Hospitals Health Systems

HOSPITALS AND HEALTH SYSTEMS What They Are and How They Work

CHARLES R. MCCONNELL, MBA, CM Human Resource and Editorial Consultant, Ontario, New York World Headquarters Jones & Bartlett Learning 5 Wall Street Burlington, MA 01803 978-443-5000 [email protected] www.jblearning.com Jones & Bartlett Learning books and products are available through most bookstores and online booksellers. To contact Jones & Bartlett Learning directly, call 800-832-0034, fax 978-443-8000, or visit our website, www .jblearning.com.

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Preface...... vii Hill-Burton Arrives Upon the Scene. . . . . 18 About the Author ...... ix A Cornerstone of Society...... 19 Classification ...... 19 Contributors ...... xi Trends in General Acute-Care Community Hospitals...... 20 Chapter 1 Hospitals: Origins A New Era of Medicine...... 22 and Growth from The Healthcare Landscape Early Times to 1900. . . 1 Forever Altered...... 23 Charles R. McConnell Brief Chapter Summary...... 24 The Earliest Years of Hospitals...... 1 Questions for Review and Discussion. . . . 24 Early American Hospitals...... 4 References ...... 25 Brief Chapter Summary...... 8 Chapter 4 Medicare and Questions for Review and Discussion. . . . 9 Medicaid: Major References ...... 9 Game-Changers. . . . 27 Chapter 2 Becoming the Center Danielle N. Atkins, Kendall Cortelyou-Ward, of the “Healthcare Reid M. Oetjen, and Timothy Rotarius System”: Introduction—Medicare and 1900–1945...... 11 Medicaid ...... 27 By the Numbers...... 29 Charles R. McConnell Initial Impacts...... 34 Entering the 20th Century...... 11 Major Concerns About Cost Control . . . . . 35 Interest in Health Coverage Emerges. . . 13 The Role of the Affordable Care Act. . . . . 38 The “Modern” Hospital Takes Its Place. . . 13 Looking Ahead...... 40 A Highly Informal “System”...... 15 Brief Chapter Summary...... 40 Brief Chapter Summary...... 15 Questions for Review and Discussion. . . . 41 Questions for Review and Discussion. . . . 16 References ...... 41 References ...... 16 Chapter 5 Enter Managed Care . . . 45 Chapter 3 The American Robert R. Kulesher Hospital from 1945 Beginnings of Managed Care: to the Present. . . . . 17 The Pre-Paid Health Plans...... 45 Charles R. McConnell Managed Care as Agent of Change. . . . . 50 Era of Extensive Change...... 17 Brief Chapter Summary...... 51 Post-World War II...... 18 Questions for Review and Discussion. . . . 52

iii iv Contents

References ...... 52 The Macro View: Mergers, Affiliations, Additional Resources...... 52 and Other Organizational Combinations ...... 102 Chapter 6 Health Benefits The Micro View: Adjusting to the Coverage and Types Blended Organization...... 108 Conclusion: When the Dust of Health Plans . . . . 53 Settles...... 113 Peter R. Kongstvedt Brief Chapter Summary— Introduction...... 54 “Is Bigger Better?”...... 114 Health Benefits Coverage...... 55 Questions for Review and Discussion...... 114 Sources of Benefits Coverage and Risk. . . . 60 References ...... 115 Types of Payer Organizations...... 66 Appendix A: Healthcare Provider-Owned or Sponsored Partnership Continuum...... 116 Health Plans...... 77 Brief Chapter Summary...... 80 Chapter 9 The Health System Questions for Review and Discussion. . . . 81 Emerges...... 119 Note...... 81 Meghan Gabriel, Kendall Cortelyou-Ward, Chapter 7 Reimbursement: Timothy Rotarius, and Reid M. Oetjen Following the Introduction...... 119 Money...... 83 History of Health Systems in the United States...... 120 James Gillespie, Kendall Cortelyou-Ward, Reid Oetjen, and Timothy Rotarius Rationale for Hospital Mergers...... 120 Hospital Classifications...... 121 Following the Money...... 83 Hospital Ownership ...... 123 Introduction to a Changing Landscape: Volume to Value...... 84 The Changing Landscape of Hospital Organizations...... 124 A History of Hospital Care Reimbursement Models ...... 86 Implications for the Future...... 129 Federal Legislation Affecting Conclusion...... 129 Reimbursements...... 92 Brief Chapter Summary...... 129 The Patient Protection and Questions for Review and Affordable Care Act (PPACA)...... 93 Discussion...... 130 The Future of the PPACA...... 96 References ...... 131 Conclusion...... 97 Brief Chapter Summary...... 97 Chapter 10 Mergers, Questions for Review and Discussion. . . . 98 Acquisitions, and References ...... 98 the Government. . . 135 Nancy J. Niles Chapter 8 Is Bigger Better? Hospitals and Introduction...... 135 “Merger Mania”. . . . 101 Collaborative Agreements...... 136 Legal and Regulatory Oversight Cristian H. Lieneck of Mergers and Acquisitions. . . . . 139 Introduction...... 102 Supply Chain Management...... 140 Contents v

Impact of Affordable Care Act on Chapter 13 Staffing Shortages: Hospital Merger Activity ...... 141 Then, Now, and The Role of HR in a Merger– Acquisition Activity...... 141 Continuing. . . . . 177 Conclusion ...... 142 Susan Young and Laura Reichhardt Brief Chapter Summary...... 143 Health Industry Changes ...... 177 Questions for Review Nursing...... 178 and Discussion...... 144 Physical Therapists...... 185 References ...... 145 Occupational Therapist...... 186 Additional Resources...... 146 Respiratory Therapists...... 187 Pharmacist...... 187 Chapter 11 Structure, Allied Health...... 188 Organization, and Brief Chapter Summary...... 189 Portals to Care. . . . 147 Questions for Review and Discussion. . . . 189 Claudia Neumann and Ashish Chandra References ...... 190 Common Organizational Structure Concepts...... 147 Chapter 14 The Physical Hospital Governance...... 151 Facility ...... 193 Doorways into the Acute Camonia R. Graham-Tutt and Lisa K. Spencer Care Hospital...... 154 Introduction...... 193 Brief Chapter Summary...... 155 Laws, Codes, and Standards...... 194 Questions for Review and Discussion. . . . 156 Plant- and Environmental-Related References ...... 156 Departments and Services in Hospitals...... 195 Chapter 12 Direct Patient Plant Engineering and Maintenance. . . . 197 Care: The Hospital Biomedical Engineering Team...... 157 (Medical Equipment)...... 198 Charles R. McConnell Safety and Security...... 199 Physical Needs of Hospitals Introduction...... 157 in the 21st Century...... 199 The Medical Staff...... 158 Brief Chapter Summary...... 200 Physician Extenders...... 159 Questions for Review and Discussion. . . . 201 Nursing Services...... 159 References ...... 201 The Clinical Laboratory and the Pathologist...... 168 Chapter 15 Business Activities Diagnostic Imaging and Therapeutic Radiology Departments...... 170 and the Business Physical Therapy...... 172 of Medicine . . . . . 203 Respiratory Therapy ...... 173 Randall Garcia and Ashish Chandra Pharmacy ...... 174 The Business of Medicine...... 203 Brief Chapter Summary...... 176 In the Matter of Budgeting Questions for Review and and Budgets...... 205 Discussion...... 176 Challenges in Health Care ...... 206 vi Contents

Hospital Information Systems...... 207 System Growth and Increased Healthcare Information Management. . .. 207 Vulnerability...... 217 Electronic Medical Records Versus The Potential for Electronic Health Records...... 207 Communications Problems...... 218 Health Insurance Portability The Supervisor’s Position ...... 218 and Accountability Act...... 209 The Organizing Approach ...... 219 HIPAA Breach...... 210 Unequal Positions...... 220 Brief Chapter Summary...... 210 A Manager’s Role...... 221 Questions for Review Shifting Ground Rules ...... 223 and Discussion...... 210 The Bargaining Election...... 224 References ...... 211 If the Union Wins...... 224 Decertification...... 225 Chapter 16 Unions in Brief Chapter Summary...... 226 Healthcare Questions for Review and Discussion. . . . 226 Organizations . . . . 213 References ...... 228 Charles R. McConnell Note...... 228 Can Unionization Be Avoided?...... 213 Glossary...... 229 Health Care: More and More a Special Case...... 215 Index...... 235 © sudok1/Getty Images Preface

pon initial consideration, this book, when proposed, was envisioned as becoming a new edition of Hospitals: What They Are and How They Work. This fundamental explanation of the composition and operation of the insti- Utution long regarded as occupying the center of what we had seen as our healthcare “system” was intended as a comprehensive introduction to the hospital primarily for persons interested in pursuing careers in health care. Hospitals: What They Are and How They Work has appeared in four editions to date, the first two by original author I. Donald Snook and the third and fourth editions edited by Donald J. Griffin with sections provided by a team of contributors. However, in consideration of all that health care has experienced in recent decades, it appeared that a straightforward new edition of Hospitals: What They Are and How They Work could not adequately address the present-day reality that more and more the individual hospital does not stand alone in providing care for the population. Certainly, there remain a significant number of free-standing hospitals, but this number is diminishing as more and more individual hospitals are brought together in healthcare systems. In recent years, there have even been hospitals and relatively new “systems” combining to comprise even larger systems. This present volume, Hospitals and Health Systems: What They Are and How They Work recog- nizes the reality of organizing for the delivery of health care today; in most instances, one must think beyond the boundaries of the individual institution and accept the fact that patient care may today be delivered in settings that are considerably differ- ent from the traditional hospital. Thus Hospitals and Health Systems: What They Are and How They Work addresses so much change that simply designating it as a fifth edition of Hospitals: What They Are and How They Work would be misleading. However, the basic intent of this volume remains as that of its predecessor volumes: to provide individuals who may be considering employment in health care a solid grounding in the arena in which they may find themselves pursuing careers. Yet regardless of the label attached to a specific entity involved in providing health care—hospital, healthcare system, clinic, group practice, urgent care center, or whatever—the quest to enhance the quality of patient care has forever been the guiding principle for healthcare professionals since the first hospitals opened their doors. With the increasing complexity of systems of healthcare delivery, and the seemingly growing presence of economic and regulatory factors, healthcare workers are continuously expected to do more with less. But regardless of how one refers to the individual arena in which some form of care is delivered, that care is provided by people: healthcare professionals, para- professionals, and vital support staff—together the folks who collaborate in the provision of quality patient care. Whether individual hospital, clinic, free-standing

vii viii Preface surgical center, group practice, or other care delivery alternative, those who work in healthcare must conscientiously work together in delivering quality healthcare services. This text makes a determined effort to simplify some of the growing complexity of the hospital or health system; however, there are some elements that even when viewed “simply,” such as reimbursement for care and managed care and its variations—require careful study. The healthcare environment is volatile in a number of dimensions. With the passage of the Patient Protection and Affordable Acre Act (PPACA) on March 23, 2010, the country’s healthcare system underwent a dramatic shift to expand access to care for millions of otherwise uninsured Americans, while simultaneously attempt- ing to reduce the cost of health care. Yet healthcare costs continue to climb, and what now remains of the PPACA makes it clear that health care in the United States is highly politicized to the extent that the two major political parties are unable to agree on a workable approach to the problem. The first three chapters of Hospitals and Health Systems: What They Are and How They Work provide a condensed history of hospitals overall and United States hospitals in particular. These chapters take us up to the mid-1960s and the advent of Medicare and Medicaid, which truly were, as the Chapter 4 title claims, major game changers for health care in this country. From there, the advent of managed care and the numerous and sometimes complex means of providing care are addressed, followed by the sometimes equally complex means of paying for care. There follows examination of mergers and affiliations and other combinations leading to a focus on the creation and operation of health systems. Chapters 12–16 actually provide an abridgement and update most of the contents of the fourth edition of Hospitals: What They Are and How They Work. Thus a new book rather than a fifth edition of an existing volume, given that most of what is contained in the pages that follow is new. Hospitals and Health Systems: What They Are and How They Work is a determined effort to present a current picture of what is probably the most volatile and changeable industry in the country. Yet the evolution of health care in the United States will continue unabated as further advances and organizational changes accrue; this we can count on.

Charles R. McConnell is an independent healthcare management and human resources consultant and freelance writer specializing in business, management, and human resource topics. For 11 years, he was active as a management engineering consultant with the Management and Planning Services (MAPS) division of the Hospital Association of New York State (HANYS) and later spent 18 years as a hospital human resources manager. As an author, coauthor, and anthology editor, he has published a number of books and has contributed numerous articles to various publications. He is in his 38th year as editor of the quarterly academic and professional journal, The Health Care Manager. Mr. McConnell received an MBA and a BS in Engineering from the State University of New York at Buffalo.

Ashish Chandra, MMS, MBA, PhD, Meghan Gabriel, PhD, University of University of Houston-Clear Lake, Central Florida, Orlando, FL. Houston, TX. Nancy J. Niles, MS, MPH, MBA, PhD, Camonia R. Graham-Tutt, PhD, Rollins College, Winter Park, FL. CHES, University of Hawaii West Peter R. Kongstvedt, MD, FACP, Oahu, Kapolei, HI; and Lisa K. American College of Physicians, Spencer, DHA, MPH, University of AcademyHealth, George Mason Hawaii West Oahu, Kapolei, HI. University, Fairfax, VA. Claudia Neumann, University of Randall Garcia, BS, MHA/MBA, CG Applied Sciences for Health Care Consultants, Houston, TX. Professions (HSG), Germany. Reid M. Oetjen, PhD, University of Cristian H. Lieneck, PhD, FACMPE, Central Florida, Orlando, FL. FACHE, FAHM, CPHIMS, Robert R. Kulesher, PhD, MBA, Associate Professor, School of Professor, Health Services and Health Administration, Texas State Information Management, College University, San Marcos, TX. of Allied Health Sciences, East Danielle N. Atkins, MPA, PhD, Carolina University, Greenville, NC. College of Health and Public Affairs, Susan Young, DHA, MSA, RN, University of Central Florida, Assistant Professor of Health Care Orlando, FL. Administration, University of James Gillespie, PhD, JD, President, Hawaii West Oahu, Kapolei, HI. Center for Healthcare Innovation Timothy Rotarius, MBA, PhD, in Chicago, IL. Department of Health Management Kendall Cortelyou-Ward, PhD, and Informatics, University of Department of Health Management Central Florida, Orlando, FL. and Informatics, University of Central Florida, Orlando, FL. Laura Reichhardt, MS, APRN, NP-C, Hawaii State Center for Nursing, Honolulu, HI.