"Part III Resource Allocation andCommunity Responsibilities in Health Care Chapter 7 Expenditures, Cost Containment, andQuality of Care Chapter 8 Ethical Resource Allocation Chapter 9 Health Disparities and Social JusticeJose Luis Pelaez/Iconica/Getty Images The ideal of the health care system is to maximize patient access to high-quality care at a cost that is afford- able to individuals as well as to society. Each of these elements has ethical components and is driven andconstrained by the legal environment in which health care is planned, provided, paid for, and evaluated. Thechapters in Part III explore different facets of the access/quality/costs challenge on the level of both indi- vidual patients and society. We also analyze failures in attempting to equitably reconcile the tension amongthese distinct but clearly interrelated facets in a real world of limited resources but infinite need.Expenditures, Cost7 Containment, and Qualityof Care iStockphoto/Thinkstock Learning Objectves1. Investgate the need for cost containment to ensure a sustainable health care system. 2. Explore the depth and breadth of inefciency, waste, and cost overruns in American health care. 3. Outline the legal methods used to control, monitor, and remedy cost and quality problems in Americanhealth care today. 4. Identfy the ways in which the Afordable Care Act of 2010 atempts to resolve the ethical and legalproblems associated with cost containment and quality assurance. 5. Examine process improvement methods used by health care facilites that are designed to eliminateredundancy and waste. 139CHAPTER 7 During the past century or so, medical care in the United States has shifted from individual doctor- patient interactions, typically within an office setting, to interactions in health care facilities thatcontinue to grow ever larger and more complex. Modern American health care has become morehighly specialized, technology centered, and fragmented—a phenomenon that has been antici- pated since the mid-19th century. The English sociologist Herbert Spencer (2004) observed thatas society increases in complexity, so do its social institutions. The bureaucratic explosion withinhealth care, therefore, seems less a symptom of inefficiency and institutionalized excess and morea part of the necessary, long-term development of specialized sectors within advanced industrial- ized society (Toulmin, 1990). Today early 20th-century forecasts seem to aptly describe the current state of affairs. Physiciansincreasingly work in large, complex medical centers and practice settings and tend to see theirscope of professional discretion minimized and finitely defined. The fear of going beyond thoseclear limits frequently causes physicians to practice medicine defensively, sometimes forgoing theends of patient care to do so. Practicing under such constraints has its advantages but can alsodistract physicians from their professional duties. For many patients, medical care has becomeakin to conveyer-belt production. Continuity of care once meant having the same health care pro- fessionals in a lifelong relationship with the patient. In the new era of medicine, care is more likelyto involve patients being scuttled between sometimes dozens of different caregivers, very few ofwhom will even remember the patient’s name or, in some cases, even meet with the patient oneon one. As a result, patients may become suspicious of their caretakers, sometimes even assum- ing an adversarial stance where once there would have been warm acceptance (Phillips & Benner,1994). Most health care administrators and managers enter the profession with clear priorities onpatient care but soon feel incessant economic and regulatory pressures to protect their institu- tion’s finances and public image. This is certainly part of any good health care administrator’sjob description, but too often the loyalty to this side of the job wins out over the ultimate aim ofhealth care—caring for patients. “No margin, no mission” has become a popular refrain amongmodern health care leaders, and the statement is certainly true. However, what often gets misun- derstood in this pithy slogan is that margin should exist only to further the mission. No mission,no health care organization. In this chapter we will look at how modern American health care has succumbed to bureaucracyand how the resulting unsustainable costs have not translated into proportionately better qualityof care. The chapter will also show how the constraints of institutionalization upon the moral prac- tice of medicine should be a major concern for health care professionals. Finally, we will examinewhat American society has done to address this major issue of ethical concern. 140Section 7.1 The Current State of Affairs CHAPTER 7 7.1 The Current State of Affairs merican health care continues to be at the leading edge of discovery and innovation. How- ever, in order to get a realistic picture of the current state of affairs, its performance mustAbe examined in comparison to that of other health care systems. That is when the paradoxi- cal success-failure story of American health care comes to light. In this section we will investigatehow American health care compares to that of other countries and consider the impact of expen- ditures on quality of care. Do Expenditures Equate to Quality of Care? The United States spends approximately 20% of itsannual gross domestic product on health care, fourtimes the average expenditure of other countries,and twice as much as the next biggest spender (Davis,Schoen, & Stremikis, 2010). Such expenditures couldbe viewed as a good thing. For example, they couldbe evidence of the importance that American societyplaces on a human right to the best health care avail- able or on the value and necessity of good health foreveryone. Paradoxically, the United States also remainsthe only leading industrial nation that chooses not toguarantee health care for all its citizens (Davis et al.,2010). This fact does not mean that such a large expen- diture is not well spent or that individuals in the UnitedStates do not receive a commensurately greater ben- efit than anyone else. Combined with other indicators,however, it becomes apparent that American healthcare dollars are not well spent, nor do these dollarsafford individuals a greater benefit for this massiveCusp/SuperStock investment. When compared to five other developedThe United States spends four times whatnations (Canada, the United Kingdom, New Zealand,the average prosperous country spends onAustralia, and Germany), the United States comes inhealth care. However, studies have shownfirst in health care dollars spent per person, but last onthat this extra spending does not lead tonearly every other criterion, including access, patientsuperior care. safety, efficiency, and equity (Furrow, Greaney, John- son, Jost, & Schwartz, 2008). The United States alsolags behind the five other comparison countries in adopting information technology and quality- improvement systems and policies—despite the fact that many of these innovations are American(Furrow et al., 2008). (See Figure 7.1 for a comparison of health care expenditures as a percentageof the GDP of five countries.) 141Section 7.1 The Current State of Affairs CHAPTER 7 Figure 7.1: Health care expenditures as a percentage of GDP, selected countries,1961–2009 Over the past 50 years, the amount of money countries spend on health care for their citizens hasconsistently risen. However, the increase is exceptionally high in the United States. What do you thinkhas caused the country to spend so much of its GDP on health care? Source: Mauersberger, B. (2012). Tracking employment-based health benefits in changing times. Chart. Retrieved from ht tp://www.bls.gov/opub/cwc/cm20120125ar01p1.htm Additionally, many Americans lack access even to basic health care, while much of the remainderof the population has spotty or insufficient health care coverage (Davis et al., 2010; Emanuel,2008). (See Figure 7.2 for a breakdown of the number of Americans without health insurance.)Rampant expenditures continually threaten to wreak economic havoc, and exorbitant administra- tive costs further emphasize the unsustainability of the current system. Consumer satisfactioncontinues to dwindle as trust erodes amidst constant news reports of health care professionalsand organizations committing malfeasance. Meanwhile, health care professionals have resortedto practicing medicine behind a defensive barricade against malpractice lawsuits from one sideand economic pressures from the other. 142Section 7.1 The Current State of Affairs CHAPTER 7 Figure 7.2: Americans under age 65 without health insurance coverage,January–June 2011 A significant number of Americans are currently without health insurance, with the largest group beingmen between the ages of 25 and 34. This figure shows the percentage of persons in the United Statesunder age 65 without health insurance coverage at the time of the interview, broken down by age groupand sex. Source: CDC, 2011. ht tp://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201112.htm Do Standards Ensure Quality? One of the ways that health care has attempted to identify and resolve areas of low performanceand compromised quality is to develop and promote practice guidelines. Professional organiza- tions review the medical literature, undertake empirical surveys of current standards of care, anddebate among their members and the public what minimal standards of acceptable care and pro- fessional performance should be expected from their field. These standards of acceptable carecan be influential as public assurances of minimal competencies and thresholds of quality. Theyalso can be used to help determine when negligence has taken place. Because standards of careare important for everyday clinical practice, practitioners must keep up-to-date about them. Why,then, do some ethicists and health care practitioners question the morality of using professionalstandards? When managed care organizations (MCOs), including health maintenance organizations andpreferred provider organizations, first gained prominence in the American health care system,many felt that the guidelines proposed by various medical entities for clinical care amounted tolittle more than an institutionalized means to limit treatment and maximize profit for providersand insurers (La Puma, 1995). In some instances, compliance with specific practice guidelines143Section 7.1 The Current State of Affairs CHAPTER 7 influenced physician compensation, thereby creating financial incentives and disincentives forphysicians’ clinical decisions. For example, physicians participating in a specific MCO might receivea bonus at the end of the year if reduced patient use of expensive medical services contributed toa positive financial bottom line for the MCO that year (Miles, 2005). (See Figure 7.3 for a break- down of medical care participants by plan type.) Figure 7.3: Percentage of medical care participants by plan type, privateindustry, 2010 Sixty-two percent of medical care participants receive insurance through preferred providerorganizations (PPO). Health maintenance organizations were the second most popular plan. What doyou think creates the interest in PPOs? Source: Mauersberger, B. (2012). Tracking employment-based health benefits in changing times. Chart. Retrieved from ht tp://www.bls.gov/opub/cwc/cm20120125ar01p1.htm Stop and Clarify: Managed Care Organizatons Managed care organizations take many different forms. The common characteristic of all MCOs, how- ever, is that they combine the insurer and provider functions into the same corporate (for-profit ornonprofit) structure. This combination of functions creates a financial incentive for the MCO and itsparticipating physicians to deliver care as efficiently and cost-effectively as possible. MCOs have beendeveloped in reaction to the traditional third-party payment system, in which the health insurer, thepatient, and the provider all had their own, often inconsistent, incentives—an inconsistency that inevi- tably resulted in escalating health care costs. (continued) 144Section 7.1 The Current State of Affairs CHAPTER 7 Stop and Clarify: Managed Care Organizatons (c on tnued) One type of MCO is the health maintenance organization (HMO). In return for the prepayment of aprospectively set monthly or annual premium, a closed-panel HMO provides comprehensive healthservices to an enrolled patient through physicians who are either employees of the HMO (staff model)or employees of a private physician group that contracts with the HMO (group model). In a closed- panel HMO, the patient must receive care from the HMO’s employed or contracted physicians; other- wise they must pay a non-HMO physician directly out of pocket. In an open-panel HMO (independentpractice association), medical care is provided by privately practicing physicians who, in addition totreating their other patients and billing insurance companies for that treatment, also participate in theHMO’s network. When a network physician treats a patient who is enrolled in the independent prac- tice association, the association pays that physician for the treatment according to a predeterminedmethodology that varies considerably among independent practice associations. The other main type of MCO is the preferred provider organization (PPO). Like the HMO, a PPO prom- ises comprehensive coverage to enrolled patients in return for a monthly or annual prepaid premium.The PPO contracts with a network of physicians and other providers (such as hospitals) to serve itspatients; to participate in the PPO, the provider must agree in advance to accept an amount of pay- ment for specific services that the PPO is willing to pay. In return for receiving the provider’s best price,the PPO makes the provider “preferred” by informing patients that the full cost of their care will onlybe covered if the patient uses one of the preferred providers. Otherwise, the patient will have to payall or part of the provider’s fee directly out of pocket. In a point of service plan, the patient gets to choose at the time of service whether to use a pro- vider inside or outside the patient’s MCO. The patient then accepts the financial consequences of thatchoice. Another potential problem with practice guidelines is that they may be applied inflexibly. Thereis no guarantee that strict adherence will always result in better care. For example, a physicianfollowing earlier guidelines that recommended annual mammography screening for older womenmight subject patients to radiation and the risk of false positive results, leading to unnecessaryand even harmful anxiety, follow-up testing, or even aggressive surgical intervention—all withouta meaningful corresponding benefit for the patient in terms of longer and enhanced quality of life. Medical practice requires careful discernment and discrimination; it takes many years for a prac- titioner to develop genuine expertise. Professionals in any field know the value of guidelines butalso realize that true experts know when to judiciously disregard them. On the other hand, whenstandards of practice were vague and totally individualistic, physicians often tended to providecostly and unnecessary care either under the guise of “thoughtful, careful medical practice” (LaPuma, 1995) or in accordance with the ethical principle of respect for autonomy since patientsrequested it. This total discretion in treatment resulted in spiraling health care costs, waste, andoften less than optimal health care outcomes. It was not long before the public began asking fora different kind of accountability to be sought through MCOs and for a way to distinguish goodhealth care from bad. 145Section 7.1 The Current State of Affairs CHAPTER 7 What Defines Quality? Though many would agree that quality is not mere compliance with practice guidelines, it is muchmore difficult to come up with a positive definition of the term. Furthermore, quality is inherentlydifficult to measure. To help answer the question of what constitutes quality, the Rand Corporation conducted its Med- ical Outcomes Study in the 1990s (La Puma, 1995). Health outcomes are defined as “a change inthe health status of an individual, group, or population that is attributable to a planned interven- tion or series of interventions, regardless of whether such an intervention was intended to changehealth status” (Definition of Wellness, n.d.) In this study, Rand researchers came up with seven dif- ferent components: financial accessibility, organizational accessibility, continuity, comprehensive- ness, coordination, intrapersonal accountability, and technical accountability (Rand Corporation,1990). This enumeration of factors constituting health outcomes is useful because it conformsto the common belief that health care assessments should focus on both the technical as wellas the interpersonal dimensions of care. The Rand project built upon the seminal work of AvedisDonabedian, a leader in the theory of health care assessment. Donabedian proposed that tech- nical care is “the application of the science and technology of medicine, and of the other healthsciences, to the management of a personal health problem” (1982, p. 4). He added that the “man- agement of the social and psychological interaction between client and practitioner” (1982) is alsoa part of technical care, although it makes up the art of medicine facet of the term. To define whatquality in technical care is, Donabedian (1980) acknowledged: At the very least, the quality of technical care consists in the application of medi- cal science and technology in a manner that maximizes the benefits to healthwithout correspondingly increasing its risks. The degree of quality is, therefore,the extent to which the care provided is expected to achieve the more favorablebalance of risks and benefits. For Donabedian, quality in health care’s interpersonal dimensions was more difficult to define. Yettogether with excellence in the medical-technical aspects, quality of care is “that kind of care whichis expected to maximize an inclusive measure of patient welfare, after one has taken account ofthe balance of expected gains and losses that attend the process of care in all its parts” (Donabe- dian, 1980). In other words, measuring quality of care must ultimately focus on the impact of careon patients’ quality of life. Donabedian’s definition of quality remains one of the earliest and most influential holistic attemptsto clarify what is now more commonly referred to as health outcomes—that is, the actual impactof care on patients’ quality of life. Later definitions—such as the IOM’s “degree to which healthservices for individuals and populations increase the likelihood of desired health outcomes andare consistent with current professional knowledge” (IOM, 1990)—offer a clearer focus on desiredresults but also incorporate the idea that professional standards should still play a role in decidingwhat constitutes quality care. This is because achieving a desired result may not be indicative ofthe quality of the care received. It may be a coincidence that things turned out the way the patientor health care provider wanted; the result may have been good despite a poor quality of care; orthe result, while desired or even good, may still pale in comparison to the result that might haveoccurred had better-quality care been rendered. The IOM definition also judges care that doesnot conform to current professional knowledge to be of poor quality, despite the health outcomes146"