CHAPTER 12
Cost, Access, and Quality
COST
Can have three different meanings:
1. Price of healthcare services—micro-perspective: How much financiers and consumers
3. Cost of producing health care—provider perspective: An efficiency measure that influences
the provider’s profitability. When there is downward pressure on P, control over the cost of
production becomes critical.
ACCESS
• Ability of consumers to obtain health care when it is needed.
QUALITY
Three key elements:
1. Extent to which desired health outcomes are obtained.
3. Quality applies at both individual (micro-perspective) and population (macro-perspective)
levels.
RELATIONSHIPS BETWEEN COST, ACCESS, AND QUALITY
• Since, E = P _ Q, cost containment at the macro level requires limitations on P and Q.
Constraining Q (demandside rationing or supply-side rationing) limits access.
• In the US, prospects of universal access have been dampened by high costs. In countries that
provide universal access, high costs force supply-side rationing, which also limits access.
COST OF HEALTH CARE
• Medical inflation has generally stayed above the rate of increase in CPI.
• Healthcare spending has generally exceeded growth in GDP.
Reasons why rising health care costs need to be controlled:
• Healthcare costs cut into the consumption of other needed goods and services.
• Excessive healthcare services result in waste of economic resources.
• In the US, employer-based health insurance adds to the cost of business. To compete in
Reasons for cost escalation:
• Third-party payment—contributes to moral hazard and provider-induced demand because it
insulates the consumers against the cost of health care.
COST CONTAINMENT
Cost-control efforts in the US are characterized by a combination of government regulation and
market-based approaches:
Regulatory approaches
• Health planning—supply-side controls, such as CON.
• Price controls—Medicaid rates, PPS reimbursement under Medicare, RBRVS, pay-for-
performance. We may see price controls for pharmaceuticals unless the industry takes voluntary
steps.
Competitive approaches
• Demand side–Cost-sharing by patients.
• Supply side–antitrust provisions regulate competitiveness by prohibiting practices such as price
fixing, exclusive contracting, and mergers that may create monopolies.
• Payer-driven competition—employers shop for the best value in health insurance premiums,
ACCESS TO HEALTH CARE
Implications:
• Access to health care is a key determinant of health status (Blum’s model, Chapter 2).
• Access is a key benchmark for the effectiveness of a healthcare delivery system.
Framework of access
• Predisposing conditions—determine propensity of individuals to use medical care: age, sex,
education, race, etc. Healthcare delivery is considered equitable if differences in utilization are
attributable to these factors.
Dimensions of access
• Accessibility—location of provider, convenience for the patient, insurance, transportation
• Affordability—cost sharing, price
Types of access
• Potential access—distribution (maldistribution) of providers, managed care penetration, size of
uninsured population
Measurement of access
• Individual level—utilization of medical services relative to enabling and predisposing factors;
patient’s assessment of interaction with the provider
QUALITY OF HEALTH CARE
• Increased interest in quality has accompanied perceived concerns that emphasis on cost–
containment and the growth of managed care may lower quality of care.
3. Quality may be evaluated from the perspective of individuals as well as populations.
5. Use of scientific evidence or professional consensus in the evaluation of quality. The IOM’s
view of quality ignores two key elements:
Dimensions of quality
• Micro-perspective—performance of individual caregivers and institutions assessed by
evaluating:
• Clinical aspects of care
measures of population health:
• Life expectancy
• Mortality rates
• Low birth weight deliveries
• Quality of life during an inpatient stay:
• cleanliness, safety, comfort
• autonomy, privacy, dignity, accommodation of preferences
• Health-related quality of life (HRQL)—life satisfaction during or after disease experience;
ability to live independently, role performance, access to healthcare resources, sense of well-
• Analyze data
• Interpret results
• Evaluate variances
• Take corrective action
• Quality Assurance (quality improvement)
1. Commitment towards continuous improvement of quality
3. Support from top managers
5. Data driven
7. Goal is to work toward a zero error rate (100% success rate)
Domains of quality assessment
• The Donabedian model includes three domains, which are equally important, complementary,
and hierarchical:
1. Structure
• Micro-perspective—indicates capability of a provider to deliver adequate level
of health care
• Physical and organizational settings
• Macro-perspective—indicates capability of a healthcare delivery system to
provide adequate healthcare to all citizens
2. Process
• The actual delivery of health care
3. Outcome
• The final results obtained from utilizing the structure and processes of
healthcare delivery
Quality improvement initiatives
1. Clinical practice guidelines (medical practice guidelines) —protocols for preferred clinical
processes, a plan for addressing a clinical problem
• Purpose—to guide physicians’ clinical decisions
• Objective—to eliminate inappropriate medical interventions and reduce healthcare costs
2. Cost-efficiency (cost-effectiveness)—based on the premise that high quality care is also cost
effective.
3. Critical Pathways
• A quality management tool that specifies planned medical interventions and expected
patient outcomes for a given case
• Goal—to improve the process of healthcare delivery
• Characteristics:
Unique to the institution
4. Public reporting
• CMS programs on quality
• AHRQ quality indicators
• National Committee for Quality Assurance (NCQA) HEDIS Measures
• State public reporting of hospital quality
ACA Takeaway
• ACA takes several steps to control costs including managed competition through health insurance
exchanges; reduction in Medicare payment rates to hospitals, skilled nursing facilities, home health
agencies, and hospices, as well as reductions in Medicare disproportionate share payments and
TERMINOLOGY
• Access—May be defined as the timely use of needed, affordable, convenient, acceptable, and
effective personal health services.
• Administrative costs—Costs associated with the management of the financing, insurance,
delivery, and payment functions. These costs include management of the enrollment process,
• Competition—Refers to rivalry among sellers for customers. In healthcare delivery, it means
that providers of healthcare services would try to attract patients who have the ability to choose
from several different providers. Although competition more commonly refers to price
competition, it may also be based on technical quality, amenities, access, or other factors.
• Cost-efficiency—Evaluates the relationship between increasing medical expenditures/risks and
• Health planning— government undertaking to align and distribute health care resources so that
the system will achieve desired health outcomes for all people.
• HRQL—Stands for health-related quality of life. In a composite sense, HRQL includes a
person’s own perception of health, ability to function, role limitations stemming from physical or
emotional problems, and personal happiness during or subsequent to the disease experience.
additional care is delivered.
• Peer review—Refers to the general process of medical review of utilization and quality when it
is carried out directly or under the supervision of physicians.
• Quality Improvement Organizations (QIO)—Also referred to as PROs (see PROs).
• Quality—Defined as the degree to which health services for individuals and populations
• Single-payer system – Refer to a type of health care financing system in which one entity,
typically a government run organization, would collect all health care fees and pay out all
healthcare costs. The main benefit is to reduce the amount of administrative waste associated
with collecting and dispensing fees.
• Small area variations—Refer to the unexplained variations in the treatment patterns for similar
quality of delivered goods and services through the participation of all levels and functions of the
organization to meet the needs and expectations of the customer.
• Underutilization—Occurs when the benefits of an intervention outweigh the risks or costs, yet
the intervention is not used.
REVIEW QUESTIONS
1. What is meant by the phrase “health care costs?” Describe the three different meanings of
the term “cost.”
The term “cost” can carry different meanings in the delivery of health care. The meaning
ascribed depends on the perspective one takes. Thus there can be three different meanings: a)