A System Analysis Assessment of Force and Selected Changes

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The United States (US) health care system has undergone significant changes within the past two decades. There have been both external and internal forces driving these changes. First of all, the US health care system is not made up of interrelated components designed to work together cohesively. Instead, the system is complex and lacks standardization, which causes it to be inefficient at times. On the other hand, the health care system is leading the world in the latest medical technology, medical training, and research and development. The primary objective of the US health care system is to provide cost-effective treatment and to provide access to services for all citizens. (Shi & Singh, 001)

The traditional approach to health care has been more of a biomedical view. Treatment focused more on the illness/disease, acute care, inpatient treatment, individual health, and fragmented-type care. However, more expanded views of treatment have evolved and it is forecasted to continue to expand within the next few years. The new broader view of health care includes 1) assessing the disease and the diseased person, ) chronic illness management, ) outpatient care, 4) wellness and prevention, and 5) community well being and managed care. Establishing a cure for a disease is more of the traditional view of treatment. (Shi & Singh, 001) The expanded view focuses not only on obtaining a cure if available, but compromising when needed by lessening the severity of the disease. (“Health & Health Care 010”)

Factors Associated With Systems Changes

Reasons for a more expanded view of health care evolves partly due changes in the economic market, demographics of the population, advancement in technology, political climate, and the physical and social environments. Internal forces that have influenced the health reform have been the evolution of the managed care program. Its objective has been to reduce health care costs by exercising more control over health care delivery services within the system. Change, albeit from external or internal sources, has been inevitable and has shaped the health care system into what it is today.

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One of the factors identified as influencing the US health care system has been the change within our population characteristics. These “changes” include more longevity, and increase in the minority populations and the health needs of these individuals. Because the life expectancy of both males and females has increased, the need for long-term care has also increased. Costs associated with long-term care are predicted to continue to rise especially with the growing age of the “baby boomers.” (Shi & Singh, 001) The flux of the minority population, namely Hispanics, within the US has also changed the composition and delivery of health care services. The health care needs of the minority population are different partly due to combinations of genetic mutations, environmental elements, and certain health behaviors. Moreover, the need for a cultural diverse health care staff has increased. (US Department of Health and Human Services, 000). To provide quality care, it is imperative for staff to be able to understand and communicate effectively with all patients, including minority groups.

Another factor affecting the change in health care can be attributed to the advancement in technology. Technological advances have provided physicians with the ability to treat more diseases and, thus, prolong life. The availability of medical research through technology, namely computers, has assisted medical workers to increase their knowledge base of effective treatment methods. (Shi & Singh, 001)

Intervention Strategies

Because change is inevitable to deter even with the health care arena, it is imperative that health care managers keep themselves a breasted to these changes and adjust accordingly. An intervention strategy that I would use with regard to the growing minority population is to focus on obtaining a culturally diverse medical staff. A diverse staff would be beneficial for both the patients as well as the profitability of the facility. This strategy would provide a “win-win” situation for all involved. The needs of the patients will be bettered cared for with effective communication. In turn, the diverse staff would be an attractive asset for the facility, thus, expanding clientele and increasing profitability. Another intervention strategy I would use to deal with the changes in the health care system is to allow employees to attend training opportunities. It is imperative that health care employees engage in continuing education to be able to provide more efficient and qualitative care to all patients. Having “up-to-date” knowledge and advanced technological equipment (within reason) is important for a business.

I believe it is important to allow staff members the opportunity to continue their education to learn more effective and efficient ways to provide care.

Health Care Cost Escalation

The term “cost” can carry different meanings in the delivery of health care, depending on the perspective one takes. There are three different meanings 1) When consumers and financiers speak of the “cost” of health care, they most often mean the “price” of health care. ) From a national perspective, health care costs refer to how much a nation spends on health care services. ) A third perspective is that of the providers. For the providers of health care, their costs are producing the services given.

Five Contributions to the Escalating Cost of Health Care

Third-Party Payment Health care is among the few services for which a third party, not the consumer, pays for most services used. Since the individual patients are only paying a fraction of the actual cost, they are not very concerned about the cost of the care. There is no incentive to be cost conscious when someone else is paying the bill. Third-party payment also removes incentives to influence physicians from admitting patients to hospitals and using high-cost technologies. The result is an almost unlimited consumption of healthcare resources.

Imperfect Market Because the US health care delivery system does not consist of a national health care program, it is not highly regulated. The delivery of health care does not take place in a highly competitive market because of various market imperfections. In an imperfect market, utilization of health care is driven by need rather than by demand, the quantity of health care services produced and delivered are likely to be much higher than in a competitive market, and the prices charged for health care services will be permanently higher than the true economic costs of production (Shi & Singh, 001). One of the reasons for an imperfect market is the existence of third-party payments.

Growth of Technology New technology is expensive to develop, and costs incurred in research and development are included in the total health care expenditures. Once technology is developed, it drives up the demand for its use. Advancements in medical science have raised the expectations of consumers as to what technology can do to diagnose and treat diseases and prolong life. Technology has substantially increased diagnoses and treatment and improved quality of life, but it is also used simply to keep people alive with little or no chance of recovery. Third-party insurance has generally paid for almost all diagnostic tests and procedures with few questions asked.

Increase in Elderly Population Growth in the elderly population in the US has outpaced growth in the nonelderly since 100. The swelling of the elderly population will result from the aging of the baby boom generation of Americans born between 146 and 164. The elderly consume more health care than younger people. Expenditures for the elderly are 7% higher than the general population and this does not take into account the Medicaid outlays for the elderly population receiving care in nursing homes. A growing elderly population will have a serious impact on health care expenditures in the future.

Medical Model of Health Care Delivery The medical model emphasizes medical interventions after a person has become sick. Prevention and lifestyle behavior changes to promote health are de-emphasized. Consequently, more costly health care resources have to be deployed to treat health problems that could have been prevented.

Health Legislative/Policies Contributing to Escalating Costs

The failure of the health reform effort from 1 to 14 has decreased the motivation for most politicians for significant health regulation. There is almost no support for large-scale social programs targeting the poor or uninsured. Major government reform is therefore unlikely. Strong support for the current Medicare and Social Security systems means that change in the benefits of these systems will be slow. The forecast for legislation is one of continued incremental program change directed primarily at providers and with little direct effect on beneficiaries. None of this will have significant impact on the general health insurance market; therefore, there are no real cost cutting measures taking place.

Trends That Are Put In Place to Slow Escalating Costs

When inpatient reimbursement is squeezed, costs shift to the ambulatory sector. The prospective payment system (PPS) led to the transfer of many therapeutic and diagnostic services from the inpatient to the outpatient setting. Because of the significant growth of Medicare outpatient services, HCFA developed a PPS for hospital outpatient services that would replace the existing cost-based payment system. Medicaid programs in some states and a few private insurance companies have been using this same type of reimbursement program.

In the US, competitive reforms were given preference because of the growing interest in market-oriented approaches across many sectors of the economy during the Reagan presidency in 180s. These reforms were accompanied by a declining interest in comprehensive health care reform at the national level. Market-oriented reforms were accompanied by mounting cost-containment efforts in the private sector and the growth of managed care. Competitive strategies can be divided into four broad types.

Demand-Side Incentives The idea of cost sharing is that if consumers are responsible for a larger share of the cost of insurance, they will be more cost-conscious when selecting the insurance plan that best serves their needs. They will not automatically choose the most comprehensive plan. Also, when they have to pay more out-of-pocket for services, they will use them less. The incentive with cost sharing is saving the health care consumer money by being cost-conscious; therefore, this will lead to lower costs within the health delivery system due to minimizing unnecessary utilization.

Supply-Side Regulation Antitrust laws in the US do not allow businesses to prevent competition among providers. Such practices include price fixing, price discrimination, exclusive contracting arrangements, and mergers deemed anticompetitive by the Department of Justice. Antitrust policy promotes competitiveness and cost efficiency. MCOs, hospitals, and other health care organizations have to be cost-efficient to survive.

Payer-Driven Competition Generally, consumers with the exception of health care markets drive competition. This is because patients lack the incentive to be good shoppers and they face information barriers that prevent them from being efficient shoppers. It is extremely difficult for patients to obtain needed information on cost and quality. Patient-driven competition has been overcome by payer-driven competition in the form of managed care. First, employers shop around for the best value in terms of premiums and benefits packages (competition among insurers). Second, MCOs shop around for the best value in providers of health services (competition among providers).

Utilization Controls The utilization controls in managed care have cut through some of the unnecessary or inappropriate services provided to consumers. Managed care steps in and makes sure that only appropriate and necessary services are provided and that services are provided efficiently. MCOs base this intervention on information that is not generally available to consumers. Current concerns are that some MCOs have been too aggressive in controlling utilization.

Managed Care and Escalating Costs

Managed care systems can potentially control costs by organizing providers into networks and by incorporating the financing, insurance, delivery, and payment functions of health care. First, by eliminating insurance and payer intermediaries, MCOs are able to realize some savings. Second, MCOs control costs by sharing risk with providers or by securing discounts from providers. Risk sharing promotes health care delivery that is economically cautious which makes it an indirect method of utilization control. Third, cost savings are achieved when a broad range of services are offered and then monitored to determine its appropriateness and make sure it is delivered in the most cost-effective settings. MCOs have emphasized outpatient services and have achieved lower rates of hospital utilization. HMOs have emphasized preventive services, which are less costly to deliver and save money through prevention as well as early detection.


Increased Costs

As we look at the development of a managed care program, it is imperative to identify and understand the factors that have influenced the need for such a program. It is also imperative to understand how the use of traditional insurance coverage has influenced the need for a managed care approach. First of all, from a historical perspective, health care costs began to noticeably increase under the provision of conventional insurance. Traditionally, health care insurance coverage and delivery of services were based upon a fee for service (FFS) type system. This meant that a patient could see any physician at his/her discretion. The physician’s office would then bill the insurance company based upon a fee schedule and what type of procedures were done. The insurance company would then pay the amount specified with little questions asked. The basic notion was that a patient would see a physician with the idea that “insurance would take care of it.” The comprehensive care provided by the physicians and the cost of the equipment used to do these procedures attributed to the increase cost of health care services. There was very little control of utilization of services. Physicians, at times, were providing more extensive treatment than necessary and then charging high prices to compensate for them. On the other hand, insurance companies had little incentive to change or question because they would just increase the premiums for the next year based upon the average spent the year before. This cycle of no concern for cost-effectiveness resulted in the evolution of developing the idea of managed care to exercise more control of utilization of services, thus decreasing costs.

The Impact of Life Expectancy

Partly due to shift in focus of a more expanded view of health versus the biomedical view, people are living longer and healthier lives. The idea of wellness and preventive care has influenced the way some health care workers approach care. In general, however, as time has past, the average life span of a person has increased. At the beginning of the 0th century, the average life expectancy was approximately 47. years. Today, however, the average life expectancy is close to 77 years. (US Department of Health and Human Services, 000) There can be several explanations to the increase in life expectancy and decrease in infant mortality rates. One explanation is that improvements in the standard of living and public health measures have occurred. Through the years, education regarding better quality of personal hygiene and sterilization have attributed to longer life expectancy. Another explanation is that infectious-type diseases were the leading cause of death years ago compared to more chronic-type diseases affecting health today. The infectious diseases were more life threatening years ago, especially among the younger population. Today, however, the chronic-type diseases can be better managed and provide a longer life expectancies with the aid of newer interventions and technology. (Rothstein) Managed care plays an important role in trying to encourage longevity by advocating for preventive care. However, with the increase in longevity, managed care has to also deal with the increased need for long term care facilities and the expense involved with caring for the elderly population. (Shi & Singh, 001).

Increase in Technology and New Drugs

The increase of new technology and drugs has had an impact on the need for a managed care program. With the advancement in technological devices, patients have had better opportunities to live longer lives. The invention of new drugs through research and development has also increased life expectancy rates. However, along with the vast importance of technology comes the increase in health care costs as well; thus, raising the issue of cost-effectiveness. A managed care program could be beneficial in placing restrictions on what type of technological device a facility has and how often it is used. The question has been whether physicians are abusing the use of the “new and expensive” equipment without regarding the price involved. A managed care program could aid in forcing physicians to be more selective about the usage of such expensive devices to help decrease health care costs. (Shi & Singh, 001).

Increased Costs and Its Direct Impact on Healthcare

The dilemma of increasing health care costs has significantly impacted the overall health care system. This dilemma is one of the major reasons why managed care has been so dominant in the health care system within the past decade. Health care services are provided in a much more “squeezed” sense, in terms of time and being less comprehensive. New schools of thought are being taught in medical schools. Community health organizations are collaborating to educate public on prevention of diseases. Consumers of health care are also experiencing restrictions on health care providers where, at one time, they had more freedom to choose their own physician. All of these changes within the health care have evolved due to the attempt to minimize health care expenditures.

The traditional approach to health care was more of a biomedical model, meaning treating patients when they were sick or injured. However, the trend is more towards educating people on preventive care and wellness. Physicians in training are now being taught to think more holistically in terms of treatment instead of just treating the symptoms of a disease. Managed care is pushing the idea of holistic health and wellness because of the belief that it will save money long-term. (“Health & Health Care 010”)

Managed care has also directly impacted the way consumers receive services. Traditionally, consumers could choose their own physician and see whomever they wanted. Consumers also had the luxury of choosing a specialist to see if they so desired. However, with the evolution of managed care, a patient’s freedom of choice became more stringent. Managed care, in its effort to reduce costs, adopted the “gatekeeping” method to utilize its control over services being provided. The gatekeeping idea means that a consumer has to choose a primary physician within the network. The primary physician is responsible for coordinating all health care services for the patient. This type of control by certain managed care organizations (MCOs) has frustrated many consumers and physicians, namely specialists. Some specialists have experienced a decrease in clientele due to the restrictions of managed care having the primary physician at as a portal of entry. (Shi & Singh, 001)

All of these changes in the health care system within the past two decades have been as a result of the increase in health care costs. The concerted effort of managed care has been somewhat successful in containing some costs at least through the 10s. However, the question is whether this type of organization will be able to continue to decrease costs in the future. There are many who are beginning to voice dissatisfaction with MCOs. The combination of lobbyists and consumer and physician dissatisfaction could put a damper on the way managed care has operated in the recent past. (Ginzberg)


Ginzberg, E. The Uncertain Future of Managed Care. The Nation’s Health.

Health & Health Care 010 The Forecast, The Challenge, Institute for the Future.

Rothstein, W.G. Trends in Mortality in the Twentieth Century. The Nation’s Health.

Shi, L., & Singh, D. A. Delivering Health Care in America A Systems Approach (nd ed.). Maryland Aspen Publication.

United States Department of Health and Human Services (000). Healthy People 010

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