WHY ARE COSTS SO WHY ARE COSTS SO HIGH?HIGH?

CHAPTER 12CHAPTER 12Code Blue Health Science Edition 4Code Blue Health Science Edition 4

Chapter 12Chapter 12

In chapter 12, David Brannan is In chapter 12, David Brannan is struggling with a reversal in the struggling with a reversal in the family’s financial situation.family’s financial situation.

Financial problems are not Financial problems are not unusual in the United States. unusual in the United States. Each year thousands of people Each year thousands of people declare bankruptcy.declare bankruptcy.

Financial DifficultiesFinancial Difficulties

Individuals facing financial Individuals facing financial difficulties have one of two difficulties have one of two choices:choices: Increase income, orIncrease income, or Decrease expensesDecrease expenses

Financial DifficultiesFinancial Difficulties

Individuals should figure out Individuals should figure out what decisions and actions have what decisions and actions have got them into difficulties they are got them into difficulties they are facing.facing.

Brannan Community Brannan Community HospitalHospital

Brannan Community Hospital is Brannan Community Hospital is also suffering from financial also suffering from financial difficulties.difficulties.

Brannan Community Brannan Community HospitalHospital

Unless the situations changes, Unless the situations changes, the hospital will close, throwing the hospital will close, throwing over a hundred employees out of over a hundred employees out of work and decreasing access to work and decreasing access to hospital care in the community.hospital care in the community.

Brannan Community Brannan Community HospitalHospital

Initially Wes Douglas realizes that Initially Wes Douglas realizes that he has three options: increase he has three options: increase revenues, decrease costs, or both.revenues, decrease costs, or both.

Before he decides whether he Before he decides whether he should tackle the problem of should tackle the problem of revenues or costs first, he realizes revenues or costs first, he realizes that he needs to understand a that he needs to understand a little more about the industry.little more about the industry.

Healthcare CostsHealthcare Costs

In the next four chapters, we are In the next four chapters, we are going to discuss a crisis in the going to discuss a crisis in the healthcare delivery system healthcare delivery system caused by out of control costs.caused by out of control costs.

We will look at the cause of the We will look at the cause of the problem, and some solutions problem, and some solutions being offered—solutions that will being offered—solutions that will dramatically impact the lives of dramatically impact the lives of future healthcare professionals.future healthcare professionals.

Major National ProblemMajor National Problem

Increasing healthcare costs are a Increasing healthcare costs are a major problem for most major problem for most companies and their employees.companies and their employees.

Per Capita Costs for Per Capita Costs for Healthcare in CountriesHealthcare in Countries

Country Per Capita Cost in 2010

United States $7,960

Germany $4,212

United Kingdom $3,438

Japan $3,045

Major National ProblemMajor National Problem

Many companies are finding that they Many companies are finding that they can no longer afford to provide can no longer afford to provide coverage for their employees.coverage for their employees. Some are dropping health insurance as a Some are dropping health insurance as a

benefit.benefit. Others are moving jobs overseas where Others are moving jobs overseas where

healthcare costs are less.healthcare costs are less.

Major National ProblemMajor National Problem

This has led to the enactment by This has led to the enactment by Congress of the Patient Congress of the Patient Protection and Affordable Care Protection and Affordable Care Act Act

We will be discussing this further We will be discussing this further later.later.

Health ExpendituresHealth Expenditures

In 2013 it is estimated that the In 2013 it is estimated that the country will spend $3 trillion on country will spend $3 trillion on healthcare.healthcare.

It is estimated this expenditure It is estimated this expenditure will double in the next seven to will double in the next seven to ten years.ten years.

If this occurs, many Americans If this occurs, many Americans will be unable to afford the cost will be unable to afford the cost of basic care.of basic care.

US Health Expenditures US Health Expenditures 1992-20121992-2012

Year

Expenditures add nine

(000,000,000)zeros

Chapters 13 through 16Chapters 13 through 16

Why are healthcare costs so Why are healthcare costs so high?high?TechnologyTechnologyUnreimbursed careUnreimbursed careAn aging American An aging American

populationpopulationLack of adequate incentives Lack of adequate incentives

for cost controlfor cost control

TechnologyTechnology

Technology has provided the ability to Technology has provided the ability to save lives that would have been lost save lives that would have been lost just a decade ago.just a decade ago.

No one wants to return to 1990s No one wants to return to 1990s medicine, but few are willing to pay medicine, but few are willing to pay the cost.the cost.

Unreimbursed CareUnreimbursed Care

Much of the care hospitals Much of the care hospitals provide is not paid for by the provide is not paid for by the individuals receiving it.individuals receiving it. Some hospitals collect less than Some hospitals collect less than

50% of billed charges.50% of billed charges. These costs must be paid by These costs must be paid by

those patients who do pay.those patients who do pay.

Unreimbursed CareUnreimbursed Care

Reasons for Unreimbursed CareReasons for Unreimbursed Care Underpayment by government Underpayment by government

programs such as Medicare and programs such as Medicare and MedicaidMedicaid

Discounts negotiated by large Discounts negotiated by large insurance companiesinsurance companies

Uninsured patients who receive Uninsured patients who receive care, but cannot or do not pay for care, but cannot or do not pay for the services they receivedthe services they received

Charity careCharity care

An Aging American An Aging American PopulationPopulation

When American soldiers returned When American soldiers returned from World War II, many started from World War II, many started families.families.

An Aging American An Aging American PopulationPopulation

The children of these soldiers were The children of these soldiers were known as the “baby boomers,” known as the “baby boomers,” due to a rapid increase in births in due to a rapid increase in births in the late 1940s and early 1950s.the late 1940s and early 1950s.

These baby boomers are now These baby boomers are now becoming senior citizens.becoming senior citizens.

Older people have significantly Older people have significantly higher healthcare costs per year higher healthcare costs per year than younger people.than younger people.

An Aging American An Aging American PopulationPopulation

In addition, people are living In addition, people are living longer!longer!

Lack of Incentives for Lack of Incentives for Cost ControlCost Control

To be discussed in the next To be discussed in the next chapterchapter

The EndThe End