Healthcare Economics Flashcards
The study of how individuals and societies make decisions about how to use their limited resources.
Economics
Why is healthcare considered a limited resource?
There is not enough time or money to purchase and provide care to every individual in every conceivable manner.
Financial decisions that affect the entire society as a whole.
Macroeconomics
Financial decisions of businesses and individuals and the effect the financial decisions have on them.
Microeconomics
Broadest measurement of the health of the US economy calculated as the total value of goods and services produced by labor and property in the US.
Gross Domestic Product (GDP)
- HC is 17%
Increased government and personal spending on healthcare results in…
Increased national debt
Decreased funds for other programs
Decreased funds for other things (food, housing, etc)
Employer-paid health insurance results in decreased employee pay
May increase cost of products & services for patients
How does the aging population affect HC economics?
Older adults will make up 20% of population by 2030 which will increase national healthcare costs due to chronic conditions requiring expensive specialty and long-term care.
How does medical technology impact HC economics?
- Evolving tech results in better patient outcomes but viewed as dominant because of its continued escalation of cost
- Accounts for 10-40% of HC expenditures
- Leads to ethical dilemmas, who gets what scarce resources
- Technologies must justify their use in competing cost climate (only adopt new technology if it improves outcomes at a lower cost)
How do prescription costs impact HC economics?
- Retail prices continue to increase 2x
- Makes life-sustaining meds unaffordable
- Increased med prices r/i increased insurance premiums and taxpayer costs for CMS
Mandated employers to provide coverage based on the number of employees and those unemployed or not covered by employers were mandated to seek coverage through the marketplace.
Affordable Care Act of 2010
What are the goals & key provisions of the ACA?
Goals = increase access to coverage and protect from insurance practices that restricted care or increased care
KEY PROVISIONS:
- insurers can no longer deny coverage/care for preexisting conditions
- can remain on parent insurance until 26y/o
- plans cannot place annual/lifetime limits on coverage
- many preventative services MUST be provided (well-child visits, common vax, screenings for DM & HTN, dx screens, counseling)
What are the challenges of ACA?
Increased taxes, increased premiums, and some believe it’s an intrusion of rights to mandate insurance
Federal health insurance for people 65+, younger people with permanent disabilities, and ESRD requiring dialysis or transplant.
Medicare
What is Medicare - Part A?
Hospital Insurance
covers hospital stay, hospice care, some home health, and skilled nursing ONLY in LTC
- free for clients if they or spouse paid medicare taxes
- can be bought with premiums if taxes were not paid
- paid for by the federal government
What is Medicare - Part B?
Medical Insurance
covers provider services, outpatient care, medical supplies/equipment, diagnostic & preventative tests
- voluntary, paid by monthly premium
- supplemental private insurance will pay what part B does not cover
What is Medicare - Part C?
Medicare Advantage Plan
private healthcare plan that can be purchased to provide part A, part B, and most of part D
- may offer extra coverage (vision, dental, hearing, health/wellness)
What is Medicare - Part D?
Prescription Drug Coverage
drug benefits plan that covers prescriptions and vaccinations
- must enroll in medicare-approved plan that offers drug coverage
Largest source of coverage, paid by joint federal and state covering with taxpayer funding. Provides health insurance for low-income families, qualified pregnant women and children, those receiving SSI, and the elderly or disabled.
Medicaid
How is Medicaid paid for and what does it cover?
State-level program that receives federal funding.
Coverage varies state-to-state ~ hospital care, skilled nursing care, preventative, labs & diagnostics, home health, and routine visits.
Insurance either provided by employer by shared expenses through their employers benefit package or through purchasing it via the marketplace.
Private Insurance
Those who go without insurance and pay costs as they arrive, not eligible for CMS and employer doesn’t provide.
- At jeopardy for bankruptcy if debt accrues
- Refer to case manager or social worker
Self-Pay
Health plans that bring together delivery and financing functions to control costs, utilization, and quality of care for optimal outcomes.
Managed Care
What are the components of managed care?
- Policies and procedures that reflect EBP
- Increase positive patient outcomes to increase organization’s money (handwashing, 2 person foley insertion)
- Cost Containment
- Decrease unnecessary costs and increase quality of care
Appropriate and efficient delivery of services so needed revenues are obtained for the sustainability of the organization.
Cost Containment
This form of coverage offers managed care through a primary provider who decides what services the patient uses. (Provider=gate keeper)
Health Maintenence Organizations (HMO)
Which form of insurance coverage is paid on a capitated basis with a focus on prevention and the use of ambulatory care rather than expensive hospital care?
HMO
Which form of insurance coverage has the LOWEST monthly cost, paid by a flat fee?
HMO
Which form of insurance coverage provides a smaller network of providers and hospitals, restricts consumers to only receive in-network care, and may require consumers to see PCP for referral to a specialist?
HMO
- Specialist may/may not be approved by HMO
- Many services require reauthorization by HMO
This form of coverage provides a network of organizations and providers that provide lower-cost services because they are in-network BUT does allow consumers to get out-of-network care for an increased cost.
Preferred Provider Organization (PPO)
- Referrals rarely needed, less restrictive than HMO
How are providers/hospitals contracted in PPO?
Third party payer contracts with group of providers to provide services at lower price in return for prompt payment and guaranteed patient volume.
- Money is based off volume of patients
This form of coverage provides a combination of HMO and PPO but the consumer bears the cost for out of network care.
Point of Service
Classification system that groups patients according to their diagnosis, type of treatment, age, surgery, length of stay, and discharge to determine average costs to guide CMS reimbursement.
Diagnostic Related Groups (DRG)
How are DRGs used to reimburse hospitals? What are some considerations pertaining to DRGs?
Payment is based on pre-determined amount for expected cost that use starting point with number of days for grouping patient is placed in.
- Nursing care NOT explicitly calculated
- Do not reflect variability of patient acuity
- Coding (documentation) important to document needed care and resources
Costs paid by an insured individual that include deductibles and co-pays.
Out-of-pocket Expenses
Amount of money paid by the consumer before the plan pays for anything.
- Generally, apply per person per year
- PPOs increase premiums but decrease deductibles
Deductibles
Flat fee paid by the consumer at the time of health service.
Co-pay
How do HCOs budget?
They estimate the money and resources to be used for planned expenses and revenue over a period of time.
How is profit calculated?
Excess income after all expenses are paid.
REVENUE - EXPENSES = profit
Operates by providing services to those who can pay for it to ensure a profit is made.
- They pay taxes and profits are distributed among investors and managers.
For-Profit (FP)
Controlled by voluntary boards or trustees and provide care for both paying and non-paying individuals.
- Excess revenue is redistributed into the organization for growth
- Don’t pay taxes
- All profit = margin!
For-Nonprofit (FNP)
Reimbursement models that attach financial incentives to the performance of HCO and providers. Payment aligned with value and quality.
Value-Based Payment
(Pay for Performance)
How do value-based payment programs provide higher reimbursements? What is the RN’s impact on reimbursement?
Higher reimbursements for positive patient outcomes, best practice, and patient satisfaction.
RNs impact through documentation of care plans and achievement of expected outcomes.
What are the value-based CMS programs?
- Hospital Value-Based Purchasing Program
- Hospital Readmission Reduction Program (HRRP)
- Hospital-Acquired Condition Reduction Program (HACRP)
Designed to improve care quality and patient experience by using financial incentives that encourage hospitals to follow best EBP and improve satisfaction via patient surveys.
Reimbursement based on performance in:
- Safety, clinical care, efficiency, patient/caregiver-centered experience
Hospital Value-Based Purchasing Program
Penalizes hospitals with higher rates of readmission compared to other hospitals and applies to specific conditions/procedures.
- Poor performance results in 3% decrease in medicare reimbursement
- Hospitals divided into groups based on SCE of pt population
Hospital Readmission Reduction Program
What conditions do the HRRP apply to?
MI, HF, pneumonia, COPD, knee and hip replacements, and CABGs
Reduces payments to hospitals based on poor performance regarding patient safety and hospital-associated conditions, such as surgical site infections, hip fractures from falls, and pressure injuries.
- Measures incidence of HA conditions like CLABSI, CAUTI, SSI, MRSA, C.diff
- Saves medicare $350m annually
Hospital-Acquired Condition Reduction Program
Differences in access to healthcare and insurance coverage that can lead to decreased quality of life, increased personal costs, and decreased life expectancy.
Healthcare Disparities
*translate to greater societal costs - the financial burden of chronic conditions
Resources used to deliver services like supplies, labor, equipment, utilities, misc.
Expenses
Expenses directly associated with patient care like medical/surgical supplies, drugs, and nursing care.
Direct Expenses
Expenses not directly associated with patient care like utilities, housekeeping, and maintenance care needed to support care.
Indirect Expenses
Expenses that do not change as the volume of patient’s changes.
- Unrelated to productivity or volume
- Rent, utilities, loan payments, administrative salaries
Fixed Costs
Expenses that vary depending on the volume or acuity of patients and types of care required.
- Nursing personnel, medication, supplies, etc.
Variable Costs
Financial plan of anticipated revenue and expenses from daily operations, given a specific volume of patients, over a period of time.
- Personnel budgets/costs (nursing is largest!! 50%)
- Day-to-day costs of operating unit
- Need to prepare daily staffing plan, establish positions, unit of service, workload
- Revenue budget established by financial office and given to manager
Operational Budget
How is the workload of a unit calculated?
Hours of care per pt per day (based on the acuity)
X
Number of patient days
=
Workload
Expenses related to the purchase of major new or replacement equipment and investments within the facility.
- Must have life >1yr and exceed cost level specified by organization
- Minimum $300-$1000, anything under considered operational
- Kept separate from operation because their high costs would make cost of care appear too high
- Costs are depreciated (allocated portion into operational)
Capital Budget
Amount left over after expenses are withdrawn; determined by relationship of income and expenses.
Profit
The difference between the projected budget and the actual result during/for that time frame.
Variance
What is considered a positive variance?
when COSTS < budgeted amount = PROFIT.
What is considered a negative variance?
when costs > BUDGETED amount = LOSS!
A match of RN expertise with the need of the recipient of nursing care services in the context of practice setting and situation.
Achieved by dynamic, multifaceted decision-making process that take into account a wide range of variables.
Appropriate Staffing
(ANA)
Unalterable nurse-to-patient ratio for a particular unit or shift.
Fixed Staffing
Nurse-to-patient ratios that consider changes in the nursing environment.
Flexible Staffing
Quantified nursing time available to each patient by available nursing staff.
Nursing hours per day
How can the NM achieve a balanced staffing plan?
Determining the correct combination of FT and PT positions needed and consider the effect of productive and nonproductive hours.
The paid hours actually worked on the unit and available for patient care.
Productive Time
Time spend with hands-on care to patient.
- Used to pay for the actual care
Direct Care Hours
Time spent with other activities that support patient care.
- Staff meetings, documentation, education
Indirect Care Hours
Benefit hours paid to employees for vacation, sick days, and education time.
Nonproductive Time
The measurement of nursing workload generated per patient, used to support staffing needs and track trends in acuity and volume.
Patient Acuity
How is patient acuity used?
Use pt classification system to measure amount/complexity of required care.
- Predicts nursing hours needed and skill mix
- Used to plan nursing care over each 24hrs
- Managers can use to justify variances in budget and staff utilization
- Can guide daily staffing
Function of implementing the staffing plan by assigning unit personnel to work specific hours and days.
Scheduling
Based on the units approved personnel budget and projected staffing need to ensure patient safety AND meet both needs of patient & organization.
Staffing Plans
What variables should be considered when developing a staffing plan?
- Hours of Operation
- Basic Shift Length for Unit
- Known Activity Patterns Throughout the Day
- Shift Rotation Requirements
- Weekend Requirements
- Personal/Professional Requirements and Time-Off Requests
- Distribution of FTEs
Employees scheduled to work, no matter the patient volume.
- Typically exempt or salaried position
Fixed FTEs
Employees scheduled to work based on the workload of the unit.
- Nonexempt, hourly wages
Variable FTEs
Staffing Patterns: Acuity Based
Patient assignment model taking into account the level of patient care based on the severity of pt illness/condition.
- # of pt varies each shift as pt needs change
- promotes efficient use of resources
Staffing Patterns: Team Nursing
Using a combination of RNs, LPNs, and UAPs to care for a group of patients.
- RN is leader of team, making assignments and delegating care w/ supervision
- Allocating human resources to provide quality and cost-effective care
- Must use communication and organize shift
Staffing Patterns: Mandatory Overtime
RNs required to stay and care for patients beyond shift when there is a lack of nursing staff.
- ANA recognizes it as a dangerous practice
- Some states hold RN liable for pt abandonment and neglect for refusing
Staffing Patterns: Floating
RN temporarily works on a different unit to help cover a short-staffed unit.
- Can decrease personnel costs by decreasing OT pay and reduce burnout
What are the KEY CONCEPTS to remember when floating?
you are STILL HELD ACCOUNTABLE
- ensure assignment is aligned with skill set
- receive orientation to unit
- responsible for errors
ANA states: nurses don’t just have a right to refuse a float, they have an OBLIGATION
Staffing Patterns: Total Patient Care
AKA: Case Method
RN provides total patient care for one patient during entire shift.
- useful in complex patient who require active sx management (hospice, ICU)
- NO delegation
What are the pros + cons of total patient care?
PROS: consistent care by 1 RN, builds trusting relationship, noticing subtle changes in status faster
CONS: lose holistic perspective when approached as task-based, very expensive, poor use of human resources
Staffing Patterns: Functional Nursing
Each licensed and unlicensed staff member performs specific tasks for a large group of patients.
- Tasks determined by scope (task-oriented roles_
- Charge RN coordinates care & assignments; may be only person aware of all needs of any patient
What are the pros + cons of functional nursing?
PROS: efficiency and time management, care can be delivered to large number of patients, fixed number of RNs and large number of UAPs
CONS: fragmentation of care, confuse pts with multiple care providers, may be too busy with tasks to communicate about pt progress, no one sees pt beginning to end making it hard to track progress, critical changes may go unnoticed
Staffing Patterns: Primary Nursing
Adaptation of TPC; organizing patient care as one RN functions autonomously as the patient’s primary nurse throughout hospital stay.
- Responsible for care 24h/day from admission to discharge
In Primary Nursing, what are the responsibilities of the primary nurse and the associate nurse?
The primary nurse is held accountable for meeting outcome criteria, communicates with other disciplines about patient, admits and writes plan of care.
The associate nurse is available when primary is not working, implements plan of care, delegated to provide care from primary, notify primary of concerns, provides input on plan of care (PRIMARY ALTERS).
What are the pros + cons of primary nursing?
PROS: patients have their own nurse, plan care with patient, decreases number of UAP, all-RN staff in ideal primary system.
CONS: may not have experience to provide TPC, not effective in larger unit with many part-time RNs, expeditated stay challenge providing depth of care, cant meet all needs if off in the middle of stay, rely heavily on feedback from associate, VERY expensive
The RN utilizes appropriate resources to plan, provide, and sustain evidence-based practices and services that are safe, effective, financially responsible and used judiciously.
Resource Stewardship
The process of coordinating healthcare by planning, facilitating, and evaluating interventions across levels of care to achieve measurable cost + quality outcomes.
Nursing Care Management
- Function that helps ensure patients need & preferences are met overtime with respect to health services and information sharing
- The deliberate organization of patient care activities between two or more, including patient, involved in care to facilitate delivery of health services.
Care Coordination
Comprehensive and integrated approach to care and reimbursement of common, high-cost, chronic illnesses like COPD, DM, MS, CHF, etc.
- Clinical Pathways (best practice and research guide care and interventions)
- Focus on primary prevention and early detection
- Employ interdisciplinary teams
Disease Management Systems
Seamless process as care shifts from one setting to another that should improve patient outcomes and manage costs.
- Continuity of care to decrease readmissions
- Multidisciplinary communication throughout stay and discharge
- Comprehensive planning and risk assessment
- Comprehensive DC planning
- Timely follow up home visits with primary care
Transitional Care Models
