Research Paper on "Performance Assessment"

Research Paper 6 pages (1694 words) Sources: 5

[EXCERPT] . . . .

Performance Assessment

To work and succeed, a hospital is equally dependent on three factors: Insurance, Hospital, and Physicians.

Insurance -- brings to the table the crucial expertise needed to market insurance to employers and to individuals, such as the ability to calculate actuarial risk and to manage a claims system. This includes marketing, financial accounting, claims processing utilizing review, and data functions such as rating and monitoring individual physicians' performances.

Hospital -- namely all institutional facilities. The Marcus Welby Hospital, to be successful, merged with two other hospitals forming the Marcus Welby Network. Its hope was to provide both primary and tertiary care cost-effectively. A hospital network may include nursing homes and outpatient facilities such as ambulatory surgery and emergency centers. These institutions may be under single or joint ownership, either by direct construction (as was the Marcus Welby originally) or by merger (as it became in 2000). They may also be independently owned facilities that affiliate by contract.

3. Physicians - it is usually necessary for physicians to align themselves by contract or partnership, too an ensuring or hospital entity in order to acquire successful physician practice.

Because there is the constant challenge of being bested by competition and of losing patients, the hospital endeavors to unite in a cohesive system with physicians and insurers. This is called 'managed care' or 'integrated service networks', or 'organized delivery systems'. Its intention is to use its limited resources most efficiently in order to prevent disaster, for when one component suffers, all the other components of the system suffer likewise. The critical issue is which component will be in control. When 'insurance' is in control, as we will see in the Marcus Welby Hospital dilemma, the other two components, each to varied degrees, suffer.

An 'organized delivery system' consists of at least four different models:

1. Foundation Plan - this is a corporation, usually non-profit (Burns, 1995), where the hospitals' corporate parent buys out the physician practices and employs the physicians.

2. Physician Hospital Organization (PHO) - this is where hospitals, physicians, and insurers are linked in a loose, contractual network with no common ownership. . In other words, the hospital and several physician groups join venture partnership and contribute equal capital, and split the proceeds.

3. Management Services organization (MSO) - This is where the hospital contracts with independents physicians and pays for resources such as their office buildings, files, medical records and so forth -- for a lump sum, whilst also acting as negotiating agent with insurers and/or employers whilst the physicians themselves remain independent contractors. Often the MSO employs all nonphsyician staff and provides administrative systems, in exchange for either a flat fee or a set percentage of group revenues (Burns, 1995)

4. Integrated health organization (IHO) -- a single legal entity with three subsidiaries: a hospital corporation, a medical services corporation, and an educational and research corporation. Typically, the whole is tax-exempt and non-profit. The medical subsidiary employs the physicians to provide services (Burns & Thorpe, 1993)

5. Other models include physician ownership of hospitals, and hospital ownership for group practices.

The last two models are not addressed in this essay.

All of these models reflect different designs of physician-hospital organization. The factor that ties the system or network together are its clinical and fiscal accountability for a defined population. When meeting the needs of this defined population becomes too challenging, as may for instance occur with economic challenges, then all models of the organized delivery system suffer, some to a greater extent than others. A case in point is the Marcus Wellby hospital infrastructure.

The Problem

Marcus Welby Hospital (MWH) is a private, nonprofit 400-bed facility that employs more than 2000 workers, and ahs more than $100 million in annual revenues. It is located on the outskirts of a metropolitan area of one million people that contains three other major tertiary care hospitals of and four smaller, community hospitals. In 2000, the hospital merged with two other hospitals to form the Marcus Welby network. Their objective was to sign up a number of physicians, mainly in primary care but also in common specialties, and then market this network directly to employers and to large insurance companies who would then offer the network to their customers. Their effort had mixed results. On the one hand, their network did not cover a large enough geographical space to appeal to the larger employers, but on the other hand, MWH had greater success with insurers since it offered a broad network which is what employers wished. Recently, however, insurers gained the upper hand by threatening to place MWH in the highest of their tiered networks, thus forcing patients to decide whether to pay much higher co-payments and deductible in order to receive local care, or instead to travel to distant parts of the city in order to receive care form lower-cost providers.

The Impact on the Hospital; PHO; MSO

The major stakes for the hospital

The hospital suffers the most from the situation. Lacking the scale to be competitive with more established insurers, and unable to recoup the expenses of acquiring or even operating the physician practices or other hospitals, MWH is faced with closure or with losing patients.

The following are several ideas for MWH to recoup its strength:

1. Both hospital and insurers are critically dependent on physicians, particularly primary-care physicians (general practitioners, obstetrician, and pediatricians) and the Marcus-Welby might use this base to work towards the future. Under the managed care arrangements that are common in HMOs, the primary care physician base determines the size of the network because these are the physicians whom the patients first see and who act as the 'gatekeepers' to hospitalization and specialists referral. Also the number of primary care physicians determines the number of enrollees that, in turn, controls the amount of payment. This issue could lower visibility of the hospital prices raise by insurance.

2. The hospital might want to avoid their insurance troubles by eliminating the "middleman" and incorporating the insurance functions themselves (Burns & Thorpe, 1993). Doing this can help them negotiate with physicians and adjust the tiered rating so that they may once again be able to offer affordable rates to patients. By incorporating the insurance function, the hospital will be able to gain more enrollees. However, it will need to gain the sufficient knowledge and expertise in order to do so.

3. The hospital could contract directly with the employer thus preempting insurers entirely. Even though in the Marcus-Welby case, their original idea of marketing directly to employers did not work because their network does not cover a broad enough geographic space to appeal to the largest employers and smaller employers preferred a network that includes most of the physicians in town, it may be that one viable option would consist of employing most of the popular physicians in town (in a PHO or MSO type of contract) thereby circumventing insurance by appealing to these smaller employers.

Major stakes for MSO

MSO owns tangible assets of the physician's practice. When successful, the physician consequently benefits, and the reverse is the case, With Marcus-Welby, the MSO element will consequently loose if the hospital suffers because they are dependent on the hospital for coverage of a tremendous proportion of their resources. However, since the physicians are simultaneously independent to the hospital, they will not lose out as much as the hospital does, and will still be able to maintain their practices.

Major stakes for PHO

The physicians who are under joint-venture partnership to the hospital will suffer the least, since contributing equally; they are the least dependent on the hospital's sufferance form insurers.

Findings suggest that financial success of the system on the whole depends on the physicians, and that the more integrated the system (where hospital, insurer, and… READ MORE

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