1. Copyright © 2006 Elsevier, Inc. All rights reserved Chapter 16 Economics of the Health Care System

2. Copyright © 2006 Elsevier, Inc. All rights reserved What Are the Trends Affecting the Rising Costs of Health Care? Intrinsic factors –Population characteristics –Health care demand –Employer-paid health insurance Extrinsic factors –Availability of technology –Prescription drug costs –Workforce costs

3. Copyright © 2006 Elsevier, Inc. All rights reserved What Are the Choices about Amount of Spending? United States spends 14% on health care Federal government largest purchaser of health care Needs of population not met

4. Copyright © 2006 Elsevier, Inc. All rights reserved What Are the Choices about Services to Provide? Oregon State passed legislation providing example of choices Americans are typically opposed to a rationing system

5. Copyright © 2006 Elsevier, Inc. All rights reserved What Are the Choices about Methods to Produce Health Care? Right care Right amount Right provider Right setting Need research to decide best method

6. Copyright © 2006 Elsevier, Inc. All rights reserved What Are Choices about Allocation? Is health care a right or a commodity? Code for Nurses (ANA)—nurses provide care without consideration of social or economic status Who pays for health care?

7. Copyright © 2006 Elsevier, Inc. All rights reserved Government Allocation Decisions Medicare –Pays for inpatient health care –Some outpatient care for patients over 65 Medicare does not cover everything!

8. Copyright © 2006 Elsevier, Inc. All rights reserved Budgets A tool to help make allocation decisions and to plan for expenditures

9. Copyright © 2006 Elsevier, Inc. All rights reserved What Are the Types of Budgets? Capital –Items to purchase for the next year –Usually a price limit per item Operating –Expected expenses –Volume projections –Admissions, discharges, and transfers

10. Copyright © 2006 Elsevier, Inc. All rights reserved Operating Budget Line items –Supplies, phones, small equipment, copying costs Variable costs –Costs that change with volume of patients Fixed costs –Don’t change with volume of patients

11. Copyright © 2006 Elsevier, Inc. All rights reserved Personnel Budget Largest unit expense –Hours per patient day (HPPD) –Staffing patterns –Full-time equivalent (FTE) –Productive time –Nonproductive time

12. Copyright © 2006 Elsevier, Inc. All rights reserved Fiscal Responsibility to the Patient Primary and most important fiscal responsibility Use most cost-efficient combination of resources to maximize health benefit to the patient Understand costs of care and different reimbursement systems Engage in early discharge planning

13. Copyright © 2006 Elsevier, Inc. All rights reserved Fiscal Responsibility to the Employing Institution Provide quality patient care Use resources wisely Understand prospective payment systems Accurately document patient’s condition