By Hatim Jaber MD MPH JBCM PhD 16 + 18 - 04 - 2018 Faculty of Medicine Health Economics and Policies (31505391) Health Markets and Regulation and Economic regulation of health markets Hospitals and pharmaceutical industry By Hatim Jaber MD MPH JBCM PhD 16 + 18 - 04 - 2018

Course Content 31505391 Post Midterm Week 9 Measurement and evaluation in health care. Goods, Market Failures, and Cost-Benefit Analysis. Week 10 Economic evaluation . Economics and efficiency cost analysis and cost effectiveness. 4-4 11:00 am GUEST LECTURE Week 11 Economic effects of Bad habits including smoking and alcohol consumption 9-4 8:00 am GUEST LECTURE Week 12 Quality Improvements in healthcare delivery Methods to improve health care delivery. Week 13 Human resources in Healthcare delivery. 19-4 10:00 am GUEST LECTURE Week 14 Health Markets and Regulation and Economic regulation of health markets. Week 15 -16 Final assessment (Exams.) 13-5-2018

Week 12 Hospital Classification Do hospitals compete with one another on price or quality or reputation? Should there be increased competition across hospitals and provider types? Principles of Value-Based Competition Price Differentials Between Brand Names and Generic Drugs Regulation by the Food and Drug Administration Pharmaceutical drug pricing. How the government intervenes to promote the safety of the population. Health of the market for prescription drugs.

Presentation outline 16 +18 - 4- 2018 Time Health Care as an Enterprise 08:00 to 08:20 Hospital Classification 08:20 to 08:30 Principles of Value-Based Competition 08:30 to 08:40 Regulations :Economic and social regulation 08:40 to 08:50 Next السياسات والتشريعات الدوائية

7 Principal Health Systems Primary health service delivery system Health workforce Leadership and governance to assure quality Health systems financing Supplying medical products and technologies Health systems information Households

Health Care as an Enterprise “Health care … is a moral enterprise and a scientific enterprise, but not fundamentally a commercial one. We are not selling a product. We don’t have a consumer who understands everything and makes rational choices – and I include myself here.” Avedis Donabedian Health Affairs – Volume 20, Number 1 (January/February 2001)

Health System Transformation: Current and Future Variable quality; expensive, wasteful Consistently better quality; lower cost, more efficient Pay for volume Pay for quality Pay for transactions Care-based episodes Quality assessment based on provider and setting (process) Quality assessment based on patient experience (outcomes)

21st Century Health Care Patients play a larger role, including involvement in making decisions about the future of health care Innovative, adaptable and very scalable systems have the potential to become national solutions Health IT makes it possible for doctors to know how patients are doing over time – and for patients to engage in new ways – and at their convenience! Medical model (Western medicine) assumes that illness and disease require treatment. Recently, some movement toward wellness model – the prevention of disease and maintenance of well-being

The Paradox of Health Care The private system with intense competition But • Costs are high and rising • Services are restricted and often fall well short of recommended care • In other services, there is overuse of care • Standards of care often lag and fail to follow accepted benchmarks • Diagnosis errors are common • Preventable treatment errors are common • Huge quality and cost differences persist across providers • Huge quality and cost differences persist across geographic areas • Best practices are slow to spread • Innovation is resisted

Healthcare Triangle Cost Access Quality

Market-driven health care The most successful health systems pay attention to: I. Political space. There is the political space for those providing an inadequate or unnecessary service to exit the market; and for those that can provide a better one to enter it. ii. Information. There is adequate information about activity, cost and quality of care to make investment decisions. iii. Motivated purchasers free to buy selectively. Purchasers have the analytic capacity and freedom to contract with alternative providers in instances of poor service. iv. Providers capable of responding to market forces. Providers are able to invest to improve services and be paid more, or be rewarded with more custom, if patients think they are doing a better job than others. v. Regulatory framework. Regulation ensures that: universal coverage is protected and assured; minimum standards of quality and finance are met; and competition policy is enforced. vi. Capital markets. Providers and insurers/commissioners are able to retain savings and generate capital in order to finance expansion. vii. Common language and currency. There is a common unit in which services are paid for, commissioned and ‘sold’. viii. Local wage determination. There is competition not only for custom, but also for staff, enabling providers to send a powerful signal that wages depend on success. ix. Culture. Staff consider quality and ‘customer service’ to be the name of the game; and are operating in an environment where pluralism and freedom of action is valued. Markets do not work so well, if at all, when immediate priorities are elsewhere.

Healthcare Marketplace Hospitals Physicians Insurance Consumers Medical Device Long-term care Employers Government Pharma-ceuticals IT

Stakeholders Consumers Providers Hospitals Physicians and Clinics Long-term care facilities (e.g., nursing homes) Pharmaceuticals, Medical Device, Biotechnology firms Insurers Employers Government

HOSPITALS Can be public or private Private hospitals can be for profit or non-profit Many different types and classifications General hospitals treat a wide variety of illnesses and ages Joint Commission on the Accreditation of Healthcare Organizations (JCAHO) – helps hospitals maintain quality of care, establishes guidelines for the operation of hospitals, conducts inspections to ensure that standards are being met.

Specialty Hospitals Specific conditions, age groups, or other ways of grouping patients For example: Cancer hospitals Pediatric hospitals Psychiatric hospitals Rehabilitation centers

Ambulatory Facilities Also called “outpatient services” – they often provide diagnostic and treatment services that were previously performed in hospitals Surgical clinics (surgicenters) outpatient surgery Urgent care centers Outpatient clinics Optical centers Genetic counseling centers (fertility clinics)

Long Term Care Facilities Mainly care for elderly patients (residents) May also care for individuals with disabilities or handicaps Residential care (nursing homes) – basic physical care Extended care (skilled nursing) facilities – provide skilled nursing care and rehabilitation services Assisted (independent) living facilities – provide basic services (meals, housekeeping, etc.) and basic medical care.

Home Health Care Became more common in late 1980s – now an area of tremendous growth Nurse or other skilled professional visits patient in his/her home to provide treatment/education Less expensive than admission to hospital or long term care facility States require licensing of home health agencies to assure the quality of care

Medical and Dental Offices Vary from small (one doctor) to large complexes with multiple specialties and other healthcare professionals Some treat a wide variety of illnesses and conditions, others specialize

Mental Health Services Counseling centers Psychiatric clinics and hospitals Chemical (drug and alcohol) abuse treatment centers Physical abuse treatment centers, dealing with child abuse, spouse abuse and elderly abuse

GOVERNMENT AGENCIES Can be at local, state, national and international levels Services are tax supported Veterans Administration Hospital

Food and Drug Administration (FDA) Federal agency Responsible for regulating food and drug products sold to the public www.fda.gov

World Health Organization (WHO) International agency Sponsored by United Nations Compiles disease statistics, promotes healthy living, and investigates serious health problems throughout the world www.who.int

Occupational Safety and Health Administration (OSHA) Part of the U.S. Department of Labor Establishes and enforces standards that protect workers from job-related injuries and illnesses www.osha.gov

Public Health System (Health Departments) Part of the MoH Department of Health and Human Services Provide services to states and local communities Examples of services Immunizations Environmental health and sanitation Collection of health statistics and records Health education Clinics for health care and prevention

Veterans Administration Federally supported Hospitals and other services Care for veterans who served in the armed forces www.va.gov

NON-PROFITS Also called voluntary agencies Most deal with specific diseases or groups of diseases They provide funding for research, promote education, and services for victims of disease. They also influence laws, create standards, and educate health professionals

Hospice Hospice movement began in England, rapidly growing in United States Provides palliative care (relieves but does not cure) to dying patients and their families Involves healthcare professionals and volunteers Emphasis is to make patient’s last days as pain-free and meaningful as possible

Value-Based Competition in Health Care Creating a Value-Based Health Care System Universal insurance is not enough The core issue in health care is the value of health care delivered Significant improvement in value will require fundamental restructuring of health care delivery, not incremental improvements Competition must be harnessed as a powerful force to encourage restructuring of care and continuous improvement in value Creating competition around value is the central challenge in health care reform

Principles of Value-Based Competition 1. The goal should be value for patients, not just lowering costs 2. The best way to contain costs is to drive improvement in quality 3. There must be unrestricted competition based on results 4. Competition should center on medical conditions over the full cycle of care 5. Value is driven by provider experience, scale, and learning at the medical condition level 6. Competition should be regional and national, not just local 7. Results must be universally measured and reported 8. Reimbursement should be aligned with value and reward innovation 9. Information technology is an enabler of restructuring care delivery and measuring results, not a solution itself

Moving to Value-Based Competition Government Measure and report health results Create IT standard data definitions and interoperability standards to enable the collection and exchange of medical information for every patient Enable the restructuring of health care delivery around the integrated care of medical conditions across the full care cycle Shift reimbursement to bundled prices for cycles of care instead of payments for discrete treatments or services End provider price discrimination across patients Open up competition among providers and across geography

11/14/2018 Regulations Government can attempt to control price, quantity, or quality of health care products. Example: Price Ceilings in The Jordanian Health Care System. Consumers are fully insured by the government. The government fixes the price the physician receives for each visit.

Regulation? Government intervenes to restore efficiency and/or equity. “Public interest theory.”

The Health and Social Care Bill proposes to increase and extend Monitor’s responsibilities substantially, to include: price-setting tackling anti-competitive behavior ensuring continuity of essential services (in the event of financial failure).

Guiding principles for the regulation of public services, including health care: Maximize competition Transfer risk to the private sector Appoint a strong pro-competition regulator Set out clearly the standards that must be met and how operators will be held accountable for them Be clear about how and by whom universal service obligations are to be met Ensure high-quality information for customers n have more consumers rather than fewer (that is, don’t have a few monopolistic health authority purchasers). (Lansley 2005)

Types of Government Intervention 11/14/2018 Types of Government Intervention Provide public goods. Correct for externalities Impose regulations. Enforce antitrust laws. Sponsor redistribution programs. Operate public enterprises. Fund medical research. Tax cigarettes, pollution. FDA

11/14/2018 Regulations Because consumers are fully insured, they will demand the number of visits as if the price per visit = 0.

ECONOMIC ANALYSIS OF REGULATION Two Types of Market Regulation Economic regulation and social regulation Economic regulation is the traditional form of regulation. It is usually industry-specific. The deregulation movement of the last two decades has been primarily focused on reducing economic regulation of markets. Social regulation is a newer form of market regulation that grew up during the 20th century, mostly since the 1960’s. While economic regulation has been declining, social regulation has grown rapidly.

ECONOMIC ANALYSIS OF REGULATION Economic Regulation of Markets Restrictions on entry, price, quantity, and market share Economic regulation limits entry into a market or sets prices, restricts quantities, and allocates market shares among sellers. While anti-trust policy is intended to open markets up to new competition, economic regulation limits competition. Examples of economic regulation that often limit competition include Public franchises Occupational licensing Other licensing requirements

ECONOMIC ANALYSIS OF REGULATION Social Regulation of Markets Regulations prescribing how products must be designed or how they must be produced features in the product. Social regulation prescribes how products must be designed or how they must be produced or mandates the inclusion of specific Social regulation includes health and safety regulations, environmental regulation, and occupational safety regulations.

REGULATION AND PUBLIC INTEREST Regulation: Principle and Practice Regulation often benefits producers and regulators, not consumers Regulation often promotes the special interests rather than the public interest Markets and prices are often superior to regulation Regulation is often based on unscientific analysis, misinformation, and faulty data In principle, regulation is supposed to improve consumer welfare. In practice, regulation negative effects on consumer welfare.

REGULATION AND PUBLIC INTEREST Example: Motorcycle Registrations and Fatalities in Helmet Law States and in Non-Helmet Law States Non-Helmet Law States Helmet-Law States 2.60 1.30 Motorcycle registrations per 1000 population 3.05 3.38 Fatalities per 10,000 registered motorcycles 2.89 2.93 Fatalities per 1000 accidents Does the data support the proposition that motorcycle helmet laws reduce motorcycle accident fatalities?