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\nTHE U.S.
\nHEALTHCARE
\nSYSTEM
\nOrigins, Organization and
\nOpportunities
\nJ O E L I. S H A L OWI T Z, M D, M B A
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\nCHAPTER
\n4
\nHOSPITALS AND
\nHEALTHCARE SYSTEMS
\n81
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\n82 The U.S. Healthcare System
\nBIRON.
\nAnd what to me, my love? and what to me?
\nROSALINE.
\nYou must be purged too, your sins are rack\u2019d,
\nYou are attaint with faults and perjury:
\nTherefore if you my favour mean to get,
\nA twelvemonth shall you spend, and never rest,
\nBut seek the weary beds of people sick . . .
\nBIRON.
\nA twelvemonth! well; befall what will befall,
\nI\u2019ll jest a twelvemonth in an hospital.
\n\u2014William Shakespeare, Love\u2019s Labour\u2019s Lost, Act 5, Scene 2
\nA BRIEF HISTORY OF WESTERN HOSPITALS
\nFor a great part of recorded history, care of the ill and injured has been provided in either the
\npatient\u2019s home or where the \u201chealer\u201d practiced his\/her art. The word \u201chospital\u201d comes from
\nthe Latin hospes (host); its usage referring to a place to care for sick and injured is rather
\nmodern. In fact, the Oxford English Dictionary (OED) gives the first definition to the oldest
\nmeaning of the word and current usage to its third reference:
\n1. A house or hostel for the reception and entertainment of pilgrims, travelers, and strangers; a
\nhospice. Hence, one of the establishments of the Knights Hospitallers . . .
\n3a. An institution or establishment for the care of the sick or wounded, or of those who require
\nmedical treatment. (The current sense.) Such institutions are either public or private, free or
\npaying, \u2014or combined, \u2014general or special with respect to the diseases treated.
\nThe ancestor of Western1 hospitals is generally considered to be the temples of Asclepius
\n(Aesculapius in Latin),2 the Greek god of medicine and healing. While a temple at Titanus
\n1Considerable evidence exists for ancient institutions in the Middle East and India; however, their relationship to the
\nfoundations of healthcare institutions in the United States is not as direct. Therefore, the focus here will be on Western
\ninstitutions.
\n2The Staff of Aesculapius (a single snake wound around a staff) often signifies the profession of medicine. For example,
\nthis symbol is on the logo of the American Medical Association. Medicine is often erroneously represented by the
\ncaduceus, which is two snakes wound around each other and separated by a staff; this symbol belongs to Hermes (Mercury), the messenger and god of commerce. The U.S. military uses the caduceus as a designation for its healthcare
\npersonnel.
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\nHospitals and Healthcare Systems 83
\nis said to have existed since 1134 BCE,3 the cult of Aesculapius was founded in the fifth
\ncentury BCE in Epidaurus (Greece) before spreading to other sites around the Greek and
\nRoman empires.4 Patients went to a temple and slept there overnight, often with the aid of
\na soporific, such as opium.5 In the morning, the temple priests would interpret dreams and
\nrecommend cures. Evidence also exists that actual procedures were performed there: \u201cThree
\nlarge marble boards dated to 350 BC preserve the names, case histories, complaints, and
\ncures of about 70 patients who came to the temple with a problem and shed it there . . . such
\nas the opening of an abdominal abscess or the removal of traumatic foreign material.\u201d6
\nThese temple practices were adopted by the Romans as that empire grew. The first permanently constructed secular hospitals (valetudinaria) were built as parts of Roman forts in
\nstrategic locations in order to treat sick and injured soldiers. The first valetudinarium was
\nbuilt about 100 BCE at Carnuntum (near Vienna).7 In addition to these permanent structures, field hospitals were also established closer to combat lines. What is noteworthy about
\nthese places of care is that they were administered by junior military officers (optio valetudinarii) rather than physicians or priests; thus, these officers were the first lay hospital
\nadministrators.
\nThe establishment of hospitals for general public use originated with the spread of Christianity, particularly after Roman Emperor Galerius\u2019 Edict of Serdica (Edict of Toleration) in
\n311 CE ordered religious tolerance for Christians. As the religion became more prevalent,
\nshelters (xenodochia) for travelers and for messengers between bishops were established.
\nThese shelters were primarily housed in monasteries, where care for the poor and sick was
\nalso provided. The word \u201cxenodochia\u201d became synonymous with what we now would call
\na hospital.8 Further, these monasteries grew herbs and medicinal plants, becoming the foundation of the first hospital-based pharmacies.
\nThe First Council of Nicaea in 325 CE encouraged further diffusion of these institutions
\nwhen it ordered the construction of a hospital in every cathedral town. In order to abolish
\npagan competition from the still-extant Aesculapian temples, in 331 CE Constantine ordered
\ntheir closure.
\nUntil this time, hospitals had been set up with religious or governmental sponsorship.
\nThe first privately funded hospital is generally recognized to have been established in 390 CE
\n3Dates will be referenced here in the format of archaeological scholarship. BCE refers to before the common era and CE
\nrefers to the common era: BC and AD, respectively. When no suffix appears, the date is CE.
\n4MacEachern, M. T. (1949). Hospital organization and management (2nd ed.). Berwyn, IL: Physicians Record. 5Askitopoulou, H., Konsolaki, E., Ramoutsaki, I. A., & Anastassaki, M. (2002). Surgical cures by sleep induction as
\nthe Asclepieion of Epidaurus. In J. C. Diz, A. Franco, D. R. Bacon, J. Rupreht, & J. Alvarez (Eds.), The history of
\nanesthesia: Proceedings of the fifth international symposium. Elsevier Science B.V., International Congress Series, 1242,
\n11\u201317.
\n6MacEachern, M. T. (1949). Hospital organization and management (2nd ed.). op. cit. 7Retief, F. P., & Cilliers, L. (2005). The evolution of hospitals from antiquity to the renaissance. Acta Theologica Supplementum, 7, 213\u2013232. 8The place in the monastery where the monks cared for the sick may have been the same rooms set aside for their own
\nbrothers. The place was called the infirmarium, from whence we get the word \u201cinfirmary,\u201d another term that has been
\nused for \u201chospital.\u201d
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\n84 The U.S. Healthcare System
\nby a penitent, wealthy Roman woman named Fabiola (later, St. Fabiola) who became a disciple of St. Jerome. (This type of facility is now sometimes called a voluntary hospital, after
\nthe voluntary nature of contributions to establish it.) According to St. Jerome\u2019s eulogy for
\nFabiola: \u201cEt primo omnium \u03bdo o\u03bao\u03bc\u03f5\u02dc\u0131\u03bd instituit, in quo aegrotantes colligeret de plateis
\net consumpta languoribus atque inedia miserorum membra refoveret.\u201d [And first of everyone, established a nosocomiun in which she brought together the sick from the streets, to
\nrestore the wretched whose limbs were consumed by disease of weakness and destroyed by
\nstarvation.]9 Fabiola thus also founded a tradition of religious women caring for the sick in
\nhospitals.
\nAfter the fall of Rome in 476 and the beginning of the so-called Dark Ages, monastic
\nstewardship of hospitals continued for the next six to seven centuries.
\nReligion continued to be the dominant influence in the proliferation of hospitals during
\nthe Middle Ages, and their establishment accelerated during the Crusades. Starting at the end
\nof the 11th century, hospitals and orders of knights were established throughout Europe to
\ncare for the sick and injured on the path to and from Jerusalem. One of the most famous is the
\nHospitallers of the Order of St. John, which founded a hospital in the Holy Land for 2,000
\npatients in 1099. The order has come down to us today as the St. John Ambulance Corps in
\nBritain and some of its former colonies.
\nThese institutions received further stimulus in 1198 when Pope Innocent III encouraged
\nestablishment of Hospitals of the Holy Spirit (Santo Spirito) in major towns. Some of their
\ncost was covered by church-levied commercial taxes.10
\nHospitals as places of learning and patient care by nonreligious medical practitioners started in the 12th and 13th centuries with several events. First, a church edict of
\n1163 forbade clergy from performing operations where blood was shed. This action
\neliminated many centuries of clerical practice, though administration of medications was
\nstill allowed. Into this void stepped a few skilled surgeons with university training; but
\nit was mostly less well educated barber surgeons who bled patients, lanced abscesses,
\nand removed teeth.11 Second, schools of medicine were established and affiliated with
\nhospitals. Finally, this age was the dawn of medical licensure, when a physician was
\nrequired to show competence by examination before local medical school professors
\nor appointees of the towns. Training to obtain this competence was partially achieved
\nin hospitals.
\nThe Western system most relevant to American hospitals is that of the United Kingdom
\n(particularly England and Scotland). Like most of Europe, until the 16th century, British
\nhospitals were primarily religious institutions run by monks. When Henry VIII established
\n9St. Jerome: Ad Oceanum De Morte Fabiolae. Epistula lxxvii. Retrieved November 15, 2011 from http:\/\/www.perseus
\n.tufts.edu\/hopper\/text?doc=Perseus%3Atext%3A2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers.01.0566%3Aletter%3D77 The Greek word translates as \u201cnosocomiun,\u201d a term for a small Roman-type hospital. From this word we derive \u201cnosocomial,\u201d which refers to conditions or
\nevents that occur in a hospital (e.g., nosocomial infections). Source of the Latin translation is Professor Heather Vincent,
\nEckerd College.
\n10MacEachern, M. T., Hospital organization and management. op. cit. 11The red-striped barber pole, simulating blood running down an arm, is a reminder of their trade.
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\nHospitals and Healthcare Systems 85
\nthe Church of England, he also eliminated the monasteries. MacEachern12 describes what
\nhappened next:
\nThe previous years of association with the Catholic Church caused hospitals to be objects
\nof spoliation by the crown, and Henry VIII ordered them to be given over to secular uses
\nor destroyed. The sick were turned into the streets. Conditions became so intolerable that
\nthe Londoners petitioned the king to return to them one or two of the buildings for the care
\nof patients, pledging financial support. Henry acceded and restored St. Bartholomew\u2019s in
\n1544 . . . but in other parts of England, hospitals were forced to close their doors. . . In fact,
\ntwenty-three of the principle counties had no general hospitals until 1710.
\nAfter that time, privately funded, charity hospitals started to be built, most notably, the
\nWestminster Hospital in 1719, Guy\u2019s Hospital in 1724, and the London Hospital in 1740.
\nAdmission to such hospitals often required the patient to obtain a ticket from a trustee testifying to the bearer\u2019s good character.
\nFollowing the European pattern, religious sponsorship was responsible for the first hospitals in the Western Hemisphere;13 however, the British secular hospital system is the one
\nthat early settlers brought with them to what would become the United States.
\nIn 1663, a hospital for soldiers was established on Manhattan Island, apparently the first
\nsuch institution on American soil. The first nonmilitary American hospital is considered to
\nbe the Philadelphia General Hospital (1732), descended from an almshouse founded in 1713
\nby William Penn for the benefit of Quakers. New York\u2019s Bellevue Hospital (now affiliated
\nwith New York University) was founded in 1736 and holds the claim to be America\u2019s oldest
\npublic hospital. The legal and structural prototype for subsequent institutions, however, is the
\nPennsylvania Hospital in Philadelphia, the first incorporated hospital in the United States.
\nThis hospital, which still operates as part of the University of Pennsylvania, was established
\nwith the help of Benjamin Franklin (who also contributed to its design). It received its charter
\nfrom the English king in 1751 and opened to the public in 1755. As was the case with the
\nLondon Hospital, moral worthiness and political connections often determined who could
\nbe admitted. According to Rosenberg:14
\nOne of the fundamental motivations in founding America\u2019s first hospitals was an unquestioned distinction between the worthy and unworthy poor. . . Thus, it was only natural that
\nthe Pennsylvania Hospital should, in the late 18th century, have demanded a written testimonial from a \u201crespectable\u201d person attesting to the moral worth of an applicant before he or she
\ncould be admitted to a bed.
\n12MacEachern, M. T., Hospital organization and management. op. cit. 13The first hospital in the Americas was the Hospital San Nicol\u00e1s de Bari in Santo Domingo. It was authorized on December 29, 1503, by Fray Nicol\u00e1s de Ovando, Spanish governor and colonial administrator (1502\u20131509). Like its European
\ncounterparts, it was also affiliated with a church (the first built of stone in the Americas). Due to earthquakes in the 19th
\ncentury, it is now in ruins. The earliest, still-extant hospital in the Americas was founded in 1524 by Conquistador Hern\u00e1n
\nCort\u00e9s: the Immaculate Conception Hospital, now the Hospital de Jes\u00fas Nazareno in Mexico City.
\n14Rosenberg, C. R. (1987). The care of strangers, the rise of America\u2019s hospital system. New York: Basic Books, p. 19.
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\n86 The U.S. Healthcare System
\nEstablishment of other hospitals in major cities followed. They included public, secular institutions (e.g., Massachusetts General Hospital, established in 1811); nonreligious
\norganizations for the benefit of certain nationalities (e.g., New York\u2019s French Hospital, established in 1809); and specialty hospitals (e.g., the Boston Lying-In, established in 1832 [now
\npart of Brigham & Women\u2019s Hospital in Boston]). Religious hospitals began to proliferate
\nin the 19th century. Particularly noteworthy are Catholic systems that are still prominent,
\nsuch as those founded by the Sisters of Mercy and Daughters of Charity. Because of religious discrimination, Jewish hospitals started to appear in the mid-19th century, often with
\nnames like Jewish Hospital, Mount Sinai, and Beth Israel.15 Among other functions, these
\ninstitutions provided a place for Jewish physicians, who were barred from medical staffs elsewhere, to practice medicine.16 Racial issues also contributed to hospital development in the
\nUnited States. Care of African Americans was established around three organizational models: general hospitals with a segregated ward (The Georgia Infirmary, 1832); demographically
\ndetermined, black-controlled hospitals (Freedmen\u2019s Hospital, in Washington, DC, 1863); and
\nblack-founded hospitals (Provident Hospital and Training School in Chicago, 1891). In addition to providing a site for care, these hospitals were also the place black physicians could
\npractice medicine, as they were excluded from segregated hospital staffs elsewhere.
\nDespite the long history of these institutions, until the 20th century, not much could be
\ndone for patients in hospitals that could not also be accomplished at home. The simple reason
\nwas that medical science was not yet sufficiently advanced. In fact, hospitals were still places
\nmostly poor people went for care; the \u201cbest\u201d care was delivered at home. Exhibit 4.1 summarizes some of the scientific developments that enabled hospitals to become the preferred
\nand higher quality centers for medical attention.
\nEXHIBIT 4.1. Some Technologies That Consolidated Care in Hospitals
\n\u25a0 Anesthesia. Crawford Long, MD, used diethyl-ether anesthesia for the first time on 30 March 1842 to remove
\na neck tumor of a patient in Jefferson, Georgia. Anesthesia allowed longer and safer surgeries.
\n\u25a0 Radiology. W. C. Roentgen, MD, published \u00dcber eine neue Art von Strahlen (On a New Kind of Rays) in the
\nSitzungsberichte der Physikalisch-Medizinischen Gesellschaft in Germany in January 1896. His work heralded
\nthe practice of radiology.
\n\u25a0 Blood banking. In 1901, Karl Landsteiner identified three blood groups, A, B, and O (which he called C),
\nand found that transfusions between persons with the same type did not cause agglutination of red blood
\ncells (a transfusion reaction that can be fatal).a Based on this finding, the first successful blood transfusion
\nwas performed by Reuben Ottenberg at Mount Sinai Hospital in New York in 1907. While the problem of
\nincompatibility had been clarified, transfusions were not helpful unless a person was on hand who could
\n15The first Jewish hospitals in the United States were the Jewish Hospital in Cincinnati (1850) and the Jews\u2019 Hospital in
\nNew York City (1855), later renamed Mt. Sinai.
\n16Katz, R. (2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). Continuing their mission, Jewish hospitals continue to invest in philanthropy. The Forward (June 18).
\nRetrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.forward.com\/articles\/13591
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
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\nHospitals and Healthcare Systems 87
\ndonate enough blood of the same type as that of the patient. In 1915, Richard Lewisohn, also at Mount Sinai
\nHospital, used sodium citrate to keep blood from coagulating, and Richard Weil demonstrated the feasibility
\nof refrigerated storage of anticoagulated blood. Two years later, during World War I, Oswald Hope Robertson
\nused these storage techniques to found what is recognized as the first blood bank.
\n\u25a0 Laboratory. Diagnostic laboratory tests (particularly examination of urine) were performed in ancient Egypt.
\nPhysicians conducted simple tests at the patient\u2019s bedside while more complex ones were carried out in a
\nchemistry lab. It was only after the mid-20th century, with advent of sophisticated and expensive automated
\nanalyzers, that hospital laboratories were the main focus of such studies.
\nExamination of tissue removed from a patient for diagnostic purposes took on clinical significance only
\nafter the latter half of the 19th century, when special stains were developed to identify different normal and
\nabnormal cellular structures. The tissue processing was carried out in a hospital laboratory. Subsequent introduction of immunochemical and electron microscopic studies consolidated the role of the hospital laboratory
\nin high-technology diagnostics.
\n\u25a0 Professional nursing. While Dr. Valentine Seaman at New York Hospital is credited with establishing the first
\nnursing school in the United States (1798), it was in 1872 that the first permanent school was founded at
\nthe New England Hospital for Women in Boston.b The nursing schools that were created after that time were
\nhospital based and had varying amounts of lecture and scientific content; however, they were all founded on
\nthe professional teachings of Florence Nightingale. The Yale School of Nursing, established in 1923, claims to
\nbe \u201cthe first school within a university to prepare nurses under an educational rather than an apprenticeship
\nprogram.\u201dc Professional nursing enables high-quality and technologically enabled attention for critically ill
\npatients, promoting the hospital as a preferred, and often essential, site for provision of care.
\n\u25a0 Aseptic technique. The importance of cleanliness while performing surgery (particularly hand washing) was
\nknown since Ignaz Semmelweis introduced the concept in Vienna in 1847. The scientific basis for this practice
\nwas not known until the 1860s, when Louis Pasteur formulated the germ theory of disease. British surgeon
\nJoseph Lister pioneered antiseptic surgery and dressing treatments using carbolic acid in the mid-1860s.d
\nDespite the demonstrated benefits of these theories and practices, physicians were very slow to adopt antiseptic methods, making hospitals very dangerous places to have surgery or deliver a baby. In fact, even after
\nLister presented his scientific findings in Philadelphia at the U.S. Centennial in 1876, many prominent American surgeons were still skeptical of the benefits of his practices. It was only after the 1880s that antiseptic
\nsurgery became widespread.e
\n\u25a0 Teaching hospitals. While not all hospitals serve as teaching facilities for medical students and those studying
\nspecialties after graduation (residents), the emergence of institutions serving that purpose enhanced the
\nreputation of all hospitals as a safe, high-quality place to obtain care. Although a few such establishments
\nexisted in the late 19th century (such as the Hospital of the University of Pennsylvania), it was the newly
\nbuilt Johns Hopkins Hospital (1889), modeled on European teaching institutions, that set the standard. The
\nproliferation of teaching hospitals dates from 1910, when Abraham Flexner published his highly influential
\nreport that reformed medical school teaching.f Prominent examples built at that time include Peter Bent
\nBrigham Hospital (Ace my homework – Write my essay – Harvard) and Barnes Hospital (Washington University).
\na In 1939, Landsteiner and colleagues discovered another category of blood types (the Rh factor) that was causing unexplained
\nreactions in patients receiving blood from a donor with a compatible ABO match.
\nb Goodnow, M. (1916). Outlines of nursing history. Philadelphia: W.B. Saunders.
\nc Yale School of Nursing (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). About YSN. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/nursing.yale.edu\/about-ysn
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n88 The U.S. Healthcare System
\nd Lister, J. (1867). Illustrations of the antiseptic system of treatment in surgery. The Lancet 90, 668\u2013669.
\ne Millard, C. (2011). Destiny of the republic: A tale of madness, medicine and the murder of a president. NY: Doubleday. The author
\nclaims that President Garfield would have survived his assassination attempt were it not for his physician\u2019s unsterile probing of
\nhis wound, which led to the massive infection that eventually killed him. Aseptic techniques were widely adopted thereafter in
\nthe United States.
\nf Ludmerer, KM. (1983). The rise of the teaching hospital in America. Journal of the History of Medicine and Allied Sciences
\n38, 389\u2013414. Flexner, A. (2002). Medical education in the United States and Canada. From the Carnegie Foundation for the
\nAdvancement of Teaching, Bulletin 4, 1910 Bulletin of the World Health Organization, 80, 594\u2013602.
\nAMERICAN HOSPITAL EXPANSION IN THE 20TH CENTURY
\nBy the early 1900s, hospitals were well established as a desired place for care; their payment sources, however, started to change over the next 50 years.17 Early in the 20th century,
\nthese institutions were still largely philanthropic organizations whose trustees were more
\nthan a governing board; they were the financial backers and administrators. With the emergence of commercial insurance in the 1930s and beyond, hospitals started to make more
\nof their money from that source, and the organizational culture shifted from charity care
\nto more of a for-profit model. This trend accelerated after World War II with a substantial increase in coverage by private insurance. In addition to changes in financing, a need
\narose for construction of more hospital beds,18 particularly in rural areas. Subsequent government policy to correct this problem was directed at both encouraging construction of
\nmore hospitals and adding more beds to existing institutions, thus promoting community
\nhospitals as the centers of the healthcare system. The hope was also that with more rural
\ncommunity hospitals, physician supply in these areas would increase. Hospitals, however,
\nwere concerned about how they were going to pay for this construction, especially given
\nthe looming possibilities of national health insurance.19 They also faced the threat of expansion of government hospital capacity, thus increasing competition with the private sector. In
\norder to ensure a funding source and continued strength of the private sector, hospitals lobbied the federal government for subsidies. According to Rosemary Stevens, \u201cthe instigating
\nforce for the hospital construction bill was George Bugbee, the AHA\u2019s [American Hospital
\nAssociation\u2019s] executive director.\u201d20 Bugbee successfully garnered bipartisan support for
\n17For more details about these events, see the section in Chapter 6, \u201cOrigins and Current Status of Private Health Insurance
\nin the United States.\u201d
\n18Rufus Rorem highlighted this maldistribution as early as 1930 in The Public\u2019s Investment in Hospitals (Chicago: University of Chicago Press). Action to address the problem only came after July 1944, when the U.S. Surgeon General, Dr.
\nThomas Parran, told the Senate Subcommittee on Wartime Health and Education that 1,200 U.S. counties with a population over 15,000 persons had no recognized hospital facilities. He estimated that 419,400 new and replacement beds were
\nneeded. The testimony was covered in JAMA 125 (12): 856\u2013857, 1944. 19President Roosevelt included such a possibility in his \u201cSecond Bill of Rights Message,\u201d as part of his January 11, 1944,
\nState of the Union Speech when he stated that every family has \u201cthe right to adequate medical care and the opportunity
\nto achieve and enjoy good health.\u201d He reinforced this message in his January 1945 budget message to Congress. Also in
\n1945, the Wagner-Murray-Dingell bill included a proposal for a national insurance plan.
\n20Stevens, R. (1989). In sickness and in wealth, American hospitals in the twentieth century. New York: Basic Books.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 89
\npassage in August 1946 of the Hospital Survey and Construction Act (Public Law [P.L.]
\n79\u201395), called the Hill-Burton Act, after its sponsors, Senators Lister Hill (D-Alabama) and
\nHarold H. Burton (R-Ohio).21 It is important to note that the act (passed in the Truman administration) originally had a universal insurance coverage provision, which was eliminated
\nbecause of anticipated costs.22 The Hill-Burton program required states to conduct hospital need assessments, formulate construction plans, and build the facilities by contributing
\n$2 for every $1 of federal money.23 Preference was given to rural facilities and university
\nhospitals that served as referral centers; only governmental and nonprofit facilities were
\neligible. Funds were also available under this program for other types of healthcare organizations, including skilled-nursing facilities, rehabilitation facilities, nursing schools, and public
\nhealth centers.
\nIn exchange for funding, recipients had two obligations. First, all facilities were required
\nby the Community Service Assurance of Title VI of the Public Health Service Act \u201cto make
\nservices provided by the facility available to persons residing in the facility\u2019s service area
\nwithout discrimination on the basis of race, color, national origin, creed, or any other ground
\nunrelated to the individual\u2019s need for the service or the availability of the needed service in
\nthe facility.\u201d24 Application of this requirement means that the facility must make emergency
\nservices available to all patients regardless of their ability to pay. Prior to the enactment of
\ncivil rights legislation, the \u201cseparate but equal\u201d doctrine was acceptable in fulfillment of this
\ncondition.
\nIn addition to the community service requirement, many facilities were also subjected
\nto the \u201cuncompensated care provision.\u201d In return for governmental financing, they were
\n\u201crequired to develop an uncompensated care allocation plan, indicating the type of services
\navailable to persons unable to pay . . . [and] publish a notice of their obligation to provide free
\nmedical care in a local newspaper, post notices within their facility, and provide individual
\nnotices of the availability of free care to all patients.\u201d25
\nThe Public Health Service (PHS) determined the total amount of uncompensated care
\na hospital was required to pay back and prorated it over 20 years, starting with the date
\nof completion of construction of the facility. At least once in 3 years, these institutions are
\nrequired to report to the Department of Health and Human Services (DHHS) the amount
\nof free care they provide. The PHS could also determine whether the facility can accelerate
\nor extend its payback obligation. Each year, DHHS determines the poverty guidelines that
\n21Senator Burton was appointed to the Supreme Court before the bill was introduced. Much of the credit for its passage
\nbelongs to the other Ohio senator, Robert Taft.
\n22Mantone, J. (2005, August 15). The big bang: The Hill-Burton Act put hospitals in thousands of communities and
\nlaunched today\u2019s continuing healthcare building boom. Modern Healthcare, 15, 35, 6\u20137, 16 23The federal contribution portion increased in subsequent years.
\n24U.S. Office of Civil Rights. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Medical treatment in Hill-Burton funded healthcare facilities. See this site for a full
\nlist of obligations. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from www.hhs.gov\/ocr\/civilrights\/understanding\/Hill-Burton
\n25Department of Health and Human Services Office of Inspector General. (1992, August). Public health service\u2019s oversight of the Hill-Burton program, 1.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
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\n90 The U.S. Healthcare System
\napply to pay-back of Hill-Burton obligations.26 Of note is that these requirements are very
\nsimilar to the current community service requirements described below.
\nAfter the enactment of Hill-Burton, more than $4.6 billion in grants and $1.5 billion in loans
\nwere allocated to projects that led to the construction of or equipment for roughly 6800 healthcare facilities in more than 4000 communities. . . The bulk of the funding was provided from
\n1960 to 1979, with $3.5 billion being issued. From 1980 to 1997, the last time money was
\nissued, $200 million was allocated.27
\nAs of December 2011, there were still 181 facilities in 40 states that had Hill-Burton obligations.28 Virtually all of these facilities are expected to pay back their obligations by 2020.
\nThe results of this program have been somewhat mixed. The program did not achieve the
\ngoal of bringing more physicians to underserved areas; but, at best, \u201cthe program might have
\nprevented the more deprived areas from falling even farther behind in the availability of doctors.\u201d29 The program was more successful in stimulating hospital construction, particularly
\nin poorer areas. \u201cA nearly complete equalization of bed supplies had occurred by 1970 across
\nstates ranked in the lowest, middle and highest thirds for bed supplies in 1950.\u201d30 This benefit was statistically significant even accounting for the country\u2019s increase in affluence and
\nthe rapid emergence of private health insurance.
\nAfter the Hill-Burton Act, the second major financial impetus for hospital construction
\noccurred in 1963 with the issuance of Internal Revenue Service (IRS) Revenue Ruling 63-20,
\n1963-1 C.B. 24. This ruling allowed private, nonprofit hospitals to issue tax-free bonds. (The
\nimplications for this benefit are explained below.) The conditions allowing issuance of such
\ndebt are explained in Exhibit 4.2.
\nEXHIBIT 4.2. IRS Conditions Allowing Issuance of Tax-Exempt Hospital Debt
\nAccording to the IRS, 63-20 corporations are formed under state nonprofit law for purposes of issuing obligations
\non behalf of a political subdivision and must meet five criteria:
\n1. The corporation must engage in activities which are essentially public in nature.
\n2. The corporation must be one which is created under the state\u2019s general nonprofit corporation law (and is
\nnot organized for profit except to the extent of retiring indebtedness).
\n26For example, see: U.S. DHHS Program Policy Notice No. 11-02 (revision), March 1, 2011.
\n27Mantone, J. (2005, August 15). The big bang: The Hill-Burton Act put hospitals in thousands of communities and
\nlaunched today\u2019s continuing healthcare building boom. Modern Healthcare, 6\u20137, 16 28Health Resources and Services Administration. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Hill-Burton facilities waiver and recovery. Retrieved from www
\n.hrsa.gov.\/gethealthcare\/affordable\/hillburton\/waiver.html
\n29Hochban, J., Ellenbogen, B., Benson, J., & Olson, R. M. (1981). The Hill-Burton program and changes in health services
\ndelivery. Inquiry, 18, 61\u201369. 30Clark, L. J., Field, M. J., Koontz, T. L., & Koontz, V. L. (1980). The impact of Hill-Burton: An analysis of hospital bed
\nand physician distribution in the United States, 1950\u20131970. Medical Care, 18, 532\u2013550.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 91
\n3. The corporate income must not inure to any private person.
\n4. The state or political subdivision thereof must have a \u201cbeneficial interest\u201d in the corporation while the
\nindebtedness remains outstanding and it must obtain legal title to the property of the corporation with
\nrespect to which the indebtedness was incurred upon the retirement of such indebtedness.
\n5. The corporation must have been approved by the state or political subdivision thereof, either of which must
\nalso have approved the specific obligations issued by the corporation.
\nThe rules for determining whether the governmental unit has the requisite \u201cbeneficial interest\u201d in the nonprofit corporation are:
\n1. The governmental unit must have exclusive beneficial possession and use of at least 95% of the fair market
\nvalue of the facilities; or
\n2. If the nonprofit corporation has exclusive beneficial use and possession of 95% of the fair market value of
\nthe facilities, the governmental unit appoints 80% of the members of the board of the corporation and has
\nthe power to remove and replace members of the board; or
\n3. The governmental unit has the right at any time to get unencumbered title and exclusive possession of the
\nfinanced facility by defeasing (paying off or providing for payment of) the bonds.31
\nThe third financial spur to hospital growth came when the Medicare program became
\noperational in 1966. Reimbursement for Medicare beneficiaries was based on the costs the
\nhospitals incurred for taking care of them, including allocated capital expenditures and interest payment on debt.32 These payments made the tax-free financing of facility expansion
\neven cheaper. As explained below, these payments lasted until 1985, when they were fully
\nreplaced by payments based on Diagnosis Related Groups (DRGs).
\nBy the mid-1960s, three types of concerns arose from these sponsored expansion activities. The first problem was the uncontrolled proliferation of facilities and lack of coordination
\nof clinical programs. This coordination problem created a barrier to efficient delivery of services and posed an obstacle to tackling issues of national healthcare importance. (Note that
\nthis problem persists and is one of the reasons for Accountable Care Organizations [ACOs],
\ndescribed below.) To address this situation, Congress passed P.L. 89-749 on November 3,
\n1966: \u201cAn Act to amend the Public Health Service Act to assist in combating heart disease,
\ncancer, stroke and related diseases.\u201d33Among the purposes of this law was \u201c[t]hrough grants,
\nto encourage and assist in the establishment of regional cooperative arrangements among
\nmedical schools, research institutions, and hospitals for research and training (including continuing education) and for related demonstrations of patient care in the field of heart disease,
\n31IRS. Introduction to Federal Taxation of Municipal Bonds, B16. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.irs.gov\/pub\/
\nirs-tege\/teb_phase_1_course_11204_-3module_b.pdf
\n32For an amusing, but clear, explanation of how this financing worked, see: Fisher, G. R. (1979). The hospital that ate
\nChicago. New England Journal of Medicine, 301, 56\u201357. 33Public Laws Enacted During the Second Session of the Eighty-Ninth Congress of the United States. PL 89-749. Government Printing Office, pp. 1180\u20131190. November 3, 1966. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/uscode.house.gov\/statutes\/
\npl\/89\/749.pdf
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\ncancer, stroke, and related diseases.\u201d The grants established 56 Regional Medical Programs
\n(RMPs), which were cooperative arrangements \u201camong a group of public or nonprofit private institutions or agencies engaged in research, training, diagnosis, and treatment relating
\nto heart disease, cancer, or stroke.\u201d This law was refunded and renewed in 1970 with
\nnew provisions [that] reflected an emphasis on primary care and regionalization of health
\ncare resources; added prevention and rehabilitation services; added kidney disease treatment
\nprograms; added authority for new construction; required review of RMP applications by
\nArea-wide Comprehensive Planning agencies [emphasis added]; and emphasized health services delivery and human resource utilization.34
\nThe National Health Planning and Resource Development Act of 1974, P.L. 93-641,
\nconsolidated RMPs with the Hill-Burton and Comprehensive Health Planning federal programs. The main purpose of the new law was to mandate a nationwide program of state-based
\nCertificate of Need (CON) reviews to evaluate the necessity for new facility expansion, particularly projects that used federal funds. The object of CON regulations is to set criteria for
\nexpansion of health facilities in order to prevent their unregulated growth. The fear regulators had was that this type of growth caused healthcare costs to rise rapidly and prevented
\ncoordination and cooperation among existing organizations. By the late 1970s, all states had
\nCON initiatives in place.
\nThe second concern came from the hospital industry: fear about increased competition coming from new facilities. Because of this worry, states adopted hospital
\nassociation-initiated CON reviews at the same time the federal government drafted its
\nlegislation. New York became the first state to enact a CON law in 1964, followed 5 years
\nlater by California, Connecticut, Maryland, and Rhode Island. Other states followed, linking
\ntheir efforts with federally initiated health planning agencies.35
\nThe results of reviews of these activities have been quite mixed, particularly because
\nof the state-by-state differences in the types of institutions that are reviewed as well as the
\nspecific methodologies.
\nSeveral older studies concluded that CON regulations have either had minimal or no direct
\neffect on healthcare expenditures. Recent studies have found that CON regulations appear to
\nraise the volume of procedures and average cost for specific services like cardiac and cancer
\ncare, while other research indicates that states with CON laws have lower hospital prices
\nand flat or reduced procedure volume for certain elective surgical procedures and cardiac
\ncare. Given these disparate findings, it is no surprise that the need for CON laws remains in
\ndispute.36
\n34U.S. National Library of Medicine. The regional medical programs collection. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/
\nprofiles.nlm.nih.gov\/ps\/retrieve\/Narrative\/RM\/p-nid\/94
\n35Congressional Budget Office. (1997, August). Expenditures for health care: Federal programs and their effects.
\nRetrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.cbo.gov\/sites\/default\/files\/95th-congress-1977-1978\/reports\/77doc566.pdf
\n36Yee, T., Stark, L. B., Bond, A. M., & Carrier, E. (2001, May). Health care certificate-of-need laws: Policy or politics?
\nNational Institute for Health Care Reform Research Brief 4.
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\nHospitals and Healthcare Systems 93
\nAs a result of the questionable benefit of this process, the federal government withdrew its requirement for CON programs in 1986. Subsequently, 14 states dropped their
\nrequirements, leaving the remaining 36 states and the District of Columbia with some type
\nof review process.37
\nThe third problem was the rapidly rising hospital costs associated with filling all those
\nnewly constructed beds. The concern was stated most famously by Shain and Roemer and
\ncame to be known as Roemer\u2019s Law: \u201c[H]ospital beds that are built tend to be used.\u201d38 As
\nthese authors go on to explain: \u201cBefore hospital insurance became common, family income
\nlargely determined which cases would go to hospitals. With widespread insurance, however,
\nthe kinds of cases that are hospitalized in any community reflect the number of beds provided.\u201d Both admission rates and lengths of stay accounted for the increased occupancies.
\nThe expanding utilization could not be explained just by the availability of beds in the community; for example, the occupancy rate was not highest where bed supply (measured in beds
\nper 1,000) was lowest, or vice versa. Nor could the increase be attributed to an increased incidence of disease or patients from more remote sites coming to these newly built or expanded
\nfacilities.39 While attention to this problem and proposed solutions came with the growing
\nprominence of utilization review in the 1980s, more recent evidence indicates this problem
\npersists.40
\nIn the first decade of the 21st century, after a long lull in hospital construction, a flurry of
\nactivity occurred due to new programmatic opportunities, changing patterns in care, and the
\nneed to replace aging facilities. The differences between this more recent building surge and
\nthose of the past are twofold. First, the source of building funds has changed: more equity,
\nless debt, and no major government sponsorship. According to the 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap Health Facilities
\nManagement\/American Society for Healthcare Engineering (HFM\/ASHE) annual survey:
\nOrganizations are relying less on bank loans and other debt to finance construction projects
\nthan at any time since the HFM\/ASHE survey began in 2005. Just 17 percent are using debt,
\ndown from 20 percent a year ago, compared with 42 percent drawing on cash reserves . . . Use
\nof tax-exempt bonds also is at its lowest in at least six years, accounting for just 21 percent
\nof construction financing among survey respondents.41
\nThe second difference is the types of construction have changed:
\n1. Newer hospitals have fewer beds than their predecessors and a higher ratio of intensive
\ncare beds to general medical\/surgical beds.
\n37See the American Health Planning Association website for a current list of which states have CON programs and what
\nthey cover. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.ahpanet.org\/matrix_copn.html
\n38Shain, M., & Roemer, M. I. (1959). Hospital costs relate to the supply of beds. Modern Hospitals, 92, 71\u201373, 168. 39Roemer, M. I. (1961). Bed supply and hospital utilization: A natural experiment. Hospitals, 35, 36\u201342. 40Delamater, P. L., Messina, J. P., Grady, S. C., WinklerPrins, V., & Shortridge, A. M. (2013, February 13). Do more
\nhospital beds lead to higher hospitalization rates? A spatial examination of Roemer\u2019s law. PLoS One. doi:10.1371\/journal
\n.pone.0054900
\n41Carpenter, D., & Hoppszallern, S. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap). Time to build? Reform uncertainties drive financial scrutiny for new projects.
\nHealth Facilities Management, 25(2), 12\u201318, 20.
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\n94 The U.S. Healthcare System
\n2. More outpatient than inpatient facilities are being built. Recently, this construction
\nhas been in the form of urgent care centers (freestanding emergency departments) and
\nphysician offices.
\n3. More renovation than new construction.
\nThe reason for these structural changes is the trend toward delivery of more care outside
\nthe hospital (outpatient care). More recent trends also include a surge in behavioral health
\nfacility construction and \u201cresilient design\u201d projects to help buildings withstand natural disasters.42
\nRegardless of the form these construction projects take, they all share one common
\ntheme: redesign of facilities around patient perceptions and needs. One of the earliest institutions in this redesign trend was Northwestern Memorial Hospital, which completed a new
\nfacility in 1999. In describing the new focus for hospital design, then-CEO Gary Mecklenburg said:
\nHealth care today is a consumer service, no different from a whole host of others . . . consumers don\u2019t want to go to a cold, sterile, unfriendly environment. Part of what
\ndrove the design of our building was the recognition that people wanted something different
\nin the environment. We asked people what they thought about hospitals and they told us they
\ndidn\u2019t like hospitals. People expected a different environment, different d\u00e9cor, a different
\ndelivery system.43
\nThis consumer-driven approach has persisted. According to a 2016: 2024 – Do my homework – Help write my assignment online report:
\nMore than 86 percent of survey respondents said that patient satisfaction is \u201cvery important\u201d in driving design changes to health facilities and\/or services. Another 12 percent said
\npatient satisfaction is \u201csomewhat important\u201d in driving changes. No respondents said patient
\nsatisfaction was \u201cnot at all important\u201d in design.44
\nHOSPITAL DEFINITION AND CLASSIFICATIONS
\nDefinition
\nIn addition to the OED description, the legal definition of a hospital varies from state
\nto state. Exhibit 4.3 provides some examples. The common features are capabilities to
\nprovide overnight (or longer) care to two or more unrelated persons for a variety of
\n42Burmahl, B., & Morgan, J. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, March 7). Hospital Construction Survey: Resilient design takes center stage as a top
\nproject consideration for health care facilities. Health Facilities Management. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www
\n.hfmmagazine.com\/articles\/3291-hospital-construction-survey
\n43Weinstock, M. (2006 – Write a paper; Professional research paper writing service – Best essay writers). Taking stock. Interviews with Gary Mecklenburg and Anthony Barbato. Hospital and Health
\nNetworks, 80(9), 42\u201345. 44Hoppszallern, S., Vesely, R., & Morgan, J. (2016: 2024 – Do my homework – Help write my assignment online, February 3). Hospital Construction Survey: Patient experience drives
\ndesign and construction. Health Facilities Management. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.hfmmagazine.com\/
\narticles\/1878-2016: 2024 – Do my homework – Help write my assignment online-hospital-construction-survey
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\nHospitals and Healthcare Systems 95
\nEXHIBIT 4.3. Examples of Legal Definitions of Hospitals
\nCalifornia
\n\u201cGeneral acute care hospital\u201d means a hospital, licensed by the Department, having a duly constituted governing
\nbody with overall administrative and professional responsibility and an organized medical staff which provides
\n24-hour inpatient care, including the following basic services: medical, nursing, surgical, anesthesia, laboratory,
\nradiology, pharmacy, and dietary services. A general acute care hospital shall not include separate buildings which
\nare used exclusively to house personnel or provide activities not related to hospital patients.
\nIllinois
\n\u201cHospital\u201d means any institution, place, building, buildings on a campus, or agency, public or private, whether
\norganized for profit or not, devoted primarily to the maintenance and operation of facilities for the diagnosis
\nand treatment or care of two or more unrelated persons admitted for overnight stay or longer in order to obtain
\nmedical, including obstetric, psychiatric and nursing, care of illness, disease, injury, infirmity, or deformity . . .
\nThe term \u201chospital\u201d does not include:
\n1. Any person or institution required to be licensed pursuant to the Nursing Home Care Act, the Specialized
\nMental Health Rehabilitation Act, or the ID\/DD Community Care Act;
\n2. Hospitalization or care facilities maintained by the State or any department or agency thereof, where such
\ndepartment or agency has authority under law to establish and enforce standards for the hospitalization or
\ncare facilities under its management and control;
\n3. Hospitalization or care facilities maintained by the federal government or agencies thereof;
\n4. Hospitalization or care facilities maintained by any university or college established under the laws of this
\nState and supported principally by public funds raised by taxation;
\n5. Any person or facility required to be licensed pursuant to the Alcoholism and Other Drug Abuse and Dependency Act;
\n6. Any facility operated solely by and for persons who rely exclusively upon treatment by spiritual means
\nthrough prayer, in accordance with the creed or tenets of any well-recognized church or religious
\ndenomination;
\n7. An Alzheimer\u2019s disease management center alternative healthcare model licensed under the Alternative
\nHealth Care Delivery Act; or
\n8. Any veterinary hospital or clinic operated by a veterinarian or veterinarians licensed under the Veterinary
\nMedicine and Surgery Practice Act of 2004 or maintained by a State-supported or publicly funded university
\nor college.
\nMassachusetts
\n\u201cHospital\u201d means any institution in the Commonwealth of Massachusetts, however named, whether conducted
\nfor charity or for profit, which is advertised, announced, established, or maintained for the purpose of caring for
\npersons admitted thereto for diagnosis or medical, surgical, or restorative treatment which is rendered within said
\ninstitution. This definition shall not include any hospital operated by the Commonwealth of Massachusetts or by
\nthe United States.
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\nconditions. Because these features also describe such organizations as skilled nursing
\nfacilities, the laws say, in effect: It is a hospital unless it is not; that is, unless it is covered
\nby another licensing law.45 The American Hospital Association will list a facility in its
\nhospital guide if it is accredited by one of several organizations (see Chapter 9, \u201cQuality\u201d)
\nor meets a long list of features about size (at least six beds) and operational requirements (e.g., presence of a responsible governing authority, pharmacy, continuous nursing
\nservices, etc.).46
\nWays Hospitals May Be Classified and Special Related Issues
\nAlthough all licensed hospitals have a single legal definition in each state, they are obviously
\nquite different from one another. It is, therefore, important to understand some of the different ways hospitals can be categorized for such purposes as peer group comparisons, quality
\nevaluations, and market segmentation activities.
\nIt should be noted, however, that despite these differences, all hospitals are facing the
\nsame environmental forces, particularly shrinking number of beds due to expanded outpatient treatment capabilities and increasing costs. Two major reasons for the cost increases
\nare increases in acuity of care and the nature of the hospital business: very personal and
\npersonnel-intensive care. Contrary to popular opinion that hospital expenses are driven by
\ncosts of technology, a significant portion of costs is due to wages and benefits. When hospital cost containment is considered, one must account for the effect on quality of reducing
\npeople. Exhibit 4.4 displays categories of typical hospital costs.
\nSome of the common ways hospitals are classified, with brief descriptions of each, are
\npresented next.
\nSize. The usual metric for hospital size is total number of beds. This number can be confusing, however, since bed size can be expressed as number of licensed beds (what the
\nstate allows the hospital to operate) or the number of beds actually available for use. For
\nexample, the hospital may be licensed for 100 beds, but because of cost overruns or staff
\nshortages, it operates 80 beds. The wide distribution of hospitals by bed size is displayed
\nin Exhibit 4.5.
\nLevels of Care. Levels of care have been traditionally divided into primary, secondary, tertiary, and quaternary. The definition of primary care usually mentions that it is the first point
\nof contact patients have with the healthcare system. (I need help writing my essay – research paper see Chapter 6, \u201cPayers,\u201d for
\na full definition and explanation of this term.) For purposes of hospital classification, \u201ca
\nprimary care hospital offers basic services, such as an emergency department and limited
\nintensive care facilities. A secondary care hospital generally offers primary care, general
\n45See, for example, the exceptions listed in the Illinois statute in Exhibit 4.3. Some facilities are excluded not because
\nthey are not hospitals, but they are not subject to the state licensing statute, for example, \u201cfacilities maintained by the
\nfederal government or agencies thereof.\u201d
\n46AHA Guide 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap edition. P. A2 Health Forum LLC. An American Hospital Association Company. 155 N. Wacker
\nDrive, Chicago, IL 60606-1725.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nEBSCO : eBook Collection (EBSCOhost) – printed on 7\/30\/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers 12:17 PM via UNIV OF WEST FLORIDA
\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\nHospitals and Healthcare Systems 97
\nEXHIBIT 4.4. Percentage of U.S. Hospital Costs in 2016: 2024 – Do my homework – Help write my assignment online, by Type of Expensea
\n56%
\n11.9%
\n6.7%
\n1.8% 1.2%
\n5.5% 5.7%
\n11.2%
\n70%
\n60%
\n50%
\n40%
\n30%
\n20%
\n10%
\n0%
\nWages and
\nbenefits
\nProfessional
\nfees
\nPrescription
\ndrugs
\nUtilities Professional
\nliability
\ninsurance
\nAll other:
\nnon-labor
\nintensiveb
\nAll other:
\nlabor
\nintensive
\nOther
\nproductsc
\nPercentage of spending on hospital care
\na Does not include capital.
\nb Get custom essay samples and course-specific study resources via\u00a0course hero homework for you service – Include s postage and telephone expenses.
\nc For example food, medical instruments, etc.
\nSource: CMS and American Hospitals Association Data. \u00a9 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online by Statistica Used with permission.
\ninternal medicine, and limited surgical and diagnostic capabilities. A tertiary care hospital
\nprovides a full range of basic and sophisticated diagnostic and treatment services, including
\nmany specialized services.\u201d47
\nThe term \u201csecondary care\u201d is not much used in the United States but is particularly
\ncommon in European countries. It generally refers to the type of care provided at a community hospital. The \u201cspecialized services\u201d of the tertiary care hospital often include such
\nprocedures as cardiovascular surgery and transplantation. An additional term used by some
\npeople is \u201cquaternary care,\u201d which refers to a tertiary care center that is extensively involved
\nin research and experimental treatments.
\nMany tertiary and quaternary care centers are also teaching hospitals (some of which
\nare also called academic medical centers). A useful definition for these organizations comes
\n47Federal Trade Commission, Department of Justice. (2004, July). Improving health care: A dose of competition. A report
\nby the Federal Trade Commission and the Department of Justice. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.justice.gov\/
\natr\/public\/health_care\/204694\/chapter3.htm#3
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\n98 The U.S. Healthcare System
\nEXHIBIT 4.5. Number of Registered Hospitals in the United States in 2016: 2024 – Do my homework – Help write my assignment online,
\nby Number of Beds
\n1,500
\n1,250
\n1,000
\n750
\nNumber of hospitals
\n500
\n567
\n6 to 24
\n25 to 49
\n50 to 99
\n100 to 199
\n200 to 299
\n300 to 399
\n400 to 499
\n500 or more
\n1,217
\n1,091
\n1,157
\n627
\nNumber of beds
\n360
\n196
\n319
\n250
\n0
\nSource: American Hospital Association 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online Hospital Data. \u00a9 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online by Statistica. Used with permission.
\nfrom the membership requirements for the Council on Teaching Hospitals (COTHs) section
\nof the American Hospital Association:
\nMembership in COTH is limited to organizations having a documented affiliation agreement
\nwith a medical school accredited by the Liaison Committee on Medical Education (LCME)
\n[the organization that accredits medical schools in the United States and Canada]. Typically,
\nthese organizations must sponsor, or participate significantly in, at least four approved, active
\nresidency programs. At least two of the approved residency programs should be in medicine,
\nsurgery, obstetrics\/gynecology, pediatrics, family practice, or psychiatry.48
\nOwnership of these facilities varies widely. They can be independent corporations (frequently but not exclusively nonprofit) or owned by the affiliated university. According to
\nthe American Association of Medical Colleges,49 while the nearly 400 teaching hospitals
\nrepresent only 6% of all U.S. hospitals, they provide:
\n\u25a0 40% of neonatal intensive care units,
\n\u25a0 61% of pediatric intensive care units,
\n48AAMC. Council of Teaching Hospitals and Health Systems. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.aamc.org\/
\ndownload\/333616\/data\/cothmemberservices.pdf
\n49Ibid.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 99
\n\u25a0 79% of all burn care units,
\n\u25a0 48% of the surgical transplant services,
\n\u25a0 44% of Alzheimer centers,
\n\u25a0 22% of all cardiac surgery services,
\n\u25a0 41% of all hospital charity care, and
\n\u25a0 Are the sites for approximately 28% of all Medicaid hospitalizations.
\nIn addition to the usual insurance payments described below, teaching hospitals receive
\nsupplemental funds from Medicare Part A that are called Medicare Direct Graduate Medical
\nEducation (DGME) Payments. These payments started with the beginning of Medicare50 and
\nwere initiated for two reasons: recognition of the importance of training medical specialists
\nand an inducement for teaching hospitals to participate in the Medicare program. The amount
\nof Graduate Medical Education (GME) support was capped by the Balanced Budget Act of
\n1997. According to Iglehart:51
\nMedicare remains the largest supporter of GME, providing both direct payments to hospitals
\nthat cover medical education expenses related to the care of Medicare patients (about $3
\nbillion per year) and an indirect medical education (IME) adjustment to teaching hospitals
\nfor the added patient-care costs associated with training (about $6.5 billion).
\nAnnual amounts are modified by an update factor (with slightly more support going
\nto primary care residency programs)52 and cover about 100,000 physician trainees. Federal
\nagencies and state Medicaid agencies spent over $16.3 billion in 2015 – Research Paper Writing Help Service to fund GME training for physicians\u2014commonly known as residency training. According to a 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online study, the
\nGovernment Accountability Office (GAO) found that in 2015 – Research Paper Writing Help Service the \u201cfederal government spent
\n$14.5 billion through five programs, and 45 state Medicaid agencies spent $1.8 billion. About
\nhalf of teaching sites that received funding\u2014such as teaching hospitals\u2014received funds from
\nmore than one of the five programs.\u201d53 (I need help writing my essay – research paper see Exhibit 4.6.)
\nIncreasing economic pressures have caused many states to cut back on their GME funding.54 In addition, the federal government is considering reduction of the IME portion of its
\nsubsidies. Of note is that the Departments of Veterans Affairs and Defense also support GME
\nat their own teaching hospitals.
\n50House Report, Number 213, 89th Congress 1 Session 32 (1965), and Senate Report, Number 404, Pt. 1 89th Congress
\n1 Session 36 (1965).
\n51Iglehart, J. K. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap). Financing graduate medical education-mounting pressure for reform. New England Journal of
\nMedicine, 366, 1562\u20131563. 52For more details about DGME payments see: Medicare Direct Graduate Medical Education (DGME) Payments.
\nRetrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.aamc.org\/advocacy\/gme\/71152\/gme_gme0001.html
\n53GAO. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, March 29). Physician workforce. HHS needs better information to comprehensively evaluate graduate
\nmedical education funding. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.gao.gov\/assets\/700\/690580.pdf 54Association of American Medical Colleges. (2016: 2024 – Do my homework – Help write my assignment online). Medicaid graduate medical education payments\u2014A 50-state survey. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.documentcloud.org\/documents\/4392445-Medicaid-Graduate-MedicalEducation-Payments-a.html
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\n100 The U.S. Healthcare System
\nEXHIBIT 4.6. Federal Spending on Graduate Medical Education Training,
\n2015 – Research Paper Writing Help Service
\nProgram Total GME Spending
\n($in millions)
\nPercentage of Total
\nSpending (%)
\nHHS programs
\nMedicare 10,335 71
\nMedicaid (federal share) 2,351 16
\nChildren\u2019s Hospital GME Payment Program 249 2
\nTeaching Health Center GME Program 76 1
\nVA program 1,499 10
\nTotal 14,509 100
\nSource: GAO: Physician workforce. HHS needs better information to comprehensively evaluate graduate medical education funding. March 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. Retrieved from https:\/\/www.gao.gov\/assets\/700\/690581.pdf
\nIn addition to the common hospital definition, teaching hospitals also share three essential features in their mission statements: patient care, education of healthcare professionals
\n(such as physicians and nurses), and research. (I need help writing my essay – research paper see Exhibit 4.7 for examples of these
\nstatements.) Despite the clarity of these three elements, members of the organization will
\nprioritize them differently. For example, in a teaching hospital without a nursing school,
\nnurses will put patient care far ahead of teaching and research. On the other hand, a junior
\nfaculty member will give top priority to research, since productivity in that area alone will
\ndetermine promotion, tenure, and salary. The other activities merely take time away from
\nresearch. Leaders in this setting often have conflicting priorities depending on which role
\nthey play in a given situation. For example, the dean of a medical school must prioritize
\nresearch because it affects rankings in the popular press. However, in order to attract medical
\nstudents, teaching must get high marks. Further, if the dean is head of the faculty medical
\ngroup, patient care takes priority because it is the largest source of the group\u2019s income. All
\nthese different priorities result in mission conflicts. While they cannot always be resolved,
\nthey must be appreciated when these organizations formulate their strategies and allocate
\nresources.
\nCorporate Status\/Sponsorship. One of the most common distinctions among hospitals is
\nwhether they are operated as for-profit or nonprofit enterprises. (I need help writing my essay – research paper see Exhibit 4.8 for
\ntrends and relative numbers of these institutions.)
\nFor-profits can be held either privately or by shareholders who trade ownership on stock
\nexchanges. Many of the largest for-profit systems are headquartered in the Nashville area
\nbecause of their connections with the largest such system located there, Hospital Corporation
\nof America (HCA). Consider these examples: In 2007, Community Health Systems cemented
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\nHospitals and Healthcare Systems 101
\nEXHIBIT 4.7. Sample Mission Statements of Teaching Hospitals
\nMission Statement of St. Michael\u2019s Hospital, Toronto, Ontarioa
\nAt St. Michael\u2019s Hospital, we recognize the value of every person and are guided by our commitment to excellence
\nand leadership. We demonstrate this by:
\n\u25a0 Providing exemplary physical, emotional, and spiritual care for each of our patients and their families
\n\u25a0 Balancing the continued commitment to the care of the poor and those most in need with the provision
\nof highly specialized services to a broader community
\n\u25a0 Building a work environment where each person is valued, respected, and has an opportunity for personal
\nand professional growth
\n\u25a0 Advancing excellence in health services education
\n\u25a0 Fostering a culture of discovery in all of our activities and supporting exemplary health sciences research
\n\u25a0 Strengthening our relationships with universities, colleges, other hospitals, agencies, and our community
\n\u25a0 Demonstrating social responsibility through the just use of our resources
\nThe commitment of our staff, physicians, volunteers, students, community partners, and friends to our mission
\npermits us to maintain a quality of presence and tradition of caring, which are the hallmarks of St. Michael\u2019s.
\nMission Statement of Northwestern Medicine (Academic System) Chicago, ILb
\nNorthwestern Medicine is a premier integrated academic health system where the patient comes first.
\n\u25a0 We are all caregivers or someone who supports a caregiver.
\n\u25a0 We are here to improve the health of our community.
\n\u25a0 We have an essential relationship with Northwestern University\u2019s Feinberg School of Medicine.
\n\u25a0 We integrate education and research to continually improve excellence in clinical practice.
\n\u25a0 We serve a broad community and bring the best in medicine closer to where patients live and work.
\na stmichaelshospital.com\/about\/mission.php.
\nb https:\/\/www.nm.org\/about-us.
\nits corporate location by its purchase of Triad, an HCA spin-off; Lifepoint was founded in
\n1999 as a spin-off of 23 HCA hospitals; and Vanguard Health Systems was formed in July
\n1997 by group of healthcare executives led by Charles Martin, Jr., a former HCA executive.
\nOne of the hallmarks of a nonprofit hospital is its tax-exempt status. According to
\nCastro:55
\nThe policies that initially conferred tax-exempt status on hospitals can trace their roots to
\nthe Elizabethan Statute of Charitable Uses of 1601. This British statute commonly bestowed
\n55Castro, A. I. (1995). Overview of the tax treatment of nonprofit hospitals and their for-profit subsidiaries: A short-sighted
\nview could be very bad medicine comment. Pace Law Review, 15, 501\u2013505.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\n102 The U.S. Healthcare System
\nEXHIBIT 4.8. Number of Hospitals in the United States from 2009 to 2016: 2024 – Do my homework – Help write my assignment online, by
\nOwnership Type
\n0
\n1,000
\n2,000
\n3,000
\n4,000
\n5,000
\n6,000
\nState\/local government Non-profit For-profit Total
\n2009 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 2011 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap 2013 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay 2015 – Research Paper Writing Help Service 2016: 2024 – Do my homework – Help write my assignment online
\nNumber of hospitals
\nSource: American Hospital Association \u00a9 Statistica 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. Used with permission.
\nexemptions upon hospitals and other \u201ccharitable\u201d organizations which promoted the common
\ngeneral welfare. The United States initially adopted this interpretation through its early common law. The federal government subsequently recognized income tax exemption with the
\nenactment of the Revenue Act of 1894, and afterward with the ratification of the Sixteenth
\nAmendment.
\nBy 1959, the statutes dealing with the tax-exempt status of charitable organizations were
\nconsolidated into IRS code 501(c)(3). Nonprofit hospitals are currently incorporated under
\nthis code. (I need help writing my essay – research paper see Exhibit 4.9 for a full explanation of this category.) The portions that
\napply directly to hospitals are the charitable, religious, educational, or scientific missions
\nand the requirement that they not be organized or operated for the benefit of private interests.
\n(Hospitals are also evaluated for nonprofit status by state\/local governments. Since the criteria
\nfor these evaluations can be very different, they will be considered separately.)
\nBecause the U.S. Tax Code does not contain a definition for the word \u201ccharitable,\u201d the
\nIRS has used two standards over the years to evaluate whether a hospital meets the criteria
\nof 501 (c) (3): the \u201ccharity care standard\u201d and the \u201ccommunity benefit standard.\u201d From 1956
\nto 1969, IRS Revenue Ruling 56\u2013185 was the statute that spelled out the requirements a
\nhospital needed to meet in order to qualify for 501(c)(3) status. Under this Ruling, a hospital
\nhad to provide, within its financial ability, free or reduced-cost care to patients unable to pay
\nfor it. It did not specify a minimum requirement for dollars spent or number treated.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\nHospitals and Healthcare Systems 103
\nEXHIBIT 4.9. Exemption Requirements\u2014Section 501(c)(3) Organizations
\nTo be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and
\noperated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any
\nprivate shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to
\ninfluence legislation as a substantial part of its activities and it may not participate in any campaign activity for or
\nagainst political candidates.
\nOrganizations described in section 501(c)(3) are commonly referred to as charitable organizations.
\nOrganizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to
\nreceive tax-deductible contributions in accordance with Code section 170.
\nThe organization must not be organized or operated for the benefit of private interests, and no part of a
\nsection 501(c)(3) organization\u2019s net earnings may inure to the benefit of any private shareholder or individual.
\nThe exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary,
\ntesting for public safety, fostering national or international amateur sports competition, and preventing cruelty
\nto children or animals. The term charitable is used in its generally accepted legal sense and includes relief of
\nthe poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science;
\nerecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening
\nneighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law;
\nand combating community deterioration and juvenile delinquency.
\nSource: Internal Revenue Service Exemption Requirements, Section 501(c)(3) Organizations. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/
\nwww.irs.gov\/charities-nonprofits\/charitable-organizations\/exemption-requirements-section-501c3-organizations
\nWith the advent of Medicare and Medicaid in 1966, and the further availability of private health insurance, charity care and philanthropy were becoming even less of a factor in
\nhospital finances. So, in 1969, the IRS issued Revenue Ruling 69-545, replacing the \u201ccharity
\nstandard\u201d with a new \u201ccommunity benefit standard.\u201d Under the newer rule:
\nA nonprofit organization whose purpose and activity are providing hospital care is promoting
\nhealth and may, therefore, qualify as organized and operated in furtherance of a charitable
\npurpose . . . The promotion of health, like the relief of poverty and the advancement of education and religion, is one of the purposes in the general law of charity that is deemed beneficial
\nto the community as a whole even though the class of beneficiaries eligible to receive a direct
\nbenefit from its activities does not include all members of the community, such as indigent
\nmembers of the community, provided that the class is not so small that its relief is not of
\nbenefit to the community.56
\nThe specific criteria mentioned in the ruling require that the hospital uses \u201cits surplus
\nfunds to improve the quality of patient care, expand its facilities, and advance its medical
\ntraining, education, and research programs.\u201d57 It must also operate an accessible emergency
\n56Rev. Rul. 69-545, 1969-2 C.B. 117.
\n57Rev. Rul. 83-157, 1983-2 C.B. 94 set conditions for hospitals to maintain their 501(c)(3) status without having an emergency room, for example, if it would duplicate existing services or the hospital was very specialized (like a rehabilitation
\nfacility) and provided its community benefits in other ways.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\n104 The U.S. Healthcare System
\nroom, maintain a medical staff open to all qualified physicians, and vest control of the hospital
\nin its board of trustees, composed of independent civic leaders.
\nIn subsequent years, Congress and the public have become more skeptical about the
\ntax-exempt status of these institutions. Particular areas of suspicion include:
\nthe prices charged to low-income uninsured patients for medical care in comparison to those
\ncharged patients paying through insurance; the methods used by hospitals to collect payment
\nfrom patients and the classification of bad debt as a community benefit; an increasing number of partnerships between tax-exempt hospitals and for-profit entities; and the amount of
\ncompensation paid to high-level employees.58
\nResearch has shown some justification for these worries. \u201cIn 2009, tax-exempt
\nhospitals varied markedly in the level of community benefits provided, with most of
\ntheir benefit-related expenditures allocated to patient care services. Little was spent on
\ncommunity health improvements.\u201d59
\nOf further concern, particularly in bad economic times, are lost direct tax revenues from
\nthese institutions. Calculating the exact amount of this loss is difficult because of lack of
\ncurrent data, differences in what studies include in the community benefits hospitals provide,
\nand differences in assigning an actual dollar value for those benefits. Given these caveats,
\nwhat is currently claimed about the trade-off between tax benefits and community benefits
\ncan be summarized as follows:
\n\u25a0 \u201cThe Congressional Joint Committee on Taxation estimated the value of the nonprofit
\nhospital tax exemption at $12.6 billion in 2002\u2014a number that included forgone taxes,
\npublic contributions, and the value of tax-exempt bond financing . . . [W]e estimate that
\nthe size of the exemption reached $24.6 billion in 2011.\u201d60
\n\u25a0 Tax exempt giving to nonprofit hospitals and healthcare systems in 2016: 2024 – Do my homework – Help write my assignment online was $10.143
\nbillion.61
\n\u25a0 \u201cIn 2013, the estimated tax revenue forgone due to the tax-exempt status of nonprofit
\nhospitals is $6.0 billion. In comparison, the benefit tax-exempt hospitals provided to
\ntheir communities . . . is estimated to be $67.4 billion, 11 times greater than the value of
\ntax revenue forgone.\u201d62
\n58Lunder, E. K., & Liu, E. C. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, May 12). 501(c)(3) Hospitals and the community benefit standard. Congressional Research Service. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.everycrsreport.com\/files\/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer0512_RL34605_
\n461b539b090d997945e30d4e85afd42cc90294ff.pdf
\n59Young, G. J. (2013). Provision of community benefits by tax-exempt U.S. hospitals. The New England Journal of
\nMedicine, 386, 1519\u20131527. 60Rosenbaum, S., Kinday, D. A., Bao, J., Byrnes, M. K., & O\u2019Laughlin, C. (2015 – Research Paper Writing Help Service). The value of the nonprofit hospital
\ntax exemption was $24.6 billion in 2011. Health Affairs, 34(7): 1225\u20131233. 61Association for Healthcare Philanthropy. (2017, October 5). Healthcare organizations raised over $11 billion in FY
\n2016: 2024 – Do my homework – Help write my assignment online. [The $11 billion was for U.S. and Canadian institutions combined]. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www
\n.prnewswire.com\/news-releases\/healthcare-organizations-raised-over-11-billion-in-fy-2016: 2024 – Do my homework – Help write my assignment online-300531776.html
\n62American Hospital Association: Estimates of the federal revenue forgone due to the tax exemption of nonprofit hospitals
\ncompared to the community benefit they provide, 2013. Prepared for the American Hospital Association October 2017 by
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\nHospitals and Healthcare Systems 105
\n\u25a0 \u201cThe incremental community benefit exceeds the tax exemption for only 62% of nonprofits. Policymakers should be aware that the tax exemption is a rather blunt instrument,
\nwith many nonprofits benefiting greatly from it while providing relatively few community benefits.\u201d63
\nIn order to address these concerns, the IRS began studying the nonprofit activities of
\nthese hospitals in 2006 – Write a paper; Professional research paper writing service – Best essay writers. Further, passage of the Patient Protection and Affordable Care Act
\n(ACA) in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer offered the possibility that a much larger number of people would be insured
\nthrough Medicaid expansion and government-sponsored Health Insurance Exchanges; thus,
\nas was the case after Medicare and Medicaid became operational, the definitions of charitable
\ncare and its potential reduced impact needed reexamination and redefinition. Anticipating
\nthese changes, the ACA included the recommendations for the IRS to formalize community
\nhealth needs assessment (CHNA) requirements described in Sections 501(r) and 4959 of the
\nIRC. In brief, hospitals64 must now perform the activities detailed in Exhibit 4.10 in order to
\npreserve their 501(c)(3) status and provide documentation on IRS Form 990 Schedule H.65
\nEXHIBIT 4.10. Hospital Activities to Preserve 501(c)(3) Status
\n\u25a0 A hospital organization must conduct a CHNA at least once every three taxable years, starting with its first
\ntaxable year beginning after March 23, 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap.
\n\u25a0 The CHNA must include:
\n(1) A description of the community served by the hospital facility and how it was determined.
\n(2) A description of the process and methods used to conduct the assessment, including a description of
\nthe sources and dates of the data and other information used in the assessment and the analytical
\nmethods applied to identify community health needs. The report should also describe information gaps
\nthat impact the hospital organization\u2019s ability to assess the health needs of the community served by the
\nhospital facility.
\n(3) A description of how the hospital organization took into account input from persons who represent
\nthe broad interests of the community served by the hospital facility. It must, at a minimum, take into
\naccount input from\u2014
\n(a) Persons with special knowledge of or expertise in public health;
\nErnst and Young. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.aha.org\/system\/files\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online-02\/tax-exempt-hospitals-benefits
\n.pdf The reader should look at the study in more detail because it makes certain assumptions, such as that charitable
\ncontributions would be made to other organizations if not donated to nonprofit hospitals\u2014so this item is not included in
\nlost governmental benefit.
\n63Herring, B, Gaskin, D., Zare, H., & Anderson, G. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Comparing the value of nonprofit hospitals\u2019 tax exemption
\nto their community benefits. Inquiry, 55, 1\u201311. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.ncbi.nlm.nih.gov\/pmc\/articles\/
\nPMC5813653
\n64If a hospital organization operates more than one hospital facility, each facility must meet these requirements (IRS
\nSection 501(r)(2)(B)(i)).
\n65IRS. 2017 Instructions for Schedule H (Form 990). Hospitals. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.irs.gov\/pub\/
\nirs-pdf\/i990sh.pdf
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\n106 The U.S. Healthcare System
\n(b) Federal, tribal, regional, State, or local health or other departments or agencies with current data or
\nother information relevant to the health needs of the community served by the hospital facility; and
\n(c) Leaders, representatives, or members of medically underserved, low income, and minority populations, and populations with chronic disease needs in the community served by the hospital
\nfacility.
\n(4) A prioritized description of all of the community health needs identified through the CHNA, as well as
\na description of the process and criteria used in prioritizing such health needs.
\n(5) A description of the existing healthcare facilities and other resources within the community available to
\nmeet the community health needs identified through the CHNA.
\n\u25a0 A CHNA must be made widely available to the public, for example by posting the written report on the
\nhospital facility\u2019s website.
\n\u25a0 A hospital must adopt a written \u201cimplementation strategy\u201d to meet the community health needs identified
\nthrough the CHNA. An implementation strategy will:
\n(1) describe how the hospital facility plans to meet the health need; or
\n(2) identify the health need as one the hospital facility does not intend to meet and explain why the hospital
\nfacility does not intend to meet the health need.
\nThe implementation strategy must tailor the description to the particular hospital facility, taking
\ninto account its specific programs, resources, and priorities. The date the implementation strategy is
\nconsidered approved by the IRS is when it is accepted by an authorized governing body of the hospital
\norganization.
\n\u25a0 Hospitals that fail to satisfy the CHNA requirements in any consecutive 3-year period will incur a $50,000
\nexcise tax.a
\n\u25a0 A hospital organization must establish a written financial assistance policy (FAP) and a written policy relating
\nto emergency medical care.b The FAP must include:
\n(1) eligibility criteria for financial assistance, and whether such assistance includes free or discounted care;
\n(2) the basis for calculating amounts charged to patients (It is important to note that for those patients who
\nqualify for its FAP, the hospital cannot use gross charges. Instead, it must limit the amounts to not more
\nthan the amounts generally billed to individuals who have insurance covering such care.);
\n(3) the method for applying for financial assistance;
\n(4) the actions the hospital organization may take in the event of nonpayment, including the reasonable
\nefforts to determine whether an individual is FAP-eligible before engaging in extraordinary collection
\nactions (ECAs); and
\n(5) measures to widely publicize the FAP within the community to be served by the hospital organization.
\na IRS: Part III\u2014Administrative, Procedural, and Miscellaneous Notice and Request for Comments Regarding the Community Health
\nNeeds Assessment Requirements for Tax-Exempt Hospitals Notice 2011-52. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from www.irs.gov\/pub\/irsdrop\/n-11-52.pdf
\nb Internal Revenue Service 26 CFR Part 1 RIN 1545-BK57, Additional Requirements for Charitable Hospitals. Notice of proposed
\nrulemaking. June 22, 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.irs.gov\/pub\/irs-drop\/reg-130266-11.pdf
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\nGiven these extensive and often vague criteria, why would a hospital organization want
\nto maintain its 501(c)(3) status? The benefits of federal nonprofit status are fourfold. The
\nfirst two were mentioned above: These hospitals do not have to pay federal taxes on their
\nearnings, and donors can deduct their contributions from taxable income (perhaps encouraging donations). The third reason is that borrowing costs are reduced because lenders (e.g.,
\nbondholders) to these institutions do not have to pay federal taxes on the interest payments
\nthey receive from borrowers; therefore, they can charge a lower rate for the loans.66 Finally,
\nthese institutions are exempt from paying federal unemployment tax.
\nSince nonprofit hospitals often engage in for-profit activities, the organizational structure
\nof these institutions must separate those latter businesses to preserve the tax exempt status
\nof the nonprofit activities. For example, if the hospital owns and manages non-healthcare
\nproperties, that activity should be isolated from the hospital itself in a distinct corporation
\n(with a separate tax number) that pays taxes.
\nAs mentioned above, since states and localities have their own levies (such as state
\nincome taxes and local property taxes), they can set their own criteria for nonprofit status
\nwithout regard to federal guidelines. The wide variance of criteria is exemplified by two
\ndecisions in the 1980s. In the first, the Supreme Court of Utah67 found that just because a
\nhospital takes charitable donations and provides free care to some of its patients, it is not
\nentitled to full property tax exemption. Instead, the extent of free care must be determined
\nannually; if it exceeds the value of the property tax, the hospital does not owe any state taxes.
\nThis decision emphasized that a hospital can lose its tax-exempt status not only by engaging in for-profit activities but also by not providing sufficient charitable services (both solely
\ndefined by the state). In Vermont, by contrast, its Supreme Court68 decided that the property
\ntax exemption could stand if the hospital is \u201copen to all who need it regardless of ability to
\npay.\u201d Exhibit 4.11 compares the two states\u2019 criteria.
\nMore recently, financially stressed states and localities have been reevaluating their
\ntax-exempt policies. For example, on June 14, 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap, then\u2013Illinois Governor Pat Quinn
\nsigned Senate Bill 2194 that changed the tax exemption status of hospitals, requiring them
\nto furnish charity care in amounts at least equal to the value of their property taxes. As the
\neconomy and the roles of insurance subsidies change, further state reevaluations of their
\npolicies will undoubtedly occur.
\nPublic\/Private Status. Most hospitals in the United States are both private and nonprofit.
\nPublic hospitals are, by definition, owned by governmental agencies. For example, the federal
\ngovernment owns hospitals for military veterans; many states own psychiatric hospitals; and
\n66For example, a lender with a tax rate of 33% is indifferent to charging a borrower 6% interest for fully taxable payments
\nand 4% if the interest income is tax exempt.
\n67Utah County v. Intermountain Health Care Inc., 709 P.2d 265 (Utah 1985).
\n68Medical Center Hospital of Vermont v. City of Burlington. No. 87\u2013501; October 13, 1989.
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\n108 The U.S. Healthcare System
\nEXHIBIT 4.11. Comparison of Criteria between Utah and Vermont Whether
\nan Institution Is Using a Property \u201cExclusively . . . for Charitable Purposes\u201d*
\nComparison of Utah Decision and Vermont Decision
\n1. whether the stated purpose of the entity is to provide a significant service to others without immediate
\nexpectation of material reward;
\nHealthcare institution need not dispense any free care in order to be considered charitable for purposes
\nof tax exemption; relevant inquiry is whether healthcare was made available to all who needed it, regardless
\nof ability to pay.
\n2. whether the entity is supported, and to what extent, by donations and gifts;
\nHealthcare institution need not show that the majority of its income is derived from charitable sources
\nin order to claim charitable use tax exemption.
\n3. whether the recipients of the \u201ccharity\u201d are required to pay for the assistance received, in whole or in part;
\nsee (1) above.
\n4. whether the income received from all sources (gifts, donations, and payment from recipients) produces a
\n\u201cprofit\u201d to the entity in the sense that the income exceeds operating and long-term maintenance expenses;
\nNot-for-profit institutions may generate revenues in excess of their expenses in order to maintain the
\norganization and still retain charitable use tax exemption, the criteria being only that such revenues not be
\npassed through to shareholders as profits but put back into operating expenses.
\n5. whether the beneficiaries of the \u201ccharity\u201d are restricted or unrestricted and, if restricted, whether the restriction bears a reasonable relationship to the entity\u2019s charitable objectives; and
\n6. whether dividends or some other form of financial benefit, or assets upon dissolution, are available to private
\ninterest, and whether the entity is organized and operated so that any commercial activities are subordinate
\nor incidental to charitable ones.
\n*Note: Text in regular font is from the Utah decision. Text in italic type is from the Vermont decision. Both states agree on criteria
\n5 and 6.
\nmany highly populated counties own their own hospitals, such as Kings County (Brooklyn),
\nCook County (Chicago), and Los Angeles County (in California).
\nGeneral\/Specialty Hospitals. This distinction separates institutions with many different services from those that tend to specialize according to some market segment, such as age
\n(children\u2019s hospitals), sex (women\u2019s hospitals), or clinical specialty (psychiatry or rehabilitation). Identifying a specialty hospital is not often obvious, however. For example, some
\nplaces designated as children\u2019s hospitals are in freestanding facilities while others are in a
\nsection of a larger institution.
\nIn addition to those obvious distinctions, specialty hospitals can be segmented by lengths
\nof stay, particularly those of longer duration. Many of these specialty hospitals have their origins as disease-specific facilities, such as tuberculosis sanitaria. The modern movement to
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\nHospitals and Healthcare Systems 109
\nlong-term acute care hospitals (LTCHs; pronounced \u201cel tax\u201d) started in the 1980s. At that
\ntime, technology began to allow many patients to survive for long times on ventilators, thus
\ncrowding hospital intensive care units. Further, after 1982, Medicare started to pay hospitals by diagnosis rather than on a fee-for-service (FFS), cost-based system. (See the section
\nin Chapter 6 devoted to Medicare for a full discussion of DRGs.) Therefore, patients with
\nserious and long-term health needs were putting space and financial stresses on hospitals. In
\norder to address these problems, the federal government created the category of LTCHs to
\nqualify for Medicare payment.69 This payment source accounts for about two thirds of the
\nincome of these facilities. Currently, three types of organizations can have an LTCH designation: freestanding facilities usually owned by for-profit corporations (such as Kindred70 or
\nSelect Medical Holdings,71 which, as the largest two for-profit chains, own more than half
\nof this market\u2019s facilities); satellite facilities usually owned by nonprofit hospitals; and \u201chospitals within hospitals\u201d (HwHs), facilities that are physically part of a hospital (like a floor
\nor wing) but designated for this purpose.
\nLike acute care hospitals, these facilities are licensed as hospitals according to different
\nstate laws; however, to
\nqualify as an LTCH for Medicare payment, a facility must meet Medicare\u2019s conditions of
\nparticipation for acute care hospitals and have an average length of stay greater than 25 days
\nfor its Medicare patients. (By comparison, the average Medicare length of stay in acute care
\nhospitals is about five days.) There are no other criteria defining LTCHs, the level of care they
\nfurnish, or the patients they treat.72
\nIn 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay, 391 LTCHs treated about 134,000 Medicare beneficiaries. Most of these stays
\nare for a few conditions; in 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay, the top 25 LTCH diagnoses made up 65% of all LTCH discharges. (I need help writing my essay – research paper see Exhibit 4.12 for the top 10 diagnoses.) CMS estimates that total Medicare
\nspending for LTCH services was $5.4 billion in fiscal year 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay. Compared with all Medicare beneficiaries, those admitted to LTCHs are disproportionately under age 65, over age
\n85, disabled, and diagnosed with end-stage renal disease. They are also more likely to be
\nAfrican American.
\nBecause of rising costs for these facilities, since 200273 Medicare has paid LTCHs by a
\nprospective payment system74 that is adjusted by relative weights. These weights reflect the
\n69CMS. Long-term care hospital prospective payment system. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.cms.gov\/
\nOutreach-and-Education\/Medicare-Learning-Network-MLN\/MLNProducts\/Downloads\/Long-Term-Care-HospitalPPS-Fact-Sheet-ICN006956.pdf
\n70Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.kindredhealthcare.com
\n71Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.selectmedical.com
\n72MedPAC. (2016: 2024 – Do my homework – Help write my assignment online, October). Long-term care hospitals payment system. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.medpac
\n.gov\/docs\/default-source\/payment-basics\/medpac_payment_basics_16_ltch_final.pdf
\n73The Medicare, Medicaid, and SCHIP [State Children\u2019s Health Insurance Program] Balanced Budget Refinement Act
\nof 1999 (BBRA) (Pub. L. 106-113) and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
\nof 2000 (BIPA) (Pub. L. 106-554).
\n74The payments are, by law, budget neutral (i.e., total expenditures are the same as if the previous method of payment
\nwere used). Also, some facilities, such as veterans\u2019 hospitals and others having existing prospective payment, are exempt.
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n110 The U.S. Healthcare System
\nEXHIBIT 4.12. Top 10 Diagnoses for LTCHs (2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay)
\nMS\u2013LTC\u2013DRG Description Discharges Percentage
\n189 Pulmonary edema and respiratory failure 16,017 12.0
\n207 Respiratory system diagnosis with ventilator support 96+ hours 15,224 11.4
\n871 Septicemia without ventilator support 96+ hours with MCC 8,809 6.6
\n177 Respiratory infections and inflammations with MCC 3,733 2.8
\n592 Skin ulcers with MCC 3,663 2.7
\n208 Respiratory system diagnosis with ventilator support <96 hours 3,105 2.3
\n949 Aftercare with CC\/MCC 2,864 2.1
\n539 Osteomyelitis with MCC 2,785 2.1
\n662 Renal failure with MCC 2,437 1.8
\n919 Complications of treatment with MCC 2,321 1.7
\nMS\u2013LTC\u2013DRG: Medicare severity, long-term care, diagnosis-related group; LTCH: long-term care hospital; MCC: major complication
\nor comorbidity; CC: complication or comorbidity; OR: operating room.
\nMS\u2013LTC\u2013DRGs are the case-mix system for LTCH facilities.
\nSource: MedPAC: Chapter 10: Long-term care hospital services. Report to the Congress: Medicare payment policy 2016: 2024 – Do my homework – Help write my assignment online, p. 284.
\nRetrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.medpac.gov\/docs\/default-source\/reports\/chapter-10-long-term-care-hospital-servicesmarch-2016: 2024 – Do my homework – Help write my assignment online-report-.pdf?sfvrsn=0.AU
\ndifferent costs in the LTCH setting as well as outlier payments for especially expensive cases.
\nUnlike other prospective payment schemes, payments to LTCHs are adjusted downwards
\nfor cases whose length of stay are shorter than average for a given diagnosis.
\nAfter establishment of LTACHs, hospital costs continued to rise, and CMS was concerned that hospitals were referring many of their acute cases to their satellites or HwHs in
\norder to be able to bill for the long term as well as acute care parts of the hospital stay. In
\nfiscal year 2005, CMS modified the payment to these affiliated facilities so that if more than
\n25% of their referrals came from their owner, payments would be the lower of the LTCH
\nprospective payment or the inpatient prospective payment. In 2007, the rule was changed to
\napply to referrals from any source.75 Further, from 2007 to 2017 (when the law expired),
\nfederal legislation mandated (with certain exceptions) a moratorium on the establishment of
\nnew LTCHs, LTCH satellites, and increase in the number of LTCH beds. This latter policy
\nchange caused consolidation in the sector due to for-profit acquisitions.
\n75\u201cIn special situations (i.e., admissions from rural and urban single or Metropolitan Statistical Area [MSA] dominant hospitals), the payment threshold was raised to 50 percent.\u201d Long Term Care Hospital Prospective Payment System: Payment
\nAdjustment Policy (Revised, 4\/16\/2013). Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.cms.gov\/LongTermCareHospitalPPS\/
\n01_Overview.asp
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 111
\nDespite all these changes, research commissioned by CMS found that \u201cpatients transferred to LTCHs had longer stays, higher total payments, and higher provider costs than
\nclinically similar patients who did not use LTCHs, with the smallest proportional differences
\nseen for patients in the ventilator condition group.\u201d76 The payment differences were much
\nless if the LTCH care evaluation focused on the most severely ill patients.
\nGoing forward, the key policy issues regarding these institutions are:
\n\u25a0 Clear and uniform admission criteria need to be set for patients and facilities. Research
\nhas not been able to distinguish many complex LTCH patients from those receiving services in acute care hospitals and some skilled nursing facilities.
\n\u25a0 Uniform payment schedules need to be established for like services. Since the patient
\npopulations in LTCHs and other facilities are similar, this uniformity is needed to avoid
\n\u201cselective gaming.\u201d Both major chains, and other owners, have been diversifying into
\nother post-acute care sectors (i.e., intensive rehab facilities, outpatient rehabilitation centers, skilled nursing facilities [SNFs], and home health agencies). These strategies are
\nintended to improve the ability of chains to control costs and limit the impact of payment
\npolicy changes.
\n\u25a0 Quality measures need to be implemented on the scale of acute care hospitals. The ACA
\nrequires CMS to collect data on quality in LTCHs. The Improving Medicare Post-Acute
\nCare Transformation Act of 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay (the IMPACT Act)77 mandates that LTCHs submit
\nstandardized patient assessment data with regard to quality measures, resource use, and
\nother measures. However, the requirements are just for reporting purposes and are not
\nas rigorous or extensive as those for acute care hospitals.78
\nLocation. This category can have at least four groups. The first group is a region\u2014for
\nexample, New England, Upper Midwest, Northwest, and so on. No consistency exists among
\ncompanies or government agencies with respect to this definition. The second classification
\nis by state. The third location dimension is by Metropolitan Statistical Areas (MSAs) (i.e.,
\naggregations of populations around high-population density centers). These designations
\nare standardized by the U.S. Census Bureau.79
\nFourth is the distinction among urban, suburban, and rural hospitals. Because rural areas
\nhave fewer beds than do their urban counterparts, federal policies give them special exemption from certain laws or extra compensations. (More about these institutions is included in
\nthe section of this chapter titled \u201cSafety Net Providers.\u201d) One special consideration will be
\n76Kandilov, A., & Dalton, K. (2011). Utilization and payment effects of Medicare referrals to long-term care hospitals
\n(LTCHs). Prepared under contract to the Centers for Medicare & Medicaid Services. Research Triangle Park, NC: RTI
\nInternational.
\n77Public Law 113-185. (2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay, October 6): Improving Medicare Post-Acute Care Transformation Act of 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay. Retrieved
\nMay 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.gpo.gov\/fdsys\/pkg\/PLAW-113publ185\/pdf\/PLAW-113publ185.pdf
\n78CMS.gov. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, April 10). Long-Term Care Hospital (LTCH) Quality Reporting (QRP). Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from
\nhttps:\/\/www.cms.gov\/Medicare\/Quality-Initiatives-Patient-Assessment-Instruments\/LTCH-Quality-Reporting\/index
\n.html
\n79Wilson, S. G. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap, September). United States Census Bureau: Patterns of metropolitan and micropolitan population
\nchange: 2000 to 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer: 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer Census Special Reports. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.census.gov\/content\/dam\/
\nCensus\/library\/publications\/2014: 2024 – Essay Writing Service. Custom Essay Services Cheap\/dec\/c2010 – Essay Writing Service: Write My Essay by Top-Notch Writersr-01.pdf
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\n112 The U.S. Healthcare System
\nmentioned here: the swing bed exemption. \u201cSwing beds\u201d are those beds in a hospital that
\nare used for acute care patients but can also be used for post-acute care, like skilled nursing
\nfacility services. As mentioned in the LTCH section, hospitals can game their reimbursement
\nby quickly discharging Medicare patients to a long-term care facility they own. Many rural
\nhospitals, however, are not filled to capacity, and the local area often lacks post-acute care
\ninstitutions. Recognizing that these hospitals are in a special, vulnerable position, Congress
\nincluded a provision in the Omnibus Budget Reconciliation Act of 1980 allowing Medicare
\nand Medicaid to pay for swing-bed care in rural hospitals that had fewer than 50 beds.
\nHospital Systems. According to the American Hospital Association,80 a health [hospital] system is defined as \u201c[h]ospitals belonging to a corporate body that owns and\/or
\nmanages health provider facilities or health-related subsidiaries. The system may also
\nown non-health-related facilities.\u201d \u201cSixty percent of AHA member hospitals are part
\nof health systems, the majority consisting of three to 10 hospitals . . . Three-quarters are
\nnot-for-profit, with another 10% identifying as Catholic church-related and 10% as for-profit
\ninvestor-owned. The remaining are non-federal government of varying types.\u201d81
\nThe three types of systems that will be discussed here are wholly owned systems,
\nalliances, and group purchasing organizations (GPOs). It is important to note that hospitals
\ncan belong to one or more of these arrangements. Since the large majority of hospitals belong
\nto some type of system (please see Exhibit 4.13), the nature of the affiliation will drive
\ninstitutional strategy and product\/service purchasing. It is therefore critical for healthcare
\nmanagers to understand these organizational arrangements and where the decision-making
\nauthority rests.
\nWholly owned\/singly managed systems. The most obvious type of system exists when a
\nsingle entity owns or manages two or more hospitals. (I need help writing my essay – research paper see Exhibit 4.14 for a list of
\nthe 10 largest systems in this category.)
\nSix reasons exist for formation of these systems:
\n1. Economies of scale
\n2. Economies of scope
\n3. Vertical integration
\n4. Capture populations
\n5. Market power over payers
\n6. Bureaucratization
\nThese reasons are discussed next.
\nEconomies of scale. The benefits of economies of scale result from major savings derived
\nby sharing support functions like payroll, accounting, logistics management, and volume
\n80American Hospital Association. (2016: 2024 – Do my homework – Help write my assignment online). Trendwatch chartbook: Glossary. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www
\n.aha.org\/system\/files\/research\/reports\/tw\/chartbook\/2016: 2024 – Do my homework – Help write my assignment online\/glossary.pdf
\n81American Hospital Association. Healthcare systems. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.aha.org\/advocacy\/
\nhealth-care-systems
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 113
\nEXHIBIT 4.13. Number of Nonprofit Hospital Systems in the United States
\nfrom 1995 to 2016: 2024 – Do my homework – Help write my assignment online
\nTotal Number of Hospitals in Systems: At least 3,200 Number of hospital systems
\n500
\n400
\n300
\n200
\n100
\n0
\n1995 2000 2005 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers 2013 2016: 2024 – Do my homework – Help write my assignment online
\n233
\n251
\n299
\n315
\n347
\n371
\nSource: The Governance Institute \u00a9 Statistica 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. Used by permission.
\npurchasing (although this latter benefit can also be gained from GPO membership, described
\nbelow). Some shared equipment, such as centralized computers and vehicles, can also
\nachieve this goal. This benefit often accrues with horizontal integration: mergers of like
\norganizations, in this case, hospitals merging with other hospitals. Despite these potential
\ncost savings, research findings are clear and consistent about the results of these mergers:
\nThey raise costs without providing other societal benefits. Gaynor recently summarized
\nthese findings:
\nExtensive research evidence shows that consolidation between close competitors leads to
\nsubstantial price increases for hospitals, insurers, and physicians, without offsetting gains
\nin improved quality or enhanced efficiency. Further, recent evidence shows that mergers
\nbetween hospitals not in the same geographic area can also lead to increases in price. Just
\nas seriously, if not more, evidence shows that patient quality of care suffers from lack of
\ncompetition.82
\n82Gaynor, M. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, February 14). Examining the impact of health care consolidation. Statement before the Committee
\non Energy and Commerce Oversight and Investigations Subcommittee, U.S. House of Representatives. Retrieved May 5,
\n2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/docs.house.gov\/meetings\/IF\/IF02\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online0214\/106855\/HHRG-115-IF02-Wstate-GaynorM-2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online0214
\n.pdf
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n114 The U.S. Healthcare System
\nEXHIBIT 4.14. Ten Largest U.S. Health Systems Based on Number of
\nHospitals (as of December 2017)
\nHospital Corporation of America
\n(Nashville, Tenn.)
\nU.S. Department of Veterans Affairs
\n(Washington, D.C.)
\nCommunity Health Systems
\n(Franklin, Tenn.)
\nAscension Health (St. Louis)
\nOperator (City, State)
\nTenet Healthcare Corp.
\n(Dallas, Tex.)
\nLifePoint Hospitals
\n(Brentwood, Tenn.)
\nTrinity Health (Livonia, Mich.)
\nPrime Healthcare Services
\n(Ontario, Calif.)
\nProvidence Health & Services
\n(Renton, Wash.)
\nKaiser Permanente (Oakland, Calif.)
\n0 25 50
\n39
\n41
\n42
\n44
\n45
\n59
\n78
\n119
\n143
\n174
\n75 100
\nNumber of hospitals
\n125 150 175 200
\nSource: Becker\u2019s Hospital Review: Top U.S. health systems based on number of hospitals as of 2017 \u00a9
\n2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online Statistica. Retrieved May 2, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.statista.com\/statistics\/245010\/top-us-for-profithospital-operators-based-on-number-of-hospitals Used with permission of Statistica.
\nEconomies of scope. When two or more different services can be produced using common
\nresources at a lower cost than if created individually, then economies of scope exist. For
\nexample, a radiology department can produce a variety of diagnostic and therapeutic services
\nusing the same staff and equipment. Another way to look at scope is when system members
\nare geographically close (a relative term that will vary case by case), they can diversify the
\ntypes of services each offers without the expense of duplication. For example, one facility
\nmay provide high-level neonatal care, while another might offer invasive cardiac treatments.
\nThis advantage is not always possible, however, since expensive diagnostics (such as CT
\nand MRI scanners) often need to be available on-site in the event of an emergency. In
\naddition, many system hospitals are located across a large geographic area so that each
\nserves a different community; each facility must, therefore, be relatively self-sufficient
\nwith a diverse portfolio of services. Because systems can draw from and service a
\nlarger area than a single hospital, certain types of system-owned, non-acute care facilities\/programs can better demonstrate economies of scope. (I need help writing my essay – research paper see Exhibits 4.15 and 4.16
\nfor examples.)
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 115
\nEXHIBIT 4.15. Types of Facilities Owned by Systems
\nAcute care hospitals
\nAssisted living facilities
\nContinuing-care retirement communities
\nFreestanding psychiatric hospitals
\nHome care facilities
\nLong-term acute care facilities
\nPhysician organizations
\nRehabilitation
\nSkilled nursing facilities
\nEXHIBIT 4.16. Types of Programs Run by Systems
\nAdult day care
\nBehavioral clinics
\nCancer treatment
\nChest pain clinics
\nDiagnostic imaging
\nDialysis
\nEmergency service facility
\nHospice
\nLaboratories
\nMobile imaging
\nOccupational health
\nPain management
\nPediatrics
\nPharmacy
\nPhysical therapy\/sports medicine
\nPhysician offices\/clinics
\nRehabilitation centers
\nSleep centers
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n116 The U.S. Healthcare System
\nEXHIBIT 4.16. (Continued)
\nSurgery centers
\nUrgent care
\nWellness centers
\nWomen\u2019s health centers
\nWound care
\nVertical integration. Because vertical integration is a bit more complex than the other reasons for system formation, it will be explained in more detail. Vertical integration occurs
\nwhen one organization acquires (or creates) another that is elsewhere along the value chain
\nfrom production of the product (or service) to its delivery to (or consumption by) the end user.
\nVertical integration primarily occurs when it is not economically advantageous or feasible
\nto create bilateral agreements, such as purchasing\/sales contracts or alliances\/joint ventures.
\nBackward integration arises when the other entity supplies inputs to the organization, while
\nforward integration occurs when the other entity receives the outputs from the organization.
\nThe simplest general examples of vertical integration are when an auto manufacturer buys
\na parts supplier (backward integration) or a dealership (forward integration). Hospitals have
\nvertically integrated by such activities as buying physician practices (backward integration)
\nand creating home health agencies (forward integration). In addition to these patient care
\nservices, vertical integration is also occurring when hospital systems set up their own health
\ninsurance capability. Exhibits 4.14 and 4.15. also provide examples of vertical integration.
\nGiven the theme of this chapter, the relevant questions are: Should hospitals vertically
\nintegrate and, if so, when? Stuckey and White83 posit that there are four reasons for vertical
\nintegration. These reasons are discussed below in the context of hospital systems.
\n1. A vertical market \u201cfails\u201d when transactions within it are too risky and the contracts
\ndesigned to overcome these risks are too costly (or impossible) to write and administer.
\n2. Companies in adjacent stages of the industry chain have more market power than companies in your stage.
\nThe transactions necessary for a hospital to assume financial and clinical risk are
\ncharacterized by high frequency and the potential of certain participants to slow care
\nor make it costlier to deliver. The best-studied vertical integration strategy is hospital
\npurchase of physician practices. Consider the following two examples of reasons for
\nvertical integration: If a hospital is taking global financial risk for a population but its
\nphysicians demand high fees, the system will not be viable. If a hospital wishes to
\ncontract with a payer for global fees for cardiovascular services but the surgeons do not
\nwant to participate, the enterprise will fail. In these cases, the power of suppliers (or
\nmore correctly, business partners) is disproportionately large.
\n83Stuckey, J., & White, D. (1993, April 15). When and when not to vertically integrate. MIT Sloan Management Review,
\n34I(3) (Spring), reprint #3435. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/sloanreview.MIT.edu\/article\/when-and-when-not-tovertically-integrate
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\nHospitals and Healthcare Systems 117
\n3. Integration would create or exploit market power by raising barriers to entry or allowing
\nprice discrimination across customer segments.
\n4. The market is young and the company must forward integrate to develop a market, or
\nthe market is declining and independents are pulling out of adjacent stages.
\nOrganized delivery systems (ODSs) can successfully differentiate themselves and access
\nrisk contracts only if they are clinically integrated. (See the Organized (Integrated) Delivery
\nSystems\/Accountable Care Organizations section later in this chapter.) If the delivery systems
\ncan achieve this clinical integration, they can raise barriers to entry for others who cannot
\naccomplish it. The price discrimination occurs when the system develops market power over
\npayers and can command higher fees.
\nOf note is that, with respect to hospitals, vertical integration has historically not
\nbeen challenged on antitrust grounds as much as has horizontal integration, though that
\nlaissez-faire attitude is changing.84 The reason was succinctly stated by Spengler in a classic
\nand oft-quoted article: \u201cHorizontal integration may, and frequently does, make for higher
\nprices and a less satisfactory allocation of resources than does pure or workable competition.
\nVertical integration, on the contrary, does not, as such, serve to reduce competition and
\nmay, if the economy is already ridden by deviations from competition, operate to intensify
\ncompetition.\u201d85 Given this statement, one must ask what the research shows about benefits
\nor harms of vertical integration. Three relationships have been studied: hospital\u2013physician,
\nhospital\u2013post-acute care, and hospital\u2013insurance.
\nStudies on the effects of hospital\u2013physician integration come mainly from the 1990s.
\nUsing data from Arizona, Florida, and Wisconsin for 1994 to 1998, Cuellar and Gertler86
\nfound that \u201cintegration has little effect on efficiency, but is associated with an increase in
\nprices, especially when the integrated organization is exclusive and occurs in less competitive markets.\u201d On the other hand, using data from California for 1994 to 2001, Ciliberto
\nand Dranove87 found \u201cno evidence of higher prices. If anything, integration is associated
\nwith lower prices, though the estimated price reductions are neither precise nor statistically
\nsignificant.\u201d
\nHospitals bought many physician practices in the 1990s, but the strategy mostly failed
\nand systems lost a great deal of money. More recently, attempts to replicate this integration
\nhave not fared much better. \u201cHospitals lose $150,000 to $250,000 per year over the first
\n3 years of employing a physician\u2014owing in part to a slow ramp-up period as physicians
\nestablish themselves or transition their practices and adapt to management changes. The
\nlosses decrease by approximately 50% after 3 years but do persist thereafter.\u201d88
\n84One of the earliest challenges in antitrust litigation for vertical integration was reported in: FTC and Idaho Attorney
\nGeneral Challenge St. Luke\u2019s Health System\u2019s Acquisition of Saltzer Medical Group as Anticompetitive. Retrieved May 3,
\n2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.ftc.gov\/opa\/2013\/03\/stluke.shtm
\n85Spengler, J. J. (1950). Vertical integration and antitrust. Journal of Political Economy, 58(4), 347\u2013352. 86Cuellar, A. & Gertler, P. J. (2006 – Write a paper; Professional research paper writing service – Best essay writers). Strategic integration of hospitals and physicians. Journal of Health Economics,
\n25, 1\u201328. 87Ciliberto, F., & Dranove, D. (2006 – Write a paper; Professional research paper writing service – Best essay writers). The effect of physician\u2013hospital affiliations on hospital prices in California.
\nJournal of Health Economics, 25, 29\u201338. 88Kocher, R. & Sahni, N. R. (2011). Hospitals\u2019 race to employ physicians\u2014The logic behind a money-losing proposition.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nNew England Journal of Medicine, 364, 1790\u20131793.
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\n118 The U.S. Healthcare System
\nResearch studies have also consistently shown that after hospitals purchase physician
\npractices, insurance and patient costs increase. For example: \u201cFor certain cardiology, orthopedic, and gastroenterology services, hospital employment of physicians results in up to 27%
\nhigher costs for Medicare and 21% higher costs for patients.\u201d89
\nWith respect to post-acute care, David et al.90 found that:
\nhospitals that are vertically integrated tend to discharge patients to their own HHA [home
\nhealth agency] and skilled nursing facilities sooner and in poorer health compared with
\nnon-integrated hospitals; yet, health outcomes are actually better for patients who transition to hospitals\u2019 own skilled nursing facilities and no worse for patients who transition to
\nhospital\u2019s own HHA.
\nIn other words, the shift to the lower-cost settings does not result in reduced quality
\nof care.
\nThe last type of vertical integration discussed here is a payer (insurance)\u2013hospital combination, called provider-sponsored health plans.91 Payer-provider combinations, such as group
\nor staff model HMOs (discussed in the Managed Care section of Chapter 6), are well known
\nand have been shown to lower costs compared to indemnity coverage. Kaiser-Permanente is
\na prominent example. However, these older organizations were designed from their start to
\nintegrate functions and harmonize incentives. In the past, when hospitals purchased insurers or set up their own companies, the efforts largely failed. (I need help writing my essay – research paper see Exhibit 4.17 for an
\nexample.) More recent efforts have not been much more successful. In an oft-quoted study,
\nBaumgarten concluded:
\nDozens of provider systems have established their own health plans since 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer . . . Based on
\nthe analysis reported here, it is hard to identify any of the new cohort of provider-sponsored
\nhealth plans that show strong promise . . . A few new plans have enjoyed some success,
\nreaching enrollments of 100,000 in just a few years. However, almost all these plans
\ncontinue to operate at a loss, in some cases reporting very large losses . . . The key to
\nsuccess for provider-sponsored health plans is the ability to enunciate and then deliver on
\na value proposition: a provider system and its affiliated physicians and hospitals providing
\nhigh-quality medical care at a lower cost . . . But, so far, the plans reviewed in this research
\nare only able to price competitively by paying their own providers below market rates. That
\nis not a strategy that can be sustained for long.92
\n89Avalere Health, LLC. (2017, November). Implications of hospital employment of physicians on Medicare beneficiaries.
\nRetrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www.physiciansadvocacyinstitute.org\/Portals\/0\/assets\/docs\/PAI_Medicare%20Cost
\n%20Analysis%20–%20FINAL%2011_9_17.pdf
\n90David, G., Rawley, E., & Polsky, D. (2011). Integration and task allocation: Evidence from patient care. Journal of
\nEconomics & Management Strategy, 22(3), 617\u2013639. 91For a list of some of the largest plans, see: Morse, S. (2016: 2024 – Do my homework – Help write my assignment online, September 16). 25 biggest provider-sponsored health
\nplans include some of the nation\u2019s biggest systems. Healthcare Finance. Retrieved May 5, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/www
\n.healthcarefinancenews.com\/news\/25-biggest-provider-sponsored-health-plans-include-some-nations-biggest-systems
\n92Baumgarten, A. (2017, June). Analysis of Integrated Delivery Systems and New Provider Sponsored Health Plans.
\nStudy for the Robert Wood Johnson Foundation. Retrieved May 5, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.rwjf.org\/content\/dam\/farm\/
\nreports\/reports\/2017\/rwjf437615
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\nHospitals and Healthcare Systems 119
\nEXHIBIT 4.17. Example of Early Failure of Provider-Sponsored Health
\nInsurance Plan
\nHealthChicago was a commercial HMO incorporated on January 2, 1984, by four suburban Chicago-area hospitals:
\nCentral Du Page Hospital in Winfield, Elmhurst Memorial Hospital in Elmhurst, Ingalls Memorial Hospital in Harvey,
\nand Northwest Community Hospital in Arlington Heights. The plan grew rapidly, so that at its peak in 1988 it had
\n85,000 members. Despite success in enrollment, the hospital-owned plan ran into early financial troubles. Financial
\nstatements ending December 31, 1986, showed a negative net worth of $2.21 million because of $6.3 million in
\nlosses. The following year was worse, when the plan had a $23 million loss. In order to maintain state-mandated
\nreserve requirements, owners needed to come up with $14 million in early 1988, bringing their total investment
\nto $41 million. By the end of September 1988, Northwest Community Hospital announced it was pulling out of
\nthe venture. According to one news reporta: \u201cThe hospital said its directors concluded that ownership of an HMO
\nisn\u2019t consistent with its role as a care provider.\u201d In 1992, membership declined to 65,000 and losses persisted. On
\nJanuary 22, 1992, Humana announced its acquisition of the plan for an undisclosed amount. The lack of insurance
\nexpertise as the principal cause of the failure is demonstrated by a postscript to this story. In August 1993, an Illinois
\nAppellate Court dismissed a lawsuit HealthChicago had originally brought against its former auditors Touche, Ross
\nand Company (a predecessor organization to Deloitte). \u201cIn its original complaint, plaintiff alleged that defendant
\nfailed to inform it of the need for changes in its pricing structure and levels of claims reserves and that such failure
\ncost plaintiff approximately $25 million.\u201db These activities are routine practices for any insurance company.
\na Moore, P. (September 28 1988). One of Health Chicago\u2019s part owners calls it quits. Chicago Sun Times.
\nb HealthChicago, Inc. v. Touche, Ross and Co., 625 N.E.2d 706 (1993) 252 Ill. App.3d 608,192 Ill. Dec. 551.
\nIn summary, what can now be said is that the outcome of vertical integration may depend
\non highly specific market characteristics, including method of physician compensation.
\nStuckey and White caution: \u201cDo not vertically integrate unless absolutely necessary. This
\nstrategy is too expensive, risky, and difficult to reverse.\u201d93 Other models with aligned
\nfinancial incentives, such as joint ventures or strategic alliances, could be employed instead
\nof vertical integration, but the power among participants would be more equal, a situation
\nnot always to the liking of hospital administrators.
\nCapture populations. It is important for individual hospitals to develop patient loyalty so
\nthat no matter what services are needed, the institution stays top of mind. One way systems
\ncan accomplish this goal is by developing strong brand recognition. Another way is by
\nproviding geographic coverage. For example, patients often wonder if they should choose
\na physician or hospital close to work or home. Systems with a strong brand identity and
\ngeographic coverage can offer themselves to patients across a variety of settings.
\nMarket power over payers. This advantage is a separate outgrowth of the previous one
\nbut can be an independent motivator for system formation. With geographic coverage and
\na large, loyal patient base, insurance companies will need to include these systems in their
\nnetworks. The one caveat systems face in this strategy is the possibility of antitrust.
\n93Stuckey, J., & White, D. (1993, April 15). When and when not to vertically integrate. MIT Sloan Management Review,
\n34I(3) (Spring), reprint #3435. Retrieved from http:\/\/sloanreview.MIT.edu\/article\/when-and-when-not-to-verticallyintegrate
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n120 The U.S. Healthcare System
\nBureaucratization. The advantage of bureaucratization is mainly seen in public institutions and in countries that have regionalized their hospitals into de facto systems. Examples
\ninclude the Veterans Administration, hospital clusters of the Hong Kong Hospital Authority, Local Health Integrated Networks in Ontario, and the Agences R\u00e9gionales de Sant\u00e9
\nin France.
\nAlliances. Alliances form for the same reasons as do single-owned\/operated systems (except
\nfor bureaucratization). In pooling alliances, entities bring together similar resources to
\nachieve economies of scale. Trading alliances are formed when participants bring different
\nresources to the enterprise to achieve economies of scope. Proponents of alliances see these
\narrangements as a way to address the increasingly complex healthcare environments while
\nmaintaining individual participant autonomy. However, this autonomy is also the source of
\nthe greatest weakness of this type of arrangement, and it has been estimated that 50% to
\n80% of all alliances fail.94
\nThree major reasons exist for failure. First, participants may enter the alliance with divergent goals that can cause conflict over strategic direction of the overall organization. These
\ndisagreements can be over such matters as different types of capital investments, location of
\ndeployed resources, or incorporation of additional partners (e.g., those with additional expertise or in a different location). Second, the governing structure may be unstable. Governing
\nboards are usually comprised of member organizations with equal or near-equal votes. This
\nproblem has caused the failure of systems that need to make decisions but are paralyzed by
\ndemocracy. A third potential problem is clash of organizational cultures. In this case, culture
\ncan dictate which issues are major problems, how problems are addressed, and how conflicts
\nare handled.
\nAn example of an alliance that failed for these reasons was the teaching hospitals of
\nNorthwestern University, called Northwestern Healthcare Network, which operated in the
\n1990s before dissolving. One of the reasons it failed was predicted in an interview with
\nGary Mecklenburg, then CEO of Northwestern Memorial Hospital: \u201cVoluntary organizations
\ncontinue to have a very important place in health care. But they don\u2019t have the ability to make
\nthe hard decisions when health care is changing, and we must make hard decisions in terms
\nof organization, structure, cost, etc. I start off with a premise that says regional networks or
\nsystems must have some degree of substantial authority to make them work.\u201d95
\nSuccessful, large national alliances include Premier96 and Vizient-owned hospitals.97
\nReasons for their success include large national presences, provision of services highly
\n94Zajac, E. J., D\u2019Aunno, T. A., & Burns, L. R. (2011). Managing strategic alliances. In L. R. Burns, E. H. Bradley, &
\nB. J. Wiener (Eds.), Shortell and Kaluzny\u2019s healthcare management: Organization design and behavior (pp. 321\u2013346).
\nClifton Park, NY: Delmar. This reference provides an excellent discussion of healthcare alliances.
\n95Johnson, D. E. (1992). CEO interview: Gary A. Mecklenburg\u2014Networks help assure survival. Health Care Strategic
\nManagement, 10, 12\u201317. 96Retrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from www.premierinc.com
\n97\u201cVizient was founded in 2015 – Research Paper Writing Help Service as the combination of VHA Inc., a national health care network of not-for-profit hospitals;
\nUniversity HealthSystem Consortium, an alliance of the nation\u2019s leading academic medical centers; and Novation, the
\nhealth care contracting company they jointly owned.\u201d Retrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.vizientinc.com\/About-us
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
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\nHospitals and Healthcare Systems 121
\nvalued by their stakeholders (such as supply chain management, revenue cycle management, and quality benchmarking information), and health policy involvement. From
\nempirical observation, it appears that alliances succeed when they focus on cost savings
\n(such as economies of scale) and quality improvement. Failure occurs more often when
\nconflicts arise over ways to increase revenues (such as resource allocations among member
\ninstitutions).
\nGroup purchasing organizations. According to the group purchasing organization (GPO)
\ntrade group, the Healthcare Supply Chain Association (HSCA), \u201cGPOs date back to 1909,
\nwhen the Hospital Superintendents of New York first considered establishing a purchasing
\nagent for laundry services. In 1910, the first GPO was created, the Hospital Bureau of New
\nYork.\u201d98 These organizations provide members not only with buying power but also such
\nservices as supply chain management (i.e., assistance with acquisition, inventory management, clinical evaluation, standardization of products, and evaluations of new technology).
\nA GAO study of the services provided by the six largest GPOs is displayed in Exhibit 4.18.
\nMany firms are owned by members; others are patronized by those who only pay membership fees. Some specialize in certain merchandise types while others offer a broad range of
\nproducts. Most of these arrangements are voluntary; members are able but not required to
\nmake purchases from the GPO to which they belong. Hospitals and systems typically belong
\nto two to four organizations and make 96% to 98% of their purchases through them.99 On
\naverage, GPO contracts account for about 73% of nonlabor purchases that hospitals make.100
\nThe business model for these companies derives principally from \u201cadministrative fees\u201d
\nvendors pay based on the purchase price that the healthcare provider pays; Exhibit 4.19
\nprovides a typical scheme for payment flows. Membership charges also contribute
\nto revenue.
\nThe largest organizations by annual spending volume are:101
\n1. Vizient (Irving, TX)\u2014$100 billion
\n2. Premier (Charlotte, NC)\u2014>$50 billion
\n3. HealthTrust (Nashville, TN.)\u2014$30 billion
\n4. Intalere (St. Louis, MO)\u2014$9 billion
\nThe benefit of these organizations to their members has been highlighted in a number of
\nstudies. For example, Burns and Lee102 found that GPOs lower product prices, particularly
\n98Retrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.supplychainassociation.org\/?page=FAQ
\n99Healthcare Supply Chain Association (HSCA). A primer on group purchasing organizations: Questions and answers.
\nRetrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/c.ymcdn.com\/sites\/www.supplychainassociation.org\/resource\/resmgr\/research\/gpo_
\nprimer.pdf
\n100Schneller, E. S. (2009, April). The value of group purchasing\u2013\u20142009: Meeting the need for strategic savings. Scottsdale, AZ: Health Care Sector Advances.
\n101Gooch, K. (2017, February 6). Four of the largest GPOs, 2017. Becker\u2019s hospital CFO report. Retrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online,
\nfrom https:\/\/www.beckershospitalreview.com\/finance\/4-of-the-largest-gpos-2017.html
\n102Burns, L. R., & Lee, J. A. (2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). Hospital purchasing alliances: Utilization, services, and performance. Health Care
\nManagement Review, 33, 201\u2013215.
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n122 The U.S. Healthcare System
\nEXHIBIT 4.18. Services the Six Largest Group Purchasing Organizations
\n(GPO) Reported Providing in 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers
\nServicea GPO
\nABCDE F
\nCustom contracting \u2713 \u2713 \u2713 \u2713 \u2713 \u2713
\nClinical evaluation and standardization \u2713 \u2713 \u2713 \u2713 \u2713 \u2713
\nTechnology assessments \u2713 \u2713 \u2713 \u2713 \u2713 \u2713
\nSupply-chain analysis \u2713 \u2713 \u2713 \u2713 \u2713
\nElectronic commerce \u2713 \u2713 \u2713 \u2713 \u2713
\nMaterials management consulting \u2713 \u2713 \u2713 \u2713 \u2713
\nBenchmarking data \u2713 \u2713 \u2713 \u2713 \u2713
\nContinuing medical education \u2713 \u2713 \u2713 \u2713 \u2713
\nMarket research \u2713 \u2713 \u2713 \u2713
\nMaterials management outsourcing \u2713 \u2713 \u2713
\nPatient safety services \u2713 \u2713 \u2713
\nMarketing products or services \u2713 \u2713 \u2713
\nInsurance services \u2713 \u2713
\nRevenue management \u2713 \u2713
\nWarehousing \u2713
\nEquipment repair \u2713
\nOtherb \u2713 \u2713 \u2713
\nNote: The six largest GPOs were selected based on their reported 2007 purchasing volume in Health Industry Distributors Association, Group Purchasing Organization & Integrated Delivery Network: Market Brief, Alexandria, Va., July 2009.
\na This list includes services that may be offered through affiliates of the GPO.
\nb Other reported services included, for example, contracting for environmentally friendly products, energy-related services and
\neducation, and public policy services.
\nSource: GAO structured data collection protocol. GAO (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, August). Group purchasing organizations. Services provided to
\ncustomers and initiatives regarding their business practices. Retrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from www.gao.gov\/new.items\/d10738.pdf.
\nfor commodity and pharmaceutical products, and reduce transaction costs. GPOs are less
\nsuccessful in lowering prices of other valued services, do not reduce costs for expensive
\nphysician preference items, and do not impede contracting with innovative firms or restrict
\ndesired products. These benefits as well as ownership in GPOs and payment of rebates to purchasers make entry into this sector very difficult. For example, in 2017, Amazon announced
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\nHospitals and Healthcare Systems 123
\nEXHIBIT 4.19. Hypothetical Flow of Contract Administrative Fees
\nPurchases product
\nfrom…
\nPays contract
\nadministrative fees to…
\nUses a portion of the contract
\nadministrative fees to cover
\noperating expenses and to
\nfinance other ventures
\nDistributes a portion of the contract
\nadministrative fees to…
\nCustomer Vendor GPO
\nSource: GAO (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, August). Group purchasing organizations. Services provided to customers and initiatives regarding their business practices. August 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. Retrieved May 6, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from www.gao.gov\/new
\n.items\/d10738.pdf
\nit would enter the hospital supply business; by April 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, the company pulled back this
\ninitiative.103
\nThe message here for healthcare product and service firms is that in addition to direct
\ncustomer sales, they must also develop a marketing strategy that involves multiple GPOs in
\ntheir channels.
\nPhysician-Owned Hospitals. Although this category could be included in either the ownership or specialty sections, some distinct issues warrant its separation. Like many healthcare
\nissues, physician-owned hospitals are not new. Many prominent organizations that own or
\ncontrol hospitals are named for their physician-founders, including the Mayo, Menninger,
\nand Ochsner clinics.104 After decades of stagnation, starting in the 1990s there was rapid
\ngrowth in these organizations. In 2017, there were about 250 such hospitals, with a heavy
\nconcentration in Texas. According to the Physician Hospitals of America105 (the trade organization for these institutions), the top five categories of these hospitals (in declining frequency)
\nare: Surgical, General Care, Orthopedic, Cardiac, and Long-Term Acute Care.
\nProponents of these hospitals cite the following benefits compared to non-physicianowned establishments:
\n\u25a0 Better clinical outcomes due to specialization
\n\u25a0 Lower costs
\n\u25a0 Higher patient satisfaction
\n\u25a0 More procedural efficiency
\n103See, for example: Aungst, T. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Amazon withdraws plans for medication distribution. Pharmacy Times(April 19).
\nRetrieved May 7, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.pharmacytimes.com\/contributor\/timothy-aungst-pharmd\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online\/04\/amazonwithdrawals-plans-for-medication-distribution
\n104These institutions are nonprofit, as distinguished from current for-profit physician-owned hospitals. 105Retrieved May 7, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.physicianhospitals.org
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\n124 The U.S. Healthcare System
\nCritics (especially the American Hospital Association and Federation of American Hospitals) claim:
\n\u25a0 Physicians choose the highest-margin services to care for patients and do not care for
\nMedicaid or indigent patients.
\n\u25a0 By taking healthier, better-insured patients, these hospitals leave general, nonprofit institutions to care for sicker patients without the cross-subsidy of the profitable services.
\n\u25a0 Physicians who have an interest in these facilities do more unnecessary\/low-value
\nprocedures.
\nThe research to support any of these claims, while extensive, is somewhat contradictory.
\nFurther, studies fall into two general time frames: before and after 2011 (i.e., during and after
\na period of rapid expansion and competitive pressures, respectively). The reason to divide the
\nresearch into these time periods is that, starting in 2011, the ACA restricted new construction
\nor expansion of existing physician-owned hospitals:
\n\u25a0 The number of operating rooms, procedure rooms, and beds is frozen except for certain
\ncounties with high population growth and\/or low bed capacity. Medicare and Medicaid stopped payment for services at such facilities if they were built or expanded after
\nDecember 31, 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.
\n\u25a0 Referring and treating physicians must disclose to patients their ownership interests (if
\nany) in the hospital, giving patients enough time to make a \u201cmeaningful decision\u201d about
\nthe place of care.
\n\u25a0 \u201cOwnership or investment returns [cannot be] . . . distributed to each owner or investor
\nin the hospital in an amount that is directly proportional to the ownership or investment
\ninterest of such owner or investor in the hospital.\u201d In other words, profits cannot be
\ndistributed based on the number or profitability of the patients referred or treated by
\nphysician-owners.106
\nCurrently, the federal government is considering lifting this freeze; however, some of
\nthe important recommendations still rely on older studies.107 Before policy makers enact
\nchanges, a thorough statistical and methodologic review of more current studies should be
\nconducted. However, since the debate continues using studies over the past two decades, it
\nis worthwhile to selectively analyze some of them.
\n106PPACA (Consolidated) (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, June 9). Title VI\u2014Transparency and Program Integrity. Subtitle A\u2014Physician Ownership and Other Transparency. Sec. 6001. Limitation on Medicare Exception to the Prohibition on Certain Physician
\nReferrals for Hospitals, pp. 619\u2013624. Retrieved May 7, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.cms.gov\/Medicare\/Fraud-and-Abuse\/
\nPhysicianSelfReferral\/Downloads\/Section_6001_of_the_ACA.pdf
\n107See, for example: Letter from MedPAC to Seema Verma [CMS Director], May 23, 2017, which largely relies
\non its 2005 report. Retrieved May 8, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/medpac.gov\/docs\/default-source\/comment-letters\/05232017_
\nmedpac2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Onlineippscommentletterfinal.pdf?sfvrsn=0 This memo\u2019s recommendation with respect to these hospitals largely
\nrelies on a 2005 MedPAC study: MedPAC: Physician-owned Specialty Hospitals. March 2005. Retrieved from http:\/\/
\nwww.medpac.gov\/documents\/Mar05_SpecHospitals.pdf
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\nHospitals and Healthcare Systems 125
\nIn a widely cited paper, Mitchell108 found: \u201cThe consistent finding of higher use
\nrates by physician owners across time clearly suggests that financial incentives linked to
\nownership of either specialty hospitals or ambulatory surgery centers influence physicians\u2019
\npractice patterns.\u201d Although the results make some intuitive sense, the study was done
\nin one state (Idaho), with data from one insurer, and analyzed one specialty. Further,
\ncausality cannot be determined: Did the physicians use their facilities solely to make
\nmoney, or did these facilities provide a more efficient way to treat patients in an area
\nwhere shortages prevented timely service provisions? Three additional criticisms of these
\ntypes of studies exist. First, they focus on ownership but not whether referring physicians
\n(as distinguished from those performing the procedures) have an interest in the facilities.
\nSecond, in most studies, utilization and other measured parameters are not correlated with
\ndegree of ownership interest. This question is especially important since the vast majority of
\nphysicians have ownership shares in these facilities of less than 5%.109 Further, according to
\nGreenwald et al.:
\n[A]lthough we found that physician-owners do tend to favor their own specialty hospitals,
\nthey also refer patients to competitor hospitals; the size of the ownership share appears
\nto be an important factor, not the fact of ownership per se. We also found that most
\nphysician-owners have very small shares in their specialty hospital and, possibly as a
\nconsequence, make few referrals to the facility.110
\nThird, almost all the studies contributing to this debate were conducted prior to implementation of the Medicare Severity-Diagnosis Related Groups (MS-DRGs) in 2007. (I need help writing my essay – research paper
\nsee Chapter 6 for an explanation of this method.) Briefly, prior to this time, facilities could
\nprofit by doing the same procedures on healthier patients. After this time, payments have
\nbeen adjusted depending on the severity of each case, thus limiting (though not eliminating)
\nthe ability to \u201ccream skim\u201d the patients with the lowest resource use.
\nThe research in this area has focused not just on the term \u201cphysician-owned hospitals\u201d
\nbut also on \u201csingle-specialty hospitals\u201d (SSHs). Specific definitions have varied, but
\nMedicare has used the term \u201cSSH\u201d to designate facilities that are largely physician-owned
\nand that primarily treat patients with cardiac, orthopedic, or general surgical services;
\nphysician ownership varies by type of hospital and ranges from about 33% to 100%.
\n108Mitchell, J. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). Effect of physician ownership of specialty hospitals and ambulatory surgery centers on frequency
\nof use of outpatient orthopedic surgery. Archives of Surgery, 145, 732\u2013738. In another article (Mitchell, J. [2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers]. Do
\nfinancial incentives linked to ownership of specialty hospitals affect physicians\u2019 practice patterns? Medical Care, 46,
\n732\u2013737), the author comes to the same conclusions based on a sample of Oklahoma workers\u2019 compensation cases for
\nback\/spine disorders.
\n109Schneider, J. E., Ohsfeldt, R. L., & Li, P. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). The effects of endogenous market entry of physician-owned
\nhospitals on medicare expenditures: An instrumental variables approach. Contemporary Economic Policy, 29,
\n151\u2013162.
\n110Greenwald, L., Cromwell, J., Adamache, W., Bernard, S., Drozd, E., Root, E., & Devers, K. (2006 – Write a paper; Professional research paper writing service – Best essay writers). Specialty versus
\ncommunity hospitals: Referrals, quality, and community benefits. Health Affairs, 25(1), 106\u2013118.
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n126 The U.S. Healthcare System
\nAn example of a study using this terminology provides further insights. Carey et al.111
\nfound that:
\nSSHs are entering less regulated markets; virtually all SSH growth nationally since 1990 has been
\nin states without certificate of need (CON) laws.
\n[R]esults did not show an overall statistical effect of either growing or declining safety-net
\nservices among general hospitals. [In other words, if SSHs take the most profitable patients,
\nthe provision of necessary community services were not reduced due to loss of profitable cross
\nsubsidies.]
\nSSH entry is associated not only with more cardiac services being performed, but with
\nmore hospitals performing cardiac services since some that did not offer these services
\nprior to the SSH entry added them. Competition from orthopedic and surgical SSHs also is
\nassociated with the growth of freestanding outpatient centers that are affiliated with general
\nhospitals.
\n[H]igh-technology diagnostic services showed a very strong pattern of growth in markets with
\nincreasing SSH competition compared to markets without SSH competition.
\nFurther, numerous studies have concluded that after adjustments for lower severity and
\nhigher procedure volume, \u201cspecialty hospitals appear to offer levels of [technical] quality
\nat least comparable and in some cases better than their general hospital counterparts.\u201d112
\nProponents of these hospitals claim the results are from the specialization in a particular
\nservice and process, so-called focused factories.113 Critics point out that even after clinical risk adjustment, differences in such factors as race and insurance status skew these
\nresults in favor of the SSH. Some even criticize the comparability of populations after risk
\nadjustment.114
\nUsing another type of measure, patient satisfaction, SSHs have enjoyed high scores compared to general hospitals in the same market.115
\n111Carey, K., Burgess, J. F., & Young, G. J. (2009, Summer). Single specialty hospitals and service competition. Inquiry,
\n46, 162\u2013171. 112Several of these studies are summarized in: Schneider, J. E., Miller, T. R., Ohsfeldt, R. L., Morrisey, M. A., Zeiner,
\nB. A., & Li, P. (2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). The economics of specialty hospitals. Medical Care Research and Review, 65, 531\u2013553. 113Herzlinger, R. (1997). Market-driven healthcare: Who wins, who loses in the transformation of America\u2019s largest
\nservice industry. Reading, MA: Addison-Wesley. 114O\u2019Neill, L., & Hartz, A. J. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap). Lower mortality rates at cardiac specialty hospitals traceable to healthier patients
\nand to doctors\u2019 performing more procedures. Health Affairs, 31(4), 806\u2013815. 115See, for example: Dunn, L. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap, January 27). Press Ganey honors 20 physician-owned hospitals with summit award. Becker\u2019s Hospital Review. Retrieved from http:\/\/www.beckershospitalreview.com\/news-analysis\/
\npress-ganey-honors-20-physician-owned-hospitals-with-summit-award.html; and, more recently, Dyrda, L. (2017,
\nFebruary 13). 38 physician-owned hospitals receive top patient ratings. Beckers Hospital Review. Retrieved from
\nhttps:\/\/www.beckershospitalreview.com\/rankings-and-ratings\/38-physician-owned-hospitals-receive-top-patient-ratings
\n.html
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\nHospitals and Healthcare Systems 127
\nAs far as cost, while higher profitability of SSHs has been linked to choice of higher
\nreimbursed services, there is evidence that they are more efficient than general hospitals.116
\nFurther, Schneider et al.117 concluded:
\nMuch of the policy concerns over physician ownership, particularly those arguing that
\nthe \u201cdemand inducement\u201d aspects of physician ownership drive up costs, are likely
\noverstated. Conversely, taking the quality and expenditure savings estimates together, POHs
\n[physician-owned hospitals] would generate about $10 billion in savings over a 10-year
\nperiod.
\nOther, more recent, studies reached these conclusions:
\n\u25a0 \u201cAlthough POHs may treat slightly healthier patients, they do not seem to systematically
\nselect more profitable or less disadvantaged patients or to provide lower value care.\u201d118
\n\u25a0 \u201cCertain models consistently outperformed others based on the VBPP [Medicare Value
\nBased Purchasing Program] methodology. In general, smaller physician-owned hospitals
\noutscored larger tertiary centers, teaching hospitals, and safety-net providers.\u201d119
\n\u25a0 \u201c[P]hysician-owned hospitals are associated with lower mean Medicare costs, fewer
\ncomplications, and higher patient satisfaction following THA [total hip arthroplasty]
\nand TKA [total knee arthroplasty] than non-physician-owned hospitals.\u201d120
\nIn summary, the two objections to physician-owned hospitals that have led to government
\nregulation, namely that taking the most profitable patients causes a decrement in the ability
\nof general hospitals to care for poorer patients and increases overall expenses, have not been
\nconclusively proved.121 More current analyses need to be performed to enlighten healthcare
\npolicy. However, in the absence of such data, the future of such facilities will depend as much
\non which political party controls Congress and the lobbying power of their critics as it does
\non their cost and quality performances.
\n116Kumar, K. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). Specialty hospitals emulating focused factories. International Journal of Health Quality Assurance,
\n23, 94\u2013109. 117The effects of physician-owned hospitals on medical care quality and expenditures: A review and update (\u201cAvalon
\nHealth Economics Study\u201d) (July 2015 – Research Paper Writing Help Service). Retrieved May 8, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/waysandmeans.house.gov\/wp-content\/
\nuploads\/2016: 2024 – Do my homework – Help write my assignment online\/08\/2015 – Research Paper Writing Help Service0519HL-SFR-Johnson-PHA-Homework help – Summary-Value-Manuscript-.pdf N.B.: \u201cThis research received partial support from an unrestricted research grant from Physician Hospitals of America.\u201d
\n118Blumenthal, D., Orav, E. J., Jena, A. B., Dudzinski, D. M., Le, S. T., & Jha, A. K. (2015 – Research Paper Writing Help Service). Access, quality, and costs of
\ncare at physician-owned hospitals in the United States: Observational study. BMJ, 351, h4466. doi:10.1136\/bmj.h4466. 119Ramirez, A., Tracci, M. C., Stukenborg, G. J., Turrentine, F. E., Kozower, B. D., & Jones, R. S. (2016: 2024 – Do my homework – Help write my assignment online). Physician-owned
\nsurgical hospitals outperform other hospitals in the medicare value-based purchasing program. Journal of the American
\nCollege of Surgeons, 223(4), 559\u2013567. 120Courtney, P. M., Darrith, B., Bohl, D. D., Frisch, N. B., Della Valle, C. J. (2017). Reconsidering the affordable care
\nact\u2019s restrictions on physician-owned hospitals: Analysis of CMS data on total hip and knee arthroplasty. Journal of Bone
\nand Joint Surgery, 99(22), 1888\u20131894. 121For a detailed economic analysis of this issue, see: Schneider, J. E., Miller, T. R., Ohsfeldt, R. L., Morrisey, M. A.,
\nZeiner, B. A., & Li, P. (2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). The economics of specialty hospitals. Medical Care Research and Review, 65, 531\u2013553.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n128 The U.S. Healthcare System
\nSafety Net Providers. Many public and private facilities are included in a group called safety
\nnet providers. The Institute of Medicine122 described these institutions as those that:
\ndeliver a significant level of health care to uninsured, Medicaid, and other vulnerable
\npatients . . . These providers have two distinguishing characteristics:
\n1. Either by legal mandate or explicitly adopted mission, they offer care to patients regardless of
\ntheir ability to pay for those services; and
\n2. A substantial share of their patient mix are uninsured, Medicaid, and other vulnerable patients.
\nCore safety net providers typically include public hospitals, community health centers, and
\nlocal health departments, as well as special service providers such as AIDS and school-based
\nclinics.123
\nAdditionally, the hospital\u2019s financial condition and the provision of selected services
\n(e.g., trauma, burn, and neonatal intensive care) may be considered.124
\nWithin this group are a number of classifications distinguished by payer mix, geography,
\nand the method of federal payment for their services. These types of institutions are subject
\nto their own Medicare Conditions of Participation in addition to the eligibility requirements
\nthat distinguish each one.
\nDisproportionate share hospitals. Medicare and Medicaid have separate programs to help
\nhospitals who care for a disproportionate number of poorer Medicare patients (those on
\nSupplemental Security Income [SSI]) and Medicaid (non-dual eligible) patients, respectively. Prior to 1981, the payment method for Medicaid services was a vaguely worded
\n\u201creasonable costs\u201d standard, and the federal government gave states leeway to set eligibility
\nand payments standards. To establish a more solid footing for payments and address
\nincreasing costs, the Disproportionate Share Hospital (DSH) program was started by the
\nOmnibus Budget Reconciliation Act of 1981. It was strengthened by the Omnibus Budget
\nReconciliation Act of 1987 (P.L. 100-203), which required state Medicaid agencies to make
\nadditional payments to hospitals that serve disproportionate numbers of low-income patients
\nwith special needs. (Its permanence was codified in Section 1923 of the Social Security Act.)
\nHowever, because the payments were not capped, program costs began to rise rapidly, causing the federal government to gradually institute three measures to control spending. First,
\nnational and state-specific ceilings were placed on special payments to DSH hospitals.125
\n122Institute of Medicine. (2000). America\u2019s health care safety net: Intact but endangered. Washington, DC: The National
\nAcademies Press. doi:10.17226\/9612
\n123Two important organizations that represent these facilities are the National Association of Community Health Centers
\n(http:\/\/www.nachc.org) and the National Association of Public Hospitals and Health Systems (http:\/\/www.naph.org).
\nBoth retrieved May 8, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
\n124Bachrach, B., Braslow, L., & Karl, A. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap). Toward a high performance health care system for vulnerable populations: Funding for safety-net hospitals. The Commonwealth Fund (March 8). Retrieved April 29, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www
\n.commonwealthfund.org\/Publications\/Fund-Reports\/2014: 2024 – Essay Writing Service. Custom Essay Services Cheap\/Mar\/Vulnerable-Populations.aspx?view=print&page=all
\n125Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991 (P.L. 102\u2013234).
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 129
\nSecond, hospital-specific ceilings were set on payments.126 Finally, limits to DSH allotments were set at 12 % of states\u2019 total annual Medicaid expenditures.127 Except for some
\nadjustments in 2003, the structure remained the same until passage of the Affordable Care
\nAct (ACA) in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. Since the government anticipated that many more people would be
\ninsured under the ACA, the law contains provisions to scale back DSH payments through
\n2020. In addition to the change in amounts, Section 3133 of the ACA also revises the
\nmethod for computing the Medicare DSH adjustment for discharges occurring on or after
\nOctober 1, 2013:
\n1. Instead of the amount that would otherwise be paid as the DSH adjustment, hospitals receive
\n25 percent of the amount determined under the current Medicare DSH payment method beginning in fiscal year (FY) 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay (for discharges occurring on or after October 1, 2013).
\n2. The remainder, equal to 75 percent of what otherwise would have been paid as Medicare
\nDSH, becomes available for an uncompensated care payment after the amount is reduced
\nfor changes in the percentage of individuals who are uninsured. The Centers for Medicare
\n& Medicaid Services (CMS) is currently using uncompensated care costs reported on
\nWorksheet S-10 in combination with insured low-income days (the sum of Medicaid days
\nand Medicare SSI days) to develop hospital uncompensated care payments. Each hospital
\neligible for Medicare DSH payments receives an uncompensated care payment based on its
\nrelative share of total uncompensated care costs and low-income days reported by Medicare
\nDSHs.128
\nSubsequent laws provide examples of legislative delay, indecision, and bowing to
\npolitical pressures. First, the payment reductions were extended to 2021129 and 2022.130
\nIn 2013, the lowered payments were put on hold until 2016: 2024 – Do my homework – Help write my assignment online, but the reductions were
\nextended to 2023.131 The following year, the reductions were delayed until 2017 and
\nextended to 2024.132 In 2015 – Research Paper Writing Help Service, the reductions were revised further to cover 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online to 2025,
\nwith increasing reductions in payments reaching $8 billion for the final 2 years. Finally, in
\n2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, the 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online\u20132019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers reductions were eliminated and the cutbacks for 2020 to 2025 were
\nadjusted.133 Under current law, federal DSH allotments are scheduled to be reduced in fiscal
\nyear (FY) 2020 by $4 billion, which is 31% of states\u2019 unreduced DSH allotment amounts.
\nDSH allotment reductions are scheduled to increase to $8 billion a year in FYs 2021
\nto 2025.
\n126The Omnibus Budget Reconciliation Act of 1993 (P.L. 103\u201366). 127Balanced Budget Act of 1997 (BBA 97, P.L. 105\u201333). 128Medicare Learning Network Fact Sheet. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, May) Medicare disproportionate share hospital. Updated May 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
\nRetrieved from https:\/\/www.cms.gov\/Outreach-and-Education\/Medicare-Learning-Network-MLN\/MLNProducts\/
\nDownloads\/Disproportionate_Share_Hospital.pdf
\n129Middle Class Tax Relief and Job Creation Act of 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap (P.L. 112\u201396). 130American Taxpayer Relief Act of 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap (P.L. 112\u2013240). 131Bipartisan Budget Act of 2013 (P.L. 113\u201367). 132Protecting Access to Medicare Act of 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay (P.L. 113\u201393). 133Bipartisan Budget Act of 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online (P.L. 115\u2013123).
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n130 The U.S. Healthcare System
\nFuture payments will take into account the Medicaid and Children\u2019s Health Insurance
\nProgram (CHIP) Payment and Access Commission (MACPAC) assessments of the program.
\nMost recently, MACPAC reported that it:
\ncontinues to find little meaningful relationship between DSH allotments and the number of
\nuninsured individuals; the amounts and sources of hospitals\u2019 uncompensated care costs; and
\nthe number of hospitals with high levels of uncompensated care that also provide essential
\ncommunity services for low-income, uninsured, and vulnerable populations. Total hospital charity care and bad debt continue to fall, especially in states that expanded Medicaid
\ncoverage.134
\nSpecifically, the study found that in the years since implementation of the ACA, total
\nhospital charity care and bad debt fell by $8.6 billion (23%) between 2013 and 2015 – Research Paper Writing Help Service, with
\nthe largest declines occurring in states that expanded Medicaid.
\nCurrently, eligibility is determined according to the formula below. \u201cIf a hospital\u2019s DPP
\n[Disproportionate Patient Percentage] equals or exceeds a specified threshold amount, the
\nhospital qualifies for the Medicare DSH adjustment. The Medicare DSH adjustment is determined by using a complex formula (the applicable formula is also based on a hospital\u2019s
\nparticular DPP).\u201d135
\nAlternatively, a hospital can qualify if it is located in an urban area, has 100 or more beds,
\nand can demonstrate that more than 30% of total net inpatient care revenues come from state
\nand local government sources for indigent care (other than Medicare or Medicaid).
\nMedicare DPP
\nTotal Medicare Days Total Patient Days
\nMedicare\/Supplemental
\nSecurity Income Days Medicaid, Non-Medicare Days +
\nAccording to MACPAC, in fiscal year 2017, \u201ca total of $12 billion in federal funds was
\nallotted for DSH payments. Similar to other types of Medicaid payments, federal DSH funds
\nmust be matched by state funds; in total, $21 billion in state and federal DSH funds were
\nallotted in FY 2017.\u201d136
\nDespite these delays and particularly in the face of subsequent adjustments, six issues
\nmust still be considered with regard to reduced DSH\u2019s financial impact. First, in order to
\nkeep their volumes up and provide a source of funding that currently comes from DSH
\npayments, these facilities will need to obtain contracts with the companies participating in
\n134MACPAC (Medicaid and CHIP Payment and Access Commission). (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, March). Report to Congress on Medicaid
\nand CHIP. Retrieved May 9, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.macpac.gov\/wp-content\/uploads\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online\/03\/Report-to-Congress-onMedicaid-and-CHIP-March-2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.pdf
\n135Medicare Learning Network Fact Sheet, op. cit. 136MACPAC. (2017, June). Issue Brief https:\/\/www.macpac.gov\/wp-content\/uploads\/2017\/06\/Medicaid-DSHAllotments-How-Could-Funding-for-Safety-Net-Hospitals-Change-in-2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.pdf
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\nHospitals and Healthcare Systems 131
\nthe Health Insurance Exchanges that the ACA created. Second, when DSH payments are
\nreduced or eliminated, the Medicaid payments may remain inadequate, since each state
\nhas wide discretion in its own program\u2019s design, including scope of benefits and payment
\namounts. Third, about 15.5% of adults aged 19 to 64 remain uninsured, higher than in
\n2016: 2024 – Do my homework – Help write my assignment online.137 Current DSH payments may no longer be available to subsidize their care. Fourth,
\nmany of these hospitals provide specialty care to currently insured patients. For example,
\nCook County Hospital has one of the area\u2019s few burn care units. With subsidy removals for
\nservices that are undercompensated (like burns), hospitals may be hard-pressed to continue
\noffering them. Fifth, reduction in DSH payments was based on anticipated full enrollment
\nin Medicaid expansion. However, with states being able to opt out, these uninsured persons
\nwill still seek uncompensated care, but now without DSH payments. The uninsured rate in
\nstates that did not expand their Medicaid programs is 21.9%.138 Finally, a significant number
\nof these hospitals\u2019 patients are Medicare beneficiaries. Medicare\u2019s payment structure is
\nincreasingly incorporating a \u201cvalue-based\u201d purchasing scheme that reduces payment if
\npatient evaluations of the process of care fall below target values.139 Because safety-net
\nhospitals (SNHs) have lower scores than non-SNHs on measures of patient-reported
\nexperience,140 their Medicare payments will suffer, thus reducing yet another source
\nof funds.
\nMedicare-dependent hospitals. Medicare-dependent hospitals (MDHs) have 100 or fewer
\nbeds, are not also classified as a sole community hospital (SCH) (see below), and at least 60%
\nof their inpatient days or discharges are attributable to individuals receiving Medicare Part
\nA benefits.141 Because hospitals have claimed that Medicare payments do not adequately
\ncompensate them for their expenses, MDHs can receive inpatient payments based on the
\ngreater of the Medicare Prospective Payment Rate (PPR) or a blend of the PPR (25%) and
\ntheir historical costs (75%).142
\nAlthough most of these facilities are rural, a subset are designated Urban Medicare
\nDependent Hospitals (UMDHs). Section 3142 of the ACA defines an UMDH as a hospital that
\ndoes not receive any additional Medicare payments or adjustments under section 1886(d)
\nof the Social Security Act, such as indirect graduate medical education payments
\n137Collins, S. R., Gunja, M. Z., Doty, M. M., & Bhupal, H. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, May 1). First look at health insurance coverage in 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online
\nfinds ACA gains beginning to reverse. Retrieved May 9, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.commonwealthfund.org\/publications\/
\nblog\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online\/apr\/health-coverage-erosion
\n138Ibid. 139HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems). Retrieved May 9, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/
\nwww.cms.gov\/Medicare\/Quality-Initiatives-Patient-Assessment-Instruments\/HospitalQualityInits\/HospitalHCAHPS
\n.html
\n140Chatterjee, P., Joynt, K. E., Orav, E. J., & Jha, A. K. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap). Patient experience in safety-net hospitals: Implications
\nfor improving care and value-based purchasing. Archives of Internal Medicine, 172(16), 1204\u20131210. 14142 C.F.R. \u00a7 412.108 Special treatment: Medicare-dependent, small rural hospitals. Title 42\u2014Public Health. 142MedPAC. (2017, October). Critical access hospitals\u2019 payment system. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www
\n.medpac.gov\/docs\/default-source\/payment-basics\/medpac_payment_basics_17_cah_final09a311adfa9c665e80adff00009
\nedf9c.pdf?sfvrsn=
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\n132 The U.S. Healthcare System
\nunder subsection (d)(5)(B), disproportionate share payments, payments to a rural
\nreferral center (RRC), payments to a sole community hospital (SCH), or payments to a
\nMedicare-dependent small rural hospital. In addition, the hospital must not be a critical access
\nhospital (CAH).143
\nThis program was extended by the Bipartisan Budget Act of 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online through September
\n30, 2022, and the terms are discussed in the 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers Medicare Inpatient Prospective Payment
\nSystem (IPPS) rule.144 CMS projected that the MDH program extension should have paid
\nhospitals about $119 million in 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
\nSole community hospitals. Congress created the Sole Community Hospital (SCH) program
\nin 1983 to support small rural hospitals that, \u201cby reason of factors such as isolated location,
\nweather conditions, travel conditions, or absence of other hospitals, [are] the sole source of
\ninpatient hospital services reasonably available in a geographic area to Medicare beneficiaries.\u201d145 CMS defines an SCH as a hospital paid under the Medicare IPPS that meets one of
\nthe following criteria:
\n1. The hospital is located at least 35 miles from other like hospitals, i.e., those that furnish
\nshort-term, acute care; are paid under the Medicare Acute Care Hospital PPS; and are not
\nCritical Access Hospitals or
\n2. The hospital is rural, located between 25 and 35 miles from other like hospitals, and meets one
\nof these criteria:
\na) No more than 25 percent of residents who become hospital inpatients or no more than
\n25 percent of the Medicare beneficiaries who become hospital inpatients in the hospital\u2019s service area are admitted to other like hospitals located within a 35-mile radius of the hospital
\nor, if larger, within its service area or
\nb) The hospital has fewer than 50 beds and would meet the 25 percent criterion above if not
\nfor the fact that some beneficiaries or residents were forced to seek specialized care outside
\nof the service area due to the unavailability of necessary specialty services at the hospital or
\nc) The hospital is rural and located between 15 and 25 miles from other like hospitals but
\nbecause of local topography or periods of prolonged severe weather conditions, the other
\nlike hospitals are inaccessible for at least 30 days in each of 2 out of 3 years or
\nd) The hospital is rural and because of distance, posted speed limits, and predictable weather
\nconditions, the travel time between the hospital and the nearest like hospital is at least
\n45 minutes.146
\n143Sibelius, K. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). Report to Congress. Department of Health and Human Services Study of Urban MedicareDependent Hospitals. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.cms.gov\/Research-Statistics-Data-and-Systems\/
\nStatistics-Trends-and-Reports\/Reports\/downloads\/Riley_UMDH_RTC_2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.pdf
\n144Department of Health and Human Services (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, May 7). Centers for Medicare & Medicaid Services 42 CFR Parts
\n412, 413, 424, and 495. Federal Register,83, 88. Proposed Rules, pp. 20172\u201320175. Retrieved from https:\/\/www.gpo.gov\/
\nfdsys\/pkg\/FR-2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online-05-07\/pdf\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online-08705.pdf.
\n145Section 405.476, Title 42 of the 1983 Code of Federal Regulations. 146Medicare Learning Network: Acute Care Hospital Inpatient Prospective Payment System. March 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
\nhttps:\/\/www.cms.gov\/Outreach-and-Education\/Medicare-Learning-Network-MLN\/MLNProducts\/Downloads\/
\nAcutePaymtSysfctsht.pdf Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 133
\n3. The hospital is rural and located between 15 and 25 miles from other like hospitals but because
\nof local topography or periods of prolonged severe weather conditions, the other like hospitals
\nare inaccessible for at least 30 days in each of 2 out of 3 years or
\n4. The hospital is rural and because of distance, posted speed limits, and predictable weather conditions, the travel time between the hospital and the nearest like hospital is at least 45 minutes . . .
\nA hospital\u2019s service area is the area from which it draws at least 75% of its inpatients during the most recent 12-month cost reporting period ending before it applies for classification
\nas an SCH.
\nRural SCHs are paid for inpatient care on a cost basis rather than by DRG and are allowed
\nto choose from several years on which to base these payments.147 Starting in 2016: 2024 – Do my homework – Help write my assignment online, rural
\nSCHs received an additional 7.1% above standard payment rates for outpatient prospective
\npayment services excluding drugs, biologics, brachytherapy sources, and devices paid under
\nthe pass-through payment policy (devices that receive temporary extra payment because of
\ntheir newness and uniqueness).
\nCritical access hospital. The Balanced Budget Act of 1997 (P.L. 105-33) created the category
\nof critical access hospitals (CAHs), expanding and replacing the Essential Access Community Hospital\/Rural Primary Care Hospital Program and the Medical Assistance Facilities
\ndemonstration in Montana.148
\nA Medicare-participating hospital must meet the following criteria for CMS to designate
\nit a CAH:149
\n\u25a0 Be located in a state that has established a State Medicare Rural Hospital Flexibility
\nProgram.
\n\u25a0 Be designated by the state as a CAH.
\n\u25a0 Be located in a rural area or an area that is treated as rural.
\n\u25a0 Be located either more than 35 miles from the nearest hospital or CAH or more than
\n15 miles in areas with mountainous terrain or only secondary roads; OR prior to
\nJanuary 1, 2006 – Write a paper; Professional research paper writing service – Best essay writers, was certified as a CAH based on state designation as a \u201cnecessary
\nprovider\u201d of healthcare services to residents in the area.
\n\u25a0 Maintain no more than 25 inpatient beds that can be used for either inpatient or swing-bed
\nservices. In addition to the 25 inpatient CAH beds, a CAH may also operate a psychiatric
\nand\/or a rehabilitation distinct part unit of up to 10 beds each. These units must comply
\nwith the Hospital Conditions of Participation.
\n147Code of Federal Regulations. Title 42\u2014Public Health. Vol. 2, Date: 2017-10-01 Title: Section \u00c2\u00a7 412.92\u2014Special
\ntreatment: Sole community hospitals. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.gpo.gov\/fdsys\/pkg\/CFR-2017-title42-
\nvol2\/xml\/CFR-2017-title42-vol2-sec412-92.xml
\n148Since a number of legislative changes shaped this program over the years since its establishment, see CAH Legislative
\nHistory. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.aha.org\/advocacy-issues\/cah\/history.shtml
\n149Critical Access Hospitals. Retrieved May 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.cms.gov\/Medicare\/Provider-Enrollment-andCertification\/CertificationandComplianc\/CAHs.html
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n134 The U.S. Healthcare System
\n\u25a0 Maintain an annual average length of stay of 96 hours or less per patient for acute inpatient care (excluding swing-bed services and beds that are within distinct part units).
\n\u25a0 Demonstrate compliance with the critical access hospitals conditions of participation
\nfound at 42 Code of Federal Regulations (CFR), Part 485 subpart F.
\n\u25a0 Furnish 24-hour emergency care services 7 days a week.
\nThese facilities may also be health clinics or centers (as defined by the state) that previously operated as a hospital before being downsized to a health clinic or center.
\nLike MDHs and SCHs, the CAHs are not subject to the fixed Inpatient Prospective Payment System (IPPS) or Outpatient Prospective Payment System. Instead, a CAH may bill
\nMedicare under one of two methods. The Standard Payment Method allows the hospital to
\nbill for facility services (inpatient and outpatient) based on 101% of reasonable costs.150
\nUnder the Optional Payment Method, the hospital can bill for both facility and physician
\nservices, the latter at 115% of local Medicare rates. In order to be eligible for the optional
\nmethod, a physician must assign Part B billing rights to the CAH. Additionally, since 2007,
\nphysicians and other practitioners electing the optional method can bill Medicare for telehealth services.151
\nThese higher payment levels (compared to Medicare inpatient and outpatient prospective payment methods) are supposed to enable these facilities to furnish services in scarcity
\nareas while maintaining quality care. Research on this topic shows that for most services,
\nCAHs furnish comparable care; however, this finding does not necessarily hold as complexity
\nincreases. For example:
\n\u25a0 With respect to Medicare beneficiaries, prior to 2002, CAHs and non-CAHs had
\nsimilar mortality rates. However, for \u201cbeneficiaries with acute myocardial infarction,
\ncongestive heart failure, or pneumonia, 30-day mortality rates for those admitted to
\nCAHs, compared with those admitted to other acute care hospitals, increased from 2002
\nto 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.\u201d152
\n\u25a0 \u201cAmong Medicare beneficiaries undergoing common surgical procedures, patients
\nadmitted to critical access hospitals compared with non\u2013critical access hospitals had
\nno significant difference in 30-day mortality rates, decreased risk-adjusted serious
\ncomplication rates, and lower-adjusted Medicare expenditures, but were less medically
\ncomplex.\u201d153
\n150The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (P.L. 108\u2013173, Section 405).
\nThis Act increased payment to 101% of costs and created the Optional Payments method.
\n151Medicare Learning Network. (2017, August). Critical Access Hospital. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.cms
\n.gov\/Outreach-and-Education\/Medicare-Learning-Network-MLN\/MLNProducts\/downloads\/CritAccessHospfctsht.pdf
\n152Joynt, K. E., Orav, E. J., & Jha, K. A. (2013). Mortality rates for Medicare beneficiaries admitted to critical access and
\nnon\u2013critical access hospitals, 2002\u20132010 – Essay Writing Service: Write My Essay by Top-Notch Writer. JAMA, 309, 1379\u20131387. 153Ibrahim, A. M., Hughes, T. G., Thumma, J. R., Dimick, J. B. (2016: 2024 – Do my homework – Help write my assignment online). Association of hospital critical access status with
\nsurgical outcomes and expenditures among Medicare beneficiaries. JAMA, 315(19), 2095\u20132103.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 135
\n\u25a0 \u201cCompared with PPS hospitals, CAHs are significantly less likely to have any observed
\n(unadjusted) adverse event on 4 of the 6 indicators. After adjusting for patient mix and
\nhospital characteristics, CAHs perform better on 3 of the 6 indicators. Accounting for the
\nnumber of discharges eliminated the differences between CAHs and PPS hospitals in the
\nlikelihood of adverse events across all indicators except one . . . The study suggests there
\nare no differences in surgical patient safety outcomes between CAHs and PPS hospitals
\nof comparable size.\u201d154
\n\u25a0 \u201cFor emergency colectomy procedures, Medicare beneficiaries in critical access hospitals experienced lower mortality rates but more frequent re-operation and readmission.
\nThese findings suggest that critical access hospitals provide safe, essential emergency
\nsurgical care, but may need more resources for postoperative care coordination in these
\nhigh-risk operations.\u201d155
\nThe relative numbers of the three types of hospitals described above are displayed in
\nExhibit 4.20.
\nEXHIBIT 4.20. Share of Hospitals and Medicare Payments by Rural Hospital
\nType, 2015 – Research Paper Writing Help Service
\nStandard PPS
\n15%
\nShare of rural hospitals Share of rural Medicare payments
\nMDH
\n8%
\nSCH
\n17%
\nCAH
\n61%
\nStandard PPS
\n27%
\nMDH
\n8%
\nSCH
\n31%
\nCAH
\n34%
\nReligious-sponsored (faith-based) hospitals. The origins of these hospitals are discussed
\nin the history section above, and they share many of the same issues as other hospitals. What
\n154Natafgi, N., Baloh, J., Weigel, P., Ullrich, F., & Ward, M. M. (2017). Surgical patient safety outcomes in critical access
\nhospitals: How do they compare? The Journal of Rural Health, 33(2), 117\u2013126. 155Ibrahim, A. M., Regenbogen, S. E., Thumma, J. R., Dimick, J. B. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Emergency surgery for medicare beneficiaries
\nadmitted to critical access hospitals. Annals of Surgery, 267(3), 473\u2013477, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
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\n136 The U.S. Healthcare System
\ndistinguishes them from the other types of hospitals is that religious beliefs guide not only
\nwhat care they provide but how they provide the care (e.g., with compassion and attention to
\nthe individual\u2019s spiritual, as well as physical, needs). The number of these organizations has
\ncontinued to grow, as shown in Exhibit 4.21.
\nThe predominant affiliation of these hospitals is Catholic. The more than 600 Catholic
\nhospitals make up over 14% of the all acute care hospitals and 1 in 6 acute care beds. CMS
\nhas identified 46 of them as being \u201csole community\u201d providers. Further, Catholic systems
\nown more than 1,400 long-term care facilities across 50 states.156
\nThese hospitals control what is provided to patients in such areas as reproductive services
\nand end-of-life care. The principles that guide their actions are dictated by the United States
\nConference of Catholic Bishops.157
\nEXHIBIT 4.21. Number of Faith-Based Hospitals in the United States from
\n1995 to 2016: 2024 – Do my homework – Help write my assignment online Percentage of hospitals
\n800
\n600
\n400
\n200
\n0
\n1995 2000 2005 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers 2013 2016: 2024 – Do my homework – Help write my assignment online
\n585
\n662 663 658 667
\n726
\nNote: In 2016: 2024 – Do my homework – Help write my assignment online, 17% of all U.S. hospitals were faith-based.
\nSource: The Governance Institute. \u00a9 Statistica. Used with permission.
\n156Johnson, S. R. (2017, September 14). As Catholic systems grow by acquiring other hospitals, abortions plummet. Modern Healthcare. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.modernhealthcare.com\/article\/20170914\/NEWS\/170919931 157United States Conference of Catholic Bishops. (2009). Ethical and Religious Directives for Catholic Health Care Services (5th ed.). Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.modernhealthcare.com\/article\/20170914\/NEWS\/170919931
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\nHospitals and Healthcare Systems 137
\nHOSPITAL INPATIENT PAYMENT METHODS
\nHospitals include in their descriptions of financial conditions and projections a metric called
\npayer mix, or what percentage of their services are paid by private payers, Medicare, Medicaid, self-pay (direct patient payments), and charity (free) care. Of equal importance, though
\noften lacking, is a description of the mix of the methods of payment. The frequency of these
\nmethods on a geographic or hospital-specific level can vary dramatically, depending on such
\npopulation factors as economics (Medicaid eligibility) and age (Medicare) and on such insurance market factors as penetration of types of managed care and degree of competition among
\npayers and providers.
\nThe following eight methods (which are not mutually exclusive for a given institution)
\nare used to pay hospitals for inpatient services; they may also be used in other countries as
\nwell as in the United States.
\n1. Fee for service. This arrangement is the traditional retail model where the payer pays
\ncharges. This method is best for hospitals since markups are significant and can cover
\nuncompensated\/undercompensated care. It is obviously the worst method for payers.
\n2. Discount fee for service. This scheme is not quite a \u201cwholesale\u201d model since the charges
\non which the discounts are based can be raised significantly to make payments substantial. It is very favorable for hospitals and only slightly better for payers.
\n3. DRGs. I need help writing my essay – research paper see the Medicare section in Chapter 6 for a discussion of DRGs.
\nBriefly, this method is a single payment for inpatient services based on the reason
\n(diagnosis) the patient was in the hospital. DRGs cover only the hospital portion
\nwhile bundled\/global payments (see below) cover physician services and possibly
\nsome post-discharge care as well. This method is better for payers since it can help
\npredict hospital costs given the mix of expected illnesses in a population. It also limits
\npayment for particularly costly patients.158
\n4. Per diems. Before discussing this topic, it should be noted that hospital expense for providing inpatient care is typically greatest in the first day or two of the stay, when costly
\nprocedures and\/or tests are usually performed. As patients recuperate or receive ongoing treatment (such as intravenous medication), costs are lower than at the beginning
\nof the stay. When payment is by DRG or global rate, shorter times are more profitable
\nfor the hospital, since revenue does not increase with longer stays but expenses do
\naccumulate. With FFS-like payments, however, longer stays are much more lucrative
\nfor hospitals since (barring complications) their margins are higher nearest the time of
\ndischarge.
\nWhen managed care plans such as health maintenance organizations (discussed in
\nmore detail in the Managed Care section in Chapter 6) started to become more prevalent
\nin the 1980s, they were looking for clearer, easier, and presumably cheaper alternatives to FFS hospital payments. While some companies negotiated payments based
\n158If patients are very ill and require prolonged services, Medicare will pay extra amounts called \u201coutlier payments.\u201d
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\n138 The U.S. Healthcare System
\non discount charges or DRG-like schemes, others crafted a method based on a flat,
\nall-inclusive, daily (per diem) fee. Each level of service (such as intensive care, regular
\nmedical\/surgical care, maternity care, and psychiatric care) has its own daily charge.
\nTotal payment is, therefore, the sum of all the daily charges. The method for calculating
\nthese fees was simple: With adjustments for days spent at different levels of care, the
\nper diem was the quotient of total costs divided by total days.
\nWhile this method is simple, for three reasons it led to inadequate compensation
\nfor hospitals. First, the patients who were being admitted were sicker than the average
\ncase used to calculate the average payments. This situation was due to an increased
\ncapability to treat many illnesses in the outpatient setting and increased scrutiny of the
\nappropriateness of hospitalization (utilization review). Second, the lengths of stay were
\nshortened and patients were being transferred to less expensive sites of care, such as
\nskilled nursing facilities. The \u201cprofitable\u201d part of the hospital stay was, therefore being
\ntruncated. Finally, when most of the payers compensated hospitals on an FFS basis,
\nno shortfall existed (or it was insignificant); all fixed costs were essentially being covered by these traditional plans, and these per diem contracts were more than covering
\nmarginal costs. However, when many private payers switched to per diem payments
\nafter the late 1980s, hospitals began to feel the economic strains.
\n5. Budgets. Many government hospitals, such as those of the Veterans Administration
\n(VA) and counties, are given annual budgets with which they must deliver all their
\nservices. These hospitals are not prohibited from collecting from private payers when
\nsuch coverage is available; however, frequently they are not equipped or are unwilling
\nto do so because of the relatively low volume of these patients. For example, a 2009
\nGAO study found that for patient services at 18 VA medical centers: \u201cAlthough some
\nmedical services are not billable, such as service-connected treatment, management
\nhad not validated reasons for related unbilled amounts of about $1.4 billion to assure
\nthat all billable costs are charged to third-party insurers.\u201d159
\nThe advantage to the payer of this method is the ability to budget expenses.
\nThe disadvantage is that the hospitals have a disincentive to be more efficient; if they
\ndo not spend their budgeted money in the designated year, their next allocation is
\nreduced at least by the amount of the savings.
\n6. Risk. This arrangement is more fully explained in the next section on organized delivery systems\/accountable care organizations. Briefly, this scheme requires hospitals
\nto accept financial risk for caring for patients (akin to insurance risk) as well as
\nclinical risk (i.e., responsibility for the quality of care). In the latter case, the payer
\nfinancially rewards the organization with additional payments if certain targets are
\nmet. Monies may also be deducted from payments if hospitals do not achieve certain
\nthresholds.
\n159Government Accountability Office Document GAO-10-152T: VA Health Care: Ineffective Medical Center Controls
\nResulted in Inappropriate Billing and Collection Practices. October 15, 2009. Retrieved May 8, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www
\n.gao.gov\/assets\/130\/123540.pdf
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\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 139
\n7. Bundled\/global\/packaged payments.
\n160 Instead of receiving a bill for multiple services from multiple providers, the payer negotiates one fee for an episode of care.
\nAs mentioned above, while DRGs refer only to in-patient services, bundled payments
\ncan refer to outpatient care as well as combined inpatient and outpatient care for the
\nsame episode of illness. Bundled payments often include professional charges (such
\nas physician fees) and ancillaries (laboratory and radiology). While private payers
\nhave been paying in this fashion for a number of years (e.g., for such services as
\ntransplantation and coronary artery bypass surgery), as a result of provisions in the
\nACA, Medicare has been at the forefront of initiating a bundled payments program
\nbased on the success of previous pilot studies. For example, in the Medicare Acute
\nCare Episode (ACE) Demonstration project, which bundled certain in-hospital cardiac
\nand orthopedic procedures in selected states, Medicare achieved a per- episode
\nsavings of $319 and total net savings of approximately $4 million.161 The Medicare
\nbundled payment programs have undergone many politically motivated changes in the
\npast several years. Most recently, CMS announced voluntary Bundled Payments for
\nCare Improvement Advanced (BPCI Advanced) for 32 clinical episodes in order \u201cto
\nalign incentives among participating health care providers for reducing expenditures
\nand improving quality of care for Medicare beneficiaries.\u201d162 The program began
\nOctober 1, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, and will run through December 31, 2023. Exhibit 4.22 provides a list
\nof these episodes. Note the diversity of conditions, which provides the opportunity for
\nbusinesses to partner with provider organizations to deliver cost-effective care.
\n8. Quality payments. In addition to the above methods, hospitals are also paid or penalized for their performance of clinical care. I need help writing my essay – research paper see Chapter 9 for details of this
\nprocess.
\nORGANIZED (INTEGRATED) DELIVERY SYSTEMS\/ACCOUNTABLE
\nCARE ORGANIZATIONS
\nOrigins and Definition
\nIn the 1990s, a number of researchers conducted studies on what were then called integrated
\nor organized delivery systems (IDSs or ODSs). These systems were formed for the same
\nreasons listed above for hospital systems. An ODS was defined as \u201c[a] network of organizations which provides or arranges to provide a coordinated continuum of services to a
\n160These three terms are often used interchangeably or idiosyncratically. Since Medicare has a program that it calls
\nBundled Payment, this term will be used for this concept.
\n161Centers for Medicare & Medicaid Services Final Evaluation Report Evaluation of the Medicare Acute Care Episode
\n(ACE) Demonstration. May 31, 2013. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/downloads.cms.gov\/files\/cmmi\/ACEEvaluationReport-Final-5-2-14.pdf Of note is that the savings from the acute care episode (physician and hospital
\ncharges) were more substantial; post-acute care costs reduced savings by 45%. 162CMS.gov. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, April 30). BPCI Advanced. Retrieved May 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/innovation.cms.gov\/initiatives\/
\nbpci-advanced
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\n140 The U.S. Healthcare System
\nEXHIBIT 4.22. Clinical Episodes for the Bundled Payments for Care
\nImprovement Advanced Program\u201429 Inpatient Clinical Episodes
\n1. Disorders of the liver excluding malignancy, cirrhosis, alcoholic hepatitis
\n2. Acute myocardial infarction
\n3. Back and neck except spinal fusion
\n4. Cardiac arrhythmia
\n5. Cardiac defibrillator
\n6. Cardiac valve
\n7. Cellulitis
\n8. Cervical spinal fusion
\n9. COPD, bronchitis, asthma
\n10. Combined anterior posterior spinal fusion
\n11. Congestive heart failure
\n12. Coronary artery bypass graft
\n13. Double joint replacement of the lower extremity
\n14. Fractures of the femur and hip or pelvis
\n15. Gastrointestinal hemorrhage
\n16. Gastrointestinal obstruction
\n17. Hip and femur procedures except major joint
\n18. Lower-extremity\/humerus procedure except hip, foot, femur
\n19. Major bowel procedure
\n20. Major joint replacement of the lower extremity
\n21. Major joint replacement of the upper extremity
\n22. Pacemaker
\n23. Percutaneous coronary intervention
\n24. Renal failure
\n25. Sepsis
\n26. Simple pneumonia and respiratory infections
\n27. Spinal fusion (noncervical)
\n28. Stroke
\n29. Urinary tract infection
\nThree outpatient clinical episodes:
\n1. Percutaneous coronary intervention (PCI)
\n2. Cardiac defibrillator
\n3. Back and neck except spinal fusion
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\nHospitals and Healthcare Systems 141
\ndefined population and is willing to be held clinically and fiscally accountable for the outcomes and health status of the population served. An ODS will own or be closely aligned
\nwith an insurance product.\u201d163
\nThe ideal structure of these systems is outlined in Exhibit 4.23.
\nNoteworthy about this scheme are the following observations:
\n1. The stakeholders are the same ones discussed in Chapter 1, \u201cUnderstanding and Managing Complex Healthcare Systems.\u201d
\n2. The end states are cost, quality, and access.
\nEXHIBIT 4.23. The Value Chain of Healthcare Delivery
\nStakeholders
\nEnd States
\nCompetencies
\nCommunities Patients Employees Employers Purchasers Government Investors
\nEase of
\naccess
\nInterpersonal
\nsatisfaction
\nAccurate
\ndiagnosis
\nCompetent
\ntreatment
\nPositive
\noutcomes
\nAffordable
\ncost
\nMore
\nknowledgeable
\nconsumer
\nDisease
\nPrevention
\nHealth
\npromotion
\nPrimary
\ncare
\nAcute
\ncare
\nmanagement
\nRehabilitative
\ncare
\nmanagement
\nChronic
\ncare
\nmanagement
\nSupportive
\ncare
\nmanagement
\nUnderlying
\nCapabilities
\nFunctional
\nIntegration
\nPhysician-system
\nIntegration
\nClinical
\nIntegration
\nSource: Shortell, S., Gillies, R. R., Anderson, D. A., Erickson, K. M., & Mitchell, J. B. (2000). Remaking healthcare in America: The
\nevolution of organized delivery systems (2nd ed.). San Francisco: Jossey-Bass.
\nFunctional Integration. The extent to which the supported functions and activities (e.g., financial management, human resources management, information technology management, strategic planning, quality improvement) are coordinated across operating units so as to add greatest overall value to the
\nsystem.
\nPhysician Integration. The extent to which physicians and the ODSs with which they are associated agree on
\nthe aims in purposes of the system and work together to achieve mutually shared objectives.
\nClinical Integration. The extent to which patient care services are coordinated across people, functions, activities, and sites over time so as to maximize the value of services delivered to patients.
\n163Shortell, S., Gillies, R. R., Anderson, D. A., Erickson, K. M., & Mitchell, J. B. (2000). Remaking healthcare in America:
\nThe evolution of organized delivery systems (2nd ed.). San Francisco: Jossey-Bass.
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\n142 The U.S. Healthcare System
\n3. The competencies represent care across the spectrum of services (from prevention to
\nend-of-life support).
\n4. Functional integration is the low-hanging fruit of integration\u2014easy to achieve and recognize its financial benefits. It mainly derives from economies of scale.
\n5. Physician integration requires not just shared culture and goals between those professionals and the system but also a compensation scheme that aligns them.
\n6. Clinical integration is the hardest alignment to achieve. It requires that the organizations not only have a process in place to learn and develop best practices, but also
\nhas a mechanism to spread those best practices and make them part of how the firm
\nworks.
\n7. In order to ensure that these systems accept not only clinical risk for care but also
\nfinancial risk, they must assume an insurance-like function, either directly by owning
\nan insurance plan or by contracting on some type of risk basis with one.
\nDespite the success of long-standing, mostly private systems (such as Geisinger, Intermountain Healthcare, Cleveland Clinic, Mayo Clinic, and others), for reasons explained
\nbelow, this concept did not fulfill the promise of transforming the way care was delivered.
\nMore recently, Section 3022 of the ACA164 added Section 1899 to the Social Security Act
\nthat requires the Secretary to establish a Medicare Shared Savings Program, which is the
\norigin of federal ACO initiatives. This change spurred a more recent attempt at using these
\nODSs (now often called ACOs) to address large regional variations in costs and quality of
\ncare. While Medicare funding is the underpinning of this program, the topic is discussed here
\nsince it has created a large, renewed impetus for systems to form and integrate. The structures of these newer arrangements are also shaped by the different payment mechanisms
\ndescribed below.
\nThe goal of the ACO initiative is to reward quality performance and operational efficiency rather than sheer volume of services. Also, federal budget deficits made shifting
\nfinancial risk for the provision of care to providers more attractive to CMS.
\nAccording to CMS: \u201cACOs are groups of doctors, hospitals, and other health care
\nproviders, who come together voluntarily to give coordinated high-quality care to the
\nMedicare patients they serve.\u201d165
\nIn addition to addressing Medicare issues, other provisions in the ACA create a number of constraints on the profitability of private payers (e.g., regulated premiums, reduced
\nability to charge different rates to older and higher risk members, mandated benefits, limits
\non members\u2019 out-of-pocket payments and bounds on profit margins). Consequently, these
\ncommercial plans are also very interested in shifting more risk to providers. The result is
\n164Section 3022 of the Affordable Care Act added a new section 1899 to the Social Security Act that requires the Secretary
\nto establish a Medicare Shared Savings Program, which is the origin of federal ACO initiatives.
\n165Like many other facts in this book, these provisions are subject to change. The provisions were taken from the CMS
\npublication of the Shared Savings Program: Accountable Care Organizations, October 11, 2011. Retrieved May 13, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online,
\nfrom http:\/\/www.cms.gov\/sharedsavingsprogram
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
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\nHospitals and Healthcare Systems 143
\nprivate ACO arrangements whereby the health delivery system takes substantial clinical and
\nfinancial risk for patient care. Since private payer contracts can vary considerably, the next
\nsection focuses on operational requirements of Medicare ACOs.166
\nEligibility
\nACO participants or combinations of ACO participants must qualify as one, or more, of the
\nfollowing providers or suppliers or participate through an ACO formed by one or more of
\nthese groups:167
\n\u25a0 Professionals in group practice arrangements
\n\u25a0 Networks of individual professional practices
\n\u25a0 Partnerships or joint venture arrangements between hospitals and ACO professionals
\n\u25a0 Hospitals employing ACO professionals
\n\u25a0 CAHs that bill for both Medicare Part A and B (such as inpatient and physician components)
\n\u25a0 Rural health clinics (RHCs)
\n\u25a0 Federally Qualified Health Centers (FQHCs)
\nIn 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, there were 561 ACOs that enrolled 10.5 million beneficiaries; the distribution
\nof types of these organizations in the Shared Savings Program (see below) were:168
\n\u25a0 Physicians only: 171 (30%)
\n\u25a0 Physicians, hospitals, and other facilities: 324 (58%)
\n\u25a0 FQHCs\/RHCs: 66 (12%)
\nCMS identifies providers using their National Provider Identifier (NPI) and Taxpayer
\nIdentification Number (TIN)\u2014either an Employer Identification Number or a Social Security
\nnumber. While specialists can contract with multiple organizations, primary care doctors can
\njoin only one ACO. Members of a group with one TIN must join the same ACO regardless
\nof their office locations. The only way to avoid this situation is if each group member has a
\ndifferent TIN.
\nFinancial Arrangements
\nIn order to achieve its goals, Medicare withholds parts of its usual payments to ACOs
\nand pays them back as bonuses if those organizations meet certain financial and quality
\n166See, also, the website for the National Association of ACOs, the trade group of these organizations. Retrieved May 15,
\n2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.naacos.com
\n167For more details on eligibility, see: CMS Eligibility Requirements Checklist for MSSP ACO Participation. Retrieved
\nMay 13, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.hcca-info.org\/Portals\/0\/PDFs\/Resources\/Conference_Handouts\/Compliance_Institute\/
\n2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay\/mon\/101handout1.pdf
\n168CMS. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, January). Medicare Shared Savings Program Fast Facts. Retrieved May 13, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.cms
\n.gov\/Medicare\/Medicare-Fee-for-Service-Payment\/sharedsavingsprogram\/Downloads\/SSP-2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online-Fast-Facts.pdf
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\n144 The U.S. Healthcare System
\nbenchmarks. Patients are assigned to an ACO based on whom they recently saw for primary
\ncare services (as determined by certain procedure codes). Except for the Pioneer and Next
\nGeneration ACOs (see below), these organizations often do not know which patients are
\nassigned to them until the end of the assessment period, when CMS calculates the bonuses
\n(or deficits). The benchmarks are adjusted using a severity-of-illness measure for the local
\ncounty population (as opposed to individual patients). One important characteristic of these
\nplans is that, like traditional Medicare, patients are free to seek care from any provider; if
\nthey do so, the financial and quality performance of the non-ACO providers are attributed
\nto the ACO to which the patient is assigned.
\nEligible providers are able to enroll in one of three types of ACOs, described next.
\nThe first, and most common, type of ACO is the Medicare Shared Savings Program
\n(MSSP), which offers participants several options that allow for varied amounts of downside
\nrisk. These options are explained in Exhibit 4.24.
\nEXHIBIT 4.24. Shared Savings Program ACO Participation Options
\nTrack
\n(% of ACOs)
\nFinancial Risk
\nArrangement
\nDescription
\n1
\n(82%)
\nOne-sided Track 1 ACOs do not assume downside risk (shared losses) if
\nthey do not lower growth in Medicare expenditures.
\nMedicare ACO Track 1+
\nModela
\n(10%)a
\nTwo-sided Medicare ACO Track 1+ Model (Track 1+ Model) ACOs assume
\nlimited downside risk (less than Track 2 or Track 3).
\n2
\n(1%)
\nTwo-sided Track 2 ACOs may share in savings or repay Medicare losses
\ndepending on performance. Track 2 ACOs may share in a
\ngreater portion of savings than Track 1 ACOs.
\n3
\n(7%)
\nTwo-sided Track 3 ACOs may share in savings or repay Medicare losses
\ndepending on performance. Track 3 ACOs take on the greatest
\namount of risk but may share in the greatest portion of savings
\nif successful.
\na The Track 1+ Model is a time-limited CMS Innovation Center model. An ACO must concurrently participate in Track
\n1 of the Shared Savings Program in order to be eligible to participate in the Track 1+ Model. See: CMS: FACT
\nSHEET: New Accountable Care Organization Model Opportunity: Medicare ACO Track 1+ Model. July 2017. Retrieved
\nMay 14, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.cms.gov\/Medicare\/Medicare-Fee-for-Service-Payment\/sharedsavingsprogram\/Downloads\/NewAccountable-Care-Organization-Model-Opportunity-Fact-Sheet.pdf See also CMS: Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online; Medicare Shared Savings Program Requirements;
\nand Medicare Diabetes Prevention Program November 15, 2017 Section H. Medicare Shared Savings Program. Regulations effective
\nJanuary 1, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. Retrieved May 14, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.federalregister.gov\/documents\/2017\/11\/15\/2017-23953\/medicareprogram-revisions-to-payment-policies-under-the-physician-fee-schedule-and-other-revisions
\nSource: CMS.gov (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, March 27). Shared savings program: About the program. Retrieved May 14, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/www.cms
\n.gov\/Medicare\/Medicare-Fee-for-Service-Payment\/sharedsavingsprogram\/about.html
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\nHospitals and Healthcare Systems 145
\nThe second type of plan is the Advanced Payment ACO. Recognizing that smaller
\nand\/or rural hospitals may have financial constraints in developing the systems and infrastructure needed for an ACO, starting in 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap, CMS offered the Advanced Payment ACO
\nmodel option. This subset of the MSSP provided advanced payments to these organizations
\nas well as monthly, population-based payments. Hospitals were to repay these advances
\nout of future savings. This program was terminated in 2015 – Research Paper Writing Help Service and replaced with the ACO
\nInvestment Model with the same aims and general financial structure.169 CMS is accepting
\napplications for the latter model in 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, with future operations dependent on further
\nevaluations.
\nThe third model is the Pioneer ACO. This program was designed for experienced, integrated systems that wanted to accept more risk and share more in the upside of savings. It
\nwas launched in 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap with 32 organizations and closed at the end of 2016: 2024 – Do my homework – Help write my assignment online with 8 (by some
\naccounts, 9). It is useful to understand how Pioneer ACOs differed from MSSPs for two
\nreasons: CMS is now moving to have MSSPs accept more risk, and some of the new features may reprise the terms of Pioneer participation; and the Next Generation ACO model
\ndescribed below is the successor to these plans.
\nThe Pioneer ACO Model differed from the Medicare Shared Savings Program in some of the
\nfollowing ways:
\nThe first 2 years of the Pioneer ACO Model were a shared savings payment arrangement with
\nhigher levels of savings and risk than in the Shared Savings Program.
\nIn year three of the program, those Pioneer ACOs that elected to and showed savings over the first
\n2 years were eligible to move to a population-based payment model. Population-based payment
\nis a per-beneficiary per month payment amount intended to replace some or all of the ACO\u2019s
\nfee-for-service (FFS) payments with a prospective monthly payment.
\nPioneer ACOs were encouraged to negotiate similar outcomes-based payment arrangements with
\nother payers by the end of the second year, and fully commit their business and care models to
\noffering seamless, high quality care.
\nPioneer ACOs were generally responsible for the care of at least 15,000 aligned beneficiaries
\n(5,000 for rural ACOs) . . .
\nPopulation-based payments were per-beneficiary per-month payments intended to replace a portion of the ACO\u2019s fee-for-service (FFS) payments with prospective payments.170
\n169CMC.gov. (2017, March 27). ACO investment model. Retrieved May 15, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/innovation.cms.gov\/
\ninitiatives\/ACO-Investment-Model
\n170CMS.gov. (2017, February 17). What was the Pioneer ACO Model?). Retrieved May 15, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/innovation
\n.cms.gov\/initiatives\/Pioneer-ACO-Model\/Pioneer-ACO-FAQs.html
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\n146 The U.S. Healthcare System
\nAt the end of the program, eight Pioneer ACOs produced gross savings of $68 million and
\nsix earned enough to participate in shared savings. CMS published a final report in December
\n2016: 2024 – Do my homework – Help write my assignment online with cumulative evaluation and performance data.171
\nThe Next Generation ACO172 was introduced in 2016: 2024 – Do my homework – Help write my assignment online as a replacement for Pioneer
\nACOs; these plans are authorized to run until 2020. In 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, 51 organizations covering about
\n1.4 million beneficiaries were participating under multiple risk arrangements (up to 100%)
\nfor achieving spending and quality173 performance benchmarks.174 In 2016: 2024 – Do my homework – Help write my assignment online (the only data
\ncurrently available), the original 18 Next Generation ACOs generated net savings of $63
\nmillion.175 All participants scored 100% across 33 quality measures, and 11 of the original
\n18 ACOs in this program received $58 million in shared savings bonuses. However, the
\nother 7 sites had to pay back $20 million.176 By participating in this model, organizations
\ngain four advantages177 over the MSSP offerings:
\n1. Telehealth expansion waiver. The enhanced ability to bill for these services normally
\nreserved for rural and underserved areas.
\n2. Post discharge home visit waiver. Relaxes supervision requirements for billing for home
\nvisits by ancillary personnel.
\n3. Three-day skilled nursing facility waiver. Normally Medicare only pays for skilled
\nnursing home visits after a 3-day inpatient stay. This provision waives the requirement
\nto receive this benefit.
\n4. Voluntary alignment assistance. In the MSSP, patients are most often unaware they are
\npart of an ACO (see below for problem discussion). Under the voluntary alignment
\nassistance, Next Generation ACOs are able to offer their assigned patients the option
\nto confirm (or deny) their relationships with specific providers.
\nBeginning in 2017, under an arrangement called the All-Inclusive Population-Based Payments (AIPBPs), the Next Generation ACOs were offered the option of receiving capitation
\nfor Medicare beneficiaries enrolled with those plans. In other words, the ACO receives a
\n171L&M Policy Research, LLC. (2016: 2024 – Do my homework – Help write my assignment online). Evaluation of CMMI Accountable Care Organization Initiatives Pioneer
\nACO, Final Report (December 2). Retrieved May 15, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/innovation.cms.gov\/Files\/reports\/pioneeracofinalevalrpt.pdf
\n172For more details, see: CMS. Next Generation Accountable Care Organization (ACO) Model: Frequently Asked Questions. Retrieved May 16, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/innovation.cms.gov\/Files\/x\/nextgenacofaq.pdf 173CMS. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). 33 ACO quality measures. Retrieved May 16, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.cms.gov\/Medicare\/MedicareFee-for-Service-Payment\/sharedsavingsprogram\/Downloads\/ACO-Shared-Savings-Program-Quality-Measures.pdf
\n174Participation in this option counts as an Advanced Payment Mechanism (APM) under the Medicare and CHIP Reauthorization Act (MACRA) and is thus eligible for additional payments not based on the ACO formula. More details on
\nthis program are explained in the Quality Chapter.
\n175Kaiser Family Foundation. 8 FAQs: Medicare accountable care organizations (ACOs). Retrieved May 16, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from
\nhttp:\/\/files.kff.org\/attachment\/Evidence-Link-FAQs-Accountable-Care-Organizations
\n176Leventhal, R. (2017, October 16). CMS releases 2016: 2024 – Do my homework – Help write my assignment online next generation ACO data with positive financial, quality
\nresults. Healthcare Informatics. Retrieved May 18, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.healthcare-informatics.com\/article\/valuebased-care\/cms-releases-2016: 2024 – Do my homework – Help write my assignment online-next-generation-aco-data-positive-financial-quality
\n177For more details about these benefits, see: CMS.gov. Next generation ACO model. Retrieved May 18, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from
\nhttps:\/\/innovation.cms.gov\/initiatives\/Next-Generation-ACO-Model
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nEBSCO : eBook Collection (EBSCOhost) – printed on 7\/30\/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers 12:30 PM via UNIV OF WEST FLORIDA
\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
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\nHospitals and Healthcare Systems 147
\nper-person, per-month payment for those assigned to that organization. Under this scheme,
\nthe ACO is responsible for paying all bills for its assigned patient members.
\nFuture Issues. A number of problems exist for this program now and in the future:
\n1. Readiness for a risk-based model. Eighty-two percent of ACOs are in the MSSP Track
\n1, which does not have any downside payment risk. These plans are allowed to remain
\nin this track for two periods of 3 years each before they are required to convert to a
\nrisk-based model. The 82 ACO that started operations in 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap or 2013 are, therefore,
\nconfronting this transition. The problem is that all the losses in this program occurred
\nin this track. In other words, only ACOs that assumed financial risk saved money for
\nMedicare. (I need help writing my essay – research paper see Exhibit 4.25.) The Association of ACOs has appealed to CMS,
\nsaying that 71% of respondents to a poll said they are slightly to very likely to drop
\nout of the program if forced to go at risk.178 Many will not be able to demonstrate they
\nEXHIBIT 4.25. Savings and Losses of Risk-Based and No-Risk ACOs
\nNet Medicare spending on ACO models, in millions:
\nALL ACOs No-risk ACOs
\nMSSP
\nTrack 1
\n$72m
\n\u2013$47m
\n\u2013$18m \u2013$14m \u2013$24m
\n\u2013$63m
\nMSSP
\nTrack 2
\nMSSP
\nTrack 3
\nAt-risk ACOs
\nNext
\nGeneration Pioneer
\nNo. of ACOs: Net Savings$0
\n458 410 6 16 8 18
\nNet Costs
\nNet Medicare spending on ACO models, in millions:
\nALL ACOs No-risk ACOs
\nMSSP
\nTrack 1
\n$72m
\n\u2013$47m
\n\u2013$18m \u2013$14m \u2013$24m
\n\u2013$63m
\nMSSP
\nTrack 2
\nMSSP
\nTrack 3
\nAt-risk ACOs
\nNext
\nGeneration Pioneer
\nNo. of ACOs: Net Savings$0
\n458 410 6 16 8 18
\nNet Costs
\nAnalysis excludes Comprehensive ESRD (End-Stage Renal Disease) Care Model. Advance Payment (AP) and Accountable Care
\nOrganization Investment Model (AIM) ACOs are included in their respective MSSP tracks.
\nSource: The Henry J. Kaiser Family Foundation. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, January). 8 FAQs: Medicare accountable care organizations (ACOs). Retrieved
\nMay 18, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from http:\/\/files.kff.org\/attachment\/Evidence-Link-FAQs-Accountable-Care-Organizations
\n178National Association of ACOs. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, May 2). Press Release. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.naacos.com\/
\nassets\/docs\/pdf\/PressReleaseonT1ExtensionSurvey050218.pdf
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nEBSCO : eBook Collection (EBSCOhost) – printed on 7\/30\/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers 12:30 PM via UNIV OF WEST FLORIDA
\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\n148 The U.S. Healthcare System
\nhave the financial resources to pay back CMS if required to do so. CMS administrator
\nSeema Varma responded with the government\u2019s position on these organizations: \u201cThe
\npresence of these upside-only tracks may be encouraging consolidation in the marketplace, reducing competition and choice for our beneficiaries. While we understand that
\nsystems need time to adjust, our system cannot afford to continue with models that are
\nnot producing results.\u201d179
\n2. Unclear responsibility. Medicare beneficiaries do not choose to belong to an ACO.
\nCMS identifies primary care providers (general practitioner, family practitioner,
\ninternist, or geriatrician as well as a nurse practitioner or physician assistant) who
\nbelong to an ACO and then assigns their patients to that ACO. This assignment is
\nbased on claims that use primary care billing codes180 linked to the provider\u2019s NPI.
\nIf beneficiaries do not see a primary care provider, then they are assigned to an
\nACO based on whomever is providing primary care services, such as a cardiologist,
\npulmonologist, rheumatologist, oncologist, and so on. However, it is not always clear
\nwhich patients fall under ACO responsibility. For example, a healthy patient who sees
\nher personal physician every few years may have visited an urgent care center for a
\nminor problem. She may, therefore, be enrolled with the ACO that employs the urgent
\ncare physician rather than with her personal physician. Except for the Next Generation
\nmodel, other ACOs and their patients may know the affiliation status only when CMS
\ncalculates bonuses or deficits at the end of the year. Thus, if an ACO wants to inform
\nits members about its services in order to try to keep them in its network, it is unable
\nto do so.
\nDespite this uncertainty, CMS requires that:
\nProviders participating in an ACO must notify beneficiaries that they are participating in an ACO, and that the provider is eligible for additional Medicare payments for
\nimproving the quality and coordination of care the beneficiary receives while reducing overall costs or may be financially responsible to Medicare for failing to provide
\nefficient, cost-effective care. The beneficiary may then choose to receive services from
\nthe provider or seek care from another provider that is not part of the ACO. A provider
\nmay not require a beneficiary to obtain services from another provider or supplier
\nin the same ACO, as beneficiaries maintain the freedom to choose which providers
\nthey see.181
\n179Dickson, V. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, May 12). Heading for the exit: Rather than face risk, many ACOs could leave. Modern Healthcare.
\nRetrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.modernhealthcare.com\/article\/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online0512\/NEWS\/180519966
\n180The primary care codes are 99201 to 99215 (new visit and follow-up office visits), 99304 to 99340 (new, follow-up or
\ndischarge services for skilled nursing facility or domiciliary care), 99341 to 99350 (home visits) and G0402 (Welcome to
\nMedicare Visit).
\n181CMS. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap, December 11). Accountable care organization 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap program analysis: Quality performance standards
\nnarrative measure specifications, final report. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.cms.gov\/Medicare\/MedicareFee-for-Service-Payment\/sharedsavingsprogram\/Quality_Measures_Standards.html
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\nHospitals and Healthcare Systems 149
\n3. Lack of control. The Medicare program is based on complete freedom for beneficiaries
\nto seek care from any Medicare-affiliated physician. This freedom is preserved with
\nall ACO models. It means that ACOs are responsible for care over which they have
\nno control. The potential magnitude of this problem was highlighted by McWilliams
\net al.:182 \u201cAmong ACO-assigned beneficiaries, 8.7% of office visits with primary care
\nphysicians were provided outside of the assigned ACO, and 66.7% of office visits with
\nspecialists were provided outside of the assigned ACO. Leakage of outpatient specialty
\ncare was greater for higher-cost beneficiaries.\u201d
\n4. Inadequate risk adjustment. Many of potentially at-risk organizations believe they take
\ncare of sicker populations. Since the financial risk is calculated on a county-wide basis
\n(as opposed to a per-individual basis), these ACOs are worried that their costs of care
\nhave a high probability to register losses without a concomitant upside potential.
\n5. Need to coordinate care across the continuum of services. Proponents of integration
\nbelieve ACOs are well positioned to improve quality and lower costs for populations
\nwith specific chronic conditions and expensive, acute diseases. While this notion is
\nattractive, there is little systematic evidence to support the effectiveness of disease management programs. For example, in a large study of such efforts, RAND Corporation
\nresearchers found that \u201calthough disease management seems to improve quality of care,
\nits effect on cost is uncertain.\u201d183 Further, since ACO formation often involves hospital
\nmergers, such consolidation must also be assessed. One study of cardiac patients that
\nconsidered 40 mergers in California from 1990 to 2006 – Write a paper; Professional research paper writing service – Best essay writers found that \u201cmerger completion
\nis associated with a 3.7 per cent increase in utilization of bypass surgery and angioplasty and a 1.7 per cent increase in inpatient mortality.\u201d184 Further, programs such as
\nthose geared to lower readmissions have not consistently proven successful.185 In short,
\nthese benefits are not self-evident.
\n6. Shortage of primary care physicians. In order to succeed, ACOs need a core of primary
\ncare physicians who will coordinate care. In the case of Medicare patients, internists
\nor family physicians with a geriatric specialty are necessary; they are already in short
\nsupply, and the situation is getting worse. This problem is discussed further in the Physicians section of Chapter 5, \u201cHealthcare Professions.\u201d
\n182McWilliams, J. M., Chernew, M. E., Dalton, J. B., & Landon, B. E. (2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay). Outpatient care patterns and organizational
\naccountability in Medicare. JAMA Internal Medicine, 174(6), 938\u2013945. 183Mattke, S., Seid, M., & Ma, S. (2007). Evidence for the effect of disease management: Is $1 billion a year a good
\ninvestment? American Journal of Managed Care, 13, 670\u2013676. See also Weintraub, A., & Terhune, C. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). Take your
\nmeds, exercise\u2014and spend billions. Businessweek (February 4). Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.businessweek
\n.com\/magazine\/content\/10_07\/b4166046292556.htm
\n184Hayford, T. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap). The impact of hospital mergers on treatment intensity and health outcomes. Health Services
\nResearch, 47(1): 1008\u20131027. 185Center for Health Research and Transformation. (2013, May). Acute care readmission reduction initiatives: Major
\nprogram highlights. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.chrt.org\/publication\/acute-care-readmission-reductioninitiatives-major-program-highlights
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nEBSCO : eBook Collection (EBSCOhost) – printed on 7\/30\/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers 12:30 PM via UNIV OF WEST FLORIDA
\nAN: 2183347 ; Shalowitz, Joel.; The U.S. Healthcare System : Origins, Organization and Opportunities
\nAccount: uwfl.main.ehost
\n150 The U.S. Healthcare System
\n7. Alignment of incentives. Successful ACOs must reward physicians for practicing cost-effective, high-quality medicine\u2014a shift from so-called volume to
\nvalue. However, according to physician placement firm Merritt Hawkins (which
\nrecruits mainly for hospitals): \u201cDespite the rise in value\/quality-based incentives,
\nvolume-based incentives . . . continue to be the most frequently utilized physician
\nproductivity metric . . . value-based incentives only account for about four percent
\nof overall physician compensation.\u201d186 Further, hospital administrators are also
\nstill largely paid for volume performance.187 Clearly, hospitals have not made the
\nappropriate shift in incentive payments necessary for ACO success.
\n8. Startup costs. According to CMS, startup costs for ACO formation average $1.7 million
\nper organization. While many established systems can start a shared savings ACOs
\nwith minimum additional costs, smaller organizations that want to enter the program
\nmay find it too costly to participate; recall that startup funding is limited to the ACO
\nInvestment Model. A further problem is that ACOs wishing to move to a risk basis may
\nneed to incur further significant expenses, such as information systems and additional
\nadministrative personnel.
\n9. Dealing with different insurance models. While MSSP ACO models are now largely
\npaid on a cost-saving basis using fee-for-service (FFS) data, the government\u2019s intention
\nis that eventually all will move toward global payments based on capitation (AIPBPs).
\nODSs employed these payment models without much success; ACOs have generally
\nnot yet adapted to make them work. One of the important questions ACOs must address
\nis how they will distribute capitated or bundled payments among both independent and
\ninstitutionally-based providers. Another unresolved problem is the system\u2019s ability to
\ncollect and analyze the data needed to handle these payment models.
\nIn transitioning to a new payment model, ACOs must recognize that in addition to
\ninpatient care, they bear risk for other potentially costly services, such as home health
\nand skilled nursing facility care.
\nPast experience has shown that four elements can challenge these systems\u2019 ability
\nto profit by taking insurance risk: low enrollment, inadequate funding, adverse selection
\n(enrollment of sicker patients), and lack of expertise managing insurance products. With
\nrespect to low enrollment, Medicare has put a lower membership limit on ACOs; the
\n5,000 members that Medicare requires should be sufficient to mitigate size-related risk.
\nThe initial shared-savings mode of payment provides FFS compensation at Medicare
\nrates, diminishing the payment adequacy problem (at least until capitation is phased-in).
\nHowever, the latter two risks remain as significant barriers to ACO success.
\n186Merritt, H. (2017). 2017 review of physician and advanced practitioner recruiting incentives. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online,
\nfrom https:\/\/www.merritthawkins.com\/uploadedFiles\/MerrittHawkins\/Pdf\/2017_Physician_Incentive_Review_Merritt_
\nHawkins.pdf
\n187Hancock, J. (2013, June 13). Hospital CEO bonuses reward volume and growth. Kaiser Health News. Retrieved May
\n20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.kaiserhealthnews.org\/Stories\/2013\/June\/06\/hospital-ceo-compensation-mainbar.aspx?utm_
\nsource=khn&utm_medium=internal&utm_campaign=skybox2
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
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\nAccount: uwfl.main.ehost
\nHospitals and Healthcare Systems 151
\nThe issue of adverse selection was discussed above. What could go wrong is
\nhighlighted by the experience of The Greater Marshfield Community Healthplan, a
\nMedicare HMO prototype in the early 1980s.188 The plan was based around the tertiary
\ncare center, Marshfield Clinic, in rural central Wisconsin. Because patients were sicker
\nthan at other demonstration sites in that state and around the country, and because
\ncapitation was based on rural Wisconsin rates, the plan folded after experiencing
\nsignificant losses.
\nThe last problem is that insurance risk and management are not core competencies
\nof these hospital-based organizations. (See the HealthChicago example in Exhibit 4.16
\nabove.) Outsourcing will not completely help since the ACO needs to understand and
\noversee companies that perform these services on their behalf.
\n10. Information system needs. While current information systems are a vast improvement
\nover those of the past two decades, at least two major problems remain. First, for ACOs
\nto operate efficiently and effectively, systems across the enterprise must be able to talk
\nto one another, an issue called interoperability. Despite the promises of health information exchanges, this requirement has not yet been realized to the extent necessary.
\nSecond, before information systems can enhance efficiency, the underlying processes
\nwhich they automate must be evaluated and often reengineered. Too often, this latter
\nprocess has not been accomplished.189 More will be said about this topic in Chapter 8,
\n\u201cInformation Technology.\u201d
\n11. Culture. Hofstede defined culture \u201cas the collective programming of the mind that distinguishes members of one group or category of people from another….Culture is to
\na human collectivity what personality is to an individual.\u201d190 While mergers are considered and then executed after financial issues are extensively vetted, few merging
\ninstitutions assess cultural compatibility. This oversight is puzzling because it can lead
\nto failure of the merged organization. Perhaps the most famous example was the merger
\nof University of California at San Francisco (UCSF) and Stanford University Medical
\nCenters in 1997. The reason for its dissolution in 2000 was succinctly stated by Nathan
\nNayman of the Hospital Council, a trade organization representing Northern California hospitals: \u201cComparing Stanford and UCSF is like comparing apples and oranges.
\nThe two hospitals had radically different institutional cultures, which made the merger
\nimpossible in the end.\u201d191
\n188Iglehart, J. K. (1982). The greater Marshfield community health plan: The future of HMOs. The New England Journal
\nof Medicine, 307, 451\u2013456. 189Carayon P., Karesh, B.-T., & Cartmill, R. S. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, October). Incorporating health information technology into
\nworkflow redesign\u2014summary report. (Prepared by the Center for Quality and Productivity Improvement, University of
\nWisconsin\u2013Madison, under Contract No. HHSA 290-2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers-10036C). AHRQ Publication No. 10-0098-EF. Rockville,
\nMD: Agency for Healthcare Research and Quality.
\n190Hofstede, G. (2001). Culture\u2019s consequences: Comparing values, behaviors, institutions, and organizations across
\nnations (2nd ed.). Thousand Oaks, CA: Sage Publications. 191Pyati, A. (2000). UCSF\/Stanford: Marriage was rough; divorce is expensive. San Francisco Business Times (April 23).
\nRetrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.bizjournals.com\/sanfrancisco\/stories\/2000\/04\/24\/focus4.html?page=all
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nEBSCO : eBook Collection (EBSCOhost) – printed on 7\/30\/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers 12:30 PM via UNIV OF WEST FLORIDA
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\nAccount: uwfl.main.ehost
\n152 The U.S. Healthcare System
\n12. Antitrust. Antitrust concerns have always threatened integration efforts; however,
\nfrom 1994 to 2007, the Department of Justice (DOJ) failed to prevent any nonprofit
\nhospital mergers. Richman192 noted that \u201cconfidence that nonprofit hospitals\u2019 market
\nconcentration does not lead to higher prices largely drives judicial sympathy for
\nnonprofits in merger cases, and in turn a tolerance of nonprofits\u2019 market power.\u201d
\nGovernmental successes in challenging these combinations began on August 7, 2007
\nwhen the Federal Trade Commission (FTC) commissioners unanimously ruled that
\nthe 2000 acquisition by Evanston Northwestern Healthcare (ENH) of Highland Park
\nHospital violated Section 7 of the Clayton Act by creating a highly concentrated
\nmarket, thereby increasing hospital prices and harming consumers. (The system is
\nnow known as NorthShore University HealthSystem.) The philosophical change in
\nattitude about nonprofits is summarized by the FTC\u2019s conclusion: \u201cENH\u2019s nonprofit
\nstatus did not affect its efforts to raise prices after the merger, and . . . does not suffice to
\nrebut complaint counsel\u2019s evidence of anticompetitive effects.\u201d193 Even though ENH
\nclaimed it spent more than $120 million on integration improvements with the extra
\ncharges, the FTC said quality improvements must result from cost-saving efficiencies,
\nnot higher prices. Since then, the FTC has been successful in a number of challenges
\nto horizontal and vertical integration of hospitals and medical groups.194 As Carlson195
\npointed out: \u201cThe collision of old-world antitrust enforcement and new ideas like
\naccountable care, bundled payments, value-based purchasing and patient-centered
\nmedical homes has ratcheted up the uncertainty over healthcare needs.\u201d Although the
\nDOJ and FTC have developed joint antitrust guidelines for the ACO shared savings
\nprogram, the interpretation and application of these rules is still unclear. A further
\nwrinkle on this issue came in 2013 when the U.S. Supreme Court ruled that even a
\ngovernment-owned hospital is not exempt from antitrust when it seeks to purchase
\na local for-profit hospital.196
\n13. Achieving physician alignment. This issue is discussed above but is worth another
\nmention because it is critical to organizational success. Of particular relevance here is
\nrealizing that when the ACO assumes full risk and is receiving only global payments,
\nthe problem of dividing the money will emerge as an important issue. Further, since
\n192Richman, B. D. (2007). Antitrust and nonprofit hospital mergers: A return to basics. University of Pennsylvania Law Review, 156, 121\u2013150. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/pdfs.semanticscholar.org\/804b\/
\n26c7ece7119ec5bc10c8ec99b96d284efaaa.pdf
\n193Federal Trade Commission. Commission Rules that Evanston Northwestern Healthcare Corp.\u2019s Acquisition of Highland Park Hospital Was Anticompetitive. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.ftc.gov\/opa\/2007\/08\/evanston.shtm
\n194Meier, M. H., Albert, B. S., & Monahan, K. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, September). Overview of FTC actions in health care services
\nand products. Health Care Division, Bureau of Competition, Federal Trade Commission. Washington DC. Retrieved
\nMay 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/www.ftc.gov\/system\/files\/attachments\/competition-policy-guidance\/overview_health_care_
\nseptember_2017.pdf
\n195Carlson, J. (2014: 2024 – Essay Writing Service. Custom Essay Services Cheap) Pulled in two directions. Providers pursuing coordinated care confused by antitrust actions. Modern
\nHealthcare, 42, 6\u20137, 16. 196Federal Trade Commission v. Phoebe Putney Health System, Inc., et al. Supreme Court Docket No. 11-1160 [Internet].
\nRetrieved from http:\/\/www.supremecourt.gov\/opinions\/12pdf\/11-1160_1824.pdf
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 153
\nthe enterprise is at increased risk for losses, it must deal with the problem of which
\npart of the system will bear the burden if those shortfalls occur. Like many of these
\nissues, achieving physician alignment is not new. This latter issue was one of the core
\ndifficulties in the above-mentioned UCSF-Stanford breakup. According to Stanford
\nUniversity president Gerhard Casper, \u201cone of the largest problems was administrators\u2019
\nfailure to achieve physician buy-in. Faculty members at both institutions resisted the
\nmerger from the beginning, refusing to combine their practices and share financial
\nrisk.\u201d197
\nBecause of some of these problems (particularly items 2, 3, and 4), many well-respected,
\nmature organizations decided from the program\u2019s beginning not to participate.198 How many
\nmore will drop out or be reluctant to participate will be seen in the near future as they must
\ndecide whether to continue with the program on a risk basis.
\nHOSPITAL GOVERNANCE
\nThis section will address hospital governance by focusing on its board of trustees or directors.
\nSince the literature on corporate governance is extensive, the focus here is primarily on the
\nessentials as they relate to nonprofit hospitals.
\nDefinition and Purpose
\nThe relevant origin of the word \u201cboard\u201d is the table where a communal meal is served. Hence,
\naccording to the Oxford English Dictionary, a board is \u201c[t]he company of persons who meet
\nat a council-table; the recognized word for a body of persons officially constituted for the
\ntransaction or superintendence of some particular business.\u201d The importance of the definition
\nis that the board decides and acts communally, in distinction from management members
\nwhose day-to-day function is frequently as individuals, though as part of a larger team. Early
\nhospital boards were made up of philanthropist trustees who raised and donated money for the
\ninstitution. As the first board of Massachusetts General Hospital stated in 1814 when trying
\nto raise $100,000: \u201cWe shall instance, in both classes of objects, to which this Institution
\nrelates, the sick poor and the insane [emphasis in the original] . . . It purposes to afford the best
\nmedical aid; the best nurses; the most suitable apartments; all the assistance which sickness
\nrequires; and all the comforts, which are subsidiary to convalescence.\u201d199
\nOnce the money was secured, trustees were responsible for proper stewardship of the
\ncharitable funds according to the institutional mission. More recently, as nonprofits have
\nbecome more complex organizations, their success has depended on performance of a larger
\n197\u201cWe Took on Too Much\u201d: Stanford-UCSF System Breaks Up. California Healthline. Friday, October 29, 1999.
\nRetrieved February 10, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.californiahealthline.org\/articles\/1999\/10\/29\/we-took-on-too-much–
\nstanforducsf-system-breaks-up.aspx
\n198Alonso-Zaldivar, R. (2011, May 11). Obama plan for health care quality dealt a setback: Mayo Clinic, other top health
\nproviders say \u201caccountable care\u201d is too complex. Retrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.nbcnews.com\/id\/42997540\/
\nns\/health-health_care\/t\/obama-plan-health-care-quality-dealt-setback
\n199Quincy, J., Perkins, T. H., Sargent, D., May, J., Barnard, T., Higginson, S., . . . Sullivan, R. (1814, January 8). Address
\nof the board of trustees of the Massachusetts General Hospital to the public Boston: J. Belcher.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n154 The U.S. Healthcare System
\nand more complex portfolio of tasks. Green and Griesinger200 succinctly stated that the practitioner literature:
\nreveals significant consensus that the activities of effective nonprofit boards should at
\nleast include (1) determining or setting the organization\u2019s mission, purpose, and policies;
\n(2) strategic planning; (3) determining or evaluating the organization\u2019s programs and
\nservices; (4) board development; (5) selecting, evaluating, and terminating the CEO;
\n(6) ensuring adequate resources, including fund development; (7) financial management
\n(operating budget); (8) interaction with the community; and (9) serving as a court of appeal
\nfor the resolution of disputes involving staff, clients, or both.
\nLegal Requirements
\nMost of the legal requirements covering boards derive from state hospital licensure laws
\nthat mandate a governing board for each institution. Further, corporate laws describe
\nstandards for stewardship, setting three interrelated fiduciary requirements for board
\nmembers:201
\n1. Duty of Care
\nRequires action in good faith (primarily without self-interest) that any ordinarily
\nprudent person would take in the best interests of the organization. In taking this action,
\nthe board member must make sure that sufficient information is available. It is reasonable to rely on management and other experts\u2019 reports for this information except
\nwhen there is reason to believe problems exist with its truthfulness. Although the courts
\nrequire that a corporate information and reporting system is in place, they do not specify the exact content and methods. Each institution must, therefore, develop its own
\ncompliance plan that satisfies its unique needs.
\n2. Duty of Loyalty
\nProhibits action in self-interest, particularly that which would result in economic
\ngain to a board member doing business with the institution.
\n3. Duty of Obedience to Purpose
\nRequires action to further the purposes of the institution in accordance with its
\nmission statement, articles of incorporation, and bylaws.
\nLegal adherence to these duties is not always straightforward.
\nThe difficulty in articulating a standard for nonprofit board business accountability is
\nthat the legal concept of duty is ambiguous and the judicial tests are muddled, forging
\na rather odd hybrid standard mixing charitable and nonprofit law. Such ambiguity in
\n200Green, J. C., & Griesinger, D. W. (1996). Board performance and organizational effectiveness in nonprofit social
\nservices organizations. Nonprofit Management and Leadership, 6(4), 381\u2013402. 201American Health Lawyers Association (2011, August 29). The health care director\u2019s compliance duties: A continued
\nfocus of attention and enforcement. A joint publication from the Office of the Inspector General, U.S. Department of
\nHealth and Human Services, and the American Health Lawyers Association. \u00a9 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer. Updated.
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\nHospitals and Healthcare Systems 155
\nnonprofit board decision making hampers good faith business judgment, particularly
\nfor multi-state hospital systems.202
\nFurther, sometimes these duties clash. One of the major sources of such conflict arises
\nwhen board members seek to fulfill the institution\u2019s charitable mission while maintaining its
\nfinancial sustainability. On this theme, the late Sister Irene Kraus (who was president of the
\nDaughters of Charity National Health System and AHA board chair) is said to have exhorted
\nher staff: \u201cNo margin, no mission.\u201d203 The seriousness of this dilemma was highlighted when
\nthe Minnesota attorney general sued Accretive Health for \u201ccompromising patient privacy and
\nusing strong-arm tactics to collect payments from patients at a health system [Fairview Health
\nServices] in Minneapolis.\u201d204
\nIn response to prominent violations of these corporate duties, Congress passed the
\nAmerican Competitiveness and Corporate Accountability Act of 2002, commonly known as
\nthe Sarbanes-Oxley Act. Except for provisions prohibiting retaliation against whistleblowers
\nand the destruction, alteration, or concealment of certain documents or the impediment
\nof investigations, Sarbanes-Oxley does not generally apply to nonprofit organizations.
\nIts influence, however, has caused many nonprofit hospital boards to reconsider the level
\nand mechanism of oversight. In this respect, the American Bar Association suggestions are
\nlisted in Exhibit 4.26.
\nEXHIBIT 4.26. Nonprofits and Sarbanes-Oxley
\nTen general principles of corporate governance emerging from the Sarbanes-Oxley reforms may be worthy of
\nconsideration for the governance of nonprofit organizations:
\nPrinciple 1. Role of Board. The organization\u2019s governing board should oversee the operations of the organization in such manner as will assure effective and ethical management.
\nPrinciple 2. Importance of Independent Directors. The independent and non-management board members
\nare an organizational resource that should be used to assure the exercise of independent judgment in key
\ncommittees and general board decision-making.
\nPrinciple 3. Audit Committee. An organization with significant financial resources should have an audit committee composed solely of independent directors, which should assure the independence of the organization\u2019s
\nfinancial auditors, review the organization\u2019s critical accounting policies and decisions and the adequacy of its
\ninternal control systems, and oversee the accuracy of its financial statements and reports.
\n202Blum, J. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). The quagmire of hospital governance, finding mission in a revised licensure model. Journal of Legal
\nMedicine, 31, 35\u201357. 203Bryant-Friedland, B. (1998, August 25). Sister Irene Kraus remembered for vision, leadership. The Florida
\nTimes-Union. 204Schorsch, C. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, April 4). Investors cool to Accretive\u2019s management shakeup. Crain\u2019s Chicago Business.
\nRetrieved May 20, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/www.chicagobusiness.com\/article\/20130404\/NEWS03\/130409891\/investors-coolto-accretives-management-shakeup
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
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\n156 The U.S. Healthcare System
\nPrinciple 4. Governance and Nominating Committees. An organization should have one or more committees,
\ncomposed solely of independent directors, that focus on core governance and board composition issues,
\nincluding: the governing documents of the organization and the board; the criteria, evaluation, and nomination of directors; the appropriateness of board size, leadership, composition, and committee structure; and
\ncodes of ethical conduct.
\nPrinciple 5. Compensation Committee. An organization should have a committee composed solely of independent directors that determines the compensation of the chief executive officer and determines or reviews
\nthe compensation of other executive officers, and assures that compensation decisions are tied to the executives\u2019 actual performance in meeting predetermined goals and objectives.
\nPrinciple 6. Disclosure and Integrity of Institutional Information. Disclosures made by an organization regarding its assets, activities, liabilities, and results of operations should be accurate and complete, and include all
\nmaterial information. Financial and other information should fairly reflect the condition of the organization,
\nand be presented in a manner that promotes rather than obscures understanding. CEOs and CFOs should
\nbe able to certify the accuracy of financial and other disclosures, and the adequacy of their organizations\u2019
\ninternal controls.
\nPrinciple 7. Ethics and Business Conduct Codes. An organization should adopt and implement ethics and
\nbusiness conduct codes applicable to directors, senior management, agents, and employees that reflect a
\ncommitment to operating in the best interests of the organization and in compliance with applicable law,
\nethical business standards, and the organization\u2019s governing documents.
\nPrinciple 8. Executive and Director Compensation. Executives (and directors if appropriate) should be compensated fairly and in a manner that reflects their contribution to the organization. Such compensation should
\nnot include loans, but may include incentives that correspond to success or failure in meeting performance
\ngoals.
\nPrinciple 9. Monitoring Compliance and Investigating Complaints. An organization should have procedures
\nfor receiving, investigating, and taking appropriate action regarding fraud or noncompliance with law or
\norganization policy, and should protect \u201cwhistleblowers\u201d against retaliation.
\nPrinciple 10. Document Destruction and Retention. An organization should have document retention policies
\nthat comply with applicable laws and be implemented in a manner that does not result in the destruction of
\ndocuments that may be relevant to an actual or anticipated legal proceeding or governmental investigation.
\nSource: American Bar Association Coordinating Committee on Nonprofit Governance (2005), Guide to Nonprofit Corporate Governance in the Wake of Sarbanes-Oxley. Chicago: American Bar Association, pp. 17\u201318.
\nResponsibilities
\nIn addition to legal requirements, boards are responsible for ensuring institutional payment
\nand accreditation, the latter being closely linked to evaluations of quality. Perhaps the
\nmost important obligation of the board with respect to payment is its responsibilities
\ndelineated by the Medicare Conditions of Participation and Conditions for Coverage.205
\n205CMS.gov. Conditions for coverage (CfCs) & conditions of participations (CoPs). Retrieved May 21, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from http:\/\/
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\nwww.cms.gov\/Regulations-and-Guidance\/Legislation\/CFCsAndCoPs\/index.html?redirect=\/cfcsandcops
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\nHospitals and Healthcare Systems 157
\nMedicare standards require six areas in which boards must act: (1) overseeing the medical
\nstaff, including credentialing and approval of bylaws; (2) appointing the hospital chief
\nexecutive officer; (3) ensuring appropriate patient care; (4) developing an institutional
\nbudget; (5) providing oversight of contracted services; and, (6) if emergency services are
\noffered, conducting them in a high-quality fashion. The relevant parts of these requirements
\nfor the governing body are excerpted in Exhibit 4.27.
\nEXHIBIT 4.27. Medicare Conditions of Participation and Conditions for
\nCoverage
\n\u00a7 482.12 Condition of Participation: Governing Body
\nThe hospital must have an effective governing body legally responsible for the conduct of the hospital as an
\ninstitution . . .
\n(a) Standard: Medical staff. The governing body must:
\n(1) Determine, in accordance with State law, which categories of practitioners are eligible candidates for
\nappointment to the medical staff;
\n(2) Appoint members of the medical staff after considering the recommendations of the existing members
\nof the medical staff;
\n(3) Assure that the medical staff has bylaws;
\n(4) Approve medical staff bylaws and other medical staff rules and regulations;
\n(5) Ensure that the medical staff is accountable to the governing body for the quality of care provided to
\npatients;
\n(6) Ensure the criteria for selection are individual character, competence, training, experience, and
\njudgment . . .
\n(b) Standard: Chief executive officer. The governing body must appoint a chief executive officer who is responsible for managing the hospital.
\n(c) Standard: Care of patients. In accordance with hospital policy, the governing body must ensure that the
\nfollowing requirements are met:
\n(1) Every Medicare patient is under the care of [a licensed practitioner in accordance with state laws]:
\n(2) Patients are admitted to the hospital only on the recommendation of a licensed practitioner permitted
\nby the State to admit patients to a hospital . . .
\n(3) A doctor of medicine or osteopathy is on duty or on call at all times.
\n(4) A doctor of medicine or osteopathy is responsible for the care of each Medicare patient with respect
\nto any medical or psychiatric problem . . .
\n(d) Standard: Institutional plan and budget. The institution must have an overall institutional plan that meets
\nthe following conditions:
\n(1) The plan must include an annual operating budget that is prepared according to generally accepted
\nCopyright @ 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Jossey-Bass.
\nAll rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
\naccounting principles.
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\n158 The U.S. Healthcare System
\n(2) The budget must include all anticipated income and expenses. This provision does not require that the
\nbudget identify item by item the components of each anticipated income or expense.
\n(3) The plan must provide for capital expenditures for at least a 3-year period . . .
\n(6) The plan must be reviewed and updated annually.
\n(7) The plan must be prepared\u2014
\n(i) Under the direction of the governing body; and
\n(ii) By a committee consisting of representatives of the governing body, the administrative staff, and
\nthe medical staff of the institution.
\n(e) Standard: Contracted services. The governing body must be responsible for services furnished in the hospital
\nwhether or not they are furnished under contracts . . .
\n(f) Standard: Emergency services. (1) If emergency services are provided at the hospital, the hospital
\nmust . . . meet the emergency needs of patients in accordance with acceptable standards of practice . . .
\norganized under the direction of a qualified member of the medical staff [and] . . . integrated with other
\ndepartments of the hospital.
\nSource: 42 C.F.R. Part 482\u2014Conditions of Participation for Hospitals. Retrieved May 21, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online from https:\/\/law.justia.com\/cfr\/
\ntitle42\/42-3.0.1.5.21.html#42:3.0.1.5.21.2.199.2.
\nIn most hospitals (for-profit as well as nonprofit), the board\u2019s oversight of quality
\noriginated from the governance criteria of the Joint Commission, a principal organization
\nresponsible for accrediting hospitals. (See Chapter 9, \u201cQuality,\u201d for more information
\nabout accreditation and the Joint Commission.) More recently, however, the board has
\nneeded to take a more active interest in quality performance due to Medicare-imposed
\nfinancial penalties for certain clinical events, such as catheter-related sepsis, pressure
\nsores, and hospital readmissions within 30 days of discharge, to name a few. Further,
\nwith increased transparency of hospital quality data,206 the board is more engaged with
\nthe issue of quality as a competitive strategy. Unfortunately, hospital boards are not
\nalways as involved as they should be in this latter regard. For example, Jha and Epstein207
\nfound that:
\nAmong our nationally representative sample of chairs of boards from [1,000] nonprofit U.S.
\nhospitals, a little over half identified clinical quality as one of the two top priorities for board
\noversight. Although 69 percent of board chairs thought that the CEO had great influence
\non quality of care, just 44 percent identified quality performance as one of the two most
\nimportant criteria for evaluating the CEO\u2019s performance. Programmatic emphasis on quality
\nwas not uniformly high. Also, although only a few board chairs had work experience in
\nthe health care sector, fewer than one-third of nonprofit boards sampled had formal training
\nprograms that include clinical quality.
\n206See, for example, http:\/\/www.medicare.gov\/hospitalcompare (accessed May 21, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). 207Jha, A., & Epstein, A. (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer). Hospital governance and the quality of care. Health Affairs, 29(1), 182\u2013187.
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\nHospitals and Healthcare Systems 159
\nSince that study was published in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer, little progress has been made in this area. As
\nPronovost et al.208 note: \u201cIn most organizations outside health care, the Board of Trustees (or
\nDirectors) assumes ultimate accountability for performance. This is rarely the case in health
\ncare, where boards have traditionally fixated on financial performance and delegated quality
\nof patient care to the medical staff, often with limited board oversight.\u201d
\nBoard Structure and Activities
\nGiven the importance of the board in institutional oversight, and the many possibilities for
\nits structure and operational features, one might ask what model(s) works best. Board practices found to be associated with better performance in both process of care and mortality
\ninclude (1) having a board quality committee; (2) establishing strategic goals for quality
\nimprovement; (3) being involved in setting the quality agenda for the hospital; (4) including
\na specific item on quality in board meetings; (5) using a dashboard with national benchmarks that includes indicators for clinical quality, patient safety, and patient satisfaction; and
\n(6) linking senior executives\u2019 performance evaluation to quality and patient safety indicators. Involvement of physician leadership in the board quality committee also enhances the
\nhospital\u2019s quality performance.209
\nFurther insight into this question involves examination of the corporate mission and
\nstructures of hospitals. For example, as hospitals moved way from strictly philanthropic
\norganizations, the purpose and expertise of their boards needed to change. Alexander et al.210
\ndraw a distinction between philanthropic and corporate models for hospital boards. \u201cThe philanthropic model stresses community participation, due process, and stewardship, whereas the
\ncorporate model stresses strategy development, risk taking, and competitive positioning.\u201d211
\nWhile their research showed that corporate model institutions were associated with enhanced
\noperational efficiency, higher volume of adjusted admissions, larger market share, better
\nstrategic adaptivity, and quicker responses to changing environmental conditions, hospital
\noccupancy and cash flow were generally unrelated to the governing board\u2019s configuration.
\nDespite these advantages, institutions should not necessarily move to the corporate model.
\nOne reason for this caution is the relationship of the institution to its stakeholders. Hospitals
\n(even nonprofits) that are part of a system will be subject to a corporate model board at the
\nparent\u2019s organizational level; thus, local institutions that have their own boards may want to
\n208Pronovost, P., Armstrong, M., Demski, R., Peterson, M. H. A., & Rothman, M. D. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Taking health care governance to the next level. NEJM Catalyst. Retrieved May 21, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, from https:\/\/catalyst.nejm.org\/healthcare-governancenext-level-quality-committee
\n209Jiang, H. G., Lockee, C., Bass, K., & Fraser, I. (1988). Board oversight of quality: Any differences in process of care
\nand mortality? Journal of Healthcare Management, 54(1), 15\u201329; discussion 29\u201330. 210Alexander, J., Morlock, L. L., & Gifford, B. D. (1988). The effects of corporate restructuring on hospital policymaking.
\nHealth Services Research, 23(2), 311\u2013337. 211Alexander, J., & Lee, S. D. (2006 – Write a paper; Professional research paper writing service – Best essay writers). Does governance matter? Board configuration and performance in not-for-profit
\nhospitals. The Milbank Quarterly, 84(4), 733\u2013758. The authors add this cautionary note to their findings and recommendations: \u201c . . . the hospital governance data for this study were based on surveys conducted in the mid to late 1980s, and
\nthe dependent variables reflected hospital performance in the period between 1986 and 1994. Accordingly, our findings
\nshould be generalized with caution to NFP hospitals in recent years.\u201d
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\n160 The U.S. Healthcare System
\nretain a philanthropic focus that is more community oriented. A similar reason applies to
\npublic hospitals, which have other layers of governmental oversight.
\nIn addition to the nature of stakeholders and corporate status, the overall environment
\n(including location and resources) also plays an important part in the board\u2019s structure and
\ndirection. In a comprehensive description of hospital boards, Shoou-Yih et al.212 identified
\nthree overarching board responsibilities: mission and strategy setting, performance evaluation and oversight, and external relations.
\nMission and strategy setting includes definition and maintenance of hospital mission, and the
\nboard\u2019s role in the approval of strategic plans for fulfilling mission. Performance evaluation
\nand oversight role comprises the assessment of hospital and CEO performance in areas such
\nas financials, care quality, patient safety, community health outcomes, and physician and staff
\nrelationships. External relations role includes such activities as community and government
\nrelations, public accountability, and fundraising.
\nWhile all three activities would seem important, the authors give the following caveat:
\n\u201c[H]igh levels of activity in multiple governance roles may not be synonymous with
\neffectiveness . . . the effectiveness of the board and its impact on hospital performance
\nmay . . . be determined by the match between governing board roles and the organizational
\nand environmental conditions of the hospitals.\u201d In implementing any governance model,
\nit is important to note the interdependency of its characteristics (viz., the components
\nare complex and symbiotic). Changing features piecemeal may therefore destroy the
\neffectiveness of the whole. Even so, other studies have identified independent features
\nand practices of higher performing boards; for example, they tend to have more physician
\nmembers. 213
\nResearch214 into a number of other characteristics of higher performing boards yields
\nsome useful, and occasionally counterintuitive, findings:
\n\u25a0 Size. Size of the boards and marginal profit were unrelated.
\n\u25a0 Terms of service. Limiting term length for board members but not board officers was
\nassociated with higher profit margin. Limiting the number of terms had no effect for
\neither officers or board members.
\n\u25a0 Compensation. Compensating board members of a nonprofit has been controversial.
\nStudy results do not indicate that payment (even travel or conference reimbursement)
\nhas any effect on profitability.
\n212Shoou-Yih, D. L., Alexander, J. A., Wang, V., Margolin, F. S., & Combes, J. R. (2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers). An empirical taxonomy of
\nhospital governing board roles. Health Services Research, 43(4), 1223\u20131243. The authors also provide a taxonomy of five
\ntypes of boards and their characteristics.
\n213Prybil, L. D. (2006 – Write a paper; Professional research paper writing service – Best essay writers). Size, composition, and culture of high-performing hospital boards. American Journal of Medical
\nQuality, 21, 224\u2013229. 214Culica, D., & Prezio, E. (2009). Hospital board infrastructure and functions: The role of governance in financial performance. International Journal of Environmental Research and Public Health, 6, 862\u2013873. Note: Performance was
\nmeasured using the average profit margins over the three years of the study.
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\nHospitals and Healthcare Systems 161
\n\u25a0 Standing committees. Paradoxically, the presence of audit and finance\/budget committees is highly negatively correlated with higher profit margins, as is the regular review of
\nfinancial statements. Likewise, the presence of the CFO as a board member is slightly
\nnegatively correlated with higher profit margins. The presence of a governance committee is also slightly negatively correlated with profitability. Routine review of capital
\nplanning, however, was associated with greater profitability.
\n\u25a0 Benchmarks. Consistent with the above findings, market share is a more useful benchmark than strict financial performance.
\n\u25a0 Individual board member expertise. Knowledge of finance, insurance, or managed care
\nwas not correlated with higher profit margins.
\n\u25a0 Frequency of meetings. Greater frequency of meetings is negatively correlated with profitability, with fewer than six meetings a year being optimal.
\n\u201cOne limitation of the study was the potential issue of reverse causality (i.e., the governance variables may themselves be affected by the hospital performance).\u201d215 For example,
\nhospitals in better financial shape may require only a few meetings per year, while poorer
\norganizations may need to meet more often to correct problems.
\nIn summary, while the general legal and regulatory requirements of a hospital board are
\nsimilar across institutions, the most effective ways to meet obligations are not straightforward. Hospitals must consider the issues mentioned above and create a board that meets
\nits current, unique needs but is flexible enough to change as the organization\u2019s internal and
\nexternal environments evolve.
\nSUMMARY
\nPrior to the 20th century, hospitals played a peripheral part in the provision of most healthcare. In the last 100 years, a confluence of advances in technology, new organizational
\nmodels, and emergence of insurance payments placed these institutions at the centers of
\ncare. These same forces, however, are refocusing where care is and should be delivered.
\nTechnology is increasingly enabling outpatient services; organizational models are incorporating nonhospital sites of care; and payers are promoting noninstitutional care to drive
\ndown costs. The questions that remain are: How far can these trends proceed? Can hospitals
\nadapt and still be able to provide high-quality care?
\n215Ibid.
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