MGT 388 Week 5 Audio Lecture Cost Controls

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Painful v. Painless Cost Control:

Painful v. Painless Cost Control Chapter 8

Painful v. Painless Cost Control:

Painful v. Painless Cost Control 1980-1999: per capita U.S. national health care increases 400% % of U.S. GDP from 8.9% to 13%

Painful v. Painless Cost Control:

Painful v. Painless Cost Control Painful cost controls lead to Rationing of services Painless cost controls lead to Eliminate unnecessary medical treatment Eliminate unnecessary administrative expenses

Health Care Costs and Outcomes:

Health Care Costs and Outcomes Robert Evans As health care spending increases, health outcomes improve Above a certain level, benefits become marginal (low yield medicine) Shift the curve to improve outcome Greater efficiency improves outcomes without increasing costs More bang for the buck!

Prices & Quantities:

Prices & Quantities Cost = Price x Quantity What is price? What is quantity? Minding the Ps and Qs of health care costs = cost containment Higher price without additional quantities is inefficient use of resources.

Cost Control Strategies:

Cost Control Strategies Controlling Price Inflation Controlling fees and provider incomes Eliminating Ineffective & Inappropriate Care Cutting the price of RX and other supplies Reducing Administrative Waste Stop doing things of no clinical benefit

Understanding Health Policy:

Understanding Health Policy Mechanisms for Controlling Costs Chapter 9

Financing Controls:

Financing Controls Regulatory strategies Government regulation/taxes Competitive strategies Health insurance/price/premiums Market pressure Weaknesses

Reimbursement Controls:

Reimbursement Controls Price Controls Regulatory Competitive Utilization (Quantity) Controls Aggregate units of payments: capitation, DRGs, global budgets Patient cost sharing Utilization management Supply limits Mixed Controls

Managed Care Cost Controls:

Managed Care Cost Controls PPO Price controls Utilization management Patient cost sharing

Managed Care Cost Controls:

Managed Care Cost Controls IPA – Network HMOs Price controls Utilization management Gatekeeping Changing unit of payment to capitation Regulating supply via selective contracting

Managed Care Cost Controls:

Managed Care Cost Controls Group and Staff Model HMOs Changing unit of payment to salary and global budgets Supply controls Administrative simplicity “management of capacity and budgets” (Dr. John Wennberg)

Canadian Cost Controls:

Canadian Cost Controls Price Controls Changing the Unit of Payment Hospitals: global budgets Physicians: expenditure caps Supply Controls Administrative Simplicity

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