Competition in the Supply of Healthcare
1) What factors might influence a physician’s ordering of services for patients?
2) What type of physician reimbursement mechanisms can be utilized to reduce services?
3) Describe the diagnosis-related groups (DRG) reimbursement system and how it is designed to function in hospital reimbursement? What factors limit its effectiveness?
4) Complete the table with supply side strategies detailing how they are designed to function and what the known limits/outcomes are of each model.
Cost Containment Strategies Definition and Mechanism/ what is it designed to do? Known Limits/failures
(quality, effectiveness, etc)
VBP
Practice Guidelines
Managed Care
ACOs
Utilization Management
PCMHs
Selective Contracting
5) Identify 2 ACO’s in your state/region, describe who operates them (e.g., hospital system?) and their membership size/scope. Use CMS’ ACO site to find ACOs if you do not know.
6) How can market power affect the US Healthcare System, using chapter, lecture and/or powerpoint points to explain your answer? What are some possible policy responses?
7) What is cost shifting and how could we better address it?
Sample Answer
Factors Influencing Physician Ordering
A physician's ordering of services for patients can be influenced by several factors, including:
Clinical necessity: The most obvious factor is the need to diagnose or treat a patient's condition based on medical evidence and best practices.
Patient demand: Patients may request specific tests or treatments they've heard about, and physicians might comply to satisfy them, even if the service isn't strictly necessary.
Malpractice concerns: To avoid lawsuits, physicians may practice defensive medicine, ordering more tests and procedures than needed to have a comprehensive record.
Reimbursement mechanisms: The way a physician is paid can directly influence their decisions. For example, a fee-for-service model incentivizes ordering more services, while a capitation model encourages fewer services.
Physician-patient relationship: Trust and communication between a doctor and patient can influence decisions. A patient with a strong rapport with their physician may be more likely to accept a doctor's recommendation.
Physician characteristics: A physician's age, training, experience, and personal beliefs can also affect their ordering patterns.
2. Physician Reimbursement Mechanisms to Reduce Services
To reduce the number of services ordered by physicians, several reimbursement mechanisms can be utilized:
Capitation: Physicians are paid a fixed amount per patient per month, regardless of the number of services provided. This model incentivizes them to manage patient care efficiently and focus on preventative measures to keep patients healthy.
Bundled Payments: A single payment is made for an entire episode of care, covering all services from multiple providers for a specific condition or procedure (e.g., a knee replacement). This encourages providers to work together to reduce unnecessary costs.
Salary: Physicians are paid a fixed salary, decoupling their income from the number of services they provide. This eliminates the financial incentive to order more services.
Pay-for-Performance (P4P): Physicians receive bonuses or penalties based on achieving specific quality or efficiency metrics, such as meeting targets for blood pressure control or reducing unnecessary hospital readmissions.
3. Diagnosis-Related Groups (DRG) and Hospital Reimbursement
The diagnosis-related groups (DRG) reimbursement system is a method of payment used by Medicare and other insurers to reimburse hospitals. It is designed to function by classifying patients into approximately 500 groups based on their diagnosis, age, sex, and presence of complications or comorbidities. A hospital is then paid a fixed, predetermined amount for each patient in a specific DRG, regardless of the actual length of stay or the services provided.