how to use the funds. Savings are also
used for relatively small and routine health care expenses. Hence, these
plans are also referred to as consumer-driven health plans. HDHPs mini-
mize moral hazard and make consumers responsible users of health care
resources. Research by the RAND Corporation (2012) unearthed strong
134 Chapter 6 Financing and Reimbursement Methods
evidence that consumer-directed health plans reduce health care spend-
ing and can lead to significant cost savings for the health care system.
The first type of HDHP includes a health reimbursement arrangement
(HRA—hence HDHP/HRA for the combination). The HRA is funded by
the employer; employees are prohibited from contributing to it. The funds
are used to reimburse the insured for qualified medical expenses, which
include payment of HDHP premiums and premiums for long-term care
insurance. Employees do not pay taxes on the payments made to them
from HRAs. Although participants in an HRA are not required to have
an HDHP, the arrangement commonly includes both. When the HRA is
coupled with an HDHP, the employee first pays for health care from the
HRA and then pays for care on an out-of-pocket basis until the health plan
deductible is met. Subsequently, HDHP kicks in. Unused HRA funds can
generally be carried forward to the next year.
The second type of arrangement combines a health savings account
(HSA) with an HDHP (HDHP/HSA) that meets federal standards. Fed-
eral regulations require caps on the yearly amounts contributed to an HSA
($3,450 for individual coverage and $6,900 for family coverage in 2018;
those 55 and older can contribute an additional $1,000). Employers may
contribute to the account but are not required to do so. The funds belong
to the account holder and can accumulate without limit. The minimum
annual deductible in 2018 was $1,350 and $2,700 for individual and fam-
ily plans, respectively. Out-of-pocket expenses are capped at a maximum;
in 2018, annual out-of-pocket expenses for deductibles and copayments
were capped at $6,650 and $13,300 for individual and family plans, respec-
tively. HSAs have significant tax advantages—namely, contributions are
tax deductible, withdrawals used to pay for medical expenses are exempt
from federal income taxes, and account earnings are exempt from taxes.
▸ The Affordable Care Act and
Private Insurance
Private health insurance was envisioned as being the major way of
obtaining coverage under the ACA. In reality, it did not work out that
way. The majority of those persons who were newly covered under the
Act gained coverage under Medicaid.
Insurance expansion is addressed through the following main man-
dates under the ACA:
1. Legal residents of the United States were mandated to have
what is referred to as minimum essential coverage. Failing
to comply resulted in an income tax penalty (called shared
responsibility payment) when the person filed his or her tax
The Affordable Care Act and Private Insurance 135
return. The Tax Cuts and Jobs Act of 2017, passed and signed
into law by President Donald Trump in December 2017, effec-
tively repealed this mandate.
2. To purchase private health insurance through government-run
exchanges, subsidies were still made available in 2018 to peo-
ple with incomes between 100% and 400% of the federal pov-
erty level (FPL).1
3. The exchanges offer four types of standardized plans—bronze,
silver, gold, and platinum—tiered according to premium cost
and cost sharing. The least expensive of the four, the bronze
plan, covers approximately 60% of a person’s health care costs.
4. Employers with 50 or more full-time-equivalent workers must
cover at least 95% of their full-time workers (“full-time” refers
to an employee who works 30 hours or more per week). The
insurance offered must comply with ACA requirements on
coverage and cost. If they fail to meet this mandate, employers
must pay heavy fines. Employers with fewer than 50 workers
are exempt from this mandate.
5. As early as 2010, the ACA made it illegal to deny health
insurance to people with preexisting medical conditions and
required children and young adults younger than the age of
26 to be covered under their parents’ health insurance plans.
▸ Public Insurance
This section discusses the financing, eligibility requirements, and cov-
ered services for the major public health insurance programs. In 2016,
40.8% of Americans who had health insurance were covered by a public
insurance program, such as Medicaid, Medicare, or military health care
(Barnett & Berchick, 2017).
Public financing supports categorical programs, each of which is
designed to provide benefits to a certain category of people who meet
the eligibility criteria to become beneficiaries. The United States does
not have publicly financed health insurance specifically for the unem-
ployed. Even though public insurance is financed by the government,
services are purchased from providers in the private sector, for the most
part. One notable exception is the Department of Veterans Affairs (VA),
which runs its own health care system that provides most of the needed
services to its beneficiaries.
1 In 2018, the FPL was an annual income of $12,060 for a single person and
$24,600 for a family of four ($28,290 in Hawaii and $30,750 in Alaska).
136 Chapter 6 Financing and Reimbursement Methods
Medicare
The Medicare program, also referred to as Title 18 of the Social Security
Act, finances medical care for three categories of people:
■ Persons 65 years and older
■ Disabled individuals of any age who are entitled to Social Security
benefits
■ People of any age who have permanent kidney failure (end-stage
renal disease)
Medicare is a federal program administered by the CMS. In 1966,
shortly after Medicare was created, it had 19.1 million beneficiaries. By
2016, the program had grown to 56.8 million beneficiaries (CMS, 2017),
or 17% of the U.S. population. Although the program was initially cre-
ated for the elderly population, 16% of the beneficiaries are now persons
younger than 65 years of age who qualify on the basis of their disability.
With the aging of the U.S. population, this program will continue to
grow. By 2024, Medicare is expected to deliver health care to one-fifth of
the U.S. population (Schoen et al., 2017). Of all government programs,
Medicare poses the single greatest future challenge to taxpayers, as
Medicare expenditures are projected to grow faster than either workers’
earnings or the nation’s economy (CMS, 2017).
Deductibles, copayments, premiums, and noncovered services can
leave Medicare beneficiaries with substantial out-of-pocket costs. Non-
covered services include vision care, eyeglasses, dental care, hearing aids,
and many long-term care services. Even for covered services, Medicare
has relatively high cost-sharing requirements. In 2016, the average out-
of-pocket spending on services per beneficiary was $3,024, not count-
ing the cost of premiums. More than one-fourth of beneficiaries spent
20% or more of their incomes to pay the premiums and out-of-pocket
expenses under Medicare (Schoen et al., 2017). To cover the high out-
of-pocket costs, most beneficiaries have some source of supplemental
coverage, such as an employer-sponsored plan for retirees (35% of bene-
ficiaries), Medicaid for low-income individuals (19% of beneficiaries), or
a privately purchased supplemental insurance plan, known as Medigap
(23% of beneficiaries) (Jacobson et al., 2015).
For almost 30 years after its inception, Medicare had a dual structure
comprising two separate insurance programs, referred to as Part A and
Part B. Today, however, Medicare has a four-part structure.
Hospital Insurance (Part A)
Part A, the hospital insurance (HI) portion of Medicare, is financed by
special payroll taxes paid equally by employers and employees. These
Public Insurance 137
taxes are paid by all working individuals, including those who are
self-employed. All earnings are subject to the Medicare tax.
Part A is designed to cover hospitalization, short-term convalescence
and rehabilitation in a skilled nursing facility (SNF), and home health care.
For terminally ill patients, Medicare pays for care provided by a Medicare-
certified hospice. FIGURE 6.3 shows the distribution of Part A payments for
various services (the managed care expenditures are for Medicare Advan-
tage, which is discussed later). Under the ACA, the share of payments to
hospitals decreased, while payments to managed care and administrative
expenses increased. Payments to managed care plans were actually cut
under the ACA, but the increasing enrollments in Medicare shifted the
share of expenditures toward managed care plans. Consequently, the man-
aged care share of Medicare HI spending rose from 24.5% in 2010 to 28.2%
in 2015 (National Center for Health Statistics, 2017).
The structure of Part A benefits is rather complex. For hospital and
nursing home stays, the timing of benefits is determined by what is
referred to as a benefit period. It begins on the day a beneficiary is hos-
pitalized and ends when the beneficiary has not been in a hospital or an
SNF for 60 consecutive days. If after 60 days the beneficiary is hospital-
ized again, a new benefit period begins. The number of benefit periods a
beneficiary can have over his or her lifetime is unlimited.
Services received during a hospital stay are fully paid for the first 60
days in a benefit period after a deductible ($1,340 in 2018) has been met.
The Part A deductible applies to each benefit period. If ongoing hospital-
ization beyond 60 days is necessary, a copayment ($335 per day in 2018)
must be paid from days 61 through 90. A benefit period has 90 days
of maximum coverage. Beyond the 90 days, there is a lifetime reserve
FIGURE 6.3 Medicare Part A Expenditures, 2015
Administration
& other 3.1%
Hospital
49.9%
Total Part A expenditures = $278.9 billion
SNF
10.7%
Home health
2.4%
Hospice
5.7%
Managed care
28.2%
Data from National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD: U.S. Department of Health and Human Services; 2017:348
138 Chapter 6 Financing and Reimbursement Methods
of 60 additional hospital inpatient days to which a higher copayment
applies ($670 per day in 2018). Benefits for medical care in a psychiatric
hospital are limited to 190 days in the beneficiary’s lifetime.
For postacute care, Medicare pays for up to 100 days in a Medicare-
certified SNF subsequent to inpatient hospitalization for at least 3 con-
secutive days, not including the day of discharge. Admission to the SNF
must occur within 30 days of hospital discharge, and it must be related to
the same condition for which the beneficiary was hospitalized. All covered
services are fully paid for the first 20 days in the SNF. Beyond that, a copay-
ment ($167.50 per day in 2018) must be paid from days 21 through 100.
Medicare pays for home health care when a person is homebound
and requires intermittent or part-time skilled nursing care or rehabili-
tation therapy determined to be necessary by a physician. Services must
be obtained from a Medicare-certified home health agency. Durable
medical equipment (DME), such as wheelchairs, hospital beds, walkers,
and medical supplies, is also covered. Home health visits do not have a
deductible, but a 20% coinsurance applies to DME.
For terminally ill patients, Medicare pays for care provided by a
Medicare- certified hospice. A small copayment applies for prescription
drugs for these patients.
Supplementary Medical Insurance (Part B)
Part B, the supplementary medical insurance (SMI) portion of Medi-
care, is a voluntary program, financed partly by general tax revenues and
partly by required premium contributions from the beneficiaries. Almost
all persons entitled to hospital insurance also choose to enroll in SMI
because they cannot get similar coverage at that price from private insur-
ers. Coverage includes physician, ambulance, outpatient rehabilitation, an
annual wellness exam, and medically needed preventive services; hospital
outpatient services such as outpatient surgery, diagnostic tests, radiology,
and pathology; emergency department visits; renal dialysis; prostheses;
and medical equipment and supplies. Part B also covers limited home
health services that are not associated with a hospital or SNF stay.
Part B premiums are income based. The standard premium for 2018
was $134 per month. For beneficiaries earning more than $85,000 and
filing individual tax returns (or earning more than $170,000 and filing
joint tax returns), 2018 premiums ranged between $187.50 and $428.60
depending on income. Part B also carries an annual deductible ($183 in
2018), and an 80:20 coinsurance applies to most services.
Medicare Advantage (Part C)
Part C is, in reality, not a program that offers specifically defined medi-
cal services. Part C was formerly called Medicare+Choice; this program
Public Insurance 139
took effect on January 1, 1998, and was mandated by the Balanced Budget
Act of 1997. That law expanded the role of private managed care health
plans such as HMO and PPO plans. To participate in Part C, a beneficiary
must first be enrolled in both Part A and Part B. The beneficiary must pay
Part B premiums to Medicare and an additional premium to the MCO (a
few plans have no premiums). Beneficiaries, however, have the choice to
remain in the original Medicare fee-for-service program instead of enroll-
ing in Medicare Advantage.
By enrolling in Medicare Advantage, the beneficiary receives all Part A,
Part B, and Part D services through an MCO. Medicare pays a set capitated
amount of money each month to the participating managed care plans on
behalf of each beneficiary. In turn, the plan manages Medicare benefits for
its members. To attract Medicare enrollees, MCOs may offer extra benefits,
such as basic dental and vision benefits and gym membership, which may
lower the beneficiaries’ out-of-pocket costs. All Part C plans include a limit
on out-of-pocket costs for covered services. Part C also eliminates the need
for Medigap coverage. Enrollment in Part C has steadily increased, reaching
19 million (33% of the beneficiaries) in 2017 (Jacobson et al., 2017).
Prescription Drug Coverage (Part D)
Part D was added to the existing Medicare program under the Medi-
care Prescription Drug, Improvement, and Modernization Act of 2003
and was fully implemented in January 2006. The program is available
to anyone, regardless of income, who has coverage under Part A or Part
B. Coverage is offered through two types of private plans approved by
Medicare. Stand-alone prescription drug plans that offer only drug cov-
erage are available to those who want to stay in the original Medicare
fee-for-service program. Alternatively, Medicare Advantage prescription
drug plans are available to those who want to obtain all health care ser-
vices through the MCOs participating in Part C.
Like Part B, the Part D program is voluntary because it requires pay-
ment of a monthly premium that varies by the beneficiary’s income and
the type of plan selected by the beneficiary. The average basic monthly
premium for 2018 was estimated to be $33.50 (National Council on
Aging, 2017). The deductibles and copayments also vary by the plan
selected. The maximum deductible for 2018 was $405.
Part D has complex rules to which there are exceptions. After the
beneficiary and the health plan have spent a total of $3,750 on prescrip-
tion drugs, the beneficiary enters a coverage gap (also called a “dough-
nut hole”). During this period the beneficiary must pay for drugs out of
pocket. After spending $5,000 (in 2018) out of pocket, the beneficiary
gets out of the coverage gap, and pays a small copayment/coinsurance
for the rest of the year.
140 Chapter 6 Financing and Reimbursement Methods
Medicaid
Also referred to as Title 19 of the Social Security Act, Medicaid is the
United States’ public health insurance program for the indigent; it is a
federal/state collaborative effort. Each state, however, administers its
own Medicaid program. Hence, eligibility criteria, covered services, and
payments to providers vary considerably from state to state. Eligibility
depends on income and other resources such as bank accounts, real
property, and other assets. Hence, Medicaid is a means-tested program.
Federal law specifies coverage for low-income elderly, the blind, the dis-
abled receiving Supplemental Security Income (SSI), and some pregnant
women. Medicaid is also instrumental in providing health insurance to
children in low-income families (FIGURE 6.4; note that the data in the
figure predate implementation of the ACA, which had a major impact
on Medicaid enrollments). In addition, most states, at their discretion,
have defined other medically needy categories. Most important among
these are individuals who are institutionalized in nursing or psychiatric
facilities and individuals who are receiving community-based services
but would otherwise be eligible for Medicaid if institutionalized.
The Medicaid program is jointly financed by the federal and state
governments. The federal government provides matching funds to the
states based on the per capita income in each state. Thus, wealthier states
have a smaller share of their costs reimbursed by the federal government.
However, for a state to receive federal matching funds, the state must
provide some specific health services (EXHIBIT 6.3).
Children’s Health Insurance Program
The Children’s Health Insurance Program (CHIP), codified as Title 21 of
the Social Security Act, was enacted under the Balanced Budget Act of
FIGURE 6.4 Medicaid Recipient Categories, 2013
Elderly
5.6%Other
9.8%
Blind, disabled
13%
Total beneficiaries = 73.3 million
Adults in families
with dependent
children
19%
Children
under age 21,
including CHIP
52.5%
Data from National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD: U.S. Department of Health and Human Services; 2017:352.
Public Insurance 141
1997. When the program was created, nearly one-fourth of the children
in low-income families were uninsured. CHIP offers additional federal
matching funds to states to expand Medicaid eligibility to enroll chil-
dren up to 19 years of age who otherwise would not qualify for coverage
because their families’ incomes exceed the Medicaid threshold levels.
Certain adults, such as pregnant women, parents, and caretaker relatives,
may also be covered under CHIP.
In 2017, most states provided CHIP coverage to children with family
incomes at or below 200% of the FPL, or about $49,200 (higher in Alaska
and Hawaii) for a family of four, and if they are not covered under a pri-
vate insurance plan. Nineteen states and the District of Columbia had a
threshold of 300% or more of the FPL (Henry J. Kaiser Family Founda-
tion, 2017a). States have the option to either operate CHIP as a separate
program or run it in conjunction with the state’s Medicaid program.
CHIP was strengthened under the ACA. As a result, enrollment in
the program increased from 5.8 million in December 2013 (Smith et al.,
2014) to 8.9 million in 2016 (Henry J. Kaiser Family Foundation, 2017b).
▸ Issues with Medicaid
The main problem with Medicaid is inadequate reimbursement for pro-
viders, which has prompted many physicians and some other provid-
ers to not serve Medicaid- covered patients. Medicaid reimbursement is
a fraction of what is paid by Medicare and private insurers. Under the
EXHIBIT 6.3 Federally Mandated Services for State Medicaid Programs
■ Inpatient hospital services
■ Hospital outpatient services
■ Physician, nurse-midwife, and nurse practitioner services
■ Federally qualified health center and rural health clinic services
■ Outpatient laboratory and x-ray services
■ Freestanding birth center services
■ Nursing facility services for beneficiaries age 21 and older
■ Home health services for those eligible for nursing facility services, including
medical supplies and equipment
■ Medical and surgical services of a dentist
■ Preventive, diagnostic, and treatment services (including vaccinations) for
children up to age 21
■ Family planning services and supplies
■ Pregnancy-related services; tobacco cessation counseling and
pharmacotherapy for pregnant women
Adapted from Paradise J. March 9, 2015. Medicaid moving forward. http://kff.org/health-reform/issue-brief/medicaid-
moving-forward/. Accessed July 5, 2015.
142 Chapter 6 Financing and Reimbursement Methods
http://kff.org/health-reform/issue-brief/medicaid-moving-forward/
http://kff.org/health-reform/issue-brief/medicaid-moving-forward/
ACA, payments were brought up to Medicare levels only temporarily.
Hence, the issue of physician participation in the Medicaid program is
an ongoing one.
Expansion of Medicaid under the penalty of losing matching funds
if a state would not expand its Medicaid program was a significant com-
ponent of the ACA. The law had also envisioned a minimum income eli-
gibility standard of 138% of the FPL to qualify for Medicaid in any state
nationwide. In a 2012 ruling, however, the U.S. Supreme Court struck
down the Medicaid provision of the law, which left each state free to
decide whether it would expand its existing Medicaid program. As of
2016, 31 states and the District of Columbia had expanded their Medic-
aid programs, thereby helping a significant number of low-income peo-
ple gain health coverage.
Some evidence indicates that the ACA-linked Medicaid expansion
resulted in better access to care and utilization (Antonisse et al., 2016).
Better access reportedly occurred despite higher use of hospital emer-
gency departments for routine care by Medicaid recipients (Pines et al.,
2016). A shortage of primary care physicians had existed even before the
ACA’s passage; under the Medicaid expansion provisions of the ACA,
an additional 2,000 primary care physicians would have been necessary
(Roberts & Gaskin, 2015).
▸ Reimbursement Methods
Insurance companies, MCOs, Blue Cross/Blue Shield, and the government
(for Medicare and Medicaid) are referred to as third-party payers, with the
other two parties in the arrangement being the patient and the provider
(Wilson & Neuhauser, 1985, p. 118). Payment made by third-party payers
to the providers of services is called reimbursement.
Fee for Service
Fee-for-service reimbursement is based on the assumption that services
are provided as sets of identifiable and individually distinct units of
services. For example, physician services may include units such as an
examination, x-ray, urinalysis, and a tetanus shot. For surgery, individ-
ual services may include an admission kit, numerous medical supplies
(each accounted for separately), surgeon’s fees, anesthesia, anesthesiolo-
gist’s fees, recovery room charges, and so forth. Each of these services is
separately billed.
Initially, fee-for-service charges were set by providers, and insurers
passively paid the claims. Later, insurers started to limit reimbursement
to a usual, customary, and reasonable amount that was determined by
each payer. In this case, providers would balance bill—that is, ask the
Reimbursement Methods 143
patients to pay the difference between the actual charges and the pay-
ments received from insurers.
Historically, providers preferred the fee-for-service method, which
fell into disfavor with payers because of cost escalations. In response, pri-
vate payers as well as the government have devised other methods aimed
at limiting the amount of reimbursement. However, some modified ver-
sions of fee-for-service reimbursement are still in use.
Bundled Payments
In bundled payments or package pricing, a number of related services are
included in one price. For example, normal vaginal delivery (i.e., child-
birth) may have one set fee that includes predelivery and postdelivery
care (Williams, 1995, p. 114). Optometrists sometimes advertise package
prices that include the charges for eye exams, frames for eyeglasses, and
corrective lenses. Research has shown that bundled payments can align
incentives for providers to work closely together across specialties and
health care settings. Consequently, Medicare is undertaking bundled
payment initiatives that link payments for multiple services beneficiaries
receive during an entire episode of care.
Resource-Based Relative Value Scale
Implemented in 1992 by Medicare, the resource-based relative value
scale (RBRVS) is a modified form of fee for service that reimburses
physicians according to a relative value assigned to each physician ser-
vice. Relative values are based on the time, skill, and intensity it takes to
provide a service, and the actual reimbursement is derived using a com-
plex formula. Each year, Medicare publishes the Medicare Fee Schedule,
which gives the reimbursement amount for each of the services and
procedures identified by a current procedural terminology (CPT) code.
The reimbursement amounts are adjusted for the geographic area in
which the practice is located. Services provided by advanced-practice
nurses and physician assistants and billed separately as such are paid at
85% of the full fee schedule.
Reimbursement Under Managed Care
Three distinct approaches are used by MCOs. PPOs use a variation of
the fee-for-service method, in which the PPO establishes fee schedules
based on discounts negotiated with providers participating in its net-
work. HMOs sometimes have physicians on their staff who are paid a
salary. Capitation is another mechanism used by HMOs. Under this
reimbursement scheme, a provider is paid a set monthly fee per enrollee
144 Chapter 6 Financing and Reimbursement Methods
(sometimes referred to as the per member per month [PMPM] rate),
regardless of whether an enrollee sees the provider or not, and regard-
less of how often an enrollee sees the provider. Capitation removes the
incentive for provider- induced demand. It makes providers prudent and
encourages them to provide only necessary services.
From Retrospective to Prospective Reimbursement
Traditionally, Medicare and Medicaid established per diem (daily) rates
when reimbursing hospitals, nursing homes, and other inpatient facili-
ties. The per diem rates were based on the actual costs the providers had
incurred during the previous year. Because rates were set after evaluat-
ing the costs retrospectively, this method was referred to as retrospective
reimbursement. Home health was also reimbursed on the basis of cost.
Because the retrospective method was based on costs that were
directly related to length of stay, services rendered, and the cost of pro-
viding the services, providers had no incentive to control costs. Services
were rendered indiscriminately because health care institutions could
increase their profits by increasing costs. Because of the perverse finan-
cial incentives inherent in retrospective cost-based reimbursement, it
has been largely replaced by prospective methods of reimbursement.
In contrast to retrospective reimbursement, in which historical costs
are used to determine the amount paid to providers, prospective reim-
bursement uses certain preestablished criteria to determine in advance
the amount of reimbursement. Medicare has been using the prospec-
tive payment system (PPS) to reimburse inpatient hospital acute care
services under Medicare Part A since 1983. The four main prospective
reimbursement methods currently in use are based on diagnosis-related
groups (DRGs), ambulatory payment classifications (APCs), resource
utilization groups (RUGs), and home health resource groups (HHRGs).
Diagnosis-Related Groups
The DRG method is used to pay for hospital inpatient services, based
on a predetermined rate. Instead of a per diem rate, the reimbursement
method based on DRGs prospectively sets a bundled price according to
the principal diagnosis at the time of admission. The hospital receives
the predetermined fixed rate for that particular DRG classification.
The primary factor governing the amount of reimbursement is the
main clinical diagnosis, but additional factors can create differences in
reimbursement for the same DRG. Such factors include differences in
wage levels between geographic areas, an urban versus a rural hospital
location, whether the institution is a teaching hospital (i.e., it has resi-
dency programs for medical graduates; adjustments in reimbursement
Reimbursement Methods 145
are based on the intensity of teaching), and an adjustment related to
treating a disproportionately large share of low-income patients. In 2007,
Medicare Severity Diagnosis-Related Groups (MS-DRGs) were imple-
mented; they include patient severity in determining the rates paid to
better reflect use of hospital resources.
The DRG-based prospective reimbursement forced hospitals to
control their costs. To keep the cost of services below the fixed reim-
bursement amount, this payment method has also forced hospitals to
minimize the length of inpatient stay. If the total cost of services is less
than the DRG-based reimbursement amount, a hospital gets to keep the
difference as profit. Conversely, a hospital loses money when its costs
exceed the prospective reimbursement rate. As an example, if the pro-
spective reimbursement rate for a given DRG is $3,500 and the costs
associated with each day of hospital stay are as shown in TABLE 6.1, a
patient admitted under this DRG should be hospitalized for no more
than 4 days, when the cumulative costs will equal $3,400. If the hos-
pital discharges this patient after 3 days, it will make a profit of $700
($3,500 – $2,800). If the patient is discharged after 5 days, the hospital
will suffer a loss of $500 ($3,500 – $4,000).
To maximize their revenues under the DRG reimbursement model,
hospitals would sometimes discharge patients too quickly, at the risk of
returning to the hospital again. Hospitals now have disincentives to dis-
charge patients too quickly. The ACA requires reduction in payments to
hospitals that incur excessive Medicare readmissions within 30 days of
discharge. In 2017, 80% of hospitals were penalized for excessive read-
missions (Sanofi-Aventis, 2017). Penalties in reimbursement are also
imposed for preventable conditions acquired in the hospitals, such as
falls and certain infections.
Ambulatory Payment Classifications
The prospective payment method based on APCs, implemented in
2000, is associated with Medicare’s Outpatient Prospective Payment Sys-
tem (OPPS) for services provided by hospital outpatient departments.
The APC divides all outpatient services into more than 300 procedural
TABLE 6.1 Hospital Days of Stay and Costs for a Given DRG
Days
of stay 1 2 3 4 5 6
Cost
per day
$1,200 $900 $700 $600 $600 $600
146 Chapter 6 Financing and Reimbursement Methods
groups, with specific reimbursement rates being associated with each
APC group. The rates are also adjusted for geographic variations in
wages. APC reimbursement includes services such as anesthesia, certain
drugs, supplies, and recovery room charges in a package price estab-
lished by Medicare.
In January 2008, Medicare implemented the OPPS to pay for facil-
ity services—such as nursing, recovery care, anesthetics, drugs, and other
supplies—in freestanding (i.e., nonhospital) ambulatory surgery centers.
The most common procedures performed in these centers are cataract
removal and lens replacement, upper gastrointestinal endoscopy, colonos-
copy, and nerve procedures. Physician services are reimbursed separately
under the physician fee schedule based on RBRVS (MedPAC, 2016).
Resource Utilization Groups
Medicare pays SNFs on the basis of RUGs, but the method differs from
the way in which DRG-based payments are used for hospitals. Whereas
a fixed amount of reimbursement is associated with each DRG, RUG
categories are used for determining an SNF’s overall severity of health
conditions requiring medical and nursing intervention. The aggregate
of clinical severity in a facility is referred to as its case mix. It is deter-
mined by first evaluating each patient’s medical and nursing care needs.
Based on this evaluation, each patient is classified into one of 66 RUGs
(according to RUG-IV classifications). The case-mix composite of an
institution is then used to determine a fixed per diem amount—an
all-inclusive bundled rate—associated with that case mix. The higher
the case mix score, the higher the reimbursement. Adjustments to the
PPS rate are made for differences in wages prevailing in various geo-
graphic areas and for facility location in urban as opposed to rural areas.
Home Health Resource Groups
Implemented in October 2000, the PPS for home health care pays a
fixed, predetermined rate for each 60-day episode of care, regardless
of the specific services delivered. Thus all services provided by a home
health agency are bundled under one payment made on a per-patient
basis. An assessment instrument called the Outcomes and Assessment
Information Set (OASIS) is used to rate each patient’s functional status
and clinical severity level. The assessment measures translate into points;
the points are totaled to determine the patient’s HHRG, with payment
then being based on the patient’s specific HHRG category. The HHRG
classification uses 153 distinct groups in which patients can be classified
according to clinical severity, functional status, and the need for rehabil-
itation therapies.
Reimbursement Methods 147
▸ Payment Reform Initiatives
A pay-for-performance approach for hospital services was implemented
in 2013 for Medicare-covered patients in each hospital. This approach
was given legal weight under the ACA, which led to the creation of an
inpatient hospital value-based purchasing program. This data-driven
approach to payments takes into account the quality and efficiency of
services delivered to Medicare-covered patients in each hospital. Pre-
liminary results indicate that for-profit hospitals, large hospitals, non-
teaching hospitals, and hospitals in less competitive markets have better
outcome scores on performance measures (Haley et al., 2017).
Going forward, value-based and bundled approaches will also affect
payments for outpatient services. This will be a big change, given that
95% of physician office visits in 2013 were paid on a fee-for-service basis
(Zuvekas & Cohen, 2016). The payment reform was established in the
Medicare Access and CHIP Reauthorization Act (MACRA) of 2015,
which includes merit-based incentive payments for professional services
delivered in various outpatient settings. The reformed payment system
envisions data-driven numerical scores that take into account quality,
resource use, clinical improvement, and meaningful electronic health
record use (Rambur, 2017). Besides Medicare, private payers are moving
in the direction of value-based payments.
The ACA authorized a Medicare Shared Savings Program (MSSP)
for participating accountable care organizations (ACOs) that aim to
coordinate services for a given patient population and take responsibil-
ity for quality while reducing costs. This program has shown some early
successes in cost savings.
The ACA also created the Center for Medicare and Medicaid Inno-
vation (CMMI). This agency has been given broad authority to conduct a
wide range of demonstrations that focus on new methods to pay provid-
ers on the basis of value. These new payment models will include bun-
dled payments as well as shared-savings and shared-risk arrangements.
One challenge, of course, is how “value” will be measured. In addition,
the new models will require changing the culture in which health care is
practiced—how physicians practice medicine and what patients expect.
In spite of the challenges that must be overcome, experts agree that the
current reimbursement system is not sustainable (Smith & Walker, 2015).
▸ National Health Expenditures
National health expenditures are an estimate of the amount spent for all
health services and supplies and health-related research and construction
activities in a country during a calendar year. According to data from the
148 Chapter 6 Financing and Reimbursement Methods
CMS, in 2015, the United States NHE exceeded $3.2 trillion. To interpret
such large expenditures, it is common to compare the NHE to the total eco-
nomic consumption. The gross domestic product (GDP) measures the total
value of goods and services produced and consumed in a country. In 2015,
the U.S. GDP was a little more than $18 trillion. Thus, 17.8% of the total
economic output in the United States in 2015 was consumed by health care.
Another way to look at health care expenditures is in terms of the average
per capita spending, which controls for changes in the size of the population.
In 2015, the average per capita spending for health care amounted to $9,973
for each American. NHE from 1960 to 2015 are presented in TABLE 6.2.
FIGURE 6.5 shows the breakdown of how 2015 national health dol-
lars were used. Almost 85% of the NHE was devoted to personal health
services and products, which include services provided by hospitals,
physician and clinical services, dental care, other professional services,
nursing home care, home health care, prescription drugs, medical sup-
plies, durable medical equipment (DME), and other personal health care
products and services. The remaining 15% of national expenditures were
accounted for by public health services, research, investment in struc-
tures and equipment, costs related to administration of government pro-
grams, and administrative costs of private insurance.
The annual growth in health care spending, or health care cost infla-
tion, is a matter of concern for almost all developed nations because health
care spending has been rising faster than people’s incomes. Cost inflation
TABLE 6.2 National Health Expenditures, Selected Years
Year
Amount
($ billions)
Share of GDP
(%)
Amount per
Capita ($)
1960 27.4 5.2 147
1970 74.9 7.2 356
1980 255.8 9.2 1,110
1990 724.3 12.5 2,854
2000 1,378.0 13.4 4,881
2010 2,604.1 17.4 8,428
2015 3,205.6 17.8 9,973
Data from Health, United States, 2013, p. 327. Health, United States, 2016, p. 331. Hyattsville, MD: National Center for
Health Statistics.
National Health Expenditures 149
in health care is evaluated by comparing it to the growth of the GDP as
well as to the consumer price index (CPI), which measures inflation in the
general economy. As TABLE 6.3 shows, in the United States, health care
cost inflation has exceeded the growth in both the GDP and the CPI.
FIGURE 6.5 Breakdown of National Health Expenditures, 2015
Physician and other
professional services:
20%
Hospital care:
32%
Nursing home,
home health,
and personal care:
13%
Prescription
drugs and
medical
products:
13%
Other*:
9%
Administration:
8%
Research, structures,
and equipment:
5%
National health expenditures = $3,205.6 billion
* Dental 4%; Other professional 3%, Public health 2%
Data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group
TABLE 6.3 Growth Comparisons of National Health Expenditures to the
GDP and CPI, 2000–2015
2000 2015
Average Annual
Increase,
2000–2015
National health
expenditures
$1,369.7
billion
$3,205.6
billion
5.8%
GDP $10,285 billion $18,037 billion 3.8%
Yearly average CPI 172.2 237 2.2%
GDP price deflator* 81.9 110.0 2.0%
* An alternative measure of inflation.
Data from Health, United States, 2016, pp. 314, 316. Inflationdata.com. https://inflationdata.com/Inflation/Consumer
_Price_Index/CurrentCPI.asp?reloaded=true. Accessed January 30, 2018.
150 Chapter 6 Financing and Reimbursement Methods
http://Inflationdata.com
https://inflationdata.com/Inflation/Consumer_Price_Index/CurrentCPI.asp?reloaded=true
https://inflationdata.com/Inflation/Consumer_Price_Index/CurrentCPI.asp?reloaded=true
▸ Conclusion
Financing plays a critical role in health care delivery. For consumers, it
pays for insurance coverage, which enables them to obtain health care
services. For providers, it reimburses them for the services they deliver.
The Affordable Care Act has been instrumental in expanding health
insurance coverage; however, serious gaps remain.
For most services, the methods of reimbursement were changed
from retrospective to prospective mechanisms after it became rec-
ognized that cost-based methods and fee-for-service reimbursement
contained perverse incentives for providers to increase the cost of
health care delivery. Prospective payment methods, now widely in use,
and capitation, used by health maintenance organizations, contain
incentives for the delivery of cost-effective health care. Comprehen-
sive health insurance also contains perverse incentives for consumers
to use more health care than needed, a phenomenon known as moral
hazard. Deductibles and copayments were instituted after payers real-
ized that these methods of cost sharing reduce the excessive use of
health care. In an effort to further improve efficiencies and quality,
current emphasis is on creating value-based payment models.
The financing of health care is shared between private and public
sources. Contrary to what many people might think, the government
incurs a sizable proportion of total health care expenditures in the
United States. Hence, at least from a financing standpoint, the United
States has a quasi-national health care system.
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References 153
© ninjaMonkeyStudio/Getty Images
CHAPTER 7
Outpatient Services
and Primary Care
▸ Introduction
Historically, outpatient care has been independent of most other services provided in health care institutions. Previously, most phy-sicians made home visits to treat patients, in addition to seeing
patients in clinics. Outpatient care now includes more than primary care.
Due to advances in medical science and for economic reasons, a variety of
outpatient settings and services have become common. With technological
innovation, health care delivery has shifted away from expensive stays in
acute care hospitals. To capture lost revenue, hospitals gradually became the
dominant players in not only inpatient care but outpatient services as well.
For economic reasons, most physician practices have become group prac-
tices, and very few solo practitioners are left. Group practices generally have
several providers in primary care or a single specialty.
154
State and local government agencies have actively sponsored limited
outpatient services for underserved populations, mainly indigent patients
who lack the resources to obtain health care in the private sector. Com-
munity health centers, which primarily depend on federal and state funds
including grants and Medicaid, serve a number of rural and inner-city
areas and provide a wide array of outpatient services.
▸ What Is Outpatient Care?
The terms outpatient and ambulatory are used interchangeably, although
outpatient is more comprehensive. Strictly speaking, ambulatory care
consists of diagnostic and therapeutic services and treatment for the
walking (ambulatory) patient. Yet, patients do not always ambulate
to health service centers to receive ambulatory care. For example, in a
hospital emergency department (ED), patients may arrive by land or
air ambulance. In other instances, such as with mobile diagnostic units
and home health care, services are taken to the patient, rather than the
patient coming to receive services. Hence, the term outpatient service
refers to any health care services that do not require an overnight stay
in a health care institution. The main settings and services for delivering
outpatient care are listed in EXHIBIT 7.1.
▸ Scope of Outpatient Services
In 2015, according to the National Ambulatory Medical Care Survey
(NAMCS), Americans made approximately 990 million visits, or 3.13
EXHIBIT 7.1 Outpatient Settings and Services
■ Private practice
■ Hospitals
■ Outpatient clinics
■ Freestanding facilities
■ Mobile facilities for medical, diagnostic, and screening services
■ Telephone triage
■ Home care
■ Hospice care
■ Outpatient long-term care services
■ Public health services
■ Community health centers and free clinics
■ Alternative medicine clinics
Scope of Outpatient Services 155
visits per person, to office-based physicians (National Center for Health
Statistics, 2015). Physicians in general and family practice accounted for
the largest share of these visits (19.5%), followed by physicians in inter-
nal medicine (14.0%), pediatrics (9.6%), and obstetrics and gynecology
(8.2%), and doctors of osteopathy accounted for 5.8% of all visits.
The South led the nation in share of physician visits (35.9%), followed
by the West (26.2%), Northeast (20.2%), and Midwest (17.6%) regions.
Ambulatory visits per person were highest in the Northeast (3.6 visits) and
lowest in the Midwest (2.6 visits).
Most physician office visits (93%) took place in metropolitan areas.
Visits per person were also higher in metropolitan areas (3.3) than in
rural areas (1.8), reflecting poorer access to primary care in rural areas
(National Center for Health Statistics, 2015). Access to care remains a
problem for certain individuals, especially the uninsured and racial/eth-
nic minorities (EXHIBIT 7.2).
Most surgeries are now performed in outpatient settings, whereas
previously many of these same procedures could be performed only in
hospitals. This shift toward outpatient care is expected to continue. Hos-
pital occupancy rates have declined for more than two decades, and hos-
pital executives have come to view outpatient care as an essential part of
their health care business (Barr & Breindel, 1995; Modi et al., 2017).
The growth of non-hospital-based outpatient services has intensi-
fied competition between hospitals and community-based providers for
patients using outpatient medical services. Areas of competition include
home health care, ambulatory clinics for routine and urgent care, and
outpatient surgery. In contrast, some other services, such as dental care
and optometric services, continue to be office-based. Financing is the
main reason that dental and optometric services are not integrated with
other outpatient medical services: Medical insurance plans have tradi-
tionally been separate from dental and vision care plans, and there are
also philosophical and technical differences. For example, chiropractic
care is generally covered by most health plans, yet remains isolated from
mainstream medicine. Other services, such as alternative therapies and
self-care, are not covered by insurance, but patient demand continues to
experience remarkable growth.
Several key changes have been instrumental in shifting the balance
between inpatient and outpatient services. These factors can be broadly clas-
sified as reimbursement, technology, utilization control, and social factors.
Reimbursement
Today, both private and public payers prefer outpatient treatment because it
costs less than inpatient care. Quicker discharge of patients from hospitals
under prospective and capitated reimbursement methods have created a
156 Chapter 7 Outpatient Services and Primary Care
EXHIBIT 7.2 Access to Primary Care
Did Not Get or Delayed Medical Care Due to Cost, 2015
Younger than 18 years 2.7%
18–64 years 9.8%
65 years and older 4.1%
White 9.9%
Black 11.0%
Hispanic 10.8%
Insured 7.2%
Uninsured 28.1%
Did Not Get Prescription Drugs Due to Cost, 2015
Younger than 18 years 1.6%
18–64 years 6.9%
65 years and older 3.9%
White 6.5%
Black 10.1%
Hispanic 8.3%
Insured 5.4%
Uninsured 17.3%
Did Not Get Dental Care Due to Cost, 2015
Younger than 18 years 4.1%
18–64 years 11.8%
65 years and older 7.0%
White 11.7%
Black 13.6%
Hispanic 14.5%
Insured 9.4%
Uninsured 28.2%
Data from Health, United States, 2016. National Center for Health Statistics (U.S.). Hyattsville, MD: National Center for
Health Statistics (U.S.); 2017:Table 63.
Scope of Outpatient Services 157
substantial market for outpatient services. In response to changes in incen-
tives for reimbursement of outpatient care, hospitals have aggressively
developed outpatient services to offset declines in income from inpatients.
Technological Factors
The development of new diagnostic and treatment procedures and less
invasive surgical methods has enabled services in outpatient settings
that previously required inpatient hospital stays. Shorter-acting anes-
thetics and the proliferation of minimally invasive technologies have
made many surgical procedures less traumatic and recovery times much
shorter. Many office-based physicians have also acquired new technol-
ogy for basic diagnostic, imaging, and surgical services.
Utilization Control Factors
Inpatient hospital stays are strongly discouraged by various payers. Prior
authorization for inpatient admission and close monitoring during hos-
pitalization have been actively pursued with the objective of minimizing
length of stay.
Social Factors
Patients generally prefer receiving health care in home and community-
based settings. Indeed, most people do not want to be institutionalized
unless absolutely necessary. Remaining in their own homes gives indi-
viduals a sense of independence and control over their lives—elements
considered important for quality of life.
▸ Outpatient Care Settings and
Methods of Delivery
Certain outpatient services are now available in various settings. For
example, agencies providing home health services may be freestanding,
hospital-based, or nursing home-based. Many physician group practices
are merging with hospitals, and hospitals and freestanding surgical clin-
ics often compete for various types of surgical procedures. Therefore,
the classifications used in this section are merely illustrative— there are
many exceptions. Furthermore, in this constantly evolving system, new
settings and methods are likely to emerge.
Private Practice
As office-based practitioners, physicians form the backbone of outpa-
tient care. Most visits entail relatively limited examination and testing,
158 Chapter 7 Outpatient Services and Primary Care
and encounters with physicians are generally of a relatively short dura-
tion. The waiting time in the office (even for those with appointments) is
typically longer than the actual time spent with the physician.
In the past, the solo practice of medicine and small partnership
arrangements attracted the majority of practitioners. Self-employment
offered a degree of independence not generally available in large organi-
zations. Nowadays, group practices and institutional affiliations—such
as employment by a hospital or managed care organization (MCO)—are
the norm. Several factors account for the shift away from solo practice:
uncertainties created by rapid changes in the health care delivery system,
contracting by MCOs with consolidated rather than solo entities, com-
petition from large health care delivery organizations, the high cost of
operating a solo practice, the complexity of billings and collections in a
multipayer system, and increased external controls over the private prac-
tice of medicine. Group practice and other organizational arrangements
offer several provider benefits, including patient- referral networks,
negotiating leverage with MCOs, sharing of overhead expenses, ease of
obtaining coverage from colleagues for time off, and attractive starting
salaries with benefits and profit-sharing plans.
Hospital Outpatient Clinics
Many hospital outpatient clinics, particularly those in inner-city areas,
function as the community’s safety net, providing primary care to the
indigent and uninsured. Even so, outpatient services now constitute a
key source of profits for many hospitals. Hospitals providing both inpa-
tient and outpatient services have the advantage of enhancing revenues
by referring postsurgical cases to their affiliated units for rehabilitation
and home care follow-up. Patients also prefer a seamless transition from
the hospital to its affiliated outpatient services.
Hospital-based outpatient services can be broadly classified into
five main types: clinical (typically for the uninsured or those participat-
ing in research studies), surgical (patients are discharged on the day of
surgery), home health care (postacute care and rehabilitation), women’s
health, and traditional emergency care.
Freestanding Facilities
Various types of proprietary, community-based, freestanding medi-
cal facilities are found across the United States, such as walk-in clinics,
urgent care centers, and surgical centers.
Walk-in clinics provide outpatient services that range from basic pri-
mary care to urgent care and are generally used on a nonroutine, epi-
sodic basis. Primary care retail clinics are becoming available in stores
Outpatient Care Settings and Methods of Delivery 159
such as Walmart, Walgreens, and CVS pharmacies. Urgent care centers
generally offer a wide range of routine services for basic and acute con-
ditions. The main advantages of walk-in clinics and urgent care centers
are convenience of location, evening and weekend hours, and availability
of services on a walk-in, no-appointment basis.
Surgicenters (short for surgical centers) are freestanding outpatient
surgery centers that operate independently of hospitals. They usually
provide a full range of services for surgeries that can be performed on
an outpatient basis and do not require overnight hospitalization. Other
types of outpatient facilities include outpatient rehabilitation centers,
optometric centers, and dental clinics.
Mobile Facilities for Medical, Diagnostic, and
Screening Services
Mobile health care services are transported directly to patients and con-
stitute an efficient and convenient means for providing certain routine
health services—for example, mammography, x-rays, dental care, and
optometric care. They mainly benefit populations in small towns, rural
communities, and nursing homes. Health screening vans, staffed by vol-
unteers who are trained professionals, are generally operated by vari-
ous nonprofit organizations and are often seen at malls and fairgrounds,
where providers screen for blood pressure and cholesterol.
Telephone or Internet Triage
Telephone or Internet access, referred to as telephone or Internet tri-
age, is a means of bringing expert opinion and advice on health care to
the patient, especially during hours when physicians’ offices are closed.
This system is staffed by trained nurses who have access to patient med-
ical records and provide guidance according to standardized protocols.
They can consult with primary care physicians when necessary or refer
patients to an urgent care facility or emergency department.
Home Care
In home health care, services are brought to patients in their own homes.
Without home services, the only alternative for such patients might be
institutionalization in a hospital or nursing home. Home health care is
consistent with the philosophy of maintaining people in the least restric-
tive environment possible. Home health services typically include nurs-
ing care, such as changing dressings, monitoring medications, and help
with bathing; short-term rehabilitation, such as physical therapy, occu-
pational therapy, and speech therapy; homemaker services, such as meal
preparation, shopping, transportation, and some specific household
160 Chapter 7 Outpatient Services and Primary Care
chores; and certain medical supplies and equipment, such as ostomy
supplies, hospital beds and oxygen tanks, as well as walkers and wheel-
chairs (referred to as durable medical equipment).
Hospice Care
The term hospice refers to a cluster of comprehensive services for termi-
nally ill patients with a life expectancy of 6 months or less. Hospice pro-
grams provide services that address the special needs of dying persons
and their families. Hospice is a method of care, not a physical location,
in which services are taken to patients and their families wherever they
are located. Hospice care includes medical, psychological, and social ser-
vices provided in a holistic context. The two primary areas of emphasis
in hospice care are (1) pain and symptom management, referred to as
palliative care, and (2) psychosocial and spiritual support.
Outpatient Long-Term Care Services
Long-term care (LTC) has typically been associated with care provided
in nursing homes, but a number of alternative settings are now available
to address a variety of needs. Two types of ambulatory LTC services are
case management and adult day care. Case management provides coor-
dination and referral among various health care services, with the objec-
tive of finding the most appropriate setting for meeting a patient’s health
care needs. Adult day care complements informal care provided at home
by family members, with professional services available during the day.
Public Health Services
Public health services in the United States are typically provided by local
health departments, and the range of services offered varies greatly by
locality. Generally, public health programs are limited in scope. They
include well-baby care, sexually transmitted disease clinics, family plan-
ning services, tuberculosis screening and treatment, and outpatient
mental health care. States vary in the range and extent of public health
services offered.
Community Health Centers
The federal government authorized the creation of Community Health
Centers (CHCs) during the 1960s, primarily to extend health care ser-
vices to medically underserved regions of the United States. CHCs are
supported by grant funding administered by the Bureau of Primary
Health Care (BPHC) within the Department of Health and Human
Services (DHHS). These centers are required by law to be located in
Outpatient Care Settings and Methods of Delivery 161
medically underserved areas and to provide services to anyone seeking
care, regardless of insurance status or ability to pay (McAlearney, 2001).
CHCs provide family-oriented preventive care, primary care, and
dental care, and serve as a primary care safety net. According to the
BPHC, 1,367 such centers were funded through the program and pro-
vided care to approximately 25.9 million people through more than
104 million medical, dental, mental health, and substance abuse visits
across the United States in 2016. Approximately 23.43% of patients were
uninsured, and another 48.51% were covered under Medicaid. The vast
majority (91.9%) of patients who visited CHCs had incomes less than
200% of the federal poverty level, and over 1 million were homeless.
Other health centers supported by federal funding include migrant
health centers, which serve transient farm workers in agricultural com-
munities (approximately 957,529 patients were seen in 2016), and rural
health centers which are located in isolated, underserved rural areas.
For example, the Community Mental Health Center Program was estab-
lished to provide outpatient mental health services in underserved areas.
Free Clinics
Approximately 1,200 free clinics in the United States provide services at
little or no cost to needy people. These clinics are neither operated nor
supported by the government, and their services are delivered mainly by
trained volunteer staff.
Alternative Medicine Clinics
Complementary and alternative medicine (CAM) refers to the broad
domain of health care resources that are not intrinsic to biomedicine
(CAM Research Methodology Conference, 1997). These treatment
approaches aim to prevent or treat disease. Complementary interven-
tions are used together with conventional medical treatments, whereas
alternative interventions are used instead of conventional medicine.
Alternative therapies include various treatments such as homeopa-
thy, herbal remedies, natural products used as preventive and treatment
agents, acupuncture, meditation, yoga exercises, biofeedback, and spir-
itual guidance or prayer (Barnes et al., 2007). A significant number of
adults in the U.S. exclusively use alternative medicine; one-fourth of adults
with no medical practitioner visits reported using CAM therapy in 2007.
Alternative medicine is not yet endorsed by most practitioners of conven-
tional Western medicine, although interest in the efficacy of these treat-
ments has been growing among the traditional medical establishment.
Alternative treatments are generally not covered by health insurance.
162 Chapter 7 Outpatient Services and Primary Care
▸ Primary Care
Primary care is the conceptual foundation for outpatient services, but
not all outpatient care is primary care. Services beyond primary health
care have become an integral part of outpatient services. As specialist
services increase in supply and use, specialist physicians have become
more integrated into the primary care system; however, improvement
is still needed to ensure seamless coordination of care between spe-
cialists and primary care providers (Farmer et al., 2017; United States
Pharmaceuticals & Healthcare Report, 2015). Primary care practice
must evolve and adapt to recent changes in the health care system, and
this transition is particularly important in light of an estimated short-
age of more than 44,000 primary care physicians in the U.S. by 2035
( Petterson et al., 2015).
What Is Primary Care?
In a tri-level classification of care delivery, primary care is distinguished
from secondary and tertiary care by its duration, frequency, and level of
intensity. Secondary care is usually short-term in nature, involving spo-
radic consultation from a specialist for expert opinions and/or surgical or
other advanced interventions that primary care physicians cannot per-
form. Secondary care includes hospitalization, routine surgery, specialty
consultation, and rehabilitation. Tertiary care is the most complex level
of care and is required for relatively uncommon conditions. Typically,
tertiary care is institution-based, highly specialized, and technology-
driven, and mostly rendered in large teaching hospitals, especially
university hospitals. Examples include trauma care, burn treatment,
neonatal intensive care, tissue transplants, and open-heart surgery. Some
tertiary treatments may be long-term, and tertiary care physicians may
assume long-term responsibility for the bulk of the patient’s care.
Primary care is commonly viewed as a set of basic and routine ser-
vices that include prevention, diagnostic and therapeutic services, health
education and counseling, and minor surgery. More saliently, primary
care should be viewed as an approach to health care rather than a set of
specific services (Starfield, 1994). In this regard, the World Health Orga-
nization (WHO) and the Institute of Medicine1 (IOM) provide useful
definitions.
1 The Institute of Medicine was renamed the National Academy of Medicine
in 2015.
Primary Care 163
WHO Definition
According to the WHO, primary health care is essential health care that is
based on practical, scientifically sound, and socially acceptable methods
and technology. Such care should be universally accessible to individuals
and families in the community by acceptable means and at an affordable
cost. Primary health care is the foundation of ambulatory services and is
characterized by the first level of contact between individuals, the family,
and the community on the one hand and the health care delivery system
on the other hand, bringing health care as close as possible to where
people live and work. It is the first element of a continuing health care
process (WHO, 1978, p. 25).
IOM Definition
The IOM Committee on the Future of Primary Care defined primary care
as the provision of integrated, accessible health care services by clinicians
who are accountable for addressing the majority of personal health care
needs, developing a sustained partnership with patients, and practicing
in the context of family and community (Vanselow et al., 1995, p. 192).
Domains of Primary Care
Taken together, the WHO and IOM definitions highlight six key domains
of primary care, as summarized in EXHIBIT 7.3.
Point of Entry
Primary care should be the point of entry into a health services system
(Starfield, 1992, p. vii), that is, the first contact that a patient makes with
the health care delivery system. This first-contact feature is closely asso-
ciated with the gatekeeper role of the primary care practitioner. Gate-
keeping implies that patients do not visit specialists and are not admitted
to a hospital without being referred by their primary care physicians.
Although gatekeeping may appear to be a controlling mechanism for
EXHIBIT 7.3 Domains of Primary Care
■ Point of entry
■ Community based
■ Coordination of care
■ Essential care
■ Integrated care
■ Accountability
164 Chapter 7 Outpatient Services and Primary Care
denying needed care, instead primary care usually protects patients from
unnecessary procedures and overtreatment (Franks et al., 1992) because
specialists use medical tests and procedures to a much greater extent than
do primary care providers, and such interventions carry a risk of iatro-
genic (i.e., caused by the process of health care) complications (Starfield,
1994). At the same time, appropriate technology must be incorporated
into primary care delivery so that costly referrals to other components of
the health delivery system are made only when necessary.
Community Based
Primary care should be available in close proximity to where people live
and work, and is thus characterized by convenience and accessibility.
These services must also be basic, routine, and inexpensive in order to
be widely available to urban, suburban, and rural communities.
Coordination of Care
One of the main functions of primary care is to coordinate the delivery
of health services between the patient and the myriad components of the
health care system. Therefore, primary care professionals also serve as
patient advisors and advocates. Besides making referrals, they give advice
regarding various diagnoses and therapies, discuss treatment options, and
provide continuing care for chronic conditions (Williams, 1993). Coor-
dination of an individual’s total health care needs ensures continuity and
comprehensiveness. These goals of primary care are best achieved when
the patient and the provider have established a close relationship over time.
Within the overall health care delivery system, primary care can be
regarded as the hub of the larger wheel. The various components of the sys-
tem are located around the rim of this wheel, with the spokes of the wheel
signifying the coordination of continuous, comprehensive care (FIGURE 7.1).
The ideal system of health care delivery is based on primary care but
also closely linked with adequate and timely specialized services. Con-
tinuous, coordinated care requires that secondary and tertiary services
be integrated with primary care through appropriate interaction and
consultation among physicians. Coordination of care has certain advan-
tages. Both the appropriateness and the outcomes of interventions are
better when primary care physicians refer patients to specialists, rather
than when patients engage in self-referral (Bakwin, 1945; Roos, 1979).
Essential Care
Primary care is regarded as essential health care. When it is made avail-
able to the vast majority of a nation’s population, population health is
optimized. Countries whose health systems are more oriented toward
Primary Care 165
primary care achieve better health outcomes, higher satisfaction with ser-
vices among their populations, and lower expenditures in overall health
care delivery (Starfield, 1994). Even in the United States, states with higher
ratios of primary care physicians to patients show better health outcomes
associated with the better availability of primary care (Shi, 1992, 1994).
Higher ratios of family and general practice physicians to patients are also
associated with lower hospitalization rates for conditions treatable with
primary care (Parchman & Culler, 1994). Adults who have primary care
physicians as their regular source of care experience lower death rates and
incur lower health care costs (Franks & Fiscella, 1998). However, the mix-
ture of public and private financing for health care services in the U.S. has
created a fragmented system, in which primary care is not the organizing
hub for continuous, coordinated health services.
Integrated Care
Integrated care embodies the concepts of comprehensive, coordinated,
and continuous services that provide a seamless process of care. Primary
care is comprehensive because it addresses any health problem at any
stage of a patient’s life cycle. Coordination ensures that the appropriate
combination of health services are provided to best meet the patient’s
needs. Continuity refers to care delivered over time by a single provider
or a team of health care professionals.
Accountability
Within the health care system, both clinicians and patients are held
accountable. On the one hand, the clinical system is accountable for
quality care, patient satisfaction, the efficient use of resources, and eth-
ical behavior. On the other hand, patients are responsible for their own
FIGURE 7.1 Coordination Role of Primary Care in Health Delivery
Inpatient careS
pe
cia
lis
ts
Surgery
Di
ag
no
sti
c
se
rv
ice
s
Primary
care
Continuity
Comprehensivenes
s
166 Chapter 7 Outpatient Services and Primary Care
health, to the extent that they are capable. Patients are also responsible
for being judicious in their use of resources when they need care. An
ideal patient–provider relationship is based on mutual trust, respect, and
responsibility. In addition to possessing the necessary knowledge and
skills, primary care clinicians must use their best judgment to involve
other practitioners in diagnosis, treatment, or both when appropriate
(Vanselow et al., 1995).
Community-Oriented Primary Care
Community-oriented primary care incorporates the elements of effective
primary care delivery but adds a population-based approach to identi-
fying and addressing community health problems. Current perspectives
on primary care delivery have extended beyond the traditional bio-
medical paradigm, which focuses on medical care for the individual in
an encounter-based system, to the broader biopsychosocial paradigm,
which emphasizes the needs and health priorities of both the population
and the individual (Gofin et al., 2015; Lee, 1994). The main challenge
has been to determine the best means to bring together individual health
needs in the larger context of community health needs. Workforce short-
ages and a lack of financial incentives to provide care beyond individual
health needs have been two major obstacles to adopting the biopsycho-
social paradigm.
▸ Primary Care Around the World
Primary care systems across the world face the dual challenges of a
shrinking medical workforce and increasing health care demands. On
the supply side, the number of medical graduates entering primary care
specialties, such as general internal medicine, family medicine, or geriat-
rics, are decreasing in the United States and internationally (Organization
for Economic Cooperation and Development [OECD], 2012; Schwartz,
2012). On the demand side, the number of patients along with their
care demands are increasing substantially. In some countries, changes to
health systems have also increased demand for primary care services. For
example, the expansion of insurance coverage to millions of previously
uninsured individuals under the Affordable Care Act (ACA) in the U.S.
has further increased the demand for primary care.
Worldwide, shortages of primary care physicians along with an
increased demand for primary care services have provided the impetus
for delivering team-based primary care. The diversity of the primary care
workforce is increasing to include a wider range of health professionals,
such as nurse practitioners, registered nurses, and other clinical staff
Primary Care Around the World 167
members. While transitioning to multidisciplinary teams appears nec-
essary, approaches to implementing primary care teams differ greatly.
Some approaches utilize traditional primary care health professionals
but redefine or extend their roles. For example, some models refocus
the roles of medical assistants on completing additional tasks such as
ordering routine tests and supporting patient self-management. Other
models include health care professionals not traditionally utilized in pri-
mary care, including social workers, pharmacists, or community health
workers, expanding the range of expertise included in the primary care
team (Freund et al., 2015).
In Canada, primary health care services have traditionally been
delivered by family physicians and general medical practitioners. To
solve the issues posed by a shortage of these providers, the Canadian
federal government has encouraged the formation of interprofessional
health care teams and greater emphasis on health promotion since 2004.
All provinces and territories have designed innovative care models and
multidisciplinary teams. For example, in British Columbia, interprofes-
sional care networks care for patients with chronic health conditions.
Under the aegis of the Divisions of Family Practice, groups of primary
care physicians can address gaps in patient care and promote family med-
icine. In Ontario, the government has also developed new approaches to
primary health care, such as the family health team (Ministry of Health
and Long-Term Care Canada, 2012).
In Australia, primary care practices have traditionally been operated
as private businesses, but the primary care landscape is changing. There
is a shift away from medically qualified general practitioners working as
solo practitioners and providing episodic opportunistic care, one-way
referral processes, and fee-for- service financing only. More recently,
general practices have included two to five primary care physicians,
providing a greater focus on prevention, early intervention, and struc-
tured chronic disease management within multidisciplinary care team
approaches (Naccarella et al., 2012).
▸ Effectiveness of Primary Care
Most preventive interventions are best carried out in primary care deliv-
ery, even though some believe a specialty care focus is warranted. For
example, cardiac care may be concerned with cholesterol levels; testing
for cholesterol levels and interventions to bring them down to desired
levels are routinely performed by primary care physicians. Primary care
practitioners may order further testing, such as electrocardiograms and
cardiac stress tests, to assess for heart disease, and may make referrals to
a cardiologist when appropriate.
168 Chapter 7 Outpatient Services and Primary Care
U.S. states with higher ratios of primary care physicians to the total
population experience lower smoking rates, less obesity, and greater use
of seat belts (Shi, 1994; Shi & Starfield, 2000). Continuity of care with a
single provider is also positively associated with primary preventive care,
including smoking cessation and influenza immunization, in a study of
60 communities in the U.S. (Saver, 2002). An increase of one primary care
physician per 10,000 population has been linked to an average reduction
of 1.44 deaths per 10,000 population (127,617 deaths per year), a 2.5%
reduction in infant mortality, and a 3.2% reduction in low-birthweight
infants ( Macinko et al., 2007).
Similarly, population subgroups with an adequate primary care
source show better birthweight distributions. In 2000, among white and
black populations in urban and rural areas of the United States, birth-
weights were higher when the source of care was a community health
center designed to provide effective primary care (Politzer et al., 2001).
Disadvantaged children are much more likely to have preventive care
visits when their source of care is a good primary care practitioner
(Gadomski et al., 1998; Kumra et al., 2017).
Early detection of breast cancer is also enhanced when primary care
physicians are adequate in supply (at least relative to specialists), and a
one-third increase in the supply of family physicians correlates to a 20%
decrease in cervical cancer mortality rates (Barry, 2017; Ferrante et al.,
2000; Macinko et al., 2007).
Hospitalizations and Use of Emergency Care
Evidence shows that lower hospitalization rates for ambulatory care–
sensitive conditions (i.e., hospitalizations that can be prevented with
quality primary care) are strongly associated with receiving primary care.
Children receiving care from a good primary care source have lower hos-
pitalization rates for these conditions and overall, which are associated
with receiving better preventive care from primary care providers (Barry,
2017; Gadomski et al., 1998). Hospital admission rates are lower in com-
munities where primary care physicians are more involved in caring for
children both before and during hospitalization (Perrin et al., 1996).
Adolescents with the same regular source of care for preventive and ill-
ness care (i.e., a source of primary care) are much more likely to receive
preventive care and less likely to seek care in emergency rooms (Ryan
et al., 2001). Thus strong evidence indicates that hospitalizations—
especially for ambulatory care-sensitive conditions—are less frequent
when primary care is available.
The geographic distribution of primary care physicians is an import-
ant factor in determining the health of the local population. Parchman
and Culler (1994, p. 45) found that geographic areas with higher numbers
Effectiveness of Primary Care 169
of family and general care physicians per population experienced lower
hospitalization rates for conditions that can be prevented with good pri-
mary care, including diabetes mellitus and pneumonia in children, and
congestive heart failure, hypertension, pneumonia, and diabetes mellitus
in adults. Women residing in primary care service areas (PCSAs) also
showed increased rates of mammography recommendation and utili-
zation (Barry, 2017). Other studies have found that poor primary care
resources are independently associated with higher hospitalization rates
for conditions that can be prevented by adequate primary care.
Cost of Care
Areas with higher primary care physician-to-population ratios experi-
ence lower total health care costs. This relationship has been demon-
strated among elderly individuals in the U.S. who live in metropolitan
areas, both for total costs (i.e., inpatient and outpatient) (Mark et al.,
1996; Welch et al., 1993) and for the total population in the U.S. (Franks &
Fiscella, 1998), and in international comparisons of industrialized coun-
tries (Starfield & Shi, 2002). Care for illnesses common in the population
(e.g., community-acquired pneumonia) is more expensive if provided by
specialists than if provided by generalists, yet no difference in outcomes
is noted based on provider type (Rosser, 1996; Whittle et al., 1998).
Morbidity
A greater supply of primary care physicians has been associated with
lower rates of self-reported poor health in a study of 60 representative
U.S. communities, after controlling for a wide range of sociodemographic
and socioeconomic characteristics (Shi & Starfield, 2000). This study
also confirmed the positive impact of primary care—patients with better
experiences of primary care reported better health (Shi et al., 2002).
Lower birthweight and infant mortality rates were also associated
with a higher supply of primary care physicians in U.S. states, even after
controlling for education, unemployment, racial/ethnic composition,
income inequality, and urban–rural differences (Shi et al., 2004).
Similarly, in a recent study of the association between primary care
physician supply in U.S. counties and patient health, individuals in coun-
ties with the highest numbers of primary care physician supply were
found to be 20% less likely to become obese than those living in counties
with the smallest numbers of primary care physician (Gaglioti, 2016).
Several studies have shown the importance of primary care as an
entry point to the health care system for a majority of conditions. For
example, one study demonstrated that entry-level access through pri-
mary care is associated with better outcomes for 16 common conditions
170 Chapter 7 Outpatient Services and Primary Care
in children and youth (Starfield, 1985). Another study showed that men
who lack a primary care provider were at even greater risk for severe
uncontrolled hypertension than men who lacked medical insurance or
had alcohol-related health problems (Shea et al., 1992).
Mortality
Perhaps the most frequently cited evidence for the benefits of primary
care has been mortality rates (i.e., death rates). One line of evidence
comes from ecological studies of the relationship between primary
care personnel-to-population ratios and various health outcomes in
the U.S. Two studies found better health outcomes in states with higher
primary care physician-to-population ratios after controlling for socio-
demographic measures (i.e., percentage of elderly, percentage of urban
residents, percentage of minority individuals, education, income, unem-
ployment, pollution) and lifestyle factors (i.e., seat belt use, obesity,
and smoking) (Shi, 1992, 1994). The supply of primary care physicians
has also been shown to exert a strong and significant direct influence
on life expectancy, stroke, and postnatal and total mortality (Bailey &
Goodman-Bacon, 2015; Shi et al., 1999).
Studies using multiple years of data have also identified an inverse
relationship between primary care physician supply and population
mortality outcomes, where increases in the supply of primary care phy-
sicians are associated with decreases in overall and cause-specific pop-
ulation mortality rates (Shi et al., 2003; Villalbi et al., 1999). There is a
strong association between life expectancy and numbers of primary care
physicians—the higher the ratio of physicians per population, the longer
the life expectancy of the population (Shi et al., 1999).
▸ The Medical Home Strategy
As health care delivery becomes increasingly complex, a renewed proposal
for coordinating care through a medical home system has gained support.
In 2006, the American College of Physicians (ACP) recommended the
medical home care model as a fundamental change in the provision and
financing of primary care. The ACP advocates patient-centered care based
on a partnership between the patient and the provider combined with
the incorporation of principles of the chronic care model. The chronic
care model is based on the premise that chronic conditions are best man-
aged with multidisciplinary practice-based teams, use of evidence-based
guidelines, appropriate health information technology, and accountability
for the quality and value of care provided (American Academy of Fam-
ily Physicians et al., 2007). With one personal physician as their primary,
The Medical Home Strategy 171
continual medical contact, patients are wholly cared for by a directed team
that is coordinated across all areas of the health system. In small-scale
studies, the medical home model has been found to improve patient health
outcomes and satisfaction, reduce medical errors, and add value by pro-
ducing cost savings without compromising health outcomes (Rojanasarot
& Carlson, 2017; Rosenthal, 2008). Studies using nationwide data have
also indicated that medical home models are effective in providing com-
prehensive, accessible, and continuous primary care (Liang et al., 2017; Shi
et al., 2017a). The medical home model offers a long-term vision of reform
that can help improve and revolutionize the primary care system.
The National Committee for Quality Assurance’s (NCQA’s)
Patient-Centered Medical Home Recognition Program is the most
widely adopted patient-centered medical home (PCMH) evaluation pro-
gram in the United States. More than 12,000 practices (with more than
60,000 clinicians) are recognized by the NCQA, and more than 100 pay-
ers support NCQA recognition through financial incentives or coach-
ing. The key criteria of PCMH recognition/accreditation (displayed
in EXHIBIT 7.4) are based on the well-known and empirically validated
Wagner Chronic Care Model, which encourages the health care system
to use community resources to effectively care for patients with chronic
illnesses through productive interactions between activated patients and
a prepared practice team. Furthermore, the NCQA recognizes practices
that successfully apply systematic processes and technology in improved
quality of patient care. A growing body of literature demonstrates that
medical homes may improve health outcomes, reduce disparities in
access and quality of care, and ultimately lower costs over time (Beal
et al., 2007; Peikes et al., 2012; Shi et al., 2017a).
▸ Use of Information Technology
in Primary Care
The effective use of medical information technology by primary care
practices to improve quality can help practices enhance their ability
to deliver both high-quality care and better patient outcomes (Hig-
gins et al., 2015). In 2009, the federal Health Information Technology
for Economic and Clinical Health (HITECH) Act, enacted under the
American Recovery and Reinvestment Act, provided incentives for the
meaningful use of electronic health records (EHRs). Objectives included
specific requirements for using EHR data to improve health care pro-
cesses and outcomes through tracking and reporting on quality mea-
sures, e-prescribing, implementing decision support, participating in
health information exchanges (HIEs), and other activities. In February
2014, the Centers for Medicare and Medicaid Services reported that
172 Chapter 7 Outpatient Services and Primary Care
it had disbursed $19.2 billion in meaningful use incentives to nearly
441,000 registered providers participating in the federal EHR meaning-
ful use program (Manos, 2014).
In addition, the ACA emphasized quality improvement and mea-
surement in its strategic plan for health information technology (IT) and
EXHIBIT 7.4 Patient-Centered Medical Home Accreditation Criteria
PCMH1: Patient-Centered Access
■ Appointment access
■ 24/7 access to clinical advice
■ Electronic access
PCMH2: Team-Based Care
■ Continuity
■ Medical home responsibilities
■ Culturally and linguistically appropriate services
■ The practice team
PCMH3: Population Health Management
■ Patient information
■ Clinical data
■ Comprehensive health assessment
■ Use data for population management
■ Implement evidence-based decision support
PCMH4: Care Management and Support
■ Identify patients for care management
■ Care planning and self-care support
■ Medication management
■ Use electronic prescribing
■ Support self-care and shared decision making
PCMH5: Care Coordination and Care Transitions
■ Test tracking and follow-up
■ Referral tracking and follow-up
■ Coordinate care transitions
PCMH6: Performance Measurement and Quality
Improvement
■ Measure clinical quality performance
■ Measure resource use and care coordination
■ Measure patient/family experience
■ Implement continuous quality improvement
■ Demonstrate continuous quality improvement
■ Report performance
■ Use certified EHR technology
Use of Information Technology in Primary Care 173
proposed the use of health IT as a tool to improve patient safety, reduce
medical errors, and ensure patient- centered care (Patient Protection
and Affordable Care Act of 2010). The Office of the National Coordina-
tor (ONC) for Health Information Technology established 62 Regional
Extension Centers in 2010 to provide EHR technical assistance mainly
to private practices, but also to federally qualified health centers, which
increase access to care for underserved communities (Heisey-Grove
et al., 2013).
Even with these incentives, health IT to support quality improve-
ment in primary care is often insufficiently or inefficiently used. Part of
the reason might be that expansion of EHR use in primary care offices
is relatively new. New users of health IT may not have mastered the
more advanced EHR functions needed for quality improvement. Some
primary care practices might find that using health IT does not auto-
matically translate into improved quality of care. Rather, using health
IT for quality improvement requires purposeful and thoughtful plan-
ning, effort, and allocation of resources—all of which require significant
investments by primary care practices in capital, clinician and staff train-
ing, and time.
Despite these barriers, some primary care practices and organizations
have found ways to effectively use health IT to support their quality improve-
ment activities. Primary care practices require four interconnected factors
to effectively use health IT: a practice culture with a strong commitment to
using health IT for quality improvement; high-functioning health IT tools to
enable data tracking and extraction; practice clinical team and staff knowl-
edge and skills related to both health IT and quality improvement; and prac-
tice processes and workflows that incorporate the effective use of health IT
for quality improvement (Higgins et al., 2015).
Regarding the use of health IT in chronic disease management, pri-
mary care facilities generally use the following types of health IT applica-
tions to address different aspects of chronic disease management:
■ Clinical decision support (CDS) systems, which help providers
interpret clinical results, document patients’ health status, and pre-
scribe medications
■ Health information exchanges, which allow organizations to share
information across organizational boundaries
■ Disease registries, which capture and track key patient information
to assist care team members in proactively managing patients
■ Patient-centered applications, such as patient portals and inte-
grated voice response (IVR) systems, which are designed to educate
patients about their disease, medications, and self-management of
chronic conditions
174 Chapter 7 Outpatient Services and Primary Care
■ EHRs with integrated decision support and chronic care manage-
ment tools, which help providers manage patient information and
monitor health outcomes for patients undergoing treatment for
chronic diseases
■ Telehealth applications that remotely connect providers and patients
in co-management of chronic diseases (Agency for Healthcare
Research and Quality, 2014)
▸ Assessment of Community Health Centers
In recent years, an increasing number of studies have assessed the qual-
ity, accessibility, and cost-effectiveness of CHCs.
CHCs’ Quality of Care
In terms of health care quality at CHCs, it is critical that the care deliv-
ered at such centers is evidence-based, appropriate, well-coordinated,
safe, and patient-centered. Through various Health Resources and Ser-
vices Administration (HRSA) and other federal, private-sector, state,
and community efforts and partnerships, CHCs have made major
advances in adopting evidence-based practices; improving patient
safety; meeting national accreditation standards, including the estab-
lishment of health centers as patient-centered medical homes; and
increasing the coordination, integration, and management of health
center care. To better monitor these advances, HRSA also established a
core set of clinical performance measures that place a greater emphasis
on health outcomes and demonstrate the value of CHC- delivered care.
These measures align with those of national quality measurement orga-
nizations, and many are commonly used by Medicare, Medicaid, and
private insurers to assess quality.
A number of studies have demonstrated that health centers’ quality
of care equals and often surpasses that provided by other primary care
providers. A programmatic emphasis on quality as well as community-
responsive and culturally appropriate care has also translated into
impressive reductions in health disparities for patients receiving care at
CHCs. These achievements are even more notable given the CHC patient
population is often sicker and more at risk than the overall patient pop-
ulation seen nationally (HRSA, 2011).
Patients who visit CHCs report positive experiences overall, cit-
ing the centers’ convenient locations and the positive interactions
with providers. However, uninsured patients may be less likely to
receive help from the staff in applying for government benefits and
Assessment of Community Health Centers 175
setting up appointments with other medical providers. Even though
racial/ethnic and insurance coverage disparities are less prevalent at
CHCs than at other primary care providers, more efforts need to be
focused on assisting those without insurance in applying for benefits
(Shi et al., 2013a). Results from another study showed that there was
no significant difference in length of visit or number of services pro-
vided between patients seen at CHCs and those seen at office-based
physician practices (Bruen et al., 2013). Across racial/ethnic groups,
CHC patients were found to be more satisfied than the U.S. low-
income patient population with the hours of operation and overall
care received (Shi et al., 2013b).
Shin and colleagues (2013) compared CHCs’ quality of care to
national benchmarks of quality performance for Medicaid MCOs. Per-
formance along three measures—diabetes control, hypertension con-
trol, and receipt of a Pap test—was evaluated. Nearly all health centers
scored above the Medicaid MCO average benchmark; only 4% of CHCs
ranked as low performers. In 2013, CHCs had a lower percentage of
low-birthweight babies than the national estimates (HRSA, 2014).
Additionally, 68% of diabetic patients had their diabetes under control,
and 62% of hypertensive patients kept their blood pressure under con-
trol (HRSA, 2017).
CHCs’ Access to Care
Access to preventive and primary services reduces the risk of increased
disease severity, complications, and emergency medical services uti-
lization (Laiteerapong et al., 2014). Compared to the general U.S.
low- income patient population, patients served by CHCs did not
experience racial/ethnic- or insurance-based disparities in access to
primary care (Shi et al., 2013b). Overall, CHCs seem to be meeting the
health care needs of the vulnerable populations they serve and reduc-
ing disparities in access to health care.
In comparing rates of inadequate hypertension control, poor dia-
betes control, and low birthweight across four racial/ethnic categories
(non-Hispanic white, black/African American, Asian, and Hispanic
/Latino), minimal differences and disparities for the clinical indicators
were found among different races and ethnicities (Lebrun et al., 2013;
Shi et al., 2017b). Thus, CHCs seem to be successful in reducing racial
/ethnic health disparities, especially when compared to the disparities
found nationwide. Moreover, increased federal funding for CHCs may
have slowed the decline in access to care among low-income populations
(McMorrow & Zuckerman, 2014).
176 Chapter 7 Outpatient Services and Primary Care
CHCs’ Cost-Effectiveness
CHC patients are found to have fewer office visits and hospitalizations,
and female CHC patients are three times more likely to receive breast
cancer screening compared to non-CHC patients (Laiteerapong et al.,
2014). Uninsured CHC patients have fewer outpatient visits and emer-
gency department visits and are more likely to receive dietary advice
and breast cancer screening than non-CHC patients (Laiteerapong et al.,
2014). The findings suggest that CHCs focus on preventive care, which
results in lower rates of medical care utilization by disadvantaged groups.
CHCs and the Affordable Care Act
The ACA created the Community Health Center Fund to provide $11 bil-
lion over a 5-year period for the operation, expansion, and construction
of CHCs across the country, including the District of Columbia, Puerto
Rico, the U.S. Virgin Islands, and the Pacific Basin. CHCs served 19.5
million people in 2010, a number that increased to 21.7 million in 2013
(HRSA, 2014). In 2014, the ACA provided $100 million for the establish-
ment of 150 more health centers across the United States (HRSA, 2014).
Despite the good intentions of the ACA, CHCs face significant
financial challenges because Medicaid reimbursement has declined even
as health centers’ Medicaid patient load has increased and physicians at
CHCs report overwhelming workloads and frustrations with adminis-
trative management (Cole et al., 2014). Unless these issues are resolved at
a fundamental level, additional funding for the expansion of CHCs will
likely accomplish little.
▸ Conclusion
Outpatient services now transcend basic and routine primary care ser-
vices, as many general medical and surgical interventions are provided in
ambulatory care settings. In response to changing economic incentives
in the health care delivery system, numerous types of ambulatory ser-
vices have emerged, and a variety of settings for the delivery of services
have developed. In most settings, patients visit delivery sites to receive
services. In other cases, services are brought to the patients.
The effectiveness of primary care has been demonstrated in numer-
ous ways. However, its predominant practice can no longer be confined
to the way primary care has been traditionally practiced. The broader bio-
psychosocial paradigm emphasizes the health of the population as well
as that of the individual. A medical home model has been advocated to
Conclusion 177
deliver primary care based on the principles of patient-centered care and
team-based chronic disease management approaches. Community Health
Centers that predominantly serve vulnerable populations have been
found to deliver high-quality care cost-effectively in underserved areas;
the Affordable Care Act authorized funds for the expansion of these cen-
ters. Both old and new approaches to primary care delivery face mounting
challenges in the wake of workforce shortages and financial constraints.
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© ninjaMonkeyStudio/Getty Images
CHAPTER 8
Hospitals
▸ Introduction
The term inpatient refers to an overnight stay in a health care facil-ity, such as a hospital or a nursing home, when the patient is for-mally admitted with a physician’s order. Outpatient, in contrast,
refers to services provided while the patient is not lodged in the hospital
or some other health care institution. This chapter describes what a hos-
pital is, explores the hospital’s evolution, and examines its current role in
health care delivery.
The American Hospital Association (AHA) defines a hospital as an
institution with at least six beds whose primary function is “to deliver
patient services, diagnostic and therapeutic, for particular or gen-
eral medical conditions” (AHA, 1994). In addition, a hospital must be
licensed, it must have an organized physician staff, and it must pro-
vide continuous nursing services under the supervision of registered
nurses. A hospital must appoint a governing body or board that is legally
182
responsible for the conduct of the hospital. It must also appoint a full-
time chief executive officer (CEO) to be responsible for the hospital’s
operations. The hospital must maintain medical records on each patient,
have pharmacy services available within the institution, and provide
food services to meet the nutritional and therapeutic requirements of
the patients (Health Forum, 2001). The construction and operation of
the modern hospital is governed by federal laws, state health regulations,
city ordinances, standards of the Joint Commission (formerly the Joint
Commission on Accreditation of Healthcare Organizations [JCAHO]),
and national codes for building, fire protection, and sanitation.
In the past 200 years or so, hospitals have gradually evolved from basic
institutions of refuge for the homeless and poor, to ultramodern facili-
ties providing the latest medical services to the critically ill and injured.
The term medical center is used by some hospitals, reflecting their high
level of specialization and wide scope of services. Medical centers often
engage in teaching and research. Since the 1980s, many hospitals have
expanded their scope of services to include outpatient care.
▸ Evolution of the Hospital in the
United States
The six major stages of hospital evolution in the United States are listed
in EXHIBIT 8.1.
Stage 1
Before 1850 or so, only a few hospitals existed, all of which were found in
major U.S. cities. The main health care institutions were the almshouses
EXHIBIT 8.1 Major Stages of Hospital Evolution
1. Almshouses as primarily institutions of social welfare
2. Community-owned private hospitals as charitable institutions supported by
affluent donors
3. Institutions of medical practice and training serving the needs of all
members of society and able to make a profit
4. Emergence of a relatively small number of physician-owned proprietary
hospitals
5. University-based centers of medical research
6. Emergence of medical systems providing a large array of health services
Evolution of the Hospital in the United States 183
(also called poorhouses) run by local governments. Pesthouses were
operated to confine people with contagious diseases. Services in these
institutions were more akin to social welfare than to medicine, consisting
mainly of providing food and shelter to the destitute and some nurs-
ing care to the sick. Medicine and nursing as the professions we know
today had not emerged. People generally stayed in these institutions for
months rather than days.
Stage 2
During the latter half of the 1800s, hospitals evolved from the alms-
houses and pesthouses but continued to serve mainly the poor. At this
time, hospitals began to transition from being primarily government-run
institutions to community-owned institutions supported mainly through
private charitable donations. Influential donors exercised control over
the hospital through their roles as members of the board of trustees.
Since this period, private (rather than government-owned) nonprofit
hospitals have dominated the hospital landscape in America.
Stage 3
Medical discoveries during the latter half of the 1800s were instrumen-
tal in transforming hospitals into true institutions of medical practice.
Discoveries that had a profound impact on hospital care included anes-
thesia, which aided significantly in advancing new surgical techniques,
and the development of the germ theory of disease, which led to the
subsequent discovery of antiseptic and sterilization techniques (Haglund
& Dowling, 1993). From around 1850 onward, technological progress
led to the development of advanced equipment, facilities, and personnel
training, which became centered in the hospital. Hospitals established
laboratories and x-ray units so that physicians could have convenient
access to diagnostic technology. These advances made it necessary for
community-based physicians to treat acute illnesses in hospitals, which
also became centers where physicians received their practical training.
Henceforth, hospitals came to be regarded as a necessity, because the
superior medical services and surgical procedures offered there could
not be obtained at home.
Stage 4
With advances in sanitation, nursing care, and medical services, hospitals
began to attract well-to-do patients who could afford to pay for their care
on an out-of-pocket basis. As these wealthier individuals began to use
their services, hospitals found that they no longer had to depend totally
184 Chapter 8 Hospitals
on charitable contributions; indeed, they could now generate a profit. At
this stage, some physicians started opening their own small hospitals,
thereby laying the foundation for proprietary (for-profit) hospitals in the
United States.
Stage 5
Many hospitals established formal affiliations with university-based
medical schools and became centers of medical research where new dis-
coveries were made. Even today, medical research plays a critical role
in finding better cures and in disseminating research findings through
publications in medical journals to advance new medical knowledge
throughout the world.
During this stage, hospitals became complex organizations, and the
field of hospital administration became a discipline in its own right. To
manage hospitals, administrators needed expertise in financial manage-
ment and good organizational and human relations skills. In addition,
departments such as food service, pharmacy, x-ray imaging, and the lab-
oratory required well-trained professional staff to manage the delivery
of services.
Stage 6
Since the 1990s, local market pressures have prompted many hospitals
to merge or enter into formal affiliations with other hospitals. In urban
areas, medical systems (or health systems) have been formed. These sys-
tems are large organizations that may include more than one hospital
to serve a large geographic area. They also provide a full array of health
care services, including outpatient clinics, same-day surgery, outpatient
imaging services, outpatient rehabilitation therapies, nursing home care,
home health services, and hospice care. Many health systems have also
opened special women’s health centers and fitness centers. Increasingly,
community services such as health education, promotion of healthy life-
styles, and prevention of disease have become an important part of a
hospital’s mission.
▸ Expansion and Downsizing of Hospitals
in the United States
The number of hospital beds in the United States grew from 35,604 in
1872 to 907,133 in 1929 (Haglund & Dowling, 1993). This phenomenal
growth started once hospitals became institutions of medical practice,
serving the needs of all members of society and making a profit (stage 4
Expansion and Downsizing of Hospitals in the United States 185
in the six-stage model). Technological advances increased the volume
of surgical work, which at that time could be done only in hospitals. As
new facilities with additional beds were built, they were quickly filled
by patients needing acute treatment or surgery. Advances in medical
science, as well as professional training of nurses and other health care
professionals, played an important role in creating a demand for more
beds. Additional factors contributing to the growth of hospitals from the
preindustrial era to around 1980 are listed in EXHIBIT 8.2.
After 1930, the wider availability of private health insurance enabled
more and more people to pay for hospital services, which became increas-
ingly more costly and unaffordable. Once people had health insurance,
that fact in itself generated new demand. Early insurance plans provided
generous coverage for inpatient care, and few restrictions were placed on
the use of hospital-based services.
In the 1940s, the U.S. government recognized that a severe short-
age of hospitals existed in the country. In response, Congress passed the
Hospital Survey and Construction Act of 1946, commonly known as the
Hill-Burton Act. It provided federal grants to the states for the construc-
tion of new hospital beds. The objective of the Hill-Burton Act was to
increase the United States’ hospital capacity to 4.5 beds per 1,000 popu-
lation (Teisberg et al., 1991). Indeed, the Hill-Burton program has been
regarded as the greatest single factor in increasing the nation’s bed sup-
ply. This building program made it possible for even small and remote
communities to establish their own hospitals (Wolfson & Hopes, 1994).
The creation of Medicare and Medicaid in 1965 made public health
insurance available to a large segment of the U.S. population. Hospital
demand, in turn, continued to grow. Between 1965 and 1980, the num-
ber of community hospitals in the United States increased from 5,736
(741,000 beds) to 5,830 (988,000 beds) (AHA, 1990). By 1980, the United
States had also reached its goal of 4.5 community hospital beds per 1,000
civilian population (National Center for Health Statistics [NCHS], 2002).
In 1983, the U.S. government decided it needed to contain the
exploding cost of hospital care, mostly because of its impact on the rising
EXHIBIT 8.2 Factors Contributing to the Growth of Hospitals
■ Broad appeal once hospitals evolved into institutions of medical practice as
a result of technological advances and professional training of health care
professionals
■ Private health insurance
■ Hill-Burton Act
■ Medicare and Medicaid
186 Chapter 8 Hospitals
cost of Medicare. FIGURE 8.1 shows the increase in costs that occurred
between 1970 and 1980. This goal of cost containment was achieved
through the enactment of the Social Security amendments of 1983. The
law required Medicare to stop paying hospitals per diem rates estab-
lished on the basis of their costs of operation (retrospective reimburse-
ment). Instead, a prospective payment system (PPS) was established to
reimburse hospitals on the basis of diagnosis-related groups (DRGs).
Under this method, hospitals received a preestablished fixed rate per
admission. To ensure that they would not lose money, hospitals had to
cut their costs of operation. They also had to discharge patients more
quickly than had been the practice in the past, because keeping patients
in the hospital longer than necessary cut into the hospital’s profits. Many
hospitals were forced to close when they had difficulty coping with the
new method of reimbursement. Other hospitals continued to operate
but had to take unused beds out of service. Thus, implementation of PPS
triggered the downsizing phase in the U.S. hospital industry.
During the 1990s, the growth of managed care played a significant
role in curtailing inpatient utilization even further. Managed care empha-
sized cost containment and efficient delivery of care through early dis-
charge from hospitals, and, if necessary, continuity of care through home
health agencies and skilled-care nursing homes. In other instances, the
emphasis has been on using outpatient services whenever appropriate
instead of admitting patients to hospitals.
FIGURE 8.1 Medicare’s Share of Hospital Expenses
Data from Department of Health and Human Services. Health, United States, 2003, p. 342; Table C-5: Selected data on community hospital expenses, 1965–95.
http://aspe.hhs.gov
110
100
90
80
70
60
50
40
30
20
10
0
1970 1980
17%
24%
$27.6 billion
$101.5 billion
Total expense
Medicare expense
Expansion and Downsizing of Hospitals in the United States 187
http://aspe.hhs.gov
The three main factors just discussed (and summarized in
EXHIBIT 8.3) were largely successful in reducing the growth of national
spending on hospital care. FIGURE 8.2 illustrates the growth of spending
on hospital inpatient care compared with the growth of national health
expenditures. Notice the slower rates of growth after the implementation
of the PPS between 1980 and 1990 and the further slowdown between
1990 and 2000 resulting from the advent of managed care.
▸ Access and Utilization Measures
Measures of Access
Discharges refer to the total number of patients released from a hospi-
tal’s acute care beds during a given period, including those patients who
die while in the hospital. The total number of patient discharges per
1,000 population is an indicator of the level of access to hospital inpa-
tient services. Because newborn infants are not included in admissions,
discharges provide a more accurate measure of the number of people
served by a hospital. Thus, discharges measure the number of patients
who received hospital inpatient services.
EXHIBIT 8.3 Factors Contributing to the Downsizing of Hospitals
■ Change in Medicare reimbursement to hospitals from a retrospective to a
prospective method, leading to shorter hospital stays
■ Hospital closings
■ Managed care’s emphasis on cost containment and use of services such as
outpatient, home health, and skilled nursing care
FIGURE 8.2 Comparison of Growth in Hospital and National Health Expenditures
Data from National Center for Health Statistics. Health, United States, 2002. Hyattsville, MD: Department of Health and Human Services, 2002:291.
0
2%
4%
6%
14%
16%
12%
10%
8%
1970 to 1980 1980 to 1990 1990 to 2000
Average annual % growth in national health expenditures
Average annual % growth in hospital care expenditures
12.9%
13.9%
11.0%
9.6%
6.4%
5.0%
188 Chapter 8 Hospitals
Measures of Utilization
An inpatient day (also referred to as a patient day or a hospital day) is a
night spent in the hospital by a patient. The average number of days a
patient spends in the hospital is called the average length of stay (ALOS).
The total number of inpatient days incurred by a population over a given
period of time is referred to as days of care. Mathematically,
= ×Days of care discharges ALOS
National data on days of care per 1,000 population show that elderly
individuals spend more time in hospitals than do younger people. Even
after adjusting for childbearing among women 18 years and older,
women are admitted to hospitals more often than men, but men incur
longer stays. Hospital utilization is higher among blacks than whites, and
is also higher among the poor than the nonpoor. Various factors (e.g.,
education, socioeconomic status, behaviors, lifestyles, heredity, access
to primary care) interact to produce differences in health status and
onset of acute conditions for the various population groups; hence, some
groups incur more frequent hospitalizations and require longer stays
once admitted. From this information, it can be concluded that over-
all hospital utilization is higher among Medicare and Medicaid recipi-
ents compared to the rest of the population. Demand for and utilization
of hospital services are also influenced by overall population growth,
advances in medical technology, and health insurance.
For the past decade, the ALOS for community hospitals in the United
States has ranged between 5.4 and 5.5 days. The PPS, as noted earlier,
had a marked influence on the decline in the ALOS, as did the intro-
duction of managed care during the 1990s. The sharp decline in ALOS
during the 1990s became possible with the growth of alternative services,
such as home health and subacute long-term care, which enabled peo-
ple to be discharged earlier than was previously possible, and yet receive
continuity of care in a non-hospital setting. Thanks to the development
of these substitute sites of care and more advanced technology, there
has been no evidence that quicker discharges of patients from hospitals
under the PPS or managed care payment systems resulted in medical
harm to patients.
Utilization of Hospital Capacity
Capacity refers to the number of beds set up, staffed, and made available
by a hospital for inpatient use. Of all community hospitals in the United
States, 84% have fewer than 300 beds. The average size of a community
hospital is approximately 160 beds (NCHS, 2017).
Access and Utilization Measures 189
The term census refers to the number of patients in a hospital on a
given day or the number of beds occupied on a given day. The cumula-
tive census over a given period of time is called patient days or days of
care. The average census over a period of time is called the average daily
census (TABLE 8.1). Mathematically,
Average daily census
Patient days over a given period
Number of days in the period
=
The occupancy rate is the percentage of capacity used during a given
period of time. It is calculated by dividing the average daily census for
that period by the capacity (Table 8.1). The fraction is expressed as a per-
centage (percent beds occupied). An individual hospital’s performance
in capacity utilization can be meaningfully compared with local and
national composite occupancy rates. In 2014, the occupancy rate for all
U.S. community hospitals was 62.8% (NCHS, 2017).
▸ Hospital Employment
According to the Bureau of Labor Statistics (BLS), in November 2017,
the health care and social assistance sector in the United States employed
TABLE 8.1 Relationship Between the Selected Measures of Capacity
Utilization
Day Number Census Patient Days
1 100 100
2 104 204
3 101 305
4 99 404
5 98 502
6 102 604
7 103 707
Patient days for this week: 707. Average daily census: 707/7 = 101. If hospital capacity is 153, the occupancy rate is 66%
[(101/153) × 100].
190 Chapter 8 Hospitals
more than 19.6 million workers. Of these, more than 5 million (26%) were
employed in hospitals (BLS, 2018). In terms of job growth, however, the
outpatient services sector continues to lead the way. Interestingly, between
2000 and 2010, while the overall employment in the United States declined
by a little more than 2%, hospital employment grew by almost 16%; over-
all health occupation jobs grew by 25% over the same period (Center for
Health Workforce Studies, 2012). Recent job growth in hospitals has been
largely focused on health occupations as opposed to non-health care posi-
tions, such as food service or janitorial staff. Between 2014 and 2024, hos-
pitals are expected to see the lowest job growth as opposed to job growth
in the other sectors of the health care industry (Martiniano et al., 2016).
Nevertheless, between 2014 and 2016, hospital staffing per occupied bed
increased particularly for registered nurses, and to a lesser extent for staff
physicians and occupational therapists. Of particular note was a decrease
in staffing for licensed practical nurses (Sanofi-Aventis, 2017).
▸ Types of Hospitals
The United States supports a variety of institutional forms, including
both private and government-owned hospitals (FIGURE 8.3). A hospital
can be classified under more than one category.
FIGURE 8.3 Types of Hospitals, 2016
Data from Health Forum LLC, an affiliate of the American Hospital Association. Fast facts on U.S. hospitals. 2018. https://www.aha.org/system/files/2018-
Other nonfederal
9%
Private nonprofit
51%
Private for profit
19%
State & local govt.
18%
Federal
4%
Total number of hospitals = 5,686
Note: Due to rounding, the data do not add up to 100%.
Types of Hospitals 191
https://www.aha.org/system/files/2018-
Community Hospitals
More than 87% of all U.S. hospitals are community hospitals. The iden-
tifying characteristics of these hospitals are listed in EXHIBIT 8.4. By defi-
nition, a community hospital is a nonfederal, short-stay hospital whose
services are available to the general public. This definition excludes
federal hospitals, such as those operated by the Department of Veterans
Affairs (VA) and military systems, and the hospital units of some insti-
tutions, such as prisons and infirmaries in colleges and universities,
because their services are not available to the general public. In contrast,
most hospitals operated by local and state governments are community
hospitals. Also excluded from the definition of a community hospital are
long-stay hospitals, such as psychiatric facilities, tuberculosis hospitals,
and other chronic disease hospitals. In long-stay hospitals, the average
length of stay is more than 25 days.
Public Hospitals
In health care, the word public connotes government ownership. Public
hospitals, therefore, are hospitals owned by agencies of federal, state, or
local governments. An estimated one-fourth of the U.S. hospitals are in
the public sector. A public hospital is not necessarily a hospital that is
open to the general public. For example, because they are government
owned, federal hospitals are classified as public hospitals, even though
they do not serve the general public. Federal hospitals are maintained
primarily for special groups of federal beneficiaries such as Native
Americans, military personnel, and veterans.
State governments have generally limited themselves to the oper-
ation of mental and tuberculosis hospitals, reflecting the government’s
early role in protecting communities by isolating the mentally ill and
persons with contagious diseases.
Local governments, such as counties and cities, operate hospitals
that are open to the general public. Hence, these hospitals are also classi-
fied as community hospitals. Government-owned community hospitals
EXHIBIT 8.4 Characteristics of a Community Hospital
■ Nonfederal: hospitals operated by local and state governments can be
community hospitals
■ Short stay: average length of stay must be 25 days or less
■ Open to the general public
■ Private for-profit or nonprofit; general or specialty
192 Chapter 8 Hospitals
are often located in large urban areas where they serve mainly the inner-
city indigent and disadvantaged populations. Due to the generally poor
health status of these populations and inner-city violence, these hospi-
tals incur higher utilization than hospitals located in suburban areas.
Most of these hospitals are of small to moderate size. Some large public
hospitals are affiliated with medical schools, and they play a significant
role in training physicians and other health care professionals. Medi-
care, Medicaid, and state and local tax dollars finance most of the ser-
vices these hospitals provide. These hospitals also provide a substantial
amount of charity care and often suffer financial losses that are covered
by funneling tax dollars into the operations.
Because of increasing financial pressures, many public hospitals have
undergone privatization or had to close in recent years. Consequently,
the number of state and local government-owned community hospitals
has steadily declined, from 1,444 in 1990 to 1,003 in 2014 (NCHS, 2017).
Private Nonprofit Hospitals
Private nonprofit hospitals are also called voluntary hospitals. A little
more than half of the hospitals in the United States are under private
nonprofit ownership (see Figure 8.3). These hospitals are owned by
nongovernment entities such as community associations, philanthropic
foundations, or religious groups. The primary mission of these hospitals
is to benefit the communities in which they are located. Their operat-
ing expenses are covered from patient fees, third-party reimbursement,
donations, and endowments.
Church-owned hospitals play a significant role in delivering hospital
services in the United States. For example, the Catholic Church oper-
ates more than 600 hospitals (more than 116,000 beds) in all 50 states
and delivers care to one-sixth of all hospital patients each year (Catholic
Health Association of the United States, 2015). Some Protestant denom-
inations and Jewish philanthropic organizations also operate numerous
community hospitals. These hospitals are not discriminatory in terms
of access to care, but are generally sensitive to the special spiritual or
dietary norms of the sponsoring denomination (Raffel & Raffel, 1994,
pp. 131–132). In one report, church-owned hospitals were found to
be superior to other ownership types in delivering high value to their
communities, offering reliable high quality and efficiency and having
high patient perception of care at a reasonable cost (Foster et al., 2013).
According to the same report, government hospitals demonstrated the
weakest balanced performance.
Lay people make a common assumption that nonprofit (some-
times referred to as not-for-profit) organizations do not make a profit.
Types of Hospitals 193
The reality is that every corporation, regardless of whether it is for profit
or nonprofit, has to make a profit (a surplus of revenues over expenses)
to remain operational over the long term. No business can survive for
long if it continually spends more than it takes in. This statement is as
true for nonprofit organizations as it is for the for-profit sector.
The Internal Revenue Code, Section 501(c)(3), grants tax-exempt
status to nonprofit organizations. As such, these institutions are exempt
from federal, state, and local taxes such as income, sales, and property
taxes. In exchange for the tax benefit these organizations receive, they
must (1) provide some defined public good, such as service, education,
or community welfare, and (2) not distribute the profits to any individ-
ual. The rationale behind tax exemption is that these facilities provide
an essential community benefit, principally for charitable, training, or
research purposes. There are ongoing debates and court cases over what
does or does not constitute a community benefit.
Research has shown considerable variation in the level of commu-
nity benefits provided by nonprofit hospitals. A national study found
that, on average, these hospitals spent 7.5% of their expenses on commu-
nity benefits; more than 85% of these expenses were devoted to charity
care and other patient care services (Young et al., 2013). Although for-
profit and nonprofit hospitals engage in similar competitive behaviors,
on average nonprofit hospitals do appear to spend more on charity care
than their investor-owned counterparts, but the difference tends to be
small (Rubin et al., 2015).
To comply with the requirements of the Affordable Care Act (ACA),
nonprofit hospitals must assess community health needs and develop
strategies to meet those needs, under a new section—501(r)—of the tax
code. These hospitals must develop and publicize written financial assis-
tance policies and limit billing and collection actions against patients
who are eligible for assistance.
Private For-Profit Hospitals
Private for-profit hospitals, also referred to as proprietary hospitals or
investor-owned hospitals, are owned by individuals, partnerships, or
corporations. They are operated for the financial benefit of the entity
that owns the institution—that is, the stockholders.
More than 260 hospitals in roughly 33 states are owned by physi-
cians, representing approximately 5% of U.S. hospitals. These relatively
small hospitals usually specialize in heart or orthopedic surgeries (Rau,
2013). According to the Physician Hospitals of America (PHA), a pro-
fessional association representing this industry sector, 67% of the hospi-
tals participating in the star-rating system developed by the Centers for
Medicare and Medicaid Services (CMS) received 4 or 5 stars compared
194 Chapter 8 Hospitals
to 41% of all hospitals nationwide (PHA, 2015). The ACA put severe
restrictions on the creation and expansion of physician-owned hospi-
tals, even though with respect to efficiency, patient satisfaction, and out-
comes these hospitals perform favorably compared to other hospitals
(Lundgren et al., 2016).
For-profit corporations operate some of the largest multihospital
chains in the United States. Among the largest are Hospital Corporation
of America (156 hospitals in 2014), Community Health Systems (208
hospitals), and Tenet Health System (76 hospitals). A significant trend
over the past few years has been the building or acquisition of a substan-
tial number of hospitals by large investor-owned corporations. Even so,
most multihospital health care systems today are operated by nonprofit
corporations. Although a major goal for a for-profit organization is to
provide a return on investment to its shareholders, it achieves this goal
primarily by excelling at accomplishing its basic mission. The basic mis-
sion of any health services provider is to deliver the highest quality of
care possible at the most reasonable price possible.
General Hospitals
A general hospital provides diagnostic, treatment, and surgical services
for patients with a variety of acute medical conditions. Its services may
include general and specialized medicine, general and specialized sur-
gery, and obstetrics. Most hospitals in the United States are general hos-
pitals, but they are not all community hospitals because most federal
hospitals are general hospitals too.
The term general hospital does not imply that these hospitals are less
specialized or that their care is inferior to that of specialty hospitals. The
difference lies in the nature of services, not the quality. General hospitals
provide a broader range of services for a larger variety of conditions,
whereas specialty hospitals provide a narrow range of services for spe-
cific medical conditions or patient populations.
Specialty Hospitals
Specialty hospitals primarily engage in treating specific types of diseases
or medical conditions—such as heart disease or cancer—or serving a
specific patient population such as children. Specialty hospitals also
provide services such as psychiatric care, rehabilitation, and orthope-
dic surgery. Specialty hospitals forge a distinct service niche in a given
market. These hospitals are also considered community hospitals as long
as they meet the criteria discussed previously. In some of the specialty
areas, these hospitals compete with general hospitals that offer the same
services.
Types of Hospitals 195
Psychiatric Hospitals
The primary function of a psychiatric hospital is to provide diagnos-
tic and treatment services for patients who have mental illnesses. Spe-
cifically, such an institution must have facilities to provide psychiatric,
psychological, and social work services. A psychiatric hospital must
also have a written agreement with a general hospital for the transfer
of patients who may require medical, obstetric, or surgical care (Health
Forum, 2001, p. A3). Historically, state governments took the primary
responsibility for establishing facilities to care for the mentally ill, but as
new pharmaceuticals have become available to treat mental illness, pri-
vate psychiatric facilities and outpatient treatment centers have assumed
the task of delivering most mental health services.
Substance abuse treatments are generally provided in non-hospital
settings. However, a hospital may have a specialized unit to deliver sub-
stance abuse therapies, such as detoxification and medically managed
withdrawal, before referring the patient to an outside agency for a com-
prehensive drug addiction treatment.
Rehabilitation Hospitals
Rehabilitation hospitals specialize in intensive therapeutic services to
restore the maximum level of functioning in patients who have suffered
recent disability due to illness or accident. Such hospitals serve patients
who generally cannot be cured but whose functioning can be improved.
Such patients include amputees, victims of accidents or sports injuries,
stroke victims, and others. Patients often transfer to such facilities after
undergoing orthopedic surgery or receiving trauma care in a general
hospital. Facilities and staff are available to provide physical, occupa-
tional, and speech and language therapy.
Children’s Hospitals
Children’s hospitals are community hospitals that typically have special
facilities and trained staff to deal with the unique medical problems of
children, particularly those with complex and rare conditions. Most of the
inpatients in children’s hospitals are treated for chronic or congenital con-
ditions. The remaining patients require intensive care for a variety of needs,
such as cancer treatment, treatment of cystic fibrosis, and tissue transplants.
Children’s hospitals have equipment and furnishings that are spe-
cially designed for children—from newborn babies requiring intensive
care to teens with chronic illness. They also maintain a nurse staffing
ratio that is higher than that in general hospitals because children require
more nursing care compared to adults.
196 Chapter 8 Hospitals
Rural Hospitals
A rural hospital is one that is located in a county that is not part of a
metropolitan statistical area (MSA). The U.S. Bureau of the Census has
defined an MSA as a geographic area that includes at least (1) one city
with a population of 50,000 or more or (2) an urbanized area of at least
50,000 inhabitants and a total MSA population of at least 100,000. Com-
pared with other hospitals, rural hospitals generally treat a larger per-
centage of poor and elderly patients. Their remote geographic location,
small size, and limited workforce, along with physician shortages and
typically inadequate financial resources, pose a unique set of challenges
for rural hospitals (AHA, 2017).
To save some of the very small rural hospitals from having to close,
the Balanced Budget Act of 1997 allowed certain rural hospitals to oper-
ate as critical access hospitals (CAHs). According to Medicare rules, a
CAH should have no more than 25 beds and must provide 24-hour
emergency medical services. An additional 10 beds may be operated for
psychiatric and/or rehabilitation services. CAHs are reimbursed accord-
ing to the retrospective cost-plus method, instead of the PPS method.
Teaching Hospitals
To be designated as a teaching hospital, a hospital must offer one or
more graduate residency programs approved by the American Medical
Association. Hence, one of the primary roles of a teaching hospital is to
train physicians. Although these hospitals may also be actively involved
in training nurses and other health professionals, such as therapists and
dietitians, unless they train physicians, they cannot be called teaching
hospitals.
Most major teaching hospitals are affiliated with medical schools of
universities. The term academic medical center applies to an organiza-
tion in which there is active collaboration among the university, med-
ical school, hospital/health system, and health care professionals. An
academic medical center is uniquely capable of conducting basic and
applied clinical research, providing health care services, and offering
medical education (Daniels & Carson, 2011). Among the largest and
most prestigious teaching hospitals are the members of the Council of
Teaching Hospitals and Health Systems, which has approximately 400
members in both the United States and Canada.
In addition to fulfilling a substantial teaching and research mission,
teaching hospitals deliver specialized care for a variety of complex med-
ical problems. These institutions often operate several intensive care
units, possess the latest medical technologies, and attract a diverse group
of physicians representing most specialties and many subspecialties.
Types of Hospitals 197
Major teaching hospitals also offer many unique tertiary care services
not generally found in other institutions, such as burn care, trauma care,
and organ transplantation.
Osteopathic Hospitals
Osteopathic medicine represents an approach to medical practice that
employs all the methods traditionally associated with allopathic medicine,
such as pharmaceuticals, laboratory tests, x-ray diagnostics, and surgery.
Osteopathic medicine, however, takes a holistic approach and goes a step
further in advocating treatment that involves correction of the position of
the joints or tissues and in emphasizing diet and environment as factors
that prevent disease and improve health. For many years after osteopathy
was established as a separate branch of medicine in 1874, osteopaths had
to develop their own hospitals because of antagonism toward their profes-
sion demonstrated by the established allopathic medical practitioners. In
1970, osteopathic hospitals became eligible to apply for registration with
the AHA (AHA, 1994). Since then, allopathic and osteopathic physicians
have practiced side by side in the same clinics and hospitals.
For all practical purposes, osteopathic hospitals are community gen-
eral hospitals. However, with the integration of medical practice, having
separate hospitals has become economically unnecessary. Also, the oper-
ation of osteopathic hospitals has been found to be more costly and less
productive in comparison to their counterparts (Sinay, 2005). Hence, a
large number of osteopathic hospitals have closed.
▸ Licensure, Certification, and Accreditation
A hospital is legally required to have a license from the state in which
it operates. The licensure function is usually carried out by each state’s
department of health. State licensure standards strongly emphasize com-
pliance with building codes, fire safety, climate control, space alloca-
tions, and sanitation. States have also established minimum standards
for equipment and personnel that health care organizations must meet
to be licensed.
Certification by the federal government gives a hospital the authority
to participate in the Medicare and Medicaid programs. The U.S. Depart-
ment of Health and Human Services (DHHS) has developed health,
safety, and quality standards referred to as conditions of participation and
has the authority to enforce those standards. Hospitals accredited by the
Joint Commission or the American Osteopathic Association have been
automatically deemed to meet all the health and safety requirements for
participation in Medicare and Medicaid.
198 Chapter 8 Hospitals
The Joint Commission, a private nonprofit body, was formed in
1951 with the approval of the various medical and hospital organi-
zations. Upon compliance with its standards, the Joint Commission
accredits most of the nation’s general hospitals, as well as many of the
long-term care facilities, psychiatric hospitals, substance abuse pro-
grams, outpatient surgery centers, urgent care clinics, group practices,
community health centers, hospices, and home health agencies. Dif-
ferent sets of standards apply to each category of health care organiza-
tion. Over the years, the Joint Commission has refined its accreditation
standards and process of verifying compliance to put greater emphasis
on quality of care. Seeking accreditation is voluntary, but Medicare reg-
ulations confer deemed status on accredited hospitals, allowing these
hospitals to participate in Medicare and Medicaid without having to
be certified.
▸ Hospital Organization
Hospitals are complex organizations. A hospital is generally responsible
to numerous external stakeholders, such as the community, the govern-
ment, managed care organizations, and accreditation agencies. Inter-
nally, hospital governance involves three major sources of power, whose
motivations are sometimes at odds. The organizational structure of a
hospital also differs substantially from that of other large organizations.
The CEO receives delegated authority from the governing body (board)
and is responsible for managing the organization with the help of senior
executives. In large hospitals, these senior executives often carry the title
of senior vice president or vice president responsible for various key
service areas, such as nursing services, rehabilitation services, human
resources, finance, and so forth. Most physicians belong to a separate
organizational structure that operates in parallel to the administrative
structure (FIGURE 8.4). Such a dual structure is rarely seen in other types
of businesses and presents numerous opportunities for conflict to arise
between the CEO and the medical staff. Sometimes matters can be
further complicated because most physicians are not employed by the
hospital, yet they must be closely involved in its operations. Also, the
nursing staff, pharmacists, diagnostic technicians, dietitians, and others
are administratively accountable to the CEO but professionally account-
able to the medical staff (Raffel & Raffel, 1994, p. 139).
One major exception to the medical staff organization described
here occurs with employment of physicians on salary in organiza-
tions such as VA hospitals. Other hospitals employ a small number
of salaried hospitalists, who manage the care of patients once they are
hospitalized.
Hospital Organization 199
▸ Ethics and Public Trust
Ethical issues arise in all types of health services organizations, but the most
significant ones occur in acute care hospitals. Advanced technologies create
situations requiring decision making under complex circumstances. Con-
straints on reimbursement often make it essential to cut costs or eliminate
unprofitable services, which also can raise ethical concerns. Many physi-
cians must deal with issues such as legalized abortion, physician-assisted
suicide, artificial prolongation of life, and experimental treatments.
Ethical Challenges
Physicians and other caregivers have moral responsibilities when deliv-
ering clinical care. These professionals are guided by the principles of
beneficence and nonmaleficence. Beneficence means that a health ser-
vices organization has an ethical obligation to do all it can to alleviate
suffering caused by ill health and injury. This obligation includes pro-
viding essential services, such as emergency care, to needy individuals
who do not have the ability to pay. Closely related to beneficence, non-
maleficence means that health services personnel have a moral obligation
not to harm the patients. This principle requires physicians to use their
best professional judgment in choosing interventions that maximize the
potential health benefits at minimum risk.
No less challenging is the ethical issue surrounding the definition
of extraordinary or heroic measures to sustain a person’s life. Medical
FIGURE 8.4 Hospital Governance and Operational Structure
Chief of Staff
(Medical Director)CEO
ADMINISTRATION MEDICAL STAFF
Dual
Operational
Structure
Board of Trustees
Tripartite Structure
of Hospital
Governance
Service Chiefs
Committee Chairs
Senior Vice President
Vice President
Department Heads
Supervisors
200 Chapter 8 Hospitals
and legal experts differ on the controversial issue of withdrawing nutri-
tion and other means of life support for dying patients (Bresnohan &
Drane, 1986). The questions raised in such cases do not have easy
answers, and most of the time physicians must follow their own con-
sciences, apply their personal ethical values, or follow hospital policy.
Other legal and ethical standards in medical treatment require the
patient’s consent before treatment is rendered, a discussion of the var-
ious treatment alternatives, and the patient’s participation in decision
making and the selection of treatment options. Health care providers
are also duty bound to hold all patient information in strict confidence.
Likewise, fairness, equality, and nondiscrimination are essential in the
delivery of health care.
Addressing Ethical Issues
Many health care organizations, especially large acute care hospitals, have
ethics committees. The ethics committee is charged with the responsibil-
ity of developing guidelines and standards for ethical decision making in
the delivery of health care (Paris, 1995). In addition, ethics committees
are responsible for resolving issues related to medical ethics. Such com-
mittees are interdisciplinary, involving physicians, nurses, clergy, social
workers, legal experts, ethicists, and administrators.
Certain legal mechanisms are also available to help deal with diffi-
cult decisions about life and death. The Patient Self-Determination Act
of 1990 applies to all health care facilities participating in Medicare or
Medicaid. This law requires hospitals and other facilities to provide all
patients, on admission, with information on patients’ rights.
Informed consent is a basic patient right. Every patient has the right
to make an informed choice regarding his or her medical treatment,
including the choice to refuse treatment. For a patient who is mentally
capable, physicians must provide all the information the patient asks for
or should have to make a properly informed decision.
Patients also have the right to formulate advance directives, allowing
the patient to express in advance his or her wishes regarding continuation
or withdrawal of treatment in the event that he or she becomes incom-
petent. When advance directives are not available, the burden of ethical
decision making falls squarely on the shoulders of those responsible for
providing health care services. In actual practice, however, discussions
between physicians and patients about the prognosis at the end of life are
infrequent and limited in scope (Bradley et al., 2011). Hence, relatively
few people use advance directives. Physicians can play an important role
by engaging their patients in discussions about the patients’ preferences
regarding end-of-life decisions.
Ethics and Public Trust 201
Public Trust
Communities must place a high degree of trust in their hospitals, but
occasionally the behavior of some hospitals has called this trust into
question. Hospital administrators have a fiduciary responsibility, mean-
ing that they are responsible for acting prudently in managing the affairs
of the organization. Because a hospital’s mission is to benefit the com-
munity, the hospital should be viewed as a community asset regardless
of whether it is an investor-owned or nonprofit institution. When such
a viewpoint is lost, and a hospital’s board and its executives start placing
other priorities ahead of their main responsibility to serve the commu-
nity, a breach of public trust can occur. Although hospitals must main-
tain their financial and operational integrity, a real danger arises when
financial concerns are put above a genuine concern for the welfare of the
patients and the community. Because hospitals form the institutional hub
of health care delivery, their integrity within the system is crucial. Scan-
dals with regard to delays in care and alleged deaths resulting from such
delays in VA hospitals received national media attention in 2014. When
the critical services promised to the nation’s veterans are not delivered,
and there is little accountability for the billions of taxpayer dollars spent
ineffectively, faith and confidence in the system are severely jeopardized.
▸ Conclusion
Any facility that treats patients on the basis of an overnight stay is called
an inpatient facility. The most common types of inpatient facilities are
hospitals and nursing homes. Both of these institutions trace their begin-
nings to the almshouses of the 18th and 19th centuries, but as medical sci-
ence advanced, hospitals emerged as institutions specializing in acute care
and surgical services. In many parts of the United States, medical systems
serve large geographic areas, delivering a full array of health care services.
Hospitals in the United States went through an expansion and then
a contraction phase, both of which were triggered primarily by govern-
ment policy. Hospital employment has steadily risen over time, and this
trend is expected to continue.
Hospitals can be classified in a number of different ways. The major-
ity of hospitals in the United States are private, nonprofit facilities. These
hospitals have been required to provide community benefits; the Afford-
able Care Act has tightened this requirement. The ACA also placed
severe restrictions on the expansion of physician-owned hospitals. Most
hospitals are community hospitals, meaning that they are nonfederal,
short stay, and open to the public.
202 Chapter 8 Hospitals
Licensure of hospitals is a legal requirement. Accreditation by the
Joint Commission confers deemed status that enables a hospital to admit
Medicare and Medicaid patients. Hospitals confront numerous ethical
challenges and must operate in a way that strengthens public trust.
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© ninjaMonkeyStudio/Getty Images
CHAPTER 9
Managed Care and
Integrated Systems
▸ Introduction
Since around 1990, managed care has been the single most dominant force that has fundamentally transformed the delivery of health care in the United States. At first, some observers viewed the managed
care phenomenon as an aberration. However, as private employers began
to realize cost savings and public policymakers and administrators saw
the opportunity to slow down the growth of Medicare and Medicaid
expenditures, they increasingly turned to managed care as a means of
delivering health care. Managed care is now firmly entrenched in the
U.S. health care system, and some features of managed care have also
been adopted by other nations.
205
When employment-based private health insurance emerged as the
dominant form of coverage in the United States, neither the employers
nor the insurance companies had any incentive to manage the delivery of
services or payments made to providers. Providers showed a strong pref-
erence to be paid on a fee-for-service basis. Over time, however, both the
delivery of health care and the payments for care got out of control. For
example, between 1980 and 1990, the consumer price index—a measure
of price increases (inflation) in the economy—rose by 59%, but inflation
in medical care was 117% during the same time period (Department of
Health and Human Services [DHHS], 1996, p. 241). Managed care was
designed to slow down the growth in health care spending by limiting
both the quantity of health care delivered and the amount of reimburse-
ment given to providers.
Managed care has experienced unprecedented success. For exam-
ple, only 27% of all employees insured through employer-sponsored
health insurance were enrolled in managed care plans in 1988. By 2002,
however, 95% were enrolled in managed care. This growth occurred
despite attacks on managed care from both physicians and consumers.
Today, fewer than 1% of workers are enrolled in employer-sponsored
conventional health insurance plans.
By enrolling a large segment of the insured U.S. population and
taking responsibility to procure cost-effective health care for the enroll-
ees, managed care organizations (MCOs) garnered enormous buying
power. To a large extent, the organizational consolidation of providers
represented a response to this growing power of MCOs. These changes
have given rise to new organizational arrangements that are discussed in
this chapter.
▸ What Is Managed Care?
Managed care is a mechanism of providing health care services in which
a single organization takes on the management of financing, insurance,
delivery, and payment.
■ Financing. Premiums are negotiated between employers and the
MCO. Generally, a fixed premium per enrollee includes all health
care services provided for in a contract.
■ Insurance. The MCO collects premiums for insuring groups of
enrollees. It then functions like an insurance company by assuming
all risk. In other words, it takes financial responsibility if the total
cost of services provided exceeds the revenue from fixed premiums.
Under the Affordable Care Act (ACA), an MCO is allowed to retain
no more than 20% of the premium dollar (15% for some MCOs)
206 Chapter 9 Managed Care and Integrated Systems
to manage risk and to cover its own administrative expenses. The
remainder of the premium that is spent on health care services is
called the medical loss ratio.
■ Delivery. Unlike conventional insurance, the MCO arranges to pro-
vide health care to its enrollees. To do so, most MCOs establish con-
tracts with physicians, clinics, hospitals, and medical systems. These
providers operate independently but are linked to the MCO through
legal contracts. Some very large MCOs have their own physicians on
salary and operate their own clinics; in some instances, MCOs even
operate their own hospitals. To keep costs under control, MCOs use
various methods to manage the utilization of health care services.
■ Payment. MCOs use three main types of payment arrangements with
providers: capitation, discounted fees, and salaries. The three meth-
ods allow risk sharing in varying degrees between the MCO and the
providers. Risk sharing puts the burden on the providers to be cost
conscious and to curtail unnecessary utilization of services. Some-
times, a limited amount of fee-for-service is used for specialized ser-
vices. Under capitation, the provider is paid a fixed monthly sum per
enrollee, often called a per member per month (PMPM) payment.
The provider receives the capitated fee per enrollee regardless of
whether the enrollee uses health care services and regardless of the
quantity of services used. The provider is responsible for delivering
all needed health care services determined to be medically neces-
sary. A provider can lose money if services are delivered indiscrimi-
nately. The discounted fee arrangement uses a modified form of fee
for service, in which the provider can bill the MCO for each service
separately but is paid according to a schedule of fees. The fee sched-
ule is prenegotiated and is based on discounts off the regular fees the
provider would otherwise charge. Providers agree to discount their
regular fees in exchange for the volume of patients the MCO brings
them. In the third method of payment, salaries for physicians are
often coupled with bonuses for efficient delivery of services.
The main characteristics of managed care are summarized in
EXHIBIT 9.1.
Accreditation and Quality Indicators
Since 1991, MCOs have been accredited by the National Committee for
Quality Assurance (NCQA); accreditation is voluntary. The NCQA has
also designed a set of standardized performance measures for MCOs.
Commonly referred to as managed care report cards, the national stan-
dards and performance reports on individual MCOs are contained in the
Healthcare Effectiveness Data and Information Set (HEDIS). The report
What Is Managed Care? 207
cards are voluntary efforts that were begun out of concerns that con-
trolling health care utilization could adversely affect the quality of care.
HEDIS measures have been used quite extensively to evaluate and com-
pare the quality of care in health plans.
The Centers for Medicare and Medicaid Services (CMS) rates the
relative quality of Medicare Advantage plans (MA; Medicare Part C) on
a one- to five-star scale, with five stars representing the highest quality.
The star rating, which provides an overall measure of a plan’s quality, is
a cumulative indicator of the quality of care, access to care, responsive-
ness, and beneficiary satisfaction provided by the plan. The star rating
incorporates HEDIS as one of the four measures. Ratings are available
on Medicare’s website to help beneficiaries choose from among the var-
ious MA plans if they want to enroll in Part C of Medicare. The ACA
authorized incentive payments to reward plans that scored higher on the
star ratings.
▸ Evolution of Managed Care
In the early 1900s, certain railroad, mining, and lumber companies
located in isolated areas employed salaried physicians to provide medi-
cal care to their workers. In other instances, such companies contracted
with physicians and hospitals at a flat fee per worker. Such arrangements
can be viewed as prototypes of managed care.
The first known private health insurance plan started at the Baylor
University Hospital in Dallas, Texas, in 1929 was also based on capita-
tion. For a predetermined fixed fee per month, Baylor, and subsequently
other hospitals, provided inpatient services.
Later, during the 1940s, some large health plans emerged in New
York, California, Washington, and St. Louis. These plans also provided
comprehensive health care to enrolled populations for a capitated fee. For
example, the well-known Kaiser Permanente plan started in California
EXHIBIT 9.1 Main Characteristics of Managed Care
■ MCOs manage financing, insurance, delivery, and payment for providing health
care.
■ Premiums are usually negotiated between MCOs and employers.
■ MCOs function like an insurance company and assume risk.
■ MCOs arrange to provide health care, mainly through contracts with providers.
■ MCOs manage the utilization of health care services.
■ Three main payment methods are capitation, discounted fees, and physicians
on salary.
208 Chapter 9 Managed Care and Integrated Systems
in 1942 when the industrialist Henry J. Kaiser was faced with the prob-
lem of providing health care to his 30,000 workers. In 1945, the Perma-
nente Health Plan was made available to the general public; today, the
Kaiser Foundation Health Plan, operated by Kaiser Permanente, is the
largest health maintenance organization (HMO) in the United States. In
the rest of the country, however, delivery of health care typically contin-
ued to follow the fee-for-service system. Commercial insurance compa-
nies were the dominant players in the private health insurance market.
The Health Maintenance Organization Act of 1973 was passed out
of concern for escalating health care expenditures. Subsequent to the
creation of Medicare and Medicaid, national health expenditures rose
at more than double the rate of growth in the consumer price index
during the 5-year period from 1966 to 1971 (FIGURE 9.1). The 1973 law
was designed to provide an alternative to the traditional fee-for-service
practice of medicine; it aimed to stimulate the growth of HMOs by pro-
viding federal funds to establish new HMOs (Wilson & Neuhauser, 1985,
p. 206). The reasoning behind promoting HMO growth was the percep-
tion that it would encourage competition among health plans, increase
efficiency, and slow the rate of growth in health care expenditures. The
law’s objective was to create 1,700 HMOs to serve 40 million members
by 1976 (Iglehart, 1994). By the end of the 1970s, however, HMOs had
enrolled fewer than 10 million members.
During the 1980s, managed care experienced relatively slow growth,
but in states such as California and Minnesota, growth was faster than in
most parts of the United States. As pointed out earlier, health care costs
continued to rise uncontrollably over this period, and private businesses
FIGURE 9.1 Average Annual Rates of Increase in National Health Expenditures (NHE),
Gross Domestic Product (GDP), and Consumer Price Index (CPI), 1966–1971
Data from Bureau of Labor Statistics, National Center for Health Statistics.
0%
2%
4%
6%
8%
10%
12%
14%
CPI, 4.6%
NHE, 12.3%
GDP, 7.4%
A
nn
ua
l P
er
ce
nt
ag
e
G
ro
w
th
19711966
Evolution of Managed Care 209
were increasingly threatened by the erosion of their profits resulting
from double-digit increases in the cost of health insurance premiums for
their employees. Consequently, employers started switching from tradi-
tional health insurance to managed care plans during the 1980s. Even so,
it was not until the early 1990s that a veritable managed care revolution
got under way, after private employers experienced a total increase of
217% (12.2% average annual increase) in the cost of health insurance
between 1980 and 1990. FIGURE 9.2 illustrates the growth of enrollment
in managed care plans between 1988 and 2003.
▸ Growth and Transformation of
Managed Care
As the market for managed care grew, competition among MCOs gave
rise to new forms of managed care plans. To differentiate among them-
selves, some new organizations adopted variations in payment schemes.
Preferred provider organizations (PPOs), for example, differentiated
themselves by using discounted fee payments instead of capitation.
Other MCOs differentiated themselves according to how the medical
care providers were organized. Still others offered their enrollees a choice
between providers who were contractually affiliated with the organiza-
tion and those who were not. MCOs also adopted various methods to
control health care costs by actively monitoring utilization of services.
FIGURE 9.2 Enrollment of Workers in Employer-Sponsored Health Plans, Selected Years
Modified from Claxton G., et al. 2007. The Kasier Family Foundation and Health Research and Educational Trust Employer Health Benefits 2007 Annual Survey. Menlo Park,
CA: Henry J. Kaiser Foundation and Chicago, IL; Health Research and Educational Trust, p. 65
27% 73%1988
1993
1998
2003
46%54%
86% 14%
5%95%
Managed care plans
Conventional insurance
10%0% 20% 30% 40% 50% 60% 70% 80% 90% 100%
210 Chapter 9 Managed Care and Integrated Systems
Private Insurance Enrollment
As pointed out previously, managed care has become the primary vehicle
for delivering health care to the vast majority of Americans and is now a
mature industry in the United States. In essence, private health insurance
can now be equated with managed care, whether it is obtained through
a small or large employer. High-deductible health plans are also com-
monly offered in the form of managed care plans.
Medicare Enrollment
Medicare beneficiaries have the choice of enrolling in a managed care plan
under the MA program or remaining in the traditional fee-for- service
program. Even though the latter option has been more popular with
Medicare beneficiaries, enrollment in MA plans doubled between 2005
(14% of beneficiaries) and 2013 (28% of beneficiaries) ( Sanofi-Aventis,
2014). More recently, the rate of growth in MA enrollment has slowed
somewhat, reaching 31.7% in 2015 (Sanofi-Aventis, 2016a).
Medicaid Enrollment
Waivers under the Social Security Act, particularly Sections 1115 and
1915(b), allowed states to enroll their Medicaid recipients in managed
care plans. Later, the Balanced Budget Act of 1997 gave states the author-
ity to implement mandatory managed care enrollments without federal
waivers (Moscovice et al., 1998). Since then, enrollment of this patient
population in managed care has grown at a rapid pace, from 56% of all
Medicaid beneficiaries in 2000 to almost 85% in 2015 (Sanofi-Aventis,
2013, 2016a).
Managed Care Backlash
Managed care made significant headway during the decade of the 1990s
and achieved notable success in slowing down the growth of national
health care expenditures. Toward the latter half of the 1990s, however,
it drew a backlash from consumers, providers, and politicians. The
American media also played a role in shaping public opinion against
managed care by presenting, in many instances, one-sided and subjec-
tive “news” stories focusing on denial of services.
For consumers, dissatisfaction with managed care was associated
mainly with the erosion of choice resulting from the limited number of
providers associated with the plans and some restrictions in direct access
to specialized services. Dissatisfaction on the part of physicians, hospi-
tals, and other providers was related to the control that MCOs exerted
Growth and Transformation of Managed Care 211
over utilization and limits on reimbursement. Risk sharing under capita-
tion became particularly controversial. Politicians responded by passing
laws to contain some of the perceived excesses of managed care. In the
process, however, all parties had to accept certain compromises.
Transformation of Managed Care
In response to the backlash, HMOs moved away from tight management
of health care services, albeit without totally abandoning utilization con-
trols. They also incorporated fee-for-service reimbursement, along with
capitation for certain services, into their payment schemes. PPOs emerged,
offering greater choice of access to providers. Both consumers and provid-
ers welcomed these changes. In the end, enrollees had to give up uncon-
ditional freedom over choice, providers had to accept some controls over
how they would practice medicine and settle for lower rates of reimburse-
ment than what they were getting under fee-for- service arrangements, and
MCOs had to relax their tight management of health care utilization.
Even though some differences between individual plans still exist,
relaxed controls and flexibility have become common features of all
plans. Managed care today is quite different from what it was initially
intended to be: an organizational mechanism that would tightly control
the financing and delivery of health care. It is because of these compro-
mises that managed care became enormously successful—practically
replacing traditional health insurance in the United States. At the same
time, these compromises have eroded managed care’s full potential to
reverse the rising tide of health care spending.
▸ Utilization Control Methods in
Managed Care
MCOs use three main approaches to monitor and control the utilization
of services:
■ Expert evaluation of which services are medically necessary in a
given case. Such an evaluation ensures that only medically necessary
services are actually provided.
■ Determination of how services can be provided most inexpensively
while maintaining acceptable standards of quality. For example,
often similar services can be obtained as an outpatient or as an inpa-
tient; outpatient services cost less. Similarly, generic drugs cost less
than brand-name drugs.
■ Review of the process of care and changes in the patient’s condition
to revise the course of medical treatment if necessary.
212 Chapter 9 Managed Care and Integrated Systems
The methods most commonly used for utilization monitoring and
control are gatekeeping and utilization review. Generally, HMOs employ
tighter utilization controls than other types of managed care plans, which
are discussed later in this chapter.
Gatekeeping
Commonly used by HMOs, gatekeeping is an arrangement that requires
a primary care physician to coordinate all health care services needed by
an enrollee. The physicians have contracts with the HMO as in-network
providers. Gatekeeping also emphasizes preventive care, routine physi-
cal examinations, and other primary care services that are delivered by
the primary care gatekeeper. Secondary care services, such as diagnostic
testing, consultation from specialists, and admission to a hospital, are
provided only on referral from the gatekeeper. In this way, the gatekeeper
controls access to costly medical services.
Utilization Review
Utilization review is the process of evaluating the appropriateness of ser-
vices provided. It is sometimes misunderstood to be a mechanism for deny-
ing services, but its main objective is actually to review each case and to
determine the most appropriate level of services. Three main types of uti-
lization review are employed: prospective, concurrent, and retrospective.
Prospective Utilization Review
Under the prospective utilization review method, the medical necessity
of certain treatments is determined before the care is actually delivered.
An example of prospective utilization review is the decision by a pri-
mary care gatekeeper to refer or not refer a patient to a specialist. Not
all managed care plans use gatekeepers; instead, some plans require the
enrollee or the provider to obtain prior approval or precertification from
the plan administrators before certain services are provided. Most plans
use established clinical guidelines to determine the appropriateness of
services. Preauthorization of hospital admissions and second opinions
for surgical procedures are additional examples of precertification. In
case of an emergency admission to an inpatient facility, plans generally
require notification within 24 hours. One of the main objectives of pro-
spective review is to prevent unnecessary or inappropriate institutional-
ization or other courses of treatment such as surgery.
Concurrent Utilization Review
Concurrent utilization review occurs when decisions regarding appro-
priateness are made during the course of health care utilization. The most
Utilization Control Methods in Managed Care 213
common examples of this type of review involve monitoring the length
of inpatient stays. When a patient is hospitalized, a certain number of
inpatient days are generally preapproved. A trained nurse then monitors
the patient’s status and reviews the case with a physician if a longer stay
is necessary. A decision is made to authorize or deny additional days.
Discharge planning is an important component of concurrent utiliza-
tion review. A patient’s prognosis for recovery, expected outcomes, and
anticipated day of discharge are critical elements of concurrent review.
Discharge planning deals with the patient’s ongoing care and evaluates
any special requirements that are necessary after discharge. For example,
if a patient is admitted with a fractured hip, it is important to decide
whether home health care or a skilled nursing facility would be more
appropriate for convalescent care. If the patient requires care in a skilled
nursing facility, then discharge planning must find out whether the
appropriate level of rehabilitation services would be available and for
how long insurance will pay for rehabilitation therapy in a long-term
care setting.
Retrospective Utilization Review
Retrospective utilization review determines the appropriateness of uti-
lization after services have already been delivered. Such review is based
on an examination of medical records to assess the appropriateness of
care. It may involve an assessment of individual cases, and large claims
may be reviewed for billing accuracy. Retrospective review may also
involve an analysis of data to examine patterns of excessive utilization or
underutilization. Underutilization occurs when medically necessary care
is not delivered; overutilization occurs when medical services that are
not necessary are delivered.
▸ Types of Managed Care Plans
Three main factors led to the development of different types of man-
aged care plans. The first and most important involved the choice of pro-
viders. HMOs were the most common type of MCOs in the 1970s, but
HMO plans had inherent weaknesses, especially with regard to choice
of providers. Other types of MCO plans that offered greater choice were
developed mainly to compete with the more restrictive HMO plans. Sec-
ond, different ways of arranging the delivery of services led to different
forms of MCOs because there is no single way to arrange providers into a
delivery network. Payment and risk sharing make up the third major fac-
tor. The main differences between the three different types of managed
care plans discussed in this section are presented in EXHIBIT 9.2.
214 Chapter 9 Managed Care and Integrated Systems
EXHIBIT 9.2 Differences Among the Three Main Types of Managed Care
Plans
Main Distinguishing Factors
1. Choice of providers
2. Delivery of services
3. Payment and risk sharing
HMO Plans PPO Plans POS Plans
Use of only in-network
providers is permitted
Use of both in-network
and out-of-network
providers is permitted
Use of both
in-network and out-of-
network providers is
permitted
Providers on staff and/or
contracted providers
Contracted providers
only
Contracted providers
only
Use of gatekeeping
Focus on prevention
and primary care
Specialty services are
obtained upon referral
No gatekeeping
Unrestricted access to
specialty services
Unrestricted access to
specialty services
Providers are paid
mostly under capitation:
Some fee for service
Risk sharing with
providers under
capitation
Providers are paid
according to discounted
fee schedules
No risk sharing
Combination of
capitation and fee for
service
Some risk sharing
Note: There may be some variations to the above for individual plans.
HMO Plans
HMOs were the first type of managed care plans to appear on the mar-
ket. An HMO is distinguished from other types of plans by its focus
on wellness care. Such an organization not only provides medical care
during illness, but also offers a variety of services to help people main-
tain their health—hence the name “health maintenance organization.”
HMOs emphasize preventive and screening services through routine
checkups and tests. Prevention of disease and early detection and treat-
ment save health care costs in the long run when the course of a disease
is checked before it turns into a more complex case. As an incentive to
the enrollees to seek wellness care, HMO plans typically do not have
Types of Managed Care Plans 215
annual deductibles, and they have lower copayments than do other types
of plans.
Initially, HMOs used only capitation to reimburse providers, but
providers disliked the risk-sharing feature of capitation. HMOs, there-
fore, had to compromise by raising PMPM rates and, in many instances,
switching to fee-for-service reimbursement. In 2015, 67% of HMOs used
capitation; 57.5% used fee-for-service reimbursement to pay physicians
(Sanofi-Aventis, 2016b).
The utilization of services is coordinated and managed by the HMO,
mainly through primary care gatekeepers. Enrollees must obtain services
from in-network hospitals, physicians, and other health care providers.
Specialty services, such as mental health and substance abuse treatment,
are frequently carved out. A carve-out is a special contract outside the
regular capitation scheme, which is funded separately by the HMO. A
state may also enroll its Medicaid beneficiaries into a specialized man-
aged behavioral health organization (MBHO).
The four most widely used HMO models differ from each other
according to the arrangements they make with participating physicians.
These models are the staff, group, network, and independent practice
association models.
Staff Model HMO
A staff model HMO employs its own salaried physicians. The physicians
are typically paid fixed salaries. An HMO may also have a bonus pro-
gram combined with the salary, in which case end-of-the-year bonuses
are based on each physician’s productivity and the HMO’s profitability.
Physicians work only for their employer HMO and provide services to
that HMO’s enrollees. Staff model HMOs must employ physicians in
all of the common specialties to provide for the health care needs of
their members. In addition, contracts with selected subspecialties are
established for less frequently needed services. The HMO operates one
or more outpatient clinics, which contain physicians’ offices, support
staff, and sometimes ancillary support facilities, such as laboratory and
radiology departments. In most instances, the HMO contracts with area
hospitals for inpatient services.
Compared with other HMO models, staff model HMOs are able to
exercise a greater degree of control over the practice patterns of their
physicians, which makes it easier to monitor utilization. Even so, the
fixed salary expense can be high, which requires that these HMOs have
a large number of members to support the operating expenses. Enrollees
generally have a limited choice of physicians. Because of its disadvan-
tages, the staff model has been the least popular type of HMO with both
consumers and physicians.
216 Chapter 9 Managed Care and Integrated Systems
Group Model HMO
A group model HMO contracts with a multispecialty group practice and
separately with one or more hospitals to provide comprehensive services
to its members. The group practice is an independent practice, employ-
ing its own physicians who can treat non-HMO-covered patients as well.
The HMO generally pays an all-inclusive capitation fee to the group
practice to provide physician services to its members. Under a different
scenario, the HMO may own the group practice, which is organized as
a separate corporation but one that is administratively tied to the HMO.
In this case, the group practice may provide services exclusively to the
HMO’s members. Ownership or an exclusive contract enables the HMO
to exercise better control over utilization. Even when it is not an exclu-
sive contract, the HMO brings a block of business to the group prac-
tice, which gives the HMO a fair amount of leverage regarding financial
terms and utilization controls.
Network Model HMO
Under the network model, the HMO contracts with more than one med-
ical group practice. This model is particularly well suited for operations
in large metropolitan areas and across widespread geographic regions
where group practices are located. Each group practice is paid a capita-
tion fee based on the number of enrollees. The group is responsible for
providing all physician services. It can make referrals to specialists but is
financially responsible for reimbursing them for any referrals it makes.
The network model is generally able to offer enrollees a wider choice of
physicians than the staff or group models. The main disadvantage is the
dilution of utilization control.
Independent Practice Association Model HMO
Of the four HMO models, the independent practice association (IPA) model
has been the most successful in terms of the largest share of enrollments.
The IPA model became popular with both providers and enrollees. IPAs
gave small groups and individual physicians the opportunity to participate
in managed care and, therefore, were preferred by physicians. The enrollees
generally have the greatest choice of providers under the IPA model.
An IPA is a legal entity separate from the HMO. The IPA, not the
HMO, establishes contracts with both independent solo practitioners
and group practices. The HMO, in turn, contracts with the IPA for phy-
sician services. Physicians do not have a contract with the HMO, but
with the IPA. Hence, the IPA functions as an intermediary representing a
large number of physicians. The IPA, which is generally paid a capitation
amount by the HMO, retains administrative control over how it pays its
Types of Managed Care Plans 217
physicians. For example, it may reimburse physicians through capitation
or some other mechanism, such as modified fee for service. The IPA
often shares risk with the physicians and assumes the responsibility for
utilization management and quality assessment.
Under the IPA model, the HMO is still responsible for providing health
care services to its enrollees, but the logistics of arranging physician ser-
vices are shifted to the IPA. As a consequence, the HMO is relieved of the
administrative burden of establishing contracts with numerous providers
and controlling utilization. Financial risk is also shared with the IPA.
IPAs may be independently established by community physicians,
or the HMO may create an IPA and invite community physicians to par-
ticipate in it. An IPA may also be hospital based and structured so that
only physicians from one or two hospitals are eligible to participate in it
( Wagner, 1995). One major disadvantage of the IPA model is that if a con-
tract is lost, the HMO loses a large number of participating physicians.
PPO Plans
PPO plans were created by insurance companies in response to the
growth of HMOs. PPOs differentiated themselves by offering out-of-
network options for enrollees. By the early 1990s, PPOs became more
popular and their market share began to exceed that of HMOs.
PPO enrollees can either choose in-network preferred providers
with whom the PPO has established contracts or use physicians and hos-
pitals outside the network. Higher copayments apply for using nonpre-
ferred providers. The additional out-of-pocket expenses largely act as a
deterrent to going outside the network for care.
PPOs make discounted fee arrangements with providers. The dis-
counts typically range between 25% and 35% off the providers’ regular
fees. Negotiated payment arrangements with hospitals can take a vari-
ety of forms, such as payments based on diagnosis-related groups, bun-
dled charges for certain services, and discounts. Hence, no direct risk
sharing with providers is involved. PPOs also apply fewer restrictions
to the care-seeking behavior of enrollees. In most instances, they do
not use gatekeeping, which allows enrollees to see specialists without
being referred by a primary care physician. Precertification (prospective
utilization review) is generally employed only for hospitalization and
high-cost outpatient procedures (Robinson, 2002).
Point-of-Service Plans
Point-of-service (POS) plans combine features of classic HMOs with
some of the characteristics of patient choice found in PPOs. Through this
combination, POS plans overcome the drawback of restricted provider
218 Chapter 9 Managed Care and Integrated Systems
choice but retain the benefits of tight utilization management. Many
POS plans are actually offered by HMOs to give members an optional
plan that allows utilization of out-of-network providers. From the con-
sumer’s perspective, free choice of providers was a major selling point for
POS plans, but after reaching a peak in popularity in 1998–1999, enroll-
ment in POS plans gradually declined mainly because of the high out-of-
pocket costs associated with them.
▸ Impact on Cost, Access, and Quality
Influence on Cost Containment
Other countries assign the task of cost containment to the govern-
ment, which controls health care expenditures by budgeting system-
wide expenditures (global budgets) and imposing limits on services
( supply-side rationing) and payments to providers. In the United States,
the primary responsibility for cost containment falls on the private sec-
tor, but the government also has pioneered various approaches, mostly
aimed at controlling Medicaid and Medicare costs. The private-sector
approach to cost containment has involved the expansion of managed
care, which has been widely credited for slowing down the rate of growth
in health care expenditures during the 1990s. Because of the backlash
against managed care, however, the full cost-containment potential of
managed care was never realized. Moreover, certain government regu-
lations imposed as part of the backlash against managed care actually
caused premiums to rise and reversed any gains in cost containment
made by MCOs (Dugan, 2015).
From a cost-containment perspective, enrollment of Medicare and
Medicaid beneficiaries in managed care has been controversial. On the
one hand, some recent evidence suggests that MA plans offer care of
equal or higher quality and for less cost than traditional fee-for- service
Medicare, thereby delivering higher value (Newhouse & McGuire, 2014).
On the other hand, the experience does not appear to be the same with
Medicaid managed care. For example, a study encompassing all 50 states
showed that shifting Medicaid recipients from fee-for-service mod-
els into managed care did not reduce Medicaid spending (Duggan &
Hayford, 2013).
Impact on Access
Baker and colleagues (2004) found that timely breast cancer and cervical
cancer screenings were twice as likely for women receiving services in
geographic areas with greater HMO market share, compared to women
Impact on Cost, Access, and Quality 219
in areas with low managed care penetration. More recent studies report
similar findings on health screenings, diabetes care, and favorable rat-
ings of physicians by the patients (Ayanian et al., 2013). In MA plans,
better access to primary care may have been responsible for lowering
the risk of preventable hospitalizations, particularly for ethnic/minority
groups (Basu, 2012). Behavioral health carve-outs have also been instru-
mental in addressing long-standing challenges in access and utilization
of behavioral health care (Frank & Garfield, 2007).
In contrast, in Medicaid managed care, Caswell and Long (2015)
found an increased probability of emergency department use (instead of
primary care) and difficulty in seeing a specialist by Medicaid enrollees.
This experience has been repeated among Medicaid enrollees who ben-
efited from the expansion of Medicaid under the ACA. In one survey,
only one-fourth of the physicians participating in Medicaid managed care
offered appointments within 2 weeks of the contact date (Taitsman, 2015).
Influence on Quality of Care
Despite anecdotes, individual perceptions, and isolated stories propa-
gated by the news media, no comprehensive research to date has clearly
demonstrated that the growth of managed care has come at the expense
of the quality of care delivered to Americans. Actually, the available evi-
dence points to the opposite conclusion: The quality of health care pro-
vided by MCOs has improved over time (Hofmann, 2002). The financial
pressures associated with managed care do not seem to lead to signifi-
cant changes in physician behavior, because under capitation a physician
takes full responsibility for the patient’s overall care (Eikel, 2002).
A comprehensive review of the literature by Miller and Luft (2002)
concluded that HMO and non-HMO plans provided roughly equal
quality of care as measured by a wide range of conditions, diseases,
and interventions. At the same time, HMOs lower the use of hospital
and other expensive resources. Hence, medical care delivered through
managed care plans has been cost-effective. Evidence also suggests that
the race, ethnicity, and socioeconomic status of managed care enrollees
have little or no effect on the quality of care they receive (Balsa et al.,
2007; Brown et al., 2005). Conversely, evaluation of the existing litera-
ture does point to lower access and lower enrollee satisfaction ratings for
HMO plans compared with non-HMO plans (Miller & Luft, 2002). Also,
quality-based star ratings by the CMS are higher for nonprofit MA plans
compared to for-profit plans (Peng et al., 2015). Earlier studies (e.g.,
Schneider et al., 2005) reached similar conclusions regarding quality of
care in for-profit versus nonprofit health plans. In recent years, the sig-
nificant growth in Medicaid managed care enrollments by states across
the country has become controversial, as many observers have suggested
220 Chapter 9 Managed Care and Integrated Systems
that this approach is being adopted without consistent evidence show-
ing that Medicaid managed care plans reduce expenditures and improve
access and quality of care.
▸ Integrated Systems
Organizational integration became necessary for economic reasons in
a changing health care landscape. It began with hospital mergers and
acquisitions during the 1990s. Subsequently, consolidation with physi-
cian group practices was viewed as beneficial for both hospitals and phy-
sicians as health care services increasingly moved from the inpatient to
the outpatient sector. Diversification into services that an organization
had not offered before was the next step in integration. Many of these
transformations can be attributed to the growth of managed care, which
came to dominate the U.S. health care landscape. For example, managed
care gained enormous bargaining power over independent hospitals and
physician clinics, and these organizations came under growing pressure
to reduce costs and deliver services efficiently to populations spread over
large geographic areas. More recently, the ACA added another twist by
requiring certain integrated organizations to be held accountable for
people’s health. Today, the U.S. health care market includes two main
types of highly integrated health care systems: integrated delivery sys-
tems (IDSs) and accountable care organizations (ACOs).
Since the passage of the ACA, consolidation through mergers and
acquisitions has picked up in the health care industry; such deals tend to
curtail competition. It is not clear, however, whether this consolidation
has occurred in response to the ACA.
Integrated Delivery Systems
An integrated delivery system (IDS) includes several organizations under
ownership or contractual arrangements that provide an array of health
care services to large communities. There can be degrees of integration,
but a highly integrated health network operates as a one-stop shopping
environment that is centered on one or more hospitals and includes out-
patient clinics and surgical centers, one or more long-term care facilities,
home health and hospice services, and ownership of or contract with one
or more MCOs. Specialized cardiac care clinics and rehabilitation facil-
ities may be included. Other services, such as imaging centers, dialysis
centers, and mental health centers, may also be incorporated.
In 2016, 81% of acute care hospitals in the United States were affil-
iated with an IDS. Moreover, between 2010 and 2016, the number of
medical group practices affiliated with an IDS almost doubled to 5,705
Integrated Systems 221
(Sanofi-Aventis, 2017). Clearly, the wave of the future is toward organi-
zational integration because of the many advantages that IDS-affiliated
facilities enjoy over non-IDS-affiliated facilities. Notably, inpatient and
outpatient caseloads, including outpatient surgery, are higher at IDS-
affiliated hospitals. They also have lower average lengths of stay, rising
revenues, and lower total costs per discharge compared with non-IDS-
affiliated hospitals (Sanofi-Aventis, 2017).
IDSs help achieve cost savings through resource sharing and elimi-
nation of duplication. Research shows that IDSs have positive effects on
quality of care, as well as the potential to lower health service utilization
and produce costs savings (Hwang et al., 2013).
Accountable Care Organizations
In a general sense, an accountable care organization (ACO) is an inte-
grated group of providers—including hospitals, physicians, and post-
discharge care delivery organizations—that work together to deliver
coordinated care and take responsibility for quality and efficiency of ser-
vices delivered to a given population of patients. The ACA authorized
formation of ACOs to serve Medicare beneficiaries enrolled in the tra-
ditional fee-for-service program. According to Medicare rules, an ACO
must be a legal entity. Hence, organizations formed through contractual
arrangements—such as alliances and virtual organizations, discussed
later—do not qualify as ACOs to serve Medicare patients. The ACO
must also have a governing body to provide oversight and be held legally
accountable for its actions.
In conjunction with the formation of ACOs, the ACA authorized
a Medicare Shared Savings Program (MSSP) that is designed to reward
ACOs that lower the growth of health care expenditures while meeting
performance standards on quality of care (CMS, 2015). ACOs are moti-
vated to eliminate unnecessary care because their contract payments
from insurers cover the entire continuum of care (Song & Fisher, 2016),
from primary care to specialty services to acute care to rehabilitation.
To realize the expectations of cost and quality, ACOs use mechanisms
already prevalent in managed care and IDSs—disease management, care
coordination, sharing of cost savings with providers, and use of informa-
tion technology, among others (Burns & Pauly, 2012).
Although this model of care delivery is still in its infancy, early
signs point to some successes being achieved. In terms of provider
participation, 64% of medical group practices participated in ACOs in
2016. ACOs participating in the MSSP program enrolled 7.3 million
Medicare beneficiaries in 2015; these ACOs generated average savings
of $11.7 million on average spending of $187 million. Going forward, it
seems likely that providers will continue to assume risk in arrangements
222 Chapter 9 Managed Care and Integrated Systems
that tie reimbursement to quality and cost outcomes (Sanofi-Aventis,
2017). Projecting from current trends, ACOs could potentially become
the main providers of services to the majority of Medicare beneficiaries.
Some states are also experimenting with ACOs to serve their Medicaid
populations. Based on past history, managed care organizations are likely
to follow suit.
More than 560 ACOs have formed across the United States; since
2012, provider participation in MSSP has jumped 1,678% (Sanofi-
Aventis, 2017). Among these ACOs, 51% have been physician led, com-
pared with 33% that have been jointly led by hospitals and physicians;
only 3% have been led by hospitals alone (Colla et al., 2014). Clearly, phy-
sicians hold the key to the future success of ACOs. These organizations
are more likely to form in geographic areas where IDSs that have experi-
ence working under capitation already exist (Auerbach et al., 2013).
ACOs have already come under criticism from providers. A survey
by the National Association of ACOs indicated that two-thirds of the
ACO participants were unlikely to remain in the ACO program. Yet,
for the program to be successful, 800 to 900 Medicare ACOs would be
needed by 2018 (Perez, 2015). Hence, it remains to be seen how ACOs
might evolve in the future.
▸ Types of Integration
Integration Based on Major Participants
Physicians and hospitals have been two key participants in the formation
of integrated organizations because, in almost all instances, one entity
cannot function without the other. Hence, a physician–hospital organi-
zation (PHO) has been a common type of integrated organization. A
PHO is a legal entity that represents an alliance between a hospital and
local physicians and combines their services under the aegis of a single
organization. It allows both entities to have greater bargaining power in
contract negotiations with MCOs. PHO formation is often initiated by
the hospital, but it is unlikely to succeed without the participation of the
medical staff leaders. PHOs provide the benefits of integration while pre-
serving the independence and autonomy of physicians. The ACA speci-
fied that PHOs could qualify as ACOs (Casalino et al., 2013).
Integration Based on Type of Ownership or Affiliation
The objectives of organizational integration can be accomplished in
ways other than outright ownership. For example, relatively simple
cooperative arrangements, sharing of resources, and joint responsibili-
ties through contracts can be established.
Types of Integration 223
Acquisitions and Mergers
Acquisition refers to the purchase of one organization by another. The
acquired company ceases to exist as a separate entity and is absorbed
under the name of the purchasing corporation. A merger involves a
mutual agreement to unify two or more organizations into a single entity.
The separate assets of two organizations are brought together, typically
under a new name. Both former entities cease to exist, and a new corpo-
ration is formed.
Small hospitals may merge to gain efficiencies by eliminating the
duplication of services. Acquisitions and mergers can also help an orga-
nization expand into new geographic markets. A large hospital may
acquire smaller hospitals to serve as satellites in a large metropolitan area
with sprawling suburbs. A regional health care system may be formed
after a large hospital has acquired other hospitals and diversified into
services such as outpatient care, long-term care, and rehabilitation.
Joint Ventures
A joint venture results when two or more institutions share resources to
create a new organization to pursue a common purpose (Pelfrey & The-
isen, 1989). Each of the participants in a joint venture continues to conduct
business independently. The new company created by the participants
also remains independent. Joint ventures are often used by organizations
to diversify into new services when the participants can benefit by joining
hands rather than competing against each other. For example, hospitals
in a given region may engage in a joint venture to form a home health
agency that benefits all partners. An acute care hospital, a multispecialty
physician group practice, a skilled nursing facility, and an insurer may
join to offer a managed care plan (Carson et al., 1995, p. 209). In this sce-
nario, each of the participants would continue to operate its own business,
and all would have a common stake in the new HMO or PPO.
Alliances
In one respect, the health care industry is unique because organizations
often develop cooperative arrangements with rival providers. Coopera-
tion instead of competition, in some situations, eliminates duplication
of services while ensuring that all the health needs of the community
are fulfilled (Carson et al., 1995, p. 217). An alliance is an agreement
between two organizations to share their resources without joint owner-
ship of assets. For example, a hospital may form an alliance with a med-
ical group practice to conduct community health assessments, jointly
create programs that minimize health risks, and work to improve the
community’s health.
224 Chapter 9 Managed Care and Integrated Systems
Alliances are relatively simpler to form than mergers. An alliance
may be a first step that gives both organizations the opportunity to eval-
uate the advantages of a potential merger. Such arrangements require
little financial commitment and can be easily dissolved if the anticipated
benefits do not materialize.
Virtual Organizations
When contractual arrangements between two or more organizations
form a new organization, the resulting entity is referred to as a virtual
organization, or an organization without walls. The formation of a health
network based on contractual arrangements is called virtual integration.
IPAs are a prime example of virtual organizations; a PHO may also be
a virtual organization. The main advantage of virtual organizations is
that they require less capital to enter new geographic or service markets
(Gabel, 1997). They also help bring together scattered entities under one
mutually cooperative arrangement.
Integration Based on Service Consolidation
Horizontal Integration
Horizontal integration is a growth strategy in which a health care orga-
nization extends its core product or service. For example, an acute care
hospital that adds coronary bypass surgery to its existing surgical services
or that builds a suburban acute care facility is integrating horizontally
(Rakich et al., 1992, p. 326). Multihospital chains, nursing facility chains,
and a chain of drugstores, all under the same management with member
facilities offering the same core services or products, are other examples
of horizontal integration. The main objective of horizontal integration is
to achieve geographic expansion. Diversification into new products or
services is not achieved through horizontal integration.
Vertical Integration
Vertical integration links services that are at different stages in the pro-
duction process of health care—for example, organization of preventive
services, primary care, acute care, and postacute service delivery around
a hospital. The intended purpose of vertical integration is to increase the
comprehensiveness and continuity of care; in essence, it is a diversifica-
tion strategy. This type of integration may be achieved through acquisi-
tions, mergers, joint ventures, or alliances. To add just one or two new
services, internal development strategies may be used. For example, CVS
Health operates walk-in retail clinics inside its pharmacy stores in many
locations. IDSs are also formed through vertical integration.
Types of Integration 225
▸ Conclusion
Most insured Americans today—either through private or government
sources—receive health care through a managed care organization. MCOs
have been credited with helping contain the costs of health care, and enroll-
ment in managed care plans has continued to grow. Yet, the full potential
of managed care was never realized because of widespread opposition.
Integrated delivery systems emerged as hospitals and physicians, in
particular, faced growing pressures from managed care to deliver ser-
vices at reduced costs. Integration has enabled large health care organi-
zations to win sizable managed care contracts and, in some instances, to
offer their own health insurance plans. However, the delivery of health
care has become complex from the standpoint of providers and con-
sumers. Through the Affordable Care Act, the U.S. government is now
experimenting with accountable care organizations in the hope that they
may be able to reduce costs and improve quality. Some early results are
promising. If the successes in providing value are consistently achieved,
ACOs could well become the providers of choice to contract with Medi-
care, Medicaid, and managed care organizations for the delivery of most
services to enrolled populations.
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228 Chapter 9 Managed Care and Integrated Systems
© ninjaMonkeyStudio/Getty Images
CHAPTER 10
Long-Term Care
Services
▸ Introduction
Long-term care (LTC) services are needed under three main cir-cumstances: (1) physical or mental deficits that limit a person’s ability to do regular daily tasks, creating the need for support and
assistance; (2) need for continuity of care after hospitalization because of
a severe illness, injury, or surgical episode; or (3) need for care in special-
ized environments. For example, elderly patients with Alzheimer’s dis-
ease and children and adolescents with birth-related disorders may need
specialized environments of care delivery. On the one hand, the elderly—
people 65 years of age or older—are the primary clients of LTC, though
most older adults do not need LTC services. In fact, most elderly persons
229
are physically and mentally healthy enough to live independently. On
the other hand, many young adults are victims of debilitating diseases,
such as multiple sclerosis, and serious injuries from vehicle crashes,
sports mishaps, and industrial accidents. In many cases, these individu-
als require LTC services.
LTC is delivered in a variety of community-based settings as well
as in nursing homes (skilled nursing facilities, subacute care facilities,
and specialized care facilities). Hence, the LTC delivery system has
two major sectors: community-based care and institutional care. In
the United States, most LTC is actually provided informally by fam-
ily, friends, and surrogates who receive no payment for their time
and effort. Current estimates of the extent of informal caregiving are
hard to come by. Previous estimates suggested that 80% of those per-
sons receiving LTC at home receive that care exclusively from unpaid
caregivers; an additional 14% receive both unpaid and paid help
( Thompson, 2004). Informal caregiver support forestalls institutional-
ization. Older people who have close access to informal support often
continue to live in the community much longer than those who do not
have such support.
In 2014, approximately 67,000 paid, regulated LTC providers served
about 9 million people in the United States. The multifaceted LTC indus-
try consisted of 15,600 nursing homes, 30,200 assisted living and simi-
lar facilities, 12,400 home health agencies, 4,800 adult day care centers,
and 4,000 hospices (Harris-Kojetin et al., 2016). Surveys over time have
shown that the vast majority of older Americans wish to stay in their
own home indefinitely. Hence, community-based services are preferred
by most older people, and these services have grown more rapidly than
LTC institutions. According to Kaye and colleagues (2010), compared
to noninstitutional LTC populations, those receiving institutional care
are older (median age = 82 years), are single or widowed, and are more
likely to have cognitive impairment—that is, a mental disorder associated
with memory and learning issues, ability to concentrate, and making
decisions.
Even though most elderly people are in good health, the aging
process leads to chronic, degenerative conditions that resist cure. As
a consequence, as people grow older, the odds increase that they will
require LTC. Moreover, LTC cannot be an isolated component of the
health care delivery system, but rather non-LTC services must be closely
integrated with those of LTC. To address the total health care needs of
patients requiring LTC, the delivery system must allow ease of transition
among various types of health care settings and services.
Chronic conditions are the leading cause of illness, disability, and
death in the United States today. Chronic conditions are characterized by
230 Chapter 10 Long-Term Care Services
persistent and recurring health consequences lasting over a long period,
which are generally irreversible. Arthritis, diabetes, asthma, heart dis-
ease, and dementia are some examples of chronic conditions. A person’s
age or the mere presence of a chronic condition does not predict the
need for LTC, but as a person ages, chronic ailments, comorbidity (mul-
tiple health problems), disability, and dependency tend to follow each
other, depending on the individual’s lifestyle and compliance with med-
ical directives. This progression increases the probability that a person
will need LTC (FIGURE 10.1). Approximately one-third of the elderly have
functional impairments of one kind or another. Among those age 85 and
older, two-thirds have functional impairments (Congressional Budget
Office [CBO], 2013).
By 2050, 20% of the U.S. population will be elderly, up from 12% in
2000. The number of people age 85 and older will grow the fastest (CBO,
2013). Growth of the elderly population will bring a corresponding surge
in the number of elderly people with functional and cognitive limita-
tions. Thus, the need for LTC will increase sharply in coming decades.
The rest of the developed world also faces aging-related problems
and challenges in providing adequate LTC services, very similar to those
noted in the United States. Indeed, the elderly population as a propor-
tion of the total population in other developed countries, such as Japan,
Germany, France, and Great Britain, is already higher than it is in the
United States.
▸ What Is Long-Term Care?
LTC can be defined as a variety of individualized, well-coordinated ser-
vices that promote the maximum possible independence for people with
functional limitations and that are provided over an extended period of
time in accordance with a holistic approach, while maximizing the per-
son’s quality of life. The seven essential characteristics of LTC are sum-
marized in EXHIBIT 10.1 and are explained in this section.
FIGURE 10.1 Progressive Steps Toward the Need for Long-Term Care Among the Elderly
Chronic conditions
and comorbidity
Functional
impairment
(Disability)
Need for
long-term care
ADL
limitations
(Dependency)
AGING
What Is Long-Term Care? 231
A Variety of Health Care Services
Clients receiving LTC need a variety of services for two main reasons:
■ The need for services varies greatly from individual to individual.
Even the elderly, who are the predominant users of LTC services, are
not a homogeneous group. For example, some people just require
supportive housing, whereas others require intensive treatments.
Hence, LTC includes services such as housing programs, transporta-
tion, case management, recreation, nutrition, nursing, medical care,
and social services.
■ Even for the same individual, the need for the various types of
services generally changes over time. Such change is not necessar-
ily progressive, developing from lighter to more intensive levels of
care. Depending on the change in condition and functioning, the
individual may shift back and forth between the various levels and
types of LTC services. For example, after hip surgery, a patient may
require extensive rehabilitation therapy in a nursing facility for 2 or
3 weeks before returning home, where he or she receives continuing
care from a home health agency. After that, the individual may con-
tinue to live independently but require a daily meal from Meals on
Wheels. Later, this same person may suffer a stroke and after hospi-
talization have to stay indefinitely in an LTC facility.
Clients often require both LTC and non-LTC services, such as pri-
mary care and acute care. Hence, LTC is not a self-contained system of
comprehensive health care services, nor can it function independently of
primary, acute, mental health, and ancillary services such as pharmaceu-
ticals and diagnostics.
LTC must also include both therapeutic and preventive services. The
primary goal of preventive services is to prevent or delay the need for
institutionalization in LTC facilities. Preventive measures include ensur-
ing that the elderly receive good nutrition and have access to preventive
medical care. For example, older adults must have access to services such
EXHIBIT 10.1 Seven Essential Characteristics of Long-Term Care
■ LTC includes a variety of health care services.
■ Services are individualized.
■ Services must be well coordinated.
■ The goal is to promote maximum possible functional independence.
■ Services are needed over an extended period of time.
■ Patients’ physical, mental, social, and spiritual needs must be met.
■ Patients’ quality of life must be maximized.
232 Chapter 10 Long-Term Care Services
as vaccination against pneumonia, annual flu shots, glaucoma screening,
diabetes screening, and cancer screening.
For those elderly persons who live independently, certain social sup-
port programs also serve a preventive function. Programs such as home-
maker, chore, and handyman services can assist with a variety of tasks
that older adults may no longer be able to perform. Examples include
shopping, light cleaning, general errands, lawn maintenance, and minor
home repairs.
Individualized Services
An assessment of the patient’s physical, mental, and emotional condition
and past medical and social history, former occupation, leisure activities,
and cultural factors is used to determine which services would be most
suitable for the individual. An individualized plan of care is developed,
and services are rendered according to that plan.
Coordination of Services
The mere availability of a spectrum of services may not be sufficient to
meet the varied and changing needs of LTC clients unless those services
are well coordinated. As it is, many people find the health care delivery
system difficult to navigate. Such difficulties are often compounded in
the case of elderly and disabled individuals. For example, acute episodes,
such as pneumonia, bone fracture, or stroke, require admission to a gen-
eral hospital. Many acute care services are now delivered in a variety
of outpatient settings instead of hospitals. After acute care delivery, a
patient may be transferred to a hospital-based transitional care unit for
intensive rehabilitation. The patient may subsequently have to be moved
to an LTC facility for ongoing care. Depression may create a need to visit
an outpatient mental health clinic. The same individual may also require
dental or optometric care.
Maximum Possible Functional Independence
Two standard measures are used to determine a person’s level of depen-
dency. First, the activities of daily living (ADLs) scale is used to assess a
person’s ability to perform certain common tasks referred to as activities
of daily living (EXHIBIT 10.2). Severe ADL limitations often indicate the
need for institutional care. For example, functional deficits in three or
more ADLs dramatically increase the probability that an individual will
need institutional care. Second, the instrumental activities of daily living
(IADLs) scale incorporates activities that are necessary for living inde-
pendently in the community, such as using the telephone, driving a car
What Is Long-Term Care? 233
EXHIBIT 10.3 Age-Related Progression of Long-Term Care Intensity
■ Independent living
■ Decline in IADLs
• Informal care for those who have adequate social support
• Informal care supplemented by paid community-based services
■ Decline in ADLs
• For light ADLs (eating, dressing, using a toilet), informal care with
supplemental services may continue
• Institutionalization
The classic ADL scale includes six basic activities:
■ Eating
■ Bathing
■ Dressing
■ Using a toilet
■ Maintaining bowel and bladder control
■ Transferring, such as getting out of bed and moving into a chair
Sometimes grooming and walking a distance of 8 feet are also included in the
scale.
EXHIBIT 10.2 Activities of Daily Living
or traveling alone by bus or taxi, shopping, preparing meals, doing light
housework, taking medicine, and handling money. IADLs are not gen-
erally used as a criterion for care in institutional settings because insti-
tutionalized persons are not required to perform many IADLs (Ostir
et al., 1999). The probability of having limitations in ADLs and IADLs
increases significantly with age; EXHIBIT 10.3 illustrates the age-related
progression of LTC intensity.
The main goal of LTC is to enable the individual to maintain func-
tional independence to the maximum level that is practicable. In many
instances, a person’s functional status can be improved by the use of
adaptive devices, such as walkers, wheelchairs, special utensils, and many
other types of equipment, and by modification of the living environment
with safety features such as grab bars. However, as dependency increases,
the need for LTC services also increases (see Figure 10.1).
Restoration of function may be possible to some extent through
appropriate rehabilitation therapy, but in most cases a full restoration of
normal functioning is an unrealistic expectation. Caregivers must ren-
der care and assistance wherever the patient is either unable to do things
for himself or herself or absolutely refuses to do so. The focus should be
234 Chapter 10 Long-Term Care Services
on maintaining whatever functional ability the patient still has and on
preventing further decline of that ability. Caregivers should motivate and
help patients do as much as possible for themselves.
Extended Period of Time
Compared to acute care, LTC is sustained over a longer period of time.
The period of care and institutional stays, when needed, generally extend
to weeks, months, and years instead of days. Even when institutional
LTC is indicated for a short period (90 or fewer days), LTC services may
continue in the patient’s own home after the patient has been discharged
from a long-term care facility. At other times, long-range confinement to
a nursing home may be necessary.
Holistic Approach
The holistic model of health not only focuses on a person’s physical and
mental needs, but also emphasizes well-being in every aspect of what
makes a person whole and complete. A patient’s physical, mental, social,
and spiritual needs and preferences are incorporated into medical care
delivery and the living environment. The following are brief descriptions
of the four aspects of holistic caregiving:
1. Physical. The physical aspect refers to the technical aspects of
care, such as medical examination, nursing care, medications,
diet, and rehabilitation treatments. It also includes comfort
factors such as appropriate temperature and cozy furnishings,
cleanliness, and safety in home and institutional environments.
2. Mental. The emphasis with mental care is on the total mental
and emotional well-being of each individual. Such care may
include treatment of mental and behavioral problems, if nec-
essary. Maintaining mental health goes beyond diagnosis and
treatment of mental conditions, however. In an institutional
setting, it includes appropriate layout, décor, and engagement
techniques that help overcome disorientation and confusion;
mental stimulation to help overcome boredom and depres-
sion; and an environment that promotes positive feelings. For
example, the living atmosphere can be enhanced through live
plants, flowers, moving water, pleasant aromas, and sooth-
ing music. Pet animals, fish in aquariums, and birds create a
vibrant living environment.
3. Social. Almost everyone enjoys warm friendships and social
relationships. Visits from family, friends, or volunteers pro-
vide numerous opportunities for socializing. Many nursing
homes have created indoor and outdoor spaces such as game
What Is Long-Term Care? 235
rooms, alcoves, balconies, and patios where people can sit and
enjoy one another’s company.
4. Spiritual. The spiritual dimension operates at an individual
level. It includes personal beliefs, values, and commitments
in a religious and faith context. Spirituality and spiritual pur-
suits are very personal matters, but for most people, they also
require continuing interaction with members of their faith
community.
Quality of Life
Quality of life refers to the total living experience that results in over-
all satisfaction with one’s life. It is particularly relevant to LTC facilities
because people typically reside there for an extended period. Quality of
life factors include lifestyle pursuits, living environment, clinical pallia-
tion, human factors, and personal choices, as discussed here:
■ Lifestyle factors are associated with personal enrichment and mak-
ing one’s life meaningful through enjoyable activities. For example,
many older people still enjoy pursuing their former leisure activities,
such as woodworking, crocheting, knitting, gardening, and fishing.
■ The living environment must be comfortable, safe, and appealing to
the senses. Cleanliness, décor, furnishings, and other aesthetic fea-
tures are important.
■ Clinical palliation should be available to provide relief from unpleas-
ant symptoms such as pain or nausea—for instance, when a patient
is undergoing chemotherapy.
■ Human factors refer to caregiver attitudes and practices that empha-
size caring, compassion, and the preservation of human dignity for
the patient.
■ Institutionalized patients generally find it disconcerting to have lost
their autonomy and independence. Quality of life is enhanced when
residents have some latitude to govern their own lives and make per-
sonal choices regarding food and daily routines. Residents in LTC
facilities also desire an environment that gives them adequate privacy.
▸ Community-Based Long-Term
Care Services
Community-based LTC services have four objectives: (1) to deliver LTC
in the most economical and least restrictive setting whenever appro-
priate for the patient’s health care needs; (2) to supplement informal
236 Chapter 10 Long-Term Care Services
caregiving when more advanced skills are needed to address the patient’s
needs; (3) to provide temporary respite to family members from caregiv-
ing stress; and (4) to delay or prevent institutionalization. These goals are
accomplished through an administrative network that includes the Fed-
eral Administration on Aging, State Units on Aging, and Area Agencies
on Aging. Nationally, more than 600 Area Agencies on Aging adminis-
ter funds appropriated by the U.S. federal government under the Older
Americans Act of 1965.
For the financially needy, Title III of the Older Americans Act may
finance such community-based services as adult day care (ADC), home
maintenance, health promotion and disease prevention (e.g., medica-
tion management, nutrition, and health screening), telephone reassur-
ance, and transportation services. States may also have some federal
funds available under Title XX Social Services Block Grants. In addition,
community-based LTC services have grown under the Home and Com-
munity Based Services waiver program that was enacted under Section
1915(c) of the Social Security Act. Medicare and Medicaid may partially
cover certain LTC services; the remainder must be covered by individual
savings and private donations.
Home Health Care
Home health care refers to health care provided in the home of the
patient by health care professionals. The organizational setup commonly
requires a hospital-based or freestanding home health agency that sends
health care professionals and paraprofessionals (such as home care aides)
to patients’ homes to deliver services approved by a physician.
Home health services typically include nursing care, such as chang-
ing dressings, monitoring medications, and providing help with bathing;
short-term rehabilitation, such as physical, occupational, and speech
therapy; homemaker services, such as meal preparation, shopping,
transportation, and some specific household chores; and certain medical
supplies and equipment, such as ostomy supplies, hospital beds, oxygen
tanks, walkers, and wheelchairs. Not all home health agencies provide all
of these services, however.
As the largest single payer for home health services, Medicare covered
40% of home health expenditures in the United States in 2015 (National
Center for Health Statistics [NCHS], 2017). To qualify for home care under
the Medicare program, patients must (1) be homebound, (2) have a plan
of treatment that is periodically reviewed by a physician, and (3) require
intermittent or part-time skilled nursing and/or rehabilitation therapies.
Under Medicaid, states have several different options available to
deliver home health services. In essence, states can develop community
Community-Based Long-Term Care Services 237
programs to deliver services to Medicaid beneficiaries if these people
would otherwise end up in an institution. In 2015, Medicaid paid for
36% of home health expenditures (NCHS, 2017).
Adult Day Care
Adult day care is a daytime, community-based, group program that is
designed to meet the needs of functionally and/or cognitively impaired
adults and to provide a partial respite to family caregivers. Such care is
designed for people who live with their families but because of physical
or mental conditions cannot remain alone during the day when the fam-
ily members are working.
Most ADC services are highly focused on prevention and health
maintenance, with the objective of preventing or delaying institutionaliza-
tion, but they also incorporate nursing care, psychosocial therapies, and
rehabilitation. As such, ADC services, in many instances, have become
alternatives to home health care and assisted living and function as a tran-
sitional step before placement in a long-term care institution. Nearly half
of the participants have dementia, and 50% of ADC centers offer special-
ized programs for these patients (MetLife Mature Market Institute, 2010).
Adult Foster Care
Adult foster care is defined as a service characterized by small, family-run
homes providing room, board, oversight, and personal care to non-
related adults who are unable to care for themselves (“AARP Studies
Adult Foster Care,” 1996). Foster care generally provides services in a
community-based dwelling in an environment that promotes the feeling
of being part of a family unit (Stahl, 1997). Participants in these pro-
grams are elderly or disabled individuals who require assistance with one
or two ADLs, and many of the residents have a psychiatric diagnosis.
Typically, the caregiving family resides in part of the home. To main-
tain the family environment, most states license fewer than 10 beds per
family unit. Each state has established its own standards for licensing
foster care homes. As states have continued to shift Medicaid funds from
institutional to community-based services, use of adult foster care has
grown. Medicare does not pay for services provided by the adult foster
care home but may cover rehabilitation services.
Senior Centers
Senior centers are local community centers for older adults where seniors
can congregate and socialize. Many centers serve a noon meal daily. Oth-
ers sponsor wellness programs, health education, counseling services,
238 Chapter 10 Long-Term Care Services
recreational activities, information and referral, and some limited health
care services. Health care services typically offered at senior centers
include health screening, especially for glaucoma and hypertension.
Approximately 11,000 senior centers have been established across
the United States, serving 1 million older adults every day. To maintain
operations, senior centers rely on a variety of public and private sources
of funding from various branches of government, businesses, donations,
and volunteer hours (National Council on Aging, 2015).
Home-Delivered and Congregate Meals
The Elderly Nutrition Program operates under the U.S. Administration
on Aging and serves congregate meals in senior centers and home-
delivered meals, referred to as Meals on Wheels, to homebound elderly
persons 60 years of age and older. The main goal of this program is to
improve the nutritional intake of older Americans. The program gener-
ally provides one hot noon meal for 5 days a week.
In the Meals on Wheels program, meals are prepared by local insti-
tutions and delivered by volunteers. The volunteers also perform an
important service by checking on the welfare of homebound elderly and
are encouraged to report any health or other problems that they may
notice during their visits.
Homemaker and Handyman Services
Some older adults are relatively healthy but cannot carry out a few simple
tasks necessary for independent living. These tasks may be as urgent as
repairing a burst plumbing pipe or as mundane as cleaning the house.
Some tasks, such as grocery shopping, must be performed often, whereas
others, such as replacing storm windows, require attention just once or
twice a year. Homemaker, household chore, and handyman services can
assist older adults with a variety of such tasks, including shopping, light
cleaning, general errands, and minor home repairs. Homemaker pro-
grams may be staffed largely or entirely by volunteers.
Emergency Response Systems
A personal emergency response system, also called a medical emergency
response system, consists of an electronic device that enables people to
summon help in an emergency. This kind of system is specifically designed
for disabled or elderly people who live alone and may not otherwise need
ongoing medical or supportive care. Other patients, after returning home
from hospitals and nursing homes, are plagued by anxiety about relapses
or accidents because they are often unprepared for self-management
Community-Based Long-Term Care Services 239
after returning home. Usually they either wear or carry a transmitter unit
that enables them to send a medical alert to a 24-hour monitoring and
response center. Such a system is available for a reasonable fee.
Case Management
In the LTC context, case management refers to a method of linking, man-
aging, and coordinating services to meet the varied and changing health
care needs of elderly clients (Zawadski & Eng, 1988). Case management
services assess the special needs of older adults, formulate a care plan to
address those needs, identify which services are most appropriate, deter-
mine eligibility for services, make referrals and coordinate delivery of
care, arrange for financing, and ensure that clients are receiving services
in accordance with the plan of care. Case managers often assist the adult
children of disabled elderly persons who may be living far from each other.
▸ Institutional Long-Term Care
Generally, institutional LTC is more appropriate for patients whose
needs cannot be adequately met in a less clinical, community-based set-
ting. However, a variety of institutional options are available to meet the
varying needs of the elderly who no longer can live alone safely. Available
options today include retirement centers, residential or personal care
facilities, assisted living facilities, and nursing homes. These facilities
provide varying levels of assistance.
An evaluation of the extent of functional impairment often deter-
mines which services are best suited to the individual, but personal pref-
erences, and often the availability of financing, also play a significant role.
Because people generally prefer to receive care in their own home, when
institutionalization becomes necessary, they prefer a homelike, nonclin-
ical setting. Nevertheless, medical needs must often override personal
preferences, especially when severe physical or mental problems develop.
FIGURE 10.2 illustrates, on a continuum, six types of elder care insti-
tutions that can be classified under three general categories: retirement
homes, personal care homes, and nursing homes. Continuing-care
retirement communities (CCRCs) offer all three options within one
campus-like setting. Based on the concept of aging-in-place, CCRCs can
address people’s changing needs over time.
Retirement Facilities
Retirement facilities do not deliver nursing care services, but rather
emphasize privacy, security, independence, and active lifestyles. Some
240 Chapter 10 Long-Term Care Services
basic personal care such as assistance with bathing may be available
in some retirement facilities, but in most instances, when additional
nursing or rehabilitation services are needed, arrangements are made
for a local home health agency to provide them.
The special features and amenities in retirement facilities are
designed to create a physically supportive environment that promotes
independence. For example, the living quarters are equipped with emer-
gency call systems. Many facilities provide monthly blood pressure and
vision screenings. Most organize programs for socializing, physical fit-
ness, recreation, and local outings for shopping and entertainment. Some
basic hotel services, such as one meal a day and periodic housekeeping,
are generally provided. Apartment units or detached cottages equipped
with kitchenettes and private baths are the most common types of retire-
ment facilities. Common laundry rooms are often shared with other resi-
dents. Many upscale retirement centers abound, in which one can expect
to pay a fairly substantial entrance fee plus a monthly rental or main-
tenance fee. At the other end of the income scale, many communities
have government-subsidized housing units for the low-income elderly
and disabled individuals.
Personal Care Facilities
Personal care can be defined as nonmedical custodial care. Custodial
care comprises basic assistance provided in a protected environment; it
does not include active medical or rehabilitative treatments.
FIGURE 10.2 Long-Term Care Institutions for the Elderly
R
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ire
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en
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ub
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C
ar
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Fa
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Retirement
homes
Personal care
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Nursing
homes
Increasing level of care
Institutional Long-Term Care 241
Facilities providing personal care may be called by different names,
such as domiciliary care facilities, board-and-care homes, foster care
homes, residential care facilities, or personal care facilities. These facil-
ities provide physically supportive dwelling units, monitoring and/or
assistance with medications, oversight, and light assistance with certain
ADLs such as bathing and grooming. To maintain a residential rather
than an institutional environment, many such facilities limit the admis-
sion of residents who use wheelchairs. Most of these facilities are rela-
tively small and can be viewed as community-based alternatives rather
than institutions. Staff members are mostly nursing paraprofessionals,
such as personal care aides, who do not require a license or professional
certification to deliver care. Similar workers employed in nursing homes
must be certified by the state.
Assisted Living Facilities
An assisted living facility provides personal care, 24-hour supervision,
social activities, recreational activities, and some nursing and rehabil-
itation services. The most common areas of assistance with ADLs are
bathing, dressing, and toileting. These facilities maintain a skeleton staff
of licensed nurses—generally licensed practical nurses (referred to as
licensed vocational nurses in some states)—to do admission assessments
and deliver basic nursing care and medication management. Hence, these
facilities can be classified on the LTC continuum somewhere between
personal care homes and nursing homes. Advanced nursing care and
rehabilitation therapies can be arranged through a home health agency.
Approximately 59% of the residents eventually move into a skilled nurs-
ing facility and one-third die while residing in the assisted living facility
(National Center for Assisted Living, 2013).
Skilled Nursing Facilities
A skilled nursing facility is a typical nursing home that provides a
full range of clinical LTC services, from skilled nursing care to reha-
bilitation to assistance with all ADLs. Skilled nursing care is medically
oriented care provided by a licensed nurse. The plan of treatment is
authorized by a physician. The majority of direct care with ADLs is
delivered by paraprofessionals, such as certified nursing assistants and
therapy assistants, but under the supervision of licensed nurses and
therapists.
A variety of disabilities, including problems with ambulation, incon-
tinence, and behavior, often coexist among a relatively large number
of patients in need of skilled care. Compared to other types of facili-
ties, these nursing homes have a significant number of patients who are
242 Chapter 10 Long-Term Care Services
cognitively impaired because of confusion, delirium, or dementia. The
social functioning of many of the patients in such facilities is also in
severe decline.
Licensed professionals who work in skilled care facilities include
registered nurses (RNs), licensed practical/vocational nurses, and regis-
tered therapists (physical therapists, occupational therapists, respiratory
therapists, and speech/language pathologists). Rehabilitation is often an
important component of skilled care, as are therapeutic diets and nutri-
tional supplements. The patient’s assessment requires multidisciplinary
input from various health care professionals, and the plan of care is
highly individualized.
Subacute Care Facilities
Subacute care is a blend of intensive medical, nursing, and other ser-
vices that are technically complex and provided in an LTC setting.
Examples include complex wound care, intravenous therapy, blood
transfusion, ventilator support, and AIDS care. Subacute care is a sub-
stitute for services that were previously provided in acute care hospi-
tals; its popularity has grown because it is a cheaper alternative to a
hospital stay.
Subacute care generally follows hospitalization and is required for a
relatively short period of time, such as between 20 and 90 days. Services
are available in three main settings:
1. Long-term care hospitals (LTCHs), according to federal regu-
lations, must be certified as acute care hospitals and must have
an average length of stay greater than 25 days.
2. Many skilled nursing facilities have opened subacute care
units by raising the staff skill mix through hiring additional
RNs and having therapists on staff.
3. Some subacute-type services are rendered by community-based
home health agencies. Thanks to new technology, certain sub-
acute services can be provided in a patient’s own home.
Specialized Care Facilities
By their very nature, both subacute care and specialized care place high
emphasis on medical and nursing services. Some skilled nursing facili-
ties have opened specialized care units for patients requiring ventilator
care, wound care, services for Alzheimer’s disease, intensive rehabil-
itation, or closed head trauma care. Other freestanding facilities have
chosen a niche, specializing only in Alzheimer’s care, rehabilitation, or
AIDS care.
Institutional Long-Term Care 243
▸ Licensing and Certification of
Nursing Homes
Nursing homes are heavily regulated through licensure and certification
requirements. In the United States, it is illegal to operate a nursing facil-
ity without a license. To serve Medicare and/or Medicaid beneficiaries, a
facility must be certified by the federal government.
Licensing
Every state requires nursing homes to be licensed by the state. Annual
renewal of a license is required for existing nursing homes. To keep
their licenses in good standing, it is essential that facilities comply
with the state’s standards for nursing homes. These standards vary
from state to state, except for national fire safety regulations. The Life
Safety Code, published by the National Fire Protection Association,
encompasses national building and fire safety rules that have become
a part of licensure standards. In addition, each state has crafted basic
standards for nursing care and other services. Compliance with stan-
dards is verified through periodic inspections, generally once a year.
A state’s department (board or division) of health or department of
human services generally has nursing home licensing and oversight
responsibilities.
Certification
The Centers for Medicare and Medicaid Services (CMS), an agency of
the U.S. Department of Health and Human Services, is responsible for
certifying a nursing home that wants to serve Medicaid and/or Medi-
care clients. To be certified, a nursing home must first be licensed by the
state. Thus, licensure and certification serve different purposes. A license
allows a facility to operate and do business, whereas certification allows
a nursing home to admit patients who are on public assistance. It is pos-
sible for a facility to have only a license, but in that case, it cannot receive
payments from Medicaid or Medicare.
Three distinct federal certification categories exist, and facilities in
all three categories are generically referred to as nursing homes:
1. SNF certification allows a facility to admit patients whose care
is financed by Medicare; Medicare pays for postacute skilled
care only after a patient has stayed in a hospital for a minimum
of 3 days, not counting the day of discharge. The maximum
coverage in an SNF-certified facility is 100 days, but in actual
244 Chapter 10 Long-Term Care Services
practice the average length of stay is much shorter due to the
complex Medicare rules that the facility must follow to deter-
mine the length of stay. Medicare pays the full cost of skilled
nursing care only for the first 20 days; the beneficiary must
pay a substantial copayment ($167.50 per day in 2018) for
days 21 through 100.
2. NF certification allows a facility to admit patients whose care
is financed by Medicaid. Unlike Medicare, Medicaid allows
patients to stay in an NF-certified nursing home indefinitely
as long as the patient’s physician authorizes the need for nurs-
ing care and the patient qualifies for Medicaid assistance.
The beneficiary is required to turn over most of his or her
monthly income to the facility; Medicaid pays the remaining
costs. Many patients are initially admitted to a facility with a
private-pay source of funding. When their private funds are
exhausted, these patients generally become eligible for Med-
icaid assistance.
3. Intermediate care facility for individuals with intellectual dis-
abilities (ICF/IID)—previously called intermediate care facil-
ity for the mentally retarded (ICF/MR)—certification allows
a nursing facility to serve patients who are intellectually/
developmentally disabled, also referred to as mentally
retarded/developmentally disabled. A developmental disabil-
ity is a physical incapacity that generally accompanies below-
average intellectual functioning and often arises at birth or in
early childhood. ICF/IIDs provide specialized programming
and care modules for patients with mental retardation and
associated disabilities. The reimbursement is derived mostly
from Medicaid.
Certification is granted on the basis of compliance with federal stan-
dards. The same standards apply to both SNF and NF certifications,
but different standards apply to ICF/IID certification. A facility may be
dually certified as both an SNF and an NF. Facilities having dual certifi-
cation can admit Medicare and/or Medicaid patients to any part of the
facility.
The small number of facilities that have elected not to be certified
can admit only those patients who have a private source of funding for
nursing home care. Such private-pay patients—those not covered by
either Medicare or Medicaid for long-term nursing home care—are not
restricted to noncertified facilities, however. In most certified nursing
homes, private-pay patients are placed alongside those who depend on
Medicare and Medicaid.
Licensing and Certification of Nursing Homes 245
▸ Other Long-Term Care Services
Respite Care
Family caregivers often experience physical and emotional problems.
Caregiving responsibilities can ignite family conflicts and encroach
on caregivers’ employment and leisure activities. Under these circum-
stances, many caregivers experience stress and burnout. Respite care
enables family caregivers to take some time off to deal with their feel-
ings of stress and frustration. Virtually any kind of LTC service—adult
day care, home health care, and temporary institutionalization—can be
viewed as respite care, as long as the focus is on giving informal caregiv-
ers some time off while meeting the disabled person’s needs for assis-
tance (Doty et al., 1996).
Restorative Care
Restorative care refers to therapeutic interventions designed to help
patients regain or improve function. Restorative rehabilitation involves
intensive short-term treatments rendered by physical therapists, occupa-
tional therapists, and speech–language pathologists. Examples of persons
requiring rehabilitation therapy include individuals who have experi-
enced orthopedic surgery, stroke, limb amputation, and prolonged illness.
Maintenance rehabilitation has the goal of preserving the present level
of function and preventing further decline. Assistance with ambulation
and range-of-motion exercises are examples of maintenance rehabilitation.
Adaptive rehabilitation improves function despite deficits that
remain. Examples include adaptive equipment and training in its proper
use, splints that can help a person use his or her arms to perform certain
ADLs, and braces or orthotics to support the knee or foot so a person
can ambulate safely.
Hospice Care
Approaches to terminal illness and death with the objective of maintain-
ing the patient’s dignity and comfort have received increased attention
in the delivery of health care. Almost three-fourths of all deaths occur
among those persons age 65 and older. The common causes of death
among the elderly are heart disease, cancer, chronic respiratory disease,
stroke, and Alzheimer’s disease (Murphy et al., 2013). Hence, dealing
with death and dying is very much a part of LTC.
End-of-life care is commonly associated with hospice, a cluster of
comprehensive services for terminally ill persons who have a life expec-
tancy of 6 months or less. Hospice is a method of care, not a location,
246 Chapter 10 Long-Term Care Services
although some freestanding hospice facilities have been established.
Hospice can be a part of home health care when the services are provided
in the patient’s home. In other instances, hospice services are taken to
patients in nursing homes, retirement centers, or hospitals.
▸ The Affordable Care Act and
Long-Term Care
The main implications of the Affordable Care Act (ACA) for long-term
care services are as follows:
■ States have the option to provide home- and community-based
attendant services under a program called Community First Choice
through an increase in Medicaid federal matching payments.
■ The Elder Justice Act of 2010 was incorporated into the ACA to
counter elder abuse, neglect, and exploitation. Nursing facilities that
receive federal payments must comply with certain reporting and
notification requirements.
■ All certified nursing facilities must comply with a Quality Assurance
Performance Improvement (QAPI) requirement with the objective
of preventing or decreasing the likelihood of quality problems.
▸ Nursing Home Industry and Expenditures
During the past several years, the number of nursing homes, bed capac-
ity, number of residents in U.S. nursing homes, and occupancy rates
have continued to decline (TABLE 10.1). This downward trend largely
reflects the growth of community-based LTC alternatives and other
institutional options and government policies that incentivize the use of
community-based care. The need for various types of LTC services will
continue to increase given a growing population with chronic conditions,
comorbidities, and subsequent disability, but with increased life span.
The nursing home industry in the United States is dominated by private,
for-profit nursing home chains. In 2014, 70% of all U.S. nursing homes had
for-profit ownership; 24% were operated by private nonprofit entities. Only
6% were government owned, and most of these are owned and operated
by local counties. Of all nursing homes, 97% were certified for Medicare;
of this group, 95% were also certified for Medicaid. Among nursing home
residents, 85% were elderly, 67% were female, and half had a diagnosis of
Alzheimer’s disease or some other dementia (Harris- Kojetin et al., 2016).
Nursing home expenditures are shown in TABLE 10.2. In recent years,
the share of U.S. nursing home expenditures has been shifting from the
Nursing Home Industry and Expenditures 247
TABLE 10.2 Sources of National Health Expenditures for Nursing Care
Facilities and Continuing Care Retirement Centers, 2016
Billions of Dollars Percent
Total expenditures 162.7
Medicare 37.5 23.0
Medicaid 50.0 30.7
Veterans Administration 5.0 3.1
Other public 3.3 2.0
Total public sources 58.8%
Private out of pocket 43.8 26.9
Private health insurance 14.8 9.1
Other private 8.3 5.1
Total private sources 41.1%
Data from CMS, Office of Actuary. National Health Expenditures by Type of Service and Source of Funds, CY 1960-2016.
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData
/NationalHealthAccountsHistorical.html. Accessed February 13, 2018.
TABLE 10.1 Nursing Home Trends (Selected Years)
2000 2010 2015
Number of nursing homes 16,886 15,690 15,656
Number of beds 1,795,388 1,703,398 1,694,777
Average beds per nursing home 106.3 108.6 108.3
Number of residents 1,480,076 1,396,473 1,360,970
Occupancy rate* 82.4% 82.0% 80.3%
* Percentage of beds occupied (number of residents per 100 beds). These data do not include long-term care facilities that
are not classified as nursing homes (Figure 10.2).
Data from National Center for Health Statistics. Health, United States, 2007 (pp. 370–371); Health, United States, 2012
(pp. 317–318); Health, United States, 2016 (pp. 312–313).
248 Chapter 10 Long-Term Care Services
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html
government to private sources. In 2011, for example, expenditures from
private sources amounted to 37.5% of the total expenditures for nursing
home and continuing care retirement centers. In 2016, the private share
of expenditures increased to 41.1%. Although out-of-pocket payments
constitute a substantial source of financing for nursing home care, for
many years Medicaid has remained the largest single source of financing.
Medicare pays for eligible beneficiaries under Part A, but the coverage is
for a short duration, representing mostly postacute care after discharge
from a hospital. Just 9% of nursing home services are paid through pri-
vate insurance. In 2014, only 11% of adults age 65 and older had private
LTC insurance coverage (Johnson, 2016). Insurance premiums are gen-
erally expensive; hence, few people purchase LTC insurance.
▸ Conclusion
LTC should be viewed not as an isolated component of the health care
delivery system, but rather as a continuum of both community-based
and institution-based services that are rationally linked to the rest of the
health care delivery system. LTC includes medical care, social services,
and housing alternatives. Hence, it involves a range of services that can
vary according to individual needs. Chronic conditions and comorbid-
ities can lead to physical and/or mental disability, which in turn may
impair the performance of ADLs and IADLs. LTC services often com-
plement what people with impaired functioning can do for themselves.
Informal caregivers provide the bulk of these services, and respite care
can provide these family members with temporary relief from the bur-
den of caregiving.
When the required intensity of care exceeds the capabilities of informal
caregivers, available alternatives include professional community-based
services to supplement informal care or admission to a long-term care
facility. Services offered at these facilities range from basic personal assis-
tance to more complex skilled nursing care and subacute care. Specialized
facilities caring for patients with Alzheimer’s disease, AIDS, intellectual/
developmental disabilities, or head trauma have also proliferated. Some
LTC patients require long-range custodial care without the prognosis of
a cure; others may require short-term postacute convalescence and ther-
apy. Still others may need end-of-life care through a hospice program.
With the aging of the baby boomer population, both demand and
supply for LTC services are expected to grow at a rapid rate in the
future. With rising costs, however, a greater emphasis is being placed
on community-based services compared to nursing home care. Overall,
public sources of financing pay for the bulk of LTC services in the United
States.
Conclusion 249
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https://www.urban.org/sites/default/files/publication/83146/2000881-Who-Is-Covered-by-Private-Long-Term-Care-Insurance
https://www.ahcancal.org/ncal/facts/Pages/Residents.aspx
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http://www.ncoa.org/assets/files/pdf/FactSheet_SeniorCenters
© ninjaMonkeyStudio/Getty Images
CHAPTER 11
Populations with
Special Health Needs
▸ Introduction
Differences in health that are avoidable and unjust—referred to as health disparities or health inequities—are greater in the United States than in other developed countries, such as Canada or
high-income European countries (Avendano et al., 2009; Lasser et al.,
2006; Siddiqi et al., 2015; van Hedel et al., 2014). Certain population
groups in the United States either face greater barriers than the general
population in accessing timely and needed health care services or have
special health-related issues that may go unaddressed. Members of these
groups, who face a greater risk of poor physical, psychological, and social
health (Aday, 1994), may be referred to as underserved populations,
251
medically underserved, medically disadvantaged, underprivileged, or
vulnerable populations; marginalized groups; or American underclasses.
The causes of their vulnerability are largely attributable to inequalities in
social, economic, health, and geographic conditions. Special population
groups encompass racial and ethnic minorities, uninsured women and
children, persons living in rural areas, the homeless, the mentally ill, the
chronically ill and disabled, and individuals with human immunodefi-
ciency virus/acquired immunodeficiency syndrome (HIV/AIDS). This
chapter defines these population groups, describes their health needs,
and summarizes the major challenges that they typically experience in
the United States.
▸ Framework to Study Vulnerable
Populations
The vulnerability model (FIGURE 11.1) is an integrated approach to study-
ing vulnerability. Vulnerability denotes susceptibility to negative events
that result in poor health or illness. Poor health can be manifested physi-
cally, psychologically, and socially. Health needs are greater for individuals
who experience problems along multiple dimensions, because poor health
along one dimension is often compounded by poor health along others.
Vulnerability does not represent a personal deficiency inherent to certain
populations, but rather the effects of interactions between multiple factors
over which individuals may have little or no control (Aday, 1999).
FIGURE 11.1 General Framework to Study Vulnerable Populations
Ecological
Predisposing
Enabling
Need
Individual
Predisposing
Enabling
Need
Individual
Physical
Mental
Social
Physical
Mental
Social
Population
Health Outcomes
Access
to Care
Quality
of Care
Vulnerability
252 Chapter 11 Populations with Special Health Needs
EXHIBIT 11.1 Predisposing, Enabling, and Need Characteristics of
Vulnerability
■ Predisposing characteristics
• Racial/ethnic characteristics
• Gender and age (women and children)
• Geographic location (rural health)
■ Enabling characteristics
• Insurance status (uninsured)
• Homelessness
■ Need characteristics
• Mental health
• Chronic illness/disability
• HIV/AIDS
Vulnerability is determined by a convergence of (1) predisposing,
(2) enabling, and (3) need characteristics at both individual and ecolog-
ical (contextual) levels (EXHIBIT 11.1). Not only do these characteristics
act synergistically to determine individuals’ access to health care, but
they also ultimately influence individuals’ risk of contracting illness or
recovering from an existing illness. Individuals with multiple risks (i.e.,
a combination of two or more vulnerability traits) typically experience
poorer access to care, lower-quality care, and inferior health status than
those with fewer vulnerability traits.
Understanding vulnerability as a combination or convergence of
disparate factors is preferred to studying individual factors separately,
because vulnerability best captures reality when it is defined as a conver-
gence of risks. Furthermore, this approach reflects the concurrence of
risk factors and underscores the belief that it is difficult to address dis-
parities in one risk factor without also addressing disparities in others.
The vulnerability model presented here has a number of distinctive
characteristics. First, it is a comprehensive model, including both individ-
ual and ecological attributes of risk. Second, it is a general model, focusing
on the attributes of vulnerability for the total population rather than for
subpopulations. Although there are individual differences in exposure to
risks, a number of common, cross-cutting traits affect all vulnerable pop-
ulations. Third, the model emphasizes the effects of experiencing multiple
vulnerability traits, which lead to cumulative consequences.
▸ Predisposing Characteristics
Attributes that predispose individuals to vulnerability include demo-
graphic characteristics, belief systems, and social structure variables.
Predisposing Characteristics 253
These attributes are associated with social position, access to resources,
health behaviors, and variations in health status, which individuals have
relatively little control over. Unfortunately, these attributes may lead to
discrimination on account of race, gender, financial status, sexual pref-
erence, or other traits. The following subsections discuss some of these
predisposing characteristics, including race and ethnicity, gender, age,
and geographic distribution.
Racial/Ethnic Minorities
The main categories for race recognized by the U.S. Census Bureau are
white, black or African American, Hispanic or Latino, American Indian
or Alaska Native, Asian, Native Hawaiian or other Pacific Islander, and
a nondescript category called “some other race.” Asian refers to persons
originating from the Far East, Southeast Asia, or the Indian subcontinent,
including those from Cambodia, China, India, Japan, Korea, Malaysia,
Pakistan, the Philippine Islands, Thailand, or Vietnam. Native Hawaiians
or other Pacific Islanders include persons originating from Hawaii, Guam,
Samoa, or other Pacific Islands. American Indian or Alaska Natives
include persons originating from North and South America (including
Central America) who maintain tribal affiliation or community attach-
ment. Nearly 30% of the U.S. population is made up of minorities: black
or African American (13.3%), Hispanic or Latino (17.8%), Asian (5.7%),
Native Hawaiian or other Pacific Islander (0.2%), American Indian and
Alaska Native (1.3%). In addition, 2.6% of the U.S. population identify
themselves as being of two or more races (U.S. Census Bureau, 2017).
Significant differences exist across the various racial/ethnic groups
on health. Indeed, minority race and ethnicity often serve as a proxy
for other factors that are correlated with health status and health care
experiences, such as socioeconomic status, language ability, or cultural
behaviors. Evidence suggests that racial/ethnic minorities generally have
poorer access to health care, receive poorer quality care, and experience
worse health outcomes (EXHIBIT 11.2).
EXHIBIT 11.2 Racial and Ethnic Disparities
Black Americans
■ More likely than whites to be economically disadvantaged.
■ Shorter life expectancies than whites.
■ Higher age-adjusted death rates than whites for leading causes of death.
■ Higher rates of premature death (death before age 75 years) from stroke and
coronary heart disease than whites (Centers for Disease Control and Prevention
[CDC], 2013).
254 Chapter 11 Populations with Special Health Needs
■ More than double the infant mortality rate compared to non-Hispanic white
women in both 2005 and 2008 (CDC, 2013).
■ More likely than whites to report fair or poor health status.
■ Males more likely than white males to smoke cigarettes (National Center for
Health Statistics [NCHS], 2015).
■ 665% higher homicide rates compared to non-Hispanic whites (CDC, 2013).
Hispanic Americans
■ Nearly one-third have less than a ninth-grade education level.
■ Among children and adolescents from ages 2 to 19, Hispanics have the highest
prevalence of obesity (21.9%) (NCHS, 2016).
■ Approximately one-fourth of families live below the poverty line (NCHS, 2015).
■ More likely to be uninsured and underinsured than non-Hispanic whites.
■ AIDS is the leading cause of death.
■ Homicide rate remains the second leading cause of death for young males
(NCHS, 2015).
■ Among individuals 18 years or older, a higher proportion of Hispanics than
whites are overweight or obese.
■ Alcohol use is 43.0% among Hispanics (NCHS, 2015).
■ Higher homicide rates compared to non-Hispanic whites (CDC, 2013).
Asian Americans
■ Bipolar distribution of education, income, and health status.
■ The Asian/Pacific Islander category is extremely heterogeneous, encompassing
21 subgroups with different health profiles.
■ In 2010, median family income was $64,308; a higher percentage (12.1%) live in
poverty compared to non-Hispanic whites (9.9%) (DeNavas-Walt et al., 2011).
■ Cambodian refugees have extremely high rates of posttraumatic stress
disorder, dissociation, depression, and anxiety.
■ As a whole, Asian/Pacific Islanders have the lowest smoking rates in the United
States, but certain groups have higher smoking rates:
• 92% of Laotians
• 71% of Cambodians
• 65% of Vietnamese (Yoon & Chien, 1996)
■ Korean Americans have a 5 times greater incidence of stomach cancer and an 8
times greater incidence of liver cancer compared to whites.
American Indians and Alaska Natives
■ Poverty is associated with a high injury-related mortality rate among these
children.
■ The rate of death due to alcohol is 7 times greater and the suicide rate is 3.5
times greater than the national averages (Pleasant, 2003).
■ Higher rates for drug-induced deaths than among non-Hispanic whites (CDC,
2013).
■ Higher homicide rates compared to non-Hispanic whites (CDC, 2013).
■ Two to five times higher motor vehicle–related death rates as compared to
other races/ethnicities (CDC, 2013).
Predisposing Characteristics 255
One of the most consistent findings across decades of research is that
minorities have poor access to health services compared to their white
counterparts, even after taking into account insurance, socioeconomic, and
health status. Various studies have documented that minority Americans
experience higher rates of illness and mortality than white Americans. Dis-
parities in health exist between white and nonwhite Americans in measures
of perceived health status as well as in traditional indicators of health such
as infant mortality rate, general population mortality rate, and birth weight.
Racial/ethnic disparities in quality of care for persons with access to
the health care system are equally concerning. A 2002 report from the
Institute of Medicine (renamed the National Academy of Medicine in
2015) identified more than 175 studies documenting racial/ethnic dis-
parities in the diagnosis and treatment of various conditions, even when
controlled for socioeconomic status, insurance status, site of care, stage
of disease, comorbidity, and age, among other potential confounders.
These disparities are observed in other empirical studies and reviews of
the utilization of preventive and clinical procedures, such as diagnostic
and therapeutic procedures (Bolorunduro et al., 2013; Harris et al., 1997),
prescription of medication for pain control (Wieder et al., 2014), surgical
treatment of lung cancer (Polednak, 2001), referral to renal transplanta-
tion (Joshi et al., 2012), treatment of heart failure (Dickson et al., 2015),
and the utilization of specific services covered by Medicare, such as immu-
nizations and mammograms (Lees et al., 2005; Mendez-Luck et al., 2016).
One of the most commonly used measures of access to care is
whether a person has a regular or usual source of care. A usual source of
care may be defined as a single provider or place where patients obtain,
or can obtain, the majority of their health care. Having a usual source of
care is associated with greater coordination of care.
Disparities persist not only in mortality rates, but also in morbid-
ity rates, exposure to environmental hazards, and social determinants
of health. Additionally, disparities persist not only between racial/eth-
nic groups, as most commonly discussed, but also between genders,
across socioeconomic strata, and between rural and urban populations.
Yet, the majority of federal initiatives have primarily served to draw
national attention to racial disparities in health care (see the examples
in EXHIBIT 11.3). Although federal programs are designed to address
the specific needs of minorities, they still use a somewhat fragmented
approach to addressing disparities in minority health and health care.
A report from the Agency for Healthcare Research and Quality
(AHRQ, 2015) shows that the nation has made progress in improving
the health care delivery system to achieve the Triple Aims of better care,
smarter spending, and healthier people. Even so, more work needs to be
done, particularly in addressing disparities in health care.
256 Chapter 11 Populations with Special Health Needs
EXHIBIT 11.3 Selected Federal Programs to Eliminate Racial and
Ethnic Disparities
U.S. Department of Health and Human Services’ (DHHS) Action Plan to Reduce Racial
and Ethnic Health Disparities (2011)
■ To reduce disparities in six key areas—infant mortality, cancer screening and
management, cardiovascular disease, diabetes, HIV/AIDS, and immunizations—
through new opportunities such as the Affordable Care Act, Healthy People
2020, Let’s Move!, the National HIV/AIDS Strategy, HHS Strategic Action Plan
to End the Tobacco Epidemic, Efforts to Reduce Disparities in Influenza
Vaccination, and Interagency Working Group on Environmental Justice (DHHS,
2011)
U.S. Office of Minority Health (1985)
■ Mission is to improve the health of racial and ethnic minority populations
through the development of effective health policies and programs that help
eliminate disparities in health (DHHS, 2011)
■ Program was launched by the Centers for Disease Control and Prevention in
1999
■ Supports the goals of Healthy People 2020 to eliminate racial disparities in
health and health care
Minority Health Initiative (1992)
■ Launched by the Office for Research on Minority Health at the National
Institutes of Health to improve the national research agenda on minority health
issues and strengthen the national commitment and responsiveness to the
health and training needs of minority Americans
Indian Health Service
■ An agency within the U.S. Department of Health and Human Services with the
mission to be the principal advocate and provider of health care services to
American Indians and Alaska Natives
Migrant Health Center Program
■ Established by the Migrant Health Act (1962) to provide medical and support
services to migrant farm workers and their families
Communities Putting Prevention to Work (CPPW)
■ Funded by the CDC, the American Recovery and Reinvestment Act, and the
Affordable Care Act, with the aim of supporting policy and environmental
strategies in 50 communities to address obesity and tobacco use (DHHS, 2011)
Administration of Children and Families Head Start Program
■ Serves to promote social and cognitive childhood development through
education, health, nutritional, social, and other services for enrollees (DHHS,
2011)
Healthy Start
■ Established by the National Institutes of Health to address disparities in the
burden of asthma among minority children and children living in poverty
(DHHS, 2011)
Predisposing Characteristics 257
Women and Children
Although women in the United States now enjoy a life expectancy almost
five years longer than that of men, they suffer greater morbidity and
poorer health outcomes compared to their male counterparts (NCHS,
2017b). Women also have a higher prevalence of certain health problems
than men over the course of their lifetimes. Compared to men of com-
parable age, women develop more acute and chronic illnesses, resulting
in a greater number of short- and long-term disabilities (National Insti-
tutes of Health [NIH], 1992; NCHS, 2016). Specifically, women are more
likely than men to have obesity or hypertension (NCHS, 2017b). Hospi-
talized women have higher mortality rates due to heart attacks than men
(AHRQ, 2014). Women also have higher cholesterol levels than men at
older ages (FIGURE 11.2). Women represent the fastest-growing popula-
tion diagnosed with AIDS as well.
Pronounced health differences between men and women also exist
in mental illness. For example, anxiety disorders and major depression
affect twice as many women as men (Rodin & Ikovics, 1990). Adoles-
cent females have a higher prevalence of depression, eating disorders,
and suicidal thoughts and attempts than adolescent males. However,
although females are more likely to have suicidal thoughts than males,
overall males have suicide rates that are four times as high as those in
women (AHRQ, 2014; Crosby et al., 2011).
The mission of the Office of Research on Women’s Health—located
under the NIH within the U.S. Department of Health and Human
Services—is to stimulate, coordinate, and implement a comprehensive
women’s health agenda on research, service delivery, and education
across the DHHS and other government agencies.
Children’s health has unique aspects in the delivery of health care,
reflecting children’s developmental vulnerability, dependency, and dif-
ferential patterns of morbidity and mortality. Developmental vulnerabil-
ity refers to the rapid and cumulative physical and emotional changes
that characterize childhood, and the potential effects that illness, injury,
or untoward family and social circumstances can have on a child’s life-
course trajectory. Dependency refers to the special circumstances that
children face that require others to recognize and respond to their health
needs. Children depend on their parents, school officials, caregivers, and
sometimes neighbors to discover their need for health care, seek health
care services on their behalf, authorize treatment, and comply with rec-
ommended treatment regimens. These relationships can affect the utili-
zation of health services by children.
Children are increasingly affected by a broad and complex array
of conditions that were not very prevalent among previous genera-
tions, collectively referred to as new morbidities. These new morbidities
258 Chapter 11 Populations with Special Health Needs
include drug and alcohol abuse, obesity, family and neighborhood vio-
lence, emotional disorders, and learning problems. FIGURE 11.3 provides
data on obesity among children. Addressing such conditions requires a
continuum of comprehensive services that includes multidisciplinary
assessment, treatment, rehabilitation, and community-based prevention
strategies.
Geographic Distribution: Rural Health
Poverty is a common dimension of life in rural America. The median
household income of rural residents is, on average, $1,910 less than that
of their urban counterparts, and 13% of rural children live in poverty
FIGURE 11.2 High Serum Total Cholesterol: Men Versus Women
Data from Centers for Disease Control and Prevention, National Center for Health Statistics. 2017. Health, United States, 2016. Hyattsville, MD. Table 55.
60
50
40
30
20
10
0
Year
Male
P
er
ce
nt
P
er
ce
nt
20–44 years
75 years and over
45–64 years
65–74 years
2007–2010 2011–2014
2007–2010 2011–2014
Female
65–74 years
75 years and over
20–44 years
45–64 years
Year
60
50
40
30
20
10
0
Predisposing Characteristics 259
(Bishaw & Posey, 2016). Rural residents face a lack of public health infra-
structure and poorer access to health care (Davis et al., 2010). Moreover,
rural communities experience an increased burden of heart disease,
stroke, diabetes, mental health disorders, tobacco use, and substance
abuse (Gamm et al., 2003; Newkirk & Damico, 2014).
One dimension of the barriers to health care access among rural
residents is the geographic maldistribution of health care professionals.
An estimated 51 million Americans (approximately one-fifth of the total
U.S. population) live in places classified as nonmetropolitan, of whom
more than 20 million live in areas designated as having primary health
care provider shortages. According to the National Rural Health Asso-
ciation, only 10% of all practicing physicians are based in rural areas.
Their low population density makes it difficult for such communities to
attract physicians and for physicians to establish financially viable prac-
tices. Rural residents have particularly low rates of access to specialist
physicians.
As a result of these factors, rural populations face greater barriers
in access to care. In turn, various measures have been undertaken to
improve access to care in rural America, including the promotion of the
National Health Service Corps, the designation of health professional
shortage areas and medically underserved areas, the development of
community and migrant health centers, and the passage of the Rural
Health Clinics Act.
FIGURE 11.3 Obesity Among Children
Data from Centers for Disease Control and Prevention, National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD. 2017, Table 59.
Year
P
er
ce
nt
2007–2010 2011–2014
6–11 years
12–19 years
2–5 years
20
15
25
5
10
0
260 Chapter 11 Populations with Special Health Needs
▸ Enabling Characteristics
Enabling characteristics include socioeconomic status, individual assets,
and various mediating factors. Socioeconomic status is associated with
social position, access to resources, and variations in health status (e.g.,
income, education, employment status, and occupation). Individual
assets, or human capital, contribute to an individual’s ability to be eco-
nomically self-sufficient (e.g., possessing inheritance, wealth, or certain
skills). Mediating factors are associated with the use of health care ser-
vices (e.g., health insurance, access to health care, quality of health care).
The following section discusses enabling characteristics such as insur-
ance status and homelessness.
The Uninsured
Even though a large percentage of previously uninsured people have
received health insurance coverage under the Affordable Care Act
(ACA), a significant number of Americans remain uninsured. In gen-
eral, uninsured individuals are likely to be poorer and less educated
than insured individuals, and tend to work in part-time jobs and/or be
employed by small firms. The uninsured also tend to be younger (age 25
to 40 years), because most of the elderly (age 65 and older) are covered by
Medicare. Ethnic minorities are also more likely to lack health insurance.
Uninsured persons face greater barriers to accessing essential health
care and are more likely to report delays in seeking essential medi-
cal care or dental care (FIGURE 11.4 and FIGURE 11.5). The plight of the
FIGURE 11.4 Delay in Seeking Needed Medical Care by Insurance Status
Data from Centers for Disease Control and Prevention, National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD. 2017, Table 63.
P
er
ce
nt
1997 2005 2010 2015
Year
Uninsured
Medicaid
Private
40
30
10
20
0
Enabling Characteristics 261
uninsured also affects the insured. For example, community hospitals
provide uncompensated care to the uninsured through emergency care;
since 2000, hospitals of all types have provided more than $538 billion in
uncompensated care to their patients (American Hospital Association,
2016). Much of this cost is currently shared by Medicaid, federal grants
to nonprofit hospitals, and charitable organizations, although these costs
are likely to be (at least partly) passed on to society if the level of uncom-
pensated care remains the same.
Homelessness
Across the United States, approximately 549,928 people are homeless
on a given night. More than 20% of this population consists of families
with children or unaccompanied children and youth (U.S. Department
of Housing and Urban Development, 2016). War veterans comprise
approximately 10.5% of this population. Single women account for
nearly 17% of the U.S. homeless adult population. Approximately 26%
of all homeless persons have a severe mental illness, yet only 5% to 7%
require institutionalization; the rest can live in the community with the
appropriate help (National Coalition for the Homeless, 2007a, 2007b).
The homeless face several barriers to adequate and appropriate
health care. Specifically, they have financial challenges and problems in
satisfying eligibility requirements for health insurance. Accessible trans-
portation to medical facilities is often unavailable to them. The homeless
usually suffer from a lack of proper sanitation, do not have a stable place
to store medications safely, and are unable to obtain the proper food for
the medically indicated diet necessary to treat conditions such as diabetes
FIGURE 11.5 Delay in Seeking Needed Dental Care by Insurance Status
Data from Centers for Disease Control and Prevention, National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD. 2017, Table 63.
1997 2005 2010 2015
Year
Uninsured
Medicaid
Private
0
P
er
ce
nt
40
30
10
5
15
25
35
20
262 Chapter 11 Populations with Special Health Needs
or hypertension. In addition, the homeless suffer from a high prevalence
of untreated acute and chronic medical, mental health, and substance
abuse problems. Such persons are also at a greater risk of assault and vic-
timization, as well as exposure to harsh environmental elements.
▸ Need Characteristics
Need attributes of individuals include their self-perceived or profession-
ally evaluated health status and quality-of-life indicators. Self-perceived
or professionally evaluated health status refers to the individual’s own
beliefs about his or her physical and mental health status or the diagno-
ses of disease made by health professionals, respectively. Quality-of-life
indicators include such factors as the ability to perform instrumental
activities of daily living, social limitations, cognitive limitations, and
limitations in the ability to complete work, housework, or schoolwork.
Certain subpopulation groups are at higher health risks. These
potential threats include risks to physical health (e.g., high-risk mothers
and infants, chronically ill and disabled individuals, and persons with
HIV/AIDS), mental health (e.g., the mentally ill and disabled, alcohol
or substance abusers, the suicide- or homicide-prone), and social well-
being (e.g., abusive families, the homeless, and immigrants and refugees).
Mental Health
Mental disorders are common psychiatric illnesses that affect both
adults and children; they represent a serious public health problem in the
United States. According to national studies, the most common mental
disorders include phobias, substance abuse (including alcohol and drug
dependence), and affective disorders (including depression). Schizo-
phrenia is considerably less common, affecting approximately 1.1% of
the U.S. population.
Mental illness ranks second, after ischemic heart disease, as a lead-
ing nationwide burden on health and productivity. According to 2014
data, an estimated 17.9% of the U.S. adult population has at least one
diagnosable mental disorder in any given year. Only 41% of persons with
a disorder receive any treatment (Substance Abuse and Mental Health
Services Administration, 2016). Serious mental illness costs the United
States an estimated $193.2 billion in lost earnings annually. Mood disor-
ders, including major depression, dysthymic disorder, and bipolar dis-
order, are the third leading cause of hospitalization in the United States
for both youth and adults. Mental illness is a risk factor for death from
suicide, cardiovascular disease, and cancer. In addition, mental health
problems are frequently associated with social problems. For example,
Need Characteristics 263
due to the easy access to guns in the United States, persons with mental
health issues often contribute to gun violence in both public and private
settings.
Most mental health services are provided in the general medicine
sector—a concept described by Regier and colleagues (1988) as the de facto
mental health service system—rather than through formal mental health
specialist services. The de facto mental health service system combines
specialty mental health services with general counseling services, such as
those provided in primary care settings, nursing homes, and community
health centers by ministers, counselors, self-help groups, families, and
friends. The U.S. mental health system is composed of two subsystems—
one primarily for individuals with insurance coverage or private funds and
the other for those persons without private means of coverage.
Chronic Illness/Disability
One of the greatest challenges for health systems globally in the 21st
century is the increasing burden of chronic diseases and their result-
ing disabilities. An illness is considered chronic if there is a disease or
injury with long-term (i.e., noticed for 3 months or more) conditions or
symptoms. Other illnesses—namely, congenital anomalies, asthma, dia-
betes, and heart disease—are classified as chronic by the National Center
for Health Statistics, regardless of their duration (NCHS, 1999, p. 5).
Chronic illness and disability also pose unique challenges to a health
care system that is primarily focused on treating acute illness.
In its report on the global challenges of chronic diseases, the World
Health Organization (WHO) noted that noncommunicable conditions—
including cardiovascular diseases, diabetes, cancers, and chronic respi-
ratory diseases—accounted for nearly two-thirds of deaths worldwide
(WHO, 2011). The most recent Global Burden of Disease Study (2010)
provides further documentation of the continued shift from communica-
ble to noncommunicable diseases around the world, and from premature
death to years lived with disability (Murray et al., 2012). Related research
indicates the scope of and key risk factors causing these global trends,
including high blood pressure, tobacco use and second-hand smoke
exposure, high body mass index (BMI), physical inactivity, excessive
alcohol use, and diets low in fruits and vegetables and high in sodium
and saturated fats (e.g., artificial trans fats) (Lee et al., 2012; Lim et al.,
2012; Murray et al., 2012).
The Institute of Medicine reported that the United States is less healthy
in key areas—including obesity, diabetes (FIGURE 11.6), heart disease, chronic
lung disease, and disability—as compared with 16 high- income or similarly
developed countries (Committee on Population, National Research Coun-
cil, 2013; National Research Council & Institute of Medicine, 2013; Woolf
264 Chapter 11 Populations with Special Health Needs
& Aron, 2013). Most Americans are vulnerable to chronic illness and dis-
ability during their lifetime. Almost half of all Americans currently have at
least one chronic condition, and chronic diseases are responsible for 7 of 10
deaths in the United States every year—deaths that are largely attributable
to preventable illnesses. Tobacco use, physical inactivity, poor nutrition or
diet, excessive alcohol consumption, uncontrolled high blood pressure, and
hyperlipidemia contribute to the major chronic disease killers—namely,
cardiovascular disease, cancer, diabetes, and chronic obstructive pulmo-
nary disease (CDC, 2010a; Mokdad et al., 2010).
Moreover, people with lower education or income, of specific races
or ethnic backgrounds, and in specific geographical locations, among
other factors, are disproportionately affected by chronic diseases, often
as a result of social disadvantages and vulnerability (Braveman et al.,
2011). For example, death rates from stroke are highest in the south-
eastern states; smoking prevalence is highest in certain Native American
tribes, particularly in the northern Plains; cardiovascular disease death
rates are highest in African Americans; and obesity rates are highest in
persons with low education or low income (Frieden, 2013).
Chronic diseases and noncommunicable conditions are increasingly
common, costly, and debilitating. In 2010, total spending for the Medi-
care population (largely people age 65 years and older) was over $300
billion, with almost all (93%) of that spending going towards support for
people with two or more chronic conditions. Similarly, lost productivity
from chronic diseases, other chronic conditions, and their risk factors is
associated with enormous costs for both those remaining in the work-
force and those who prematurely exit the workplace due to disability
(DeVol & Bedroussian, 2007).
FIGURE 11.6 Diabetes Prevalence in the United States
Data from Centers for Disease Control and Prevention, National Center for Health Statistics. Health, United States, 2016. Hyattsville, MD. 2017, Table 40. 2015, Table 44.
20–44 years
45–64 years
65 years
and over
3020100
Percent
2.6
21.9
2011–2014
12.3
Need Characteristics 265
HIV/AIDS
AIDS is caused by infection with HIV, a retrovirus that represses the
immune system. Certain widely recognized risk factors promote the
transmission of HIV, including male-to-male sexual contact, male- to-
female sexual contact, drug use by injection, exposure to contaminated
blood, and perinatal transmission from mother to infant during preg-
nancy, delivery, or breastfeeding.
At the end of 2015, an estimated 1.1 million persons age 13 and older
were living with HIV infection in the United States, including an esti-
mated 162,500 (15%) persons whose infections had not been diagnosed
(CDC, 2017). Reporting and surveillance efforts have been more success-
ful in recent years; more people infected with HIV know their positive
status and a higher numbers of cases are being reported to the CDC. This
trend can largely be traced to increased and more widespread HIV testing.
With the advent of combination antiretroviral therapy, AIDS sur-
veillance data no longer reflects trends in HIV transmission because
such therapy has been effective in delaying the progression of HIV to
AIDS (CDC, 1999). Advancements in diagnosis and treatment have led
to an increase in the number of people living with HIV/AIDS, although
the incidence of new cases has remained relatively stable (CDC, 2010b).
The average cost of antiretroviral therapy is at least $15,000 per year,
making treatment difficult for many patients in the United States to obtain
and keeping it out of reach of patients in developing countries, where
more than 90% of new HIV infections occur (Long et al., 2010). Some
patients temporarily quit treatment because the complicated drug regi-
men requires the coordination of many pills and doses, making it easier
to skip medications or doses. Other problems associated with HIV in the
United States include issues related to urban home health care; HIV infec-
tion in rural communities, children, and women; lack of HIV prevention
programs; late diagnosis; general discrimination; and the need for more
HIV/AIDS-related research and health care provider training.
▸ Eliminating Disparities
Health disparities are not inevitable; actions that reduce social disadvan-
tages can also reduce gaps in health outcomes, quality of care, and access
to care. For example, progress in reducing health inequities between
blacks and whites was made in the late 1960s and 1970s after the passage
of major civil rights legislation (Almond et al., 2006; Kaplan et al., 2008;
Krieger et al., 2008). Recent data suggests that inequality in mortality has
decreased among the young but increased among older adults (Currie &
Schwandt, 2016).
266 Chapter 11 Populations with Special Health Needs
Health insurance coverage also plays an important role in eliminat-
ing health care disparities. People without health insurance receive less
care than those with health insurance, including preventive care and
screening services (Baicker et al., 2013; Sommers et al., 2014), and their
health may suffer as a result. Further efforts are needed to ensure cov-
erage, including encouraging states to opt into Medicaid expansion and
determining which areas have relatively low enrollment in health insur-
ance exchanges and requiring targeted enrollment efforts.
Policies that improve the overall social and economic well-being
of individuals and families will reverberate across a variety of health
outcomes and help achieve health equity. Policies that enable individ-
uals and families to cope with challenging periods and life events may
be especially effective. Most countries support people for time spent in
caring for family members, and the availability of sick leave and paren-
tal leave is associated with better health. Across 141 countries, neonatal,
infant, and child mortality rates are lower in nations that offer longer
paid maternal leave (Heymann et al., 2011).
The Action Plan to Reduce Racial and Ethnic Health Disparities, cre-
ated by the DHHS, outlines goals and actions to reduce health disparities
among racial and ethnic minorities in the United States. The Action Plan
includes a continuous assessment of the impact of all policies and pro-
grams on racial and ethnic health disparities and promotes integrated
approaches, evidence-based programs, and best practices to reduce dis-
parities. The Action Plan builds on the foundation of the ACA and aligns
with other programs and initiatives such as Healthy People 2020 and the
national HIV/AIDS strategy. The Action Plan has five main goals: (1) to
transform health care; (2) to strengthen the nation’s health and human
services infrastructure and workforce; (3) to advance the health, safety,
and well-being of the American people; (4) to advance scientific knowl-
edge and innovation; and (5) to increase the efficiency, transparency, and
accountability of health and human services programs.
The ACA also includes provisions for disparities reduction, data col-
lection and reporting, quality improvement, and prevention. In addition,
this law is expected to reduce health disparities by investing in preven-
tion and wellness and giving individuals and families more control over
their own care.
Other prominent public-sector initiatives to eliminate disparities are
highlighted here:.
■ One of the four overarching goals of the Healthy People 2020 initia-
tive is “to achieve health equity, eliminate disparities, and improve
the health of all groups” (DHHS, 2010). The Healthy People 2020 ini-
tiative will assess health disparities in the U.S. population by track-
ing rates of death, chronic and acute diseases, injuries, and other
Eliminating Disparities 267
health-related behaviors for subpopulations defined by race, eth-
nicity, gender identity, sexual orientation, disability status or special
health care needs, and geographic location.
■ Home-visiting programs, especially during pregnancy and early
childhood, have demonstrated multiple benefits.
■ Programs such as Healthy Families America, Nurse–Family Partner-
ship, and Parents as Teachers address threats to the social, emotional,
and cognitive health of children of low-income families by assessing
family needs, educating and supporting parents, and referring and
coordinating services as needed. They can help parents and children
to build better relationships, strengthen family support networks,
and link families to community resources, although results have not
been consistent across implementations (Olds, 2016).
■ The Let’s Move! initiative proposed to create a healthy start in life for
children from pregnancy through early childhood, serve healthier
food in schools, and increase physical activity.
■ President Barack Obama’s national HIV/AIDS strategy envisioned
that the United States would become a place where new HIV infec-
tions are rare and when they do occur, every person—regardless of
age, gender, race and ethnicity, sexual orientation, gender identity,
or socioeconomic circumstances—would have unfettered access to
high-quality, life-extending care, free from stigma and discrimina-
tion (National HIV/AIDS Strategy for the United States, 2010).
■ The DHHS has announced a strategic action plan to end the tobacco
epidemic.
■ The DHHS has launched efforts to maximize vaccinations in targeted
racial and ethnic minority groups through coordinated efforts as
well as private–public partnerships.
■ The Interagency Working Group on Environmental Justice under
Executive Order 12898 charges each federal agency to identify and
address disproportionately high adverse human health or environ-
mental effects on minority and low-income populations.
■ The Office of Minority Health (2010) has launched the National
Partnership for Action to End Health Disparities.
■ An earlier program, Vaccines for Children, implemented in 1994,
was effective in reducing disparities in vaccination coverage among
U.S. children.
High-burden chronic conditions—such as diabetes, hypercholester-
olemia, hypertension, and obesity—can be addressed at both the individ-
ual and population levels through policy and environmental approaches
to change the context of health behaviors, through early detection and
better management in the health care system to improve outcomes,
268 Chapter 11 Populations with Special Health Needs
and through community programs linked to the health care system to
slow disease progression, mitigate complications, and avert adverse out-
comes. For people who have or who are at high risk for chronic condi-
tions, community-deployed, evidence-based, disease self-management
regimens can help improve their quality of life and reduce the number
of health care visits needed to maintain good health (Administration
on Aging, 2017). The combination of whole-population and individ-
ual approaches, including targeted resources and support for popula-
tion subgroups with the greatest burden, can reduce the prevalence of
chronic disease and narrow health disparities.
Over time, community-based and clinically based prevention strate-
gies may be developed to address the root causes of chronic conditions such
as social conditions and physical environments and manage their existing
burden. These prevention strategies seek to create community conditions
that support health, such as community water fluoridation and smoke-free
air laws, and strengthen links between community settings and health care
systems to ensure that patients and caregivers have the means to better
manage their health outside the clinical setting (Pearson et al., 2013).
Collaborations between health care systems and public health efforts
are needed to bundle strategies and interventions, address combinations
of risk factors and conditions, create population-wide changes, help the
most affected subgroups, and ensure implementation of measures under-
taken in many sectors, including public–private partnerships where all
stakeholders are involved. The magnitude of the chronic disease issue
in the United States requires a sustained policy and program focused
on high-value prevention targets that draw upon strengthened links
between public health and clinical care. Historically, major improve-
ments in population health were achieved through collaborations with
other sectors, such as investments in water and sewage systems, and
policies and regulations establishing housing and transportation safety
standards (Cutler & Miller, 2005). The existing burden of chronic condi-
tions underscores the urgent need to intensify upstream policy and envi-
ronmental approaches to prevent chronic diseases by reducing tobacco
use, improving nutrition, increasing physical activity, and strengthening
community programs that are connected to clinical settings.
Furthermore, health care financing strategies can be employed to
reduce health disparities. Traditional financing models in the United
States deliver suboptimal population health outcomes, allow substantial
health disparities to arise and persist, and exacerbate the burgeoning
costs of medical care. Instead, payment mechanisms that value preven-
tion over acute care should encourage providers to address social fac-
tors that drive the need for services (National Academies of Science,
Engineering, and Medicine, 2016).
Eliminating Disparities 269
Public health surveillance data provide essential information to guide
these strategies by measuring the burden of chronic diseases (i.e., down-
stream indicators), informing priority setting for interventions, and moni-
toring progress for the whole population and across population subgroups
(Brownson & Bright, 2004; Wegner et al., 2010). Key risk factors and indi-
cators of the epidemiology and burden of chronic diseases are monitored
in surveillance and data systems at the state and national levels. For exam-
ple, the Behavioral Risk Factor Surveillance System (BRFSS) measures
the prevalence of lifestyle risk factors at the state level (Li et al., 2011),
while the National Health and Nutrition Examination Survey (NHANES)
and the National Health Interview Survey (NHIS) (Adams et al., 2011)
measure the prevalence of selected chronic conditions and health indica-
tors at the national level. These systems also allow monitoring of conditions
and risk behaviors by education, income, race or ethnic origin, and other
variables related to health disparities. The National Vital Statistics System
(NVSS) measures national cause-specific death rates, and state vital records
offices register statewide deaths that together produce national mortality
data. Analyses of national survey data (Anderson, 2010) and, particularly
for those age 65 years and older, Medicare fee-for-service claims data pro-
duce estimates of expenditures associated with chronic conditions.
▸ Conclusion
This chapter has examined the major characteristics of certain vulnerable
U.S. population groups that face challenges and barriers in accessing health
care services. These groups may be organized along predisposing, enabling,
and need characteristics and include racial/ethnic minorities, children and
women, persons living in rural areas, the homeless, the mentally ill, and
individuals with HIV/AIDS. Current gaps between these groups and the
rest of the population demonstrate the need for significant efforts to
address the unique health concerns of vulnerable U.S. subpopulations.
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https://www.samhsa.gov/samhsa-data-outcomes-quality/major-data-collections/reports-detailed-tables-2015-NSDUH
https://www.samhsa.gov/samhsa-data-outcomes-quality/major-data-collections/reports-detailed-tables-2015-NSDUH
https://www.samhsa.gov/samhsa-data-outcomes-quality/major-data-collections/reports-detailed-tables-2015-NSDUH
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https://www.hudexchange.info/resources/documents/2016-AHAR-Part-1
http://www.who.int/nmh/publications/ncd_report2010/en/
© ninjaMonkeyStudio/Getty Images
CHAPTER 12
Cost, Access, and
Quality
▸ Introduction
The effectiveness of a health care delivery system is typically evaluated in terms of cost, access, and quality. All three major outcomes of health care delivery continue to be considered by
various stakeholders. Yet, unless costs are brought down to a reasonable
level, any achievements in the other two domains will remain elusive,
because cost, access, and quality are interrelated.
From a macro prospective, costs are commonly viewed in terms of
national expenditures for health care. A widely used measure for national
health expenditures is the proportion of its gross domestic product (GDP)
that a country spends on the delivery of health care services. In simple
275
terms, national health expenditures refer to the proportion of national
income that a country spends on health care. From a micro perspective,
health care costs refer to the cost of purchasing health insurance and
the out-of-pocket costs incurred by individuals when they receive health
care services. Costs must be contained at both the macro and micro lev-
els. Increased access generally leads to higher utilization and, in turn,
higher costs, assuming there are no significant structural changes in how
health care is delivered (e.g., prevention versus treatment, primary care
versus tertiary care, and community versus institutional orientation).
High-quality care should also be the most cost-effective care. Hence, cost
is an important factor in the evaluation of quality of health care services
delivered.
This chapter discusses some key reasons for the dramatic rise in
health care expenditures. Costs of health care in the United States are
compared with those of other countries, and the impact of various
cost-containment measures is examined. The U.S. government has
played a significant role in cost containment and quality improvement,
but access to health care by all Americans has not yet been achieved.
▸ Cost of Health Care
The term cost can carry different meanings in the delivery of health care,
depending on the perspective one takes. Three distinct meanings are
presented here.
First, when consumers and financiers speak of the cost of health
care, they are usually referring to the price of health care, such as the
physician’s bill or the premiums that both employers and employees pay
when purchasing health insurance.
Second, from a national perspective, health care costs refer to how
much a nation spends on health care services, commonly referred to as
health care expenditures or health care spending. These terms primarily
reflect the consumption of economic resources in the delivery of health
care. Such economic resources include health insurance, skills of health
care professionals, organizations and institutions of health care delivery,
pharmaceuticals, medical equipment and supplies, public health func-
tions, and new medical discoveries. Because expenditures equal price
multiplied by quantity (E = P × Q), growth in health care spending can
be accounted for by growth in the prices charged by providers as well as
by increases in the utilization of services.
A third perspective is that of the providers. From their viewpoint,
cost refers to staff salaries, capital costs for building and equipment,
rental of space, purchase of supplies, and other costs of production.
276 Chapter 12 Cost, Access, and Quality
It is useful to understand which factors drive costs, as this can help
identify which costs can be controlled to ensure that health care is deliv-
ered at an optimal value.
▸ The High Cost of U.S. Health Care
Health care spending spiraled upward at double-digit rates during
the 1970s due to the massive expansion in access to health care cre-
ated by the Medicare and Medicaid programs in 1965. By 1970, U.S.
government expenditures for health care services and supplies had
grown by 140%, from $7.9 billion to $18.9 billion (National Center
for Health Statistics [NCHS], 1996). During the 1980s, the growth rate
began slowing down. Then, in the 1990s, medical inflation was finally
brought under control to a single-digit rate of growth, mostly because
medical care costs and utilization were controlled through managed
care. The average annual rate of growth in health spending slowed to
5.7% between 1993 and 2000 as managed care proliferated; however,
the growth rate then started to accelerate again. The recent economic
recession slowed health care spending growth substantially, with only
a 4.1% increase in 2008 and a 4.0% increase in 2009—the slowest
growth rate in more than 50 years. Simultaneously, however, federal
health spending increased as more people became eligible for benefits
and government revenues declined, increasing spending from 37.6%
of federal revenues in 2008 to 54.2% in 2009 (Martin et al., 2011). In
2015, total U.S. health care spending reached $3.2 trillion, or $9,990
per person (Centers for Medicare and Medicaid Services [CMS],
2015b, 2017). In 2016, 17.9% of the U.S. GDP was consumed by health
care (CMS, 2017).
Trends in national health expenditures are commonly evaluated by
comparing medical inflation to general inflation in the economy, mea-
sured by annual changes in the consumer price index and by comparing
changes in national health spending to changes in the GDP. Typically, the
rates of change in medical inflation have remained consistently above
the rates of change in the consumer price index, and health care spend-
ing growth rates have consistently surpassed growth rates in the general
economy. When health care spending grows at a faster rate than GDP,
a growing share of the country’s total economic resources is devoted to
health care delivery.
TABLE 12.1 compares U.S. health spending with that of 30 other
developed countries. In 2016, the United States spent $9,892 per capita
on health—approximately $2,400 more than the country with the second
highest spending, Luxembourg.
The High Cost of U.S. Health Care 277
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280 Chapter 12 Cost, Access, and Quality
https://stats.oecd.org
▸ Reasons for High Health Care Costs
The rise in health care expenditures has been attributed to the complex
interaction of many factors. General inflation in the economy is a prom-
inent cause of health care spending, because it affects the cost of pro-
ducing health care services through such tangibles as higher wages and
costs of supplies. Apart from general inflation, numerous other factors
influence medical cost inflation (EXHIBIT 12.1).
Third-Party Payment
Health care is among the few services for which a third party—not the
consumer—pays the lion’s share for most of the services used. Whether
the government or a private insurance company foots the bill, individual
patients pay a price that is far lower than the actual cost of the service
(Altman & Wallack, 1996). As a result, the propensity to utilize greater
quantities of health care than one would if services were fully paid out of
pocket—moral hazard—leads to excessive utilization. Actually, the par-
ties representing both demand (patient) and supply (provider) have little
incentive to be cost-conscious when someone else is paying the bill.
Growth of Technology
In the adoption and diffusion of intensive medical procedures, the
United States follows an early-start, fast-growth pattern (TECH Research
Network, 2001). The introduction and intensive use of technology
directly impacts the escalation of health care costs. Developing new tech-
nology is expensive, and research and development costs are included in
the total health care expenditures. Once technology is developed, its mere
availability creates demand for its use. The introduction of new technol-
ogy raises consumer expectations about the ability of medical science to
diagnose and treat disease and prolong life. Unsurprisingly, attempts to
EXHIBIT 12.1 Main Reasons for the High Cost of Health Care
■ Third-party payment
■ Growth of technology
■ Increase in the elderly population
■ Medical model of health care delivery
■ Multipayer system and administrative costs
■ Defensive medicine
■ Waste and abuse
■ Variations in practice
Reasons for High Health Care Costs 281
limit the diffusion of certain expensive technologies in the United States
have proved largely unsuccessful. Medical technology assessment—that
is, the systematic evaluation of new methods in medical care delivery in
terms of their efficacy—still lags behind in development and remains
unevenly applied.
Increase in the Elderly Population
During the past 100 years, life expectancy in the United States has
increased significantly. Life expectancy at birth increased by almost
30 years, from 47.3 years in 1900 to nearly 78.8 years in 2015 (NCHS,
2017). The increased life expectancy of the aging baby boomer popula-
tion has added to the notable increase in the total U.S. elderly popula-
tion. The elderly consume more health care services compared to other
age groups, incurring costs that are nearly three times as high as those
for the general population. In 2007, the average medical expenses for a
person 65 years or older amounted to $9,696 per person, compared to
$3,499 per person for individuals younger than 65 (NCHS, 2010, p. 377).
Personal health care spending for the 65 and older population was
$18,988 per capita in 2012, more than 5 times greater than the spending
per child ($3,552) and approximately 3 times the spending per working-
age person ($6,632) (CMS, 2018).
Medical Model of Health Care Delivery
The medical model emphasizes medical intervention after a person has
become sick, rather than focusing on prevention or lifestyle/behavior
changes to promote health. Although health promotion and disease pre-
vention are not the answer to every health problem, these principles have
yet to be accorded their rightful place in the U.S. health care delivery
system. Consequently, more costly health care resources must be used to
treat many health problems that could have been prevented or delayed
in onset.
Multipayer System and Administrative Costs
Administrative costs include costs associated with health insurance mar-
keting and enrollment, contracting with providers, claims processing,
utilization monitoring, and handling of denials and appeals. Because of
the complexity inherent in a multipayer system, costs are often dupli-
cated and account for as much as 25% of total health care expenditures
in the United States. A single-payer health care system may have lower
administrative costs.
282 Chapter 12 Cost, Access, and Quality
Defensive Medicine
The U.S. health care delivery system is riddled with legal risks for provid-
ers that encourage the use of defensive medicine. The practice of defen-
sive medicine involves tests and services that are not medically justified
but, rather, performed or ordered by physicians to protect themselves
against potential malpractice lawsuits. Unrestrained malpractice awards
by the courts and increased malpractice insurance premiums for physi-
cians significantly add to the cost of health care.
Waste and Abuse
Health care fraud is a major problem in Medicare and Medicaid pro-
grams. It may also occur when more services are provided than are med-
ically necessary, or when services that were not actually provided are
billed to third-party payers. The latter practice may entail billing for a
higher-priced service than is actually delivered, or picking a more favor-
able diagnosis as in a diagnosis-related groups (DRG) payment scheme.
Practice Variations
The work of John Wennberg and others brought to light a disturbing
aspect of physician behavior that accounted for wide variations in treat-
ment patterns for similar patients. These differences in practice are
referred to as small-area variations, in recognition of the fact that the
observed differences in practice patterns were associated only with cer-
tain geographic areas of the country. Such a variation in practice inten-
sity, which can be as great as twofold, cannot be explained by age, gender,
race, pricing variations, demand inducements, or health status (Baucus
& Fowler, 2002). Small-area variations signal gross inefficiencies in the
U.S. health care delivery system because they increase costs without
appreciably improving outcomes.
▸ Cost Containment
Even though rising health care expenditures may seem innocuous to
some, they must be controlled for several reasons. First, rising health
care costs mean that Americans must forgo other basic goods and ser-
vices such as education, housing, road, public transportation, safety.
Second, economic resources should be directed to their highest-valued
uses, even though consumers decide how much to spend on purchas-
ing a product or service based on their perception of its expected value
( Feldstein, 1994, p. 13).
Cost Containment 283
The United States has made many attempts to control health care spend-
ing, through a combination of government regulation and market-based
competition. Most undertakings have met with limited success, mainly
because implementing a system-wide cost-control initiative has not proved
feasible in such a fragmented system. Cost-containment measures in the
United States can be applied only in a piecemeal fashion and can affect only
specific targeted sectors of the health care delivery system at one time. In
contrast, national health care programs in other countries have single-payer
systems in which effective centralized controls are feasible.
Another reason that cost-control efforts in the United States have
not proved very successful is cost-shifting between programs and sec-
tors. Cost-shifting refers to the ability of providers to make up for lost
revenues in one area by increasing utilization or charging higher prices
in other areas that are free of controls. Only system-wide controls can
prevent cost-shifting.
Health Planning
Health planning refers to an undertaking by the government to align
and distribute health care resources in order to achieve desired health
outcomes for all people. Health planning employs supply-side rationing
to control health care expenditures. This kind of central planning func-
tion does not fit well in a system that is largely private, without a central
administrative agency to monitor the system. In the United States, the
types of health care services, their geographic distribution, access to these
services, and the prices charged by providers develop independently of
any preformulated plans.
Price Controls
In 1971, President Richard Nixon created the Economic Stabilization Pro-
gram, which limited the amount by which hospitals could raise their prices
from year to year (Williams & Torrens, 1993). The Economic Stabiliza-
tion Program controlled moderated influence on price increases for most
medical services; however, the program placed no limits on the quantity
of services or costs of production, and inflation returned to its pre-control
levels once the controls were lifted (Altman & Eichenholz, 1976).
Perhaps the most important initiative to control prices for inpa-
tient hospital care was the transformation of hospital Medicare reim-
bursement from a retrospective plan to a prospective system based on
diagnosis-related groups as authorized by the Social Security amend-
ments of 1983. This change reduced the growth in inpatient hospital
spending, but had little impact on total per capita Medicare cost infla-
tion; costs mainly shifted from the inpatient to the outpatient sector.
284 Chapter 12 Cost, Access, and Quality
Another rate-setting mechanism was the Omnibus Budget Reconcil-
iation Act of 1989, which helped establish a national Medicare fee sched-
ule. With this fee schedule, known as the resource-based relative value
scale, physicians are paid according to relative value units established for
more than 7,000 covered services. In addition, a volume performance
standard was implemented to contain the annual rate of growth in Medi-
care physician payments.
Peer Review
The term peer review refers to the general process of medical review of
utilization and quality carried out directly by, or under the supervision of,
physicians (Wilson & Neuhauser, 1985, p. 270). Under the Medicare pro-
gram, peer review organizations were established in 1984 to determine
whether care is reasonable, necessary, of adequate quality, and provided
in the most appropriate setting. Now called quality improvement organi-
zations, these statewide private organizations are composed of practicing
physicians and other health care professionals who are paid by the fed-
eral government to review the care provided to Medicare beneficiaries.
They can deny payment if the care does not meet certain standards.
Competitive Approaches
Competition refers to rivalry among sellers for customers (Dranove,
1993). In the context of health care delivery, health care providers try
to attract patients who can choose from several different providers.
Although competition more commonly refers to price competition, it
may also be based on technical quality, amenities, access, or other factors
(Dranove, 1993). In the United States, competitive reforms are preferred
because of the growing interest in market-oriented approaches across
many sectors of the economy during the Ronald Reagan presidency in
the 1980s. Market-oriented reforms were accompanied by mounting
cost-containment efforts in the private sector and the rise of managed
care. Competitive strategies can be classified into four broad types:
demand-side incentives, supply-side regulation, payer-driven price com-
petition, and utilization controls.
Demand-side incentives refer to cost-sharing mechanisms that place
a larger cost burden on consumers, thereby encouraging consumers to
be more cost-conscious in selecting the insurance plan that best serves
their needs and more judicious in utilizing services. Supply-side regu-
lation typically refers to U.S. antitrust laws, which prohibit business
practices that stifle competition among providers, such as price fixing,
price discrimination, exclusive contracting arrangements, and mergers
deemed anticompetitive by the Department of Justice. Such restrictions
Cost Containment 285
force health care organizations to be cost-efficient in order to survive.
Payer-driven price competition occurs when employers shop for the best
value in terms of the cost of premiums and the benefits package (compe-
tition among insurers), and when managed care organizations (MCOs)
shop for the best value from providers of health services (competition
among providers). In managed care, utilization controls have eliminated
some of the unnecessary or inappropriate services provided to consum-
ers by intervening in provider decisions, in an effort to ensure that only
appropriate and necessary services are provided.
Chronic Disease Prevention and Management
Approximately 70% of all U.S. health care costs are generated by 10% of
patients, who typically have one or more chronic diseases; thus, there is
enormous potential for cost containment through improving the deliv-
ery of care for chronic conditions. So far, steering the system toward a
preventive and chronic disease–oriented model has proved difficult.
But new approaches, such as the medical home model and accountable
care organizations, are being investigated as a means to nudge the health
care system in this direction. There is also a notable regulatory push for
providers to adopt electronic health records. The effectiveness of these
approaches in controlling costs remains uncertain.
▸ Unequal Access to Health Care
In broad terms, access to care can be defined as the ability to obtain per-
sonal health services that are needed, affordable, convenient, acceptable,
and effective in a timely manner. Access to appropriate health care ser-
vices is one of the key determinants of health status, along with envi-
ronment, lifestyle, and heredity factors. Access to care also helps assess
the effectiveness of the care delivery system and is increasingly linked to
quality of care and the efficient use of necessary services.
Although access is a familiar term used in both popular and aca-
demic media, it is associated with many differing concepts. It may refer
to the availability or unavailability of a usual source of care for an indi-
vidual, the actual utilization of health services, or the acceptability of
particular services. FIGURE 12.1 illustrates the system, provider, and indi-
vidual characteristics that influence access to care.
Data on Access
Population-based surveys supported by federal statistical agencies are
the major data sources for analyses on access to care. Large national
286 Chapter 12 Cost, Access, and Quality
surveys such as the National Health Interview Survey and the Medical
Expenditure Panel Survey are the leading data sources used to moni-
tor access trends as well as other issues related to health care. The latter
comprises a series of surveys on health care use and expenditures (e.g.,
inpatient, outpatient, and office-based care; dental care; and prescription
medications), health insurance coverage, access to care, sources of pay-
ment, health status and disability, medical conditions, health care qual-
ity, and measures of socioeconomic and demographic characteristics.
Other well-known national surveys are listed in TABLE 12.2. They
include national surveys and surveys on special topics.
The federal government also collects data on special topics such as
community health centers (e.g., Bureau of Common Reporting Require-
ment and Uniform Data System), human immunodeficiency virus/
acquired immunodeficiency syndrome (HIV/AIDS; e.g., HIV Cost and
Services Utilization Study 1994–1998), managed care (e.g., Consumer
Assessment of Health Plans Study 1996), and mental health (e.g., Men-
tal Health Care Services Study). The Medicare Current Beneficiary Sur-
vey, the Medicare Statistical System, the Medicaid Data System, and
FIGURE 12.1 Determinants of Access
System Characteristics
Availability
Volume
Distribution
Organization
Entry
Structure
Policy
Financing
Organization
Utilization
Type
Site
Purpose
Time Interval
Provider Characteristics
Treatment Efficacy
Interpersonal
Communication
Continuity
Appropriateness
Hours/Location
Outcomes
Health Status
Satisfaction
Recovery
Morbidity
Mortality
Cost
Individual Characteristics
Demographic
Beliefs
Health Status
Resources
Knowledge
Unequal Access to Health Care 287
TABLE 12.2 Selected National Surveys of Health Care
Survey Title Survey Author Survey Function
Current Population Survey
and Survey of Income and
Program Participation
U.S. Census
Bureau
Information on population
characteristics
Area Resource File Bureau of Health
Professions
Pools information
on characteristics of
population and health care
delivery system
National Health and
Nutrition Examination
Survey
NCHS Information on
demographics, prevalence
of selected diseases,
nutrition, and behavioral
risk factors
National Hospital
Discharge Survey
NCHS Data on short-stay hospital
discharges and utilization
Ambulatory Medical Care
Survey
NCHS Data on ambulatory
medical encounters
National Hospital
Ambulatory Medical Care
Survey
NCHS Data on ambulatory
hospital encounters
National Nursing Home
Survey
NCHS Data on nursing homes
and utilization, nursing
home residents, and
nursing home staff
Behavioral Risk Factor
Survey
CDC Data on health practices
and behavioral risks of
illness
National Health Provider
Inventory
CDC Data on inpatient facilities
Longitudinal Survey on
Aging
CDC Data on older individuals
National Nursing Home
Survey Follow-Up
CDC Data on nursing homes
288 Chapter 12 Cost, Access, and Quality
the Medicaid Demonstration Projects (1983–1984, 1992–1996) have
collected data relevant to Medicare and Medicaid.
States, associations, and research institutions also regularly collect
data on topics of interest. Examples include state health services utiliza-
tion data (e.g., all-payer hospital discharge data systems), state-managed
care data (e.g., managed care encounter data), state Medicaid enrollee
satisfaction data (e.g., Medicaid enrollee satisfaction surveys), physician
data from the American Medical Association’s Physician Masterfile, and
hospital data from the American Hospital Association’s Annual Survey
of Hospitals 1946 to present. Examples of research institution–based ini-
tiatives include data collection on the health care delivery system (e.g.,
Center for Evaluative Clinical Sciences: Dartmouth Atlas of Health Care
in the United States), women’s health (e.g., Commonwealth Fund: Wom-
en’s Health Survey 1993), minority health (e.g., Commonwealth Fund:
Health Care Services and Minority Groups: A Comparative Survey of
Whites, African Americans, Hispanics, and Asian Americans 1994),
health insurance (e.g., Mathematica Policy Research/Robert Wood
Johnson Foundation: Family Survey on Health Insurance 1993–1994),
and access to care (e.g., Robert Wood Johnson Foundation National
Access Surveys, Mathematica Policy Research: Access to Care Pilot Sur-
vey of Medicaid Beneficiaries 1994).
With the growth of managed care, encounter databases have become
critical in recording and evaluating access to care. In addition to the fed-
eral government, private nonprofit research centers collect information
on managed care. Examples include the National Health Maintenance
Organization Census (1977 to the present, sponsored by Interstudy) and
the Healthcare Effectiveness Data and Information Set (sponsored by the
National Committee for Quality Assurance).
Access Disparities
Access to care is best predicted by race, income, and occupation. These
three factors are interrelated: Individuals belonging to minority groups
National Employer Health
Insurance Survey
CDC Data on insurance
Vital Statistics of the United
States
CDC Vital statistics information
Abbreviations: CDC: Centers for Disease Control and Prevention; NCHS: National Center for Health Statistics.
Data from Centers for Disease Control and Prevention; NCHS, National Center for Health Statistics. http://www.cdc.gov
/nchs/surveys.htm
Unequal Access to Health Care 289
http://www.cdc.gov/nchs/surveys.htm
http://www.cdc.gov/nchs/surveys.htm
tend to be poorer, less educated, and more likely to work in job environ-
ments that pose greater health risks. In the United States, both low socio-
economic status and minority group membership are associated with
lower overall health care access and utilization. Racial/ethnic minorities
are less likely than their white counterparts to have a specific source of
ongoing care. A similar trend is observed among lower-income indi-
viduals as compared to their higher-income counterparts. Among per-
sons with a usual source of care, blacks and Hispanics are more likely
than whites to have hospital-based (as opposed to office-based) care.
Hispanics, in particular, are less likely than their non-Hispanic white
counterparts to have a usual primary care provider (36% versus 21%).
Nonwhite beneficiaries of Medicare have fewer cancer screenings, fewer
flu shots, less mental health care, and fewer ambulatory and physician
visits than their white counterparts (Almario et al., 2016; Daly et al., 2017;
Gornick, 2000; Jackson et al., 2016; Nadruz et al., 2017; Saadi et al., 2017).
Geographic disparities in access are also present, such that individ-
uals in rural areas face greater barriers to access than those residing in
urban areas. Rural Americans have higher mortality and morbidity rates
and shorter life expectancies than their urban counterparts (Cordes,
1989; DeFriese & Ricketts, 1989; Rowland & Lyons, 1989; Sherman,
1991). Although rural residents have a greater need for health care ser-
vices, services to address their needs are often sorely lacking. The main
challenges in rural health care delivery include shortage and maldistri-
bution of physicians, lack of both primary and specialty care services,
and inability to pay for services.
Access Initiatives
Access to care has been incrementally addressed by the U.S. govern-
ment through a variety of public programs. Efforts to increase access
for disadvantaged populations have been undertaken periodically
throughout U.S. legislative history. The Sheppard-Towner Act of 1921
exemplifies early federal attempts to provide direct primary care health
services to economically disadvantaged mothers and children. Gov-
ernment interest in ensuring access to care for other lower-income
populations grew during World War II, when comprehensive care was
extended to the wives and children of low-rank armed forces person-
nel. Concern for the health care access for disadvantaged populations
paved the way for the Great Society programs of the 1960s to help the
elderly and poor through the Medicare and Medicaid programs.
Later, services such as cancer screening and immunizations were
added to Medicare, and states were allocated $24 million in 1997 to
create the Children’s Health Insurance Programs (CHIP) for children
in low-income families who do not otherwise qualify for Medicaid.
290 Chapter 12 Cost, Access, and Quality
Several states have expanded their Medicaid programs under the Afford-
able Care Act (ACA), although the mandate for all states to expand Med-
icaid was struck down by the U.S. Supreme Court.
▸ Health Care Quality
Quality can be interpreted from both a micro perspective and a macro
perspective. EXHIBIT 12.2 provides examples of micro- and macro-level
quality indicators. The micro view focuses on services at the point of
delivery and their effects, and is associated with the performance of care-
givers and health care organizations. The macro view looks at quality
from the view of populations and reflects the performance of the entire
health care delivery system.
The Institute of Medicine defines quality as “the degree to which health
services for individuals and populations increase the likelihood of desired
health outcomes and are consistent with current professional knowledge”
(McGlynn, 1997, p. 8). This definition has several implications:
1. Quality performance occurs on a continuum, theoretically
ranging from unacceptable to excellent.
2. Quality focuses on the services provided by the health care
delivery system, as opposed to individual behaviors.
3. Quality may be evaluated from the perspective of individuals,
populations, or communities.
4. Quality emphasizes desired health outcomes, and evidence
must be used to identify the services that improve health
outcomes.
5. In the absence of evidence regarding appropriateness of care,
professional consensus can be used to develop the definition
and measurement of quality (McGlynn, 1997).
EXHIBIT 12.2 Selected Quality Indicators
Micro level
■ Small-area variations
■ Medical errors
■ Patient satisfaction
■ Quality of life
■ Health outcomes
Macro level
■ Costs of care
■ Access to care
■ Population health
Health Care Quality 291
Although comprehensive in many respects, the definition of quality
proposed by the Institute of Medicine fails to include the roles of cost
and access in the evaluation of quality. Even though the United States
spends more of its GDP on health care than other nations, Americans are
not the healthiest people in the world. The main reasons that the United
States trails behind other industrialized nations in population measures
of health include inadequate emphasis on disease prevention and health
promotion, poor access to primary health care, and prevailing socioeco-
nomic and racial/ethnic disparities in health and health care. Greater
health care expenditures and more intensive use of medical technology
do not necessarily produce better health. In other words, more is not
better and does not imply better quality.
In his well-known model for defining and measuring quality
in health care organizations, Donabedian (1980) proposed three
domains in which to examine health care quality: structure, process,
and outcomes, which are all important in measuring the quality of
care.
The domains of structure, process, and outcomes are closely linked
(FIGURE 12.2). They are also hierarchical. Specifically, structure is the
foundation of quality of care; good processes require good structure.
Deficiencies in structure generally have a negative effect on health
care delivery processes (defined in the “Process” subsection later in
this section). Together, structure and processes influence quality out-
comes. This model views quality strictly from the perspective of the
delivery system, and it does not account for social and individual life-
style and behavioral factors that may also have a significant influence
on health status.
Structure
Structure is defined as “the relatively stable characteristics of the providers
of care, of the tools and resources they have at their disposal, and of the
physical and organizational settings in which they work” ( Donabedian,
1980, p. 81). Structural measures indicate the extent to which health care
organizations can provide adequate levels of care (Williams & Torrens,
1993). Hence, structure is an indirect measure of quality, assuming that a
good structure enables health care delivery professionals to employ good
processes that lead to good outcomes.
A significant initiative geared toward improving structure is the use
of electronic health records (EHR)—digitally formatted medical records
that provide real-time patient medical information for authorized per-
sonnel (HealthIT, 2013). However, their effectiveness in improving qual-
ity is not yet clearly established.
292 Chapter 12 Cost, Access, and Quality
Process
Process refers to the specific manner in which care is provided. Examples
of process include diagnostic tests, prescriptions, drug administration,
pharmaceutical care, waiting time to see a physician, and interpersonal
aspects of care delivery. As with structure, it is important to relate process
FIGURE 12.2 The Three Domains of Health Care Quality
OUTCOME
Final Results
Patient satisfaction
Health status
Recovery
Improvement
Nosocomial infections
Iatrogenic illnesses (injuries)
Rehospitalization
Mortality
Incidence and prevalence
of disease
STRUCTURE
Resource Inputs
Facilities
• Licensing
• Accreditation
Equipment
Staffing levels
Staff qualifications
• Licensure and accreditation
• Training
Delivery system
• Distribution of hospital beds
and physicians
PROCESS
Actual Delivery of Health Care
Technical aspects of care
• Diagnosis
• Treatment procedures
• Correct prescriptions
• Accurate drug administration
• Pharmaceutical care
• Waiting time
• Cost
Interpersonal aspects of care
• Communication
• Dignity and respect
• Compassion and concern
Health Care Quality 293
to care outcomes, and structures and processes should be employed with
the objective of achieving better outcomes. Significant initiatives toward
improving process have taken place in recent years, including clinical
practice guidelines, cost-efficiency analysis, critical pathways, and risk
management (discussed in the “Developments in Process Improvement”
section later in this chapter).
Outcome
Outcome refers to the effects or final results of utilizing the structure and
processes of health care delivery. Outcomes are viewed by many as the
bottom-line measure of the effectiveness of the health care delivery sys-
tem (McGlynn & Brook, 1996). Positive outcomes suggest recovery from
disease and improvement in health as well as an overall improvement in
population’s health. Outcome measures include postoperative infection
rates, nosocomial infections, iatrogenic illnesses, rates of hospitalization
readmission, and patient satisfaction.
▸ Quality Strategies and Initiatives
Several government agencies, individual organizations, and collabora-
tive initiatives have helped shape the national health care agenda with
respect to quality improvement, cost-saving transparency, accountability,
improvement, and informed choice. Within their respective areas of focus,
they have helped to advance technical knowledge, resources, and tools.
The CMS Quality Strategy strives to achieve the three broad aims of
the National Quality Strategy (CMS, 2013):
■ Better care: Improve the overall quality of health care by making care
more patient-centered, more reliable, more accessible, and safer.
■ Healthy people, healthy communities: Improve the health of the U.S.
population by supporting evidence-based interventions to address
behavioral, social, and environmental determinants of health in
addition to delivering higher-quality care.
■ Affordable care: Reduce the cost of quality health care for individu-
als, families, employers, and the government.
The ACA requires the U.S. Department of Health and Human Ser-
vices to develop quality-focused data collection and reporting tools
such as a quality rating system, a quality improvement strategy, and an
enrollee satisfaction survey system. Information obtained with these
tools will inform consumer selection of a Quality Health Plan (QHP),
decisions about QHP certification, and the monitoring of QHP perfor-
mance by federal and state marketplaces (CMS, 2015a).
294 Chapter 12 Cost, Access, and Quality
Formerly known as the Physician Quality Reporting Initiative, the
Physician Quality Reporting System (PQRS) encourages eligible indi-
vidual professionals and group practices to report information on the
quality of care to Medicare. PQRS allows participating professionals and
group practices to assess the quality of care they provide. In 2015, the
program applied a negative payment adjustment to eligible individual
professionals and group practices that failed to satisfactorily report data
on quality measures for Medicare Part B Physician Fee Schedule– covered
professional services via PQRS in 2013. Those who report satisfactorily
for the 2015 program year will avoid the 2017 PQRS negative payment
adjustment (CMS, 2015c).
The Agency for Healthcare Research and Quality (AHRQ) devel-
oped a set of Quality Indicators (QIs)—standardized, evidence-based
measures of health care quality that can be used with readily available
hospital inpatient administrative data. The 101 Quality Indicators are
organized into four main modules and two stand-alone modules that
measure quality associated with care delivery. To use the QIs, organi-
zations may download and use free software from AHRQ in SAS or
Windows format. The software output of QI results can be used to high-
light potential quality concerns, identify areas for further investigation,
and track changes in quality over time (AHRQ, 2017a).
Surveys for the Consumer Assessment of Healthcare Providers and
Systems (CAHPS) ask consumers and patients to report and evaluate
their health care experiences. These surveys focus on topics of relevance
to consumers and aspects of quality that consumers are best qualified
to assess, such as provider communication skills and ease of access to
care. All CAHPS surveys and related documents are free to anyone
who wishes to use these surveys to assess patients’ experiences of care.
Among the users of CAHPS survey results are patients and consumers,
health care providers, quality monitors and regulators, health plans,
community collaboratives, and public and private purchasers of health
care. These individuals and organizations use survey results to evaluate
and compare health care providers and to improve the quality of health
care services (AHRQ, 2017b).
My Own Network, Powered by AHRQ (MONAHRQ) is a free soft-
ware product for health care performance and quality reporting that
enables an organization to input its own hospital administrative data and
generate an interactive, data-driven querying website. The MONAHRQ
software tool, developed by AHRQ, supports public, web-based report-
ing of health care quality measures. It enables host users to automati-
cally generate their own interactive health care reporting website, which
they then host as they choose. Some sections of the reporting website are
designed for health care consumers, while other sections are designed
Quality Strategies and Initiatives 295
for more sophisticated data users. Although the MONAHRQ software
is available to anyone, its primary host users—those interested in gener-
ating and hosting a MONARHQ reporting website—may be state data
organizations, chartered value exchanges, and hospital organizations.
To generate the website, host users must provide input data—hospital
administrative data and/or another publicly available measure result
that MONAHRQ can load and report. Minimal technical knowledge is
required to use MONAHRQ (AHRQ, 2017c).
The Aligning Forces for Quality (AF4Q) program is a signature effort
of the Robert Wood Johnson Foundation to enhance the overall quality of
health care in selected communities, reduce racial and ethnic disparities,
and provide models for national health care reform. AF4Q asks the peo-
ple who receive care, the people who provide care, and the people who
pay for care to work together toward common, fundamental objectives
for better care. The 16 participating communities are geographically,
demographically, and economically diverse and, together, cover 12.5%
of the U.S. population. After eight years, AF4Q communities have built
transformative partnerships. Data on quality, cost, and patient experi-
ence measures are collected and publicly reported. Through this proj-
ect, practice coaches are deployed in hundreds of primary care practices,
hospitals are improving care from the emergency department to the bed-
side, patients are playing a crucial role in transforming health care, new
models for delivery and organization are being tested and implemented,
and innovative payment reform is becoming a reality (Robert Wood
Johnson Foundation, 2017a).
The Consumer–Purchaser Alliance is a collaboration among lead-
ing consumer, employer, and labor groups to promote the use of per-
formance measurement in health care to inform consumer choice,
value-based purchasing, and payment. Funded by the Robert Wood
Johnson Foundation and supported by participating organizations, the
collaboration envisions a future in which data on meaningful measures
of performance—clinical and patient-reported outcomes, coordination
of care across the health system, affordability, and patient experience—
are used by consumers to make informed choices about health care, by
purchasers to make good decisions about the health benefits they offer,
and by physicians, hospitals, and other health care providers to con-
tinuously improve the care they deliver. The result would be a system
that delivers top-quality, affordable care. The mission of the Consumer–
Purchaser Alliance is to strengthen the role of consumers and purchas-
ers in the quest for higher-quality, more affordable health care (Robert
Wood Johnson Foundation, 2017b).
The Informed Patient Institute (IPI) is an independent nonprofit
organization that provides credible online information for consumers
296 Chapter 12 Cost, Access, and Quality
about health care quality, patient safety, and health care costs. IPI rates
the usefulness of online doctor, hospital, and nursing home report cards
and provides Tip Sheets about what to do in case of concerns about qual-
ity in a hospital, nursing home, or physician’s office. Rollout of these ser-
vices began in California, Connecticut, Maine, New York, Pennsylvania,
and South Carolina. IPI also advocates for making quality and cost infor-
mation available to consumers (IPI, 2017).
The Joint Commission has a longstanding commitment to providing
meaningful information about the performance of accredited organiza-
tions to the public. Its Quality Check website (www.qualitycheck.org),
launched in 1996, fulfills this commitment. On the site, consumers can
search for accredited and certified organizations by city and state, name,
zip code, and organization Joint Commission ID number, if known. Con-
sumers can also find organizations by type of service provided in a geo-
graphic area, with results filtered by accreditation decision, provider type,
setting of care, or patient population, if preferred. Users can download
free hospital performance measure results by clicking on the Quality Data
Download tab, and print a list of Joint Commission–certified disease-
specific care and health care staffing programs, in addition to programs
with add-on certification in behavioral health home, memory care, pri-
mary care medical home, and other areas (Joint Commission, 2017).
The Measure Applications Partnership (MAP), a public–private
partnership convened by the National Quality Forum (NQF), provides
input to the U.S. Department of Health and Human Services (DHHS) on
selecting performance measures. Since 2011, the DHHS has called upon
MAP to recommend the most appropriate measures for public report-
ing, performance-based payment, and other uses. One of MAP’s key ini-
tiatives is to have stakeholders conduct an intensive annual review of the
quality measures being considered by the DHHS for more than 20 federal
health programs. More recently, MAP provided input to the DHHS on
assessing the quality of care for the nearly 10 million Americans who are
enrolled in both Medicare and Medicaid due to their very low income
and complex healthcare needs. Another recent MAP initiative is rec-
ommending core measures of quality of care for adults in Medicaid and
ensuring that the measure set evolves over time. In 2014, MAP began to
work on a core set of measures for children enrolled in Medicaid. The
DHHS is guided by the recommendations from all of these projects as it
finalizes measures for programs, which help improve the quality of care
for the more than 100 million Americans covered by these federal health
programs.
In convening MAP, the NQF brings together representatives of con-
sumers, businesses and purchasers, labor, health plans, clinicians and
providers, communities and states, and suppliers. MAP’s balance of
Quality Strategies and Initiatives 297
http://www.qualitycheck.org
these stakeholder interests ensures that the federal government receives
varied, thoughtful input on the selection of performance measures. As of
2018, MAP gathered approximately 150 health care leaders and experts,
representing nearly 90 private-sector organizations, as well as liaisons
from 7 federal agencies. MAP’s work is intended to foster the use of a
more uniform set of measures among federal programs and across public
and private sectors. This uniformity is intended to help providers better
identify key areas for improving quality; reduce wasteful data collection
for hospitals, physicians, and nurses; and curb the proliferation of redun-
dant measures that could confuse patients and payers (NQF, 2017).
▸ Developments in Process Improvement
Clinical Practice Guidelines
In response to findings of small-area variations, various professional
groups, MCOs, and the U.S. government have developed standardized
practice guidelines. Clinical practice guidelines (also called medical prac-
tice guidelines) are explicit descriptions of preferred clinical processes for
managing a clinical problem based on research evidence, where possi-
ble, and on consensus in the absence of evidence (Larsen, 1996). Hence,
clinical practice guidelines are designed to provide evidence-based or
well-researched protocols to guide physicians’ clinical decisions and to
promote lower costs of care and better health outcomes. Currently, the
National Guideline Clearinghouse works within the Agency for Health-
care Research and Quality to compile, update, and disseminate objective,
detailed clinical practice guidelines for various conditions, diseases, and
treatments in the U.S. (AHRQ, 2015).
Cost-Efficiency
Cost-efficiency, also referred to as cost-effectiveness, is an important
concept in quality assessment. A service is cost-efficient when the ben-
efit received is greater than the cost incurred in providing the service.
In economic terms, services beyond the optimal point produce dimin-
ishing marginal returns. This point also represents optimal quality,
which serves as a point of demarcation between underutilization and
overutilization. On the one hand, underutilization (underuse) occurs
when the benefits of an intervention outweigh its risks or costs, yet the
intervention is not used (Chassin, 1991). On the other hand, overutiliza-
tion (overuse) occurs when the costs or risks of treatment outweigh the
benefits, yet additional care is delivered. When health care is overused,
precious resources are wasted.
298 Chapter 12 Cost, Access, and Quality
Critical Pathways
Critical pathways are interdisciplinary, outcome-based, patient-centered
tools for clinical management that facilitate care coordination among
multiple departments and caregivers in a health care facility, such as a
hospital. A critical pathway is a timeline that identifies planned medical
interventions and expected patient outcomes for a specific diagnosis or
class of medical conditions, often defined by a diagnosis-related group.
Pathways may also measure factors such as patient satisfaction, self-
reported health status, mental health, and daily activities. Using these
tools reduces costs and improves quality by reducing errors, improving
coordination among different players, streamlining clinical manage-
ment, providing systematic data for assessing care, and reducing varia-
tion in practice patterns (Abrahams et al., 2017; Giffin & Giffin, 1994).
Risk Management
Risk management consists of proactive efforts to prevent adverse events
related to clinical care and facilities operations, with a special focus on avoid-
ing medical malpractice (Orlikoff, 1988). Initiatives by a health care organi-
zation to review clinical processes and establish protocols for the purpose of
reducing malpractice litigation can actually enhance quality of care. Malprac-
tice concerns cause defensive medicine; thus, risk-management approaches
should employ cost efficiency principles along with standardized practice
guidelines and critical pathways. Unfortunately, fear of litigation may lead
to reluctance on the part of hospitals and physicians to disclose preventable
harm and actual medical errors. In this respect, fear of litigation may actually
conceal problems that compromise patient safety (Lamb et al., 2003).
▸ Patient Safety
Patient safety and quality are two sides of the same coin. Quality indi-
cates higher performance and better clinical and health outcomes, while
safety emphasizes the absence of medical errors that could compromise
performance and reduce clinical and health outcomes. A patient safety
event is any process, act of omission, or commission that causes hazard-
ous health care conditions or unintended harm to the patient. Patient
safety has become a major concern of society and policymakers. A report
by the Institute of Medicine,1 To Err Is Human: Building a Safer Health,
1 The Institute of Medicine was renamed the National Academy of Medicine
in 2015.
Patient Safety 299
highlighted the risks of medical care in the United States. A primary
focus of patient safety research has been to analyze data to identify prob-
lems and prove that a new practice will lead to improved quality or safety.
First, the key safety issues that contribute to patient risk can be
classified as process errors in domains such as diagnosis, prescribing,
communication, policy, and administration. Pace et al. (2005) identified
medical errors and their relationship to harm in the U.S. health care sys-
tem by analyzing medical errors reported to the Patient Safety Reporting
System. From 357 reports, 608 errors were identified and subjected to
univariate, bivariate, and multivariate logistic analysis. The study found
that harm was associated with the therapeutic intent of an activity (odds
ratio [OR], 2.71; 95% confidence interval [CI], 1.75–4.17), language
barriers (OR, 8.35; 95% CI, 2.52–27.65), errors of judgment (OR, 2.36;
95% CI, 1.34–4.16), communication from another office (OR, 2.11; 95%
CI, 1.20–3.73), mistiming of procedures (OR, 1.95; 95% CI, 1.28–2.95),
and medication errors (OR, 4.14; 95% CI, 2.69–6.39) (Pace et al. 2005).
Second, a failure to capture and maintain accurate, comprehensive
clinical information may present a risk in U.S. primary care. Primary
care coordination or management is information-intensive and may be
impeded if relevant clinical information is missing. In a cross-sectional
survey conducted by Smith et al. (2005) among U.S. ambulatory care
physicians, missing clinical information was reported in 13.6% of vis-
its. Important missing information included laboratory results, letters,
radiology results, history and physical examination documentation, and
information relating to patient medications. The authors reported that
this missing information was likely to adversely affect patients in 44% of
cases and had resulted in delayed care or a need for additional services in
60% of cases (Smith et al., 2005).
Third, the failure to maintain medical equipment is a risk to patient
safety. A wide range of equipment is used in primary care settings, and
potential errors in maintaining or using such equipment may result in
patient harm. Daniel and Rupert (2003) conducted a cross-sectional sur-
vey study of the calibration of ultrasound units in physical therapy com-
munities. They found that a large percentage (44% of the 45 machines
tested) of ultrasound machines in chiropractic physicians’ offices deliv-
ered too much or too little dosage to the patient. Electrical safety inspec-
tions also revealed a significant failure rate, as only 2 of the 45 machines
tested had been checked for safety in the previous 12 months (Daniel &
Rupert, 2003).
Fourth, processes associated with ordering, transcribing, dispensing,
administering, or monitoring medications are sources of potential risk to
patient safety. The role of pharmacists in potential medication errors,
unregulated alternative therapy, and patient risk has been investigated.
300 Chapter 12 Cost, Access, and Quality
Evidence suggests that high prescription volumes, pharmacist fatigue,
pharmacist overwork, interruptions to dispensing, similarity or confu-
sion in drug names, lack of systematic dispensing workflow, or lack of
regulatory guidelines may result in dispensing errors that compromise
patient safety (Davis et al., 2004; Franks et al., 2009; Persell et al., 2004).
Finally, diagnostic errors pose a particular risk to patient safety. In a
descriptive cross-sectional analysis of malpractice databases of the Phy-
sician Insurers Association of America (PIIA) conducted by Philips et al.
(2004), one-third of the underlying causes of malpractice claims were
due to diagnostic errors, followed by medication errors, improper per-
formance, failure to communicate with patients, and failure in referral.
As for solutions to reduce patient safety risk, current efforts can be
summarized as follows. First, pharmacist-led reviews of medication can
help reduce hospital admissions. Krska et al. (2001) conducted a ran-
domized controlled trial in a primary care setting to determine whether
a multidisciplinary approach (pharmacist and general practitioner)
could reduce medication-related problems in patients with chronic dis-
eases who took multiple drugs. Such problems included adverse drug
reactions, poor compliance with therapy, and inappropriate drug selec-
tion. Pharmacists reviewed the medications of 332 patients with at least
two chronic health conditions who took at least four prescribed medica-
tions daily. The intervention group had their medications reviewed and a
pharmaceutical care plan drawn up, whereas the control group received
usual care. After 3 months, 70% of the medication problems in the inter-
vention groups were resolved, compared to 14% in the control groups.
The authors reported that pharmacist-led medication review may sub-
stantially reduce medication-related errors, and any patient 65 years or
older should have a pharmaceutical review. Although this is only a single
study, it provides evidence that regular review of medication is one way
to reduce the risk of medication errors (Krska et al., 2001).
Second, evidence suggests that accuracy in electronic prescriptions
is improving, but could improve further. Steele et al. (2005) confirmed
the benefit of automated alerts on provider ordering behavior in a U.S.
outpatient setting. As prescribers ordered medications on a computer, an
alert was automatically displayed for any relevant drug–laboratory result
interactions. Drug–laboratory interaction refers to clinically relevant
laboratory-determined values associated with medication use. The num-
ber and type of laboratory tests a prescriber ordered were monitored in
response to automated drug alerts. This study focused on interactions
related to medication use that could lead to hyperkalemia or hypokale-
mia, among other interactions. As providers ordered medications on a
computer, any “abnormal” or “missing” laboratory values were identi-
fied and an automatic alert was provided (Steele et al., 2005). This study
Patient Safety 301
concluded that providers tended to adhere to alerts and use this feedback
to improve patient care.
Third, educational interventions may increase awareness of patient
safety risk among both medical students and medical practitioners.
Wallace et al. (2007) examined interventions within the English health
authority that were designed to improve risk management in general
practice. Educational interventions included the practices’ own initia-
tives, significant event audits (SEAs), and workshops with the Medical
Defence Union which included significant event analysis of reported
errors. The authors reported that promoting education among general
practitioners, practice nurses, practice managers, and administrative
staff yielded improved competence in identifying and managing patient
risk over the period of the study, particularly through widening the
breadth of staff involved in patient safety and using formal recording
systems (Wallace et al., 2007).
Fourth, reporting patient safety events appears to be an effective
approach for improving patient safety. The mechanism of event reporting
was first introduced in high-risk industries, such as the aviation, nuclear,
and rail industries, to improve safety and enhance organizational learn-
ing from errors. The mechanism was then extended to health care sys-
tems, with additional features such as anonymous reporting, meaningful
feedback, and greater ease of reporting. By collecting data on adverse
events and near misses in health care, the reporting systems enable safety
specialists to analyze events, identify underlying factors, and generate
actionable knowledge to mitigate risks. Since the emergence of electronic
patient safety reporting (e-reporting) systems, the collection and analy-
sis of events has been conducted more efficiently than with traditional
paper-based systems (Kou et al., 2012; Pronovost et al., 2008).
Finally, more recent studies have examined the relationships among
the safety culture, patient safety, and quality of care outcomes in hos-
pital settings and identified directions for future research. In a system-
atic review of patient safety culture and patient outcomes, DiCuccio
(2015) observed inconsistent findings regarding significant relation-
ships between safety culture and nursing-sensitive patient outcomes. For
example, one study found that a strong safety culture was related to fewer
medication errors (Chang & Mark, 2011), whereas other investigators
found that a strong safety culture was associated with more medication
errors (Mark et al., 2008). Similarly, Mark et al. (2008) found a positive
relationship between safety culture and patient falls, whereas Obrien
(2009) found nonsignificant results. It is possible that a heightened safety
culture may yield greater awareness and sensitivity in measurement,
leading to a positive correlation between safety culture and safety issues.
302 Chapter 12 Cost, Access, and Quality
▸ Conclusion
Increasing costs, lack of access, and concerns about quality of health care
constitute the greatest challenges to health care delivery in the United
States. To some extent, these three issues are interrelated. Increasing
costs limit the ability of the health care delivery system to expand access.
However, without universal health insurance coverage for all Americans,
the United States is unlikely to ever match other developed countries in
population health outcomes.
Health care costs in the United States are the highest in the world.
The shift toward prospective payments and the growth of managed care
helped curb the rise in health care spending during the 1990s. Even so,
current forecasts predict accelerated spending growth in the future, as a
larger share of U.S. economic resources will be spent on health care.
Access to appropriate medical care is one of the determinants of
health status, along with environmental, lifestyle, and heredity factors.
Access is also regarded as a benchmark in assessing the effectiveness of
the medical care delivery system, and is explained in terms of enabling
and predisposing factors as well as factors related to health policy and
health care delivery.
One reason that the effort to pursue quality in health care has
trailed behind the emphasis on cost and access to care is the challenge
of defining and measuring quality. Nevertheless, the growth of man-
aged care and the emphasis on cost containment have raised interest
in quality because of the intuitive concern that control of costs may
negatively impact quality. Much work remains to be done in specifying
what constitutes good quality in medical care, how to guarantee good
quality in patient care, and how to reward providers and health plans
whose outcomes indicate successes in quality improvement. One chal-
lenge to achieving this goal is that patients, providers, and payers may
define quality differently, translating into different expectations of the
health care delivery system and, therefore, differing evaluations of qual-
ity (McGlynn, 1997).
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© ninjaMonkeyStudio/Getty Images
CHAPTER 13
Health Policy
▸ Introduction
Although the United States does not have a centrally controlled system of health care delivery, the nation does have a history of federal, state, and local government involvement in health and
social policy. Perhaps the most well-known policy efforts were the social
programs created under Social Security legislation during Franklin Roo-
sevelt’s presidency in the 1940s. These paved the way for the creation
of the Medicare and Medicaid programs through amendments to the
Social Security Act in 1965. Recently, the Affordable Care Act (ACA)
has brought about multifaceted changes to the U.S. health care system,
yielding some benefits such as insurance expansion and use of informa-
tion technology, but not yet achieving other impacts such as those on
cost containment and quality improvement.
307
This chapter first defines health policy and explores the principal
features of health policy in the United States. Next, it describes the devel-
opment of U.S. legislative policy and gives examples of critical issues of
health policy. Finally, an overview of the ACA and subsequent events is
provided.
▸ What Is Health Policy?
Public policies are authoritative decisions that are made in the legislative
(congressional), executive (presidential), or judicial (courts, including
the Supreme Court) branches of government with the intention to direct
or influence the actions, behaviors, or decisions of others ( Longest,
2002). When public policies pertain to or influence the pursuit of health,
they become health policies. Thus, health policy can be defined as “the
aggregate of principles, stated or unstated, that … characterize the distri-
bution of resources, services, and political influences that impact on the
health of the population” (Miller, 1987, p. 15).
Different Forms of Health Policies
Health policies often arise as a by-product of public social policies cre-
ated by the government. A relevant example is the expansion of health
insurance coverage. Previously, policies that excluded fringe benefits
from income or Social Security taxes—and a U.S. Supreme Court ruling
that employee benefits, including health insurance, could be legitimately
included in the collective bargaining process—led to important changes
in the U.S. health care system. As a result, employer-provided health
insurance benefits grew rapidly in the mid-20th century (Health Insur-
ance Association of America, 1992). In 1965, adoption of Medicare and
Medicaid legislation expanded the health sector by providing publicly
subsidized health insurance to the elderly and indigent. More recently,
the ACA has reduced the number of uninsured Americans by several
million.
The American health care system has developed under exceedingly
favorable public policies. For example, the federally funded National
Institutes of Health (NIH) had a budget of approximately $10 million
when it was established in the early 1930s. Today, following exponen-
tial growth in funding, the NIH’s annual budget exceeds $30 billion
(NIH, 2017). In addition, private industry spends a significant amount
on biomedical research and development, encouraged by governmental
policies that permit businesses to recoup investments in research and
development.
308 Chapter 13 Health Policy
Health policies pertain to health care at all levels, including the
production, delivery, and financing of health care services. Such poli-
cies may affect groups or classes of individuals, such as physicians, the
poor, the elderly, or children. They can also affect organizations—such
as medical schools, health maintenance organizations (HMOs), nursing
homes, producers of medical technology, or employers. In the United
States, each branch and level of government can influence health pol-
icy. For example, both the executive and legislative branches at the fed-
eral, state, and local levels can establish health policies, and the judicial
branch can uphold, strike down, or modify existing laws affecting health
and health care at any level.
Statutes or laws are also considered policies—for example, the stat-
utory language in the 1983 amendments to the Social Security Act that
authorized the prospective payment system (PPS) for reimbursing hospi-
tals for Medicare beneficiaries. Another example is the certificate-of-need
programs through which many states seek to regulate capital expansion
in their health care systems.
Regulatory Tools
Health policies can be used as regulatory tools (Longest, 2002). They may
call upon the government to prescribe and control the behavior of a par-
ticular target group by monitoring the group and imposing sanctions for
failure to comply. Federally funded organizations for quality improve-
ment, for instance, develop and enforce standards for appropriate care
under Medicare. State insurance departments across the country regu-
late health insurance companies in an effort to protect customers from
excessive premiums, mendacious practices, and defaults on coverage in
case of the financial failure of an insurance company.
Some health policies are self-regulatory. For example, physicians set
standards of medical practice, and schools of public health decide which
courses are part of their graduate programs in public health (Weissert &
Weissert, 1996).
Allocative Tools
Health policies can also be used as allocative tools (Longest, 2002),
involving the direct provision of income, services, or goods to certain
groups of individuals or institutions. Allocative tools in health care are
of two main types: distributive and redistributive. Distributive policies
spread benefits throughout society and include NIH funding of med-
ical research, the construction of facilities (e.g., hospital construction
under the Hill-Burton Act program during the 1950s and 1960s), and
What Is Health Policy? 309
the establishment of new institutions (e.g., HMOs). Redistributive poli-
cies, in contrast, obtain resources from one group and allocate them to
another group—a system that often creates visible beneficiaries and pay-
ers. As a consequence, health policy is often most visible and politically
charged when it performs redistributive functions. Redistributive poli-
cies include Medicaid, which spends public taxes on the poor in the form
of free health insurance.
▸ Principal Features of U.S. Health Policy
Several distinct features characterize U.S. health policy, including the
role of the government as a subsidiary to the private sector; fragmented,
incremental, and piecemeal reform; pluralistic (interest group) politics; a
decentralized role for the states; the impact of presidential leadership; and,
to a lesser extent, the role of the research community. These interrelated
features often influence the development and evolution of health policies.
Government as Subsidiary to the Private Sector
In the United States, health care is not regarded as a right of citizenship
nor as a primary responsibility of government. Instead, the private sec-
tor plays a dominant role in providing health care. As with many other
public policy issues, Americans generally prefer market solutions over
government intervention in health care financing and delivery and thus
have a strong preference for minimizing the government’s role in health
care delivery. One result is that Americans are far more reluctant than
their counterparts in most other industrialized democracies to develop
social insurance programs. Public opinion in the United States often pre-
sumes such programs to be overly generous.
Generally, the role of government in U.S. health care has grown
incrementally, mainly in response to perceived problems and negative
consequences. The most widely cited problems associated with govern-
ment involvement include escalating costs, bureaucratic inflexibility and
red tape, excessive regulation, irrational paperwork, arbitrary and some-
times conflicting public directives, inconsistent enforcement of rules and
regulations, fraud and abuse, inadequate reimbursement, arbitrary denial
of claims, insensitivity to local needs, consumer and provider dissatisfac-
tion, and charges that such efforts tend to promote welfare dependence
rather than a desire to seek employment (Longest, 2002).
The most credible argument for policy intervention begins with
identifying situations in which markets fail or function inefficiently.
Health care in the United States is a large industry, but certain character-
istics and conditions of the health care market distinguish it from other
310 Chapter 13 Health Policy
types of businesses. Notably, the market for health care services in the
United States violates the conditions of a competitive market in several
ways.
For example, the complexity of health care services renders consum-
ers almost unable to make informed decisions without guidance from
the sellers (providers). In addition, the entry of sellers into the health
care market is heavily regulated. Widespread insurance coverage also
affects the decisions of both buyers and sellers in these markets. There-
fore, markets for health care services do not operate competitively, which
invites policy intervention to rectify perceived inequities.
Government spending for health care has been mostly confined
to filling gaps in the private sector. Such interventions have included
environmental protection, preventive services, communicable disease
control, care for special groups, institutional care for the mentally and
chronically ill, provision of medical care to the indigent, and support for
research and training. Health coverage is considered a privilege for those
offered insurance through employers, and the government is left to take
on a gap-filling role for the most vulnerable of the uninsured population.
Fragmented, Incremental, and Piecemeal Reform
The subsidiary role of the government and the attendant mixture of
private and public approaches to the delivery of health care also result
in a complex, fragmented pattern of health care financing. Under this
scheme, (1) the employed are predominantly covered by voluntary
insurance provided through contributions made by themselves and their
employers; (2) the aged are insured through a combination of coverage
financed out of Social Security tax revenues (Medicare Part A), volun-
tary insurance for outpatient and prescription drug coverage (Medicare
Part B and Part D), and voluntary purchase of Medigap plans; (3) the
poor are covered through Medicaid via federal, state, and local revenues;
and (4) special population groups, such as veterans, Native Americans,
and members of the armed forces, have coverage that is provided directly
by the federal government.
Health policies in the United States have been introduced in an incre-
mental, piecemeal fashion. One example is the gradual reforms in Med-
icaid since it was established in 1965. In 1984, the first steps were taken to
mandate coverage of pregnant women and children in two-parent fami-
lies who met income eligibility requirements and to mandate coverage for
all children age 5 years or younger who met financial eligibility require-
ments. In 1986, states were given the option of covering pregnant women
and children up to 5 years of age in families with incomes below 100% of
federal poverty income guidelines. In 1988, that option was expanded to
cover families with incomes at 185% of the federal poverty level. In 1988,
Principal Features of U.S. Health Policy 311
as part of the Medicaid Catastrophic Act, still in effect today, Congress
mandated coverage for pregnant women and infants in families with
incomes below 100% of federal poverty guidelines. (In 1989, this crite-
rion was expanded to 133% of the federal poverty income, and coverage
of children was extended to include children up to 6 years of age.) In
1988, Congress required that Medicaid coverage continue for 6 months
for families leaving the Aid to Families with Dependent Children pro-
gram and allowed states the option of adding another 6 months to that
extension. The Children’s Health Insurance Program (CHIP) lets states
use Medicaid expansion to extend insurance coverage to uninsured chil-
dren who do not otherwise qualify for existing Medicaid programs.
These examples illustrate how a program may be reformed and
expanded through successive legislative enactments over several years.
In characteristic American fashion, Medicaid has been reformed through
incremental change, but has not ensured access to care for all uninsured
people in the nation. Among the uninsured are millions of Americans
who are not categorically eligible for services—mostly adults younger
than age 65 with no dependent children. Congress has demonstrated the
desire and political will to address the needs of a small number of the
uninsured who are considered to be the most vulnerable (e.g., pregnant
women and children), but did not develop a consensus on more dra-
matic steps until the passage of the ACA. The ACA greatly increased
insurance options for previously uninsured Americans, including a
Medicaid expansion for adults with incomes up to 133% of the federal
poverty level (in states that chose to expand their Medicaid programs),
the creation of state and federal health insurance exchanges for better
regulation of private plans, and a prohibition on insurers against denying
coverage due to preexisting medical conditions.
The development process of legislative health policy offers another
vivid case of institutional fragmentation. Thirty-one different con-
gressional committees and subcommittees try to claim a fragment of
jurisdiction over health legislation. Reform proposals that emerge from
these various committees face a daunting political challenge, because
proposals must go through separate consideration and passage in each
chamber of Congress, are subject to negotiations in a joint conference
committee to reconcile bills passed by the two houses, and then return
to each chamber for approval. In the Senate, 41 of the 100 members can
thwart the process at any stage.
Even after a bill has passed in Congress, its journey is far from over.
Multiple levels of federal and state bureaucracy must interpret the leg-
islation, and rules and regulations must be written for its implementa-
tion. During this process, the ultimate design of the program may be
influenced by political actors, interest groups, or project beneficiaries.
312 Chapter 13 Health Policy
At times, the final result may differ significantly from the initial intent of
the congressional sponsors of the bill.
This complex and seemingly disorganized process of policy formu-
lation and implementation makes fundamental, comprehensive policy
reform extremely difficult to achieve. Traditional ideology and the hier-
archical organization of government reinforce the tendency to maintain
the status quo. It usually takes a great political event—a landmark elec-
tion, a mass popular upheaval, a war, or a domestic crisis—to shake off
(even if only temporarily) the tilt toward inaction. The passage of the
ACA was a notable feat in this regard, but it remains to be seen how
effectively the law will be in reducing health care costs while increasing
coverage and access to care.
Pluralistic and Interest Group Politics
Perhaps the most common explanation for health policy outcomes in
the United States is the role of interest groups and the incremental poli-
cies that result from compromises to satisfy their demands. Traditionally,
policy community members have included (1) the legislative committees
with jurisdiction in a policy domain, (2) the executive branch agencies
responsible for implementing policies in the public domain, and (3) the
interest groups in the private domain. The first two categories are the
suppliers of the policies demanded by the third category.
Innovative, non-incremental health policies are resisted by estab-
lished groups, because they undermine the bargaining practices designed
to reduce threats to established interests. The system is stable, because
overall most groups are satisfied with the benefits they receive; however,
the satisfaction for any single group is less than optimal.
The most effective demanders of health policies are the well-
organized interest groups. The pluralism of interest groups affects health
policy discussions, as it does any other policy debate in American pol-
itics. Powerful interest groups involved in health care politics are ada-
mant about resisting major change (Alford, 1975), and each group fights
hard to protect its own interests.
By combining and concentrating the resources of their members,
organized interest groups can dramatically change the ratio between
the costs and benefits of participation in the political arena for policy
change. Interest groups represent a variety of individuals and entities,
such as physicians in the American Medical Association, senior citi-
zens allied with AARP (formerly the American Association of Retired
Persons), institutional providers such as hospitals belonging to the
American Hospital Association, nursing homes belonging to the Ameri-
can Health Care Association or the American Association of Homes and
Principal Features of U.S. Health Policy 313
Services for the Aging, and member drug companies in the Pharmaceu-
tical Research and Manufacturers of America. In recent years, physicians
have often found it difficult to find a unified voice to lobby for their
interests, due to the sheer variety of physician specialty groups.
The policy agenda of interest groups is typically reflective of their
interests. For example, AARP advocates programs to expand financ-
ing for long-term care for the elderly. Organized labor was among the
staunchest supporters of national health insurance during the 1950s and
again in the 1990s. Universities, medical schools, and teaching hospi-
tals would like more funding (e.g., from the NIH) for research. Educa-
tional institutions and accrediting organizations have primary concerns
embedded in policies that enable them to receive more funding to
educate health care professionals.
Employers
The health policy concerns of American employers are mostly shaped
by the degree to which employers help provide health insurance bene-
fits for their employees, their employees’ dependents, and their retirees.
Many small business owners oppose health policies that require them
to provide employees coverage, believing they cannot afford to do so.
Health policies affecting the health of workers, or the health of labor–
management relations as experienced by employers, also attract their
attention. For example, employers must comply with federal and state
regulations for the health and well-being of their employees and engage
in measures to prevent job-related illnesses and injuries. Employers are
often subject to inspection by regulatory agencies to ensure that they
adhere to health and safety policies for the workplace.
Consumer Groups
Consumer interests are not uniform, nor are the policy preferences
of their interest groups. Often, consumers have insufficient financial
means to organize and advocate for their own interests. Because most
Americans already have private or public health insurance, consumer
concerns are directed more toward lowering premiums and copayments
or having more covered benefits, than toward expanding insurance to
the uninsured, especially if it imposes higher taxes or premiums for their
own insurance.
The health policy concerns of consumers and the groups repre-
senting them reflect the rich diversity of the American people. African
Americans and, more recently, a growing number of Hispanics experi-
ence unique health problems. Both groups are underserved for many
health care services and underrepresented in all health professions in the
314 Chapter 13 Health Policy
United States. Their health policy interests include having their unique
health problems be adequately addressed—including higher infant mor-
tality, higher exposure to violence among adolescents, higher levels of
substance abuse among adults, and earlier deaths from cardiovascular
disease and various other causes.
Manufacturers of Technology
The health policy concerns of medical technology and pharmaceuti-
cal organizations include discerning changes in health policy areas and
exerting influence over the formulation of policies. Health policy con-
cerns for medical technology (including pharmaceuticals) are driven by
three main factors: (1) Medical technology plays an important role in
rising health costs, (2) medical technology often provides health bene-
fits (albeit not always), and (3) medical technology provides economic
benefits in addition to health benefits. These factors are likely to
remain important determinants of the nation’s policies toward medical
technology.
Another factor that is driving current policy for medical technol-
ogy in the United States is the interest of policymakers in developing
cost-saving technology and expanding its access. To this end, the gov-
ernment spends an increasing amount of money on technology assess-
ment of the relative values of alternative technologies, presumably so it
can support the best values in technology.
Alliances
To overcome pluralistic interests and optimize health policy outcomes,
diverse interest groups may create alliances among themselves and with
members of the legislative body to protect and enhance the interests of
those benefitting from government programs. Members of the alliances
receive benefits from current programs. Meanwhile, legislators can show
their constituencies the economic benefits from government spending in
their districts, agencies can expand their programs, and interest groups
directly receive benefits bestowed by government programs.
Decentralized Role of the States
In the United States, individual states play a significant role in developing
and implementing health policies. The importance of the role of individ-
ual states can be seen in programs focused on the following concerns:
■ Financial support for the care and treatment of the poor and
chronically disabled, including primary responsibility for the admin-
istration of federal/state Medicaid and CHIP programs
Principal Features of U.S. Health Policy 315
■ Quality assurance and oversight of health care practitioners and
facilities (e.g., state licensure and regulation)
■ Regulation of insurance, including health insurance
■ Control of Medicaid costs
■ Health personnel training (states cover most of the cost for training
health care professionals)
■ Authorization of local government health services
States are vested with broad legal authority to regulate almost every
facet of the health care system. They license and regulate health care facil-
ities and health professionals; restrict the content, marketing, and price of
health insurance (including professional liability or malpractice insurance);
set and enforce environmental quality standards; and enact a variety of con-
trols on health care costs. All states bear a large responsibility for financing
health services for the poor, primarily through Medicaid, for which financ-
ing is shared with the federal government. In addition, most states subsidize
some of the costs of delivering health services to persons with neither public
nor private coverage. Personal health services that are funded or provided by
states, often in cooperation with local governments, include a range of ser-
vices, such as public health nursing, communicable disease control, family
planning and prenatal care, nutrition counseling, and home health services.
Most of the incremental policy actions of recent years originated
in state governments. One such action was the creation of insurance
risk pools—a measure intended to help persons who were otherwise
unable to acquire private insurance because of the medical risks they
posed to insurance companies. Most of these programs are financed by
a combination of individual premiums and taxes on insurance carriers.
Other state-initiated programs have addressed additional vulnerable
populations. For example, New Jersey developed a program to ensure
access to care for all pregnant women. Florida began the Healthy Kids
Corporation program to link health insurance to schools. Massachusetts,
Hawaii, and Oregon experimented with more comprehensive programs
designed to provide universal access to care within their jurisdictions.
Under the ACA, all states have to decide whether to expand Medicaid
and whether to establish a state-run health insurance exchange.
Arguments have been made against excessive state control over
health policy decisions. The more control states have, the more difficult
it is to develop a coordinated national strategy. For example, it is difficult
to plan a national disease control program if not all states participate
in the program or if they do not all collect and report data in the same
manner. Moreover, some critics argue that disparities among states may
cause inequalities in access to health services. This, in turn, may lead to
increased migration from states offering poor health benefits to states
providing more generous programs.
316 Chapter 13 Health Policy
Impact of Presidential Leadership
Americans often look to strong presidential leadership to catalyze major
change in health policies. In turn, presidents have key opportunities to
influence congressional outcomes by achieving political compromises
that allow for the passage of bills with at least some of their preferred
agendas.
President Lyndon Johnson’s role in the passage of Medicare and
Medicaid is often cited as a prime example. Johnson shepherded the pas-
sage of Medicare and Medicaid legislation through Congress in 1965 in
the context of an unusually favorable political opportunity and by effec-
tively using his leadership skills.
The major piece of health legislation that was passed under Pres-
ident Harry Truman was the Hill-Burton Hospital Construction Act.
Two other major pieces of health legislation were passed during Richard
Nixon’s presidency: (1) the actions leading to federal support of HMOs
in 1973 and (2) the enactment of the National Health Planning and
Resources Development Act of 1974. Under President Ronald Reagan,
new approaches to Medicare cost control for hospitals and physicians
were created, as well as additional Medicare coverage for the elderly.
Although President Bill Clinton’s efforts at comprehensive health care
reform failed, many of his incremental initiatives succeeded, including
the Health Insurance Portability and Accountability Act (HIPAA) of
1996 and CHIP.
Many political lessons can be learned from the failure of Clinton’s
health care reform initiative (Litman & Robins, 1997). Presidential lead-
ership in achieving landmark changes in health policies can be success-
ful only when political opportunity, political skill, and commitment
converge. Opportunities were uniquely abundant for Johnson in 1965, so
he effectively handled his legislative role. Presidents Harry Truman, John
Kennedy, and Jimmy Carter might have promoted their proposals with
greater skill, but were fundamentally thwarted by the absence of a true
window of opportunity. Clinton enjoyed uniquely high public interest
in health care reform but failed in part due to other weaknesses related
to opportunity, especially his failure to act within the first 100 days after
his inauguration. The complexity of the ever-changing details of his pro-
posal was another major flaw and ultimately proved too much for the
public to comprehend and too easy for adversaries to distort.
The 2008 presidential race, from which President Barack Obama
emerged victorious, offered another opportunity for Democrats to take
up health care reform. While campaigning for the presidency, Obama
presented a framework for health care reform to achieve three goals:
(1) modernize the U.S. health care system to improve quality and reduce
costs, (2) expand health insurance coverage to all Americans, and
Principal Features of U.S. Health Policy 317
(3) improve prevention and public health. The ACA is the most ambitious
expansion of insurance since the creation of Medicare and Medicaid.
Research and Policy Development
The research community can influence health policymaking through
documentation, analysis, and prescription (Longest, 2002). The first role
of research in policymaking is documentation—the gathering, catalog-
ing, and correlating of facts about the state of the world that policymak-
ers face. Documentation may help define a given public policy problem
or raise its political profile.
A second way in which research informs, and influences, policy-
making is through the analysis of what does and does not work. Program
evaluation and outcomes research fall under this domain. Analysis often
takes the form of demonstration projects intended to provide a factual
basis for determining the feasibility, efficacy, or practicality of a policy
intervention, and can help shape the solutions to health policy problems.
The third way in which research influences policy making is through
prescription. Research that demonstrates that a particular course of
action being contemplated by policymakers may (or may not) lead to
undesirable or unexpected consequences can contribute significantly to
policymaking.
▸ Development of Legislative Health Policy
The making of health policy in the United States is a complex process
involving both the private and public sectors, including multiple levels
of government.
Policy Cycle
The formation and implementation of health policy occur in a policy
cycle comprising five components: (1) issue raising, (2) policy design,
(3) building of public support, (4) legislative decision-making and build-
ing of policy support, and (5) policy implementation. These activities are
likely to be shared in varying degrees with Congress and interest groups.
The first component, issue-raising, is clearly essential in the policy
formation cycle. Before a new policy is enacted, various issue-raising
actions typically create widespread awareness of a problem and the need
for it to be addressed. The president may form policy concepts from a
variety of sources, including campaign information; party ideology; rec-
ommendations from advisers, cabinet members, and agency chiefs; per-
sonal views; expert opinions; and public opinion polls.
318 Chapter 13 Health Policy
The second component of policy-making activity involves the
design of specific policy proposals. Presidents have substantial resources
for developing new policy proposals. For example, they may call on seg-
ments of the executive branch of government, such as the Centers for
Medicare and Medicaid Services (CMS), or policy staff within the U.S.
Department of Health and Human Services.
In building public support, presidents can choose from a variety of
strategies. For example, they may make major addresses to the nation,
mobilize their administrations to make public appeals, and organize
attempts to increase support among interest groups.
In order to facilitate legislative decision-making and building of pol-
icy support, presidents, key staff, and department officials interact closely
with Congress. Presidents generally meet with legislative leaders several
times a month in an effort to shape upcoming legislative agenda and
identify possible problems as bills move through different committees.
Legislative Process
When a bill is introduced in the House of Representatives, the speaker
assigns it to an appropriate committee. The committee chair forwards
the bill to the appropriate subcommittee, which then forwards pro-
posed legislation to agencies that will be affected by the legislation,
holds hearings and debates (markup), receives testimony, and may add
amendments. The subcommittee and committee may recommend or
not recommend the bill, or recommend that the bill be tabled. Diverse
interest groups, individuals, experts in the field, and business, labor, and
professional associations often exert influence over the bill at this stage
through campaign contributions and intense lobbying. The full House
then hears the bill and may add amendments. The bill can be approved
with or without amendments, and the approved bill is sent to the Senate.
In the Senate, the bill is sent to an appropriate committee and then
forwarded to an appropriate subcommittee, which may send the bill to
agencies that will be affected and also holds hearings and receives tes-
timony from interested parties (e.g., private citizens, business, labor,
agencies, experts). The subcommittee votes on and forwards the pro-
posed legislation with appropriate recommendations. Amendments may
or may not be added. Then, the full Senate hears the bill and may add
amendments. If the bill and House of Representatives amendments are
accepted, the bill goes to the president. If the Senate adds amendments
that have not been voted on by the House, then the bill must go back to
the floor of the House for a vote.
If the amendments are minor and noncontroversial, the House may
vote to pass the bill. If the amendments are significant and controversial,
Development of Legislative Health Policy 319
the House may call for a conference committee to review the amend-
ments. The conference committee consists of members from the equiva-
lent committees of the House and Senate. If their recommendations are
not accepted, another conference committee is called.
After the bill has passed both the House and the Senate in identi-
cal form, it is forwarded to the president for signature. If the president
signs the legislation, it becomes law. If the president does not sign it,
after 10 days (excluding Sundays), it becomes law unless it is vetoed by
the president. If fewer than 10 days remain in the congressional session,
inaction on the part of the president results in a veto—a situation called
a pocket veto. The veto can be overturned by a two-thirds majority vote
of the Congress; otherwise, the bill is dead.
After legislation has been signed into law, it is forwarded to the
appropriate agency for implementation. The agency publishes proposed
regulations in the Federal Register and holds hearings regarding how the
law is to be implemented. A bureaucracy, only loosely controlled by the
president or Congress, writes regulations—namely, it publishes, gathers
comments about, and rewrites them. At that point, the program goes on
to all 50 states for enabling legislation, if appropriate. At the state level,
organized interest groups hire local lawyers and lobbyists, and a whole
new political cycle begins. Finally, to settle disputed issues, all parties
may adjourn to the courts, with potentially long rounds of litigation
shaping the final outcome.
▸ Critical Policy Issues
Government health policies have been enacted to resolve or prevent per-
ceived deficiencies in health care delivery. Over the last four decades,
most health policy initiatives and legislative efforts have focused on
access to care (e.g., expanding insurance coverage, outreach programs in
rural areas), cost of care (e.g., PPS, resource-based relative value scale),
quality of care (e.g., creating the Agency for Health Care Policy and
Research, later renamed the Agency for Healthcare Research and Quality
[AHRQ]), and calling for clinical practice guidelines.
Access to Care
Policies on access to care are intended primarily for health care pro-
viders and financing mechanisms, with the purpose of expanding care
to the most needy and underserved populations, including the elderly,
minorities, rural residents, individuals with low income, and persons
with acquired immunodeficiency syndrome (AIDS). In addition to the
coverage provisions of the ACA, other programs, such as an expansion
320 Chapter 13 Health Policy
of the Community Health Center program by 263 new centers (serving a
total of 1.25 million additional patients), aim to increase access to health
care services (Bureau of Primary Health Care, 2011).
Providers
Several groups of providers are involved in delivering health care. Policy
issues include ensuring a sufficient number of providers with a desir-
able geographic distribution. The debate over the supply of physicians
is an important public policy issue, because policy decisions influence
the number of persons entering the medical profession which, in turn,
has implications for other policies. The number of new entrants into the
profession is influenced by government assistance programs for indi-
vidual students and by government grants given directly to educational
institutions. On the negative side, an increasing supply of physicians may
result in increased health care expenditures because of provider-induced
demand. On the positive side, an increasing supply of physicians may help
alleviate shortages in certain regions of the country. Policy approaches to
expand access have included the National Health Service Corps, legisla-
tion supporting rural health clinics to expand geographic access to care,
student assistance programs to expand the pool of health care workers,
and legislation to expand the system of emergency medical services.
Public Financing
In the United States, public financing has largely been used to help vul-
nerable groups obtain health care. Vulnerable groups include the elderly
(Medicare), poor children (Medicaid), poor adults (Medicaid and local
or state general assistance), the disabled (Medicaid and Medicare), veter-
ans (Veterans Health Administration), Native Americans (Indian Health
Service), and patients with end-stage renal disease (Medicare and Social
Security benefits for kidney dialysis and transplants). Inadequate access
to care continues to be a problem in many communities, however, partly
because policies enacted since 1983 have focused on narrowly defined
elements of the delivery system.
Access and the Elderly
Two main concerns dominate the debate about Medicare policy. First,
spending must be restrained to keep the program solvent. Second, the
program must be made truly comprehensive by adding services that
are currently not covered or covered inadequately, such as comprehen-
sive nursing home coverage. These concerns create a paradox, however,
since their goals are at odds.
Critical Policy Issues 321
Access and Minorities
Minorities are more likely than whites to face health care access problems.
Hispanics, blacks, Asian Americans, and Native Americans, to name the
most prevalent minorities, all experience difficulties accessing the U.S.
health care delivery system. In some instances, the combination of low
income and minority status creates further difficulties; in others, the inter-
action of distinct cultural habits and minority status causes problems in
accessing health care. Resolving the problems confronting these groups
will require policies to encourage professional education programs that are
sensitive to the unique needs of minorities as well as programs to expand
the delivery of services to areas populated by minorities. Many of these
areas have been designated as having shortages of health care workers.
Access in Rural Areas
Delivery of health care services in rural communities has always posed
the problem of making advanced medical care available to residents of
sparsely settled areas. Purchasing high-tech equipment to serve a few
people is not cost-efficient, and finding physicians who want to reside in
rural areas is difficult. Thus, specialists and expensive diagnostic equip-
ment are not readily available in rural medical practices. Furthermore,
reimbursement systems based on average costs make financial survival
difficult for rural hospitals that serve few patients.
Funding the National Health Service Corps is one step toward
addressing the problem of personnel shortages in rural areas; however,
the Corps affects only those graduating physicians who practice in
workforce- shortage areas, and only for a limited time for each student.
Additional programs are needed to increase the total supply of physi-
cians and create incentives for permanent practice in rural areas.
Access and Low Income
Low-income mothers and their children have problems accessing the
health care system, both because they lack insurance and because they
generally live in medically underserved areas. Pregnant women in low-
income families are far less likely to receive prenatal care than are women
in higher-income categories. CHIP, created in 1997, has given states
some flexibility in how they spend federal funds allocated for investment
in children’s health coverage (“States Face a Welcome Dilemma,” 1997).
Smoking and Tobacco Use
In the United States, lung cancer is the leading cause of death from can-
cer, killing 156,000 people annually (American Cancer Society, 2017).
322 Chapter 13 Health Policy
Overall, tobacco use causes almost 1 in 5 deaths in the United States and
is responsible for approximately 480,000 premature deaths every year
(Centers for Disease Control and Prevention [CDC], 2016). In 2007,
the Institute of Medicine1 released a report entitled Ending the Tobacco
Problem: A Blueprint for the Nation, with the stated goal of reducing
smoking rates in the United States. This goal is to be achieved through
a two-pronged strategy that strengthens and fully implements tradi-
tional tobacco control measures and modifies the regulatory landscape
to permit policy innovations. The report concluded that, if states main-
tain a comprehensive integrated tobacco control strategy at the CDC-
recommended funding level of $15 to $20 per capita, tobacco use could
be effectively reduced.
Research has shown that more capital and time invested in tobacco
control programs result in greater and quicker impact. For example, in
California, the state with the longest-running tobacco control program,
smoking rates fell from 22.7% in 1988 to 13.2% in 2008. Residents of the
state now buy approximately half the number of cigarettes as the rest of
the nation. California was the first state to pass electronic tax stamp laws,
making it easier to collect sales taxes and prevent tax evasion. The pro-
gram adopted a novel “de-normalization” strategy to reduce the social
acceptability of tobacco use and exposure to second-hand smoke in Cal-
ifornia communities. This approach shifted public attitudes, changed
social norms, and is saving lives (California Tobacco Control Program,
2010, 2017).
In addition to supporting control programs, the U.S. government
has teamed up with national partners to run nationwide campaigns
directed at smoking cessation. The American Legacy Foundation
administers the “truth” campaign, which supports state-based youth
prevention efforts. The Americans for Nonsmokers’ Rights group pro-
vides states and municipalities with assistance and guidance in passing
and implementing smoke-free indoor air policies. The American Cancer
Society, American Heart Association, and American Lung Association
provide advocacy on tobacco control policy issues, while also providing
community- level support through offices across the nation.
Cost Containment
To a large extent, the strengths of the U.S. health care delivery system
also contribute to its weaknesses. The United States boasts both the
1 The Institute of Medicine was renamed the National Academy of Medicine
in 2015.
Critical Policy Issues 323
latest developments in medical technology and an ample supply of well-
trained specialists, but these advances collectively create the most expen-
sive means possible to provide care to patients, making the U.S. health
care system the costliest health care system in the world. No other aspect
of health care policy has received more attention during the past 30 years
than efforts to contain increases in health care costs. Two major pol-
icy initiatives enacted by the federal government have targeted hospitals
(PPS) and physician services (resource-based relative value scale) for
price controls.
The National Health Planning and Resources Development Act of
1974 marked the transition from improving access to containing cost as
the principal theme of U.S. federal health policy. Through certificate- of-
need review, health planning was used as a policy tool to contain hos-
pital costs. One major change in health policy that strives to hold down
costs was the launch of the prospective payment system (PPS) of paying
hospitals for Medicare clients, enacted in 1983 (Mueller, 1988). The PPS
method of reimbursement has proved to be the most successful tool for
controlling hospital expenditures (Wennberg et al., 1984). Government
programs—especially Medicare and Medicaid—federal employee bene-
fit programs, and Veterans Health Administration and armed services
programs face constant pressure from Congress to keep costs down.
Expenditures are a function of the price of services multiplied by
the quantity of services delivered. In the past, most policies that were
enacted focused on the price of services. Policymakers are reluctant to
consider restricting the quantity of services, fearful of a backlash if they
are perceived as “rationing care.”
Increasing debate over the right to die and the value of life- extending
services provides an opportunity to discuss limiting reimbursable ser-
vices. So far, the federal government has been reluctant to adopt an
explicit rationing strategy to contain expenditures, but state governments
can be expected to experiment with other means of cost containment.
The private sector also influences the policy focus on cost con-
tainment. Major corporations are now aggressively pursuing methods
to restrain the growth of health insurance costs for their employees.
Large employers have started to offer discounts toward the purchase
of health insurance when employees enroll in healthy lifestyle pro-
grams and achieve certain health goals. In early 2018, three corporate
behemoths—Amazon, Berkshire Hathaway, and JPMorgan Chase—
announced that they would form an independent health care company
for their employees in the United States. The alliance was another sign
of just how disappointed American businesses are with the state of the
nation’s health care system and the upwardly spiraling costs of medical
treatment.
324 Chapter 13 Health Policy
Quality of Care
Along with access and cost, quality of care is another main concern of
health care policy. The Health Care Quality Act of 1986 mandated the
creation of a national database within the U.S. Department of Health
and Human Services to provide data on legal actions against health care
providers. This information allows people recruiting physicians in one
state to discover actions against those physicians in other states, thereby
helping ensure they choose the best possible employees.
Under the Omnibus Budget Reconciliation Act (OBRA) of 1989,
Congress created a new agency, the National Center for Health Services
Research (now called the Agency for Healthcare Research and Quality
[AHRQ]), and mandated it to conduct and support research with respect
to the outcomes, effectiveness, and appropriateness of health care ser-
vices and procedures (U.S. House of Representatives, 1989). AHRQ has
established funding for patient outcomes research teams that focus on
particular medical conditions. These research teams are part of a broader
effort—the medical treatment effectiveness program, which “consists of
four elements: medical treatment effectiveness research, development
of databases for such research, development of clinical guidelines, and
the dissemination of research findings and clinical guidelines” (Salive
et al., 1990). The development of clinical guidelines was carried out by
AHRQ from 1992 to 1996; this effort has now broadened to become
the National Guideline Clearinghouse, which is responsible for the
analysis and dissemination of clinical guidelines across the United
States (National Guideline Clearinghouse, n.d.). AHRQ also focuses on
improving quality of care through comparative effectiveness research,
health information technology initiatives, preventive medicine (through
the U.S. Preventive Services Task Force in particular), and health care
value analyses. Other initiatives introduced to further improve the qual-
ity of care include Consumer Assessment of Healthcare Providers and
Systems (CAHPS), National Healthcare Quality and Disparities Reports
(QDR), and My Own Network, Powered by AHRQ (MONAHRQ)
(AHRQ, 2017).
Mental Health
Mental health policy encompasses a variety of areas pertaining to people
with a diagnosis or possible diagnosis of a mental health condition, and
to those providers involved in managing or treating these patients. In
the past, mental health care in the United States experienced four major
periods of reform: the American asylum movement led by Dorothea Dix
in 1843; the “mental hygiene” movement inspired by Clifford Beers in
1908; the deinstitutionalization started by Action for Mental Health in
Critical Policy Issues 325
1961; and the community support movement called for by the CMCH
Act Amendments of 1975.
In 1843, Dorothea Dix submitted a Memorial to the Massachusetts
legislature, describing the abusive treatment and horrible conditions
received by the mentally ill patients in jails, cages, and almshouses. In
1866, the New York state legislature was presented with a recommen-
dation to establish a separate asylum for chronic, mentally ill patients.
Some hospitals placed patients with chronic mental illness into separate
wings or wards, or different buildings, though their care was not nec-
essarily improved by these measures (Luchins, 1989). In A Mind That
Found Itself (1908), Clifford Whittingham Beers described the humiliat-
ing treatment he received and the deplorable conditions he encountered
while in a mental hospital. In 1909, the National Committee for Mental
Hygiene (NCMH) was founded by a small group of reform-minded
scholars and scientists—including Beer himself—which marked the
beginning of the “mental hygiene” movement (Cohen, 1983).
In 1961, the Joint Commission on Mental Health published the
Action for Mental Health, a call that recommended that community clin-
ics take on the burden of prevention and early intervention of mental
illness. Soon, courts started to rule in favor of patients on the topic of
involuntary committal, stating that they could not necessarily be forced
into mental health treatment (Koyanagi & Goldman, 1991).
However, simply changing the location of mental health care from
state hospitals to nursing homes was insufficient to implement the idea
of deinstitutionalization. In 1975, the National Institute of Mental Health
created the Community Support Program (CSP) to provide funds for
communities to set up comprehensive mental health services and sup-
ports to help mentally ill patients become integrated successfully in
society. The program stressed the importance of other supports in addi-
tion to medical care, including housing, living conditions, employment,
transportation, and education, and it established a new national prior-
ity for assisting people with serious mental disorders. In 1980, Congress
enacted the Mental Health Systems Act to prioritize the provision of
services to the mentally ill and to emphasize the expansion of services
beyond just clinical care alone (Koyanagi & Goldman, 1991).
Later in the 1980s, under the influence of Congress and the Supreme
Court, many programs started to help mentally ill patients reclaim their
benefits. A new Medicaid service was also established to assist people
who were diagnosed with a chronic mental illness. People who were tem-
porarily hospitalized were provided with aid and care, and a pre-release
program was created to enable people to apply for Medicaid reinstate-
ment prior to discharge. Not until 1990, about 35 years after the start
of the deinstitutionalization, did the first state hospital begin to close.
326 Chapter 13 Health Policy
The number of such hospitals eventually dropped from around 300 to
approximately 40 in the 1990s (Koyanagi, 2007).
Some critics maintain that deinstitutionalization has, from a men-
tal health point of view, been a total failure. Many seriously mentally ill
individuals are either homeless or in prison; in either case (especially the
latter), they typically receive little or no mental health care. This failure
may be attributable to lack of funding for community support programs
and a shortage of mental health providers (Torrey, 2005).
In 1990, Congress passed the Americans with Disabilities Act (ADA).
Title I of this civil rights law protects individuals with depression, post-
traumatic stress disorder (PTSD), and other mental health conditions
from discrimination in the workplace. It prohibits employers with 15 or
more employees from firing, refusing to hire, or taking other adverse
actions against a job applicant or employee based on real or perceived
mental health conditions. It also strictly limits the circumstances under
which an employer can ask for information about medical conditions,
including mental health conditions, and imposes confidentiality require-
ments on any medical information the employer has (U.S. Public Health
Service, 1999).
The Paul Wellstone and Pete Domenici Mental Health Parity and
Addiction Equity Act of 2008 (MHPAEA) is a federal law that prevents
group health plans and health insurance issuers providing mental health
and substance use disorder (MH/SUD) benefits from imposing less
favorable limitations on such benefits than on medical/surgical coverage
benefits. CMS further applies these rules to Medicaid and CHIP, pre-
venting inequities between beneficiaries who have mental health or sub-
stance use disorder conditions in the commercial market (including the
state and federal marketplace) and those who have such conditions and
are covered by Medicaid or CHIP. This also promotes greater cross-state
consistency for patients (Substance Abuse and Mental Health Services
Administration, 2011).
The 2011 National Prevention Strategy included goals for mental
and emotional well-being. In particular, implementing better parenting
and early intervention programs increases the likelihood that such pre-
vention programs will be included in future U.S. mental health policies
and research funding will be broadened to include longitudinal preven-
tion studies (National Institute of Mental Health, 2012).
In recent years, public policies have focused on support for rigor-
ous addiction rehabilitation programs and an improved mental health
safety net. Efforts include promoting federal initiatives that support
public education on mental illness and addiction, such as the Mental
Health First Aid Act; ensuring that federal funding is implemented and
expanded for community behavioral health organizations, as outlined in
Critical Policy Issues 327
the Excellence in Mental Health Act; promoting and funding incentives
to help states and local governments expand drug treatment, prevention,
and recovery efforts, as emphasized in the Comprehensive Addiction
and Recovery Act; preserving funding for other important behavioral
health programs, such as the Substance Abuse Prevention and Treatment
Block Grant and other programs funded by the Substance Abuse and
Mental Health Services Administration; ensuring that behavioral health
providers are eligible for health information technology incentives, as
expressed in the Behavioral Health IT Act; protecting federal funding
for Medicaid and protecting Medicaid beneficiaries and providers; and
ensuring the full inclusion of behavioral health in health reform imple-
mentation (National Council for Behavioral Health, 2016).
▸ National Health Reform
Health reform in the United States has a long history. In only the past
ten years, landmark reform has been passed through two federal statutes
enacted in 2010: the Patient Protection and Affordable Care Act (ACA),
signed on March 23, 2010, and the Health Care and Education Recon-
ciliation Act of 2010 (H.R. 4872), which amended the ACA and became
law on March 30, 2010 (Blumenthal et al., 2015). The years following the
ACA’s passage have witnessed intense implementation efforts, and new
opportunities for policy making have emerged, such as the bipartisan
passage of the Medicare Access and the CHIP Reauthorization Act
(MACRA) in 2015 (Blumenthal et al., 2015; Obama, 2016).
A central goal of the ACA is to significantly reduce the number of
uninsured Americans by providing affordable coverage through Medicaid
and the health insurance marketplaces. The ACA offers states the oppor-
tunity to expand Medicaid coverage for adults to those with incomes that
are up to 138% of the federal poverty level, and indeed 33 states have
done so as of April 2018 (Kaiser Family Foundation 2018). The ACA also
extended funding for CHIP through fiscal year 2015 and has reauthorized
for the program through 2019. As of 2017, 15 states (including the District
of Columbia) have opted to use CHIP funds to expand their Medicaid
programs. The other 36 states used CHIP funds to run a combination or
separate health insurance program. During fiscal year 2016, 8.9 million
children were enrolled in CHIP-funded coverage, while 37.1 million chil-
dren were enrolled in Medicaid-financed coverage (CMS, 2018).
Under the ACA’s provisions for employer-shared responsibility,
certain employers—called applicable large employers [ALEs]—must
offer minimum essential health benefits to full-time employees or
else make an employer-shared responsibility payment to the Internal
328 Chapter 13 Health Policy
Revenue Service. As a result, approximately 94% of all U.S. companies
with 50 to 199 employees and 98% of all U.S. companies with 200 or
more employees now offer health insurance coverage (Kaiser Family
Foundation, 2017a).
In addition to Medicaid expansion and reform of individual health
insurance markets, the ACA contains numerous provisions aimed at
reforming health care delivery and payment in the United States. These
provisions focus on three broad aspects: (1) testing new delivery mod-
els and promoting successful ones (e.g., the development of account-
able care organizations [ACOs], the patient-centered medical home
[PCMH]), (2) encouraging the shift toward value-based payment (e.g.,
shared savings, pay-for-performance, bundled payment), and (3) devel-
oping resources for system-wide improvement (e.g., meaningful use of
health information system, precision medicine).
According to the Commonwealth Fund (2015), there are three major
challenges related to fully implementing the ACA:
■ The Supreme Court made it optional for states to expand Medicaid
eligibility, resulting in significant consequences for residents in states
that opted out. Millions of people in those states are now trapped in
a coverage gap, earning too much to qualify for Medicaid but not
enough for marketplace subsidies (Commonwealth Fund, 2015).
■ Undocumented immigrants are excluded from the law; conse-
quently, they cannot purchase marketplace coverage or qualify for
Medicaid (Commonwealth Fund, 2015). The Congressional Budget
Office estimates that 30% of the remaining uninsured people will
consist of unauthorized immigrants by 2020 (Commonwealth Fund,
2015).
■ Some individuals with higher incomes are having difficulty afford-
ing their premiums and deductibles, due to subsidies becoming less
generous with higher household income (Commonwealth Fund,
2015).
In 2017, under the administration of President Donald Trump, the
American Health Care Act (AHCA) was introduced in the House of
Representatives. On May 4, 2017, the House voted to pass this act by
a narrow margin of 217–213, sending the bill to the Senate for delib-
eration. The Senate developed several amendments and bills to modify
the AHCA bill that had passed in the House, but none received enough
votes to win passage. On July 28, 2017, the bill was returned to the calen-
dar after the Senate rejected several amendments (Congressional Record,
2017).
Although Congress was unable to pass a comprehensive national
health reform bill in 2017, many other reforms are playing out in
National Health Reform 329
Congress, regulatory agencies, and state capitals that could profoundly
impact the health care landscape over the coming years. These changes
include efforts by Congress to reform the federal tax code (which could
repeal ACA’s insurance mandate); efforts by the Department of Health
and Human Services to reshape how the ACA is administered and how
government pays for value over volume; and efforts by individual states
to control Medicaid and drug spending thus limiting coverage (Kaiser
Family Foundation, 2017b).
▸ Conclusion
Health policies are developed to serve the public’s interests; however, pub-
lic interests are diverse, and members of the public often hold conflicting
views. Although the U.S. public consistently supports the goal of national
health insurance, it rejects the idea of the federal government running
the health care delivery system. Similarly, although the American public
wants the government to control health care costs, many people believe
the federal government already exerts too much control over their daily
lives. The challenge for policymakers is to find a balance between gov-
ernmental provisions (i.e., control) and the private health care market
to improve coverage and affordability of care. Successful health policies
are more likely to be couched in terms of cost containment—a market
justice, economic, business, and middle-class concern—than in terms of
improved or expanded access and reduction or elimination of health dis-
parities (a social justice, liberal, labor, low-income issue). Nevertheless,
cost-related health policies will likely have little impact on improving the
quality of care or reducing health disparities.
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© ninjaMonkeyStudio/Getty Images
CHAPTER 14
The Future of Health
Services Delivery
▸ Introduction
Fundamental features of U.S. health care delivery, such as the largely private infrastructure and traditional American values, have, in the past, resisted any proposals for a sweeping transformation of health
care. How certain forces of change play out in the future will be partic-
ularly significant. The main forces affecting the U.S. health care system
include social, demographic, and cultural trends; economic conditions;
political will and legal rulings; technological innovation; global health
issues; and ecological events, such as the emergence of new diseases and
catastrophic occurrences. Some of these forces, such as demographic
trends, will follow a foreseeable course, based on which some predictions
333
can be made. For other factors, making even short-term predictions is
difficult. For instance, it is impossible to predict the future course of the
U.S. economy, employment, and family incomes, all of which will affect
what individual Americans and the nation may or may not be able to
afford in the wake of rising health care costs. It is clear, however, that
U.S. health care stands at a tipping point—a convergence of a growing,
graying, and highly consumptive population with increasingly limited
financial and human capital resources (Frist, 2014).
Despite the intents and promises of the Affordable Care Act (ACA),
serious issues remain to be resolved in the areas of coverage, cost, access,
and affordability. As of spring 2018, the U.S. Congress had failed to pass
a comprehensive reform bill. However, the ACA’s individual mandate—
which had required all Americans to either have health insurance or pay
a tax penalty—was effectively repealed by the Tax Cuts and Jobs Act of
2017. Going forward, it is unclear whether or how the lingering issues
of health insurance associated with the ACA—such as the employer
mandate, health insurance exchanges,1 federal subsidies for low-income
people to buy health insurance, and Medicaid expansion in the more than
30 states that implemented it—will be addressed. Moreover, a significant
number of Americans continue to lack health insurance—an estimated
27 million people in 2016 (Congressional Budget Office [CBO], 2016).
This chapter puts the future of American health care in the larger
national and global context. Likely future courses of health care reform,
models of care delivery, and clinical technology are discussed.
▸ Forces of Future Change
The framework presented here views health care delivery and policy
from a macro perspective. Keen observers of these forces can create
opportunities for change. These forces also ensure that the U.S. health
care system will continue to evolve.
Social, Demographic, and Cultural Trends
It is no secret that the rising tide of the elderly in America, concom-
itant with dropping birth rates, will put serious strains on Medicare
and Social Security—the government-run medical and retirement pro-
grams, respectively, which are funded through workers’ payroll taxes.
1 Under the ACA, some states, and the federal government in states that opted
not to do so, established online marketplaces where people could shop for an
approved health insurance plan.
334 Chapter 14 The Future of Health Services Delivery
For example, according to recent Medicare trustees reports, this pro-
gram faces a substantial financial shortfall with looming negative conse-
quences for beneficiaries, providers, and taxpayers, despite the 165-some
provisions contained in the ACA to reduce Medicare costs, increase rev-
enues, and combat program fraud and abuse (Centers for Medicare and
Medicaid Services [CMS], 2012).
Aging of the population will also affect the supply of and demand
for health care workers. The demand for health care services, and hence
for health care workers, will increase as the population becomes older
because the elderly consume a disproportionately large share of health
care services. Yet, the supply of health care workers may decrease as those
workers become older themselves and large numbers retire or reduce
their working hours. An aging population will also affect the nature of
the skills and services the health care workforce must be equipped to pro-
vide (Willis Towers Watson, 2016). Rational policies on future immigra-
tion may be one factor that affects the supply of health care professionals.
The U.S. society’s cultural mix, which also reflects the rate and nature
of immigration, will continue to slowly transform health care delivery in
the United States. Social and cultural factors affect exposure and vul-
nerability to disease, risk-taking behaviors, health promotion and dis-
ease prevention, and health care–seeking behaviors. For example, rates
of health risk behaviors among students in grades 9–12 are generally
higher among blacks and Hispanics compared to whites, and emergency
department use is disproportionately higher among blacks compared
to whites (National Center for Health Statistics [NCHS], 2017). Even
though illegal immigrants are technically uninsured, they do get health
care through a variety of sources, including emergency rooms, commu-
nity health centers, and charity from hospitals. Increasing dependency
on government assistance and a haphazard immigration policy that does
not promote cultural assimilation have the potential to alter the tradi-
tional American health care system in important ways in the future.
Economic Forces
Currently, health care expenditures consume one-fifth of the U.S. eco-
nomic production. Hence, the nation’s economic health, to a large extent,
depends on the expenses incurred for the delivery of health care. Expen-
ditures can rise as long as people can afford them; in turn, affordability
of health care at both individual and national levels is critical. Household
income in relation to economic inflation is a fundamental determinant
of affordability, and both employment and personal income depend on
the nation’s economic health and quality of employment. In the past few
years, President Donald Trump’s economic agenda, relief from some
burdensome regulations, and tax cuts have inspired some early signs of a
Forces of Future Change 335
stronger economy and employment growth compared to previous years,
but this trend needs to be maintained over the longer term. Following
are some of the key elements of Trump’s economic agenda:
■ A manufacturing recovery within the United States would add to
both household incomes and tax revenues.
■ Energy self-sufficiency would provide a tremendous boost to the
U.S. economy.
■ Repeal and replacement of the remaining portions of the ACA that deal
with health insurance might help convert many part-time jobs into full-
time positions, thereby boosting household incomes. Any new legisla-
tion must include policies that make health insurance more affordable.
■ Increased spending on national defense and the country’s infrastructure
could improve employment.
■ Despite positive signs in the nation’s economy and personal incomes,
many unknowns remain. For example, protracted military involve-
ment overseas or even trade wars could produce negative results.
Political Will, Ideologies, and Legal Rulings
The ACA is a textbook case that illustrates the role of political will on the
part of the president and his political party in passing and rolling out a
substantial piece of legislation. While it has improved health care access
across the country to some extent, this legislation has also resulted in
rising health insurance premiums for many Americans while still leaving
a large number of people uninsured.
The ACA was overwhelmingly supported by Democrats, who held
the majority in both houses of Congress in 2010. The political land-
scape was reversed in 2016, when Republicans captured the majority in
Congress. Even so, the American Health Care Act of 2017, which was
designed to partially repeal and replace the ACA, failed to pass. Hence,
the future direction of health care reform remains unclear.
Nevertheless, based on Republicans’ campaign promises, health care
reform is not likely to remain a dead issue. In the short term, much will
depend on whether the Republican Party gains or loses congressional
seats (and its majorities in the House of Representatives and Senate) in
the November 2018 elections. As was the case with the ACA, the courts
are also likely to play a pivotal role in deciding future challenges to any
major reform efforts in the future.
Technological Innovation
The adoption of new medical technology almost invariably increases
health care costs. Yet, Americans strongly favor ongoing innovation,
336 Chapter 14 The Future of Health Services Delivery
availability, and use of new technology. One recent example of this pref-
erence is the 21st Century Cures Act of 2016, which is aimed at advancing
medical innovation and providing quick access to new treatments. The
high cost of research and development and the subsequent costs associ-
ated with the use of technology, however, do call into question the unre-
strained innovation and use of medical technology. In the future, the
health care system is likely to focus on those technologies that promote
a greater degree of self-reliance and self-care for patients, with remote
monitoring to ensure effectiveness and safety.
Global Health Issues
In many respects, the world has become progressively interconnected and
interdependent through greater ease of trade and travel. Globalization
presents both opportunities and challenges. For example, manufacture of
generic and other drugs by Asian countries for export to Europe, Canada,
and the United States helps the economies of both the manufacturing and
importing countries. From the developed world’s perspective, however,
safety can become an issue with remote manufacturing. The Food and
Drug Administration (FDA) has warned that consumers may be buying
potentially risky drugs over the Internet with no guarantee of their effec-
tiveness or safety. From the developing world’s perspective, immigration
of trained professionals, such as physicians, nurses, and therapists, results
in “brain drains” that leave shortages of skilled health care workers in
developing countries while relieving shortages in developed nations. This
flow may go in the other direction when it comes to patients: The World
Health Organization has estimated that over a 10-year period from 2007
to 2017, the number of Americans traveling abroad to receive cosmetic
as well as medical treatments (referred to as medical tourism) increased
from 750,000 to 16 million (Saltsman & Lett, 2017).
On other fronts, the prevention and control of infectious diseases
globally will continue to pose major challenges. In this young 21st
century alone, increased cross-border travel has resulted in the spread
to the United States of previously unknown communicable diseases such
as severe acute respiratory syndrome (SARS), as well as deadly infections
such as the Ebola virus and the Middle East respiratory syndrome (MERS)
virus. Current efforts to strengthen global health security include dis-
ease surveillance for outbreaks of international importance and urgency,
exchange of technical information on new pathogens, and early warning
and control of serious animal disease outbreaks. In a rapidly changing
world, renewed efforts and cooperation among nations will become nec-
essary. The worldwide shortage of trained health care workers is another
area of alarming concern, as lack of treatment and isolation capabilities
often result in deadly pandemics, affecting large segments of a population.
Forces of Future Change 337
Ecological Events
New diseases, natural disasters, and bioterrorism have major implica-
tions for public health. Diseases that are communicable—such as new
strains of influenza—and those related to environmental agents—such
as vector-borne diseases (for example, West Nile virus and Chikungunya
virus)—can bring about mass hysteria particularly in large population
centers, especially when some diseases remain mysterious and treat-
ments are not readily available, as was the case with Ebola-related ill-
nesses in 2014. Growth of populations and expansion of the human
footprint around the globe will intensify interactions at the human–
animal– ecosystem interface, raising the probability that new diseases
will emerge in the future. Whenever a significant number of people are
affected or threatened by disease, research and technological innova-
tion go into high gear. Technologies such as remote biosensing and geo-
graphic information systems, therefore, will find ongoing applications in
public health and safety.
Natural disasters not only disrupt people’s daily lives, but also cre-
ate conditions that pose serious health risks through contamination of
food and water. Health problems and psychological distress often fol-
low in their wake. Initiatives such as biosurveillance and infrastructure
upgrades will be constantly needed to cope with the consequences of
both natural and human-made disasters. The roles of the Centers for
Disease Control and Prevention (CDC) and other partnering agencies
will continue to evolve as new challenges emerge. On the downside,
the need to combat new ecological threats will divert resources from the
quest to provide routine health care to the patients in most need of those
services, especially those in developing countries.
▸ Coverage, Cost, and Access Dilemmas
The number of Americans who gained health insurance under the
various provisions of the ACA has been estimated at approximately
20 million (Jost & Pollack, 2016), or an estimated 7.3% of the nonelderly
U.S. population. Of these, almost 44% were enrolled in Medicaid, 23%
in exchange-based plans (with premium subsidies), and 8.8% in other
privately purchased health plans (without premium subsidies). Approxi-
mately 27 million people remain uninsured (CBO, 2016). It is estimated
that the repeal of the ACA’s individual mandate will increase the number
of uninsured by 13 million in 2027 (CBO, 2017). The rationale for this
projection is that healthier people will be less likely to obtain insurance
and, especially in the nongroup market, the resulting increases in premi-
ums will cause more people to not purchase insurance. Hence, achieving
338 Chapter 14 The Future of Health Services Delivery
universal coverage in the United States will remain a challenge well into
the future.
One important test of a robust health care system is whether the
insured get timely access to health care services. Health insurance facil-
itates access, but it does not guarantee it. Alcalá and colleagues (2018)
concluded that despite ACA-related gains in insurance coverage, those
persons who purchased insurance through government-established
exchanges or in the individual health insurance market and those indi-
viduals covered by Medicaid encountered more barriers to care than
those with employer-based insurance. Hence, costly and inefficient use
of hospital emergency departments has persisted among many individ-
uals with health insurance coverage because they cannot find a doctor
to serve their medical needs. Finding a primary care physician appears
to be the biggest hurdle; finding a specialist or a dentist has been even
tougher (Millman, 2014).
For many years, the success of health policy has been measured by
the number of insured versus uninsured, under the erroneous assump-
tion that once insured, everyone will somehow be able to get appropriate
health care services when needed. Thus, little has been done to address
the shortage of health care practitioners. The capacity of the health care
system to meet the demand for services is now recognized as a major
issue that threatens future access to health care for most Americans.
Hospital executives, for example, believe that across the nation there are
shortages of physicians, nurses, and advanced practitioners (“ Hospital
Executives,” 2014). Economists estimate that one-third of the current
physician workforce and at least half of the nurse workforce could retire
by 2021. It is also projected that the United States will require 10 to
12 million new and replacement direct care workers—medical assistants,
nursing aides, home health aides, and so on—to meet patients’ demands
for various types of health care services (Okrent, 2011).
The cost of health care is another critical variable that affects both
coverage and access. Under the ACA, the average health insurance pre-
miums in the individual health insurance market were estimated to
increase by 25% in 2017 (Herron, 2016) and by 37% in 2018 (Luhby,
2017). By comparison, in the employer-based health insurance market,
premiums rose by less than 4% in 2017 (Claxton et al., 2017). Clearly,
because of its many regulatory mandates, the ACA failed to control run-
away health insurance premiums for those forced to purchase insurance
in the government-established exchanges, but who did not benefit from
taxpayer-supported federal subsidies.
Unaffordable premiums affect people’s ability to obtain coverage,
but a second layer of costs—in the form of deductibles—influences their
ability to obtain services despite having insurance. For 2018, the annual
Coverage, Cost, and Access Dilemmas 339
maximum deductible under the ACA was $14,700 for a family plan.2 By
comparison, in employer-sponsored plans, the average annual deduct-
ible varied between $2,503 and $4,527 per family; this included high-
deductible health plans (Claxton et al., 2017). According to one report, the
“sticker shock” comes not on the front end when purchasing a plan, but
on the back end when health care is needed; “sky-high deductibles . . . are
leaving some newly insured feeling as vulnerable as they were before they
had coverage” (Pear, 2015).
▸ The Future of Health Care Reform
Health care reform in the United States is currently at a crossroads, with
an unclear future. It does not appear that any major policy initiatives
will emerge until after the November 2018 congressional elections. The
Republicans in power have lacked the fortitude to come up with a solu-
tion to the problems and issues described in the previous sections. Their
Democratic counterparts have opted for the status quo, perhaps hop-
ing that given the opportunity in future they may be able to evolve the
ACA into a single-payer system, a national health care program in which
the financing and insurance functions are taken over by the federal
government.
The American Health Care Act
The American Health Care Act (AHCA) of 2017 was crafted by the
Republicans in the House of Representatives, but was not supported by all
Republicans. It barely squeaked through the House with a 217–213 vote.
For the conservatives who wanted to repeal the ACA fully, the AHCA did
not go far enough; for moderates, its effects on lower- and middle-income
Americans were too harsh. Even President Trump remarked that the pro-
posed legislation did not adequately protect individuals who would buy
health insurance through the exchanges (Davis, 2017). Republicans in the
Senate then drafted their own version of a health care reform proposal,
which failed to pass. As mentioned previously, the individual mandate
was later repealed under the Tax Cuts and Jobs Act of 2017, leaving the
rest of the ACA mainly intact.
It is noteworthy that public opinion about the AHCA was not pos-
itive, even though the ACA drew even more pessimistic ratings in pub-
lic polls. A greater number of people said that, under the AHCA, costs
2 In two years, the deductible increased by more than 11%, from $13,200 in
2015 (Herman, 2015).
340 Chapter 14 The Future of Health Services Delivery
would go up and quality of care would go down than those who had
positive views about these two issues (Freeman, 2017).
Repeal of some of the ACA’s key insurance provisions under the
AHCA would have increased the number of uninsured by as many as
24 million people by 2026. At the same time, the projected cost sav-
ings under the program would have reduced national budget deficits by
$337 billion over the 2017–2026 period (Jost, 2017).
Will a Single-Payer System Emerge?
In an interview, then Senator Harry Reid (Democrat–Nevada), one
of the chief architects of the ACA, confessed that a number of Demo-
crat lawmakers were ready to support a single-payer system (McHugh,
2013). Hence, a necessary (though not necessarily sufficient) precon-
dition for development of a single-payer system in the United States in
the future would be control of Congress and the White House by the
Democratic Party.
In a recent national survey by the Pew Research Foundation, a
majority of Americans (60%) said that it was the federal government’s
responsibility to make sure all Americans have health care coverage—
the highest percentage favoring a role for the U.S. government in ensur-
ing health insurance for all in nearly a decade. Overall, one-third of the
public supported a single-payer approach run by the government, rather
than delivered through a mix of private companies and government pro-
grams. Perhaps not surprisingly, support for such a system is highest
among liberal Democrats (64%) (Kiley, 2017). Interestingly, such a sce-
nario has occurred in American politics in the past: In 1993, President
Bill Clinton’s Health Security Act failed to gain traction after the public
became disenchanted with the prospects of paying higher taxes to fund
a single-payer plan. Earlier polls had shown that the public would be in
favor of a national health insurance program run by the government.
A single-payer system in the United States would be fairly simi-
lar to today’s Medicaid program, in which the beneficiaries get tax-
financed health care, but with more controls over how that health care
is delivered. Alternatively, a single-payer system might resemble today’s
Medicare program,3 in which the beneficiaries get subsidized health
care. Over time, however, such a program would likely start leaning
toward the Medicaid model, with some out-of-pocket cost sharing still
in place.
3 This idea was proposed in 2016 by Trump’s opponent, Hillary Clinton,
during the presidential race.
The Future of Health Care Reform 341
Unlike Medicaid and Medicare, however, a single-payer system
would not have eligibility criteria. Instead, such a scheme aims to provide
universal coverage—that is, all legal residents get health insurance—and
some form of universal access—that is, all the insured get some degree
of access to health care services. As discussed previously, it remains
unknown how a given degree of access would be assured for all.
Throughout the history of health care reform, political forces have
taken center stage in the debates. Indeed, for largely political reasons,
the central features of the ACA were not scheduled to be implemented
until 2014, after Obama’s second-term election in 2012. The outcome of
the 2014 congressional elections, in which Democrats ceded both houses
of Congress to Republican control, may well have hinged on the wide-
spread disenchantment with the promises of the ACA and the experi-
ences of those who lost the coverage they had liked. Following the 2014
elections, Senator Chuck Schumer, an influential Democrat from New
York, said that whatever the merits or demerits of health reform, it was
“bad politics” (Goodman, 2014). In future, politicians will have to assess
the political cost they would personally incur for taking a position in
favor of a single-payer system, if it comes to that.
Transitioning the ACA into a single-payer system will also depend
on social and economic factors. For example, if health insurance pre-
mium costs and out-of-pocket costs rise beyond what most people con-
sider to be affordable, there could be a push for a single-payer system.
Conversely, mass dissatisfaction with the ACA might kill the prospects
of a single-payer system, unless crafty politicians could put the blame on
corporate America and if Americans buy into that spin. Corporations
could be accused of being insensitive to the rising cost of health insur-
ance, and insurance companies could be labeled as profit mongers.
The Cost-Control Imperative
The ACA’s coverage expansion in 2014 spurred a spike in health care
spending, as would be expected. The law enabled millions of people to
get subsidized health insurance through the exchanges and “free” cov-
erage through Medicaid expansion. Health care costs increased by 5.3%
in 2014, up from a low of 2.9% in 2013. The Office of the CMS Actuary
estimated that increased use of health care services accounted for nearly
40% of the increase in per capita health spending. Health costs grew by
5.8% in 2015 (Weiner et al., 2017).
For a system to remain solvent, any expansion of coverage must be
accompanied by cost-control measures. To control costs materially, it is
necessary to manage utilization, limit reimbursement to providers, and
employ some sort of rationing for the supply of health care services. Only
the government is in a position to wage war against costs on all three
342 Chapter 14 The Future of Health Services Delivery
fronts at the same time, particularly in a single-payer national health care
system. However, heavy-handed government controls would be strongly
opposed by most Americans. Hence, this approach is not seen as a prac-
tical alternative for future reforms.
Other factors, such as benefit design and technology innovation,
could have some impact on rising health care expenditures, which con-
sumed almost 18% of the United States’ total economic production in
2015 (NCHS, 2017). In high-deductible health plans, for example, the
insured monitor their own benefit design by seeking value in their health
care consumption behavior. Slower adoption of expensive new medical
technology and fewer new blockbuster drugs may also be important fac-
tors contributing to cost control (Weiner et al., 2017). Going forward,
however, there are no easy answers to the health care cost dilemma.
National Debt
Any meaningful health care reform cannot be undertaken in isolation
from broader economic realities. U.S. budget deficits (overspending) and
the rising national debt (borrowing money to pay for the overspending)
will affect all aspects of the economy, including health care. According to
the U.S. Department of the Treasury (2018), the country’s total outstand-
ing public debt was $20.5 trillion in January 2018. Since the previous
edition of this text was prepared, the United States has racked up an addi-
tional $2.5 trillion in debt. If at some point in the future (no one knows
when, and it may not happen for a few years to come), the United States
defaults on its obligation to repay the debt, there would be unimaginable
consequences that will reverberate throughout the world’s economies.
The national debt has consequences for the world’s economies and the
standard of living that Americans have been taking for granted.
This is what the CBO (2015) has said about the mounting debt:
The rising debt could not be sustained indefinitely; the govern-
ment’s creditors would eventually begin to doubt its ability to
cut spending or raise revenues by enough to pay its debt obliga-
tions, forcing the government to pay much higher interest rates
to borrow money.
Higher interest rates will only exacerbate the problem because they
will increase the cost of borrowing.
Medicare’s Generational Impact
The financing of Medicare is essentially a generational transfer system
in which current taxpayers pay for the benefits provided to current ben-
eficiaries. Shortfalls in such a financing system must be paid by future
The Future of Health Care Reform 343
generations. Data from the three most recent reports (2014–2016) of the
boards of trustees of the Federal Hospital Insurance and Federal Sup-
plementary Medical Insurance Trust Funds (trustees’ report) on annual
Medicare deficits are presented in TABLE 14.1. The short-term trend is
in a favorable direction, going from a deficit of $14.1 billion in 2014 to
a surplus of $31.5 billion in 2016. Various provisions of the ACA seem
to have made an impact on what had been out-of-control Medicare
spending. More recently, the Medicare Access and CHIP Reauthoriza-
tion Act (MACRA) of 2015 seems to have made a difference in cost sav-
ings through its payment reform initiatives. Notably, the rate of growth
of Medicare expenditures has slowed to 4.8% (Table 14.1), although
it remains above the rate of growth of total health care expenditures
between 2015 and 2016 (4.3%) (Office of Actuary, 2018).
Even though the estimated date for Medicare’s bankruptcy fluc-
tuates from year to year, there is no denial that within the next 10 to
15 years the system will be insolvent, mainly because of the rapid rise
in the number of beneficiaries. No meaningful health care reform can
ignore the serious steps needed to address this impending disaster that
will otherwise affect the lives of not only millions of senior citizens but
also all working Americans. Going forward, the solvency of Medicare
will depend on the size of the workforce and the level of workers’ earn-
ings. Numerous economic and demographic factors will come into play,
as well as more efficient methods of care delivery, productivity improve-
ments in the delivery of health care, and elimination of fraud and abuse
in the program.
TABLE 14.1 Deficits and Surpluses in Medicare Funding: 2014–2016
2014 2015 2016
Total income $599.3 $644.4 $710.2
Total expenditures $613.3 $647.6 $678.7
Surplus (deficit) (income
minus expenditures)
$(14.1) $(3.2) $31.5
Rate of growth of expenditures
from previous year
— 5.6% 4.8%
Data from Centers for Medicare and Medicaid Services 2015, 2016, 2017 Annual report of the boards of trustees of the
federal hospital insurance and federal supplementary medical insurance trust funds.
344 Chapter 14 The Future of Health Services Delivery
▸ Future Models of Care Delivery
Accountable care organizations and medical homes—discussed in other
chapters of this text—have received much attention since the passage of
the ACA. These care delivery models are still in their infancy and, as
time progresses, new models of health care delivery will undoubtedly
emerge. Indeed, there will be both successes and failures along the way.
Yet, certain guiding principles will remain in place to inform the devel-
opment of new approaches that achieve better health at reduced costs.
To serve a variety of needs, several different models of care will find a
footing in the U.S. health care delivery system. Even so, having different
models of care by no means suggests a dismantling of the traditional
infrastructure consisting of hospitals of different types, small and large
clinics, and other existing settings of care. Innovative payment systems
that reward providers for achieving the desired goals of quality and cost
will incentivize newer approaches to care delivery.
Value-Based Shared Savings Payments
Providers respond to incentives built into reimbursement methods—
and they will have to be nimble to be able to respond to changes in those
reimbursement schemes. To sustain their businesses, they will have to
improve their productivity by “doing more with less” while still achiev-
ing their desired profit margins. Future payment methods may be based
on achievement of health-related goals, management of chronic condi-
tions and prevention of complications, preventing hospitalizations, and
reaching population health targets. A payer–provider partnership that
will share cost savings will enhance value in the delivery of health care.
Population Health
In the health maintenance organization (HMO) model, the provider
assumed the responsibility for meeting all the health care needs of a
given population. During the managed care bashing of the 1990s, HMOs
were given a bad name by doctors, enrollees, politicians, and the media.
Subsequently, HMOs fell out of favor while preferred provider organiza-
tions (PPOs) gained popularity. Care delivery through PPOs, however, is
fraught with inefficiencies because of the absence of gatekeeping and care
coordination. In the future, provider-led organizations, such as ACOs
and integrated delivery systems, will likely evolve into risk-bearing enti-
ties, somewhat like staff-model HMOs, at first through partnerships with
health plans. Eventually, employers and payers such as Medicare and
Medicaid are likely to enroll their insured populations into these orga-
nizations, which will provide insurance coverage and also manage the
Future Models of Care Delivery 345
total health care needs of the covered populations for a negotiated fee per
enrollee. A tighter consolidation within one organization— compared to
what exists in today’s managed care organizations—of financing, insur-
ance, delivery, and payment functions will achieve synergies and effi-
ciencies that do not currently exist. The end result will be better health
at a lower cost.
Community Outreach
The type of organization just described will be in a position to engage
in community health programs, such as prevention and/or management
of diabetes, stroke, and cardiovascular issues. Health education through
community outreach will improve health of the community on the one
hand and bring goodwill to the organization on the other hand.
Virtual Care
To some extent, the health care delivery system will evolve to replace
periodic encounters between patients and providers with an ongoing
relationship that includes remote monitoring and virtual consultations.
Virtual video consultations are an effective way to provide timely med-
ical interventions and promise to reduce or eliminate wait times for
face-to-face encounters.
Technology-Driven Home Visits
An increasing amount of care will be delivered where patients are, in
their own homes. Home care will be used extensively to manage high-
risk populations. Biosensors, early warning systems, and remote mon-
itoring will enable the shift from frequent office visits to home care.
A major objective of remote monitoring is to keep chronically ill patients
connected to necessary clinical expertise in between office visits so as
to avert medical crises that might otherwise land these patients in the
emergency room (Moore, 2009). Further innovations in remote care
may enable just-in-time provider interventions when needed (Kvedar
et al., 2011).
▸ Future Workforce Challenges
An adequate and well-trained workforce is a critical component of the
health care delivery infrastructure. The impending shortage of health
care professionals has been pointed out previously. Hence, the most pro-
ductive use of existing resources must be emphasized.
346 Chapter 14 The Future of Health Services Delivery
According to the recommendations included in a report produced
by the National Academy of Sciences (2010), nurses should practice to
the full extent of their education and training. Licensing requirements
and rules governing the scope of practice across states need to be uni-
fied for advanced-practice nurses who have master’s or doctoral degrees.
Residency programs for nurses need to incorporate training in commu-
nity health, public health, and geriatrics.
Primary care physicians need training so they can adequately func-
tion as “comprehensivists” to address the needs of a growing number
of people with complex chronic conditions. They must be prepared to
manage complex pharmacology, understand end-of-life issues and med-
ical ethics, and lead health care teams.
A shortage of health care professionals trained in geriatrics is a crit-
ical challenge with serious implications, given the anticipated growth in
the U.S. elderly population. This problem is compounded by the short-
age of faculty in colleges and universities who are trained in geriatrics.
The elderly use the majority of home health care services and nursing
home care, account for roughly half of all hospital inpatient days, and
represent approximately one-fourth of all ambulatory care visits. Many
elderly patients suffer from chronic conditions, and their care is often
complicated by the presence of comorbidities, the use of multiple pre-
scription drugs, and an increased prevalence of mental conditions and
dementia. Evidence shows that care of older adults by health care pro-
fessionals specifically prepared in geriatrics yields better physical and
mental outcomes without increasing costs (H. J. Cohen et al., 2002). The
most effective strategies to incentivize future workers to train for geri-
atric care remain uncertain, however. Under alternative demographic
scenarios, an additional 2.5 to 3 million professionals in various occu-
pations (e.g., nurses, assistants, social workers) will be needed to meet
the United States’ demand for long-term care services by 2030 (Spetz
et al., 2015).
Integration of a racially and culturally diverse workforce is also a
growing necessity. It is estimated that somewhere near the middle of
the 21st century, more than half of all U.S. citizens will be nonwhite
(U.S. Census Bureau, 2001). Developing skills in cultural competence
will divert some resources from health care. The term cultural compe-
tence refers to knowledge, skills, attitudes, and behavior required of a
practitioner to provide optimal health care services to persons from a
wide range of cultural and ethnic backgrounds. To demonstrate cultural
competence, health care providers need to understand how and why dif-
ferent belief systems, cultural biases, ethnic origins, family structures,
and many other culture-based factors influence the manner in which
people experiencing illness comply with medical advice and respond
Future Workforce Challenges 347
to treatment. Such variations have implications for outcomes of care
(J. J. Cohen et al., 2002).
▸ Global Challenges
As pointed out previously, global issues can affect health care at the coun-
try level. Each year, more than 350 million foreign travelers arrive in the
United States. To safeguard the public’s health, the CDC operates quar-
antine stations at several major entry points. In addition, American busi-
nesses have spread worldwide, so the CDC has become actively involved
in global surveillance and early detection of health threats and works
closely with U.S. embassies overseas. The CDC operates more than 60
Global Disease Detection Centers and other offices worldwide.
Even though international cooperation is absolutely critical for com-
bating health threats, achieving this lofty goal has proved to be an ongoing
challenge. Since 2007, International Health Regulations (IHRs) have been
binding on 196 countries under the aegis of the World Health Organiza-
tion (WHO). The IHRs require countries to report certain disease out-
breaks and other public health events to WHO (WHO, 2015). However,
80% of the countries have failed to meet the requirements of the IHRs,
according to the Office of Global Affairs of the U.S. Department of Health
and Human Services (DHHS). Neither the United States nor the United
Nations has the authority to enforce compliance—yet, when threats to
public health arise anywhere in the world, the affected nations look to the
United States and other developed countries to come to their aid.
U.S. government agencies lend their assistance primarily through
critically needed scientific knowledge and technical expertise to address
a wide range of health issues. Many U.S.-based private philanthropic
organizations send supplies and aid workers to affected areas. The irony
is that when major disturbances occur, the affected areas are not safe
either for the locals or for foreign aid workers.
Ongoing armed conflicts, in places such as the Middle East, affect
medical care and public health services. In war zones, diseases such as
diarrheal episodes and acute respiratory infections can spread rapidly. In
this kind of scenario, the health care infrastructure may sustain damage;
health workers may be injured, killed, or evacuated; supplies dwindle;
and refugees often migrate in large numbers, putting a strain on food
and water supplies and sanitation. Hence, both morbidity and mortality
increase. Large-scale bioterrorism has not yet occurred, but global unrest
amid the rise of extremism makes it a real possibility in the future. Con-
flicts occurring in other parts of the globe can be “exported” to countries
such as the United States.
348 Chapter 14 The Future of Health Services Delivery
▸ New Frontiers in Clinical Technology
Despite its role in cost escalation, technological progress will most assur-
edly continue, albeit accompanied by increased efforts directed toward
technology assessment. At some point, assessment and use of technology
based on cost-effectiveness is likely to influence health policy.
Today, technology affects many aspects of medical practice, to the
point that it currently drives much of the growth in the health ser-
vices industry. Several areas of technological advance are especially
noteworthy.
Genetic mapping is the first step in isolating a gene. The ability to
collect and interpret human genetic information has opened the way for
the field of molecular medicine, the branch of medicine that focuses on
understanding the role that genes play in disease processes and treat-
ment of diseases through gene therapy. In gene therapy, a functioning
gene is inserted into targeted cells to correct an inborn defect or provide
the cell with a new function. This technique is expected to replace treat-
ment with medications or surgery in some areas. Cancer treatment is
receiving much attention as a prime candidate for gene therapy because
current treatment techniques (surgery, radiation, and chemotherapy) are
effective in only half of all cases and can greatly reduce a patient’s quality
of life.
Personalized medicine and pharmacogenomics are relatively new
fields. Pharmacogenomics is the study of how genes affect a person’s
response to drugs. Personal characteristics of individual patients can
vary so much that not all medications work for everyone. In personal-
ized medicine, specific gene variations among patients are matched with
responses to particular medications to increase effectiveness and reduce
unwanted side effects.
Rational drug design is expected to shorten the drug discovery pro-
cess. The chief candidates for development through this process are drugs
to treat neurologic and mental disorders and antiretroviral therapies for
HIV/AIDS, encephalitis, measles, and influenza. New drug delivery sys-
tems will be used to target specific cells. For example, cancer tumors may
be treated without incurring damage to healthy tissues through the use
of nanoparticles as drug delivery vehicles.
Imaging technologies have undergone some of the most dramatic
advances in health care. For example, focused energy beams can now
avoid damage to adjacent tissue, 3-D technology can allow faster and
more accurate analysis of images, and neuroimaging can help in early
detection of strokes and Alzheimer’s disease.
Minimally invasive surgery is undergoing advances that include
image-guided brain surgery, minimal-access cardiac procedures, and
New Frontiers in Clinical Technology 349
endovascular placement of grafts for abdominal aneurysms. The use of
robotic surgery is in its early stages.
Vaccines have traditionally been used prophylactically to prevent
specific infectious diseases. More recently, the therapeutic use of vac-
cines in the treatment of noninfectious diseases, such as cancer, has
opened new frontiers in medicine. At the same time, development of
new vaccines for emerging infectious diseases remains a key item on the
research agenda.
Blood substitutes would likely be available one day for large-scale use.
Substitutes for real blood are necessary when supplies fall short, particu-
larly in war and in natural disasters.
Xenotransplantation, in which animal tissues are used for transplants
in humans, is a growing research area. It presents the promise of over-
coming the critical shortages of available donor organs. Organs from
genetically engineered animals may one day be available for transplanta-
tion (Schneider & Seebach, 2013).
Regenerative medicine holds the promise of regenerating damaged
tissues and organs in vivo (in the living body) through reparative
techniques that stimulate previously irreparable organs into healing
themselves. Regenerative medicine also enables scientists to grow tissues
and organs in vitro (in the laboratory) and safely implant them when the
body cannot be prompted into healing itself.
▸ Conclusion
Some features of U.S. health care delivery have remained stable in recent
years, but the future will be determined by how certain forces of change
interact. The ACA was passed in late 2010, but has not solved all prob-
lems related to health care insurance: Serious issues remain in the areas
of coverage, cost, access, and affordability. Hence, a new wave of health
care reform has just begun. Serious challenges lie ahead unless the
United States can control its rising consumption of health care resources,
the costs associated with that use, and put the economy on a growth tra-
jectory. Eventually, the nation will have to come to grips with what it can
reasonably afford in terms of health care.
The existing model of health care delivery is also likely to undergo
major changes in the future. New models of care delivery are being
investigated that focus on value-based shared savings, population health,
community outreach, virtual consultations, and technology-driven
home care.
Another critical area that must be addressed is the shortage of health
care professionals. While the U.S. population is rapidly aging, little has been
350 Chapter 14 The Future of Health Services Delivery
done to address the need for geriatric care. Addressing workforce diversity
and training are other looming challenges that could threaten the ade-
quacy of the health care workforce in a changing demographic landscape.
To combat global health threats, international readiness to respond
quickly to those challenges must be maintained. Armed conflicts in
unstable areas of the world not only create new health crises, but also
siphon off limited resources. Catastrophic consequences could follow if
global health threats are not identified and managed in a timely fashion.
Technological innovations in the areas of advanced imaging, min-
imally invasive surgery, genetic mapping, and regenerative medicine,
among others, will help shape the delivery of medical care in ways never
before imagined. Many of these developments will likely shift the focus
of medicine from the acute phase of illness to prevention and aftercare.
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Academic medical center: An organi-
zation in which there is active collabora-
tion among a university, medical school,
hospital/health system, and health care
professionals.
Access: The ability of persons needing
health services to obtain appropriate care
in a timely manner.
Accountable care organization (ACO):
An integrated group of providers—
including hospitals, physicians, and post-
discharge care delivery organizations—that
work together to deliver coordinated care
and take responsibility for quality and
efficiency of services delivered.
Acquisition: Purchase of one organiza-
tion by another.
Activities of daily living (ADLs): The
most commonly used measure of
disability. ADLs determine whether an
individual needs assistance to perform
basic activities, such as eating, bathing,
dressing, toileting, and getting into or
out of a bed or chair. See instrumental
activities of daily living (IADLs).
Acute condition: Short-term, intense
medi cal care for an illness or injury usually
requiring hospitalization. See subacute
care.
Adaptive rehabilitation: Care that
improves function despite deficits that
remain.
Administrative costs: Costs associated
with health insurance marketing and
enrollment, contracting with providers,
claims processing, utilization monitoring,
and handling of denials and appeals.
Administrative information systems:
Information systems that are designed
to assist organizations in carrying
out financial and administrative sup-
port activities such as payroll, patient
accounting, materials management, and
office automation.
Adult day care: A community-based,
long-term care service that provides a wide
range of health, social, and recreational
services to elderly adults who require
supervision and care while members of
the family or other informal caregivers are
away at work.
Adult foster care: Long-term care ser-
vices provided in small, family-operated
homes, located in residential commu-
nities, which provide room, board, and
varying levels of supervision, oversight,
and personal care to nonrelated adults.
Advance directive: A patient’s wishes
regarding continuation or withdrawal of
treatment in the event the patient lacks
decision-making capacity.
Advanced-practice nurse (APN): A
general name for nurses who have educa-
tion and clinical experience beyond that
required of a registered nurse (RN). APNs
include four areas of specialization in
nursing: clinical nurse specialists (CNSs),
certified registered nurse anesthetists
(CRNAs), nurse practitioners (NPs), and
certified nurse-midwives (CNMs).
Alliance: A joint agreement between
two organizations to share their resources
without joint ownership of assets.
Allied health professional: A profes-
sional who is educated and trained in a
specialized field of health care and has
responsibility for the delivery of services
associated with medical care.
355
© ninjaMonkeyStudio/Getty Images
Glossary
356 Glossary
Allocative tool: A use of health policy
in which there is a direct provision of
income, services, or goods to groups of
individuals who usually reap benefits in
receiving them.
Allopathic medicine: A philosophy of
medicine that views medical treatment as
active intervention to counteract the effects
of disease through medical and surgical
procedures that produce effects oppo-
site those of the disease. See osteopathic
medicine.
Almshouse: Also called a poorhouse. An
unspecialized institution existing during
the 18th and mid-19th centuries that
mainly served general welfare functions,
essentially providing shelter to the home-
less, the insane, the elderly, orphans, and
the sick who had no family to care for
them.
Alternative medicine: Also called alter -
native and complementary medicine.
Non tradi tional remedies—for example,
acupuncture, homeopathy, naturopathy,
biofeedback, yoga exercises, chiropractic,
and herbal therapy.
Ambulatory: Related to walking; typi-
cally used as the opposite of inpatient.
Ambulatory care: Also referred to as
outpatient services. Services that include
(1) care rendered to patients who come
to physicians’ offices, outpatient depart-
ments of hospitals, and health centers;
(2) outpatient services intended to serve
the surrounding community (community
medicine); and (3) certain services that
are transported to the patient.
Asylum: Forerunner of today’s inpa-
tient psychiatric facilities. These institu-
tions were built by state governments for
patients with untreatable, chronic medi-
cal illness.
Average daily census: Average num-
ber of hospital beds occupied daily over
a given period of time. This measure pro-
vides an estimate of the number of inpa-
tients receiving care each day at a hospital.
Average length of stay (ALOS): The
average number of days each patient stays
in the hospital. For individual or specific
categories of patients, this measure indi-
cates severity of illness and resource use.
Balance bill: Billing of the leftover sum
by the provider to the patient after insur-
ance has partially paid the charge initially
billed.
Behavioral factors: Individual lifestyles
that include diet, exercise, a stress-free
lifestyle, risky or unhealthy behaviors, and
other individual choices that may contrib-
ute to significant health problems.
Beneficence: The ethical obligation of a
health services organization to do all it can
to alleviate suffering caused by ill health
and injury.
Beneficiary: Anyone covered under a
particular health insurance plan.
Benefit period: A period determined
by a spell of illness beginning with
hospitalization and ending when the
beneficiary has not been an inpatient
in a hospital or a skilled nursing facility
for 60 consecutive days. Under Medicare
rules, benefits for an inpatient stay are
based on a benefit period.
Biologics: Biological products such as
vaccines, blood and blood components,
allergenics, somatic cells, gene therapy,
tissues, and recombinant therapeutic
proteins.
Biosimilar: A product that is highly
similar to, or is interchangeable with, a
biologic that has already been approved
by the Food and Drug Administration.
Bundled payments: Payment scheme
in which a number of related services are
included in one price.
Capacity: The number of beds set up,
staffed, and made available by a hospital
for inpatient use.
Capitalism: Political and economic sys-
tem that relies primarily on market forces
Glossary 357
in the production and distribution of
goods and private ownership; contrasts
with socialism, where collective or gov-
ernmental forces prevail.
Capitation: A reimbursement mecha-
nism under which the provider is paid a
set monthly fee per enrollee (sometimes
referred to as per member per month
[PMPM] rate) regardless of whether the
enrollee actually sees the provider and
regardless of how often an enrollee sees
the provider.
Carve-out: The assignment through
contractual arrangements of special-
ized services to an outside organization
because these services are not included in
the contracts managed care organizations
(MCOs) have with their providers or the
MCO does not provide the services.
Case management: An organized
approach to evaluating and coordinating
care, particularly for patients who have
complex, potentially costly problems that
require a variety of services from multiple
providers over an extended period.
Case mix: An aggregate of the severity
of conditions requiring medical inter-
vention. Case-mix categories are mutu-
ally exclusive and differentiate patients
according to the extent of resource use.
Categorical programs: Public health
care programs designed to benefit only a
certain category of people.
Census: The number of patients in a
hospital on a given day or the number of
beds occupied on a given day.
Certification: Conferred by the U.S.
Department of Health and Human Ser-
vices, a status that entitles an organization
to participate in Medicare and Medicaid.
The organization must comply with the
conditions of participation.
Chronic condition (chronic disease): A
long-lasting medical condition that can be
controlled but not cured.
Clinical decision support systems:
Interactive software systems designed
to help clinicians with decision-making
tasks, such as determining a diagnosis or
recommending a treatment for a patient.
Clinical information systems: Systems
that involve the organized processing,
storage, and retrieval of information to
support patient care processes.
Clinical practice guidelines (medi-
cal practice guidelines): Standardized
guidelines in the form of scientifically
established protocols, representing pre-
ferred processes in medical practice.
Clinical trial: A research study, gen-
erally based on random assignments,
designed to examine the effectiveness of
a new drug, device, or treatment.
Cognitive impairment: A mental dis-
order that is indicated by a person hav-
ing difficulty remembering, learning new
things, concentrating, or making deci-
sions that affect the individual’s everyday
life.
Coinsurance: Cost sharing in the form
of a percent amount. A plan with an 80:20
coinsurance, for example, pays 80% of
all covered medical expenses after the
deductible requirement has been met
until the maximum out-of-pocket liabil-
ity in a given year has been met.
Community hospital: Nonfederal (i.e.,
Veterans Administration and military
hospitals are excluded), short-term, gen-
eral or specialty hospital whose services
are available to the public.
Community-oriented primary care
(COPC): Care that incorporates the ele-
ments of good primary care delivery as
well as a population-based approach to
identifying and addressing community
health problems.
Comorbidity: The presence of more
than one health problem in an individual.
Conditions of participation: Standards
developed by the Department of Health
and Human Services with which a facility
must comply to participate in the Medi-
care and Medicaid programs.
358 Glossary
Consumer-driven health plan: A
high-deductible health plan that carries a
savings option to pay for routine health
care expenses.
Consumer price index: A measure of
inflation in the general economy.
Copayment (coinsurance): A portion
of health care charges that the insured has
to pay under the terms of his or her health
insurance policy. See deductible.
Corporate era: A recent period in the
evolution of the U.S. medical delivery
system that is characterized by the dom-
ination of corporations rather than indi-
viduals in decision making regarding care
delivery and payment.
Corporatization: In this text, the ways
in which health care delivery in the
United States has become the domain of
large organizations.
Cost-effectiveness: Evaluation of the
overall usefulness of medical technology,
including evaluation of the safety and
efficacy of a technology in relation to its
cost. See cost-efficiency.
Cost-efficiency: Delivery of services in a
manner so that the benefit is greater than
the cost incurred to provide the service.
Cost sharing: Sharing in the cost of
health insurance premiums by those
enrolled and/or payment of certain med-
ical costs out of pocket, such as copay-
ments and deductibles.
Cost-shifting (cross-subsidizing): In
general, shifting of costs from one entity
to another as a way of making up losses in
one area by charging more in other areas.
For example, when care is provided to
the uninsured, the provider makes up the
cost for those services by charging more
to the insured.
Critical access hospital (CAH): Medicare
designation for small rural hospitals with
25 or fewer beds that provide emergency
medical services besides short-term hos-
pitalization for patients with noncomplex
health care needs. Such hospitals receive
cost-plus reimbursement.
Critical pathways: Outcome-based,
patient-centered case management tools
that are interdisciplinary in scope, facili-
tating coordination of care among multi-
ple clinical departments and caregivers. A
critical pathway identifies planned med-
ical interventions in a given case, along
with expected outcomes.
Custodial care: Nonmedical care pro-
vided to support and maintain the patient’s
condition, generally requiring no active
medical or nursing treatments.
Days of care: Cumulative number of
patient days over a given period of time.
Decision support systems: Computer-
based information and analytical tools to
support managerial decision making in
health care organizations.
Deductible: The portion of health
care costs that the insured must first pay
(generally up to an annual limit) before
insurance payments kick in. Insurance
payments may be further subject to
copayment.
Deemed status: A designation used
when a hospital, by virtue of its accred-
itation by the Joint Commission or the
American Osteopathic Association, does
not require separate certification from the
DHHS to participate in the Medicare and
Medicaid programs.
Defensive medicine: Excessive medi-
cal tests and procedures performed as a
protection against malpractice lawsuits,
otherwise regarded as unnecessary.
Demand-side incentive: Cost-sharing
mechanism that places a larger cost bur-
den on consumers, thereby encouraging
consumers to be more cost-conscious
in selecting the insurance plan that best
serves their needs and more judicious in
their utilization of services.
Demand-side rationing: Barriers to
obtaining health care faced by individ-
uals who do not have sufficient income
to pay for services or purchase health
insurance.
Glossary 359
Dependency: (1) A person’s reliance on
another for assistance with common daily
functions, such as bathing and grooming.
See activities of daily living. (2) Children’s
reliance on adults, such as parents or
school officials, to recognize and respond
to their health needs.
Determinants of health: See health
determinants.
Developmental disability: A physical
incapacity that generally accompanies
mental retardation and often arises at
birth or in early childhood.
Developmental vulnerability: Rapid
and cumulative physical and emotional
changes that characterize childhood and
the potential impact that illness, injury, or
untoward family and social circumstances
can have on a child’s life-course trajectory.
Discharge: Release of a patient who
has received inpatient services. The total
number of discharges indicates access to
hospital inpatient services as well as the
extent of utilization.
Discharge planning: Part of the over-
all treatment plan designed to facilitate
discharge from an inpatient setting. It
includes, for example, an estimate of how
long the patient will be in the hospital,
what the expected outcome is likely to be,
whether any special requirements will be
needed at discharge, and what needs to be
facilitated for postacute continuity of care.
Disease: Condition determined by a
medical professional’s evaluation; con-
trast with an illness, which is based on the
patient’s assessment. See illness.
Dispensary: A clinic during the prein-
dustrial era that provided charity care in
urban areas.
Distributive policies: Spreading of ben-
efits throughout society. Examples are
funding of medical research through the
National Institutes of Health, the training
of medical personnel through the National
Health Services Corps, the construction
of health facilities under the Hill-Burton
Act program, and the initiation of new
institutions (e.g., health maintenance
organization).
Efficacy: The health benefit to be derived
from the use of technology, or how effec-
tive a given technology is in diagnosing or
treating a condition.
E-health: Health care information and
services offered over the Internet by pro-
fessionals and nonprofessionals alike.
Enabling characteristics: Within the
access to care framework, factors that
make it possible (or easier) for individuals
to use available health care resources.
Enrollee: A person covered by a health
plan, especially a managed care plan.
Environmental factors: Factors that
encompass the physical, socioeconomic,
sociopolitical, and sociocultural dimen-
sions of life.
E-therapy: Any type of professional
therapeutic interaction that makes use of
the Internet to connect qualified mental
health professionals and their clients.
Ethics committee: An interdisciplin-
ary committee responsible for developing
guidelines and standards for ethical deci-
sion making in the provision of health
care and for resolving issues related to
medical ethics.
Financing: Any mechanism that gives
people the ability to pay for health care
services.
Gatekeeping: The use of primary care
physicians to coordinate health care ser-
vices needed by an enrollee in a managed
care plan.
General hospital: A hospital that pro-
vides general and specialty medical ser-
vices for a variety of medical needs.
Generalist: A physician in family prac-
tice, general internal medicine, or general
pediatrics. See specialist.
Genetic mapping: The first step in iso-
lating a gene.
360 Glossary
Globalization: Various forms of cross-
border economic activities driven by
global exchange of information, produc-
tion of goods and services more eco-
nomically in developing countries, and
increased interdependence of mature and
emerging world economies.
Health: A state of physical, mental, and
social well-being (World Health Organi-
zation, 1948).
Health care delivery: The provision of
medical care or illness care.
Health care reform: Systemic changes
in how medical care is financed or
delivered.
Health care system: Organizations, per-
sonnel, and activities associated with pro-
moting, restoring, and maintaining health.
Health determinants: Factors that con-
tribute to the general well-being of indi-
viduals and populations.
Health informatics: The application of
information science to improve the effi-
ciency, accuracy, and reliability of health
care services. It requires the use of infor-
mation technology (IT) but goes beyond
IT by emphasizing the improvement of
health care delivery.
Health plan: The contractual arrange-
ment between the managed care orga-
nization and the enrollee, including the
collective array of covered health services
to which the enrollee is entitled.
Health planning: Decisions made
by governments to limit health care
resources, such as hospital beds and dif-
fusion of costly technology.
Health policy: Public policy that per-
tains to or influences the pursuit of
health.
Health technology assessment: Any
process of examining and reporting prop-
erties of a medical technology used in
health care, such as its safety, effective-
ness, feasibility, indications for use, and
cost-effectiveness.
Heredity: A key determinant of health
that predisposes individuals to certain
diseases.
Holistic medicine: A philosophy of
health care that emphasizes the well-
being of every aspect of a person, includ-
ing the physical, mental, social, and
spiritual aspects of health.
Horizontal integration: A growth strat-
egy in which an organization extends
its core product or service. See vertical
integration.
Hospice: A cluster of special services for
the dying, which blends medical, spiri-
tual, legal, financial, and family-support
services. The venue can vary from a spe-
cialized facility to a nursing home to the
patient’s own home.
Hospitalist: A physician who special-
izes in the care of hospitalized patients.
Illness: Patient condition recognized by
the patient’s perceptions and evaluation
of how he or she feels; contrast with dis-
ease, which is determined by a medical
professional. See disease.
Information technology (IT): Technol-
ogy used for the transformation of data
into useful information. It involves deter-
mining data needs, gathering appropriate
data, storing and analyzing the data, and
reporting the information generated in a
user-friendly format.
Informed consent: A fundamental
patient right to make an informed choice
regarding medical treatment based on full
disclosure of medical information by the
providers.
Inpatient: Services delivered on the
basis of an overnight stay in a health care
institution.
Inpatient day: A night spent in the hos-
pital by a person admitted as an inpatient;
also called a patient day or a hospital day.
Instrumental activities of daily living
(IADLs): A person’s ability to perform
household and social tasks, such as home
Glossary 361
maintenance, cooking, shopping, and
managing money. See activities of daily
living (ADLs).
Insured: The individual who is covered
for risk by insurance.
Integrated care: Care that embodies
the concepts of comprehensive, coordi-
nated, and continuous services that pro-
vide a seamless process of care.
Integrated delivery system (IDS): A
network of organizations that provides or
arranges to provide a coordinated contin-
uum of services to a defined population
and is willing to be held clinically and
fiscally accountable for the outcomes and
health status of the population serviced.
Interoperability: The ability to share and
access patient information by various users.
Item-based pricing: The costs of ancil-
lary services that often accompany major
procedures such as surgery.
Joint venture: Creation of a new orga-
nization in which two or more institu-
tions share resources to pursue a common
purpose.
License: Permission granted by the state
for an organization to legally operate.
Long-term care: A variety of individ-
ualized, well-coordinated services that
are designed to promote the maximum
possible independence for people with
functional limitations. These services are
provided over an extended period to meet
the patients’ physical, mental, social, and
spiritual needs, while maximizing quality
of life.
Maintenance rehabilitation: Care
that aims to preserve the present le-vel of
function and prevent further decline.
Managed care: A system of health care
delivery that (1) seeks to achieve efficien-
cies by integrating the four functions of
health care delivery, (2) employs mecha-
nisms to control (manage) utilization of
medical services, and (3) determines how
much the providers get paid.
Market justice: A distributional principle
according to which health care is most equi-
tably distributed through the market forces
of supply and demand rather than govern-
ment interventions. See social justice.
Meaningful use: Specific criteria in qual-
ity, safety, efficiency, and other areas that
providers are required to meet to comply
with the Health Information Technology
for Economic and Clinical Health Act
(HITECH) of 2009.
Means-tested program: A program in
which eligibility depends on income.
Mediating factors: Forces or condi-
tions that moderate the effects of an inter-
vention being studied, either positively or
negatively.
Medicaid: A joint federal–state program
of health insurance for the poor.
Medical center: A hospital with a high
level of specialization and a wide scope of
services.
Medical home: Primary care deliv-
ery based on a partnership between the
patient and the provider with a focus on
chronic care.
Medical loss ratio: The percentage of pre-
mium revenue spent on medical expenses.
Medical model: Delivery of health care
that places its primary emphasis on the
treatment of disease and relief of symp-
toms instead of prevention of disease and
promotion of optimal health.
Medical practice guidelines: See clini-
cal practice guidelines.
Medical system: Large organizations
that may include more than one hospital
to serve a large geographical area.
Medical technology: Practical applica-
tion of the scientific body of knowledge
for the purpose of improving health and
creating efficiencies in the delivery of
health care.
Medicare: A federal program of health
insurance for the elderly, certain disabled
362 Glossary
individuals, and people with end-stage
renal disease.
Medigap: Commercial health insurance
policies purchased by individuals covered
by Medicare to insure the expenses not
covered by Medicare.
Member: An enrollee in a private health
insurance plan.
Merger: Unification of two or more
organizations into a single entity through
mutual agreement.
Molecular medicine: A branch of med-
icine that deals with the understanding
of the role that genes play in disease pro-
cesses and treatment of diseases through
gene therapy.
Moral hazard: Consumer behavior that
leads to a higher utilization of health care
services solely because people are covered
by insurance.
Nanomedicine: A developing area of
medicine in which materials are manip-
ulated on the atomic and molecular level
(one nanometer is one-billionth of a
meter).
Need: The necessity for health services
(in contrast to demand for health ser-
vices), based on the individual judgment
of the patient or a health care professional.
Need attributes: Within the access to
care framework, factors that reflect the
health status of the individual, either
from a self-perceived perspective or from
professional assessment.
New morbidities: Dysfunctions, such
as drug and alcohol abuse, family and
neighborhood violence, emotional disor-
ders, and learning problems, from which
older generations often do not suffer.
Nonmaleficence: The moral obliga-
tion of health services personnel not to
harm the patients. This principle requires
physicians to use their best professional
judgment in choosing interventions that
maximize the potential health benefits at
minimum risk.
Nonphysician practitioners (NPPs):
Clinical professionals, such as nurse
practitioners and physician assistants,
who practice in many areas similar to
those in which physicians practice but
who do not have an MD or a DO degree.
Occupancy rate: The percentage of a
hospital’s total inpatient capacity that is
actually utilized.
Organized medicine: Concerted activ-
ities of physicians, mainly to protect their
own interests, through such associations
as the American Medical Association.
Orphan drugs: Certain new drug ther-
apies for conditions that affect fewer than
200,000 people in the United States.
Osteopathic medicine: A medical phi-
losophy based on the holistic approach to
treatment that also emphasizes correc-
tion of the position of the joints or tis-
sues and diet and environment as factors
that might destroy natural resistance. See
allopathic medicine.
Outcome: The end result of health care
delivery; often viewed as the bottom-line
measure of the effectiveness of the health
care delivery system.
Outpatient: A person who receives
health care services without being admit-
ted to a hospital; the opposite of inpatient.
See ambulatory.
Outpatient services: Any health care
services that are not provided based on
an overnight stay in which room and
board costs are incurred. See ambula-
tory care.
Overutilization (overuse): Utilization
of medical services, the cost of which
exceeds the benefit to consumers or the
risks of which outweigh the potential
benefits.
Package pricing: Bundling of fees for
an entire package of related services.
Palliation: Care intended to relieve or
alleviate symptoms, such as pharmaco-
logic pain management and nausea relief.
Palliative care: Pain and symptom man-
agement; it is a primary area of emphasis
in hospice care.
Glossary 363
Part A: The component of Medicare that
mainly covers hospital care and limited
nursing home care.
Part B: The component of Medicare in
which government-subsidized voluntary
insurance covers physician services and
outpatient services.
Patient days: The cumulative census
over a given period of time. See days of
care and inpatient day.
Payer-driven competition: Competi-
tive strategy used by employers that shop
for the best value in terms of the cost
of premiums and the benefits package
(competition among insurers), and by
managed care organizations that shop for
the best value from providers of health
services (competition among providers).
Peer review: The general process of
medical review of utilization and quality
when it is carried out directly or under
the supervision of physicians.
Per diem: A type of reimbursement that
pays a flat rate for each day of inpatient
stay.
Personalized medicine: Matching of
gene variations with responses to particu-
lar medications so as to increase effective-
ness and reduce unwanted side effects.
Pesthouse: An institution that existed
in preindustrial America to quarantine
people with contagious diseases such as
cholera, smallpox, or typhoid.
Pharmaceutical care: A mode of phar-
macy practice in which the pharmacist
not only dispenses drugs but also informs
patients on the proper use of drugs and
their potential misuse. When asked, the
pharmacist also assists prescribers in
making appropriate drug choices.
Pharmacogenomics: The study of how
genes affect a person’s response to drugs.
Physician–hospital organization
(PHO): A legal entity formed between a
hospital and a physician group to achieve
shared market objectives and other
mutual interests.
Planned rationing: See supply-side
rationing.
Poorhouse: See almshouse.
Postindustrial era: Phase of the medi-
cal delivery system that began in the late
19th century. The medical profession
grew as a result of urbanization, new sci-
entific discoveries, and reforms in medi-
cal education.
Precertification: Requirement by some
insurance plans that the enrollee or the
provider call the plan administrators
for approval before certain services are
provided.
Preindustrial era: Phase of the medi-
cal delivery system from the middle part
of the 18th century until the latter part
of the 19th century. Health care was not
grounded in science and was delivered in
a free market.
Premium: The insurer’s charge for
insurance coverage; the price for an insur-
ance plan.
Process: The specific way in which care
is provided. Examples of process include
correct diagnostic tests, correct pre-
scriptions, accurate drug administration,
pharmaceutical care, waiting time to see
a physician, and interpersonal aspects of
care delivery.
Proprietary hospital: A for-profit hos-
pital owned by individuals, a partnership,
or a corporation; also referred to as an
investor-owned hospital.
Prospective reimbursement: A method
of payment in which certain preestablished
criteria are used to determine in advance
the amount of reimbursement.
Provider-induced demand: Artificial
creation of demand by providers that
enables them to deliver unneeded ser-
vices to boost their incomes.
Public health: A wide variety of activi-
ties undertaken by state and local govern-
ments to ensure conditions that promote
optimal health for society as a whole.
Public health system: A system whose
mission is to improve and protect com-
munity health.
Public hospital: A hospital owned by
the federal, state, or local government.
364 Glossary
Public policies: Authoritative decisions
made in the legislative, executive, or
judicial branches of government that are
intended to direct or influence the actions,
behaviors, or decisions of others.
Quality: The degree to which health
services for individuals and populations
increase the likelihood of desired health
outcomes and are consistent with current
professional knowledge.
Quality of life: (1) Factors considered
important by patients, such as environ-
mental comfort, security, interpersonal
relations, personal preferences, and auton-
omy in making decisions when institu-
tionalized. (2) Overall satisfaction with life
during and following a person’s encounter
with the health care delivery system.
Quality-of-life indicators: Measures
that demonstrate the general well-being
of individuals and societies.
Redistributive policies: Policies that
take money or power from one group and
give it to another. An example is the Med-
icaid program, which takes tax revenue
and spends it on the poor in the form of
health insurance.
Regenerative medicine: Regeneration
of damaged tissues and organs in vivo
through techniques that stimulate pre-
viously irreparable organs into healing
themselves. It can also be done in vitro
and the tissue or organ implanted when
the body cannot be prompted to heal itself.
Regulatory tools: Health policies in
which the government prescribes and
controls the behavior of a particular tar-
get group by monitoring the group and
imposing sanctions if it fails to comply.
Reimbursement: The amount insurers
pay to a provider. The payment may only
be a portion of the actual charge.
Reinsurance: Stop-loss coverage that
self-insured employers purchase to pro-
tect themselves against any potential risk
of high losses.
Residency: Graduate medical educa-
tion in a specialty that takes the form
of paid on-the-job training, usually in a
hospital.
Resource-based relative value scale
(RBRVS): A payment method instituted
by Medicare for determining physicians’
fees. Each treatment or encounter by
the physician is assigned a relative value
based on the time, skill, and training
required to treat the condition.
Respite care: A service that provides
temporary relief to informal caregivers,
such as family members.
Restorative care: Short-term therapy
treatments to help a person regain or
improve physical function.
Retail clinic: A type of proprietary,
community-based, freestanding medi-
cal facility found across the country in
retail establishments such as Walmart,
Walgreens, and CVS pharmacies.
Retrospective reimbursement: Reim-
bursement rates based on costs actually
incurred.
Risk: The possibility of a substantial
financial loss from an event of which the
probability of occurrence is relatively
small.
Risk management: Limiting risks against
lawsuits or unexpected events.
Rural hospital: A hospital located in a
county that is not part of a metropolitan
statistical area.
Safety: Protection against unnecessary
harm from the use of technology.
Secondary care: Routine hospitaliza-
tion, routine surgery, and specialized
outpatient care, such as consultation with
specialists and rehabilitation.
Self-insurance: Health insurance pro-
vided by large employers that can afford
to assume the risk by budgeting funds
to pay medical claims incurred by their
employees.
Senior centers: Local community
centers for older adults that provide
Glossary 365
opportunities to congregate and social-
ize, and in some cases have a midday
meal.
Single-payer system: A national health
care program in which the financing and
insurance functions are taken over by the
federal government.
Skilled nursing care: Medically ori-
ented long-term care provided mainly by
a licensed nurse under the overall direc-
tion of a physician.
Small-area variations: Unexplained
varia tions in the treatment patterns for
similar patients and medical conditions.
Social justice: A distribution principle
according to which health care is most
equitably distributed by a government-run
national health care program. See market
justice.
Socialism: A political and economic
system that advocates collective or
governmental ownership and adminis-
tration of the means of production and
distribution of goods; contrast with cap-
italism, where private and market forces
dominate.
Socialized medicine: Any large-scale
government-sponsored expansion of
health insurance or intrusion in the pri-
vate practice of medicine.
Socioeconomic status: A measure of
one’s social position in relation to others,
typically based on income, education, and
occupation.
Special populations: Persons with health
needs but with inadequate resources to
address those needs.
Specialist: A physician who specializes
in specific health care problems—for
example, anesthesiologists, cardiologists,
and oncologists. See generalist.
Specialty hospital: A hospital that
admits only certain types of patients or
those patients with specified illnesses or
conditions. Examples include rehabili-
tation hospitals, tuberculosis hospitals,
children’s hospitals, cardiac hospitals, and
orthopedic hospitals.
Stop-loss: An insurance provision in
which an insured has a maximum out-of-
pocket liability in a given year.
Structure: “The relatively stable char-
acteristics of the providers of care, of the
tools and resources they have at their
disposal, and of the physical and orga-
nizational settings in which they work”
(Donabedian, 1980, p. 81).
Subacute care: Clinically complex ser-
vices that are beyond traditional skilled
nursing care.
Subacute condition: A technically
complex condition that requires services
beyond traditional skilled nursing care.
Supply-side rationing: Also called
planned rationing; rationing that is gen-
erally carried out by a government to
limit the availability of health care ser-
vices, particularly expensive technology.
Supply-side regulation: The antitrust
laws passed in the United States, which
prohibit business practices that stifle com-
petition among providers, such as price
fixing, price discrimination, exclusive
contracting arrangements, and mergers
deemed anticompetitive by the Depart-
ment of Justice.
Surgicenter: A freestanding, ambula-
tory surgery center that performs various
types of surgical procedures on an outpa-
tient basis.
Teaching hospital: A hospital with
an approved residency program for
physicians.
Technological imperative: Use of
technology without cost considerations,
especially when the benefits to be derived
from the use of technology are small com-
pared to the costs.
Technology assessment: See health
technology assessment.
Technology diffusion: The prolifera-
tion of technology once it is developed.
Telemedicine: Use of telecommunica-
tions technology that enables physicians
to conduct two-way, interactive video
366 Glossary
consultations or transmit digital images,
such as x-rays and magnetic resonance
imaging results, to other sites.
Tertiary care: The most complex level
of care, which is typically institution
based, highly specialized, and highly
technological. Examples include burn
treatment, transplantation, and coronary
artery bypass surgery.
Third-party payers: In a multipayer sys-
tem, the payers for covered services—for
example, insurance companies, managed
care organizations, and the government.
They are called third parties because they
are neither the providers nor the recipi-
ents of medical services.
Title 18: The Medicare program; more
precisely known as Title XVIII (18) of the
Social Security Amendment of 1965.
Title 19: The Medicaid program; more
precisely known as Title XIX (19) of the
Social Security Amendment of 1965.
TriCare: An insurance program financed
by the U.S. Department of Defense in
which beneficiaries can receive care from
both private and military medical care
facilities.
Underutilization: Withholding of med-
ically needed health care services, espe-
cially when potential benefits are likely to
exceed the cost or risks.
Underwriting: A systematic technique
used by an insurer for evaluating, select-
ing (or rejecting), classifying, and rating
risks.
Universal access: The ability of all cit-
izens to obtain health care when needed.
It is a misnomer because timely access to
certain services may still be a problem
because of supply-side rationing.
Universal coverage: Health insurance
coverage for all citizens.
Urgent care center: A walk-in clinic
generally open to see patients after nor-
mal business hours in the evenings
and weekends, which does not require
patients to make an appointment.
Usual source of care: A single provider
or place where patients obtain, or can
obtain, the majority of their health care.
Utilization control: Limiting utilization
of medical services to only those deemed
appropriate and necessary.
Utilization review: A process by which
an insurer reviews decisions by physi-
cians and other providers on how much
care to provide.
Value: Greater benefits or higher quality
at the same or lower price levels (costs).
Vertical integration: Linking of ser-
vices that are at different stages in the
production process of health care—for
example, a hospital system that launches
hospice, long-term care, or ambu-
latory care services. See horizontal
integration.
Veterans Integrated Service Net-
works (VISNs): Components of the Vet-
erans Administration system. There are
21 geographically distributed networks
that are responsible for coordinating the
activities of the hospitals and other facili-
ties located within its jurisdiction.
Virtual integration: The formation
of networks based on contractual
arrangements.
Virtual organization: A new organiza-
tion that is formed by contractual arrange-
ments between two or more organizations;
an organization without walls.
Virtual visits: Online consultations
between physicians and patients.
Voluntary health insurance: Private
health insurance (in contrast to government-
sponsored compulsory health insurance).
Voluntary hospital: A nonprofit hospital.
Vulnerability: Susceptibility to negative
events that result in poor health or illness.
Poor health can be manifested physically,
psychologically, and socially.
Glossary 367
Walk-in clinic: A freestanding, ambu-
latory clinic in which patients are seen
without appointments on a first-come,
first-served basis.
Xenotransplantation: Also called xeno-
grafting; transplanting of animal tissue
into humans.
References
Donabedian A. 1980. Explorations in quality assessment and monitoring: The definition of
quality and approaches to its assessment. Vol. 1. Ann Arbor, MI: Health Administration
Press.
World Health Organization. 1948. Preamble to the Constitution. Geneva, Switzerland:
World Health Organization.
369
© ninjaMonkeyStudio/Getty Images
Note: Page numbers followed by e, f, or t indicate materials in exhibit, figures,
or tables respectively.
Index
A
AARP. See American Association of Retired
Persons
ACA. See Affordable Care Act
academic medical center (AMC), 197
access, health care, 31
community health centers, 176
data on, 286–287, 289
defining, 11–12, 286
determinants of, 31, 287f
disparities, 289–290
elderly persons and, 321
geographical disparities in, 119
geographical distribution in, 259–260
HIV/AIDS, persons with, 266
homeless persons and, 262–263
hospitals and, 188
initiatives to address, 290–291
managed care and, 219–220
mental health and, 263–264
primary care and, 11–12, 157e
public financing and, 321
racial/ethnic minorities and, 254–257,
254–255e, 290
socioeconomic status and, 290
surveys on, 287
unequal in, 286–291
uninsured persons and, 11, 16
universal access, 23, 316
accountability
patients and providers, 110
primary care and, 166–167
provider and patient, 15–16, 156
accountable care organizations (ACOs), 6,
148, 221–222, 345
ACP. See American College of Physicians
acquisitions and mergers, 234
Action for Mental Health, 326
Action Plan to Reduce Racial and Ethnic
Health Disparities, 267
activities of daily living (ADLs), 233,
234e, 263
acute care
long-term care versus, 232, 233
Medicare benefits and, 139, 140
technology and, 10–11
acute conditions, 29, 160, 189
ADA. See Americans with Disabilities Act
adaptive devices, 234
adaptive rehabilitation, 246
ADC. See adult day care
ADLs. See activities of daily living
Administration of Children and Families
Head Start Program, 257e
administrative costs, 282
administrative information systems, 104
ADN. See associate’s degree
adolescent females, 258
adult day care (ADC), 161, 238
adult foster care, 238
advance directives, 201
advanced medical home, 171–172
advanced-practice nurses (APNs), 89
AF4Q program. See Aligning Forces for
Quality program
AFDC program. See Aid to Families with
Dependent Children program
Affordable Care Act (ACA), 1, 51, 77, 115,
126, 194, 247, 261, 267, 294, 307,
312, 334, 338
accountable care organizations and, 222
and community health centers, 177
expansion of Medicaid under, 135–136, 312
health insurance exchanges and, 312
lifetime limits and, 131
looming shortages and, 81–83
managed care organizations, 206
and payment reform, 148
political opportunism and, 50
political will, ideologies, and legal
rulings, 336
370 Index
and private insurance, 135–136
quality indicators and, 208
social, demographic, and cultural trends,
334–335
uninsured under, 143, 261–262
wellness exam and, 139
age-related progression of long-term care
intensity, 234e
Agency for Healthcare Research and Quality
(AHRQ), 115, 256, 295, 325
AHA. See American Hospital Association
AHCA. See American Health Care Act
AHRQ. See Agency for Healthcare Research
and Quality
Aid to Families with Dependent Children
(AFDC) program, 312
AIDS. See HIV/AIDS
Alaska Natives, 254, 255e
Aligning Forces for Quality (AF4Q)
program, 296
alliances, 12, 224–225, 315
allied health professionals, 91–93
allocative tool, health policy as, 309–310
allopathic medicine, 78–79, 198
almshouses, 55, 183–184
ALOS. See average length of stay
alternative medicine clinics, 162
AMA. See American Medical Association
ambulatory care, 155. See also outpatient
services
clinics, 81, 81t
ambulatory payment classifications (APCs),
146–147
AMC. See academic medical center
American Association of Homes and Services
for the Aging, 313–314
American Association of Retired Persons
(AARP), 313
American Board of Examiners, 87
American Board of Opticianry, 93
American Cancer Society, 323
American College of Physicians (ACP), 171
American Dental Association, 84
American Health Care Act (AHCA), 329, 340
American Health Care Association, 313
American health care system, 308
American Heart Association, 323
American Hospital Association (AHA), 62,
182, 197, 289, 313
American Indians, 254, 255e
American Legacy Foundation, 323
American Lung Association, 323
American Medical Association (AMA),
58–59, 313
accountable care organizations and,
221–223
consolidation power of, 58
insurance industry and, 62
medical education and, 59–60, 197
opposition on national health care, 64
Physician Masterfile, 289
teaching hospitals and, 197
American Osteopathic Association
(AOA), 198
American Physical Therapy Association, 93
American Speech–Language–Hearing
Association, 93
Americans for Nonsmokers’ Rights, 323
Americans with Disabilities Act (ADA), 327
anesthesia, discovery of, 184
Annual Survey of Hospitals (AHA), 289
antisepsis, discovery of, 184
antitrust laws, 285
anxiety disorders, 258
AOA. See American Osteopathic Association
APCs. See ambulatory payment classifications
APNs. See advanced-practice nurses
Area Agencies on Aging, 237
Asian Americans, 255e
assessment, technology, 120–122
assistants, medical, 92
assisted living facilities, 242
associate’s degree (ADN), 88
asylums, 55
asymptomatic disease, 29
audiologists, 93
average daily census, hospital, 190, 190t
average length of stay (ALOS), 189
B
bachelor of science in nursing (BSN)
degree, 88
balance bill, 143
Balanced Budget Act (1997), 140, 141, 197,
211
Baylor University Hospital, 62, 208
Beers, Clifford Whittingham, 325–326
behavioral determinants of health, 31
behavioral health carve-outs, 220
Behavioral Health IT Act, 328
behavioral health programs, 328
Behavioral Risk Factor Surveillance System
(BRFSS), 270
behavioral science, 46
beneficence, 200
beneficiary, insurance, 130
benefit period, 138
Bill of the First Act to Strengthen Long-Term
Care, 18
bioethics, impact on, 120
Index 371
biologics, 114
Biologics Price Competition and Innovation
Act of 2009, 115
biomedical model, 27, 167
biomedical R&D, 109, 119, 308
biopsychosocial paradigm, 167
Biosimilar User Fee Act of 2012, 115
biotechnology industry, 109
bioterrorism, 338
Black Americans, 254–255e
blood substitutes, 350
Blue Cross Association, 62
Blue Cross Commission, 62
Blue Cross/Blue Shield, 2f, 62
BPHC. See Bureau of Primary Health Care
BRFSS. See Behavioral Risk Factor
Surveillance System
British system, 17
BSN. See bachelor of science in
nursing degree
bundled charges, 14, 144, 218
bundled payments, 144
Bureau of Chemistry, 111
Bureau of Primary Health Care (BPHC), 5, 161
C
CAHPS. See Consumer Assessment of
Healthcare Providers and Systems
CAHs. See critical access hospitals
California Medical Association, 62
CAM. See complementary and alternative
medicine
Canada, 102
health care system in, 16, 17–18
health technology assessment in, 120
hospitalists in, 79
Canada Health Transfer, 17
cancer, 115
capacity, hospital, 189–190, 190t
capitalism, 32
capitation (per head) payment, 3, 14, 144,
207, 210, 216
cardiac implantable electronic devices, 107
caregivers, respite for, 246
Carnegie Foundation for the Advancement of
Teaching, 59
carve-out contracts, 216, 220
case management, 161, 240
case mix, 147
catastrophic illness, 131
categorical programs, 136
CBO. See Congressional Budget Office
CCRCs. See continuing-care retirement
communities
CDC. See Centers for Disease Control and
Prevention
CDSSs. See clinical decision support systems
census, hospital, 190
Center for Medicare and Medicaid
Innovation (CMMI), 148
Centers for Disease Control and Prevention
(CDC), 323, 338, 347
Centers for Medicare and Medicaid Services
(CMS), 67, 127, 194–195, 208, 244
central governing agency, 10
centrally controlled health care systems, 10
certificate-of-need program, 309, 324
certification of nursing homes, 244–245
certification standards, 10
certified nurse–midwives (CNMs), 89
certified occupational therapy assistants, 92
certified registered nurse anesthetists
(CRNAs), 89
CHCs. See community health centers
chief executive officer (CEO), hospital,
183, 199
chikungunya virus, 8, 338
childhood obesity, 44, 260f
children
death rates among, 12, 13f
health policy and, 311–312
hospitals, 196
in long-term care, 229
new morbidities and, 256
primary care and, 169
as vulnerable population, 258–259
Children’s Health Insurance Program
(CHIP), 6, 141–142, 312, 315, 322
CHIP. See Children’s Health Insurance
Program
chiropractors, 87t, 88
chronic care model, 171
chronic conditions, 29, 77, 230–231, 265, 286
chronic disease management, 174–175
chronic illness/disability, 264–265
church-owned hospitals, 193
civil rights law, Title I of, 327
clinical decision support systems
(CDSSs), 105
clinical information systems, 103–104
clinical nurse specialists (CNSs), 89
clinical practice guidelines, 122, 298
clinical trials, 120
clinically based prevention strategies,
eliminate disparities, 269
Clinton, Bill, 64, 317, 341
CMMI. See Center for Medicare and
Medicaid Innovation
CMS. See Centers for Medicare and
Medicaid Services
372 Index
CMS Quality Strategy, 294
CNMs. See certified nurse–midwives
CNSs. See clinical nurse specialists
coalition agreement plan, 18
cognitive impairment, 230
coinsurance, 131
Commission on Dietetic Registration of the
American Dietetic Association, 93
Commonwealth Fund, 329
Communities Putting Prevention to Work
(CPPW), 257e
community-based interventions, 44
community-based long-term care services,
236–240
adult day care (ADC), 238
adult foster care, 238
case management, 240
emergency response systems, 239–240
home-delivered and congregate meals,
239
home health care, 237–238, 247
homemaker and handyman services, 239
senior centers, 238–239
community-based prevention strategies,
eliminate disparities, 269
Community Health Center Program, 321
community health centers (CHCs), 155, 161
access to care, 176
and Affordable Care Act, 177
cost-effectiveness and, 177
dental care and, 84
quality of care and, 175–176
Community Health Systems, 195
community health workers, 94–95
community hospitals, 189, 192, 192e
Community Mental Health Center Program,
162
community-oriented primary care, 167
community outreach, 346
Community Support Program (CSP), 326
comorbidity, 80, 231
comparative effectiveness study, 121
competition
among health care providers, 110–111, 209
among hospitals, 194
among managed care organizations, 210
complementary and alternative medicine
(CAM), 16
Comprehensive Addiction and Recovery
Act, 328
computerized physician-order entry, 104
CON program. See certificate-of-need
program
concurrent utilization review, 213–214
conditions of participation, 198
confidentiality, 106
Congress, U.S.
drug legislation, 112–113
hospital shortage and, 186
legislative process in, 319–320
Medicaid and Medicare programs and,
61, 64–68, 290, 312
national health insurance and, 63–64
nontaxable health coverage and, 63
policy and institutional fragmentation
of, 312
quality of care and, 325
tax exemption for nonprofits and, 194
wage freezes during WWII and, 62
Congressional Budget Office (CBO),
338, 343
consent, informed, 201
Consumer Assessment of Healthcare Providers
and Systems (CAHPS), 295
consumer-driven health plans, 134
consumer groups, 314–315
consumer price index (CPI), 150, 206, 209,
209f, 277
Consumer–Purchaser Alliance, 296
continuing-care retirement communities
(CCRCs), 240
continuity, 166
copayment, 130
coronary artery bypass graft, surgery, 117
corporate era, 52
medical services in, 68–70
corporatization of health care
delivery, 68–69
globalization and, 69–70
information revolution and, 69
corporatization of health care delivery,
68–69
cost(s), 11
antiretroviral therapy, 266
expenditures, growth in, 67
hidden, 14
high cost of U.S. health care, 277,
278–280t
reasons for, 281–283
meanings of, 276–277
-shifting of, 284
technology, effect on, 57, 281–282
U.S. spending versus other developed
countries, 278–280t
U.S. versus other developed country, 10
cost containment
chronic disease prevention and
management, 286
Index 373
competitive approaches and, 285–286
electronic health records and, 286
health planning and, 284
managed care and, 219
peer review and, 285
policy on, 323–324
price controls and, 284–285
technology and, 122
cost-control imperative, 342–343
cost-effectiveness
community health centers and, 177
of medical technology, 121–122
of primary care, 170
of telemedicine, 107
cost-efficiency concept, 298
cost-saving technology, 118e, 315
cost sharing, 130–132
coinsurance, 131
copayment, 130
deductible, 131
stop-loss provision and, 131
cost-shifting, 284
Council of Teaching Hospitals and Health
Systems, 197
Council on Education for Public Health, 96
Council on Medical Education, 59
Council on Social Work Education, 93
CPI. See consumer price index
CPPW. See Communities Putting Prevention
to Work
CPT code. See current procedure
terminology code
critical access hospitals (CAHs), 197
critical pathways, 299
critical policy issues, 320
access and low income, 322
access and minorities, 322
access and the elderly, 321
access in rural areas, 322
access to care, 320–321
cost containment, 323–324
providers, 321
public financing, 321
quality of care, 325
research and policy development, 318
smoking and tobacco use, 322–323
CRNAs. See certified registered nurse
anesthetists
CSP. See Community Support Program
Culler, S., 169
cultural beliefs and values
about health, 32
about technology, 109–110
cultural competence, 347
current procedure terminology (CPT)
code, 144
custodial care, 241
D
days of care, hospital, 189, 190
de facto mental health service system, 264
death rates, among children, 12, 13f
decision support systems, 105
deductible
definition of, 131
high-deductible health plans, 134–135
deemed status, 199
defensive medicine, 16, 283
demand-side incentives, 285–286
demand-side rationing, 33, 129
dementia, 231, 238, 347
dentists/dental care, 84–85, 85t, 156, 160, 233
licensure for, 84
specialties (2012), 85t
Department of Health and Human Services
(DHHS), 267, 268, 319, 325
community health centers and, 5, 162
conditions of participation and, 198
database on legal actions against health
care providers, 325
drug/device regulation and, 111
Initiative to Eliminate Racial and Ethnic
Disparities in Health (1998), 257e
technology research and, 115
women’s health and, 258
Department of Veterans Affairs (VA), 127,
136, 192
dependency of children for health needs, 258
depression, among elderly persons, 233
determinants of health, 30–32, 46
behavior and lifestyle, 31
environment, 31
examples of, 30e
heredity, 31
medical care, 32, 41–42
medical points of intervention, social and,
42–46
social, 41f, 45
developmental disabilities, 245
developmental vulnerability, 258
devices, regulation of, 113–114
DHHS. See Department of Health and
Human Services
diabetes, 117, 264, 265f
diagnosis-related groups (DRGs), 145–146,
187, 284
374 Index
diagnostic technicians, 199
dietitians, 93, 199
direct-purchase private insurance, 132
disability coverage, 61, 137
discharges
defining, 188
review, 214
discounted fee payments, 207, 210
disease
acute/subacute, 29
chronic, 29, 77, 230–231, 264–265, 286
classification of, 29
illness, defining, 29
infection, 56
infectious, 337
management of, 168, 286
disparities, initiatives to eliminate, 266–270
dispensaries, 56
dispensing opticians, 93
distance medicine, 107
distributive justice, 33
distributive policies, 309–310
diversity, in workforce, 351
Dix, Dorothea, 325–326
DME. See durable medical equipment
DO. See doctor of osteopathic medicine
doctor of medicine (MD), 77–78
doctor of osteopathic medicine (DO),
77–78, 156
doctoral-level health professionals,
87–88, 87t
Domenici, Pete, 327
downsizing of hospitals, 185–188, 188e
DRGs. See diagnosis-related groups
drug–laboratory interaction, patient safety,
301–302
drugs
approval system, 111
orphan drugs, 112
rational drug design, 349
regulation of, 111
durable medical equipment (DME), 139,
149, 161
E
e-health, 69, 106–107
e-therapy, 106–107
Ebola virus, 337
economic forces, 335–336
Economic Stabilization Program (ESP), 284
education, medical
geriatrics education need, 347
during preindustrial era, 52
reform during postindustrial era, 59
specialty-oriented, 83
in teaching hospitals, 59, 145, 163, 197
technology effects on, 102
educational interventions, patient safety, 302
educational reform, 59
efficacy of medical technology, 120–121
EHRs. See electronic health records
Elderly Nutrition Program, 239
elderly persons
access and, 321
adult day care for, 161, 238–239
adult foster care, 238
case management for, 161, 240
dental needs of, 85
emergency response systems and,
239–240
growth of, effect on health care costs,
281–282
home-delivered/congregate meals and,
239
home health care and, 233
homemaker and handyman services for,
239
retirement facilities for, 240–241
senior centers for, 238–239
electronic health records (EHRs), 45,
105–106, 172, 292
key components of, 105–106
electronic medical records, 105–106
emergency departments
access, effect on overuse of, 12, 16
ethical issues, 201
primary care, effect on overuse of,
169–170, 339
Emergency Medical Treatment and Labor Act
(1986), 16
emergency response systems, 239–240
employer-based health insurance, 132
supplemental coverage for Medicare, 139
employer-sponsored dental insurance, 85
employer-sponsored health insurance, 131
employer-sponsored health plans, worker
enrollment in, 210f
employers, 314
employment-based health insurance, history
of, 62–63
employment-based private health insurance,
206
enabling characteristics, 253e, 261–263
end-of-life care, 246–247
end-of-life decisions, 201
end-stage renal disease, 117, 137
Ending the Tobacco Problem: A Blueprint for
the Nation (IOM), 323
Index 375
England. See United Kingdom
enrollee, 3, 130
entry-level health services administrators, 95
environmental factors, effect on health, 31
equity, 33
ESP. See Economic Stabilization Program
ethical dilemmas in medical research, 102
ethics, 200–202
ethics committee, 201
Europe, technology spending in, 119
Excellence in Mental Health Act, 328
F
FDA. See Food and Drug Administration
Federal Administration on Aging, 237
federal employee benefit programs, 324
Federal Food, Drug, and Cosmetic Act
(1938), 112e, 113
federal government, 115
Federal Hospital Insurance, 344
federal hospitals, 192, 195
federal legislation, 111
federal programs, 256
Federal Supplementary Medical Insurance
Trust Funds, 344
fee-for-service, 144, 206, 207, 209, 211, 212,
216, 270
financing, 126–128. See also insurance,
health; reimbursement
Affordable Care Act, 143
and private insurance, 135–136
definition of, 126
effects of health insurance and, 128–129,
129e
government as financier, 127–128
payments to health care providers, 127
private employer as financier, 127–128
private insurance, 132–135
public insurance, 136–142
relationship to other reimbursement
methods, 127, 128f
Flexner, Abraham, 59
Flexner Report, 59
flux, health care reform in, 71–72
Food and Drug Administration (FDA),
111–113, 337
control of drugs under, 111
control of medical devices under, 113–114
legislation summary, 112e
Food and Drug Administration Modernization
Act (1997), 112e, 113
Food and Drugs Act of 1906, 111, 112e
Forand, Aime, 65
foreign direct investment in health care
services, 70
foundations of U.S. health care delivery,
21–22, 26, 46
based on definition of health, 27–30
cultural beliefs and values, 32
determinants of health and, 30–32
distribution of, 32–36
strategies to improve health and, 36–46,
44e
France, 52, 55
fraud, 283
free clinics, 56, 162
free market, 12, 14, 33, 52
freestanding medical facilities, 160
future of health services delivery, 333–334,
350–351
bioterrorism, effect on public health, 338
clinical technology, 349–350
community outreach, 346
cost-control imperative, 342–343
coverage, cost, and access dilemmas,
338–340
forces of future change, 334–338
global threats and international cooper-
ation, 348
health care reform, 340–344
medical workforce challenges, 346–348
models of care delivery, 345–346
population health, 345–346
technology-driven home visits, 346
value-based shared savings payments, 345
virtual care, 346
G
gatekeeping, 164, 213, 218
GDP. See gross domestic product
gender disparities, in overall health, 256
gene therapy, 349
general hospitals, 195, 198
General Law on Patients’ Rights (Germany in
2013), 18
generalists. See primary care physicians
generational transfer system, 343–344
genetic mapping, 349
geographical disparities, in access, 119
geographical distribution, in access, 259–260
geriatrics education, need for, 347
Germany
early medical education in, 52
health care system in, 18–19
labor unrest, effect on universal health
insurance in, 63
376 Index
glaucoma, 233, 239
global health issues, 337
global threats and international cooperation,
348
globalization, 69–70, 102
government
health policies, 320
subsidiary to private sector, 14
government-owned community hospitals,
192–193
Great Britain
early hospital expansion in, 55
early medical education in, 52
medical technology usage in, 108
gross domestic product (GDP), 11, 11f, 67,
68t, 149, 275, 277
average annual rates of increase in, 209f
groundbreaking medical discoveries, 57, 58e
group insurance, 132
group model HMO, 217
group practices, 154, 159, 217
as accountable care organizations, 221
alliances and, 224
HMOs and, 217
joint ventures and, 224
guidelines, medical practice, 122–123
H
handicapped persons, dental needs of, 85
Harvard Medical School, 59
HCFA. See Health Care Financing
Administration
HDHPs. See high-deductible health plans
Head Start, 85
health
community-based interventions, 44
cultural beliefs and values about, 32,
109–110
defining, 27–30
determinants of, 30–32, 40–46
indicators of, 28e
quality of life and, 30
strategies to improve, 36–46, 44e
wellness promotion and, 90
Health and Social Care Act of 2012, 19
health care
cost of, 339
delay in seeking care by insurance status,
261f
distribution of, 32–36
expenditure per capita, U.S./selected
countries, 11f, 12f
shortage of, 347
Health Care and Education Reconciliation
Act of 2010, 326
health care costs, technology and, 117–118
health care delivery, 27. See also foundations
of U.S. health care delivery;
subsystems of health care delivery
access, 11–12, 16
accountability and, 16
acute care focus of, 10–11
balance of power in, 15
central governing agency, 10
characteristics of, 9–16, 10e
distribution of, 32–36
government as subsidiary to private
sector in, 14
health care reform, 8–9
imperfect market conditions, effect on,
12–14
integration need, 15–16
interventions, 42–46
legal risk as influence on practice behav-
iors, 16
major forces of change in, 51, 51e
market/social justice fusion in, 14–15
of other developed countries, 16–20
in preindustrial America, 52, 53e
structure and processes of, 119
subsystems of, 3–8
systems framework, 21–22, 21f
Health Care Financing Administration
(HCFA), 66–67
health care financing, effects of, 128–129,
129e
health care financing strategies, eliminate
disparities, 269
health care fraud, 283
Health Care Quality Act (1986), 325
health care reform, 8–9, 70–72
in flux, 71–72
future of, 340–344
health care system
capacity of, 339
justice in, 36
WHO definition of, 28
health disparities, 266
health informatics, 104
health information exchanges (HIEs), 172
health information technology, 103–108
Health Information Technology for
Economic and Clinical Health
(HITECH) Act, 106, 172
health insurance, history of
creation of Medicare and Medicaid, 64–68
Index 377
emergence and rise of private health
insurance, 61
employment-based health insurance,
62–63
failure of national health insurance in U.S,
63–64
hospital plan and birth of Blue Cross,
61–62
physician plan and birth of Blue Shield, 62
workers’ compensation, 61
health insurance coverage, 267
health insurance exchanges, 262, 312
Health Insurance Portability and
Accountability Act (HIPAA),
106, 317
health insurance rates, 132, 133e
health maintenance organization (HMO),
219–220
carve-outs, 216
difference from PPO and POS plans, 215e
federal support of, 309
gatekeeping and, 218
group model HMO, 217
growth of, 209
independent practice association model
HMO, 217–218
Medicare Advantage and, 139–140
model, 345
network model HMO, 217
number of, 3
plans, 215–218
reimbursement, 144, 212
staff model HMO, 216
Health Maintenance Organization Act
(1973), 209
Health Manpower Act of 1968, 88
health plan, 3, 284
health plan enrollments, distribution of,
132, 132f
health policy
allocative tools, 309–310
definition of, 308
different forms of, 308–309
regulatory tools, 309
health professional, 70
health reimbursement arrangement
(HRA), 135
health savings account (HSA), 135
Health Security Act, 341
health services administrators, 95–96
health services delivery, future. See future of
health services delivery
health technology assessment (HTA),
121–122
benefits of, 122–123
health workers, worldwide shortage of, 337
Healthcare Effectiveness Data and
Information Set (HEDIS), 208,
289
Healthy Families America programs, 268
Healthy Kids Corporation, 316
Healthy People 2020 initiative, 36–40, 39f, 267
Healthy People Consortium, 38
heart disease, 117
HEDIS. See Healthcare Effectiveness Data
and Information Set
heredity, as determinant of health, 31
HHRG. See home health resource group
HI. See hospital insurance
hidden costs, 14
HIEs. See health information exchanges
high-burden chronic conditions, 268–269
high-deductible health plans (HDHPs),
134–135
Hill-Burton Hospital Act, 186
Hill-Burton Hospital Construction Act, 317
HIPAA. See Health Insurance Portability and
Accountability Act
Hispanic Americans, 254, 255e
history of medicine in U.S., 183–185, 183e
corporate era, 68–70
health care reform, 70–72
health insurance, 61–68
medical training, 52–53
postindustrial era, 52, 56–60
preindustrial era, 52
HITECH Act. See Health Information
Technology for Economic and
Clinical Health Act
HIV/AIDS, 287
access to health care, 320
antiretroviral therapy, cost of, 266
dental care and, 85
drug review process, 112
females diagnosed with, growing number
of, 266
subacute care and, 243
technology, effects on, 117
transmission paths, 266
HMO. See health maintenance organization
holism, 78
holistic medicine, 28
holistic model of health, 28, 235–236
Home and Community Based Services waiver
program, 237
home-delivered and congregate meals, 239
home health care, 160, 237–238, 247
home health resource group (HHRG), 147
378 Index
home-visiting programs, 268
homebound persons, dental needs of, 85
homelessness, 262–263
homemaker and handyman services,
160–161, 239
horizontal integration, 225
hospice care, 161, 246–247
Hospital Corporation of America, 195
hospital insurance (HI) (Part A), 62, 137–139
hospital planning, 61–62
Hospital Survey and Construction Act
(1946), 186
hospitalists, 79–80
hospitals
access and utilization measures, 188–190
accreditation, 198–199
Affordable Care Act, 198
capacity utilization, 190, 190t
certification, 198–199
chief executive officer of, 183, 199
children’s, 196
community, 189, 192, 192e
cost containment and, 324
development in postindustrial era, 60
employment in, 190–191
ethics and, 200–202
evolution of, 183–185, 183e
expansion and downsizing of, 185–188,
188e
expenditures, hospital/national health
comparison, 188f
expenses, Medicare share of, 187f
factors contributing to growth, 186e
general, 195, 198
governance and organization, 199, 200f
licensure, 198–199
long-term care, 243
osteopathic, 198
outpatient clinics, 159
overview of, 182–183
private for-profit, 194–195
private nonprofit, 193–194
psychiatric, 196
public, 192–193
public trust and, 202
rehabilitation, 196
rural, 197
specialty, 195
teaching, 59, 145, 163, 197–198
types of, 191–198, 191f
Howard University School of Medicine, 60
HRA. See health reimbursement arrangement
HSA. See health savings account
HTA. See health technology assessment
hypertension, 29, 170, 239, 263
I
IADLs. See instrumental activities of daily
living
ICF/IID. See Intermediate Care Facility for
Individuals with Intellectual
Disabilities
ICF/MR certification. See Intermediate care
facility for the mentally retarded
certification
IDSs. See integrated delivery systems
IHRs. See International Health Regulations
imaging technology, 349
in-home patient monitoring, 107
independent practice association (IPA),
217–218, 225
Indian Health Service, 257e
individual-level interventions, 45–46
infant mortality, 16, 170, 255e, 256, 257e, 315
infectious diseases, 56, 337
information revolution, 69
information-sharing networks, 105
information technology (IT), 103–108
administrative information systems, 104
clinical decision support systems, 105
clinical information systems, 104
decision support systems, 105
electronic health records, 105–106
health informatics, 104
internet and e-health, 105, 106–107
in primary care, 172–175
telemedicine, 69
and remote monitoring, 107–108
informed consent, 201
Informed Patient Institute (IPI), 296–297
Initiative to Eliminate Racial and Ethnic
Disparities in Health (1998), 257e
Injury and Illness Prevention Program, 43
inpatient, defining, 182
inpatient day, 189
Institute of Medicine (IOM), 105–106, 291
definition of primary care, 163, 164
Future of Public Health in the 21st
Century, 7
on tobacco use, 323
institutional long-term care, 240–243, 241f,
246
assisted living facilities, 242
personal care facilities, 241–242
as respite care, 246
retirement facilities for, 240–241
skilled nursing facilities, 242–243
specialized care facilities, 243
subacute care facilities, 243
Index 379
instrumental activities of daily living
(IADLs), 233, 263
insurance, health
basic concepts, 130
Blue Cross/Blue Shield, 2f, 62
children’s program, 5, 141–142
coinsurance, 131
copayment, 130
cost sharing, 130–132
coverage, 16, 110, 311
deductible, 131
direct-purchase private, 132
effects of health care financing and,
128–129, 129e
employer-based, 62–63, 132
employment-based, 206
first private, 208
group, 133
history of
children’s program, 311–312,
316, 322
employer based health insurance,
62–63
first hospital plan and birth of Blue
Cross, 61–62
first physician plan and birth of Blue
Shield, 62
Medicaid and Medicare, creation of,
64–68, 307
managed care and, 134
nationalized, 1
numbers of Americans covered by, 3
in postindustrial era, 61–68
private, 3, 132–135, 208–209
public, 3, 127
self-insurance, 133–134
insurance risk pool, 316
insured, definition of, 130
integrated care, 166
integrated delivery systems (IDSs), 6, 68,
221–222
accountable care organizations, 221
acquisitions, 221
alliances, 224–225
based on major participants, 223
based on service consolidation, 225
based on type of ownership or affiliation,
223–225
horizontal integration, 225
joint ventures, 224
mergers, 224
types of, 223–225
vertical integration, 225
virtual organizations, 225
integrated electronic medical records, 44
integrated systems, 22
integration, quest for, 15–16
Interagency Working Group on
Environmental Justice, 268
interest groups, 313–315
politics, 313–315
intermediate care facility for individuals
with intellectual disabilities (ICF/
IID), 245
intermediate care facility for the
mentally retarded (ICF/MR)
certification, 245
International Health Regulations
(IHRs), 348
Internet, 102, 106–107
interoperability, 105
interventions, health care, 42–46
investor-owned hospitals. See private
for-profit hospitals
IOM. See Institute of Medicine
IPA. See independent practice association
IPI. See Informed Patient Institute
IT. See information technology
item-based pricing, 14
J
Johns Hopkins University, 59
Johnson, Lyndon, 66, 317
The Joint Commission, 183, 199, 297
Joint Commission on Mental Health, 326
joint ventures, 224
justice, in health care system, 36
K
Kaiser, Henry J., 209
Kaiser Permanente plan, 208–209
Kefauver-Harris Amendments, 111
Kerr-Mills Act program, 66
L
Latino Americans, 254
legal risks, influence practice behaviors, 16
legislative health policy development,
318–320
legislative process, 319–320
Let’s Move! Initiative, 268
licensed practical nurses (LPNs), 88, 242
380 Index
licensed vocational nurses (LVNs), 88, 242
licensing of nursing homes, 244
life expectancy
at birth, 12, 12f
income inequality and, 31
increase in, 282
rural Americans and, 290
life-extending services, 324
Life Safety Code, 244
life support, 102, 120, 201
lifestyle, as determinant of health, 31
long-term care (LTC), 229–230
Affordable Care Act (ACA) and, 247
assisted living facilities, 242
case management and, 161, 240
characteristics of, 231, 232e
children in, 229
community-based services, 236–240
continuing-care retirement
communities, 240
coordination of services in, 233
definition of, 231
extended period of time, 235
goal of, 234
holistic approach to, 235–236
home health care and, 237–238
hospice care, 246–247
individualized services, 233
informal, 230
institutional, 240–243, 241f, 246
maximum possible functional indepen-
dence and, 233–235
nursing homes, 244–245
outpatient services and, 161
personal care facilities, 241–242
progression toward need for, 231, 231f
quality of life and, 236
respite care, 246
restorative care, 246
retirement facilities, 240–241
skilled nursing facilities, 242–243
specialized care facilities, 243
subacute care facilities, 243
as subsystem, 7
variety of services in, 232–233
young adults in, 230
long-term care hospitals (LTCHs), 243
longevity, 101, 116
low population density, 260
LPNs. See licensed practical nurses
LTC. See long-term care
LTCHs. See long-term care hospitals
Luft, H. S., 220
LVNs. See licensed vocational nurses
M
MA-PDs. See Medicare Advantage
prescription drug plans
MACRA. See Medicare Access and CHIP
Reauthorization Act
magnetic resonance imaging (MRI), 103
maintenance rehabilitation, 246
major medical plans, 133
maldistribution, 81–84
defining, 81
geographic, 83, 260
looming shortages and Affordable Care
Act, 81–83
specialist, 83–84
malpractice, 283
insurance, 17
managed care, 2f
defining, 206
of health care delivery, 3–4
precertification and, 213, 218
plans, 134
reimbursement under, 144–145
report cards, 207
managed care organizations (MCOs), 3, 22,
132, 134, 140
access and, 219–220
accountable care organizations, 222–223
accreditation and, 207–208
Affordable Care Act (ACA), 226
backlash/response to backlash, 211–212
capitation (per head) payment, 207,
210, 216
characteristics of, 206–207, 208e
competition among, 210
corporatization of health care and, 68
cost containment and, 219
defining, 3, 206
evolution and growth of, 206–212
financing of, 206
gatekeeping, 213
health care delivery, 207
health maintenance organization (HMO)
plans, 215–218
hospital downsizing and, 187
insurance premiums and, 206–207
integrated systems, 221–222
integration, types of, 223–225
Medicare Advantage and, 139–140
number of enrollees, 3
outpatient clinics, 159
payer-driven price competition and, 286
percentage of employer-based plans as, 132
Index 381
point-of-service plans, 218–219
preferred provider organization (PPO)
plans, 218
primary care and, 159
private health insurance and, 211
provider payments, 207
public health insurance and, 212
quality indicators, 207–208
quality of care and, 220–221
reimbursement, 144, 206, 212
success of, 206, 211
transformation of, 212
types of plans, 214–219, 215e
utilization controls, 212–214
utilization review, 213–214
MAP. See Measure Applications Partnership
market conditions, effect of health care
delivery, 12, 13–14
market justice, 14–15, 33, 35
principle of, 35
versus social justice, 34t
U.S. health care system as not
based on, 36
market-oriented reforms, 285
MCOs. See managed care organizations
MD. See doctor of medicine
Meals on Wheels program, 232, 239
meaningful use, of EHR technology, 106
means-tested program, 66, 141
Measure Applications Partnership (MAP),
297–298
mediating factors, 261
Medicaid, 3, 5–6, 7, 10, 127, 141
Affordable Care Act (ACA) and, 343–344
Children’s Health Insurance Program
and, 141–142
community health centers and, 162
community hospitals and, 193
creation of, 64–68, 307
dental care and, 85
eligibility, 66, 127, 141
expansion and reform of, 329
expansion under ACA, 135–136, 203, 312
fraud and, 283
gradual reforms of, 311
home health care and, 238
hospital certification and, 198
hospital expansion and, 186
hospital utilization and, 189
issues with, 142–143
long-term care and, 237–238, 247
managed care and, 211, 219, 220
MAP initiative, 297
Medicare versus, 66, 67e
passage of, 317
program, 66
reimbursement and, 10, 15
single-payer system, 342
state policy and, 315–316
Medicaid Catastrophic Act, 312
Medicaid Data System, 287
Medicaid Demonstration Projects, 289
Medical Assistance Act, 65
medical care, determinants of health, 32, 42
medical center, 183
Medical Devices Amendments of 1976,
113–114
medical devices, regulation of, 113–114
medical discoveries, groundbreaking, 57, 58e
Medical Expenditure Panel Survey
(MEPS), 287
medical-home model, 171–172
medical homes, 345
medical institutions, 55–56
medical laboratory technicians, 92
medical loss ratio, 207
medical model, 27, 282
medical points of intervention, 42–46
medical practice, 53–54
guidelines, 122–123, 298
medical profession, 56–57
medical rationing, 102, 108
medical records, electronic, 44, 105–106
medical services
in corporate era, 68–70
in postindustrial America, 56–60
in preindustrial America, 52
medical systems, 185
medical technology, effect of, 336–337
medical tourism, 70
medical training, 52–53
and practice, about technology, 109–110
medically underserved areas, 260
Medicare
accountable care organizations
(ACOs), 223
Affordable Care Act (ACA) and, 343–344
community hospitals and, 193
creation of, 64–68, 307
eligibility, 127, 137–140
Federal Hospital Insurance, 344
fee-for-service, 270
financing of, 343–344
fraud and, 283
funding (2012–2014), 344t
generational impact of, 343–344
hospital certification and, 198
hospital expansion and, 186–187, 187f
382 Index
hospital insurance (HI), 62, 137–139
hospital utilization and, 189
long-term care (LTC), 7, 237, 247
low-income beneficiaries, 137
managed care enrollments and, 211
MAP initiative, 297
versus Medicaid, 66, 67e
Medicare Advantage (Part C), 139–140,
208, 211, 219
noncovered services, 137
number of enrollees, 3, 130
Patient Self-Determination Act and, 201
peer review and, 285
prescription drug coverage (Part D),
140, 311
reimbursement and, 10, 15, 144–147,
284, 324
rules, 222
single-payer system, 342
supplemental coverage, 137
supplementary medical (Part B), 139
Supplementary Medical Insurance Trust
Funds, 344
Medicare (Part A), 137–139, 138f
Medicare (Part B), 7, 66
Medicare (Part D), 3, 5, 66, 140, 334
Medicare Access and CHIP Reauthorization
Act (MACRA), 106, 148, 328
Medicare Advantage (Part C), 139–140, 208,
211, 219
Medicare Advantage prescription drug plans
(MA-PDs), 140
Medicare Current Beneficiary Survey, 287
Medicare Fee Schedule, 144
Medicare Prescription Drug, Improvement, and
Modernization Act (MMA), 140
Medicare Severity Diagnosis-Related Groups
(MS-DRGs), 146
Medicare Shared Savings Program (MSSP),
148, 222
Medicare Statistical System, 287
Medicare tax, 128, 138
Medicare+Choice, 10, 139
Medigap, 137, 140
plans, 311
Meharry Medical College, 60
Memorial to the Massachusetts legislature, 326
mental care, holistic caregiving, 235
mental health, 263–264, 325–328
homeless persons and, 262–263
mental health and substance use disorder
(MH/SUD), 327
mental health care, reform of, 60
Mental Health First Aid Act, 327
Mental Health Parity and Addiction Equity
Act of 2008 (MHPAEA), 327
mental health policy, 325–328
Mental Health Systems Act, 326
mental hygiene movement, 325
mental illness, 263–264
MEPS. See Medical Expenditure Panel Survey
mergers, 224
MERS. See Middle East Respiratory
Syndrome
metropolitan statistical area (MSA), 197
MHPAEA. See Mental Health Parity and
Addiction Equity Act
Middle East Respiratory Syndrome (MERS),
337
middle-level health services administrators,
95
Migrant Health Act (1962), 257e
Migrant Health Center Program, 257e
migrant health centers, 81, 85, 91, 162
military medical care system, 4–5, 127
Miller, R. H., 220
A Mind That Found Itself (1908) (Beers), 326
minimally invasive surgery, 117, 349–350
Minority Health Initiative, 257e
mobile facilities, 160
molecular medicine, 349
moral hazard, 129, 151, 281
morbidity
gender and, 256
new morbidities, 256
primary care effect on, 170–171
rural Americans and, 290
technology and, 116
mortality
death rates by age and cause, 27, 27f
eating disorder, 258
income inequality and, 31
infant, 169, 170, 255e, 256, 257e, 315
minorities and, 256, 257e
primary care effect on, 84, 169, 171
rural Americans and, 290
MRI. See magnetic resonance imaging
MS-DRGs. See Medicare Severity Diagnosis-
Related Groups
MSA. See metropolitan statistical area
MSSP. See Medicare Shared Savings Program
multipayer system, 282
multiple players, health care system, 15
Mutchnick, I. S., 69
My Own Network, Powered by AHRQ
(MONAHRQ), 295–296
N
NACCHO. See National Association of
County & City Health Officials
Index 383
nanomedicine, 103
National Academy of Sciences, 347
National Ambulatory Medical Care Survey, 155
National Association of County & City
Health Officials (NACCHO),
38–39
National Board for Certification in
Occupational Therapy, 93
National Board of Podiatry, 87–88
National Center for Health Services
Research, 325
National Center for Health Statistics
(NCHS), 277
National Center for Health Workforce
Analysis, 83
National Committee for Mental Hygiene
(NCMH), 326
National Committee for Quality Assurance
(NCQA), 207
National Contact Lens Examiners, 93
national debt, 343
National Fire Protection Association, 244
National Health and Nutrition Examination
Survey (NHANES), 270
national health care costs. See national health
expenditures
national health expenditures, 148–150, 149t
average annual increase, 209, 209f
breakdown of, 150f
defining, 127, 148–149
GDP/CPI comparison, 277
gross domestic product (GDP)
as measure for, 275
growth comparisons of, 150t
hospital expenditures compared with, 188f
national health insurance in U.S, 64, 65e
failure of, 63–64
National Health Interview Survey (NHIS),
270, 287
National Health Maintenance Organization
Census, 289
National Health Planning and Resources
Development Act (1974), 317, 324
national health reform, 328–330
National Health Service Corps (NHSC), 260,
321, 322
national HIV/AIDS strategy, 268
National Institute for Health and Clinical
Excellence (NICE), 108
National Institutes of Health (NIH), 115, 308
National Partnership for Action to End
Health Disparities, 268
National Prevention Strategy, 327
National Public Health Performance
Standards Program, 7–8
National Quality Forum (NQF), 297–298
National Quality Strategy, 294
National Rural Health Association, 260
National Sample Survey of Registered
Nurses, 89
National Surveys of Health Care, 288–289t
National Vital Statistics System (NVSS), 270
nationalized health care, 12, 16
American Medical Association (AMA)
opposition to, 64
historical failure in U.S., 63–64
Native Americans, 321
Native Hawaiians, 254
natural disasters, 338
NCHS. See National Center for Health
Statistics
NCMH. See National Committee for Mental
Hygiene
NCQA. See National Committee for Quality
Assurance
need attributes, 263
need characteristics, 253e, 263–266
needs-based model, 83
network model HMO, 217
new morbidities, 258–259
NF certification, 245
NHANES. See National Health and Nutrition
Examination Survey
NHIS. See National Health Interview Survey
NHS-England, 19
NHSC. See National Health Service Corps
NICE. See National Institute for Health and
Clinical Excellence
NIH. See National Institutes of Health
Nixon, Richard, 284, 317
nonmaleficence, 200
nonphysician practitioner (NPP), 90–91
advanced-practice nurses, 89
certified nurse–midwives, 90–91
nurse practitioners, 90–91
physician assistants, 90
value of services, 91
nonprofit organizations, tax benefits for, 194
NPP. See nonphysician practitioner
NPs. See nurse practitioners
NQF. See National Quality Forum
nuclear pharmacists, 86
nurse practitioners (NPs), 89
Nurse–Family Partnership programs, 268
nurses, 88–89
future educational needs for, 347
licensed practical nurses, 88, 242
licensure for, 88
registered nurses, 88
shortfall of, 89
nursing homes
certification of, 244–245
384 Index
industry and expenditures, 247–249, 248t
licensing of, 244
Nursing Training Act (1964/1971), 88
nutrition-support pharmacists, 86
nutritionists, 93
NVSS. See National Vital Statistics System
O
OASIS. See Outcomes and Assessment
Information Set
Obama, Barack, 51, 317–318, 342
Obamacare. See Affordable Care Act
obesity, 169, 171
childhood, 44, 259, 260f
OBRA. See Omnibus Budget
Reconciliation Act
occupancy rate, hospital, 190
Occupation Safety and Health Act (OSHA), 43
occupational therapists (OTs), 93, 160, 246
Office of Minority Health, 257e
Office of Research on Women’s Health, 258
Office of the Actuary, 127
Office of the National Coordinator
(ONC) for Health Information
Technology, 174
older adults. See elderly persons
Older Americans Act (1965), 237
Omnibus Budget Reconciliation Act (OBRA)
of 1989, 285, 325
OPPS. See Outpatient Prospective
Patient System
optometrists/optometric care, 87, 87t, 91,
144, 156, 160, 233
reimbursement for, 156
organizational integration, 221
organized medicine, 58
Orphan Drug Act (1983), 112, 112e
orphan drugs, 112
OSHA. See Occupation Safety and Health Act
osteopathic hospitals, 198
osteopathic medicine, 77–79
osteopaths, 156
OTs. See occupational therapists
out-of-pocket cost, 140
outcome domain, quality of health care, 294
outcomes
patient, 325
system, 22
Outcomes and Assessment Information Set
(OASIS), 147
outpatient, defining, 182
outpatient care, defined, 155
Outpatient Prospective Patient System
(OPPS), 146
outpatient services, 177–178. See also
primary care
alternative medicine clinics, 162
community health centers, 162, 175–177
free clinics, 162
freestanding facilities, 159–160
home care, 160–161
hospice care, 161
hospital outpatient clinics, 159
long-term care and, 161
managed care organizations and, 159
mobile facilities, 160
overview of, 154–155
private practice, 158–159
public health services, 161
reimbursement, 156
scope of, 155–158
settings and delivery methods, 155e,
158–162
social factors leading to increase in, 158
technologic factors leading to increase
in, 158
telephone triage, 160
utilization control factors leading to
increase in, 158
overutilization, 214, 298
P
Pacific Islanders, 254, 255e
package pricing, 14, 144
PAHO. See Pan-American Health
Organization
palliative care, 161
Pan-American Health Organization
(PAHO), 42
Parchman, M. L., 169
Parents as Teachers programs, 268
participatory decision making, 44
Passage of the Affordable Care Act (ACA),
social justice and, 27
patient-centered care model, 96–97
patient-centered medical home (PCMH),
94, 172, 173e
patient days, hospital, 190
patient outcomes research teams
(PORTs), 325
Patient Protection and Affordable Care Act
(ACA), 328. See also Affordable
Care Act (ACA)
patient-provider relationship, 15
patient safety, 299–302
Patient Safety Reporting System, 300
Patient Self-Determination Act (1990), 201
patients
Index 385
confidentiality issues, 106
empowerment of, 107
informed consent and, 201
quality of life, 30, 117, 236
rights of, 106
payer-driven price competition, 286
payment reform initiatives, 148
PCMH. See patient-centered medical home
peer review and cost containment, 285
peer review organizations (PROs), 285
per diem reimbursement rates, 145
per member per month (PMPM),
145, 207, 216
PERS. See personal emergency response
system
personal care facilities, 241–242
personal emergency response system
(PERS), 239
personalized medicine, 349
pesthouse, 56, 184
PHA. See Physician Hospitals of America
pharmaceutical care, 86
pharmaceutical industry, 109
rational drug design and, 349
Pharmaceutical Research and Manufacturers
of America, 314
pharmacists, 85–86, 86t
pharmacogenomics, 349
pharmacotherapists, 86
PharmD degree, 86
PHO. See physician–hospital organization
physical aspect, holistic caregiving, 235
physical therapists (PTs), 92–93, 246
physical therapy, 160
assistants, 92
Physician Hospitals of America (PHA), 194
Physician Insurers Association of America
(PIIA), 301
Physician Masterfile, 289
physician planning, 62
Physician Quality Reporting System
(PQRS), 295
physician–hospital organization (PHO), 223
physicians
doctor of medicine, 77–79
doctor of osteopathic medicine, 77–79
generalists, 79, 166
geographic maldistribution of, 83, 260
hospitalists, 79–80
licensure requirements, 77
maldistribution of, 81–84
MDs and DOs comparison, 78–79
number of active, 78, 78t
as office-based practitioners, 158
residency, 78
specialists, 79
specialty maldistribution of, 83–84
work settings and practice patterns,
80–81, 81t
PIIA. See Physician Insurers Association of
America
planned rationing, 36
pluralistic groups politics, 313–315
PMPM. See per member per month
podiatrists, 87, 87t
point of entry, primary care as, 164–165, 164e
point-of-service (POS) plans, 218–219
difference from HMO and PPO plans, 215e
policy, health care, 307
access to care, 320
as allocative tool, 309–310
cost containment, 323–324
critical policy issues, 320–328
decentralized role of states, 315–316
defining, 308
forms of, 308–309
as fragmented/incremental/piecemeal,
311–313
government as subsidiary to private
sector, 310–311
legislative health policy development,
318–320
national health reform, 328–330
pluralistic and interest group politics,
313–315
presidential leadership, effect on, 317–318
principal features of, 310–318
quality of care, 325
as regulatory tool, 309
policy cycle, 318–319
policy interventions, 43
political will, 336
poorhouse, 55
population-based surveys, 286
population health, 30f, 345–346
PORTs. See patient outcomes research teams
POS plans. See point-of-service plans
positron emission tomography, 116
postindustrial era, 52, 56–60, 102
American Medical Association, 58–59
educational reform, 59
health insurance, 61–68
hospitals, development of, 60
medical profession, 56–57
organized medicine and, 58
scientific discoveries, 56, 57
specialists, overemphasis on, 57
urbanization effects on, 56
poverty, 44, 255e, 259
PPO. See preferred provider organization
PPS. See prospective payment system
PQRS. See Physician Quality Reporting System
386 Index
practice behaviors, legal risks influence, 16
precertification for treatment, 213, 218
predisposing characteristics, 253–260, 253e
racial/ethnic minorities, 254–257
rural health, 259–260
women and children, 258–259
preferred provider organization (PPO)
difference from HMO and POS plans, 215e
Medicare Advantage and, 140
number of enrollees, 3
overview, 218
reimbursement, 144, 212
preindustrial era, history of medicine in the
U.S., 52–56
medical institutions, 55–56
medical practice, 53–54
medical training, 52–53
premium
cost sharing, 130
definition of, 130
prescription drug benefit (Part D), 66
prescription drug coverage (Part D), 140, 311
Prescription Drug User Fee Act (1992), 112,
112e
presidential leadership
effect on health policy, 317–318
impact of, 317–318
Prevention and Public Health Fund, 8
price rationing, 33
primary, definition of, 127
primary care, 177–178, 79–80. See also
outpatient services
access to, 157e
accountability issues, 166–167
assessment of community health centers,
175–177
community-oriented, 167
coordination role in health delivery,
165, 166f
cost of care and, 170
defining, 163–164
disease management and, 168
domains of, 164–167, 164e
effectiveness of, 168–171
emergency care use and, 169–170, 339
as essential care, 165–166
hospitalization rates and, 169–170
information technology in, 172–175
integrated, 166
medical-home strategy, 171–172
morbidity and, 170–171
mortality and, 171
overview, 163
as point of entry to health services,
164–165
reform, 18
across the world, 167–168
primary care physicians, 79
ambulatory visits by, 81t
decline in supply of, 83–84
future educational needs, 347
Primary Care Transition Fund, 18
private for-profit hospitals, 194–195
private health insurance, 132–135
Affordable Care Act, 135–136
direct-purchase, 134
emergence and rise of, 61
family plan, 131
group insurance, 133
high-deductible health plans, 134–135
managed care plans, 134, 211
self-insurance, 133
private nonprofit hospitals, 193–194
private sector
approach, 219
government as subsidiary to, 310–311
process domain, quality of health care,
293–294
process improvement, developments in,
298–299
processes, health care system, 21f, 22
proprietary hospitals. See private for-profit
hospitals
prospective payment system (PPS), 147, 309
decline in average length of stay and, 189
prospective reimbursement, 145–147
ambulatory payment classifications
and, 146
defining, 145
diagnosis-related groups and,
145–146, 187
prospective utilization review, 213, 218
provider-induced demand, 14, 129, 145
providers and professionals, health care
allied health professionals, 91–93
chiropractors, 87t, 88
dentists, 84–85, 85t
doctoral-level health professionals,
87–88, 87t
employment levels of doctoral-level, 87t
health services administrators, 95–96
increasing demand for, 77
nonphysician practitioner, 90–91
nurses, 88–89
optometrists, 87–88
percentage of labor force, 75, 76t
persons employed at health services
sites, 76t
pharmacists, 85–86, 86t
podiatrists, 87, 87t
psychologists, 87, 87t
public health professionals, 93
Index 387
specialization, effect on employment, 77
work settings for, 80–81, 81t
psychiatric hospitals, 196
psychologists, 87, 87t
PTs. See physical therapists
public health
defining, 40
disasters, and bioterrorism, 338
professionals, 93
services, 161
social justice and, 35–36
surveillance data, 270
system, 7–8, 40
Public Health Service Act of 1944, 114
public hospitals, 192–193
public insurance, 136–142
Affordable Care Act, 143
Children’s Health Insurance Program,
141–142
hospital insurance (Part A), 137–139
Medicaid, 141
Medicare, 137–140
Medicare Advantage (Part C), 139–140
prescription drug coverage (Part D), 140
supplementary medical insurance
(Part B), 139
public policies, 308
public-sector initiatives, to eliminate
disparities, 267–268
public trust, 202
Q
QHP. See Quality Health Plan
QIOs. See quality improvement organizations
QIs. See Quality Indicators
quad-function model, 2f, 4
quality, health care, 291–294
domains of, 293f
Quality Check website, 297
Quality Health Plan (QHP), 294
quality improvement organizations
(QIOs), 285
Quality Indicators (QIs), 295
for managed care, 207–208
quality of care, 325
community health centers and, 175–176
criteria for, 116e
impact on, 116–117
managed care and, 220–221
policy on, 318
quality of life, 30
indicators, 263
long-term care and, 236
technology and, 117
R
R&D. See research and development
racial/ethnic minorities, 254–257
access and, 254–257, 254–255e, 290
disparities, comparison across groups,
254–255e
federal programs to reduce disparities, 257e
mortality and, 255e, 256
radiological technicians, 92
radiopharmacists, 86
Rand Health Insurance Experiment, 131
rational drug design, 349
RBRVS. See resource-based relative value scale
Reagan, Ronald, 285, 317
redistributive policies, 310
regenerative medicine, 350
Regier, D. A., 264
regional health care system, 224
registered nurses (RNs), 88, 182, 243
regulatory tool, health policy as, 309
rehabilitation, 243, 246
hospitals, 197
Reid, Harry, 341
reimbursement, 144–147
Affordable Care Act, 148
ambulatory payment classifications
(APCs), 146
bundled payments, 144
defining, 143
diagnosis-related groups and, 145–146
per diem reimbursement rates, 145
fee-for-service, 143–144
home health resource groups, 147
managed care, 144–145, 206
Medicaid, 10, 15
medical technology, 129
Medicare, 10, 15, 143–147, 284, 324
national health expenditures, 148–150
outpatient services, 156, 158
package pricing, 144
preferred provider organization, 134, 212
prospective, 145–147, 187
resource-based relative value scale, 144
resource utilization groups, 147
retrospective, 145–147, 284
specialty maldistribution and, 83
reinsurance, 134
remote monitoring, 107–108
research and development (R&D), 101, 109e,
119, 281, 308
residency, 78
resource-based relative value scale (RBRVS),
144, 285
resource utilization group (RUG), 147
388 Index
resources, system, 22
respiratory therapists, 243
respiratory therapy technicians, 92
respite care, 246
restorative care, 246
retirement facilities, 240–241
retrospective reimbursement, 145–147, 284
retrospective utilization review, 214
right to die, 324
rights of patient, 106
risk, 130
management, 299
RNs. See registered nurses
Robert Wood Johnson Foundation, 296
Roosevelt, Franklin, 64
Roosevelt, Theodore, 63
RUG. See resource utilization group
RUG-IV classifications, 147
rural communities, 260
rural health, 259–260
rural health centers, 162
Rural Health Clinics Act, 260
rural hospitals, 197
S
SAEM. See Society for Academic Emergency
Medicine
Safe Medical Devices Act of 1990, 112e, 114
safety net, 5, 6, 159, 162
safety of medical technology, 121
SARS. See severe acute respiratory syndrome
Schumer, Chuck, 342
Second Act to Strengthen Long-Term Care, 18
secondary care, 80, 163, 165, 213
Security tax revenues (Part A), 311
self-employment, 159
self-insurance, 133
senior centers, 238–239
severe acute respiratory syndrome
(SARS), 337
shared responsibility payment, 135
Sheppard-Towner Act (1921), 290
sickness funds, 17
single-payer systems, 284, 341–342
skilled nursing care, 242
skilled nursing facilities (SNFs), 138–139,
242–243
certification, nursing homes, 244–245
small-area variations, 283
smoking and tobacco use, policy on, 322–323
SNFs. See skilled nursing facilities
social determinants of health, 41–42, 41f
Social Health Insurance, 18
social justice, 14–15, 35–36
market justice versus, 34t
principle of, 35
U.S. health care system and, 36
social points of intervention, 42–46
social relationships, holistic caregiving,
235–236
Social Security, 334
Social Security Act, 307
Social Security Amendments, 187, 284
social workers, 93, 201, 347
socialism, 32
socialized medicine, 64
Society for Academic Emergency Medicine
(SAEM), 28
socioeconomic status and health, 30,
42, 261, 290
special populations, subsystem for, 5–6
specialists
ambulatory visits by, 81t
certification of, 79
costs issues, 84
for dentists (2012), 85t
hospitalists, 79–80
maldistribution of, 83–84
oversupply of, 110
primary versus specialty care, 80
specialized care facilities, 243
specialty hospitals, 195
Speech–Language–Hearing Association, 93
speech/language pathologists, 93, 243, 246
speech therapy, 160
spirituality, health and, 162, 236
staff model HMO, 216
standardized practice protocols, for medical
technology, 122–123
standards, certification, 10
state hospitals, 192, 196
state Medicaid programs, federally mandated
services for, 142t
state-of-the-art technology, 110
State Units on Aging, 237
stop-loss provision, 131
structure domain, quality of health care, 292
subacute care, 189
facilities, 243
subacute condition, 29
Substance Abuse and Mental Health Services
Administration, 328
Substance Abuse Prevention and Treatment
Block Grant, 328
subsystems of health care delivery, 3–8
integrated delivery, 6–7
long-term care delivery, 7
managed care, 2, 2f, 3–4
Index 389
military, 4–5
public health system, 7–8
special populations, 5–6
supplementary medical insurance
(Part B), 139
Supplementary Medical Insurance Trust
fund, 344
supply-side rationing, 36, 102, 110,
129, 219, 284
supply-side regulation, 285
surgicenters, 160
system foundations, 21–22, 21f
system outcomes, 21f, 22
system outlook, 21f, 22
system processes, 22, 22f
system resources, 22, 22f
systems framework, 21–22, 22f
T
Tax Cuts and Jobs Act of 2017, 334
taxation benefits for nonprofit
organizations, 194
teaching hospitals, 59, 145, 163, 197–198
technicians, 92, 199
technological imperative, 110
technologists, 92–93
technology, medical, 104e, 281
acute care focus of, 10–11
Affordable Care Act and, 115
assessment of, 121–122
benefits of assessment, 122–123
bioethics and, 120
changes triggered by, 102
cost containment and, 122
cost-effectiveness of, 107, 121–122
cost increases associated with, 118e
cost-saving, 118e, 315
costs and, 11, 57, 60, 101, 107
criteria for quality of care, 116e
defining, 103
diffusion and utilization of, 108–111
e-health, 69
effects of, 115
efficacy of, 120–121
examples of, 104e
future of, 349–350
geographical access and, 119
global medical practice, impact on, 119
government role in technology diffusion,
111–115
health care costs, impact on, 118e
hospitals, impact of, 119
impact of, 115–120
information technology, 103–108
mechanisms to control growth of, 109e
medical training and practice, 102
outpatient services and, 158
outsourcing of medical services, 69
policy, manufacturers influence on, 315
postindustrial interest in, 58
quality of life and, 117
research on, 115
safety of, 121
specialty maldistribution and, 83–84
standardized practice protocols and, 122
structure and processes of health care
delivery, impact on, 119
telemedicine, 69, 107–108
value and, 122
technology diffusion, 108
government role in, 111–115
technology-driven home visits, 346
tele-ICU, 108
telemedicine, 69, 107–108
telephone triage, 160
10-Year Plan to Strengthen Health Care, 17
Tenet Health System, 195
tertiary care, 80, 84, 163, 165, 198
thalidomide, 112
therapists, 92–93
third-party payers, 143, 281
Title III of Older Americans Act, 237
Title 18 of the Social Security Act, 66
Title 19 of the Social Security Act, 66, 141
Title XX Social Services Block Grants, 237
top-level health services administrators, 95
total health care expenditures, effect of
financing on, 129
transplantation, 198, 350
TriCare, 4
Truman, Harry, 64, 317
Trump, Donald, 329, 336
21st Century Cures Act of 2016, 337
U
UCR. See usual, customary, and reasonable
underutilization, 214, 298
underwriting, insurance, 130
undocumented immigrants, 329
uninsured persons
access issues for, 11, 16
Affordable Care Act (ACA) and, 261
numbers in U.S., 10
United Kingdom
health care system in, 19, 20t
hospitalists in, 79
390 Index
United States
health care spending versus other devel-
oped countries, 278–280t
health care system, 105
health care system versus other developed
countries, 19, 20t
universal access, 23, 316, 342
universal coverage, 342
universal health care, 102
urgent care centers, 160
U.S. Department of Defense medical care
system, 4
U.S. Department of Health and Human
Services (DHHS), 297
U.S. Office of Minority Health, 257e
U.S. Supreme Court, 63
usual, customary, and reasonable (UCR), 143
usual source of care, 256
utilization
controls on, 158, 286
hospitals and, 188–190, 190t
overutilization, 214
underutilization, 214
utilization review, 213–214
concurrent, 213–214
prospective, 213
retrospective, 214
V
vaccines, 350
Vaccines for Children program, 268
value
and beliefs, 32, 64, 109–110
concept of, 122
value-based payment, 148
value-based shared savings payments, 345
vertical integration, 225
Veterans Administration (VA) health care
system, 4, 192
Veterans Health Administration, 324
Veterans Integrated Service Networks
(VISNs), 4
virtual care, 346
virtual integration, 225
virtual organizations, 225
virtual visits, 105
VISNs. See Veterans Integrated Service
Networks
voluntary health insurance, 61
voluntary hospitals. See private nonprofit
hospitals
vulnerability, definition of, 252
vulnerable populations, 251–270
children, 258–259
chronic illness/disability, 264–265
disparities, 266–270
enabling characteristics, 253e, 261–263
framework for studying, 252–253, 252f
health care delivery subsystems for, 5–6
HIV/AIDS, persons with, 266
homeless persons, 262–263
mental health issues of, 263–264
need characteristics, 253e, 263–266
predisposing characteristics, 253–260, 253e
racial/ethnic minorities, 254–257,
254–255e
rural health, 259–260
women and children, 258–259
in rural area, 260
uninsured, 261–262, 261f, 262f
W
walk-in clinics, 160
wellness promotion, 90
Wellstone, Paul, 327
Wennberg, John, 283
West Nile virus, 338
WHO. See World Health Organization
Wilson, Woodrow, 63
women
health centers, 185
health coverage for pregnant, 141, 142,
312, 316
as vulnerable populations, 258–259
workers’ compensation, 36, 61
World Health Organization (WHO), 42, 348
definition of health, 28
definition of health care system, 28–29
definition of primary care, 164
World War I, 63, 88
World War II, 62
X
xenotransplantation, 350
Y
young adults, in long-term care, 230
Cover
Essentials of The U.S. Health Care System
Copyright
Contents
Preface
Acknowledgments
List of Exhibits
List of Tables
List of Figures
Chapter 1 Major Characteristics of U.S. Health Care Delivery
Introduction
Subsystems of U.S. Health Care Delivery
Managed Care
Military Medical Care
Subsystems for Special Populations
Integrated Systems
Long-Term Care Delivery
Public Health System
Health Care Reform
Characteristics of the U.S. Health Care System
No Central Governing Agency; Little Integration and Coordination
Technology Driven and Focused on Acute Care
High in Cost, Unequal in Access, and Average in Outcome
Imperfect Market Conditions
Government as Subsidiary to the Private Sector
Fusion of Market Justice and Social Justice
Multiple Players and Balance of Power
Quest for Integration and Accountability
Access to Health Care Services Selectively Based on Insurance Coverage
Legal Risks Influence Practice Behaviors
Health Care Systems of Other Developed Countries
Canada
Germany
United Kingdom
Systems Framework
System Foundations
System Resources
System Processes
System Outcomes
System Outlook
Conclusion
References
Chapter 2 Foundations of U.S. Health Care Delivery
Introduction
What Is Health?
Illness and Disease
Acute and Chronic Conditions
Quality of Life
Determinants of Health
Environment
Behavior and Lifestyle
Heredity
Medical Care
Cultural Beliefs and Values
Distribution of Health Care
Market Justice
Social Justice
Justice in the U.S. Health Care System
Strategies to Improve Health
Healthy People Initiatives
Public Health
Focus on Determinants
Conclusion
References
Chapter 3 Historical Overview of U.S. Health Care Delivery
Introduction
Medical Services in Preindustrial America
Medical Training
Medical Practice
Medical Institutions
Medical Services in Postindustrial America
Medical Profession
The American Medical Association
Educational Reform
Development of Hospitals
Reform of Mental Health Care
History of Health Insurance
Worker’s Compensation
Emergence and Rise of Private Health Insurance
First Hospital Plan and the Birth of Blue Cross
First Physician Plan and the Birth of Blue Shield
Employment-Based Health Insurance
Failure of National Health Insurance in the United States
Creation of Medicare and Medicaid
Medical Services in the Corporate Era
Corporatization of Health Care Delivery
Information Revolution
Globalization
Era of Health Care Reform
Health Care Reform in a Flux
Conclusion
References
Chapter 4 Health Care Providers and Professionals
Introduction
Physicians
Similarities and Differences Between MDs and DOs
Generalists and Specialists
Hospitalists
Differences Between Primary and Specialty Care
Work Settings and Practice Patterns
Imbalance and Maldistribution of Physicians
Dentists
Pharmacists
Other Doctoral-Level Health Professionals
Nurses
Advanced-Practice Nurses
Nonphysician Practitioners
Value of NPP Services
Allied Health Professionals
Technicians and Assistants
Technologists and Therapists
Public Health Professionals
Community Health Workers
Health Services Administrators
Patient-Centered Care
Conclusion
References
Chapter 5 Technology and Its Effects
Introduction
What Is Medical Technology?
Health Information Technology
Major Categories
Electronic Health Records
The Internet, E-Health, and E-Therapy
Telemedicine and Remote Monitoring
Diffusion and Utilization of Medical Technology
Cultural Beliefs and Values
Medical Training and Practice
Insurance Coverage
Competition Among Providers
The Government’s Role in Technology Diffusion
Regulation of Drugs, Devices, and Biologics
The Affordable Care Act and Medical Technology
Research on Technology
Impact of Medical Technology
Impact on Quality of Care
Impact on Quality of Life
Impact on Health Care Costs
Impact on Access
Impact on the Structure and Processes of Health Care Delivery
Impact on Global Medical Practice
Impact on Bioethics
Assessment of Medical Technology
Efficacy
Safety
Cost-Effectiveness
Benefits of Technology Assessment
Delivering Value
Cost Containment
Standardized Practice Protocols
Conclusion
References
Chapter 6 Financing and Reimbursement Methods
Introduction
Effects of Health Care Financing and Insurance
Insurance: Its Nature and Purpose
Basic Insurance Concepts
Cost Sharing
Private Insurance
Group Insurance
Self-Insurance
Direct-Purchase Private Insurance
Managed Care Plans
High-Deductible Health Plans
The Affordable Care Act and Private Insurance
Public Insurance
Medicare
Medicaid
Children’s Health Insurance Program
Issues with Medicaid
Reimbursement Methods
Fee for Service
Bundled Payments
Resource-Based Relative Value Scale
Reimbursement Under Managed Care
From Retrospective to Prospective Reimbursement
Payment Reform Initiatives
National Health Expenditures
Conclusion
References
Chapter 7 Outpatient Services and Primary Care
Introduction
What Is Outpatient Care?
Scope of Outpatient Services
Reimbursement
Technological Factors
Utilization Control Factors
Social Factors
Outpatient Care Settings and Methods of Delivery
Private Practice
Hospital Outpatient Clinics
Freestanding Facilities
Mobile Facilities for Medical, Diagnostic, and Screening Services
Telephone or Internet Triage
Home Care
Hospice Care
Outpatient Long-Term Care Services
Public Health Services
Community Health Centers
Free Clinics
Alternative Medicine Clinics
Primary Care
What Is Primary Care?
WHO Definition
IOM Definition
Domains of Primary Care
Community-Oriented Primary Care
Primary Care Around the World
Effectiveness of Primary Care
Hospitalizations and Use of Emergency Care
Cost of Care
Morbidity
Mortality
The Medical Home Strategy
Use of Information Technology in Primary Care
Assessment of Community Health Centers
CHCs’ Quality of Care
CHCs’ Access to Care
CHCs’ Cost-Effectiveness
CHCs and the Affordable Care Act
Conclusion
References
Chapter 8 Hospitals
Introduction
Evolution of the Hospital in the United States
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Stage 6
Expansion and Downsizing of Hospitals in the United States
Access and Utilization Measures
Measures of Access
Measures of Utilization
Utilization of Hospital Capacity
Hospital Employment
Types of Hospitals
Community Hospitals
Public Hospitals
Private Nonprofit Hospitals
Private For-Profit Hospitals
General Hospitals
Specialty Hospitals
Psychiatric Hospitals
Rehabilitation Hospitals
Children’s Hospitals
Rural Hospitals
Teaching Hospitals
Osteopathic Hospitals
Licensure, Certification, and Accreditation
Hospital Organization
Ethics and Public Trust
Ethical Challenges
Addressing Ethical Issues
Public Trust
Conclusion
References
Chapter 9 Managed Care and Integrated Systems
Introduction
What Is Managed Care?
Accreditation and Quality Indicators
Evolution of Managed Care
Growth and Transformation of Managed Care
Private Insurance Enrollment
Medicare Enrollment
Medicaid Enrollment
Managed Care Backlash
Transformation of Managed Care
Utilization Control Methods in Managed Care
Gatekeeping
Utilization Review
Types of Managed Care Plans
HMO Plans
PPO Plans
Point-of-Service Plans
Impact on Cost, Access, and Quality
Influence on Cost Containment
Impact on Access
Influence on Quality of Care
Integrated Systems
Integrated Delivery Systems
Accountable Care Organizations
Types of Integration
Integration Based on Major Participants
Integration Based on Type of Ownership or Affiliation
Integration Based on Service Consolidation
Conclusion
References
Chapter 10 Long-Term Care Services
Introduction
What Is Long-Term Care?
A Variety of Health Care Services
Individualized Services
Coordination of Services
Maximum Possible Functional Independence
Extended Period of Time
Holistic Approach
Quality of Life
Community-Based Long-Term Care Services
Home Health Care
Adult Day Care
Adult Foster Care
Senior Centers
Home-Delivered and Congregate Meals
Homemaker and Handyman Services
Emergency Response Systems
Case Management
Institutional Long-Term Care
Retirement Facilities
Personal Care Facilities
Assisted Living Facilities
Skilled Nursing Facilities
Subacute Care Facilities
Specialized Care Facilities
Licensing and Certification of Nursing Homes
Licensing
Certification
Other Long-Term Care Services
Respite Care
Restorative Care
Hospice Care
The Affordable Care Act and Long-Term Care
Nursing Home Industry and Expenditures
Conclusion
References
Chapter 11 Populations with Special Health Needs
Introduction
Framework to Study Vulnerable Populations
Predisposing Characteristics
Racial/Ethnic Minorities
Women and Children
Geographic Distribution: Rural Health
Enabling Characteristics
The Uninsured
Homelessness
Need Characteristics
Mental Health
Chronic Illness/Disability
HIV/AIDS
Eliminating Disparities
Conclusion
References
Chapter 12 Cost, Access, and Quality
Introduction
Cost of Health Care
The High Cost of U.S. Health Care
Reasons for High Health Care Costs
Third-Party Payment
Growth of Technology
Increase in the Elderly Population
Medical Model of Health Care Delivery
Multipayer System and Administrative Costs
Defensive Medicine
Waste and Abuse
Practice Variations
Cost Containment
Health Planning
Price Controls
Peer Review
Competitive Approaches
Chronic Disease Prevention and Management
Unequal Access to Health Care
Data on Access
Access Disparities
Access Initiatives
Health Care Quality
Structure
Process
Outcome
Quality Strategies and Initiatives
Developments in Process Improvement
Clinical Practice Guidelines
Cost-Efficiency
Critical Pathways
Risk Management
Patient Safety
Conclusion
References
Chapter 13 Health Policy
Introduction
What Is Health Policy?
Different Forms of Health Policies
Regulatory Tools
Allocative Tools
Principal Features of U.S. Health Policy
Government as Subsidiary to the Private Sector
Fragmented, Incremental, and Piecemeal Reform
Pluralistic and Interest Group Politics
Decentralized Role of the States
Impact of Presidential Leadership
Research and Policy Development
Development of Legislative Health Policy
Policy Cycle
Legislative Process
Critical Policy Issues
Access to Care
Providers
Public Financing
Access and the Elderly
Access and Minorities
Access in Rural Areas
Access and Low Income
Smoking and Tobacco Use
Cost Containment
Quality of Care
Mental Health
National Health Reform
Conclusion
References
Chapter 14 The Future of Health Services Delivery
Introduction
Forces of Future Change
Social, Demographic, and Cultural Trends
Economic Forces
Political Will, Ideologies, and Legal Rulings
Technological Innovation
Global Health Issues
Ecological Events
Coverage, Cost, and Access Dilemmas
The Future of Health Care Reform
The American Health Care Act
Will a Single-Payer System Emerge?
The Cost-Control Imperative
National Debt
Medicare’s Generational Impact
Future Models of Care Delivery
Value-Based Shared Savings Payments
Population Health
Community Outreach
Virtual Care
Technology-Driven Home Visits
Future Workforce Challenges
Global Challenges
New Frontiers in Clinical Technology
Conclusion
References
Glossary
Index