MEDICAL ERRORS: Incidence and Prevelance

Robert James Cimasi

Todd A. Zigrang

Health Capital Consultants - Healthcare Valuation

“Knowing is not enough; we must apply. Willing is not enough; we must do. Goethe [1]

As developments in research and technology have advanced medical practice, the improved ability to diagnose and treat patients has led to an increased volume of medical assessments and procedures performed. However, these increases in the volume of procedures performed by physicians have led to an increase in both the risk of harm to patients and the exposure to liability for physicians.[2] Today, most healthcare services are delivered not by individual Marcus Welby type of physicians,[3] but through a group practice, healthcare organization, or hospital system. While there are numerous advantages to physicians providing care as employees of a healthcare enterprise, some of the unintended consequences exhibited under physician employment arrangements (e.g., diminishing physician autonomy, patient quotas, and limited time to spend with patients) have led to an increase in the potential for patient harm and subsequent physician liability.[4]  Additionally, as the overlap between the scope of practice for physicians and non-physicians continues to increase, the complexities of malpractice liability, which may jeopardize the licenses of both the supervising physician and the non-physician professional, may similarly increase.[5] The result of these increased risks, medical errors, disgruntled patients, and changing scopes of practice has produced an environment that is ripe for malpractice litigation.[6] 

Numerous studies and examinations of the reality of medical errors demonstrate the varied nature and causes contributing to these errors, and the need for the medical malpractice system.  The 2000 Institute of Medicine’s (IOM) landmark report, entitled, “To Err is Human: Building a Safer Health System,” conservatively estimated that in 1997, “at least 44,000 and perhaps as many as 98,000 Americans die in hospitals each year as a result of medical errors.”[7] Moreover, the IOM report noted that out of 30,000 discharges at 51 randomly selected New York hospitals in 1984, adverse events occurred in 3.7% of all hospitalizations or (1,110 hospitalizations), with 58% of adverse events (approximately 644 hospitalizations) caused by preventable medical errors, and 27.6% of adverse events (approximately 306 hospitalizations) caused by negligence.[8]  In addition to medical errors, more than one million serious medication errors occur every year in U.S.[9] As observed in The Leapfrog Group’s study, one adverse drug effect (ADE) adds, on average, $2,000 to the cost of a hospitalization, which totals over $7.5 billion per year nationwide.[10]

Other studies have updated the figures relied upon in the IOM report. In 2010, the Office of Inspector General (OIG) estimated that approximately 13.5% of hospitalized Medicare beneficiaries experienced adverse events during their hospitalizations, 44% of which were deemed preventable by independent physician reviewers.[11] Within this estimate, the OIG subdivided the adverse events into four clinical categories:

  • Events related to medication – 31%;
  • Events related to ongoing patient care – 28%;
  • Events related to surgery or other procedures – 26%; and,
  • Events related to infection – 15%.[12]

A 2013 study published in Journal of Patient Safety combined the OIG’s estimate with the estimates of three other studies[13] relating to the prevalence of medical errors to conclude that over “210,000 preventable adverse events per year…contribute to the death of hospitalized patients,” with numerous additional errors shortening patients’ lifespans and causing other harms.[14]

The debate surrounding medical errors focuses not only on the number of adverse events in hospitals and deaths due to these adverse events, but also the causes of these adverse events.  Although the 2000 IOM report is widely cited for its estimate of deaths due to medical errors,[15] the report also provided one of the first arguments that many medical errors “could likely have been avoided had better systems of care been in place,” framing the medical error debate not solely on “incompetent or impaired providers” but also on the process of care delivery.[16] These process improvements can center on infrastructure as well as policies and procedures regarding the provision of medical care. The same IOM committee that published the 2000 report released a second report in 2001 entitled, “Crossing the Quality Chasm: A New Health System for the 21st Century,” which advocated for widespread change in overall structures and processes in the healthcare environment as a means to preventing medical errors and improving quality, and listed six “aims” for high quality care: safety; effectiveness; efficiency; equity; timeliness; and, patient-centeredness.[17]  However, a 2013 IOM report entitled, “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America,” noted that, 12 years later, these six aims still had not been achieved, and attributed the “fragmented, uncoordinated, and diffusely organized” infrastructure of the U.S. healthcare delivery system to the lack of systemic processes in place.[18] Specifically addressing outpatient enterprise structures, a 2011 study on adverse drug events (ADEs) in ambulatory care settings noted the potential for infrastructure improvements to support the reduction of medical errors, stating that “as health information technology becomes more widespread in ambulatory health care delivery… automated surveillance for (adverse drug events) will become more feasible.”[19]

The OIG has provided similar guidance to healthcare providers regarding the relationship between structure and quality. In its revised guidance to nursing homes, the OIG recommended that nursing facilities can “promote compliance by having in place proper medication management processes,” such as utilizing a consultant pharmacist and continually training staff in proper medication management.[20]  Nevertheless, criticism still exists regarding the processes utilized by healthcare providers to reduce medical errors. In its 2010 report on adverse events suffered by Medicare beneficiaries, the OIG recommended that the Centers for Medicare & Medicaid Services (CMS) “influence hospitals to reduce adverse events through enforcement of the conditions of participation” in Medicare, which includes sanctioning physicians through the peer review process.[21] Other studies have advanced the OIG’s claim a step further, arguing that “the hospital peer-review system has widespread failures that permit negligent care by physicians.”[22]

In an attempt “to improve patient safety by encouraging voluntary and confidential reporting of events that adversely affect patients,”[23] The Patient Safety and Quality Improvement Act (PSQIA) of 2005, effective January 19, 2009, established a voluntary reporting system for medical errors.[24] Under PSQIA, to address provider fear that “patient safety event reports could be used against them in medical malpractice cases or in disciplinary proceedings,”[25] confidentiality provisions regarding the protection of “patient safety work product” were established.[26]Patient safety work product” includes any information that is collected while reporting and analyzing a patient safety event,[27] i.e., “a process or act of omission or commissions that resulted in hazardous health care conditions and/or unintended harm to the patient.[28] Under PSQIA, Patient Safety Organizations (PSOs) are charged with collecting and analyzing data under the supervision of the Agency for Healthcare Research and Quality (AHRQ).[29]

Despite the numerous attempts and strategies to curtail the prevalence of medical errors, no definitive answer exists as to whether medical errors are properly attributable to process or physician errors on a large scale. If it were determined that most medical errors are mistakes from breakdowns in processes of care rather than the negligence of physicians, improving and implementing new and effective process controls may best reduce medical errors – and the resulting incidence of medical malpractice cases.[30] However, to date, the healthcare industry and the U.S. tort system are far from reaching this conclusion, leaving the tort system – as well as malpractice insurers and their physician insureds – to continue to grapple with this uncertainty.

https://media3.s-nbcnews.com/j/newscms/2016_18/1524261/errors_fd53fca207ac4622017a0b55e1dcb951.nbcnews-ux-2880-1000.png

[1]       “Crossing the Quality Chasm: A New Health System for the 21st Century,” Institute of Medicine, National Academy of Sciences, 2001, front matter.

[2]       “Overview of Medical Errors and Adverse Events,” By Maité Garrouste-Orgeas, et al., Annals of Intensive Care, Vol. 2, No. 2 (2012), p. 6.

[3]       “Healthcare Valuation: The Financial Appraisal of Enterprises, Assets, and Services,” Vol. 1, By Robert James Cimasi, MHA, ASA, FRICS, CVA, CM&AA, Hoboken, NJ: John Wiley & Sons, 2014, p. xiii.

[4]       “Health Law: Cases, Materials, and Problems, 7th Edition,” By Barry R. Furrow, Thomas L. Greaney, Sandra H. Johnson, Timothy Stoltzfus Jost, and Robert L. Schwartz, St. Paul, MN: West Publishing Company, 2013, p. 507.

[5]       “Licensure of Health Care Professionals,” In “Health Care Law: A Practical Guide, Second Edition” By Scott Becker, Matthew Bender Co., 1998, § 16.02[4], p. 16-23.

[6]       “Health Law: Cases, Materials, and Problems, 7th Edition,” By Barry R. Furrow, Thomas L. Greaney, Sandra H. Johnson, Timothy Stoltzfus Jost, and Robert L. Schwartz, St. Paul, MN: West Publishing Company, 2013, p. 506-507.

[7]       “To Err is Human: Building a Safer Health System,” Institute of Medicine, National Academy of Sciences, 2000, p. 26. The IOM study extrapolated data from the 1984 New York study, as well as a 1992 study from Colorado and Utah to the number of hospitalizations in 1997 to estimate the number of deaths due to medical errors in 1997. The report authors note that these extrapolations may be low because the studies:

  1. Considered only those patients whose injuries resulted in a specified level of harm;”
  2. Imposed a high threshold to determine whether an adverse event was preventable or negligent;” and,
  3. Included only errors that are documented in patient records.”

“To Err is Human: Building a Safer Health System,” Institute of Medicine, National Academy of Sciences, 2000, p. 31.

[8]       “To Err is Human: Building a Safer Health System,” Institute of Medicine, National Academy of Sciences, 2000, p. 30.

[9]     “Fact Sheet: Computerized Physician Order Entry,” The Leapfrog Group, March 3, 2009; “To Err is Human: Building a Safer Health System,” By Institute of Medicine, 2000, p.1.

[10]     “Leapfrog Hospital Survey Results,” The Leapfrog Group, 2008, p. 3.

[11]     “Adverse Events in Hospitals: National Incidence among Medicare Beneficiaries,” Office of Inspector General, November 2010, p. 15, 22.

[12]     “Adverse Events in Hospitals: National Incidence among Medicare Beneficiaries,” Office of Inspector General, November 2010, p. 15.

[13]     “‘Global Trigger Tool’ Shows That Adverse Events in Hospitals May be Ten Times Greater Than Previously Measured,” By David C. Classen et al., Health Affairs, Vol. 30, No. 4 (2011); “Adverse Events in Hospitals: Case Study of Incidence Among Medicare Beneficiaries in Two Selected Counties,” Office of Inspector General, December 2008, http://oig.hhs.gov/oei/reports/OEI-06-08-00220.pdf (Accessed 2/17/15); “Temporal Trends in Rates of Patient Harm Resulting from Medical Care” By Christopher P. Landrigan, MD, MPH, et al., New England Journal of Medicine, Vol. 363, No. 22 (November 24, 2010).

[14]     “A New, Evidence-Based Estimate of Patient Harms Associated with Hospital Care” By John T. James, PhD, Journal of Patient Safety, Vol. 9. No. 3 (September 2013), p. 125.

[15]     “How Many Die From Medical Mistakes in U.S. Hospitals?” By Marshall Allen, National Public Radio, September 20, 2013, http://www.npr.org/blogs/health/2013/09/20/224507654/howmanydiefrommedicalmistakesinushospitals (Accessed 12/3/14).

[16]     “To Err is Human: Building a Safer Health System,” Institute of Medicine, National Academy of Sciences, 2000, p. 30.

[17]     “Crossing the Quality Chasm: A New Health System for the 21st Century,” Institute of Medicine, National Academy of Sciences, 2001, p. ix, 25.

[18]     “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America,” Institute of Medicine, National Academy of Sciences, 2009, p. 134.

[19]     “Adverse Drug Events in U.S. Adult Ambulatory Medical Care,” By Urmimala Sarkar et al., Health Services Research, Vol. 46, No. 5 (October 2011), p. 1527.

[20]     “OIG Supplemental Compliance Program Guidance for Nursing Facilities,” Federal Register Vol. 73, No. 190 (September 30, 2008), p. 56837.

[21]     “Adverse Events in Hospitals: National Incidence among Medicare Beneficiaries,” Office of Inspector General, November 2010, p. 32.

[22]     “A New, Evidence-Based Estimate of Patient Harms Associated with Hospital Care”, By John T. James, PhD, Journal of Patient Safety, Vol. 9. No. 3 (September 2013), p. 127.

[23]     “Patient Safety and Quality Improvement Act of 2005,” Agency for Healthcare Research and Quality, http://archive.ahrq.gov/news/newsroom/press-releases/2008/psoact.html (Accessed 3/5/15).

[24]     “Health Information Privacy: Understanding Patient Safety Confidentiality,” U.S. Department of Health and Human Services, http://www.hhs.gov/ocr/privacy/psa/understanding/index.html (Accessed 3/5/15); “Patient Safety and Quality Improvement; Final Rule,” Federal Register, Vol. 73, No. 226 (November 21, 2008), p. 70732.

[25]     “Patient Safety and Quality Improvement Act of 2005,” Agency for Healthcare Research and Quality, http://archive.ahrq.gov/news/newsroom/press-releases/2008/psoact.html (Accessed 3/5/15).

[26]     “Patient Safety and Quality Improvement: Final Rule” Federal Register, Vol. 73, No. 226 (November 21, 2008), p. 70734.

[27]     “Patient Safety and Quality Improvement: Final Rule” Federal Register, Vol. 73, No. 226 (November 21, 2008), p. 70739.

[28]     “Patient Safety and Quality Improvement: Final Rule” Federal Register, Vol. 73, No. 226 (November 21, 2008), referring to footnote 7 in “Patient Safety and Quality Improvement: Proposed Rule” Federal Register, Vol. 73, No. 29 (February 12, 2008), p. 8113.

[29]     “Understanding Patient Safety Confidentiality” U.S. Department of Health and Human Services, http://www.hhs.gov/ocr/privacy/psa/understanding/index.html (Accessed 3/5/15).

[30]     “To Err is Human: Building a Safer Health System,” Institute of Medicine, National Academy of Sciences, 2000, p. 30.

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Letters to Trump – Continue Focus on Value-Based Payment

Two Letters to Trump from Healthcare Leaders – Continue Focus on Value-Based Payment

By Robert James Cimasi MHA CMP™

Health Capital Consultants, Inc

                                             ***

In December 2016 and January 2017, over 100 leading healthcare organizations sent two letters to President Donald Trump and Vice President Michael Pence lobbying the Trump Administration to continue the shift in healthcare reimbursement from volume-based to value-based payment models.
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The expansion of the number and scope of value-based reimbursement programs following the 2010 passage of the Patient Protection and Affordable Care Act (ACA) is in keeping with the national strategy regarding healthcare reimbursement in the landmark legislation; most notably the fourth priority established by the ACA, i.e., to “…improve Federal payment policy to emphasize quality and efficiency…
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However, in light of the criticism of many in the Trump Administration regarding value-based reimbursement models, most notably Tom Price, M.D., the Secretary of the U.S. Department of Health and Human Services (HHS), many healthcare delivery organizations felt compelled to advocate for continued implementation of such payment systems, and acted by sending the above referred letters to the new administration.
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Assessment
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This Health Capital Topics article summarizes the contents of those two letters received by the Trump Administration, and discusses how this advocacy fits into the current uncertainty surrounding healthcare reform. (Read more…) 

Conclusion

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On The State Licensing Process of Physicians

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By State Medical Boards

robert-cimasitodd-zigrang

By ROBERT JAMES CIMASI; MHA, ASA, FRICS, MCBA, AVA, CM&AA, CMP

By TODD A. ZIGRANG; MBA, MHA, ASA, FACHE

(C) Health Capital Consultants, LLC All rights reserved. St. Louis, MO USA

A SPECIAL ME-P REPORT

USA

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Every state and the District of Columbia require the licensure of all allopathic (M.D.) and osteopathic (D.O.) physicians [1] Although the specific criteria for licensure vary by state, each state requires candidates to submit proof of completion of the requisite number of years of graduate medical education and passage of examinations verifying that “the physician is ready and able to practice competently and safely in an independent setting [2].

Moral Character

Additionally, a physician applying for licensure is typically required to have “good moral character,” absent his or her involvement in illegal activities [3] Most physicians satisfy the exam requirement by submitting proof of their successful completion of the United States Medical Licensing Examination (USMLE) or the Comprehensive Osteopathic Medical Licensing Examination (COMLEX-USA) to the licensure board [4] However, as some practicing physicians may have been licensed under a previously administered exam, certain state licensing boards may consider a combination of other examinations sufficient to meet licensure requirements, so long as those exams were completed prior to 2000 [5]

Of State Medical Boards

The licensure of physicians is governed by a state medical board, the “primary responsibility” of which board, according to the Federation of State Medical Boards, is to “protect consumers of health care by ensuring that all physicians…are properly licensed and comply with various laws and regulations pertaining to the practice of medicine[6] To accomplish this goal, state legislatures have delegated certain powers to the state’s medical board, including the power to grant, suspend, and revoke licenses; conduct investigations into complaints against physicians; and, release guidelines related to best medical practices [7] State medical boards have traditionally consisted solely of physicians; however, there has recently been an increase in the number of non-physician board members on state medical boards [8].

History

Over the last 50 years, state medical boards have faced intense scrutiny regarding their commitment to disciplining physicians based on quality concerns [9] In 1960, the American Medical Association (AMA) heard “sobering” facts from the Federation of State Medical Boards that “much confusion over the definitions and objectives exists” related to state medical board enforcement of medical standards [10] From 1963 to 1967, 0.06% of all physicians were subject to discipline, while in 1981, 0.14% of all physicians were subject to discipline, due in large part to the problems identified by the AMA [11] Although the rate of physician discipline rose eightfold by the mid-1990s, to date, there are continuing concerns regarding state medical board enforcement of quality standards.

A March 2011 report by advocacy group Public Citizen found that over 55% of physicians who faced clinical privilege disciplines by hospitals from 1990 to 2009 did not have a corresponding action from a state medical board [12] Additionally, in 2011, state medical boards imposed 3.06 “serious disciplinary actions” (e.g., revocations, surrenders, suspensions, and probations of medical licenses) per 1,000 physicians, an increase from the 2010 rate of 2.97 per 1,000, but a decrease from the 2004 rate of 3.72 per 1,000 [13] Numerous reasons have been offered to explain the disparity in quality enforcement by state medical boards, the most prominent being that physicians are loath to report fellow physicians for major disciplinary actions such as licensure revocation[14]

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nurses

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Assessment

Other reasons include a focus by state medical boards on “character-related misconduct” over clinical quality standards [15] as well as a lack of resources to investigate and enforce quality standards, which forces state medical boards to rely on physicians and hospitals to “police” themselves [16].

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 REFERENCES

[1]       “State Medical Boards: Future Challenges for Regulation and Quality Enhancement of Medical Care,” By James N. Thompson, Journal of Legal Medicine, Vol. 33, No. 9 (January-March 2012).

[2]       “State Medical Boards: Future Challenges for Regulation and Quality Enhancement of Medical Care,” By James N. Thompson, Journal of Legal Medicine, Vol. 33, No. 9 (January-March 2012); “Healthcare Valuation: The Four Pillars of Healthcare Value,” By Robert James Cimasi, MHA, ASA, FRICS, MCBA, AVA, CM&AA, Hoboken, NJ: John Wiley & Sons, Inc., 2014, p. 449-450.

[3]       “Medical Practice: Education and Licensure,” in “Legal Medicine,” By S. Sandy Sanbar et al., 6th Ed., Mosby, 2004, p. 81.

[4]       “Medical Licensure,” American Medical Association, 2014, http://www.ama-assn.org/ama/pub/education-careers/becoming-physician/medical-licensure.page, (Accessed 12/19/14); “COMLEX-USA,” National Board of Osteopathic Medical Examiners, 2014, http://www.nbome.org/exams-faq.asp (Accessed 12/19/14).

[5]       “Medical Licensure,” American Medical Association, 2014, http://www.ama-assn.org/ama/pub/education-careers/becoming-physician/medical-licensure.page, (Accessed on 12/19/14); “Healthcare Valuation: The Four Pillars of Healthcare Value,” By Robert James Cimasi, MHA, ASA, FRICS, MCBA, AVA, CM&AA, Hoboken, NJ: John Wiley & Sons, Inc., 2014, p. 450.

[6]       “What is a State Medical Board?” Federation of State Medical Boards, 2014, http://www.fsmb.org/policy/what-is-a-smb-faq (Accessed 12/19/14).

[7]       “What is a State Medical Board?” Federation of State Medical Boards, 2014, http://www.fsmb.org/policy/what-is-a-smb-faq (Accessed 12/19/14).

[8]       “What is a State Medical Board?” Federation of State Medical Boards, 2014, http://www.fsmb.org/policy/what-is-a-smb-faq (Accessed 12/19/14); “Character, Competence, and the Principles of Medical Discipline,” By Nadia N. Sawicki, Journal of Health Care Law & Policy, Vol. 13, No. 1, 2010, p. 291.

[9]       “Character, Competence, and the Principles of Medical Discipline,” By Nadia N. Sawicki, Journal of Health Care Law & Policy, Vol. 13, No. 1, 2010, p. 287, n. 7; “To Err is Human: Building a Safer Health System – Summary,” Institute of Medicine, 2000, http://www.iom.edu/~/media/Files/Report%20Files/1999/To-Err-is-Human/To%20Err%20is%20Human%201999%20%20report%20brief.pdf (Accessed 12/19/14).

[10]     “Medical Licensure Statistics for 1960,” Journal of the American Medical Association, Vol. 176, No. 8 (May 27, 1961), p. 694.

[11]     “Medical Licensing Board Characteristics and Physician Discipline: An Empirical Analysis,” By Mark T. Law & Zeynep K. Hansen, Journal of Health Politics, Policy and Law, Vol. 35, No. 1 (February 2010), p. 66.

[12]     “State Medical Boards Fail to Discipline Doctors with Hospital Actions Against Them,” By Alan Levine et al., Public Citizen, March 2011, http://www.citizen.org/documents/1937.pdf (Accessed 12/19/14).

[13]     “Public Citizen’s Health Research Group Ranking of the Rate of State Medical Boards’ Serious Disciplinary Actions, 2009-2011,” By Sidney M. Wolfe, M.D., et al., Public Citizen, May 17, 2012, http://www.citizen.org/documents/2034.pdf (Accessed 12/19/14).

[14]     “Medical Boards are Too Lax, Critics Claim,” By Wayne J. Guglielmo, MA, MedScape, October 17, 2014, http://www.medscape.com/viewarticle/833141 (Accessed 12/3/14);

[15]     “Character, Competence, and the Principles of Medical Discipline,” By Nadia N. Sawicki, Journal of Health Care Law & Policy, Vol. 13, No. 1, 2010, p. 287.

[16]     “Medical Licensing Board Characteristics and Physician Discipline: An Empirical Analysis,” By Mark T. Law & Zeynep K. Hansen, Journal of Health Politics, Policy and Law, Vol. 35, No. 1 (February 2010), p. 90; “Medical Licensure Statistics for 1960,” Journal of the American Medical Association, Vol. 176, No. 8, May 27, 1961, p. 694.

NC Update: H543v2 – 04152015

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The Medical Painting Gallery of HCC, LLC

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A Digital Medical Painting Gallery GOOD FRIDAY Review

Courtesy Robert James Cimasi; MHA ASA FRICs MCBA AVA CM&AA CMP™

[Health Capital Consultants, LLC]

***

OK; I was never much of a liberal arts guy in my younger days; despite my Jesuit education at Loyola University. Always more of a modified STEM scientist.

Still, I remember the first time I learned of this famous painting in college, then medical school [a requirement of all anatomy students, worldwide]. So, imagine how blessed I felt when I viewed the original when I visited Amsterdam … chilling!

And, this painting and entire gallery seems an appropriate ME-P for Good Friday 2015.

David Edward Marcinko

***

The Anatomy Lesson of Dr. Nicolaes Tulp

Rembrandt (1606–1669)

[1632: commissioned by Chirurgijnsgilde, Amsterdam]

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CLICK FOR MORE:

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Assessment

Paintings are part of the collection of the U.S. National Library of Medicine. 

Conclusion

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PP-ACA Physician Ownership Provisions

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Understanding the “whole hospital exception” to the Stark laws

By Dr. David Edward Marcinko MBA CMP®

www.CertifiedMedicalPlanner.org

Dr. David E. Marcinko MBAThis was a big week for healthcare reform, wasn’t it? Some provisions of the PP-ACA requiring the employer mandates were delayed another year; until January 1, 2015.

But, before passage of the ACA in 2010, the “whole hospital exception” to the Stark law allowed physicians to have an ownership interest in a hospital to which those physicians refer patients, provided the physician is invested in the whole hospital and not a subdivision of the hospital, with no limitations as to the amount or extent of physician ownership, on either an aggregate or individual basis.

Prohibitions

Now, according to colleague Robert James Cimasi MHA, AVA, ASA, MCBA, CMP®, of www.HealthCapital.com, The ACA completely prohibits physician-owned hospitals which were not Medicare-certified by December 31, 2010.

[1] The ACA allows hospitals with a provider agreement prior to December 31, 2010 to continue Medicare participation if they meet the following four criteria: (1) located in a county with a population growth rate of at least150% the state’s population growth over the last 5 years; (2) have Medicaid inpatient admission percentage of at least the average of all hospitals in the county; (3) located in a state with below-national-average bed capacity; and, (4) have bed occupancy rate greater than state average. [2]

Grandfathered

A very limited number of physician-owned hospital existing in 2010 met or were close to meeting all 4 of criteria.[3] The Reconciliation Act provided a limited exception to the ACA growth restrictions for grandfathered physician owned hospitals that treat the highest percentage of Medicaid patients in their county (and are not the sole hospital in a county).[4]

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Financial Management Strategies for Hospitals and Healthcare Organizations: Tools, Techniques, Checklists and…

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Assessment

Based on these provisions, the 2010 healthcare reform legislation will likely have a considerable negative impact on physician-owned hospitals, in terms of impeding development of new hospitals and expansion of existing hospitals.

Conclusion

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[1]       “Section-by-Section Analysis with Changes Made by Title X and Reconciliation included within Titles I-IX,” Democratic Policy Committee, http://dpc.senate.gov/healthreformbill/healthbill96.pdf (Accessed 5/24/2010).

[2]       “Section-by-Section Analysis with Changes Made by Title X and Reconciliation included within Titles I-IX,” Democratic Policy Committee, http://dpc.senate.gov/healthreformbill/healthbill96.pdf (Accessed 5/24/2010).

[3]       “Healthcare Reform: A Brief Analysis on How it Impacts ASCs and Physician-OwnedHospitals – 10 Observations”, By Scott Becker, Leigh Page, and Rob Kurtz, Becker’s Hospital Review, http://www.beckersorthopedicandspine.com/news-a-analysis/legal-a-regulatory/1193-healthcare-reform-abrief- analysis-on-how-it-impacts-ascs-and-physician-owned-hospitals-10-observations (Accessed 5/20/10).

[4]       “Section-by-Section Analysis with Changes Made by Title X and Reconciliation included within Titles I-IX,” Democratic Policy Committee, http://dpc.senate.gov/healthreformbill/healthbill96.pdf (Accessed 5/24/2010).

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Doubting the Accountable Care Organization B-Model

New Healthcare Business Model or Edsel Model?

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By David Edward Marcinko MBA http://www.CertifiedMedicalPlanner.org

[Publisher-in-Chief]

Dr. Marcinko with ME-P FansDefined by Professor Michael Porter at Harvard Business School, value is defined as a function of outcomes and costs. Therefore to achieve high value we must deliver the best possible outcomes in the most efficient way, outcomes which matter from the perspective of the individual receiving healthcare and not provider process measures or targets.

Sir Muir Gray expanded on the idea of technical value (outcomes/costs) to specifically describe ‘personal value’ and ‘allocative value’, encouraging us to focus also on shared decision making, individual preferences for care and ensuring that resources are allocated for maximum value.

Healthcare Value and ACOs

According to our Medical Executive-Post Health Dictionary Series of administrative terms http://www.HealthDictionarySeries.org  and health economist and colleague Robert James Cimasi MHA, ASA, AVA CMP™ of www.HealthCapital.com; an ACO is a healthcare organization in which a set of providers, usually large physician groups and hospitals, are held accountable for the cost and quality of care delivered to a specific local population.

ACOs aim to affect provider’s patient expenditures and outcomes by integrating clinical and administrative departments to coordinate care and share financial risk.

ACO Launch

Since their four-page introduction in the PP-ACA of 2010, ACOs have been implemented in both the Federal and commercial healthcare markets, with 32 Pioneer ACOs selected (on December 19, 2011), 116 Federal applications accepted (on April 10, 2012 and July 9, 2012), and at least 160 or more Commercial ACOs in existence today.

Federal Contracts

Federal ACO contracts are established between an ACO and CMS, and are regulated under the CMS Medicare Shared Savings Program (MSSP) Final Rule, published November 2, 2011.  ACOs participating in the MSSP are accountable for the health outcomes, represented by 33 quality metrics, and Medicare beneficiary expenditures of a prospectively assigned population of Medicare beneficiaries.

If a Federal ACO achieves Medicare beneficiary expenditures below a CMS established benchmark (and meets quality targets), they are eligible to receive a portion of the achieved Medicare beneficiary expenditure savings, in the form of a shared savings payment.

Commercial Contracts

Commercial ACO contracts are not limited by any specific legislation, only by the contract between the ACO and a commercial payor.

In addition to shared savings models, Commercial ACOs may incentivize lower costs and improved patient outcomes through reimbursement models that share risk between the payor and the providers, i.e., pay for performance compensation arrangements and/or partial to full capitation.

Although commercial ACOs experience a greater degree of flexibility in their structure and reimbursement, the principals for success for both Federal ACOs and Commercial ACOs are similar.

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Eidsel

Dr. David E. Marcinko with 1960 Ford Edsel

[© iMBA, Inc. All rights reserved, USA.]

[The Edsel was an automobile marque that was planned, developed, and manufactured by the Ford Motor Company during the 1958, 1959, and 1960 model years. With the Edsel, Ford had expected to make significant inroads into the market share of both General Motors and Chrysler and close the gap between itself and GM in the domestic American automotive market. But, contrary to Ford’s internal plans and projections, the Edsel never gained popularity with contemporary American car buyers and sold poorly. The Ford Motor Company lost millions of dollars on the Edsel’s development, manufacturing and marketing].

More:

 

Update

Junking the Merit-Based Incentive Payment System (MIPS) would undoubtedly let the proverbial air out of the MACRA balloon, dealing a significant blow to the value-based reimbursement shift; right?

Assessment

Although nearly any healthcare enterprise can integrate and become an ACO, larger enterprises, may be best suited for ACO status.

Larger organizations are more able to accommodate the significant capital requirements of ACO development, implementation, and operation (e.g., healthcare information technology), and sustain the sufficient number of beneficiaries to have a significant impact on quality and cost metrics.

Conclusion

But, will this new B-Model work? Isn’t leading doctors in a shared collaborative effort a bit like herding cats? And, what about patients, HIEs, outcomes management, data analytics and … Population Health via our colleague David B. Nash MD MBA of Thomas Jefferson University, often considered the “father” of Pop Health?

OR, what about the developing IRS scandal and full PP-ACA launch in 2014? Will it affect federal funding, full roll-out, or even repeal of the entire Act?

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Understanding Modern Healthcare Market Competition

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Updating Competitive Strategy Theory in Healthcare

By Robert James Cimasi; MHA ASA FRICs MCBA AVA CM&AA
By Todd A. Zigrang; MBA MHA ASA FACHE
By Anne P. Sharamitaro; Esq.

www.HealthCapital.com

Michael Porter[i] is considered by many to be one of the world’s leading authorities on competitive strategy and international competitiveness.  In 1980, he published Competitive Strategy: Techniques for Analyzing Industries and Competitors,[ii] in which he argues that all businesses must respond to five competitive forces.

(1) The Threat of New Market Entrants

This force may be defined as the risk of a similar company entering the marketplace and winning business.  There are many barriers to entry of new market entrants in healthcare including: the high cost of equipment, licensure, requirement for physicians and other highly trained technicians, development of physician referral networks and provider contracts, and other significant regulatory requirements.

Certificate of Need (CON) laws, which require governmental approval for new healthcare facilities, equipment, and services have been in place since they were federally mandated in 1974.  State CON laws create a regulatory barrier to entry.  New medical provider entrants commonly face substantial political opposition by established interests, which is manifested in the CON review process.

(2) The Bargaining Power of Suppliers

A supplier can be defined as any business relationship upon which a business relies to deliver a product, service, or outcome.  Healthcare equipment is a highly technical product produced by a limited number of manufacturers. This reduces the range of choices for providers and can increase costs.

(3) Threats from Substitute Products or Services

Substitute products or services are those that are sufficiently equivalent in function or utility to offer consumers an alternate choice of product or service.  An illustration of this in healthcare would be diagnostic imaging as a substitute for surgery, which is often a more costly and risky option for patients. The threat of less invasive or less expensive diagnostic tests other than diagnostic imaging is relatively small for the near term future.

(4) The Bargaining Power of Buyers

This force is the degree of negotiating leverage of an industry’s buyers or customers.  The buyers of healthcare services are ultimately the patients. However, the competitive force of buyers is manifested through healthcare insurers including the U.S. and state governments through the Medicare, Medicaid, TRICARE, and other programs; managed care payors (e.g., Blue Cross/Blue Shield affiliates); workers’ compensation insurers; and, others.  In addition to the government, many of these healthcare insurers are large, national companies, often publicly traded, commanding significant bargaining power over healthcare provider reimbursement.

(5) Rivalry Amongst Existing Firms

This is ongoing competition between existing firms without consideration of the other competitive forces which define industries. Healthcare providers face pressure from other existing providers to obtain favorable provider contracts; maintain the latest technology; increase efficiencies; and, lower prices.

References:

[i]  A professor of Business Administration at the Harvard Business School, Michael Porter serves as an advisor to heads of state, governors, mayors, and CEOs throughout the world.  The recipient of the Wells Prize in Economics, the Adam Smith Award, three McKinsey Awards, and honorary doctorates from the Stockholm School of Economics and six other universities, Porter is the author of fourteen books, among them Competitive Advantage, The Competitive Advantage of Nations, and Cases in Competitive Strategy.

[ii]  Porter, M.E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. The Free Press, 1980.

Conclusion

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Recognizing the Differences between Healthcare and Other Industries

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Why Hospitals, Clinics and Medical Offices are Not Hotels, or Manufacturing Plants or Production Assembly Lines, etc.

By Dr. David E. Marcinko FACFAS, MBA, CMP™

[Editor-in-Chief]

The rising cost of health insurance remains a major concern for business; despite the Affordable Care Act [ACA] of March 2010. Local and national news publications have trumpeted that healthcare costs are not just rising but are growing in proportion to the cost of other goods and services.

Many of these publications have expressed the widely held view that because of the “inflation gap,” the cost of medical expenses needs curbing.  Proponents of this viewpoint attribute the growth in the gross domestic product (GDP) devoted to personal medical services (from 5% in 1965 to approximately 14% in 2005 and 17% in 2012) to increases in both total national medical expenditures as well as prices for specific services, and then conclude that there is a need to rein in the growing costs of healthcare services for the average American, even if it be through a legislative mandate.

Healthcare Is the Economy

According to colleague Robert James Cimasi MHA, AVA, CMP™ of Health Capital Consultants LLC in St. Louis, MO, healthcare cannot be separated from the economy at large. Although economists have cited the aging population as the reason for the increase in healthcare’s share of the GDP, other voices assert that financial greed among HMOs, pharmaceutical companies, hospitals, and medical providers like doctors and nurses is responsible.  In reality, the rise in healthcare expenditures is, at least in large part, the result of a much deeper economic force.

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As economist William J. Baumol of New York University explained in a November 1993 New Republic article: “the relative increase in healthcare costs compared with the rest of the economy is inevitable and an ineradicable part of a developed economy. The attempt [to control relative costs] may be as foolhardy as it is impossible”.

Baumol’s observation is based on documented and significant differences in productivity growth between the healthcare sector of the economy and the economy as a whole.

Low Productivity Growth

Healthcare services have experienced significantly lower productivity growth rates than other industry sectors for three reasons, according to Cimasi:

1) Healthcare services are inherently resistant to automation. Innovation in the form of technological advancement has not made the same impact on healthcare productivity as it has in other industry sectors of the economy.  The manufacturing process can be carried out on an assembly line where thousands of identical (or very similar) items can be produced under the supervision of a few humans utilizing robots and statistical sampling techniques (e.g., defects per 1,000 units). The robot increases assembly line productivity by accelerating the process and reducing labor input. In medicine, most technology is still applied in a patient-by-patient manner — a labor-intensive process. Patients are cared for one at a time. Hospitals and physician offices cannot (and, most would agree, should not) try to operate as factories because patients are each unique and disease is widely variable.

2) Healthcare is local. Unlike other labor-intensive industries (e.g., shoe making), healthcare services are essentially local in nature. They cannot regularly be delivered from Mexico, India or Malaysia.  They must be provided locally by local labor.  Healthcare organizations must compete within a local community with low or no unemployment among skilled workers for high quality and higher cost labor.

3) Healthcare quality is — or is believed to be — correlated with the amount of labor expended. For example, a 30-minute office visit with a physician is perceived to be of higher quality than a 10-minute office visit. In mass production, the number of work-hours per unit is not as important a predictor of product quality as the skills and talents of a small engineering team, which may quickly produce a single design element for thousands of products (e.g., a common car chassis).

Assessment

Healthcare suffers a number of serious consequences when its productivity grows at a slower rate than other industries, the most serious being higher relative costs for healthcare services. The situation is an inevitable and ineradicable part of a developed economy.

For example, as technological advancements increase productivity in the computer, and eHR, manufacturing industry, wages for computer industry labor likewise increase. However, the total cost per computer produced actually declines.  But in healthcare (where technological advancements do not currently have the same impact on productivity), wage increases that would be consistent with other sectors of the economy yield a problem: the cost per unit of healthcare produced increases.

Conclusion

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Integration as a Competitive Strategy in Healthcare Reform

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Understanding Horizontal and Vertical Integration

[By Robert James Cimasi MHA, AVA, CMP™]

Health Capital Consultants, LLC

St. Louis MO

Several potential benefits are associated with the integration of companies in the same or related industries. These synergistic benefits depend upon the type of companies and their integration strategies, as well as whether the anticipated transaction is a manifestation of horizontal consolidation or vertical integration.

Horizontal consolidation is “the acquisition and consolidation of like organizations or business ventures under a single corporate management, in order to produce synergy, reduce redundancies and duplication of efforts or products, and achieve economies of scale while increasing market share.”

Vertical integration involves the joining of organizations that are fundamentally different in their product and/or services offerings, i.e., “the aggregation of dissimilar but related business units, companies, or organizations under a single ownership or management in order to provide a full range of related products and services.”

Healthcare Locality

As healthcare is essentially a local business, horizontal integration within the local market has been limited by antitrust laws. Therefore, in order to control greater market share, a hospital’s strategy has required vertical integration. Healthcare providers and organizations have placed much emphasis on the benefits of vertical system integration in the last 10 or more years, whereby a single healthcare organization owns all of the elements needed to provide a continuum of care for all the needs of a given patient population. Much of this effect has stemmed from the desire to be able provide a “continuum of care,” i.e., to be able to single source contract for the healthcare needs of a patient population and to profit from implementing preventative healthcare and utilization management measures. The relative economic benefits of this type of vertical integration versus horizontal integration strategies remain the subject of great debate in academia and among the strategic managers of other industries. One lesson that may be drawn from other industries is that neither of these forms of integration is universally applicable or beneficial to every organization and market. There are also great costs to integration, which must be outweighed by the benefits. Each specific benefit should be identified and researched when examining the probable effects of integration, consolidation, mergers or divestitures as a competitive strategy.

Rapid Consolidation Periods

During the rapid consolidation and integration of healthcare providers, insurers, and purchasers, in recent years, there was much discussion of a concept termed “managed competition.” This term appears to have been an outgrowth of the term “managed care” and was viewed by many as the logical result of the integration of healthcare markets nationally. The concept of “managed competition” apparently related to an idealized vision of competition between very large, integrated providers (organized into integrated delivery systems), large, national managed care payors, and purchasing group coalitions that could achieve a balance of power between these interacting groups. However, many believe that the result of such an arrangement would more likely be a reduction in competition between members of each of these three groups and the creation of powerful bureaucratic and intractable organizations. Further, this scenario does not appear to effectively remove any of the existing barriers to competition and therefore doesn’t introduce any additional incentives for innovation to produce value for consumers which, of course, is the “sine qua non” of competition.

Disadvantages

The disadvantages of integration are becoming apparent, including:

  • the loss of autonomy;
  • increased bureaucracy;
  • difficulty in aligning incentives; and
  • other failed expectations.

Many organizations that sought strategic advantage through integration are ending those arrangements and now divesting acquired organizations.

Other Industries

In other industries, specialized providers of goods and services are increasingly able to offer customers a full range of services through affiliation and affinity with other independent specialists, made more seamless through the use of increasingly sophisticated communications and computing technologies. However, this move to “dis-integration” must also be carefully considered if organizations are not to make further costly organizational changes inspired by a rushed judgment of general market trends.

Porter Speaks

Michael Porter (et al.) wrote in the Harvard Business Review that,

In industry after industry, the underlying dynamic is the same: competition compels companies to deliver increasing value to customers. The fundamental driver of this continuous quality improvement and cost reduction is innovation. Without incentives to sustain innovation in health care, short-term cost savings will soon be overwhelmed by the desire to widen access, the growing health needs of an aging population, and the unwillingness of Americans to settle for anything less than the best treatments available. Inevitably, the failure to promote innovation will lead to lower quality or more rationing of care — two equally undesirable results.

Assessment

Therefore, if the emerging healthcare industry is to respond successfully to the Affordable Care Act [ACA] and related market pressures to reduce costs, then the healthcare market must first create incentives for innovation. The barriers to competition cannot include barriers to innovation as many do now. Physicians, nurses, healthcare purchasers, managers, and legislators must ensure innovation takes the forefront of any reform, if it is to be effective.

Conclusion

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The Largest Purchaser of Domestic Healthcare?

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It’s the Government – Silly

By Ann Miller; RN, MHA

[Executive Director]ERT Prison Healthcare

By far, our federal government is the largest purchaser of healthcare services, according to Robert James Cimasi MHA, AVA, CMP™ of Health Capital Consultants, in St. Louis, MO; and many others.

Obama Care

Although the government faces immense pressure to control healthcare costs, especially during the current HR 3200-3400 debates, it also faces pressure to expend additional funds in order to achieve its ostensible primary mission in its involvement in healthcare, i.e., to expand and improve public health.

Federal Payment Schemes

In many ways the government has led the way for cost control through its development of resource-based reimbursement, prospective payment systems, budget limitations and other payment schemes. However, its conflicting goals have led it to approach these controls in a hesitant and piecemeal manner rather than effecting bold, comprehensive reforms.

Consider, for example, the lack of government intervention in the face of mounting pressure to remove some of the barriers preventing a reduction in US pharmaceutical costs.

Assessment

Today, most experts agree that Uncle Sam pays for at least 51% of domestic healthcare when Medicare, Medicaid, SHIPS, the VA, Indian and Prison Healthcare Systems are considered. In fact, according to our Publisher-in-Chief, Dr. David Edward Marcinko; MBA:

‘We already have a single payer health system in this country, but most folks just don’t realize it.”

Conclusion

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Defining and Understanding “Boutique Medicine”

What it is – How it Works

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By Dr. David Edward Marcinko MBA 

http://www.CertifiedMedicalPlanner.org

According to colleague Robert James Cimasi of Health Capital Consultants LLC in St. Louis MO, concierge or boutique medical practices began in the mid-1970s, and are now in many major metropolitan areas. Concierge medicine is described as a “return to old-fashioned medicine,” where physicians limit their client base and devote more time to each patient. Patients can usually get in to see their physician within a day, and most have 24-hour access to their physician by beeper or cell phone.

The Doctor’s Perspective

Physicians who turn to concierge medicine are typically tired of not having enough time with their patients and dealing with overbooked caseloads, and are looking for a way of balancing their lives while still providing quality care for their patients. Patients who have physicians in this type of practice appreciate the “perks” they get for paying a yearly fee — similar to “annual membership dues.” These fees can range anywhere from $1,000 per year to $10,000 per year depending on the patient’s age, benefits received, area of the country, and practice.

Patient Amenities

Amenities vary by practice, but some include longer physician office visits, increased access to physicians, e-mailed “newsletters” or condition-specific information, physicians accompanying patients on visits to specialists, and house calls. In order to provide more attentive care and amenities to patients, physicians often decrease their patient load to approximately 10-25% of their managed care load. Thus, most of their patients must find other physicians, leading to potential increases in the patient load of managed care physicians.

Elitist Patients

Although concierge medicine may provide many benefits for patients (including more, and in some cases, nearly unlimited access to their physicians), it has been met with some scrutiny. Some say that this type of medicine is elitist, that it is available only to wealthy patients who can pay the annual fees. Medicare beneficiaries who are members of a concierge practice have received political attention, because many politicians have said that the annual fees patients pay is a lot more than the Medicare rate and thus is illegal billing.

dhimc-book23

Critics

Critics also emphasize that healthcare needs to be first-rate for everyone, something that the current managed care system prevents. The implication that managed care means second-class medicine has also been a fear cited by critics.

Assessment

However, concierge physicians portray their clients as mostly middle-income people who are willing to pay more for this kind of care. Concierge medicine is not a substitute for health insurance. Patients typically keep their traditional insurance to pay for any tests or scans ordered by the physician.

MORE: https://medicalexecutivepost.com/2009/10/26/customer-relationship-management-and-the-nascent-concierge-medical-practice/

MORE: https://medicalexecutivepost.com/2009/10/26/customer-relationship-management-and-the-nascent-concierge-medical-practice/

Conclusion

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Paradigm Shift to “Defined Health Contributions” from “Defined Health Benefits” Plans

What it is – How it Works

By Staff Reporters

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In the past, according to Robert James Cimasi MHA AVA CMP™ of Health Capital Consultants LLC in St. Louis MO, many employers had defined retirement benefits for employees. Today, most retirement benefits are in the form of 401K plans where companies make defined contributions, effectively shifting the financial risk of paying for retirement to employees.

Defined Health Contributions

Defined health contributions are similar to employer-funded defined retirement contributions like 401K plans. Currently, employers pay for some portion of about half of Americans’ health insurance. Traditional employer-funded plans are those for which the employee simply fills out a form; that is, an employer will offer one or possibly two health insurance plans, and the employee fills out application paperwork. The employer administers the plan and may charge the employee a portion of the monthly premium or pay the entire premium themselves. A defined contribution plan allows companies to shift the financial risk of paying for rising health insurance costs.

Defined Health Benefits

Although part of the “benefit” of a health benefit plan is that the employer also takes care of all the administrative paperwork related to the insurance, companies are increasingly uninvolved in the administration process, opting instead to let the employee decide which plan out of many choices suits them best. For example, if an employer typically spends about $5,000 per employee per year on health benefits, the employer would use that money as a “defined contribution.” The employee then has $5,000 to spend per year on benefits, but instead of using the employer-defined health plan, the employee may choose from a variety of HMOs, preferred provider organizations PPOs, or other health plans. If the insurance premiums rise above this amount, the employee must make up the difference.

dhimc-book24Defined Contribution Package

Many employers are currently offering a defined contribution package to their employees. The definition of “defined contributions,” however, can range from one in which employers are completely uninvolved in the administration of benefits and simply give their employees cash or vouchers for the amount contributed that they can use to buy coverage, to a more “defined choice model” where employers offer a variety of health options at differing price levels along with a premium dollar contribution, and a variety of other options in between.

Risk Shifting

Thus, defined contributions shift the financial risk from the employer to the employee. Defined care is not a replacement for managed care, but will probably cause managed care to adapt under these new systems. That is, HMOs, PPOs and other managed care plans still appear to be the main choices in a defined care environment, so they are in fact a part of the system.

Assessment

Another challenge with a defined health benefit program is that the concept of risk-pooling becomes more difficult. In traditional employer-sponsored plans, rates are usually based on the pool of employees; a chronically ill employee who tries to find insurance independently may face rates drastically higher than if they had participated in an employer-sponsored plan.

MORE: www.CertifiedMedicalPlanner.org

Conclusion

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