medical procedures or cost effectiveness issues. The National Institutes of Health assesses some technology through its system of awarding grants for clinical trials and consensus development conferences. OTA evaluates some medical technology in providing information for congressional decision makers in setting national health policies. The Department of Defense, the Veterans Administration, and private sector organizations, such as the AMA, AHA, the Blue Cross and Blue Shield Association, and the Health Insurance Association of America, are also involved in some technology assessment.176 In 1978, the Congress attempted to strengthen medical technology assessment when it established the National Center for Health Care Technology (NCHCT) in HHS. Its purpose was to conduct, sponsor, and coordinate the assessment of new and existing technologies. HCFA, which administers the Medicare and Medicaid programs, obtained information from the NCHCT to help in making reimbursement decisions which were also frequently followed by other third-party payers. The NCHCT was abolished in 1981 and the Office of Health Technology Assessment, based in the National Center for Health Services Research of the U.S. Public Health Service, assumed some of its functions.177 In a series of studies of medical technology assessment, OTA concluded in 1982 that most existing technologies had not been adequately assessed. OTA found that there was no coherent system for assessing all medical technologies, but an urgent 178 need existed for such a system. The consequences of the disparate approaches to medical technology assessment can be significant. The emergence and application of valuable new technologies may be hampered and obsolete technologies may not be retired quickly enough.179 UCLA and Harvard studies commissioned by HHS estimated that Medicare alone could save $100 to $200 million per year if reimbursement for certain technologies were not made.180 In 1982, OTA concluded that most existing technologies have not been adequately assessed. 181 In establishing the prospective payment reimbursement system for Medicare in 1983, the Congress also expressed the need to assess medical technology in authorizing the Prospective 182 Payment Assessment Commission. In regard to technology, the Commission is to --collect and assess information on medical and surgical procedures and services, including information on regional variations in medical practice and giving special attention to excessively costly or inappropriate services not adding to the quality of care provided, and -assess the safety, efficacy, and cost-effectiveness of new and existing medical and surgical procedures. The Commission is to use its assessments in addition to other factors in making recommendations to HHS on adjustments to the DRG rates beginning in 1986.183 To assist the Commission, the Health Promotion and Disease Prevention Amendments of 1984 (Public Law 98-551) created the National Center for Health Service Research and Health Care Technology Assessment within HHS. Among other things, the Center is to consider the safety, efficacy, and costeffectiveness of health care technologies and advise HHS on which technologies should be reimbursable under federally financed health programs. 184 WHAT PROBLEMS EXIST IN THE Several problems confront the nation in regard to the supply of health resources. The aggregate supply of physicians may soon be in excess, particularly in certain specialties such as surgery. Some contend that this oversupply increases costs. Others contend that this situation increases competition among physicians for patients and results in their moving into lower cost arrangements, such as health maintenance and preferred provider organizations which contain costs. To date, little action has been taken to directly limit the supply of physicians. Accordingly, what course of action to take, if any, in regard to the ever-increasing supply is a complex issue which may need attention as the evidence in regard to physicians' impact on spending becomes clearer. Hospital bed supply Some contend that the nation also has an excess supply of community hospital beds. Some believe that this increases health care spending and some actions have been taken to try to deal with this situation. The closure of entire hospitals appears to offer more potential for containing expenditures rather than reducing bed supply. However, this is a difficult and unpopular action that could result in a reduction in access and quality of care. Recent changes have been made that affect hospital revenues, such as Medicare's prospective payment system and state efforts to control hospital revenues and bed supply, which should force hospitals to operate more efficiently. Already, many hospitals have begun to reduce the supply of beds and some hospitals may close. Whether additional actions are needed to further reduce the supply of hospital beds is a situation that needs to be closely monitored. Nursing homes The situation with nursing homes is somewhat more complex. In some sections of the country, nursing home beds are apparently in short supply. However, there is substantial evidence that many nursing home patients do not need to stay in a nursing home while there are patients residing needlessly in hospitals waiting for nursing home beds. Thus, whether an actual shortage of nursing home beds exists is unclear. Accordingly, more information is needed on the potential to provide more appropriate placements of existing nursing home residents and persons who, in the future, may need some form of care in order to reduce avoidable institutionalization. Home health care and day care programs are two examples of potentially lower-cost alternatives which appear to need more consideration at the time decisions are being made to place persons in nursing homes. After such information is available, a clearer picture of the nursing home bed situation will be apparent. Medical technology The rapid development of expensive medical technology, while benefiting many patients, has also created several problems. The primary difficulty results from the ease with which technological advances have been introduced, diffused, and utilized in the health care delivery system before their cost effectiveness or medical efficacy has been clearly demonstrated. The recent establishment of an HHS organization responsible for assessing medical technology may help to alleviate this situation. However, some contend that this may slow research and development of new technologies that could benefit patients. Therefore, in carrying out its duties, care is needed to be sure that technological research does not adversely impact the development of new technology. CHAPTER 3 HEALTH CARE DELIVERY SYSTEM The health care delivery system in the United States is comprised primarily of several hundred thousand physicians, nearly 7,000 hospitals and more than 20,000 nursing homes. These three providers account for the bulk of the nation's health care expenditures. In 1984, over $265 billion of the $387.4 billion (nearly 70 percent) spent on health care in this country went to these providers. Over the years, significant changes have occurred in the manner of delivering health care. For example, many physicians' practices have become closely associated with hospitals. Hospitals have evolved from facilities serving the dying to modern facilities supported by sophisticated and expensive technology to diagnose and treat virtually every known ailment. Patients who needed long-term care, such as the elderly, were traditionally cared for by families and friends. Today, these needs are met to an ever-increasing degree by hospitals and nursing homes. The nation also maintains a separate health care system to meet the needs of certain population groups, such as veterans and military personnel. The manner of delivering health care has, to a large extent, contributed to rising health care costs. Physicians are paid, for the most part, on a fee-for-service basis in which they have financial incentives to provide more and more services. The emergence of hospitals as sophisticated facilities for delivering care has not been achieved without a price. For example, services provided in intensive care units cost more than twice as much as those provided in conventional care settings. Treating critically and terminally ill patients in hospitals is also expensive. Hospitals' costs for dying patients are as much as 40 percent higher than costs for other patients. Keeping a patient on a respirator can cost as much as $1,000 per day. The delivery of a large amount of care in nursing homes has contributed to increased costs resulting from (1) patients remaining in hospitals due to lack of a nursing home bed, and (2) placement of patients in nursing homes who do not need such care. A significant portion of health care has been delivered in institutional settings, the most costly place to provide such However, as the costs of health care have increased, public and private payers of the nation's health care bill have begun to look for less costly ways of providing care. Accordingly, many alternative methods have been developed to avoid unnecessary hospital or nursing home admissions. In addition, physicians, partly as a result of increased competition for patients, are gradually moving away from the fee-for-service method of payment into other methods, in which they are salaried or reimbursed a fixed amount per patient. WHAT CHANGES HAVE OCCURRED IN THE WAY The physician is usually the first contact point for a patient's entry into the health care delivery system. As such, the physician is primarily responsible for the manner in which health care is delivered and the setting in which it is provided. Working with other health personnel, the physician diagnoses a patient's condition and prescribes, provides, or supervises the provision of appropriate medical treatment. In discharging these responsibilities, the physician must decide, among other things, what conditions require immediate attention, what can wait, and whether he or she can manage the condition or if a specialist is needed. Historically, the typical physician practiced independently, worked primarily out of the office and was reimbursed on a fee-for-service basis. Most physicians were general practitioners who only occasionally treated patients in a hospital. Under the fee-for-service method of payment, the physician was reimbursed on the basis of the specific treatment provided. Under this arrangement, the physician sees a direct relationship between what he does and what he earns. The fee-for-service incentives encourage higher quantity and greater intensity of services.1 Over the past several decades, however, certain developments have occurred which have altered the way physicians practice and how they are reimbursed.2 First, physicians' practices have become more closely associated with hospitals. Physicians decide whether to hospitalize patients, how long they should remain in the hospital, which diagnostic tests and treatment procedures are appropriate, and if surgery is needed. Thus, the physician is solely responsible for determining the utilization of most, if not all, those goods and services for which a hospital can charge. Office-based physicians provide about 16 percent of their patient visits in the hospital. Physicians in surgical specialties provide more than 32 percent of their patient visits in the hospital.3 |