Economics in Healthcare DSA

Question 1

Economic activity:

Answer 1

the situation wherein an individual or group possesses a skill, service or commodity and supplies it to another individual or group for a price

Question 2

Economic analysis

Answer 2

the study of the relationship between the demand, the supply and the price of an economic activity

Question 3

Market failure:

Answer 3

the failure of an economic system to effectively match supply and demand, often caused by third-party price derangement

Question 4

Efficiency:

Answer 4

a term used to describe the relationship between the cost of providing a unit of service or commodity and the outcome that it achieves

Question 5

Cost-effectiveness analysis:

Answer 5

the study of the cost of a treatment strategy to produce a desired effect.

Question 6

Cost-benefit analysis:

Answer 6

the study of the relationship between the cost of a service or commodity and the benefit that it supplies

Question 7

Risk-benefit analysis:

Answer 7

a study of the relationship between the probability of harm in a course of therapy and its likely benefits

Question 8

Time trade-off analysis:

Answer 8

a written instrument used to assess the amount of diminution in quality of life that an individual patient will accept for a therapy likely to extend life by a given amount

Question 9

Quality-adjusted life years (QALYs):

Answer 9

a common unit of health benefit that combines mortality with quality of life considerations

Question 10

Conflict of interest:

Answer 10

a situation in which one’s duty to a particular person conflicts with one’s own self-interest

Question 11

Conflict of obligation:

Answer 11

a situation in which one’s obligation or feeling of obligation to a particular person or group conflicts with one’s obligation to another person or group

Question 12

A surgeon sees a patient in clinic for severe GERD. The surgeon recommends a laparoscopic Nissen fundoplication and obtains informed consent from the patient to perform the procedure. Which of the following would best describe this encounter?

Cost-benefit analysis
Risk-benefit analysis
Cost-effectiveness analysis
Time trade-off analysis
Conflict of interest

Answer 12

risk-benefit analysis

Question 13

Which of the following health care delivery systems or methods of physician payment gives the physician the most incentive to limit a patient’s care?

Managed care
Health maintainence organization
Capitation
Fee-for-service
Medicare

Answer 13

Capitation

Question 14

HEALTH CARE DELIVERY history

Answer 14

Before the 1960’s, patients usually paid the physician for services “out of pocket”—money or barter
Beginning in the 1960’s, the advent of insurance, technology and expanding commercialism changed the healthcare landscape
Prior to 1980 the AMA Code of Ethics prohibited advertising
- This ban was overturned by the Supreme Court in 1975
- AMA’s stance now is that competition is both ethical and encouraged
1980’s saw the advent of managed care and prospective payment

Question 15

Fee-for service:

Answer 15

the arrangement whereby a physician provides a patient units of health care services and is reimbursed by the patient for each unit
- The patient may pay out-of-pocket (money or barter) or by insurance
— Insurance may have a co-pay and/or deductible
— Physician may require co-pay and deductible be paid at time of service (or before)
— Physician’s office may or may not file insurance claim for patient
This type of arrangement has the most inherent incentives for overuse of health care resources by the physician

Question 16

Managed care:

Answer 16

an insurance arrangement by which the patient’s care is subject to limitation or justification (eg. Prior authorization, second opinion, drug formulary, panel of providers)

• Patient (and provider) give up some autonomy in this arrangement
• Managed care may be arranged around an HMO or point-of-service model
• Usually there are provisions for the patient to go outside of model or network for extra expense (out-of network)
• Providers may be subject to economic credentialing

Question 17

HMO: (Health Maintenance Organization)

Answer 17

An economic arrangement whereby an insurance company or an organization pledges to care for all the patient’s health care needs for one premium (specific type of managed care organization)
- May be organized around an institution (eg. Mayo Clinic), an affiliated group of providers (usually a multispecialty group clinic), or unaffiliated providers contracted by the insurance company
- Patient is usually assigned to a primary care physician who provides all primary care and acts as “gatekeeper” to specialists
This arrangement has the inherent incentive to keep patients healthy, but also to limit the amount of care given to each individual patient and to make sure that all care is provided within the panel of contracted providers
Providers are often subject to a “withhold provision” where a portion of their reimbursement is withheld at the beginning of the year and only returned if the HMO makes a profit

Question 18

PPO: (Preferred Provider Organization)

Answer 18

An arrangement whereby an insurance company gives a patient incentives to use a group of providers who have agreed to a discounted rate for their services
- Incentives are usually in the form of decreased co-pay or deductibles for use of PPO providers

• A type of fee-for-service arrangement, but often with incentives built in for providers to limit care
• – Providers may be paid by capitation, ie. one set fee per month (or year) for each patient, regardless of amount of service provided to the patient or whether any service is provided to the patient at all.

Question 19

Medicare:

Answer 19

The public, national insurance program for individuals over age 65 or disabled. Pays physicians a standard rate fee-for-service under Part B and hospitals a set DRG (Diagnosis Related Group) rate under Part A. Pharmacy charges are covered under Part D.
Physicians may elect whether or not to participate each year, but must accept the discounted fee as full payment (no “balance billing” of the patient)
In the last few years, “pay for performance” has become popular and requires physicians and/or institutions to meet certain quality standards or face decreased payments.
Advent of Accountable Care Organizations and “bundled payments”

Question 20

Medicaid:

Answer 20

A program, similar to Medicare, administered by each individual state to cover health care costs for low-income residents of that state

Question 21

EMTALA

Answer 21

Emergency Medical Treatment and Active Labor Act
Passed by Congress in 1986
Also called the “patient anti-dumping act”
Applies to all hospitals participating in Federal Medicare Act
Requires that a hospital ER: 1) Conduct a screening exam on anyone seeking care to determine whether a medical emergency exists and 2) Stabilize the patient before discharge or transfer.
Intended to keep hospitals from refusing care or “dumping” indigent patients to other hospitals

Question 22

Concierge (boutique) medicine

Answer 22

A practice arrangement wherein a physician is paid a retainer to be available to patients at any time. Patients may be required to pay an additional cash fee for certain services. Usually not covered by insurance.

Question 23

A morbidly obese female patient brings a magazine article to her physician describing a weight-loss therapy used in Europe. The patient insists that the doctor contact her insurance company to authorize payment for the therapy. The physician researches the therapy and is able to demonstrate to the patient that there is no scientific evidence showing the therapy to be effective in her situation or to justify its significant expense to her insurance company. This interaction would best be described as which of the following?

Unrestricted advocacy
Restricted advocacy
Conflict of interest
Risk-benefit analysis
Cost-benefit analysis

Answer 23

Restricted advocacy

Question 24

AUTONOMY

Answer 24

Patients (and physicians) may give up some autonomy when participating in insurance programs
Physicians may give up some autonomy when employed by an organization
Requires careful review of an organization’s mission, values, policies and goals before accepting employment
Organizational ethics

Question 25

Unrestricted advocacy

Answer 25

Whatever the patient wants, the patient should get

Question 26

Restricted advocacy

Answer 26

Balance patient preferences, safety and benefit of treatment, cost-effectiveness and cost to the patient and insurance company

Question 27

Beneficence and non-Maleficence

Answer 27

Physician is a Fiduciary, ie. one who holds the Beneficiary’s (patient’s) interests in trust and are obligated to hold the beneficiary’s interest above all others.
Physician may have other roles vis-à-vis the patient, eg. Ally, advocate, confidante, but primary role is as a Fiduciary.
Fiduciary role can provide ethical conflict, as a therapy that can be medically good can produce economic harm or vice versa. Requires balance

Question 28

Contextual issues—fairness, justice, loyalty

Answer 28

There are many potential conflicts of interest in economics and health care
Incentives to provide too much or too little care based on health care delivery model
Incentives to use drugs or therapies based on loyalty to industry rep or status as a stockholder
Incentives to use facilities based on physician investment
Stark laws
Incentive to order tests or therapies to avoid litigation

Question 29

Resolution of ethical conflicts

Answer 29

Respect patient preferences as much as possible
Practice restricted advocacy
Practice for the good of the patient and avoidance of harm to the patient
Recognize conflicts of interest and obligation
Avoid them when possible
Remember the Fiduciary Role of the physician