Health Care Economics and Trends

1. Health Care Economics and Trends NU 305 DL Sacred Heart University

2. Health Care Economics • Where the health care dollar comes from? • Past, Present and Future • How the health care dollar is spent? • Past, Present and Future • What does this mean for nursing? • Past, Present and Future

3. Where the health care dollar comes from? • Government (45%) • Private Insurance Companies (33%) • Individuals (out of pocket) (20%) • Other (2%)

4. Payment patterns • Fee for service • DRGs • Capitation • Managed Care • Point of Service

5. Government • Federal (70%) • Medicare • Veterans Administration • Military • State (30%) • Medicare (also financed in part with federal $) • Husky Program

6. HCFA (Health Care Financing Administration) is now the Center for Medicare and Medicaid Services (CMS)

7. Center for Medicare and Medicaid Services • Administers Medicare, Medicaid, and the States Children’s Health Insurance • Provides insurance for over 74 million • Department of Health and Human Services • Secretary of HHS is a member of the President’s Cabinet

8. CMS • Keeps statistics • www.cms.hhs.gov

9. How the money is being spent? • Visit www.cms.hhs.gov • From home page link to “Statistics and Data” • Link to Health Accounts • View Highlights • View Tables

10. Gross Domestic Product • Gross Domestic Product is the total market value of all the goods and services produced in a country in a year. • Standard against which health care expenditures have been measured • Money spent on health care is then not available to spend on other programs such as education

11. National Health Care Expenditures, 2002 • Spending in 2002 increased 9.3% from 2001 • Overall growth was 5.7% points faster than overall economy • Spending was $1.6 trillion • 14.9% of the Gross Domestic Product • Up from 14.1 in 2001 • Up from 13.1 in 1999 • Up from 12% in 1990

12. 2002 2001 2000 1999 1997 1991 $5,440 $5,081 $4,637 $4,377 $4001 $2966 Trends in GrowthPer Individual

13. Reasons for Increase • Hospital and drug costs main cause • Accounted for over 50% of overall increase • Medicare increased payments to payers • As result of lobbying demonstrating harm to patients • Resistance to managed care • Consumers are choosing less restrictive options • Consolidation of hospitals into systems have increased their bargaining power

14. Home health Expenditures grew by 7.2% in 2002 after declining 35% from 1996 to 1999. • Nursing Home spending increased 4.1%.

15. A Closer Look at Hospital Costs • Spending increased 9.5% to $486.5 billion, the 4th consecutive year of accelerated growth • First time since 1991 hospital spending outpaced overall spending • Growing demands for services • Rising labor costs - compensation

16. A Closer Look at Prescription Drugs • Total national spending on drugs has doubled in the past five years and has tripled from 1990 to 2000 • Slight decrease from 15.9% in 2001 to 15.3% in 2002 • Outpaced growth in all other health services • Evidence needed that drugs are effective and reduce comorbidity, hospital stays, etc.

17. So what? • More money out of pocket • Higher insurance premiums • Fewer benefits from employers • More cost constraints on hospitals • More concern re fraud and abuse • Increase number of uninsured • Higher percentage of the GDP

18. Health Care Expenditures • Personal Health Care Expenditures (PHCE) include all purchased services and products that are associated with individual health. • Hospital • Physician and Clinical Services • Dental and other Professional Services • Nursing Home Care and Home Health Care • Prescription Drugs and Medical Supplies

19. Personal Health Care Expenditures • Hospital • single largest component • rate Had been slowing, but has increased in 2001 and 2002 • overall hospital occupancy fell to less than 60%, but is beginning to increase

20. Personal Health Care Expenditures • Physician Expenditures • growth of physician expenditures less than the overall growth of health care spending • income declining for specialist and those who are “procedure” dependent

21. Personal Health Care Expenditures • Pharmacy • Proportion of prescription costs paid by 3rd party payers decreased while the out-of-pocket cost to consumers increased • Largest % increases • Advertising by pharmaceutical companies

22. Personal Health Care Expenditures • Home Health Care • Costs had actually decreased in late 1990’s and 2000 • Increased 7.2% in 2002 from 2001 • Medicare's share has doubled since 1990

23. Personal Health Care Expenditures • Nursing Home Care • Increase of 4.1% in 2002 • Decreasing occupancy even as aging population due to alternative of assisted living and home care • 2/3 of costs paid by Public and 1/3 Private

24. Trends • Demographics • Improving Financing and Optimism • Post Election Politics • High Technology • Employers Search for Options • Customer Relationship Management • Competing on Excellence

25. Trends • Bed Shortages/New Facilities • Service and Satisfaction • Public Health • Clinical Care Improvement

26. Demographics • By 2010 • average life expectancy will be up to 86 yo for women and 76 yo for men • More than 100,000 people over 100 yo • First baby boomers will turn 65 in 2010

27. Demographics • More ethnically diverse • Currently 74% of the population is white but will decreease to 64% by 2010 • 5% Asian • 13% African American

28. Demographics • More educated but “tiered” • Empowered consumer • Worried consumer • Excluded consumer

29. Workforce Demographics • 570,000 physicians in US, 170,000 in pipeline, • Three new physicians for every one that retires • Numbers of NP’s, PA’s, and other non-MD clinicians are growing

30. Improving Finances and Optimism • Health Care Executives feeling more positive about their financial future • 75% expect to breakeven or make money in five years • Reason • Win more favorable rates • Improvements in Medicare rates • Cost controls kick in

31. Post Election Health Politics • Incremental • Key issues • Shore up Social Security • Prescription coverage for Medicare • Access for the medically uninsured • increased another 10 million in past year • Patient Bill of Rights

32. High Technology • Medical Technology • Hospitals competing based on technology • Marketing the technology • “Medical arms race” is on

33. Medical Technologies • Minimally invasive surgery • Genetic mapping and testing • Gene therapy • Vaccines • Artificial blood • Xenotransplants

34. Technology • Information Technology • Smart, Small, Mobile, Complex • Interconnected/Interfaces of clinical information • Data analysis • Telehealth

35. Employers Search for Options • Ways to decrease cost • Consolidating health plans • Increasing employee cost share • Increasing co-pays • Leapfrog Initiative • 60 major employers (IBM, GE, GM, and AT&T) • Use hospitals with reduced medical errors

36. Customer Relationship Management • Latest marketing trend • Need to know customer preferences • Communication, education and marketing • Patient Satisfaction Surveys • Benchmarking • “Report Cards”

37. Competing on excellence • “Top 100”- Healthgrades.com or HCIA/SACHS • US News and World Report • Enhances market reputation

38. Bed Shortages/New Facilities • Some geographical areas are having shortages/bed crisis • Diversions • Building of new facilities for alternative care • Occupancy rates fallen from 80% to 60% but closures difficult. • Continued reduction in beds

39. Service and Satisfaction • May be “Make or Break Issue” • Bedside manner, hospitality, sensitivity to the patient • Service quality is key factor

40. Service and Satisfaction • Informed and Influential Health Care Consumer • Internet

41. Public Health • Under funded and marginalized • Yet global, bio-terrorism issues will need addressing

42. Clinical Care Improvements • Improving clinical performance is most important cost management strategy of the future • Clinical care costs are 80-85% of the average hospital budget • Use of clinical guidelines, practice protocols • Reduce variations in practice

43. Clinical Care Improvements • Too Err is Human • IOM Quality of Health Care in America Committee • Two studies (CO & UT) and NY • Adverse events occurred in 2.9-3.7% of hospitalizations • 8.8-13.6 % of these resulted in death

44. Extrapolated to 33.6 million admissions per year implies that • 44,000 to 98,000 Americans die each year as a result of medial errors • More than MVA, breast cancer, and Aids • Medication errors alone are estimated to account for 7,000 deaths per year

45. One study at two prestigious hospitals found • Two out of every 100 admissions experience an preventable adverse drug event • Increase cost of the hospitalization by $4700 per admission • National estimate $2 billion

46. Modest estimate of problem • Hospital only, what about all the other settings? • Implications of cost, trust, satisfaction • Recommendations

47. What are the potentials for errors? • How can we decrease errorsin nursing?

48. Crossing the Quality Chasm • Care should be safe • Care should be effective • Care should be patient centered • Care should be timely • Care should be efficient • Care should be equitable

49. Crossing the Quality Chasm • Care based on continuous healing • Care should be customized based on patient needs and values • Control should rest with the patient • Knowledge and information should be shared wit the patient • Clinical decisions should be evidence-based

50. Care system should be safe • Health system should be more transparent • Health system should anticipate patient needs rather than simply reacting to events • Health system should not waste resources • More cooperation among clinicians