You are outside counsel to the Marcus Welby Healthcare Corporation (MWHC), which

Question

You are outside counsel to the Marcus Welby Healthcare Corporation (MWHC), which is concerned that expenses in some of its ancillary departments are causing it to lose money under Medicare and HMO insurance. It would like to start charging its hospital-based physicians for some of the costs of running their departments. Its current relationship with these physicians is one in which they have exclusive contracts to work in these departments, but no money changes hands between them. The hospital handles all billing, staffing, and overhead, but it bills separately for facility charges versus professional fees, and the physicians keep all the professional fees the hospital collects on their behalf. This is the standard practice in the industry. MWHC has the following suggestions for changing this arrangement: • Have the radiology group pay for services, supplies, personnel, utilities, maintenance, and billing services furnished by the hospital. In a non-hospital, office-based setting, this package would normally cost about $100,000 to $150,000 per year. The hospital will charge the radiology group only $25,000 at first, but increase the charges to $100,000 over four years. Payments are due only if the hospital's gross revenue derived from radiology services exceeds $1,000,000 in the previous year. • The hospital's clinical laboratory, under the direction of the pathology group, would pay the hospital a 20 percent fee for “specimen collection and handling services” when a physician on the MWHC medical staff orders a test from the clinical lab. What advice would you give?

Explanation / Answer

Th cnmic vlutin f mricn Hlth Cr: Frm Mrcus Wlby t Mngd Cr

Hlth systms in mst cuntris hv undrgn uphvls vr th pst tw dcds, lrgly in rspns t sclting csts. Nwhr hv ths chngs bn mr drmtic (nd vn trumtic) thn in th Unitd Stts. In singl gnrtin, hlthcr hs vlvd frm bing lrgly unrgnizd cllctin f intrctins btwn individul clints nd individul physicins, t highly intrcnnctd systm invlving mny crprt bdis. Th pthsis f such chng is th divrs ssmbly f rrngmnts gthrd undr th rubric f mngd cr. Mngd cr in turn hs nt bn cnfind t th US. Mny f its fturs nd tchniqus—such s slctiv cntrcting nd utiliztin rviw—hv fund widr pplictin in urp, ustrli nd Nw Zlnd, nd r bing pushd s slutins t th hlth systm nds f dvlping cuntris. Th UK bgn xprimnts with mngd cr pprchs in th rly 1990s with th intrnl mrkt, nd mny vstigs r rsurfcing in currnt hlth plicy. Thus n undrstnding f hw nd why hlth systms chng, nd clrifictin f th rltiv mrits f ltrntiv plicy pprchs, rmin imprtnt gls.

cnmics prvids n vry usful lns t id such undrstnding. It uss n nlytic frmwrk tht idntifis ctrs within th systm (individul nd rgniztinl), ssums sm dgr f rtinlity within ths ctrs, nd scribs t thm dsirs tht thy sk t grtify. Thus shifts in rgniztinl rrngmnts (.g. mrgrs nd llincs) nd trnds in rgniztinl prmtrs (.g. csts, vlum, qulity) r bth xplind nd prdictd by nlysing nd rslving th rspctiv frcs f slf-intrst tht r ssumd t prt. In Th cnmic vlutin f mricn Hlth Cr Dvid Drnv is cmmndbly cndid frm th utst: ‘I hv lwys bn big blivr in th bnfits f cmptitin... whn I first strtd t writ this bk, I fully xpctd it t b swping ndrsmnt f mngd cr’. Whil suggsting subsquntly tht ‘my ptimistic viw f mngd cr's ptntil hs [sinc] wvrd’, littl f th min txt btrys ny such wvring. Thrughut, Drnv is rlntlss in luding th chivmnts f mngd cr t dt nd in prmting th likly cntributins f mngd cr t cm. His min rgumnt is tht mngd cr ws highly succssful in cutting csts in th 1990s, with littl (dmnstrbl) ffct n qulity, nd tht, lthugh such gins hv nw stlld, thy wr in thmslvs wrthwhil. Mr thn this, h ss th nd t rvitliz mngd cr s mns f driving furthr fficincis nd qulity imprvmnts. Th pwr t wrk undrpinning mngd cr is, f curs, cmptitin, nd Drnv mrgs s rlntlssly pr-mrkt nd nti-plnning. Rgultin is sn s nthm unlss it is in plc t prmt grtr mrkt cmptitin.

Th pning chptrs d prvid vry rdbl intrductin t th chnging ntur f mricn hlthcr, nd r ngging in xplining th difficultis in trting hlthcr s trdbl cmmdity. Mving n t xplin th brdr shifts in th US hlth cnmy, th ris f mngd cr, nd th fight-bck by vstd intrsts (physicins), Drnv's pcy ccunt nvr wvrs frm its cnmic fcus. Cmptitin, slf-intrst nd rtinlity r th nly frcs invkd t xplin brd nd cmplx chng. Such fcus prvids n ccssibly chrnt ccunt, but th rflctiv rdr my wndr but thr pssibl xplntry frmwrks (wht f intrinsic mtivtin, f bligtin, f prfssinlism, r scil cpitl?). In dditin, thr is n lmst cmplt bsnc f intrntinl rfrnc pints. Thus th nrrtiv lwys rlts t US bnchmrks, nvr sking why, fr xmpl, if mngd cr is s cst-cntining, th US still spnds mr thn ny thr cuntry n hlthcr whil lving lmst n in fiv mricns withut dqut cvr.

ny wvring but th mrits f mngd cr cnsists simply f n lbrtin f th ky rquirmnts tht nd t b in plc fr cmptitin t wrk its mgic—cmptitiv mrkts fr f cllusin nd crtls; infrmd cnsumrs willing t shp rund; nd ffctiv mrkt infrmtin. Whil th currnt chllngs t ths r utlind, th tn rmins ssntilly ptimistic. Drnv blivs tht th public (r thir rprsnttivs) cn b prsudd t xrcis cnsumr pwr, nd tht dt systms will ris t th chllng, prviding sufficint infrmtin t llw rtinl dcisin-mking bsd n qulity rthr thn just pric. n whthr th mrkts will b bl t rmin unfttrd Drnv is lss sur, sing drkr frcs f vstd slf-intrst nd th dd hnd f burucrtic frmwrks s likly t intrcd.

Th shr singl-minddnss with which this bk xplins cmplx chng, nd its cmplt nglct f th undrlying scipliticl systms tht sustin ntinl hlth systms, shuld b sufficint t cutin ginst ny uncriticl trnsfrnc f ids. Whil fw wuld dny tht cnmic frcs nd incntivs r imprtnt fr undrstnding rgniztinl nd individul bhviur, th highly scilizd systms f hlthcr in mst cuntris ls rquir multipl wys f undrstnding, nd suggst th nd fr multiplicity f crdinting nd rgulting mchnisms. Whil mrkts hv sm rl, hirrchicl cntrl nd rltinship ntwrks my b t lst s imprtnt, nd filur t ddrss ths nd ttnd t scil cpitl will lv us ll th prr.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.