main healthcare problems in 1850-1900

• epidemics, not a public health issue. no understanding of how environment and living conditions can make you sick.

early beginnings of health insurance

first plan 1850:

1. Franklin health insurance company of Mass. : covered bodily injuries not resulting in death. Kinda like a travel insurance.

2. Traveler's Insurance: 1860 more like todays plan

3. Accident and Life Insurance companies: Late 1800's --> mostly covering loss of certain acute illnesses

Ross-Loos Group Practice, Los Angeles (1929)

another capitated methodology

• First MD sponsored health insurance plan with prepayment
• For water and power workers in LA

Hospital beginnings in early period:

• first hospitals:
  • Almshouses and poorhouses of the 1700’s
  • In miami, jackson is the public hospital
• Infirmaries: birthplace of public hospitals meant to serve the poor
  • Late 1800’s
  • Hospital departments of the city poorhouses
  • first public hospital
• pesthouses: think quarantining and providing healthcare before they go out in the community
  • Seaport towns
  • Predecessors of the contagious disease and TB hospitals.
• few early hospitals:
  • Community owned or voluntary hospitals. Roots in religious community.
  • Funded by private donations and donations from local governments
  • To support OB and surgery
  • Admitted both poor and paying patients
• for contagious disease, mental illness: go to city, county, and eventually sate hospitals

Medical Science advancing in second period

• in like 1900-1940
• Water, sewage, food and milk urban housing quality all enhanced by 1900
• Plagues essentially eliminated

Influenza

• Virus
• Spreads through direct and indirect contact with respiratory secretions
• Epidemics and pandemics throughout history: annual epidemics (Flu), 3 pandemics in 20th cent., 1 pandemic in the 21st century.
• Minor antigenic changes in the virus result in antigenic drift (small changes in genetic makeup) and may lead to epidemic. Generally you can fight them off.
• Major changes result in antigenic shift and may lead to pandemic.
• Spread of Influenza around the world:
  • • First reports in 1918 in Kansas brought by troops in the eastern U.S.
    • May and june 1918 epidemic in europe
    • Summer 1918 reported in other places around the world
    • August 1918: 2nd wave in U.S.: *more severe* and was known as the Spanish Flu

Healthcare management in U.S.

• public health issue on obesity:
  • Direct costs of healthcare services = $152 billion spent on medical care per year
  • Indirect costs= value of lost productivity + insurance premium and compensation + absence from work
  • Cost of diabetes in U.S. in 2020= $327 billion
• public health issue on opioid crisis:
  • Creation of “pill mills”
  • Bad unintended consequences

Medical Schools in Second Period

• Before 1910: numerous medical school and no quality control
• Flexner Report (1910): medical education in the U.S. and Canada for the Carnegie Foundation for Advancement in Teaching
  • Many medical schools closed
  • Remaining affiliated with universities
  • How to clean out medical education
  • Universal hope
• Shift focus to acute illnesses and injuries of the INDIVIDUAL not the population
• Better surgical techniques: including antibiotic war drugs and insulin
• People live longer

Physician Practice in 1900-1940

• 1940 → 80% of trained MD’s were GP’s not specialists
• In early 1900’s, significant growth of group practices
• Early 1930’s about 150 medical group practices

Hospitals changing in 1900-1940

• Went from over 150 hospitals in 1873 to over 4k hospitals in 1909. Overall, big AF shift in the number of beds and hospitals.
• Today, there are 6,129 hospitals in the U.S.
• Change in concept:
  • Hospital and social welfare facilities → institutions for medical science
  • Charitable orgs → business
  • Patrons and poor → professionals and patients

6 MAJOR CHANGES FROM 1800 TO EARLY 1900'S TO AFFECT HOSPITALS:

1. Advances in medical science: greater efficacy and safety in hospitals
2. Greater technology and specialization required greater institutionalization. Think about needing hospital settings for stuff like cochlear implants or PBB.
3. Professional nursing
4. Adding teaching and research to hospitals
5. Growing health insurance
6. Government controlling hospitals more

Advent of Managed Care and health insurance:

Western Clinic in Tacoma WA and Rural Farmers' Cooperative Health Plan

Western Clinic of Tacoma Washington (1910)

• For lumber mill owners and employees
• Assured income for the clinic
• Expanded to other sites
• Step 1) owners: maximize profits, produce lumber, workers→ health and uninjured, and family members healthy and uninjured. WIN!
• Step 2) workers: make money→ healthy and uninjured, and family → healthy and uninjured.WIN!
• Step 3) Dr. Bridge: pmpm (revenue), capitated system, π= TR - TC
  • Where TR= total revenue
  • Where TC= total costs, which is prevention
  • WIN!
• THIS IS THE CAPITATED MODEL: “Capitation is a fixed amount of money per patient per unit of time paid in advance to the physician for the delivery of health care services.”
  • A capitated system ensures and aims to promote protective practices
  • Cons to this model: churning out fast

Rural Farmers' Cooperative plan:

a threat to the indemnity model:

• Oklahoma with Dr. Shadid
• Participating farmers purchases shares to raise K for hospitals
• Farmers got discounted care in return
• Political problems for Dr. Shadid: exempt from health insurance laws and ownership opportunities. Also, not being ethical at all has nothing to do with the practice.
• “Unethical” for doctor (self) and referred doctors

Indemnity model (FFS):

• Fee for service
• Aka sick model
• Want sick/injured people

Baylor Hospital (1929)

• Agreed to provide teachers prepaid care in its hospitals. Get $3 for coming in
• Origin of blue cross
• Expanded to more employees and more hospitals

Ross-Loos Group Practice, Los Angeles (1929)

another captivated methodology

• First MD sponsored health insurance plan with prepayment
• For water and power workers in LA

Kaiser Foundation Plan (1937)

another capitated methodology

• Initially for workers and families on construction sites
• From pre birth to death.
• Certain amount up front and they take care of you

Group Health Association-- GEHA (1937)

• Started in D.C. to reduce defaults due to large health bills
• Created a non-profit consumer coop
• Political problems

Birth of Blue Shield (1939)

• Made by california medical society
• To pay MD bills in hospital setting

Growing Social and Organizational Structures of Healthcare: THIRD PERIOD

1. growth of health insurance

2. feds more involved:

• Hill-Burton Act: 1946 paid for segregation
• Mental Retardation Facilities
• Higher NIH budget
• Medicare and Medicaid (both in 1965)
  • Medicare: people over 65 get healthcare
  • Medicaid: medically poor because healthcare costs (part state and federally funded). Different state to state.

3. neighborhood health centers.

4. national health planning and resource development act

Due to WWII – Feds supported medical research

• Direct Result: antibiotics, trauma unit, better transport of sick and injured
• Hospitals changed to greater technology
• In 1940, 80% of MDs were GPs, post WW-II 80% of MD’s were specialists
• More time spent by MDs in hospitals, less in patients houses
• Growth in professional groups and accreditation process
• Technology growth with no evaluation of effectiveness

WWII changed view of health insurance:

• Active military receive health insurance
• Medical benefits seen for first time as right, not privilege
• Wage and price freezes caused firms to increase fringe benefits
• Unions
• Employer based health insurance tax exemption
• Overall, health insurance companies flourished

Evolutionary healthcare policy:

• First period: private
• Second period: local, city, county
• Third period: FEDS
• Fourth period: private employer

Medicare: 1865 for people over age of 65+

***

• Part A:
  • In hospital (get automatically) insurance is social insurance
• Part B:
  • Supplemental medical insurance – outpatient or ambulatory
  • Not compulsory
  • Not funded as a trust fund: comes from general treasury, and premiums deducted from monthly social security check

Medicaid: July 1965

• Title 19 of Social Security Act:
  • Administered by HCFA
  • Funded by Feds on average 55%
  • 45% by state gov
• Used general treasury funds
• First federal programs for the poor

Significant post-1966 healthcare inflation measures by feds:

• Reasonable cost limits for hospitals
• Established state and local health planning agencies and CONs
• Established professional standard review organizations

Hospitals

• Mainly inpatient, AHA initiated hospital insurance cuz hospital care too costly and hospitals were closing
• Private insurance and medicare and medicaid covered more of the bill
• Coverage caused increased use rather than fewer cost alternatives
• Cost-plus reimbursement
• Hill Burton Act
• Significant proprietary nature

Third period academic medical centers

become increasing, more emphasis on clinical revenue, development of primary care networks.

Horizontal and Vertical Integration

1. Horizontal: being at the same level of the supply chain. Merfers and acquisitions. Acquire a practice thats at the same level. If a hospital buys another thats still horizontal.
2. Vertical: either up or down but sometimes productivity drops off. Ex: hospital sets up health insurance company, hospital buys medical practice, hospital buys nursing home.

- growing in 1960s and 1970s

- not for profit hospitals followed lead of proprietary hospitals

- very little financial benefit and/or efficiencies gained due to defensive nature of many mergers and acquisitions

- some recent divestiture -- but now a recent trend toward integration.

- vertical integration focus more a function of managed care

Ambulatory Surgery, Diagnostic and Emergency Centers

• Growth in hospital based centers
• First free standing ambulatory surgery center
• Initially outpatient basis
• Growth in mobile diagnostic and physician care vans

Nursing Homes

decreasing in numbers in the 2000’s. Due to medicare and changing role of nursing homes

FOURTH PERIOD ISSUES: Limited Resources

• Restriction of growth, changes in structure, pharma market changes

U.S. National Health Expenditure

• Price x quantity constant = Expenditure = PQ
• America goes through second wave of managed care:
  • HMO “Health Maintenance Orgs”
    • Uses a gatekeeper approach. Go through your PCP to get access to other specialists. Gatekeeper for other specialists.
• in 1940, Health expenditure made up 4.5% of all spending. In 1980, health expenditure made up 19.5% of all spending.
• U.S. has the highest spending on healthcare around the world
  • U.S. 2X > canada
  • U.S. 2.5X > UK

Source of problems for high healthcare spending:

aging of the population, tech advancements expensive, more services per person, increases in price a result of → increased demand and market control over price by medical care suppliers.

Value

Value = quality/ costs

• For any value of costs quality increases
• Value proposition:

U.S. poor healthcare outcomes from our system:

• Lower life expectancy compared to other countries
• High infant, neonatal, and maternal mortality rates
• High medical error little patient safety.
• Why?
  • Medicaid coverage is up for the poor, private insurance coverage is down. Overall health coverage for the poor is down.
  • Dental use lower
  • Lower incidence of regular MD by minorities
  • Minorities less likely to have preventive services provided
  • Access problems has grown
  • No increase in prenatal care utilization
  • Low immunization rates
  • Low income cannot regularly access MD’s so greater hospitalization
  • Race issues related to access problems
  • There is no system of healthcare!!!

Uninsured health care system

• Those younger than 35 have an uninsured rate of 21.4%
• Uninsured rate amongst women = 12.8%

System for Employed, Insured, Middle-Income America: Private Practice- Private Insurance:

• Gov involvement limited to public health
• Provision of services through private sector
• Shift to institutional care
• Third party insurance takes over
• Mental health rise: inpatient to outpatient → an emphasis on deinstitutionalization

A System for Unemployed, Uninsured, Inner-City, Minority America: Local Government Health Care

• People use city and county local services like hospitals
• Many don't have a family MD, use ER as an MD
• Use proprietary long term care facilities
• Mental health access through ER
• Many homeless people in the U.S. many of which have comorbidities

Issues with Qualifying for Medicare and Medicaid:

Medicaid: but very hard to get, varies from state to state, really only foe access to some type of care as a middle income, paperwork, moving to managed care

Medicare: age 65: shift to medicare

• deductible and copayment a barrier to access

Military Medical Care System

• All inclusive, highly preventative, medics provide lots of care, hospitalization is robust
  • • Treats long term chronic
    • A highly integrated system
    • All healthcare employees salaries
    • Dependents and families were combination of military and middle class system
• Military medical care programs

Veterans Health Administration

For retired or disabled veterans: mostly inpatient but also primary care, utilize private nursing homes

A Non-System: Not Integrated

• Each system must compete with other given limited resources
• Those with more power gain more
• Potential for significant duplication of services

FIFTH PERIOD advancements in medical care:

• Rational drug design
• Advanced imaging
• Minimally invasive surgery
• Genetic mapping
• Gene therapy
• Vaccines
• Artificial blood
• Xenotransplantation
• Digitalization
• Globalization and medical tourism1.
• Immunotherapy
• Stem cell research