The Changing Health Care System

The health care delivery system is largely shaped by the way it is financed. The fee-for-service reimbursement system in the United States, the dominant payment system until the early 1980s, provides an example. Under fee-for-service reimbursement, hospitals and providers were paid for care of sick people; almost no payment was made for well-care. As a result, hospitals served as the focus of care and long hospital stays, and even routine diagnostic procedures were carried out on an inpatient basis. The fee-for-service system put the provider in charge and rewarded more care and more procedures.

Beginning in the 1940s, insurance companies (third-party payers) proliferated, following the successful example of the Blue Cross plan created in the Depression of the '30s to assist hospitals and patients during a time of crisis. At the end of World War II, this trend was further fueled by wage caps, resulting in many companies' offering health insurance as an employee benefit instead of wage increases. Thus, the employer, acting as broker between employees and insurance companies, covered most of the cost of health insurance coverage for a large segment of Americans. This system continues today in the United States.

Third-party payment was further extended in the 1960s when Medicare and Medicaid became the health care insurer for those over the age of 65 and for poor and disabled Americans. These government programs, too, were paid on a fee-for-service basis. The result of this third-party, fee-for-service reimbursement method was the proliferation of increasingly high tech health care services and skyrocketing health care costs. Meanwhile, consumers of health care were increasingly disconnected from the real cost of health care. Since their insurance paid the provider directly for most the cost of care, consumers never saw their bills. Patients increasingly demanded more health care services and a choice of providers. Middle-class and wealthy Americans came to see the best and most expensive health care as their right.

By the 1970s, the escalating cost of health care in the U.S. was seen as a crisis, and in the early 1980s, the government responded with the introduction of Diagnostic Related Groupings (DRGs) as a new reimbursement method for hospital payment. Private insurance companies followed shortly thereafter, introducing their own schedules of prospective payment. The changed incentive of a prospective payment system produced a shock wave of change in the healthcare system that is still playing out as providers struggle to shape a health care delivery system to match this new method of financing healthcare in the United States.

New models of payment have driven health care to run more like a business than ever before. Today we face even more overwhelming challenges with the state of the economy and the demands to be competitive in a global economic environment. Since health care legislation is at the forefront this semester with the conference committee for the House of Representatives and the Senate set to convene the week we start this class, please keep up with the process and outcomes and integrate these current events in your assignments throughout the semester. In this lesson we're going to explore what all these changes mean for nurses and for the role of the nurse manager.