Basic Notions of Health Care Management

Categories: HealthHealth Care
  • Access to care may be defined as the timely use of needed, affordable, convenient, acceptable, and effective personal health services.
  • Accessibility refers to the fit between the location of a provider and the location of patients.

Administrative costs are costs associated with the management of the financing, insurance, delivery, and payment functions. These costs include management of the enrollment process, setting up contracts with providers, claims processing, utilization monitoring, denials and appeals, and marketing and promotional expenses.

An all-payer system requires the participation of all major health care payers in a nationwide cost-containment program.

APG stands for ambulatory patient groups, which are based on a patient classification and payment system designed to identify and explain the amount and type of resources used in an ambulatory visit. Patients in an APG have similar clinical characteristics, similar resource use, and similar cost.

Clinical practice guidelines (also called “medical practice guidelines”) are explicit descriptions representing preferred clinical processes. They are standardized guidelines in the form of scientifically established protocols designed to guide physicians’ clinical decisions.

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Competition refers to rivalry among sellers for customers. In health care delivery, it means that providers of health care services would try to attract patients who have the ability to choose from several different providers. Although competition more commonly refers to price competition, it may also be based on technical quality, amenities, access, or other factors.

  • Cost-efficiency evaluates the relationship between increasing medical expenditures/risks and improvements in health levels. A service is cost-efficient when the benefit received is greater than the cost incurred in providing the service or the potential health risks from additional services.

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  • Cost shifting refers to the ability of providers to make up for lost revenues in one area by increasing utilization or charging higher prices in other areas.
  • Critical pathways are case specific plans of medical care that identify along a time line w ho will provide what interventions and what the expected outcomes would be.
  • Demand-side incentives refer to the cost-sharing mechanisms that place a larger cost burden on consumers, thus encouraging consumers to be more cost conscious in selecting the insurance plan that best serves their needs and more judicious in their utilization.
  • Defensive medicine is the practice of medicine that involves prescribing tests and services that are not medically justified but are likely to protect physicians against possible malpractice lawsuits.
  • Fraud involves a knowing disregard for the truth. It generally occurs when billing claims or cost reports are intentionally falsified. It includes pro vision of ser vices that are not medically necessary and billing for ser vices that were not provided.
  • Outcome is the end result obtained from utilizing the structure and processes of health care delivery. Outcomes are often viewed as the bottom-line measure of the effectiveness of the health care delivery system.
  • Overutilization occurs when the costs or risks of treatment outweigh the benefits and yet additional care is delivered.

The term peer review refers to the general process of medical review of utilization and quality w hen it is carried out directly or under the supervision of physicians. PRO stands for peer review organization. PROs are state-wide private organizations composed of practicing physicians and other health care professionals who are paid by the federal government to review the care provided to Medicare beneficiaries to determine whether care is reasonable, necessary, and provided in the most appropriate setting.

  • Quality has been defined as the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.
  • Quality assessment refers to the measurement of quality against an established standard.
  • Quality assurance is a step beyond quality assessment and is synonymous with quality improvement. It is the process of institutionalizing quality through ongoing assessment and using the results of assessment for continuous quality improvement (CQI).

Reliability reflects the extent to which the same results occur from repeated applications of a measure.

Risk management consists of proactive efforts to prevent adverse events related to clinical care and facilities operations and is especially focused on avoiding medical malpractice.

Small area variations refer to the unexplained variations in the treatment patterns for similar patients and health conditions in different parts of the country.

Supply-side regulation typically refers to antitrust laws in the U.S., which prohibit business practices that stifle competition among providers, such as price fixing, price discrimination, exclusive contracting arrangements, and mergers deemed anticompetitive by the Department of Justice.

A top-down control over total health expenditures establishes budgets for entire sectors of the health care delivery system. Funds are distributed to providers in accordance with these global budgets. Thus, total spending remains within pre-established budget limits. The downside to this approach is that, under fixed budgets, providers are not as responsive to patient needs, and the system provides little incentive to be efficient in the delivery of services. Once budgets are expended, providers are forced to cut back services, particularly for illnesses that are not life-threatening or do not represent an emergency.

  • TQM stands for total quality management and is synonymous with continuous quality improvement (CQI). It is an integrative management concept of continuously improving the quality of delivered goods and services through the participation of all levels and functions of the organization to meet the needs and expectations of the customer.
  • Underutilization occurs when the benefits of an intervention outweigh the risks or costs, yet the intervention is not used.
  • The validity of a scale is the extent to which it actually assesses what it purports to measure.


  1. What are the two main objectives of this chapter?
  2. What are the three major cornerstones of health care delivery?
  3. What is meant by the term “health care costs”? Describe the three different meanings of the term ‘cost.’
  4. Why should the United States control the rising costs of health care?
  5. Name and describe the 9 major factors contributing to the high costs of health care.
  6. What is a third-party payment/reimbursement?
  7. Explain how, under imperfect market conditions, both prices and quantity of health care are higher than they would be in a highly competitive market.
  8. Discuss price controls and their effectiveness in controlling health care expenditures.
  9. Discuss the role of PROs (peer review organizations) in cost containment.
  10. What are the two competition-based cost-containment strategies?
  11. What does access to care mean?
  12. What are the implications of access for health and healthcare delivery?
  13. What is the role of enabling and predisposing factors in access to care?
  14. What are some of the implications of the definition of quality proposed by the Institute of Medicine? In what way is the definition incomplete?
  15. Discuss the dimensions of quality from the micro- and macro-perspectives.
  16. Discuss the main developments in process improvement that have occurred in recent years.

Cite this page

Basic Notions of Health Care Management. (2016, Apr 09). Retrieved from

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