Code Blue

1
Code Blue

• Chapters 12 through 16
• Economics drives healthcare

2
Chapter 12

• In chapter 12, David Brannan is struggling with a
  reversal in the familys financial situation.
• Financial problems are not unusual in the United
  States. Each year thousands of people take out
  bankruptcy.

3
Financial Difficulties

• Individuals facing financial difficulties have
  one of two choices
• Increase income, or
• Decrease expenses

4
Brannan Community Hospital

• Brannan Community Hospital is also suffering from
  financial difficulties.
• West Douglas realizes that he has a similar
  option.
• Increase the hospitals revenues, or decrease its
  costs.
• He decides to tackle the problem of cost first.

5
Brannan Community Hospital

• Before he can determine if the hospitals costs
  are too high, he must know a little more about
  the healthcare industry.
• He recognizes that healthcare is an expensive
  product.

6
Major National Problem

• Increasing healthcare costs are a major problem
  for most companies and their employees.

7
Major National Problem

• Many companies are finding that they can no
  longer afford to provide coverage for their
  employees.
• Some are dropping health insurance as a benefit.
• Others are moving jobs overseas where healthcare
  costs are less.

8
Health Expenditures

• In 2004, the United States spent 1.9 trillion
  for healthcare.
• It is estimated this expenditure will double in
  the next seven years.
• If this occurs, many Americans will be unable to
  afford the cost of basic care.

9
Chapters 13 through 16

• Why are healthcare costs so high?
• Technology
• The uninsured
• An aging American population
• Lack of adequate incentives for cost control

10
Technology

• Technology has provided the ability to save lives
  that would have been lost just a decade ago.
• No one wants to return to 1990s medicine, but few
  are willing to pay the cost.

11
Technology

• For example, the cost of a new hospital including
  equipment runs anywhere from one to two million
  dollars per bed.
• Hospitals often purchase new equipment, not
  because the old has worn out, but because it will
  save more lives.

12
The Uninsured

• An estimated 47 million people were uninsured in
  2002.
• Some are uninsured because they cannot afford
  healthcare insurance.

13
The Uninsured

• Others who could afford it, would rather spend
  their income on other things such as a nicer
  home, or automobile, or recreation equipment.

14
The Uninsured

• Many hospitals collect only 50 of billed
  charges.
• Uncollected revenues arise from
• Underpayment of actual costs by Medicare and
  Medicaid
• Discounts demanded by large insurance companies
• Bad debts
• Charity care

15
The Uninsured

• Hospitals must cover costs somehow.
• Many compensate for unreimbursed care by
  overcharging self-pay patients.
• These patients pay for their own care and for the
  care of others.

16
An Aging American Population

• When American soldiers returned from World War
  II, many started families.

17
An Aging American Population

• The children of these soldiers were known as the
  baby boomers, due to a rapid increase in births
  in the late 1940s and early 1950s.
• These baby boomers are nowbecoming senior
  citizens.

18
Healthcare Costs

• A non-profit study group calculated the cost of
  adding ten years to the life of one person using
  ten promising medical technologies.

19
Heres what they found . . .
20
Another cause of high costs lack of proper
incentives for cost control

• In a free enterprise market economy, the market
  provides incentives for cost control.
• There is no market mechanism in healthcare.

21
Lack of Proper Incentives

• When people shop on the basis of price . . .
• This creates cost competition . . .
• Which provides an incentive for businesses to
  keep costs low.
• There is no such incentive in the healthcare
  industry.

22
Lack of Price Competition

• When is the last time you heard someone say
• Where can I get a cut-rate price on a brain
  operation? or
• Who is the cheapest doctor in town?

23
In addition . . .

• Most products in a market economy have prices
  that can be determined before they are purchased.

24
In addition . . .

• This is not true of healthcare.
• Doctors and hospitals dont post their charges,
  and . . .
• Most patients dont know the cost of the products
  they purchase until they receive a bill.

25
Are there other reasons providers didnt control
costs?

• Yes, one of these had to do with the way doctors
  and hospitals were paid.
• Hospitals traditionally were paid cost plus a
  small margin for profit.
• This was called cost reimbursement.
• Cost reimbursement provided few incentives for
  cost control.

26
Cost Control

• If you were the administrator of a hospital that
  received full cost reimbursement plus a 3 profit
  from insurance companies, what is one easy way
  you could increase profits?
• Let cost increase!

27
Hospital Reimbursement

• The government tried to correct this problem in
  the early 1980s by fixing the price of hospital
  products and services.
• With fixed price reimbursement, hospitals would
  absorb the cost of inefficiency.
• Fixed price payment is also called prospective
  payment.

28
Hospital Reimbursement

• One type of prospective reimbursement is
  diagnostic related group (DRG) reimbursement.
• Medicare classified all illnesses into
  approximately 400 categories.
• A fixed price was set for each product.

29
Hospital Reimbursement

• If the hospitals actual costs to treat the
  patient were less than the fixed payment, they
  made an additional profit.
• If the costs were higher, the hospital had to
  absorb the loss.
• DRG reimbursement provided an incentive to keep
  costs down.

30
Other Incentives

• Another way that the government and the insurance
  industry has tried to provide incentives for cost
  control is through managed care.

31
Managed care tries to keep costs down by

• Negotiating lower prices with doctors and
  hospitals.
• Mandating that patients go to these doctors and
  hospitals.
• Making patients get a second opinion before
  getting an expensive procedure or operation.
• Encouraging patients to use generic drugs.

32
Managed Care

• Not everyone likes managed care.
• Doctors feel that insurance companies are telling
  them how to practice medicine.
• Patients dont like being told where to go for
  treatment.
• The issue is cost versus choice.

33
If you dont like the system . . .

• Then you and those of your generation will have
  to fix it.
• The students in your class who go on to become
  healthcare professionals, will face problems far
  more severe than any previous generation of
  healthcare professionals.

34
Redesign of System

• The author is convinced that if the healthcare
  delivery system of tomorrow is to meet the needs
  of the American population, physicians nurses and
  other health professionals will have to take the
  system back from the businessmen, accountants and
  actuaries.
• Both groups are needed, but more input is needed
  from doctors and nurses.

35
Redesign of System

• In a sense you will play the role of West
  Douglas, except youll be trying to save the
  American healthcare delivery system instead of
  just one hospital.
• To fix the system you will need to understand how
  it works.
• Hence, the reason Ive included a section on
  health economics in the book.

36
Other Topics Covered

• Systems
• Listening Skills

37
Systems

• Appendix to chapter 15

38
Systems

• Note to teachers and students. The author used
  the national health skill standards developed as
  a pilot project by the U.S. Department of labor
  in determining what topics should be included in
  Code Blue.
• A test on these standards leading to a Healthcare
  Foundation Skills Certificate can be taken by
  students wishing this certification
  (www.nocti.org).

39
Systems

• After completing Code Blue, the author took the
  exam and felt that all of the skill standards
  were covered in sufficient detail except for
  systems.
• While the author did not write Code Blue to
  provide specific answers found on the test,
  systems is such a broad area that the it was felt
  advisable to add an appendix focusing
  specifically on those systems topics NOCTI felt
  relevant for the exam.
• Although this appendix was written specifically
  for students interested in taking the test, the
  material should be useful to any health
  occupations student.

40
A System

• A system is an orderly and complex arrangement of
  parts.
• There are many types of systems including
• Physiological systems the digestive system, the
  neurological system, and the circulatory system.
• Economic systems capitalism and socialism.
• Computer systems network, mainframe, and PC
  computer systems.

41
Common Elements

• Most systems have the following elements
• Input resources entering the system.
• Throughput the processes and resources used to
  create a product.
• Output the final product.
• Feedback information taken from the output to
  control or correct errors in throughput.

42
Illustration
43
Systems Thinking

• Systems thinking is one approach to
  problem-solving.
• It is also known as systems analysis.

44
Systems Thinking

• Systems thinking is a way of solving problems by
  looking at a problem from a broad perspective,
  looking not only at the individual parts of the
  system, but the way these parts relate to each
  other.

45
Systems Thinking

• Systems thinking recognizes the whole is greater
  than the sum of its parts, and often results in
  different conclusions than those reached by
  traditional problem-solving models.

46
The American Healthcare Delivery System

• The American healthcare delivery industry is a
  system.
• System components include doctors, hospitals,
  insurance companies, and so on.
• In addressing problems within the healthcare
  delivery system, it is important to look at the
  system as a whole, and not just focus on one or
  more of its components.

47
Backwards Thinking

• Systems thinking involves backwards thinking.
• It begins with the final goal and works
  backwards, analyzing the relationship of each
  part or activity to the goal.

48
Backwards Thinking

• For example, if the goal of a team is to produce
  low-cost but high-quality medical products, then
  backwards thinking starts with the final product,
  and evaluates each input an activity involved in
  producing the product.

49
Evaluate each activity to see if . . .

• The activity was needed for the manufacture of
  the product.
• The activity raised quality.
• The activity cut costs.

If the answer to the second or third question is
no, the team might redesign the input to achieve
that goal.
If the answer to the first question is no, the
team might evaluate stopping the input or the
process.
50
Advantages of Systems Thinking

• Globalism It provides a global approach to
  problem-solving.
• Systems thinking helps employees see the forest
  for the trees.
• It enables team members to see the big picture.

51
Advantages of Systems Thinking

• Focus Systems thinking allows problem solvers to
  identify cause and effect relationships.
• It focuses on the activities needed for change.

52
Advantages of Systems Thinking

• Team building Systems thinking helps team
  members identify the goal of the team, and
  understand how their individual activities
  contribute to that goal.

53
The American Healthcare Delivery System

• The American healthcare delivery system can be
  modeled as follows

54
Healthcare System Inputs

• Human resources include the professionals who
  diagnose and treat the patients.
• Financial resources are the funds to pay the
  salaries of the healthcare workers.
• Patients, of course, are the people who enter the
  system for diagnosis, treatment, and so on.

55
The American Healthcare Delivery System

• Inputs include
• Human and financial resources
• patients

56
Finance mechanisms are an important throughput

• By this we mean the individuals, insurance
  companies, government agencies, and so on who pay
  the bills.

57
How does America finance healthcare?

• Self paymentsome patients pay their own doctor
  and hospital bills.
• Employersmany companies provide health
  insurance.
• Private insurancesome people buy their own
  health insurance coverage.

58
How does America finance healthcare?

• Medicaidstate-run programs that pay the cost of
  healthcare for the poor or indigent.
• Medicarea federally funded program that pays for
  some healthcare products and services for those
  65 years of age and older.

59
How does America finance healthcare?

• The healthcare industrymany healthcare providers
  (most specifically hospitals) provide charity
  care.

60
The American Healthcare Delivery System

• Throughputs include
• Treatment and education resources
• Financial mechanisms
• Management and control mechanisms

61
The American Healthcare Delivery System

• Outputs include
• Healthy patients
• Healthy lifestyles

62
The American Healthcare Delivery System

• Information feedback links outputs to inputs

63
The healthcare delivery system is like a mobile

• Movement or pressure exerted on one component
  exerts pressure on others.

64
For example . . .

• Pressure to cut cost affects the volume of
  patients entering the system.
• Greater volumes of patients entering the system
  puts pressure on finance mechanisms such as
  Medicare and Medicaid.

65
For example . . .

• Changes in financing can affect cost, quality,
  and access to care.
• More resources spent preventing illness will cut
  resources needed for diagnosis and treatment.
• Staff shortages can raise wages and put pressure
  on financing mechanisms.

66
Summary

• The healthcare industry is a complex system of
  many parts.
• It is impossible to change one part of the system
  without influencing others.
• Historically, some people haveattempted to fix
  the system by focusing on one or more broken
  parts.

67
Summary

• By failing to take a systems approach and
  consider the big picture, however, they often
  reap unintended consequences.
• Those wishing to address quality, cost, and
  accessibility must adopt a systems approach to
  problem-solving.

68
Listening Skills

• Appendix to Chapter 16

69
Listening Skills

• Listening may seem like an inborn ability, but
  active listening requires practice and skill.
• Have you ever had a conversation with someone
  whos distracted?
• Listening is an important part of successful
  communication.

70
Characteristics of good listeners include . . .

• An interest in the subject
• An ability to focus
• A desire to know, versus a desire to be known
• The ability to set aside prejudice
• The ability to read body language
• Patience a willingness to give the speaker time
• A willingness to put oneself into anothers
  situation

71
Tips for increasing your listening skills

• Talk less, listen more. Pay attention to what the
  speaker is saying, instead of thinking about what
  you are going to say next.

72
Tips for increasing your listening skills

• Give feedback paraphrase or restate what the
  other person is saying.
• Offer your interpretation.

73
Tips for increasing your listening skills

• Reflect on what is being said.
• Asked questions probe.

74
Review of Discussion Questions

• Chapters 12 through 16.

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The End