The Healthcare Market in South Carolina

Introduction

All hospitals in the country are legally obliged to provide healthcare to patients regardless of their ability to pay. Health facilities in South Carolina are no exception. It is estimated that about 764,000 individuals in this state are uninsured. The situation is one the reasons why hospitals in this region support the new healthcare reform laws. The new legislations will introduce a number of frameworks that will help expand coverage, promote innovation, and reduce costs in the healthcare sector. They will also improve the quality of care provided (Wolf, 2011).

Current Healthcare Delivery Structures in South Carolina and the Major Determinants of Market Power

Overview

South Carolina is ranked as one of the top five states with regards to the safety and quality of healthcare services provided to consumers. It is also rated highly in relation to responsiveness in healthcare. There are a number of factors behind this success. Some of them are reviewed in the section below:

Reimbursement

It is an important element in the health sector. Revenue generation among healthcare facilities in South Carolina helps them achieve their objectives. Reimbursements have made it possible for hospitals to sustain their source of income over the years. The development streamlines the provision of care and delivery of medical services in the state (Harris, 2008).

Expansion of Medicaid

The expansion of Medicaid will ensure that the policy covers over 250,000 low income earners in South Carolina. The individuals are currently uninsured and cannot afford alternative medical covers. Medicaid is the most affordable medical insurance in the country. However, the cuts made in the state’s budget threaten access to medical insurance for many residents in South Carolina (Yih, 2011).

Certificate of Need

The authorities in the state have put in place measures to restrict the accumulation of expensive medical services. To this end, the region is one of the 35 states that have continued to effectively utilize the law on Certificate of Need (Schulte, 2009).

Medical Liability Reforms

The application of these reforms by hospitals in South Carolina will significantly lower the cost of defensive medicine. Studies show that the average American family spends up to $2000 every year to fund such services. The authorities are making efforts to change the situation (Harris, 2008).

CMS Rules and Regulations

All hospitals in the state are privy to the proposed rules. Their employees are also conversant with the comments and final rules submitted to CMS by SCHA on behalf of member hospitals (Harris, 2008).

Value Based Purchasing (VBP)

The policy is used in the state of South Carolina to establish a value relationship between the quality and the price of a given product (Roth, 2010).

Tobacco-Free Hiring Policies

The government of South Carolina has adopted this hiring strategy in a bid to improve the health of all citizens in the state. The aim is to eliminate the various avoidable costs in the healthcare system (Roth, 2010).

Telemedicine

It is an application that allows for the delivery of clinical healthcare services to patients via a two-way video system and other forms of electronic telecommunication (Harris, 2008).

Trauma System

The government of South Carolina, through its established trauma system, ensures that the chances of a person surviving after an accident are tripled. The objective is achieved by offering the much needed care within an hour after an accident (Wolf, 2011).

Emergency Preparedness

Hospitals in South Carolina are properly equipped and staffed to care for people in case of disasters. Considering that the state is located at the coast, the citizens have to deal with threats of hurricanes every year. As such, the healthcare facilities need to be fully equipped to help the people deal with such situations (Schulte, 2009).

Competitive Forces in South Carolina’s Healthcare Delivery System

Competition is apparent in the country’s healthcare system. The situation affects the price, demand, and supply of services. It also influences the consumption of services. In addition, it impacts on the quality of care and the compensation provided to the healthcare personnel.

Incentives

The quality of services provided in healthcare facilities depends on a number of factors. One of them includes the payments made by the various stakeholders. The outcomes of markets in the healthcare sector are determined by these issues. The activities of caregivers are also affected by these factors (Cowen et al., 2007). The table below highlights the incentives offered to providers in the state of South Carolina:

Table 1. Incentives in South Carolina.

Health Facility Payment Method Financial Incentive Set to Provider
Primary healthcare. Input-based line item budget. Increased input factors (bed, staff, and others). Utilization of full budget.
Fee-for-service. Increased services per patient.
Capitation adjusted by age and gender. Treating patients within budget. In a ‘worst case scenario’, sub-standard care is provided, except for high-risk patients.
Refer patients to specialists and other hospitals
Capitation- Fee-for-service mix. Treat within budget and increase number of fee-based services.
Salary. Lower physician’s productivity and level of responsiveness.
Lack of economic incentives to enhance the quality of services.
Pay for Performance. Increase number of services that lead to improved performance indicators.
Hospital payment. Input-based line item budget. Increase number of staff, bed, and other facilities.
Reduce number of admissions.
Keep occupancy rate low, but prolong patients’ average lengths of stay.
Refer high-risk/intensity patients to other hospitals.
Hospital day. Increase number of admissions and prolong patients’ average length of stay (ALOS).
Per Admission. Encourage health facilities to reduce the duration of stay.
Motivate healthcare organizations to cut back on the quantity of care provided to clients.
DRGs. Increase number of admissions.
Shorten ALSO.
Risk-select less severe patient case-mix.
Global budget. Provide care within a budget ceiling.

Salary

The payments made to personnel are another competitive element affecting the provision of healthcare services. Low salaries may help the hospital reduce its expenditure and use the money on other projects. However, such a situation may also lead to an inefficient workforce. As such, providers need to strike a balance between remuneration and funds for development. Attractive salaries offered by one provider may increase the quality of care in the market. The situation may lead to changes in prices and other factors (Hicks, 2004).

Per Diem

It is a fixed amount of money paid on a daily basis to the patient as a result of hospitalization. The amount is provided irrespective of the services offered. It encourages hospitals to reduce the amount of time and care given to individual patients. The allocation of these funds is a major competitive factor (Schulte, 2009).

The Positive and Negative Aspects of Healthcare Provided by HMO Agents

Health Maintenance Organization (HMO) refers to a company made up of a network of physicians. It offers a wide range of medical benefits to the parties. Patients pay a fixed monthly fee on joining the program. In return, they have the freedom to choose their preferred primary caregiver from the available network of physicians. However, some HMOs allow patients to expand their pool of physicians in case of an emergency. Some of them charge a small fee to cater for visits and prescriptions (Roth, 2010).

Advantages of the System

The contracts between the HMO and a given network provide policy holders with a wide array of advantages. First, they are able to regulate their healthcare expenditure. Regulating the activities of healthcare providers makes it hard for caregivers to charge exorbitantly for basic services. HMOs instruct healthcare providers on what they should charge and what should be provided for free. The regulation protects the patients from unscrupulous dealers (Roth, 2010).

As a result of a HMO arrangement, the patient can choose from a variety of networks. To make a wise decision, the client should take into consideration the nature of the contract between a given HMO and a network of medical facilities and physicians (Cowen et al., 2007). With the help of HMO contracts, physicians get a constant flow of patients. If a physician is affiliated to a particular network that is contracted by a HMO company, then they get to provide care to the patients under that arrangement (Porche, 2012).

Hospitals also gain significantly from the policy. Prices are already defined for them. As a result, they are able to plan ahead using these costs and the estimated number of patients in the plan. HMOs are also less cumbersome to the patient compared to other policies. The consumers do not have to fill in laborious claim forms after every visit. On the contrary, they are only required to present a card. The fact that a patient pays a fixed fee per visit (depending on the HMO contract) serves as an incentive. It encourages them to undergo regular check-ups to enhance their wellbeing (Roth, 2010).

Disadvantages of the System

The plan relies on a defined network of medical professionals. As a result, patients have to wait for long to secure an appointment depending on the number of people under their respective network. The situation is different in an indemnity health insurance plan (Porche, 2012). As mentioned earlier, a patient only pays a set amount of money for each visit. The arrangement encourages the client to access periodic medical check-ups. However, these fixed charges can prove expensive for patients who have existing and ongoing medical conditions.

Specialized treatment is a major problem under the HMO plan. To start with, the patient has to secure a referral. There are instances where individuals fail to obtain these recommendations. The HMO network does not cater for the costs incurred by the client in such cases. In other situations, the patient may engage the services of a specialist operating outside the pool covered by the policy. Similarly, the charges incurred in such situations are not paid for by the agency (Hicks, 2004).

The health policy fails to provide adequate cover for emergency situations. Indemnity health insurance plans provide a better cover under such circumstances compared to HMO.

The Economic Incentives Available to Providers in South Carolina

Traditional and contemporary plans compensate caregivers for services delivered without taking into consideration whether the services were beneficial to the patient or not. The economic incentives, in the opinion of this author, are not efficient at all. In fact, this is one of the reasons why the state of South Carolina is trying to reverse the situation. Many employers are following suit (Yih, 2011).

The proliferation of early elective deliveries is attributed to a number of factors. One of them is the American payment system (Porche, 2012). The deliveries lead to the admission of patients to NICUs. The authorities disregard the fact that NICU centers are profit driven. Studies indicate that a reduction in the number of deliveries may improve the quality of services. The situation may reduce NICU admissions by 500000 days, lowering the cost of healthcare in the process (Porche, 2012). However, this may affect the revenues generated by hospitals. Regardless of this, it is apparent that the economic incentive system is flawed and inefficient.

The Financial Risks of the Capitation Payment System

The system refers to the payments made on a per person basis. The expenses cover a defined package of services for a fixed period of time. What this means is that a fixed rate is provided to the caregiver. The payment depends on the number of people catered for within a given period of time. The reimbursement system disregards the nature of the services offered in such facilities (Porche, 2012).

Capitation payments help organizations to control the costs of healthcare. They do this by regulating the use of resources available to them. However, the regulation is checked to ensure that patients are not offered sub-optimal care as a result of under-utilization of healthcare services. To achieve this, managed care organizations assess the rate of resource utilization among physicians.

Conclusion

One can safely infer that capitation places the financial risk of providing healthcare on the physician and the provider. The rates vary from one region to the other. Most policies provide for the inclusion of a risk pool. Practitioners cannot access such funds before the close of the financial year. When the time comes, the money is paid to the provider if the plan recorded the desired financial performance. However, the money is used to cater for deficits if the performance was not as good as expected.

References

Cowen, M., Halasyamani, L., McMurtrie, D., Hoffman, D., Polley, T., & Alexander, J. (2007). Organizational structure for addressing the attributes of the ideal healthcare delivery system. Journal of Healthcare Management, 53(6), 407-418.

Harris, D. (2008). Contemporary issues in healthcare law and ethics. Chicago: Health Administration Press.

Hicks, L. (2004). Economics of health and medical care (6th ed). Burlington, MA: Jones & Bartlett Learning, LLC.

Porche, D. (2012). Health policy. Sudbury, MA: Jones & Bartlett Learning.

Roth, W. (2010). Comprehensive healthcare for the U.S. Boca Raton, FL: CRC Press.

Schulte, M. (2009). Healthcare delivery in the U.S.A. Boca Raton: CRC Press.

Wolf, J. (2011). Organization development in healthcare. Bingley: Emerald Group.

Yih, Y. (2011). Handbook of healthcare delivery systems. Boca Raton, FL: CRC Press.

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