Scanning of the External Environment of Health Care Industry - Term Paper Example

Scanning of the external environment of health care industry Social As a society, America is not known to be health conscious. This unhealthy lifestyle of Americans affect the health care industry in a way that it would tell them on what particular disease should the health care industry should focus more to be responsive to the health care needs of their community. Due to its unhealthy lifestyle, the case of obesity is steadily increasing in the US. In the past 20 years, obesity has been on a steady rise with the cases of being overweight (body mass index of (BMI) range of over 30) increasingly threatens to shorten life expectancy among Americans (Lobb, 2008). Obesity rates among adolescents in the United States have tripled since 1963. More than one-third (33.6%) of U.S. children and adolescents are either obese or at risk of becoming obese, with significant variations across ethnic and socioeconomic groups. Overweight children have a 70% chance of being overweight or obese as adults and an 80% chance if one or more parent is overweight or obese. Obesity increases various health related risks both in childhood and into adulthood (American Heart Association, 2005 cited in Goldberg and Gunasti, 2007).). It is estimated that at current rates, the lifetime risk of type 2 diabetes (and many related health problems) is 30% for boys and 40% for girls (McGinnis et al., 2006 cited in (Goldberg and Gunasti, 2007).). Other associated health problems for which obesity increases the risk include high cholesterol, high blood pressure, asthma, and general poor health” (Koplan et al., 2005). Needless to say, the social factors that affect the health of Americans breed diabetes and cardiovascular diseases. Economic It has to be mentioned that the present economic environment of the US is far from ideal because it is still recovering from the financial crisis. Thus, both customers and organizations alike are in cost saving mode in order to cope with the current economic situation. This is however not peculiar in the health care industry because the current difficult economic situation is felt across America’s industries whether in healthcare, finance, auto etch. Policy wise, the most significant economic development in the health care industry is the implementation of the pay for performance because it can affect the bottom line and viability of a health care provider institution. “Pay-for-performance or P4P is a quality improvement strategy that employs financial incentives to improve compliance with evidence-based clinical practice guidelines, to improve patient experience, to induce investment in information technology that is expected to improve quality and outcomes of care, and sometimes to improve the efficiency or cost-effectiveness of care” (Steinberg, 2006 pg. 11). The program collaborates with “providers and other stakeholders The foundation of effective pay-for-performance initiatives is collaboration with providers and other stakeholders, to ensure that valid quality measures are used, that providers are not being pulled in conflicting directions, and that providers have support for achieving actual improvement” (Centers for Medicare and Medicaid Services, 2005). It is a response to the initiative to the rising health care issues such as “rising medical cost trends, the growth in chronic care conditions, healthcare utilization, consumer directed healthcare and demands by purchasers for improvements in the quality of care” (Baker et al, 2003) and is dictated from the health care quality improvement imperative to make health care delivery more responsive and efficient. The Pay for Performance works by compensating physicians and medical institutions according to their performance, which would come in the form of a bonus in addition to their standard fee-for-service compensation. Quality Issues: advantages & disadvantages of process and criteria used It is important to stress that the adoption of pay for performance payment system is intended to improve the quality of health care and reduced its costs. While its efficacy is still equivocal (Long et al., 2008), it can be construed that this intent is one of the inherent advantage of the pay for performance payment system. One of pay for performance immediate advantage is that the payment system discourages the unnecessary inflating of health care costs because providers will no longer have the need to add unnecessary procedures to achieve scale where they were used to get incentive. This could lead to the reduction of deaths that led to errors which the pay for service may inadvertently caused as this payment system overlooks quality to achieve volume. Political The landscape in the healthcare industry will dramatically change with the implication of President Obama’s “Patient Protection and Affordable Care Act” which was enacted into law in 2010. This political initiative of President Obama which will take full effect in 2014 will require shift in perspective among health care providers and healthcare industry in general. The law intends to rehabilitate “some of the worst practices of the insurance companies” such as insurance companies refusal to cover due to pre-existing condition and hefty fees associated with it, lifetime caps and rescission clauses which insurance companies stretches to avoid paying expensive insurance claims. Once fully enforced in 2014, people who are considered as high risk today would have to be insured as mandated by this law. The lifetime limitation of the amount of insurance coverage which is the current practice of insurance companies on individual policies will also be removed when Obama’s new health care policy will be fully implemented in 2014. With regard to business, employers will be required to cover all their employees despite their medical condition. Failure to cover its employees would tantamount to paying fines which the law will impose on the company. This is important to mention because this is the new context that businesses will be operating in terms of providing health insurance to their employees. If the law will be strictly adhered to, businesses will have to cover all of its employees including those who were previously uninsurable and those who have pre-exisitng conditions. That would mean an added cost in terms of paying premiums as employees who were not uninsurable has to be insured now. To be able to control the seemingly rising insurance cost, employers adopted several ways to be able to save on cost. One of the option being considered by the big companies such as AT&T and Caterpillar, is to stop providing health coverage for their employers and pay the fines that the government will levy. They will instead give raise to their employees in lieue of non-coverage and still save money (Colvin, 2012). Big companies are considering this option because the forced coverage of the new law on health insurance on all of its employees including those who were previously uninsurable would mean huge addition of cost due to the scale of its employees. Such, they deemed it more cost effective to stop insurance coverage, just pay the fine and give employees a raise as a replacement of health insurance coverage. Another option that employers are now implementing is to self-insure their employees. It meant that the employers themselves would now be responsible for covering the health insurance of their employees and would pay their claims directly rather than going through the conventional health insurance policies (whose cost has gone up with the implementation of Obamacare). The self-insured employer choses and designs their own plan and hire a third party administrator to manage the plan. And employers who cannot afford huge claims purchase stop-losss insurance that would cover the claim just in case they reach a certain level (Sammer, 2011). This became an option because the new law on health insurance removed the annual and lifetime payment caps that made stop-loss coverage a good alternative among employers. These cost-saving devices of employers may also be challenged by employees who would actually opt in with the coverage of the new health insurance law especially parents who have children under 27 years old. Under the law, employees who will be covered by the insurance policy of their employers can now include their children under the age of 27 in their insurance coverage with Obama’s new health care law. This component of the new law will be very advantageous to employees who has/have sickly child/children because the cost incurred in the health care of their children can now be shouldered by their present insurance when the new health care law. Employers who will attempt to stop health insurance coverage of their employees are almost certain to have conflict with them because that would mean depriving employees who are parents of this benefit. In sum, this new political development in the healthcare industry will refocus the policy orientation of health care practices from being reactive (as coverage focuses on treatment) to being proactive as the new health care policy will also put importance on preventive therapies. Check-ups, consultations and preventive therapies which used to require a co-pay from policy holders, it will no longer be required under the new law so as not to discourage patients from availing preventative measures in looking after their health. Obama’s new health care policy will also address the present inequitable distribution of health care spending. Previously, half of the total expenditures in health care were spent on the 5% of the population and only 3% were spent on the 50% of the population. As it currently stands, the majority of American population receives only a miniscule fraction of health care expenditure while half of its total health care expenditures were spent on a small privilege number of Americans. Technological One of the components that is responsible for increasing the cost in health care is the intense use of technology. Technology sue in health care is intensive because it is used in various stage of health care practice from diagnostic tests (MRI, CT Scan etch) to the actual treatment. Thus, technology is the one of the primary driver of cost in health care. To fully maximize the benefit of technology particularly in today’s economic difficulty, the actual benefit must be at least as great as the cost. This ensures that technology use will not only be responsive, but also efficient in cost which would ultimately benefit both the patient and the industry (Danson, 2002). References Baker, Geoffrey; Haughton, John, MS; Mongroo, Peter (2003). Incentive Programs in Healthcare: Market Dynamics and Business Process. Retrieved at [http://www.leapfroggroup.org/media/file/Leapfrog-Pay_for_Performance_Briefing.pdf Centers for Medicare and Medicaid Services (2005). MEDICARE " (P4P)" INITIATIVES. Retrieved at [http://www.cms.gov/apps/media/press/release.asp?counter=1343]. Colvin, Geoff (2012). IF OBAMACARE SURVIVES, EMPLOYERS MAY DO IT IN.  Fortune, 00158259, 165 (7) Danson, Patricia M (2002). Health care industry. Libarary of Economics and Liberty. Retrieved from http://econlib.org/library/Enc1/HealthCareIndustry.html Goldberg, Marvin E; Gunasti, Kunter Creating an Environment in Which Youths Are Encouraged to Eat a Healthier Diet.American Marketing Association. Vol 26 (2) 162-182 , 20p Guy, Gery P. Jr.; Adams, Kathleen; Adams Atherly (2012) Public and Private Health Insurance Premiums: How Do they Affect the Health Insurance Status of Low-Income Childless Adults? Inquiry. 49: 52–64 Koplan, Jeffrey P., Catharyn T. Liverman, and Vivica I. Kraak, eds. (2005), Preventing Childhood Obesity: Health in the Balance.Washington, DC: The National Academies Press. Lobb, Alexandra; Butler, Laurie T.; Traill, W. Bruce The influence of age and gender on food choice: a focus group exploration.By: Chambers, Stephanie;. International Journal of Consumer Studies, Jul2008, Vol. 32 Issue 4, p356-365, 10p Long, Judith A.; Helweg-Larsen, Marie; Volpp, Kevin G. (2008). Patient Opinions Regarding ‘Pay for Performance for Patients’. JGIM: Journal of General Internal Medicine, 23(10): 1647-1652. Sammer, Joane (2011). Is Self Insurance for you? HR Magazine. 35-37 Read More