Background, Trends, Issues, and Opportunities In Healthcare Backgrounds, Trends, Issues and Opportunities in Healthcare TR-107833-R1 Final Report, September 1999 EPRI Project Manager J. Bauch EPRI • 3412 Hillview Avenue, Palo Alto, California 94304 • PO Box 10412, Palo Alto, California 94303 USA 800.313.3774 • 650.855.2121 • [email protected] • www.epri.com DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITIES THIS PACKAGE WAS PREPARED BY THE ORGANIZATION(S) NAMED BELOW AS AN ACCOUNT OF WORK SPONSORED OR COSPONSORED BY THE ELECTRIC POWER RESEARCH INSTITUTE, INC. (EPRI). 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ORGANIZATION(S) THAT PREPARED THIS PACKAGE EPRI Healthcare Initiative ORDERING INFORMATION Requests for copies of this package should be directed to the EPRI Distribution Center, 207 Coggins Drive, P.O. Box 23205, Pleasant Hill, CA 94523, (800) 313-3774. Electric Power Research Institute and EPRI are registered service marks of the Electric Power Research Institute, Inc. EPRI. POWERING PROGRESS is a service mark of the Electric Power Research Institute, Inc. Copyright © 1999 Electric Power Research Institute, Inc. All rights reserved. CITATIONS This report was prepared by EPRI Healthcare Initiative Revised from the original report by L. Friedman Principal Investigators for the original report (April 1997) J. Emmanual T. Chester The research for this report was sponsored by EPRI. The report is a corporate document that should be cited in the literature in the following manner: Backgrounds, Trends, Issues and Opportunities in Healthcare, EPRI, Palo Alto, CA, 1999. TR-107833-R1. iii blank page REPORT SUMMARY The healthcare industry is undergoing more changes now than at any time during the past century. Electric utilities must be ready to address these changes by having up-to- date knowledge about the healthcare sector. This report is an attempt to provide that information so that utility representatives are prepared to market services and technologies that meet the current needs of healthcare facilities and organizations. Background The healthcare industry is composed of a variety of public, private, and non-profit organizations. These organizations include healthcare facilities, such as hospitals, nursing homes, outpatient clinics, and doctor offices, and administrative organizations, such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), and independent practice associations (IPAs). In addition, a few allied establishments, such as veterinarian clinics and mortuaries, share issues similar to those of healthcare facilities. Objective This report is intended to provide members of the EPRI Healthcare Initiative with general background information on the healthcare sector, including industry trends, strategic issues, and opportunities to market electrotechnologies and electric utility services. Approach This report is divided into seven chapters. Each chapter covers a specific area of concern for electric utility representatives. Chapters 1 and 2 of this document offer a general overview of the healthcare industry, including how the healthcare facilities market for electricity is affected by key players and forces. Chapter 3 is more focused on healthcare facilities—hospitals, nursing homes, and clinics. This section will examine their operation and structure as well as look at the organizations that own them. Chapter 4 concentrates on the regulatory agencies and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) standards for healthcare facilities. Chapter 5 looks at overall energy use in the healthcare sector. v Chapter 6 addresses selected technical issues for healthcare facilities and potential electrotechnology solutions. Finally, Chapter 7 offers strategies for marketing electricity services and technologies to healthcare providers. Results The report summarizes the major trends and issues faced by the healthcare industry today and forecasts other issues that may become important in the future. EPRI Perspective The EPRI Healthcare Initiative (HCI) is a collaborative effort with member utilities. Its purpose is to assist the healthcare industry to meet the ever-changing demands of the industry through education and the use of electrotechnology solutions that will reduce risk and liability, meet regulatory compliance demands, and ultimately provide the highest level of quality patient care. Key Words Healthcare Reform Hospitals Nursing Homes Healthcare Funding Healthcare Facilities Healthcare Statistics Regulatory Compliance Electricity Use vi CONTENTS 1 THE HEALTHCARE INDUSTRY SECTOR..................................................................... 1-1 Introduction ......................................................................................................................... 1-1 Statistical Information on the Industry.................................................................................. 1-2 2 THE U.S. HEALTHCARE SYSTEM ................................................................................ 2-1 The U.S. Healthcare System............................................................................................... 2-1 Healthcare and the National Economy ............................................................................ 2-1 Healthcare Funding ......................................................................................................... 2-2 Major Players .................................................................................................................. 2-8 Background ................................................................................................................. 2-9 Payers......................................................................................................................... 2-9 Providers ................................................................................................................... 2-11 The Role of Government ........................................................................................... 2-12 Catalysts for Change: Healthcare Reform and the Market............................................. 2-13 3 HEALTHCARE FACILITIES ........................................................................................... 3-1 Hospitals ............................................................................................................................. 3-1 Classification of Hospitals................................................................................................ 3-1 Type ............................................................................................................................3-2 Control.........................................................................................................................3-2 Size and Length of Stay .............................................................................................. 3-2 Private Hospitals ......................................................................................................... 3-4 For-Profit ................................................................................................................. 3-4 Catholic ................................................................................................................... 3-5 Secular and Other Religious Not-For-Profit.............................................................. 3-6 Public Hospitals........................................................................................................... 3-7 Federal Government................................................................................................ 3-7 vii State and Local Government ................................................................................... 3-7 Utilization and Trends...................................................................................................... 3-7 Utilization.....................................................................................................................3-8 For-Profit Systems....................................................................................................... 3-9 Other Networks ........................................................................................................... 3-9 Other Trends ............................................................................................................. 3-10 Services Offered............................................................................................................ 3-10 Organizational Structure...............................................................................................