Health Care USA Chapter 4

Chapter 4

Hospitals: Origin, Organization and Performance

CHAPTER OBJECTIVES• Understand origins of America’s hospitals • Understand reimbursement and other factors that

shaped the current hospital system till today• Identify the many dimensions of hospital functions and

financing• Review the quality and financial challenges in today’s

hospital environment• Identify effects of the ACA on future hospital role and

operations

Character of American Hospitals

• Appreciated• Maligned• Poorly understood• Places of:– Treatment–Research– Education– Employment, community economy

Early History (1)• 1700’s seaport cities: decrepit pesthouses

segregated contagious, diseased sailors• Pesthouses commissioned by town boards

housed mentally & physically ill who offended polite society

• Although provided in the most deplorable of conditions by today’s standards, early “hospital” care reflected American concepts of “charity” and public responsibility providing for society’s most destitute and vulnerable members

Early History (2)

• 1736: Bellevue housed the “poor, aged, insane and disreputable,” originally “The Poor House of New York City”

• 1789: Public Hospital of Baltimore, later Johns Hopkins University Hospital

• 1835: Eloise Hospital, Michigan serving “old, young, deaf, dumb, blind, insane and destitute”

Early History (3)

• Following upon municipal “pesthouses,” Physicians founded hospitals with citizen funding in the 1800s: – Protect the well from sick and “insane”– Provide centrally located “practice” teaching

sites• Religious Orders (mid 1800s)– Protestant and Catholic Sisters played major

roles in “professionalizing” nursing care: Sisters of Charity and German “Deaconesses”

Sources that Shaped the Hospital Industry: Health Insurance, Specialization, Hospital Expansion (1)

• Private health insurance: Blue Cross, other plans changed “charitable” mission with business motives– In 1940, only 9% of U.S. population had hospital

insurance– By 1960, billions $$ flowing into hospitals from

insurance companies• Medical specialization, advances encouraged hospital

use• Hill-Burton Act (1946): federal support for new

construction & expansion

Sources that Shaped the Hospital Industry: Health Insurance, Specialization, Hospital Expansion (2)

• Medicare & Medicaid fueled costs & utilization– Medicare payment rates became the national

standard for hospital reimbursement– Changed prior “social role” of hospitals in caring

for the most needy, the elderly and poor; hospitals transformed to lucrative business enterprises

– Struggles to define the relative roles of voluntarism, government and business continue

Growth and Decline in Number of Hospitals

• 1873: 178; 1909: 4,300; 1946: 6,000+• 1946 Hill-Burton Act expansions and new

construction through 1980s yielded a high point of approx. 7,200 acute-care hospitals

• 1980s: medical advances transferred procedures to ambulatory settings, cost containment reduced numbers to approx. 5,700 through mergers and closures

Types of Hospitals

• Acute care: avg. stay ≤30 days• Long-term care: psychiatric, rehabilitation• Teaching: medical school affiliation, student &

resident clinical education (400-6% of all hospitals)

• Non-teaching: not medical-school affiliated but may provide educational experiences for health-related students

Hospitals by Ownership Status, 2011

• All U.S. Registered Hospitals: 5724• 51%- Non-governmental not-for-profit– Teaching and non-teaching

• 21% -VA, State and local governments– Federal, state, city, county owned

• 18%- Investor-owned for profit– Management companies, physicians

• 10%-Non-federal psychiatric or long term care

Physician-owned Hospitals

• Major growth since 1965 to over 1,000 in 2011; specialize in cardiology, orthopedics, surgery.– High-efficiency with many amenities– Focus on less complex, profitable cases– Concerns regarding financial incentives,

competition with community hospitals– Supporters point out owners’ service to

community hospitals and tax payments as for-profit entities

Financial Condition of Hospitals

• Declining occupancy: major shifts to ambulatory settings

• Private insurer and Medicare pressures to cut utilization and costs

• Rising operational & capital costs for technology

• Competition with physicians for profitable diagnostic and treatment services

Academic Health Centers, Medical Education and Specialization (1)

• Academic health center (AHC): accredited, degree-granting institution composed of a medical school, one or more professional schools (dentistry, nursing, public health, pharmacy, allied health) with an owned or affiliated relationship with one or more teaching hospitals, health system or other organized care provider.

Academic Health Centers, Medical Education and Specialization (2)

• Technologically advanced; sources of major clinical research and the sophisticated technology

• Technical advancements fuel specialization• Training sites for all health professionals; high

costs• Serve medically needy populations• Fragmented services result from training venues

Hospital System of the Department of Veterans Affairs (1)

• The largest health care system in the U.S.: 153 hospitals, 135 nursing homes, 47 residential rehab facilities, 900+ outpatient clinics

• Major teaching centers- most medical school affiliated

• Insulated from other hospitals’ financial woes by strong Congressional support

Hospital System of the Department of Veterans Affairs (2)

• Veteran’s Integrated Service Networks (VISNs): decrease cost & improve quality; 22 VISNs function as vertically integrated delivery systems.

• Health Services Research & Development Service (HSR&D): spans clinical research to management policy

Structure and Organization of Hospitals (1)

• Typical organization model is the not-for-profit hospital

• Direction, control & governance rest on a three-legged platform: – Board of Directors (trustees)– Administration– Medical staff


• Major Operating Divisions– Medical– Nursing– Patient support– Diagnosis– Administration & Fiscal– Human resources– Hotel services– Community relations


• Medical staff organization: headed by physician President or Chief of Staff– Liaison between administration and physicians– Recommends physician appointments; oversees

quality of care• “Attendings”: physicians in practice with

hospital privileges• “House staff”: post-medical school trainees

under Attending/academic supervision


• Nursing Division: Largest professional component of employees– Function in “units” by type of care–Units typically led by nurse managers who

coordinate staff and patient service


• Patient support: e.g. pharmacy, social work, nutrition, discharge planning

• Diagnostic: e.g. labs, imaging, non-invasive cardiology

• Administrative and fiscal: board of directors’ relations, strategic planning, non-clinical service management, regulatory compliance, billing, records


• Human resources: employee hiring, orientation, training, termination, benefits management, regulatory compliance, labor relations

• Hotel: e.g. plant facilities, housekeeping• Community relations: Media and public

relations management, community services

Information Technology’s Impact on Hospitals

• Hospital adoptions of EHRs more than doubled from 16% to 35% since HITECH Act of 2009

• At mid-2012, 4,000+ hospitals enrolled in Medicare & Medicaid EHR incentive programs; received $ 5B in “meaningful use” payments

• Seek duplication and error reductions, access to patient records, billing and reporting efficiencies

Complexity of the System

• 75% employ 1000+ persons; “systems” may employ 10,000+

• Hundreds of inter-related services, personnel, functions and procedures

• Complicated morass for patients and families– Patient advocates help navigate issues & concerns

Types and roles of Patients

• Persistent historical perceptions of patients as needy and compliant with authoritarian professionals conditioned patients to assume submissive “sick role”– More educated and assertive patients increasingly

reject passive role and demand participation in care

Patient Rights, Responsibilities• Rights protected by U.S. Constitution, state

laws, regulations• “Bill of Rights” (AHA) provided to every

patient upon admission• Patient responsibilities: accurate information,

respect providers, other patients, financial obligations

• Complexity challenges rights.

Patient Bill of Rights (Synthesis) (1)

1. Receive respectful, considerate treatment2. Know names & titles of all individuals

providing their care3. Complete and understandable explanations

of their diagnosis, treatment and prognosis4. Receive from physician all information

necessary to provide informed consent


5. Request & receive consultation on their diagnosis & treatment or obtain a second opinion

6. Set limits on the scope of treatment or refuse treatment & be informed of consequences of such refusal

7. Leave the hospital, unless unlawful, even against physician’s advice & receive an explanation of responsibilities in exercising that right


8. Request & receive information & assistance in discharging financial obligations & review a complete bill, regardless of payment source

9. Access their records on demand & someone capable of explaining records

10. Receive assistance in planning and obtaining post discharge services

Informed Consent

• Legally recognized since 1914–Patient understands medical procedure to

be performed, its necessity and alternatives and why–Benefits–Risks and consequences & likelihood–Consent freely given

Second Opinions

• Insurers require for certain procedures• May be patient-generated• Guard against unnecessary, inappropriate or

non-beneficial procedures

Diagnosis Related Group (DRG) Hospital Reimbursement

• Retrospective reimbursement perverse to cost control, fueled utilization

• Response to over-use, rising costs, corporate outcries

• Shift to prospective reimbursement reversed financial incentives for overuse of treatments, services

• Medicare adopted 1983; other insurers followed

Discharge Planning• Arranges post-hospital care• Involves physicians, social workers, insurance

company and nursing• Right of discharge appeal: Medicare

designated Quality Improvement Organizations (QIOs) protect patient rights to appropriate discharge planning

Post-DRG and Managed Care: Early Market Reforms (1)

• Mid 1980s-2000: ~2,000 hospitals closed; inpatient days fell by 1/3, many consolidated into local/regional/multi-facility systems.

• 1980s-1990s “production line” concepts to gain efficiencies; research highlighted alienated patients and caregivers

• 2000-present: Refocus on personalized, patient care and amenities


• Horizontal Integration: hospital mergers under one or more corporate structures to allow economies of scale, enhanced expert recruitment and deployment, increased access to capital and stronger brand marketing

• Crested in mid 1990s and slowed until 2002 when anticipated reforms refueled consolidations and mergers


• Vertical Integration: Operation of a variety of related businesses; in health care, ideal vertical system encompasses full continuum:– Primary and specialty diagnosis and treatment– Inpatient medical and surgical services– Short and long-term rehabilitation– Long term home and institutional services– Terminal care

Quality of Hospital Care (1)• Operational factors, indicators, value

judgments• Historically: “degree of conformance with pre-

set standards”• Peer review: implicit criteria with qualitative

judgments• Avedis Donabedian: structure, process,

outcome• Landmark studies revealed wide variations.

Quality of Hospital Care (2)• Hospital accreditation by the JCAHO initially

structural; moved to process and most recently to outcomes

• Computerized information & analytical techniques allow adjustment of findings to account for patient variables previously held to confound fair assessments of patient outcomes

Quality of Hospital Care (3)

• Variations in medical care: John Wennberg, Alan Gittlesohn (1973): documented variations in the amounts and types of medical care provided to patients with the same diagnoses living in different geographic areas– Amount & cost of hospital treatment related more

to number, specialties and preferences of physicians than to patients’ conditions


• Leapfrog Group: Est. in 2000; 160 fortune 500 corporations, large public and private benefit purchasers w/Robert Wood Johnson Foundation support– Hospital Quality and Safety Survey: tracks progress

in implementing 30 National Quality Forum safety practices; available free, online.


• Hazards of hospitalization: IOM Report 1999: 44-98,000 annual deaths from errors

• System deficiencies, not negligent providers• Types: diagnostic, treatment, preventive,

other• Congressional, professional responses rapid,

but short-lived• Improvement efforts continue with some

successes but no “system-wide” uniformity


• Nursing Shortage Crisis– Dissatisfaction with staff reductions, overwork,

and inability to maintain quality patient care– Qualified individuals have many less demanding

career options– 1/3 of nursing workforce is 50+ years of age;

young persons disinclined to enter the profession• Shortage improved 2002-2009 with 62%

increase in employable RNs.

Research Efforts on Quality Improvement

• JCAHO: quantitatively defined quality with measurable, results focus

• Patient-focused hospital satisfaction studies• Studies on test, procedure appropriateness:

On average, 1/3 or more of all procedures of questionable benefit (Fig. 4-1)

Responsibility of Governing Boards for Quality of Care

• Boards carry ultimate responsibility for quality; oversee quality assurance & monitor indicators such as:–Mortality rates by department–Hospital-acquired infections–Patient complaints–Adverse drug reactions–Hospital-incurred traumas

Hospitalists: A Rapidly Growing Innovation

• Substitute for patients’ primary physicians• Coordinate all in-hospital care• Most are qualified in internal medicine• Many assessments underway regarding quality

& coordination of care– “Specialty designation” currently under

consideration

Forces of Reform (1)

• Cost, quality & access are hospital survival criteria of the future– Overuse of expensive technology without

evidence-based patient benefits will be curtailed– Americans are more attuned than ever to

shortcomings of the expensive, ineffective health care system

– Hospital performance will be matters of public judgment based on published outcomes criteria


• ACA effects on hospitals1. Population focus: shift to accountability for

overall outcomes of patient care, not only within “hospital walls,” requires new levels of coordination

2. Market consolidations: Mergers and Acquisitions: Create new, larger systems for negotiating power with payers, increased efficiencies and control of population groups


• ACA effects on hospitals, cont’d.3. Accountable care organizations: Hospitals join in

legal arrangements with physicians, other providers, suppliers to coordinate patient care across full spectrum of needs

4. Reimbursement and payment revisions: ACO shared savings; hospital value-based purchasing; readmissions reduction program; bundled payments for care improvement initiative

Continuing Change (1)

• Retain core roles – technologically advanced care– education of physicians & other health

professionals– clinical research sites

• Advance into new role – one component of integrated systems in

continuum of community-based care


• Results of government and private entity experiments with hospital roles in a population-focused, value-driven delivery system will inform about refinements affecting costs and quality.

• Rising concerns about ACOs joining prior competitors, creating market power that may drive up costs


• Positive reports on consolidated hospital systems note that system member hospitals outperform and improve faster than independent hospitals on important quality parameters.

• Likely to be variation in capability of individual hospitals to adjust to reforms; not all will survive.

Documents

Health Care USA Chapter 4