Hospitals

1. Hospitals Chapter 9 Tracey Lynn Koehlmoos, PhD, MHA HSCI 678 Intro to US Healthcare System

2. Hospital History 101 • Phase 1: 1751 to mid-1800’s • Voluntary hospitals—donations • Public hospitals—tax supported • Phase 2: Mid-1800’s to 1890 • Particularist Hospitals: children, TB specific • 172 hospitals in US at end of period • Phase 3: 1890 to 1920 • Profit-making hospitals • 4,000 hospitals & 521 mental illness centers

3. Hospital Historical Transition Beginning: social welfare, charity poor patrons, Later: medical science, business, health service professionals The hospital became the hub of medical education and practice

4. Today’s Hospital • 8510 general short-stay hospitals (2000) • Can be categorized by: • Urban/Rural • Bed Size • Level of Care • Ownership • Teaching Status • Specialty Status • Government Status

5. Hospital Supply • Hill-Burton Program • Post WWII: funds for rural hospitals • Later, urban hospitals and up-grades • Capital Expenditure Review Program • Certificate of Need program • 1122 program of SSA 1965 • Limited impact on hospital distribution • Both repealed in mid-1980’s

6. Distribution: SCH, RPCH • Sole Community Hospitals: • TEFRA 1982: ONLY source of care • Reimbursement exception Medicare/Medicaid • Rural Primary Care Hospitals: • Small hospital, rural areas • Stabilization then transfer • Essential Access Community Hospitals • Rural areas, enhanced emergency services.

7. Centers of Excellence • High cost to maintain surgical functions • High quality, high volume = cost savings • Medicare reimburses CoE only • CABG, Joint Replacement, Outpatient cataract, heart transplant

8. Board of Trustees Medical Staff Hospital Admin. Hospital Organization

9. Hospital Medical Staff • Most physicians NOT hospital employees • Except radiology, pathology, ER • MD’s given Privileges to admit patients • Market exceptions: • HMO—hospitalists • Physicians who staff Public Hospitals • Military, VA, other government employed Drs.

10. Hospital Administration • Recognized as a profession since early 1900’s. • Experts in organization and finance • Focusing on market share • Strategic positioning • Structure with physicians & other providers • Planning for emergency situations

11. Hospital Governance • Depends on hospital type • Not-for-profit: 52%, Board of Trustees • Community leaders & business people • Diminishing role as hospitals use debt financing • For Profit: 13%, Board of Directors • Shareholders • State and Local Government: 20% • Board of County Commissioners & advisors

12. Hospital Systems • Freestanding hospitals—rare, rural • Cooperative agreements, joint ventures, organizational linkage • Public hospitals—unlikely to be linked, “safety net” for indigent care • Hot Topic: acquisitions and mergers at the national scope (like HCA)

13. Horizontal Integration • Development of Continuum of Care • Hospitals joining with hospitals and other hospital based services to expand market share and reach

14. Vertical Integration • Hospital captures and controls more patient care that leads to and from in-patient services • Out-patient services • Urgent Care Centers • HOSPITALIZATION • Rehabilitation Center • Nursing Home

15. Hospital Revenue Sources

16. Uncompensated Care • Any person who presents at the ER has the right to receive treatment if the hospital participates in Medicare. • Voluntary and Private hospitals must at least stabilize the patient before transfer to a public hospital.

17. Uncompensated Care • Big financial implications to hospitals • Unevenly distributed • About 6% of care is uncompensated • Urban, public hospitals: 1/3 US total • Major teaching hospitals, 3x market share in uncompensated care

18. Regulation of Hospitals • Quality of Care • Licensure, Medicare/Medicaid, JCAHO • Utilization: • Medicare’s (QIO); payer’s utilization review • Capital Development: no current restrictions • Costs/Provider Payment: • Periodic freezes on Medicare/Medicaid • Cost-containment boards like in Florida

19. Regulation v. Competition • Healthcare: social good or market good? • Regulation prevents true competition • However, can hospitals be truly competitive? • Cost containment measures • Social role • For Profit hospitals, offering only profitable services

20. More Financing Issues • Medical Teaching Adjustment Funds • SSA 1965, GME provision (more tests, more supplies, more staff) • Medicare/Medicaid Disproportionate Share Funds • Catch-up mechanism of PPS for hospitals with a disproportionate share of low income patients.

21. Hospitals in Transition • Reimbursement changes lead to care changes. • Medicare PPS—push to more outpatient services, shorter lengths of stay • Acquisitions and Mergers (1980’s)—efficiency v. market share • Downsizing: resulting from mergers and duplications of services, closing of smaller rural hospitals

22. Summary • The hospital was once the hub of patient care, now it is part of a network of patient care. • Hospitals and the administrators who run them must stay abreast of the changing market place in order to stay financially viable.