Health Care Law Outline-2 PDF

[Chapter 1: Cost, Quality, Access & Choice 5](#chapter-1-cost-quality-access-choice) [A. 1) Pure waste 6](#pure-waste) [B. 2) Net waste 6](#net-waste) [The Problem of Medical Error 7](#the-problem-of-medical-error) [II. Adverse Event: 7](#adverse-event) [III. A medical Error: 7](#a-medical-error) [Comparative Effectiveness Research (CER) 8](#comparative-effectiveness-research-cer) [ACA Aims/Goals: 10](#aca-aimsgoals) [ACA Strategies: 10](#aca-strategies) [Access 10](#access) [Insurance (pg 421) 11](#_Toc184805286) [V. "Underinsured" (pg 422) 11](#underinsured-pg-422) [IX. Health insurance: (pg 409) 12](#health-insurance-pg-409) [X. Underwriting: (pg 410) 12](#underwriting-pg-410) [XI. Preexisting conditions: 13](#preexisting-conditions) [Managed care (pg 415) 13](#managed-care-pg-415) [V. Distinguishing features of managed care: 14](#distinguishing-features-of-managed-care) [VI. Types of managed care orgs (p. 418): 14](#types-of-managed-care-orgs-p.-418) [A. Health Maintenance Organizations (HMOs) 14](#health-maintenance-organizations-hmos) [B. Point of Service Plans (POSs) 14](#point-of-service-plans-poss) [C. Preferred Provider Organizations (PPOs) 14](#preferred-provider-organizations-ppos) [D. Provider Sponsored Organizations (PSOs) 14](#provider-sponsored-organizations-psos) [E. Accountable Care Organizations (ACOs) 14](#accountable-care-organizations-acos) [Cost (p. 423) 14](#cost-p.-423) [V. We don't have a health care system. We have a health care MARKET. 15](#we-dont-have-a-health-care-system.-we-have-a-health-care-market.) [E. Who is paying. 16](#who-is-paying.) [I. Hospitals have to get certificates of need when they expand. 16](#hospitals-have-to-get-certificates-of-need-when-they-expand.) [J. Admin costs in the insurance industry (pg 428) 16](#admin-costs-in-the-insurance-industry-pg-428) [K. Population demographics (pg 427) 16](#population-demographics-pg-427) [L. Malpractice (pg 430) 17](#malpractice-pg-430) [M. Physician pay 17](#physician-pay) [N. Changing nature of disease \-- chronic illness/disease (pg 428) 17](#changing-nature-of-disease----chronic-illnessdisease-pg-428) [O. Technology & Big Pharma (pg 429) 17](#technology-big-pharma-pg-429) [VII. Cost Contributions: 17](#cost-contributions) [Video - "Sick Around the World" 18](#video---sick-around-the-world) [ Themes from foreign systems: 22](#themes-from-foreign-systems) [ACA (pg 511) 22](#aca-pg-511) [○ Private insurance reform 23](#private-insurance-reform) [ Reinsurance program 23](#reinsurance-program) [ Underwriting 23](#underwriting) [Chapter 13: The Structure of the Health Care Entities (p. 753) 24](#chapter-13-the-structure-of-the-health-care-entities-p.-753) [I. Note different types of health care organization structures on p. 755: 24](#note-different-types-of-health-care-organization-structures-on-p.-755) [A. Independent Practice Association 24](#independent-practice-association) [B. Physician-Hospital Organization (**PHO**) (pg 756) 24](#physician-hospital-organization-pho-pg-756) [C. Multi-Specialty Group Practice (MSGP) (pg 756) 24](#multi-specialty-group-practice-msgp-pg-756) [D. Management Services Organization (MSO) (pg 757) 24](#management-services-organization-mso-pg-757) [E. Integrated Delivery System (IDSs) (pg 757) 25](#integrated-delivery-system-idss-pg-757) [V. Horizontal integration v. vertical integration: 25](#horizontal-integration-v.-vertical-integration) [VI. Dimensions of organizational structures in health care sector: 25](#dimensions-of-organizational-structures-in-health-care-sector) [VIII. Accountable care organizations (ACOs) (p. 759): 25](#accountable-care-organizations-acos-p.-759) [IX. Limited liability and corporate form: (pg 761) 26](#limited-liability-and-corporate-form-pg-761) [Corporate governance and fiduciary duties in nonprofit & for-profit orgs (pg 762) 26](#corporate-governance-and-fiduciary-duties-in-nonprofit-for-profit-orgs-pg-762) [I. *Stern v. Lucy* (D DC, 1974) (see case brief) \| Business Judgment Rule (Page 764) 26](#stern-v.-lucy-d-dc-1974-see-case-brief-business-judgment-rule-page-764) [II. *In re Caremark* (Chanc. DE, 1996) (pg 771) 27](#in-re-caremark-chanc.-de-1996-pg-771) [B. Potential director liability for failure to supervise (pg 773): 27](#potential-director-liability-for-failure-to-supervise-pg-773) [Duties of Non-Profit Board (pg 779) 28](#duties-of-non-profit-board-pg-779) [Certificates of Need (p. 783) 30](#certificates-of-need-p.-783) [The corporate practice of medicine (p. 721) 30](#the-corporate-practice-of-medicine-p.-721) [VII. *Berlin v. Sarah Bush Lincoln Health Center* (SC IL, 1997) (pg 721) 30](#berlin-v.-sarah-bush-lincoln-health-center-sc-il-1997-pg-721) [Chapter 2: Quality Control Regulation: Licensing Health Care Professionals (Page 35) 31](#chapter-2-quality-control-regulation-licensing-health-care-professionals-page-35) [III. Licensure: 31](#licensure) [Discipline - Regulating Professionals 32](#discipline---regulating-professionals) [IV. ***In re Williams*** (OH, 1991) (pg 38) 32](#in-re-williams-oh-1991-pg-38) [V. ***Hoover v. Agency for Health Care and Admin.*** (FL Ct of App, 1996) (pg 41) 32](#hoover-v.-agency-for-health-care-and-admin.-fl-ct-of-app-1996-pg-41) [VI. Prescribing controlled substances for chronic pain (pg 49) 34](#prescribing-controlled-substances-for-chronic-pain-pg-49) [VII. The National Practitioner Data Bank 34](#the-national-practitioner-data-bank) [Complementary and Alternative Medicine (CAM) (pg 53) 36](#complementary-and-alternative-medicine-cam-pg-53) [II. Collision of CAM and traditional medicine: 36](#collision-of-cam-and-traditional-medicine) [III. ***In re Guess*** (NC, 1990) (pg 54) 36](#in-re-guess-nc-1990-pg-54) [Unlicensed Providers (pg 60) 37](#unlicensed-providers-pg-60) [I. ***State Bd of Nursing and State Bd of Healing Arts v. Ruebke*** (KS, 1996) (pg 61) 37](#state-bd-of-nursing-and-state-bd-of-healing-arts-v.-ruebke-ks-1996-pg-61) [Scope of Practice Regulation 38](#scope-of-practice-regulation) [I. ***Sermchief v. Gonzales*** (MO, 1983) (pg 71) 38](#sermchief-v.-gonzales-mo-1983-pg-71) [Chapter 12: Professional Relationships in Health Care Enterprises 39](#chapter-12-professional-relationships-in-health-care-enterprises) [Staff privileges and hospital-physicians contracts (pg 695) 39](#staff-privileges-and-hospital-physicians-contracts-pg-695) [Credentialing/Staff Privileges 40](#credentialingstaff-privileges) [I. ***Sokol v. Akron General Medical Center*** (6th Cir., 1999) (pg 698) 40](#sokol-v.-akron-general-medical-center-6th-cir.-1999-pg-698) [F. Common law right of fair procedure \-- network delisting: 40](#common-law-right-of-fair-procedure----network-delisting) [III. ***Mateo-Woodburn v. Fresno Community Hospital*** (CA Ct of App, 1990) (pg 707) 41](#mateo-woodburn-v.-fresno-community-hospital-ca-ct-of-app-1990-pg-707) [B. **Review of hospital administrative/policy decision:** 41](#review-of-hospital-administrativepolicy-decision) [Labor and employment (pg 729) 42](#labor-and-employment-pg-729) [II. *Turner v. Memorial Medical Center* (SC IL, 2009) (pg 729) 42](#turner-v.-memorial-medical-center-sc-il-2009-pg-729) [V. *NYU Med. Center, Bellevue Psychiatric Hospital* (NLRB, 1997) (pg 733) 43](#nyu-med.-center-bellevue-psychiatric-hospital-nlrb-1997-pg-733) [Chapter 3: Quality Control Regulations of Health Care Institutions (p. 83) 43](#chapter-3-quality-control-regulations-of-health-care-institutions-p.-83) [Organizational Context (pg 84) 43](#organizational-context-pg-84) [Defining and Assessing Quality 44](#defining-and-assessing-quality) [A. ***In re Smith v. Heckler*** (10th Cir., 1984) (pg 94) 45](#in-re-smith-v.-heckler-10th-cir.-1984-pg-94) [III. Enforcement: inspections and sanctions 46](#enforcement-inspections-and-sanctions) [A. ***Sunshine Haven v. U.S. Dep't of HHS*** (D.NM, 2016) (pg. 107) 46](#sunshine-haven-v.-u.s.-dept-of-hhs-d.nm-2016-pg.-107) [Chapter 4: The Professional-Patient Relationship (p. 121) 47](#chapter-4-the-professional-patient-relationship-p.-121) [Private Accreditation (p. 117) 47](#private-accreditation-p.-117) [I. Joint Commission 47](#joint-commission) [II. "Deemed status" 47](#deemed-status) [Confidentiality and Disclosure in the Physician-Patient Relationship 47](#confidentiality-and-disclosure-in-the-physician-patient-relationship) [Patient Privacy - Breaches of Confidentiality (State Law) 47](#patient-privacy---breaches-of-confidentiality-state-law) [I. ***Humphers v. First Interstate Bank of Oregon*** (OR, 1985) (pg 163) 47](#humphers-v.-first-interstate-bank-of-oregon-or-1985-pg-163) [VII. ***Doe v. Medlantic Health Care Croup, Inc.*** (pg 170) 48](#doe-v.-medlantic-health-care-croup-inc.-pg-170) [B. Breach of confidentiality 48](#breach-of-confidentiality) [HIPAA (Pg 174) 49](#hipaa-pg-174) [II. HIPAA - protected health information: 49](#hipaa---protected-health-information) [VIII. 6 categories of permitted uses/disclosures (p. 181): 49](#categories-of-permitted-usesdisclosures-p.-181) [HIPAA and State Law 51](#hipaa-and-state-law) [I. *Byrne v. Avery Center for OB/GYN* (SC Conn, 2014) (pg 199) 51](#byrne-v.-avery-center-for-obgyn-sc-conn-2014-pg-199) [The Professional-Patient Relationship 52](#the-professional-patient-relationship) [Physician Patient Relationship (pg 121) 52](#physician-patient-relationship-pg-121) [Triggers four duties: 52](#triggers-four-duties) [Forming the Physician-Patient Relationship (Pg 122) 52](#forming-the-physician-patient-relationship-pg-122) [*Lection v. Dyll* (pg 122) 52](#lection-v.-dyll-pg-122) [Informational Consultations (pg 129) 53](#informational-consultations-pg-129) [Duty not to Abandon a patient (pg 131) 53](#duty-not-to-abandon-a-patient-pg-131) [II. *Ricks v. Budge* (UT, 1937) pg 131 53](#ricks-v.-budge-ut-1937-pg-131) [III. Abandonment Claim Elements (pg 134) 54](#abandonment-claim-elements-pg-134) [IV. *Childs v. Weiss* (TX Ap, 1969) (pg 287) 54](#childs-v.-weiss-tx-ap-1969-pg-287) [*V.* *Lyons v. Grether* (pg 289) 54](#lyons-v.-grether-pg-289) [VII. Common law contract theory: 55](#common-law-contract-theory) [ACCESS 56](#access-1) [EMTALA: The Exception for Emergency Care (pg 299) 57](#emtala-the-exception-for-emergency-care-pg-299) [II. See statute on page 300. 57](#see-statute-on-page-300.) [III. *Baber v. Hospital Corp. of America* (4th Cir., 1992) (pg 303) 57](#baber-v.-hospital-corp.-of-america-4th-cir.-1992-pg-303) [C. EMTALA: 57](#emtala) [Federal Antidiscrimination Statutes (pg 314) 58](#federal-antidiscrimination-statutes-pg-314) [Chapter 14: Tax-Exempt Health Care Organizations (p. 787) 59](#chapter-14-tax-exempt-health-care-organizations-p.-787) [Federal Tax-Exemption Under Section 501(c)(3) 59](#federal-tax-exemption-under-section-501c3) [V. Charitable purposes - Community benefit standard (pg 788) 60](#charitable-purposes---community-benefit-standard-pg-788) [B. Community health needs assessment (pg 791) 60](#community-health-needs-assessment-pg-791) [C. Financial assistance and emergency medical care policies. (pg 792) 61](#financial-assistance-and-emergency-medical-care-policies.-pg-792) [D. Limitations on charges. (pg 793) 61](#limitations-on-charges.-pg-793) [E. Billing and collection. (pg 793) 61](#billing-and-collection.-pg-793) [State Tax Exemptions (pg 841) 61](#state-tax-exemptions-pg-841) [II. *Provena Covenant Med Center v. the Department of Revenue* (IL, 2012) (pg 843) 61](#provena-covenant-med-center-v.-the-department-of-revenue-il-2012-pg-843) [C. Charitable institution? 63](#charitable-institution) [D. The quid pro quo is so important 63](#the-quid-pro-quo-is-so-important) [Policy Debate 63](#policy-debate) [ACA Changes (pg 791) 64](#aca-changes-pg-791) [III. Community health needs assessment \-- 64](#community-health-needs-assessment---) [IV. Financial assistance, billing and collection \-- 64](#financial-assistance-billing-and-collection---) [Relationship Between Access and Cost-Control in Managed Care 65](#relationship-between-access-and-cost-control-in-managed-care) [Ch. 10: The Regulation of Insurance and Managed Care (pg 589) 65](#ch.-10-the-regulation-of-insurance-and-managed-care-pg-589) [**III.** **3 distinguished features of managed care:** 65](#distinguished-features-of-managed-care) [IV. Any willing provider state laws (pg 591) 65](#any-willing-provider-state-laws-pg-591) [V. Utilization review preauthorization (gatekeepers) 66](#utilization-review-preauthorization-gatekeepers) [B. Mandated grievance laws 66](#mandated-grievance-laws) [D. Some states require providers to disclose payment schemes to patients 66](#some-states-require-providers-to-disclose-payment-schemes-to-patients) [VII. Regulation of private health insurance under state law (p. 621) 67](#regulation-of-private-health-insurance-under-state-law-p.-621) [Tort Liability of Managed Care (p. 260) 67](#tort-liability-of-managed-care-p.-260) [**B.** **Vicarious liability involving independent contractors (pg 261)** 67](#vicarious-liability-involving-independent-contractors-pg-261) [IV. Vicarious liability: Corporate liability \-- holding the entity liable for its own actions. 68](#vicarious-liability-corporate-liability----holding-the-entity-liable-for-its-own-actions.) [A. *Shannon v. McNulty* (Pa Super Ct, 1998) (pg 261) 68](#shannon-v.-mcnulty-pa-super-ct-1998-pg-261) [V. The theories available for going after MCOs are also available for going after ACOs. (p. 267) 69](#the-theories-available-for-going-after-mcos-are-also-available-for-going-after-acos.-p.-267) [C. Liability risks: 69](#liability-risks) [Chapter 8: Employee Retirement Income Security Act (ERISA) (p. 457) 69](#chapter-8-employee-retirement-income-security-act-erisa-p.-457) [ERISA Preemption: The Framework (pg 458-460) 70](#erisa-preemption-the-framework-pg-458-460) [I. **ERISA Preemption** - 29 U.S.C. Section 1144 (Section 514 of ERISA) 70](#erisa-preemption---29-u.s.c.-section-1144-section-514-of-erisa) [B. 514(b)(2)(A) 70](#b2a) [C. 514(b)(2)(B) - 70](#b2b--) [D. 502 has been interpreted to provide the exclusive remedies under ERISA. 70](#has-been-interpreted-to-provide-the-exclusive-remedies-under-erisa.) [II. **502 Remedies** - 70](#remedies--) [IV. *Rush Prudential, Inc. v. Debra C. Moran, et al.* (SCOTUS, 2002) (pg 461) 71](#rush-prudential-inc.-v.-debra-c.-moran-et-al.-scotus-2002-pg-461) [VIII. Applying the savings clause (pg 474) 72](#applying-the-savings-clause-pg-474) [A. *KY Association* - Determining whether a law "regulates insurance": 72](#ky-association---determining-whether-a-law-regulates-insurance) [IX. "Relate to" employee benefit plan (pg 473): 73](#relate-to-employee-benefit-plan-pg-473) [ERISA Preemption of State Tort Litigation (pg 494) 73](#erisa-preemption-of-state-tort-litigation-pg-494) [C. *Aetna Health Inc. v. Davila* (SCOTUS, 2004) (pg 494) 74](#aetna-health-inc.-v.-davila-scotus-2004-pg-494) [XI. ERISA and state coverage reforms (pg 484) 75](#erisa-and-state-coverage-reforms-pg-484) [A. *Retail Industry Leaders Association v. Fiedler* (4th Cir. 2007) 75](#retail-industry-leaders-association-v.-fiedler-4th-cir.-2007) [Medicare/Medicaid (p. 595) 76](#medicaremedicaid-p.-595) [Medicare (pg 598) 76](#medicare-pg-598) [I. Eligibility (pg 599) 76](#eligibility-pg-599) [III. Services/Payment (pg 600) 77](#servicespayment-pg-600) [1. Medicare Payment (pg 616- 629) 77](#medicare-payment-pg-616--629) [Medicaid (pg 639) 78](#medicaid-pg-639) [Fraud and Abuse: Chapter 15 (p. 853) 79](#fraud-and-abuse-chapter-15-p.-853) Chapter 1: Cost, Quality, Access & Choice ========================================= **Intro** I. What is health law? - **Study of what role the law might play in:** A. Promoting the *quality* of health care; B. Organizing the *delivery* of health care; C. Assuring the adequate control of the *cost* of health care; D. Promoting *access* to necessary health care; and E. Protecting the *human rights* of those who are provided care within the health care system. II. The practice of health law has changed extensively in the past 120 years. F. While technology improves the quality of the system, it adds cost to the system. G. The health care industry is a business; it's no longer an isolated doctor-patient relationship. III. **Unique industry:** H. The health care industry is involved in the delivery of an extremely important, very expensive and highly specialized professional service, where the widgets are people and the stakes are very high, at times involving life and death decisions. I. The end user patient is typically not the payor; it's an insurance company or the government (if the payor is on Medicaid/Medicare). There is tension between what the physician says you need and what the insurance company is willing to pay. IV. **Sources of regulation:** J. State licensure K. Private accreditation L. Certification for participation in government insurance programs M. ACA (reform law) **Buchanan article (TWEN)** I. MEDICARE MEETS MEPHISTOPHELES: HEALTH CARE, GOVERNMENT SPENDING, AND ECONOMIC PROSPERITY II. The ACA's main impact was on the area of *access*, primarily through insurance reform. Reforming the insurance industry impacts the health care industry. III. In 2010 when the ACA was enacted, there were 46.5 million people that didn't have health insurance, which meant they didn't have access to health care. In 2016, we hit a low of 26.7 million people without insurance. So the ACA cut the number of uninsured in half. It's on the rise again now. COVID has only made it worse because of employment issues. A. Under the ACA, Medicaid expansion was mandated under Congress's constitutional spending power. But SCOTUS said Medicaid expansion was a violation of the spending power because states rely too much on the Medicaid money for you to hold it all hostage if they don't expand. The red states did not expand (including MS), while most of the blue states did expand. Today, only 12 states have not expanded. IV. Buchanan's concern is not with access, it's with *quality and cost*. The ACA doesn't do enough to address these issues. V. There are two different types of waste: B. [1) Pure waste] --------------------------- 1. spending health care dollars and getting a worse result; treatments that we know don't provide any benefits. Example is prescribing an antibiotic to treat a virus. C. [2) Net waste] -------------------------- 2. benefits that do not justify the expense; unnecessary procedures. Providers are incentivized to order unnecessary procedures because of defensive medicine (i.e., don't get sued for not doing enough), and the pay system (i.e., fee for service model) encourages providers to do more to get paid more. There really aren't any disincentives to treatments as long as they don't hurt the patient. A physician's training and the technology/resources available can impact the types of treatment ordered. D. We aren't usually talking about curing diseases; we're talking about treating symptoms/improving quality of life. This means we are not able to use an outcome based test for measuring the effectiveness of treatment. Why spend \$250 to get a 95% chance, when we could spend \$500 to get a 97% chance? E. It's difficult to define waste, because there's a subjectivity to the assessment/justification. We're left with a system that has a bias toward more care rather than less care (this isn't true in all countries). Much of the care that we provide does not translate into quantifiably justified outcomes. VI. Health care in the US represents a terrible bargain. We spend much more on health care than does any other country in the world, but Americans are less healthy than citizens in many other countries. No matter who pays for our health care - governments, businesses, or individuals - and no matter how they pay for it, we must stop wasting resources on health care. We must stop spending money on medical interventions that make people at best no better off, and which can actually make people worse off. Doing nothing about this situation is not only immoral, it is economic suicide. VII. The US ranks lower than other countries on infant mortality rate and life expectancy. If you have access to health care, you can expect some of the best health care in the world in the US, but not if you don't have access. The US doesn't get as much bang for our buck as other countries. VIII. Quality, access and cost are not mutually exclusive; they are interrelated. **Enthoven excerpt (pp. 10-15) (TWEN)** I. Reducing waste can help decrease health care costs, but how do we identify waste? It's subjective. II. There's no such thing as best practices because medicine is an art rather than a science. **The Problem of Medical Error** -------------------------------- I. Adverse event v. medical error A. An adverse event doesn't necessarily mean there was an error \-- unanticipated complications not due to hospital negligence. II. ### Adverse Event: B. IOM - an injury caused by medical management rather than the underlying condition; C. AHRQ - any negative or unwanted effect from any drug, device, or medical test (regardless of cause); D. Occurrence of an adverse event does *not* necessarily mean that an error occurred - could be realization of an anticipated risk. III. ### A medical Error: E. Failure of planned action to be completed as intended: 1. Error of execution (correct procedure performed poorly; botched procedure) 2. Error of planning (improper diagnosis/choosing wrong treatment regimen). F. 3rd leading cause of death in the US. About 250,000 deaths per year due to medical error. G. Medical errors can also lead to no harm. H. Many medical errors are not reported. There is stigma in the medical community associated with medical error (e.g., shame, awkwardness, embarrassment, etc.). There is this myth that providers have to be perfect and infallible, so providers are less willing to report and investigate errors. Repercussions: lose license, revoke privileges, medical malpractice suits, harmed reputations, etc. I. Research in this field has helped create positive change. J. When a medical error occurs, who is at fault? It could be the doctor, it could be the system, it could be a staff member. Historically, when a medical error occurs, the patient goes after the physician. K. The aviation model expects errors, so it builds the system to absorb errors and prevent them (e.g., buffers, standardizations, check lists, multiple people, etc.). The medical system is the opposite; it does not expect mistakes to happen. The medical system can implement ideas from the aviation model. Standardization within a system can decrease errors. L. Does medical malpractice reduce the incidents of error? No. Does it punish physicians? No, it\'s very rare for a physician to lose their license or be suspended; instead, they would receive more training. Does it compensate patients for their harm? Very few; 1 in 16 persons who are harmed by medical error gets compensation through a litigation system. Comparative Effectiveness Research (CER) ---------------------------------------- I. **Basic premises:** A. 1\) Many current practices are either ineffective or could be replaced with less expensive substitutes (ex: stent v. drugs); B. 2\) The reasons for choosing more expensive treatment are often driven by defensive medicine, bias, and payment incentives; and C. 3\) Patients would choose differently if they had better information about risks, benefits, costs, etc. II. Goal is to collect and disseminate the most effective/efficient protocol in order to reduce cost and standardize best practices. And speed up the process for implementing the best practices. Standardize these best practices and eliminate waste, thereby increasing quality and decreasing cost. These are reactive studies with the goal of shaping effective treatment. III. Emphasize science rather than art. IV. According to the ACA, these best practices are not supposed to be considered the federally mandated standard of care. It's just supposed to help physicians identify the best practices and create standardization. V. This research is publicly available. VI. Problems with this: D. There is a lot of variation from patient-to-patient; these "best practices" could never be mandatory, because, for example, the patient could be allergic to the alternative drug. E. Takes away physician discretion; infringes upon physicians' autonomy through databases. How? Patients might challenge their doctor based on the CERs that are publicly accessible (but this isn't very likely). Before the physician does the procedure, they need to make sure they'll get paid (e.g., insurance). So the billing department has to confirm whether your insurance will cover it. The insurance companies will screen it to determine if the procedure aligns with best practices. And if there's something that's cheaper and seems to be just as effective, they will not authorize the procedure. F. Systems v. individuals. On the individual level, this sucks. On the systemic level, this is necessary to decrease cost and medical error and increase quality and standardization. Put science back into medicine and decrease the art aspect. VII. States can use practice guidelines as evidence of the standard of care; states take varying approaches. G. Example: *Conn v. United States* (see case brief) 1. MS case authored by Judge Reeves. 2. There is a lack of consensus in the federal courts as to whether AMA or ACC guidelines can establish an appropriate standard of care in medical malpractice actions. VIII. Problem: biases with practice guidelines. H. One type of bias could be that the device manufacturer could find a doctor to publish research that recommends this device for financial gain. You counteract this through the insurance companies, who start funding research to find a cheaper option. Money drives all of this stuff (either by those who will receive the money, such as the physician or device manufacturer, or by those who will pay, such as the insurance company). All of this taints the research. Is it really about quality, or about money? IX. JAMA article (TWEN) I. National Guideline Clearinghouse \-- no longer free, so you have to pay to gain access to these guidelines. And in order for the CERs to work, people have to be reading this research. J. The government is exploring ways to develop the best practices to develop new payment mechanisms. K. The ACA throws a lot of money at payment mechanisms. The pay-for-service model doesn't really work. L. CERs don't just fund new research, they also review old studies and update them. ACA Aims/Goals: --------------- I. Improving outcomes, efficiency, and patient-centeredness for all populations; II. Closing gaps in information; III. Improving payment policies to improve quality/efficiency; IV. Focusing on the small percentage of patients with high-cost chronic illness; V. Improving research and dissemination of strategies for best practices; and VI. Reducing health care disparities across populations. ACA Strategies: --------------- I. Identify/disseminate/standardize best practices II. Identify the bad (adverse events; medical error; near misses) III. Disclosure of provider performance to regulators, patients, and payors IV. Reform payment strategies V. Coordinate/integrate delivery of care A. Instead of paying for each treatment separately, this model bundles treatment under an umbrella of an "episode" VI. Increase provider responsibility (identify bad apples and hold them accountable) Access ====== **Consumer-driven medicine** I. The patient needs to contribute some money to the care to have more skin in the game and reduce waste. II. In theory, if you had to pay, you wouldn't get all this treatment (moral hazard). You're gonna think you need what you actually want. This reduces overall waste within the system. Republicans push this concept. III. But on the other end on the spectrum, people without insurance or who are underinsured avoid preventive care because they can't afford it. Then they might show up at the ER with much more costly treatments because the situation has gotten so bad. IV. Advocates of consumer-driven health care contend that the central problem of our health care system is the tendency of insured persons to use more products and services than they would if they were not insured and had to pay the full price. Which of the following is the most correct term for this perceived tendency A. Moral hazard **Insurance (pg 421)** ---------------------- I. Nearly 45,000 people per year die because they don't have insurance. II. Paradox between statistical lives v. identifiable lives. (e.g., video of Nikki dying from lupus because she wasn't insured). This is a big piece of the puzzle for mobilizing reform to affect real systemic change. III. The norm is that people who lack insurance or are underinsured do not seek out preventive care. Lack of early diagnosis leads to worse and more expensive outcomes (typically at the ER). IV. Who are these uninsured people? A. Majority: White people under the age of 65 living in families with incomes of more than \$25,000 a year and at least one year-round worker. B. Groups with the highest risk of being uninsured include adults between 26-34; racial and ethnic minorities (particularly Hispanics); noncitizens; members of families with only part-time workers or no workers; workers employed in low-paying jobs; individuals in families with incomes below 200% of the federal poverty level. 1. 70% of non-elderly uninsured Americans live in a household with at least one full-time employee C. Why are they uninsured? 2. Because they can't afford the premiums. 3. A lot of employers often won't insure employees unless it's mandated. For example, Walmart won't insure many workers because they're part-time or seasonal. V. ### "Underinsured" (pg 422) D. they have insurance policies, but they have high deductible plans, have to pay out of pocket, and can't afford it. VI. Most people with insurance are covered by their employers. But what happens in a down economy when employers can't afford to offer these types of benefits packages? E. It's usually a cost-sharing thing. The employer will offer some percentage of your plan, and the employee covers the rest. F. When employers want to reduce the cost of insurance, they have options: raise prices (more unlikely), eliminate employees, cut back on hours to make employees part-time, eliminate/reduce benefits (e.g., we won't offer as good of a plan, so your deductible is now more; we're now only going to cover 50% instead of 75% of your plan). Lots of employer manipulation of the system. VII. Why is a private insurance plan so expensive/why are premiums so expensive? VIII. How does it work? G. You pay money to an insurance company. The insurance company collects money from lots of people, and then pays it out when individuals need health care services. The healthy pay for the sick. If healthy people run away and there are more sick people, you encounter the "death spiral" \-- more money is being paid out than is coming in. This is called "adverse selection." "Favorable selection" occurs if the insurer successfully enrolls more lower risk clients than its competitors. H. What is underwriting? The insurance company uses fancy algorithms to assess risk. Based on that risk, the company uses the info to assign a rating, and then it sets the premium based on your risk. Part of the game of gambling is predicting in order to decrease risk. It's easier to assess risk on a population basis rather than an individual basis. Disease is very difficult to predict on an individual basis, but it's easy to predict illness based on population. So you want your insured to mirror the general population for risk pooling. I. If you have too many sick people, you raise premiums. But then you run the risk of losing your healthy people. IX. **Health insurance: (pg 409)** ------------------------------ J. Spread risk across pool K. Healthy pay for sick L. Premiums paid in must exceed payments going out (or get death spiral) M. Adverse selection: insurers only want the healthiest people to enroll, but only the sickest people want insurance. N. Moral Hazard: those with insurance using more services than they had to pay X. **Underwriting: (pg 410)** -------------------------- O. Algorithms used to evaluate risk (and set premiums) of those trying to enter the pool P. Costs need to be reasonably predictable and stable over time Q. Very difficult to predict disease in individuals, much easier to predict disease across populations R. Therefore, want risk pool to match general population as closely as possible S. This is why it is much easier to obtain insurance in large groups (like through employer), than entering the market as an individual T. The smaller the pool, the more work underwriters have to do \-- charge too much for health, and they won't enter, leaving only sick and ultimately death spiral XI. ### Preexisting conditions: U. Historically, insurance companies could exclude people with preexisting conditions. The problem with this in a down economy is that people are losing their jobs and can't afford health insurance on their own. These people already have a preexisting condition (e.g., chronic illness), which means they need treatment. So then they show up to an insurance company asking for an individual plan, but the insurance plan could exclude them for their preexisting condition. Now they're uninsured. V. This is why these exclusions were barred by the ACA (and it had bi-partisan support because both parties were losing their jobs). So healthy people are forced to buy insurance to subsidize these sick people, otherwise the insurance companies would hit the death spiral. Someone has to pay for these sick people. W. Insurance companies can't drastically increase premiums for preexisting conditions in order to avoid the death spiral. But if insurance companies allowed sick people to get insurance at the same premium as healthy people, then people wouldn't get insurance until they actually got sick. Managed care (pg 415) ===================== I. Payor (insurance) v. provider. Goal to reduce cost and waste. A. This is done by Managed Care organizations being able to control when, how, and what amount of care beneficiaries receive. Therefore, it guards these managed care orgs from increasing costs. II. In the last fifty years, the majority of private health insurance plans shifted from being pure indemnity plans, which pay medical professionals directly for services provided to insured at the rate charged by the practitioner, to managed care plans, which contract with medical professionals to manage the cost, utilization, and quality of care. III. Shift from fee-for-service care. Insurance companies were basically writing blank checks to physicians. Fee-for-service leads to lots of service (waste). IV. Health Maintenance Organization (HMOs) \-- different payment method than fee-for-service. This payment model is capitated pay, which leads to less services. Characterized by having integrated networks of physicians. V. Distinguishing features of managed care: ---------------------------------------- B. (Managerial oversight over these three functions:) C. Degree of risk sharing between providers of care and payors; D. Degree to which administrative oversight constrains clinical decisions; and E. Degree to which enrollees in plan are required to receive care from a specified roster of providers. VI. Types of managed care orgs (p. 418): ------------------------------------ F. ### Health Maintenance Organizations (HMOs) 1. Limit members to an exclusive network of providers. Emphasize preventive care. Use inceptives like capitation (fixed payments). G. ### Point of Service Plans (POSs) 2. Allow members to obtain services outside the network with additional cost-sharing, and often use gatekeeper controls. H. ### Preferred Provider Organizations (PPOs) 3. Providers agree to provide services on a discounted basis to subscribers. I. ### Provider Sponsored Organizations (PSOs) 4. Directly contract with employers to provide services on a capitated basis. J. ### Accountable Care Organizations (ACOs) 5. Providers that agree to share medical and financial responsibility for the care of the patient population. Promote quality through collaboration, preventive care and integration. Cost (p. 423) ============= I. In 2016, the mean average family insurance plan is about \$18k per year. This is about 30% of the median household income. This has grown tremendously since 2007. Employers will pick up a lot of this. II. We spend more money on health care services than any other country. In 2016, the U.S. spent more than \$3.3 trillion on health care goods and services. In 2018, it went up to 3.6 trillion. This is where the majority of the country's money goes (e.g., more than national defense, etc.). III. But are we receiving more care than other countries? A. No; one factor is an access issue \-- less people have access to care here. But people who do get care are getting LESS care than other countries (less preventive care, less time in the hospital, etc.). B. We spend more money on medical services and drugs than other countries do for the same drugs/services. C. While we seem to access medicine less, we seem to access the more expensive services more. When you have the expensive technologies, drugs, services, procedures, etc., you use them. Overutilization is a huge problem. About 30% of all health care paid for by Medicaid and private insurers in the U.S. is useless, unneeded, and a waste. IV. Are we spending more on *overall* health? D. No. We aren't investing money in social determinants of health. E. There's a relationship between things like education and overall health (as well as sidewalks, infrastructure, housing, transportation, diets, exercise, mental health, compliance with medical advice, etc.). This is a type of preventive care. F. Holistic health infrastructure is just as (if not more) important than expensive health services. Spending more money on these things will lead to better population health outcomes. G. One concrete response to this is a diet prescription. Physicians could prescribe healthy food and then you could pick it up from the hospital or whatever. V. We don't have a health care system. We have a health care MARKET. ----------------------------------------------------------------- VI. We, as a country, thrive on a free market enterprise, so laws and regulations promote this. The markets drive the health care industry. Markets reflect limited government restraint. So why has the market not worked in the health care industry to contain costs? H. Lack of competition and strength of providers/monopolization. A dominant provider who doesn't have competition can raise their prices. I. Lack of standardization of pricing. Different people paying different things. This leads to increased costs because of the billing on the administration level. A billing coordinator has to keep track of all of these different billing codes because there is no standardization. It's a mess; so these coordinators are in high demand. J. Lack of transparency \-- you need to know how much the product costs to make decisions about cost v. quality. In the health care sector, there isn't such transparency. The patients don't know, nor do the doctors. K. Lack of choice at the consumer level. If there's not choice, there's not competition. Oftentime the consumer doesn't get to choose the insurer, the hospital, the provider, the treatment, etc. L. Who is paying. -------------- 1. In a typical market, the consumer is the one paying, so they are the one price shopping to make informed decisions. In the health care sector, the consumer is not the payor, so they lack the incentives to price shop and reduce cost/waste. The patients have to rely on the providers to give them information, and then rely on the insurer to pay for the treatment. M. Patients often don't get second opinions, maybe because they can't afford it, it's not covered, they don't know any better, or they don't want to offend their physician. N. [Physicians control both supply and demand. ] O. Unlike competition in the typical market, which drives down prices, competition in the health care market can actually drive up prices because people think if they pay more money, they're getting better quality of care. P. Hospitals have to get certificates of need when they expand. ------------------------------------------------------------ 2. So there can be waste/overutilization to show the "need." If a hospital gets a new MRI machine, it's going to use it. Q. ### Admin costs in the insurance industry (pg 428) 3. On average, insurance co. CEOs make about \$29 million per year. 4. Admin costs in the private sector are about 25 cents on the dollar, while they are about 2 cents on the dollar in the public sector, and they are about 5 cents on the dollar in other countries. 5. For-profit insurance companies spend a ton of money on advertising. R. ### Population demographics (pg 427) 6. The US population is steadily growing and aging, contributing to increases in overall healthcare expenditures. 7. The Baby Boomers are old, and the last few years of life are the most expensive. S. ### Malpractice (pg 430) 8. Settlements paid out (this doesn't cost the system much, though). 9. Medical malpractice premiums could contribute to the cost (but this doesn't contribute much to overall health care spending). 10. Defensive medicine is a greater concern, because it contributes to waste, but it's more difficult to measure because physicians can't admit that they're practicing defensive medicine (or else they would get sued). T. ### Physician pay 11. Physicians in the US make significantly more money than physicians in other countries. 12. The cost of education could be an argument for paying physicians more. Medical school is expensive, and they won't make much money right out of med school. In other countries, education is free. 13. Perhaps some physicians are making too much money to recruit the level of quality we're looking for. Other countries pay their physicians less and have overall better population health outcomes. There's a fine balance between paying too much and paying just enough to incentivize specialists to do a ton of school and perform quality care. 14. Do we even need physicians doing some of these things? Does someone need to go to school for 10 years to give stitches? U. ### Changing nature of disease \-- chronic illness/disease (pg 428) 15. Chronic illness/disease costs the system a TON of money. V. ### Technology & Big Pharma (pg 429) 16. Funding research for drugs/technology is EXPENSIVE. This is part of the reason why they charge so much. VII. **Cost Contributions:** ----------------------- W. National wealth; X. Aging population/demographics; Y. Waste (pure and net); Z. Market structure (failures); A. Administrative costs; B. Malpractice (unknown impact of defensive medicine); C. Physician income (at least certain ones); 17. This gets into the discussion of when to know if a physician is being paid too much 18. This is a reflection of what does it cost to get like quality of the same care from physicians 19. If this number is too high comparatively, how far can I get to that entry level before employees leave 20. If i lower the pay too much, what kind of quality could I expect a. Probably pretty shitty because the only physicians you can get accept such low pay comparatively D. Changing nature of disease (chronic illness); E. Hopeless cases; F. Higher prices for services; G. Technology. **Video - "Sick Around the World"** ----------------------------------- **Great Britain** - Government-run national health service \-- the NHS covers everyone with tax dollars. Brits pay much higher taxes to cover healthcare. - Runs much like our Veterans Associations. - No insurance premiums, no fees, no pay at all. No one goes medically bankrupt. No medical bills. - May have to wait to see a doctor \-- waiting lists. - Physicians are salary government employees. - Primary care and emergency care is good, but elective care is not great (e.g., hip replacements, heart operations, etc.). It could take months to get a new hip. - Government-owned hospitals compete against each other for more money. You compete to survive as a hospital. - You don't go straight to a specialist; first, you have to go to a general practitioner. This is the gatekeeper. They are paid a fixed amount based on the number of patients they see, and they get a bonus for keeping their patients healthy. GPs make a lot more than GPs in the US. - Prevents overutilization, using the gatekeepers allows the GP to provide care first rather than going straight to an unneeded specialist - Care costs the patients too little here, which means there can be more waste. - Britain has become a world leader in preventive medicine. - Too much government here for American taste. - Insurance companies are not allowed to make a profit. - Market strategies - making the hospitals compete. Hospitals were working harder to have better quality/shorter waiting times. - Rationing care so some people won't get treated if the cost outweighs the benefit. - Wealthy people come to the US to get treatments if the UK won't do it. - Lack of complex treatments/experimentation. - Canada uses this, but it's not the most common system. **Tokyo/Japan** - Cover everyone, and spend half as much as the US on health care per capita. - They spent 8% of GDP. - Longest healthy life expectancy and lowest infant mortality rate in the world. - Not all paid through taxes; everyone must pick up a health insurance policy. "Social insurance." The government only pays for insurance for those who can't afford it. - Almost every doctor's office is private. - No gatekeepers \-- can see almost any specialist they want. - Japanese see doctors over 3 times more than Americans. - Japanese have longer hospital stays and utilize technology more. The Japanese health ministry controls the health care industry \-- fixed prices for procedures and drugs. - Toshiba makes affordable technology. An MRI scan costs about \$98. So how can they afford the technology with such low prices for scans? Because Toshiba can charge other countries like the U.S. (who will charge \$2k for a scan and will pay more for the machines). So this subsidizes the cost for Japanese health care. - Doctors can't get rich. - Japanese pay into a social insurance fund. - If you lose your job, you don't lose your health insurance. You switch to a community insurance program. - Insurance companies are barred from making a profit. - Japanese premiums are only about \$280 per month, and employers pay half. - 50% of hospitals are in financial deficit now. Hospice may be one of the endangered species. So the Japanese spend too little on health costs. The prices aren't high enough to balance the books. The problem is hospitals going broke, not patients going broke (like in the US). - Very short waiting times. **Germany** - Bismark model - developed is the late 1800s - Price fixing collectively - Collectively bargain and operate as a single payer - providers take what the insurers are willing to pay. - System of 90 insurers. - Mandate that everyone has to participate and \$ is collected through employment. - Means tested (those who make more pay more). - Government picks up the poor. - Everyone in Germany is offered health care. The rich can opt out, but about 90% of Germans opt in. - System covers dental, mental health, etc. - Not terrible waiting times. - The rich pay for the poor. The ill are covered by the healthy. Social support system accepted by the population. - Pregnant women pay nothing. - There is a small copay, and premiums are much cheaper than they are in the U.S. - Insurance companies ("sickness funds") are not allowed to make a profit. They are incentivized by growth/survival. If they don't compete and perform well, they go out of business. - Patients have many different choices and pay a lot less. The quality is good. Germans are satisfied with their health care. - Administrative costs and drugs are a lot cheaper than in America. - Hospitals don't get funded enough. - Prices are set within geographic regions and providers cannot raise the prices to make more money. - The doctors don't make as much, but they don't pay for med school and they pay less for malpractice insurance. Problem is that physicians feel overworked and underpaid. - "To this day German's are largely in favor of this system"- Prof. Will - German physicians pay 1/10 for med mal insurance than those in the US - Due to their pragmatic approach to their culture, they are very result oriented. So their health care system seems to answer some problem. Here, the answer may be to healthy people, to have a healthy economy, to provide a better position in world dominance. **Taiwan** - Looked around the world and chose the best ideas to create their new health care system from scratch. - National insurance system that forces everyone to join in and pay. The rich cannot opt out. One government insurer collects the money. Similar to Medicare. - Everyone has equal access to care. - No gatekeeper and no waiting time. - Everyone has a smart card, and when the provider swipes that card, all of the patient's history uploads onto the computer. Billing is also done on the smart card. This reduces administrative costs tremendously (no paper records). The government visits people who utilize the health care sector too much according to the smart care history. - No one goes medically bankrupt. - The system itself has financial strains. The government doesn't spend enough on health care. They don't bring in enough money to pay for all of the services they cover. The government has to borrow money from banks. The solution is to increase spending. **Switzerland** - Universal coverage with high quality. - The shit hit the fan in health care expenditures all over the world in the 90s. Mostly due to technological advances. The costs were rising exponentially above inflation all over the world. All other countries adjusted and did something about it, but the U.S. really didn't. - Before the 90s, Switzerland's health care system looked like the U.S.'s, but it changed in the 90s. - Everyone must buy insurance \-- the rich pays for the poor. Insurance companies could not cherry pick the young and healthy. - Many insurers were nonprofit before the change, so it was an easier adjustment. - Could not make a profit on basic health care - The benefit packages are fixed, so insurance companies compete by offering lower prices. - Drug prices are much lower. But they only have \$8 million people, so it's not a big deal because they can price gouge countries like the U.S. Our country subsidizes their costs. - No one goes medically bankrupt. - Second most expensive health care system in the world, but still much cheaper than ours. - Doctors and hospitals accept standard fixed prices. This keeps costs down because they can't raise them or they'll be out. **Notes:** - 3 limits: - Insurance companies must accept everyone and can't profit. - Everyone is mandated to buy insurance and gov pays for the poor. - Doctors and hospitals have to accept standard set fixed prices. - Stumbling blocks that would prevent major reforms: - Strong lobbying from companies doing well with this system (insurance companies) - Cultural differences \-- Americans want freedom of choice, less government, free market economy, every man for himself, etc. - Generally people in this country do not like price fixing, which is what these other systems promote - Cost sharing - Is whats covered, dental services are often not covered - - Practical differences \-- US is very large, both in terms of population and geography - Americans are generally less healthy than citizens of other countries - Health care in this country is a commodity, theres someone making a profit from it., You start eliminating profit, you\'re not only affecting the business, you\'re also affecting the shareholders. - - ### Themes from foreign systems: - Remove profits from insurance covering basic care; everyone covered (no pre-existing condition exclusions) - Not a single-payer system, but operating like one. - Individual mandate with government picking up the poor - Service providers (docs/hospitals) accept standard payment (does not necessarily require single-payor system) - Countries vary on how much people have to pay into the health care system. - Dental and vision is usually not covered under the standard insurance plan. What core benefits should be included? What should be covered? The ACA expanded coverage. - It would make sense to cover annual wellness visits \-- preventive care. - Cosmetic procedures? It depends on whether it's medically necessary. Typically a health insurance plan would cover breast reductions, but not augmentation (medical necessity v. not necessary). Some things may be medically necessary (skin grafts for burn patients); but reconstructive surgery can get complicated. An insurance company may not want to be in the news for refusing to cover certain procedures that tug on heartstrings. An argument could be made that there's a mental health aspect to reconstructive surgeries. It's difficult to reach consensus. - Who will pay and how will they pay? Single-payor system, collective bargaining, etc.? The ACA did not move us to a single-payer government system. The ACA was SUPPOSED to include a "public option" for health insurance, but it was struck down. So one of the choices for insurance would be a government plan. Insurance companies fought against this by arguing they couldn't compete with a public option because of administrative costs (28% private v. 2% public admin costs). We're not that far from being a single-payer system, as the US government pays for 60% of healthcare costs. ACA (pg 511) ============ - What did the ACA do? Reform the private health insurance market and medicaid expansion. - Medicaid was expanded by allowing more poor people eligible to go on the medicaid rolls. If you made up to 128% of the poverty line, you are eligible for Medicaid now. But this was struck down under the government's spending power. Medicaid is a federally-funded state-run program. The reform law told states that if you don't expand medicaid, the federal government won't pay for your medicaid anymore, but the SCOTUS shot this down. Most states expanded, but about 10 red states have not expanded. - Private insurance reform ------------------------ - the individual mandate was supposed to curtail the adverse selection problem from eliminating preexisting conditions exclusions. Prevent the death spiral. But you can't just force people to buy insurance when people can't afford it, so the government has to subsidize health insurance to the people who couldn't afford it. Also, the age of staying on parents' health insurance plan increased to 26. - The ACA did not eliminate profit from health insurance companies for basic health plans. But it did impact profit for insurance companies \-- a certain percentage of premium dollars has to be allocated toward qualifying health care services as opposed to purely profits, admin., etc. - ### Reinsurance program - collects money and then redistributes it to insurance companies with sicker populations of insured. - ### Underwriting - ACA limited the ability of insurance companies to underwrite. The premiums can't be adjusted all that much. - Traditionally, private insurance companies wrote premiums on an individual basis, factoring in sex, race, pre-existing conditions. Due to the ACA this is no longer the case as premiums are now on a community type basis. With the only factors that are weighted are age, geography, and tobacco use. - The ACA pays the least attention to cost. It has not reduced cost. It throws some money at payment structures, but there was no discussion about standardized prices. Other countries set standardized prices through collective bargaining between the payers and the providers. They get together and talk about what it costs to provide health care in this state/region/country. So we're not even having open discussions about these prices. - **ACA (pg 516)** - Pre-existing condition exclusions removed, but not profits (some additional financial restrictions put on insurance companies) - Premiums generally reflect that of Age, Geography, and tobacco use ( - Lower pop/Rural areas will typically have higher premiums - Individual mandate, but government will not pick up all poor (particularly with Medicaid expansion now permissive; and prior administration removed penalty from Tax Code) - Certainly not a single-payor system, and no real efforts to standardize pricing (though lots of money for the study of new payment strategies) Chapter 13: The Structure of the Health Care Entities (p. 753) ============================================================== **Intro:** I. Note different types of health care organization structures on p. 755: ---------------------------------------------------------------------- A. ### Independent Practice Association 1. These are the physicians that contract together to form the IPA to form a network, often then providing their services to PPO to deliver care to a defined group of patients for a discounted *Fee-for-Service* model B. ### Physician-Hospital Organization (**PHO**) (pg 756) 2. Least integrated and least complex form of vertical integration. Primary purpose is to negotiate and administerer managed care contracts for its providers. Allows physicians to maintain their own practice while being affiliated with the PHO C. ### Multi-Specialty Group Practice (MSGP) (pg 756) 3. This form of integration bands together numerous types of services to provide care in different areas to form a network for HMO members D. ### Management Services Organization (MSO) (pg 757) 4. This is not really involved with the administering of care, but the administrative work that goes on behind the scenes E. ### Integrated Delivery System (IDSs) (pg 757) 5. By far the most integrated system that bands together numerous organizations and networks that allow the system to take care of patients from beginning to end covering all aspects of an "episode" a patient may have. II. The managed care movement was about bringing together things that had been separate \-- providers and payers. III. Once it was clear that licensed hospitals could pay physician groups, hospitals started to buy up physician groups in the 1990s. Why would they come together in this way? F. Hospitals wanted to corner the markets; reduce competition; exclusivity. Physicians would only perform procedures at that hospital. G. A physician wouldn't necessarily make more money, but the physicians get all of the billing/admin benefits from the hospital. This could possibly reduce overhead for the physicians, so maybe they would make more money. IV. But in the early 2000s, hospitals spit out physicians because they couldn't afford them anymore. V. Horizontal integration v. vertical integration: ----------------------------------------------- H. Vertical \-- hierarchical structure I. Horizontal \-- everyone is working together on the same level VI. ### Dimensions of organizational structures in health care sector: J. Level of formal organizational integration and control K. Ability for the organization to take on financial risk L. Ability for the organization to engage in clinical management over a patient's entire episode of care across providers and settings (clinical integration) M. Degree of exclusivity in the relationships between organizational entities N. \*These are the four dimensions of organizational structures that entities consider when determining how to structure. VII. There really aren\'t any specialty hospitals being formed anymore because it's bad for the hospitals (takes away highest paying patients) and the payors (specialty hospitals were dominating costs). VIII. Accountable care organizations (ACOs) (p. 759): ----------------------------------------------- O. The ACA encouraged/incentivizes providers to integrate. A Medicare patient would receive all of their services under an umbrella of care, and the government would pay via a bundle of payment. The Medicare patient would receive care for their entire episode. This model incentivizes efficiency for accountable care organizations. P. There must be contractual relationships that cover a patient's entire episode of care. This qualifies as an ACO and qualifies for the financial incentives. Q. So because of the ACA, we're seeing reintegration. R. As providers integrate, they are increasing price by collective bargaining. They're increasing their market share as the ACO gets bigger. If the payors don't integrate or flex their market power, then the ACOs have all of the financial power. S. Integration can affect the corporate practice of medicine, antitrust laws, stark and antikickback laws, etc. IX. Limited liability and corporate form: (pg 761) ---------------------------------------------- T. These different structures can have different legal forms. U. Things to think about when forming a business: 6. How are we going to limit liability? Taxation. Flexibility in management. 7. How do we make money (e.g., issue bonds, take on investors, etc.)? What can we do with the money? For profits v. non profits have much different rules. Corporate governance and fiduciary duties in nonprofit & for-profit orgs (pg 762) ================================================================================= I. ***Stern v. Lucy*** (D DC, 1974) (see case brief) \| **Business Judgment Rule (Page 764)** ------------------------------------------------------------------------------------------ A. Facts: The charitable hospital trustees put their money in non-interest bearing accounts, so there was no money being generated to use for services/treatment. B. **Hospital Trustees:** 1. Tend to apply *corporate* rather than trust principles. 2. Must exercise ordinary and reasonable care in the performance of their duties, exhibiting honesty and good faith (business judgment rule). C. **Potential Liability:** 3. A director whose failure to supervise permits negligent mismanagement by others to go unchecked has committed an independent wrong against the corporation for which he may be held liable. D. **Self Dealing/Potential Conflicts** \-- No absolute prohibition, but must show: 4. Entire fairness of deal; 5. Full disclosure of conflict; and 6. Many jurisdictions require the interested director to refrain from voting. E. **Potential sources of liability for breach of fiduciary duty:** 7. Failure to use diligence in supervising; OR 8. Failure to disclose conflicts (personal interest in transaction) or otherwise why not "entirely fair;" OR 9. Actively participating in decision (like voting or arguing in favor of deal) \-- other than disclosure of potential conflict; OR 10. Violation of business judgment rule (failure to perform duties in good faith with reasonable diligence). F. Trustees of a charitable hospital will be evaluated under the corporate standard of care that includes the duty to supervise general investment decisions and the duty to avoid active participation in any transaction where potential conflict of interest are not safeguarded against. G. Standard we hold hospital board of trustees to (business judgment rule): 11. Make good faith efforts 12. Ordinary and reasonable care 13. No conflicts of interest 14. Exhibit honesty and good faith H. Hospital boards of trustees can form committees to delegate, but they still must supervise and provide oversight. In this case, there was insufficient oversight. II. ***In re Caremark*** (Chanc. DE, 1996) (pg 771) ----------------------------------------------- I. Facts: This is a shareholder derivative suit in which basically Caremark was found to have violated anti-kickback laws because it was paying physicians to prescribe a Caremark manufactured drug. J. ### Potential [director] liability for failure to supervise (pg 773): 15. When it leads to negligent action (assessed using business judgment rule); process-based analysis. 16. When it leads to avoidable harm caused by inaction. K. Board of Directors must make good faith judgment that the corporation's information and reporting system is in concept and design adequate to assure the board that appropriate information will come to its attention in a timely manner as a matter of ordinary operations. Must attempt in good faith to assure that compliance/reporting system is in place. L. **Business judgment rule** \-- must exercise ordinary and reasonable care in the performance of their duties, exhibiting honesty and good faith. M. The duty of care owed by corporate directors may be breached either by active decisions which are negligent (misfeasance), or by negligent failure to act (nonfeasance). Generally, a director's inattention must be egregious for liability to attach. Directors are not expected to oversee all actions of all employees. However, fraudulent acts by ordinary employees can have enormous effects on the corporation. Therefore, [directors must make good-faith efforts to ensure that reporting and informational systems exist.] The [business judgment rule protects directors' discretion in determining the extent of such systems]. Total failure to exercise reasonable oversight, however, may subject directors to liability. N. This breach of duty can arise from action or inaction. Action is governed by the business judgment rule. The court notes this is a process-based determination, not an outcome-based assessment. **It wouldn't be fair to hold hospitals liable when they have a bad outcome; business involves risk**. The court doesn't want to ding hospitals every time they take a risk and lose \-- this would deter hospitals from taking risks, which would stunt advancement. So it's not about what happened, but how that decision was made. O. The Board of Directors must set up a system that is likely to work (not certainly) and provide oversight over that system. III. What's at stake? P. If the physician has a financial incentive to choose one option over the other, this can lead to overutilization and exorbitant costs. The system feels the pain of that overutilization, because the overall prices go up and the health insurance premiums go up... it's a domino effect. Q. In this industry, the widgets are people. So there should be different standards. R. Should there be different standards for for-profit settings than non-profit settings? For-profit section is subject to corporate principles. In the for-profit sector, shareholders as well as the public/government (SEC) hold the leaders of the entity accountable. You don't have this in the nonprofit sector \-- the patients aren't really aware enough to hold nonprofits accountable. Because there's not as much external oversight, it must be held accountable from within. But if the principles are too stringent, then the leaders may not be willing to take necessary risks. Duties of Non-Profit Board (pg 779) ----------------------------------- - Caretaker of nonprofit entry & its assets. - *Duty of Obedience*: to ensure that the mission of the charitable corporation is carried out. \[could either be a standalone duty or subsumed under broader duty of loyalty\]. **Conversions, asset sales, and mergers of nonprofit corporations (p. 817)** IV. ***Manhattan Eye, Ear and Throat Hospital v. Spitzer*** (SC NY, 1999) (see case brief) S. Facts: Why is the court so worried? MEETH started this whole process of talking about conversion because it got an offer from Sloan Kettering. The court thinks that this should have been driven by the interests of the public. But the Board didn't state where the money was going (MEETH would presumably put the money into the D&T centers). Since 1860, MEETH was a specialty hospital serving the community and they were a teaching hospital. As a result of this deal, that all goes away. Where is the discussion about whether this community needs or doesn't need an ear, nose and throat hospital and/or a teaching hospital? MEETH didn't do any studies. The decision to monetize drove all of this. T. **Duties of non-profit board of directors:** 17. Caretaker of nonprofit entity and its assets. 18. Fiduciary obligation to act on behalf of corporation and advance its interests in good faith and with that degree of diligence, care and skill which ordinarily prudent men would exercise under similar circumstances. (differs from traditional corporate standard by virtue of "care and skill" addition). 19. Duty of obedience: To ensure that the mission of the charitable corporation is carried out. U. **Sec 511 Analysis** \-- 2-prong test: In order to receive court approval of a sale as required under § 511 of the New York Not-for-Profit Law, the BOD must show: 20. Prong 1: The consideration and terms of the transaction must be fair and reasonable to the corporation. Evaluated at the time the contract is signed. 21. Prong 2: The purposes of the corporation must be promoted. Evaluated at the time the petition is made to the court for approval. V. **Applicable elements from conversion framework:** 22. Due diligence used in deciding to sell, selecting purchaser, and negotiating terms. 23. Fair procedures used in making decision (including use of expert) 24. Whether any relevant conflicts disclosed (including conflicts with experts) 25. Whether seller will receive reasonably fair value for assets sold. W. The court isn't upset about the outcome, but rather the process. (Process-based analysis, not outcomes-based analysis). The court isn't saying that Sloan Kettering expanding a cancer center is a bad thing. Rather, the court is upset about the *process* regarding how this deal came about. The community needs were not prioritized \-- monetization was the priority. X. Mission or Margin?? 26. Should you have to run the entity into the ground before you make a change? What's more important \-- mission or margin? Who's in the best position to make that decision \-- the Board of the nonprofit or the AG? 27. The AG has less conflict of interest. More objective perspective. 28. The Board has access to all of the information regarding the nonprofit. Because they have a financial incentive, they will be more diligent. Y. Concern in the nonprofit transferring to the for-profit sector. The concern is that there aren\'t enough people paying attention to the value of the company, so it would be undervalued. So it would get sold under market value, and then the new entity reaps the true value of the assets, and then officers and directors of the nonprofits get compensation packages moving forward. Certificates of Need (p. 783) ============================= I. Many states require that local facilities obtain a certificate of need prior to undertaking construction or renovation of facilities, purchasing major equipment, or offering new health services. II. The federal government was concerned about overutilization and waste. If there's not a need for the expansion, then it would be wasteful to allow them. So you have to apply for a CON before expanding. Otherwise, if the hospitals were expanding their wings but not filling their beds, they would be trying to fill the beds unnecessarily. The federal government jumped off the bandwagon, but many states have kept their regulations in place. III. However, it has become a political issue due to abuse. CONs tend to worsen competition and increase prices, without controlling costs or ensuring access. CON have also invited abuse with politicians. IV. Hospitals are competing for privately insured patients. So entities like River Oaks have used CON tactics to prevent other hospitals from expanding in the community (like Saint Dominic). This diminishes quality and competition. V. CON is one of the only ways a state can exert power over the industry. The corporate practice of medicine (p. 721) =========================================== VI. [Corporations can't practice medicine] because they're entities, not people. So they can't get a medical license. The concern is the commercialization of medicine. For-profit corporations would prioritize profit over patients. The physician's duty is to patients, not corporate monetization. We're concerned about decreasing the quality of health care. A. Example: we don't want Ford to hire an in-house physician because it\'s cheaper. VII. ***Berlin v. Sarah Bush Lincoln Health Center*** (SC IL, 1997) (pg 721) ----------------------------------------------------------------------- B. Facts: Physician Berlin (Plaintiff) signed a contract with Sarah Bush Lincoln Health Center (defendant) to be a physician there for 5 years. Defendant was a non-profit seeking to contract with Berlin. Well, this contract contained a provision that prohibited Berlin from working within 50 miles of the medical center for 2 years upon the finishing the term. Berlin, after the 5 years started working within 1 mile of the medical center. Defendant filed suit seeking injunction from Berlin to work at the new center. Judgment from lower courts determined that the work contract was unenforceable due to the non-profit hospital practicing medicine (through contracting with Berlin). C. Generally, the employment of physicians by a corporation is illegal because the physician's acts are attributable to his employer, which cannot obtain a medical license. There are also public policy concerns against the corporate employment of physicians, including the possible corporate control over a physician's professional medical judgment and a division of loyalty between the physician's patient and his employer. D. Illinois approach: A duly licensed hospital corporation in Illinois is not subject to the corporate practice of medicine prohibition because it possesses legislative authority to practice medicine by means of its staff of licensed physicians. VIII. Does the corporate practice of medicine apply to all health services? No, but it applies to many. Depends on the level of training and oversight that's required. For instance, PTs and massage therapists aren't typically subject to the corporate practice of medicine. IX. What about managed care organizations? Rhetorical question. X. Most states acknowledge some sort of prohibition on the corporate practice of medicine, but the scope varies by state. E. Will started to focus in class on whether these MCO that have multiple entities across the country, with a centralized location such as New York making decisions, this starts to sound like Corporate Practice of medicine F. Following this with these centralized call centers of Physicians this also opens up the door for practicing medicine in another state without a license (E.G. making the decision in New York and the patient is in MS) Chapter 2: Quality Control Regulation: Licensing Health Care Professionals (Page 35) ==================================================================================== **Intro** I. The delivery of health care is largely regulated internally. Health professionals set the standard of care. II. The state plays a role \-- licensing, malpractice, etc. III. Licensure: ---------- A. The health care industry is not market-driven. We don't want patients to die before the market kicks out the physician. The state wants to protect patients. Patients don't have enough information about physicians to make educated decisions. B. The American Medical Association (AMA) supported government licensure because it garnered respect and prestige for physicians. It allowed the "real" physicians to be distinguished from the quacks and gave Americans some justification for submitting to the physicians. C. But now you need board certification in addition to licenses because technology expanded and medicine got even more complicated. Discipline - Regulating Professionals ------------------------------------- IV. ### ***In re Williams*** (OH, 1991) (pg 38) D. Man was letting his patients pop addy to lose weight, which was far beyond the "recommended" time limit. Was not something that was *prohibited by law* but was just the minority opinion to treat. At the time he was prescribing these types of medications, then they came out with regulations that completely prohibited addy for weightloss, at that point Williams stopped prescribing the medications for that reason. E. **Standard for court review of administrative orders:** Reviewing court must uphold agency order if it is supported by reliable, probative, and substantial evidence, and is in accordance with law (this is a very deferential standard). F. The licensing board should not convert its own disagreement with an expert's opinion into affirmative evidence of a contrary proposition where the issue is one in which medical experts disagree. G. At the hearing, expert witnesses testified that the physician\'s practice, though considered the minority view on weight loss, *was not unacceptable*. The board doesn't have unfettered discretion to set the standard of care. 1. This case essentially set the standard of care H. Which of the following best describes the controlling rule applied by the *Williams* Court 2. An order by the state medical board must be supported by reliable, probative, and substantial evidence V. ### ***Hoover v. Agency for Health Care and Admin.*** (FL Ct of App, 1996) (pg 41) I. Doc was reprimanded for prescribing drugs to patients for chronic pain. The board attempted to strip her of her license based of expert testimony of two jerk-offs that one did not practice in the field of pain management and two did not look even attempt to look at the patients medical records. Despite this, they still found that Hoover's prescription of these drugs violated the Florida statute (think who is paying for these "experts" to testify). J. In this case, there was disagreement among expert physicians regarding prescribing controlled substances for chronic pain. Despite the hearing officer finding for the D physician, the medical board inappropriately supplanted those findings with its own independent and unsupported determination. 3. The Board in this case did not know Hoover's patients, nor did any of them specialize in chronic pain like Hoover did. These decisions by the Board, contrary to the hearing officer's testimony, was erroneous. Despite the Agency's accumulative hearing on all the matters, taking the testimony and findings from each side. The Board nevertheless, still tried to punish Hoover. (Keep in mind these Board members are usually hired by the hospital they sit on, you have to remember that they know who signs their checks) a. Nevertheless the Court reasoned that if they would have held for the Hospital rather than Hoover, this would cause Doctors to deter from trying alternative measures (maybe better sometimes) to treat patients. K. **Determining standard of care:** When the standard of care is in flux, is a disciplinary hearing in front of a licensing board the appropriate way to determine the standard? If not, what is? 4. Problems: even though they're physicians, they may not have extensive knowledge on all types of medical practices. Also, they're humans. Sometimes they're elected/appointed, so it's political. The interests of the licensing board may not align with best practices due to biases. If the licensing board always chooses the majority as the standard of care, then it could stunt progress. If physicians are afraid to do anything contrary to the majority, they won't explore alternative options for treatment. b. **This case swayed on the Board not factoring the relevant evidence contrary to their opinion, allowing the Court to take action** 1. The board's decision needs to be supported by **substantial evidence** 2. The board cannot just create its own standard to fit its agenda, it must factor **all relevant evidence** 5. Alternatives: let the court system decide through something like med. mal. litigation; evidence-based medicine and comparative effectiveness research; legislature can pass laws (or rules/regulations) to define the standard of care. c. If the legislature sets the standard of care through statutes, it would be political. Driven by biases and ulterior motives. You can't trust the legislature to create a comprehensive standard of care. It's not possible to create a statute that defines EVERY single standard of care. There are certain instances where statutes work. d. Comparative effectiveness research \-- this information can be used to set the standard of care. L. Where is the standard of care determined? On what are those standards of care based (e.g., what info is used to set that standard)? There are different approaches depending on the state. VI. Prescribing controlled substances for chronic pain (pg 49) ---------------------------------------------------------- M. Treating chronic pain is a problem in this country. 90% of the world's opioids are consumed in the U.S. In the case of treatment for pain, however, removing the "bad apples" from practice has been called the "chilling effect" because the threat of legal sanction seems to lead doctors to avoid legitimate and effective treatments. N. **Controlled substances:** Prescribing is also regulated by the FDA and the Drug Enforcement Administration (DEA), two powerful federal agencies. 6. **FDA:** controls drugs that enter the market, but no control over the practice of medicine (including off-label prescription). e. The FDA has the authority to approve and monitor safety of drugs and devices. But once it's approved for prescribing, the FDA does not have the authority to restrict physicians in their prescribing of the drug for particular purposes. 7. **DEA:** maintenance of schedule of drugs with potential for abuse or addiction (controlled substances); restrict conditions under which controlled substances can be prescribed. Cocaine = Schedule II and *can* be prescribed; Marijuana = Schedule I and cannot! f. The DEA more directly regulates prescribing practices through its authority under the Controlled Substances Act. Under the CSA, the federal government governs the production and distribution of drugs that have the potential for abuse and addiction. Such drugs are categorized as controlled substances and placed on a "schedule" that rates a drug by its abuse potential from Schedule V (the lowest potential) to Schedules I and II (the highest potential). g. Marijuana is a schedule I drug, but there is a discrepancy between the federal and state governments on how to permit marijuana use/prescription. VII. The National Practitioner Data Bank ----------------------------------- O. Congress created the National Practitioner Data Bank in part to create an effective system for preventing doctors with disciplinary history in one state from moving to another and practicing until detected, if ever. P. Only 5% of the practitioners are causing this harm. Q. What is reported? Malpractice settlements/judgments, adverse actions taken by hospitals and state licensure boards, criminal convictions, professional society actions, letters of reprimand, etc. 8. Hospitals report, licensing boards report, 9. Could be liability for failing to report or not conducting a query for incoming doctors 10. Malpractice settlements are reported, but what does that mean? h. Doesnt mean liability was imposed, but to a layperson if an amount was paid, it would seem like liability to someone who did not know any better i. Ex. OBGYN have the highest malpractice insurance because they have to settle, sending this to a jury (usually meaning a kid was harmed) would not work well regardless of liability. Therefore they settle, WHICH DOES NOT MEAN THAT THERE WAS LIABILITY R. How does it work? Before a physician hops to another state to get a license, obtain admitting privileges, work somewhere else, etc., that physician is supposed to be screened through the data bank. S. It is not publicly available, but it's available to key players in the industry who are supposed to be querying. Some states have similar publicly available databases (like Massachusetts). The ACA created some databases as well. 11. Should this type of information be available to the public? In theory, the argument is that to have an effective market, consumers need access to information. However, there is a cost \-- the public loses trust/faith in providers. The benefit may not be great if the public doesn't know how to interpret the information. Shouldn't the government be responsible for identifying the most important information to protect the public? Physicians don't love the idea of this information being publicly available, particularly those who work in an area with a lot of med mal. T. There's a major loophole in the system in which if the doctor resigns before the investigation starts, the hospital does not have to report anything 12. "You should probably take your practice somewhere else" U. Problems: 13. Med mal settlements are problematic because not all settlements are meritorious, but they all have to be reported to the national data base. This could be unfair for a physician to have to carry around. 14. Are players actually querying when they should? 15. Are mandatory reporters actually reporting when they're supposed to? 16. These things all sound great in theory, but in practice, there are problems. **Complementary and Alternative Medicine (CAM) (pg 53)** -------------------------------------------------------- I. CAM \-- Approaches to health care that aren't validated through the AMA (there's not a clear definition). A. Examples: acupuncture, homeopathy, music, prayer, etc. II. ### Collision of CAM and traditional medicine: B. Licensed health care professionals incorporating CAM into their traditional practice (allegation of substandard care) C. CAM practitioners treading a little too close to the "practice of medicine" (allegation of unauthorized practice of medicine) D. Licensing of CAM providers? III. ### ***In re Guess*** (NC, 1990) (pg 54) E. The doc that was prescribing homieopothy to his patients. The board originally attempted to take his license away due to a substandard practice of care that was not recognized in NC. The superior court of NC basically found that there was no harm given to his patients through this way of medicine. The board appealed the decision due to the Superior Court adding an element of harm to the applicable NC statute. The COA determined that this was an abuse of discretion essentially because harm to the public is the underlying message of rules governed by the board. Also, the COA determined that the superior court adding an element to the statute essentially takes away the policing power of the board, which the court does not have the authority or knowledge to do. F. Example of the first collision \-- Licensed health care professionals incorporating CAM into their traditional practice (allegation of substandard care) \-- Doctor was practicing homeopathic medicine, and the Supreme Court upheld the Board's decision to revoke his license. G. The court said it's within the State's police power to strictly regulate CAM. If the state wants to allow the practice of homeopathy, the legislature can amend. 1. The Board has ultimate power to determine the scope of unprofessional/unethical conduct 2. A licensed professional who is disciplined by a Board for their respective profession can bring an action in state court against the state licensing board declaring the judgment was wrongful the Court will hold the Board's decision **IF SUPPORTED by substantial evidence** H. After this opinion was published, the legislature actually amended the statute to read: "The Board shall not revoke the license of or deny a license to a person solely because of that person's practice of a therapy that is experimental, nontraditional, or that departs from acceptable and prevailing medical practices [unless, by competent evidence, the Board can establish that the treatment has a safety risk greater than the prevailing treatment or that the treatment is generally ineffective]." 3. So you can still be sanctioned for causing harm, but now the burden is on the Board rather than on the professional to prove safety and efficacy. 4. Dean Will question \-- should we instead focus on informed consent? What's the appropriate role for the government? One might argue, "Let the market work. Let the patient make autonomous decisions." But another might argue that we need the government to protect laypersons from these complicated decisions. **Unlicensed Providers (pg 60)** -------------------------------- I. ### ***State Bd of Nursing and State Bd of Healing Arts v. Ruebke*** (KS, 1996) (pg 61) A. This is the midwife case in which D was practicing midwifery while consulting with the appropriate medical professionals (OBGYN and Nurses) for advisory to help treat the surrogate. The problem here was the grey area that separated the practice of midwifery and the practice of nurses. The expert witnesses testified that from viewing the records, the care that was administered was that of a nurse. Its important to note that the defendant here never held herself out as a nurse/practicing professional, but a mere midwife and frequently consulted with professionals, nor actually did

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