HSC 6636: Costs, Value, & Trends 1 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Topics Rising Costs The Value of Healthcare Containing Costs Trends “…although the GDP was increasing—creating a much bigger national economic pie—health care spending was an ever-larger slice of that pie. It also means that less of the pie is available for spending on all other goods and services.” Text, pp

HSC 6636: Costs, Value, & Trends 2 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Costs Healthcare costs are projected to grow to 20% of GDP by 2015

HSC 6636: Costs, Value, & Trends 3 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Rising Costs What are all of the contributing components of the increasing healthcare costs that we have seen? –National gross expenditures –Per capita expenditures –National expenditures as a % of GDP

HSC 6636: Costs, Value, & Trends 4 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida The Value of Healthcare “ Would the average American want to go back to a medical system where life expectancy at birth was 47 years, where one out of every five children died before the age of 10, and where there were no antibiotics or heart surgery, in order to have another $6,280 per year to spend at the mall? ” Text, p. 482

HSC 6636: Costs, Value, & Trends 5 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida The Value of Healthcare (cont.) What is the fundamental problem with valuing healthcare? What is the fundamental problem with managing healthcare? What do we do about it? –As individuals –As a nation and society –As a healthcare providing organization “But at the end of the day, all of the money must come from somewhere.” Text, p. 490

HSC 6636: Costs, Value, & Trends 6 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Containing Costs The text lists several approaches for containing costs We want to identify these approaches as to whether they are incremental or fundamental –Incremental: Carves out relatively small areas of slack or inefficiency (though repetition may make the improvements significant at the national level) –Fundamental: Has an order of magnitude impact on costs by either Finding larger areas of cost savings Fundamentally changing HC consumption

HSC 6636: Costs, Value, & Trends 7 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Containing Costs (cont.) Areas for cost containment –Managed care –Healthcare information technology –Evidence-based management –Outsourcing –Managing the revenue cycle –Physician buy-in –Addressing the nursing shortage

HSC 6636: Costs, Value, & Trends 8 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Containing Costs (cont.) Containing prescription drug costs –Most rapidly increasing component of HC costs –Marked by low manufacturing costs but high development costs –Little federal policy activity Efforts resisted by Congress –Medicare prescription drug coverage has given the federal government a dog in the fight –What pharmaceutical cost controls are already underway?

HSC 6636: Costs, Value, & Trends 9 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Containing Costs (cont.) Medicare and Medicaid Reform –Review: What are the fundamental differences between these two programs How do these differences affect –Costs Who pays them –Who has decision rights –Approaches Setting a fixed budget Managed care Restricting coverage

HSC 6636: Costs, Value, & Trends 10 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Containing Costs (cont.) Additional approaches –Using competition –Anti-trust policy –Medical Savings Accounts and Consumer-Driven healthcare –Reducing fraud –Price controls

HSC 6636: Costs, Value, & Trends 11 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Containing Costs (cont.) Who are the decision makers? What are the consequences of the decisions they face? –“The problem is not that we do not know how to control costs, but that controlling costs is painful.” –“The grim reality of cost containment is that only two things actually reduce cost in labor-intensive service industries: cutting wages or cutting the number of employees.” –“Ultimately, the nation will probably have to resort to policy approaches, such as rationing, that limit access to care.” (pp 502-3)

HSC 6636: Costs, Value, & Trends 12 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Trends The semester has been a historical review of the HC delivery system in the US (with a peek at other countries along the way) What have been the major trends we have seen? –Technical and knowledge advances –HC worker education and training –Changes in organizations offering HC –Changes in insurance and other payers –Changes in the roles of governments –Changes in public (and voter) attitudes –Demand for healthcare

HSC 6636: Costs, Value, & Trends 13 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Trends (cont.) What elements of the US HC System are currently in a state of flux? –Which elements have major transitions in progress at the current time? Technical and knowledge advances HC worker education and training Changes in organizations offering HC Changes in insurance and other payers Changes in the roles of governments Changes in public (and voter) attitudes Demand for healthcare

HSC 6636: Costs, Value, & Trends 14 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Trends (cont.) What new and existing trends do we expect to see in the future? How do we expect these trends to affect us… –…personally? –…professionally? Technical and knowledge advances HC worker education and training Changes in organizations offering HC Changes in insurance and other payers Changes in the roles of governments Changes in public (and voter) attitudes Demand for healthcare

HSC 6636: Costs, Value, & Trends 15 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Healthcare Reform Note that the book was written before passage of the Patient Protection and Affordable Care Act of 2010 and before the 2007 presidential election What are the provisions of the PPACA of 2010? You should be able to look at almost any provision of this Act and… –…Identify the problem it was designed to address –…Identify who will benefit from the provision –…Identify who will pay for the provision Cover non-monetary ‘costs’ or impacts –…Identify other impacts of the provision

HSC 6636: Costs, Value, & Trends 16 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Wellness and Prevention Why are wellness and prevention so important in future HC policy? What are the fundamental problems with addressing HC costs through wellness and prevention programs?

HSC 6636: Costs, Value, & Trends 17 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Chronic Conditions What is the perverse result of improved HC on the prevalence (and cost) of chronic conditions? What is the role of existing coverage for those with chronic conditions? Are there coverage gaps which suggest big impacts for targeted policy or coverage changes?