The U.S. Healthcare System Origins, Organization and Opportunities

Provides a diverse, multi-faceted approach to health care evaluation and management

The U.S. Health Care System: Origins, Organization and Opportunities provides a comprehensive introduction and resource for understanding healthcare management in the United States. It brings together the many “moving parts” of this large and varied system to provide both a bird’s-eye view as well as relevant details of the complex mechanisms at work. By focusing on stakeholders and their interests, this book analyzes the value propositions of the buyers and sellers of healthcare products and services along with the interests of patients.

The book begins with a presentation of frameworks for understanding the structure of the healthcare system and its dynamic stakeholder inter-relationships. The chapters that follow each begin with their social and historical origins, so the reader can fully appreciate how that area evolved. The next sections on each topic describe the current environment and opportunities for improvement.   

Throughout, the learning objectives focus on three areas: frameworks for understanding issues, essential factual knowledge, and resources to keep the reader keep up to date.

Healthcare is a rapidly evolving field, due to the regulatory and business environments as well as the advance of science. To keep the content current, online updates are provided at: www.HealthcareInsights.MD. This website also offers a weekday blog of important/interesting news and teaching notes/class discussion suggestions for instructors who use the book as a text.

The U.S. Health Care System: Origins, Organization and Opportunities is an ideal textbook for healthcare courses in MBA, MPH, MHA, and public policy/administration programs. In piloting the content, over the past several years the author has successfully used drafts of chapters in his Healthcare Systems course for MBA and MPH students at Northwestern University. The book is also useful for novice or seasoned suppliers, payers and providers who work across the healthcare field and want a wider or deeper understanding of the entire system.

JOEL I. SHALOWITZ, MD, MBA, FACP, was Clinical Professor and Director of the Health Industry Management Program at the Kellogg School of Management for 28 years. In addition to practicing internal medicine, he has also been on Northwestern's Feinberg Medical School's faculty for more than 35 years, most recently as Professor of Preventive Medicine. He teaches and consults internationally, was the recipient of three Fulbright awards, and is currently a Senior Fellow at ETLA (the Research Institute of the Finnish Economy) and an Affiliate Professor at the Institute of Management of the Scuola Superiore Sant'Anna in Pisa.

List of Exhibits xiii

Foreword xxi

Acknowledgments xxiii

One: Understanding and Managing Complex Healthcare Systems 1

Definitions 2

Health System Structure and Features 7

Who Pays? 8

How Much Is Paid? 11

Who and What Is Covered? 12

Where Is Care Provided? 13

Who Provides the Services and Products? 14

Strategic Planning 17

Stakeholders 17

Health System Trade-offs and Value Propositions 20

Putting It All Together 30

Summary 32

Two: Determinants of Utilization of Healthcare Services 33

Reasons Stakeholders Seek Healthcare 34

Patient Characteristics That Influence Care-Seeking 36

Age 37

Gender/Sex 37

Race 39

Income 41

Social Status 42

Education 43

Culture and Beliefs 44

Multifactorial Causes 46

Reducing Patient Demand for Healthcare 47

Increase Out-of-Pocket Expenses 47

Prevention 51

Eliminate/Reduce Risky Behaviors 51

End-of-Life Issues 52

Healthy Lifestyle Promotion 54

Consumer Behavior—Healthcare Market Segmentation 54

Provider-Induced Demand for Healthcare 56

Local (Small Area) Variations 61

Summary 63

Three: Managerial Epidemiology 65

Introduction 66

What Is Epidemiology? 66

Why Is It Important to Learn about Epidemiology? 66

Definitions and Uses of Principles 67

Morbidity and Mortality 67

Incidence and Prevalence 67

Validity 67

Reliability 68

Sensitivity, Specificity, Positive Predictive Value, and Negative Predictive Value 68

Clinical Study Designs 70

Case Control Studies 70

Problems with Observational Research 72

Benefits to Employing Observational Research 73

Cohort Study 74

Randomized Controlled Trial 78

Summary 80

Four: Hospitals and Healthcare Systems 81

A Brief History of Western Hospitals 82

American Hospital Expansion in the 20th Century 88

Hospital Definition and Classifications 94

Definition 94

Ways Hospitals May Be Classified and Special Related Issues 96

Hospital Inpatient Payment Methods 137

Organized (Integrated) Delivery Systems/Accountable Care Organizations 139

Origins and Definition 139

Eligibility 143

Financial Arrangements 143

Hospital Governance 153

Definition and Purpose 153

Legal Requirements 154

Responsibilities 156

Board Structure and Activities 159

Summary 161

Five: Healthcare Professionals 163

Physicians 164

History of Western Medical Care 164

History of American Medical Care 177

Current Status of Medical Training 190

Licensure 197

Shortage of Physicians 199

Employment Status 204

Summary 206

Nurses 206

Registered Nurses 206

Nurse Practitioners 208

Nurse Anesthetists 209

Midwives 210

Education and Certification 212

Physician Assistants 213

Education and Certification 214

Physician versus NP/PA Care 215

Summary 216

Six: Payers 219

Principles of Health Insurance 220

The Loss Must Have Some Nontrivial Value Upon Which Both Insured and Insurer Agree 222

The Peril Must Occur Randomly and Be Out of the Control of the Insured 222

The Event Must Occur Neither Too Frequently Nor Too Rarely 225

The Insurer Must Be Able to Write Large Numbers of Contracts to Indemnify Similar Risks 226

Background and Current Status of Health Insurance in the United States 229

Private Health Insurance 229

Medicare 264

Medicaid 318

Children’s Health Insurance Program: Social Security Title XXI 335

Other Federally Sponsored Programs 337

Managed Care 357

Principles 361

Quality and Safety 361

Summary 381

Seven: Healthcare Technology 385

Definition and Frameworks for Study 386

Major Trends in Healthcare Technology 388

Safety 388

History of Safety Problems and Corrective Legislation 390

What Is Substantial Equivalence 404

When a 510(k) Is Required 404

Bringing Healthcare Technology to Market 435

Evolving Industry Structure 438

Globalization 444

Generics 444

Specialty Pharmaceuticals 446

Patents 453

Genomics and Precision Medicine 453

Disruptive Innovation 458

Healthcare Technology’s Contribution to Costs by Stage of Care 460

Overview 460

Quality-Adjusted Life Years 460

Core Cost Issues 462

Prevention 463

Screening 464

Diagnosis 464

Treatment 466

Other Considerations 470

Religious Issues 470

Ethical Issues 470

End-of-Life Costs 471

Media’s Role in Increasing Technology Costs 472

Malpractice and Defensive Medicine 473

Summary 474

Eight: Information Technology 475

Introduction 476

Definitions 477

Background and Key Issues in Health Information Technology 479

Collection, Classification, and Ordering of Data 479

Terminology/Coding 486

Interoperability 492

Lessons Learned 529

Challenges 529

Sustainability 529

Certification 534

Privacy and Security of Information 537

Management Considerations 547

Other Issues and Trends 549

Summary 563

Nine: Quality 565

Introduction 566

History of Healthcare Quality and Development of Key Concepts and Institutions 567

Ancient Origins 567

1900–1950 568

1950–1970s 574

1980s and Total Quality Management 580

1990s 589

2000–2010 592

2010–Present 605

Quality of Care and the Public’s Health 623

The Centers for Disease Control and Prevention 623

Healthy People 626

Definition of Quality 630

Key Questions for Successful Evaluation and Implementation of Quality Measures 632

Choosing Standards 633

Monitoring Standards 637

Evaluating Results 639

Volume/Quality Relationship 644

Managing Quality Improvement 646

Value Propositions 646

Cost–Quality Trade-off 648

Cost–Access Trade-off 648

Quality–Access Trade-off 649

Summary 649

Index 651

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