(Part 1 of a 2-part series)
Whether you get your news online or in print, how many articles have you read recently that are enthusiastic about the economy or, for our more focused purposes, the health care industry? If you’re straining to come up with one positive story but can easily quote dozens of negative stories, you are not alone. Whether liberal or conservative, man or woman, old or young, Americans almost universally agree that the US health system is broken and in need of a total overhaul.

Before we can look at what opportunities and challenges face the respiratory therapy manager early in the 21st century, let us take a quick quiz about the US health care system.

Question: Where does the United States rank in terms of overall health system performance?

Answer: According to the World Health Organization (WHO), the United States ranks 37th in overall health system performance.1 It seems hard to believe, but according to the health care performance metrics used by WHO, the United States is ranked between Costa Rica and Slovenia. In addition to these dire statistics, when it comes to national spending on health care, the United States spends 22% more than second-ranked Luxembourg, 49% more than third-ranked Switzerland, and 2.4 times the average of the other Organisation for Economic Co-operation and Development (OECD) countries on health care per capita.2 What is the disconnect? Why are we spending so much on health care and, according to these statistics, getting so little in return? The answer is that it is not as simple as the statisticians and their data lead one to believe and some or many of our politicians think. There is far more to this complex health care delivery system, and we will analyze it in this article.

Having gotten your attention on this one, let us first take a look at health care trends, some of which are in play and others that are brewing as part of the proposed total health care makeover. The 13 health care trends comprise issues that deserve a review before we delve into how this might play out with respect to the US health care system in general and for respiratory therapy managers in particular.

Charity Care/Cost Shifting to Universal Access

The traditional city hospitals were founded many years ago to provide care for those who could not afford private care. That initial model has changed dramatically in the intervening years to become the current model of hospitals providing care for virtually everyone. Over the years, particularly with the advent of federal- and state-funded health care, we have witnessed a continuing trend of increasing government support of individuals, with hospitals picking up (and being reimbursed for) this “charity care.” Regardless of the party in power in Washington, we are hearing an almost universal outcry to abandon the system in place for the last century and replace it with a universal access system.

No Cost Controls to Mandated/Managed Care

Judging from the mean age of the late 40s for respiratory therapists, most of us began our careers in a cost-plus health care system. The goals of the respiratory therapy managers in those days were to do all that was asked and receive reimbursement for their valiant efforts. The resultant push-back from the government and commercial insurance was to install cost controls through various means. Space does not permit an exhaustive review of the various methodologies, but suffice it to say that the efforts to manage care by managing cost were not successful, as is evidenced by the nearly total demise of health maintenance organization (HMO) plans.

With the advent of newer models of reimbursement, particularly prospective reimbursement, the tide has turned from the cost-control model to one of managing the care of each patient. The evolution of case management to care management is still in its infancy, but time will tell whether this refocusing of managing the appropriate care in the proper setting delivered by the appropriate provider will truly manage care and rein in the burgeoning cost of health care at the same time.

Fee for Service to Global Fees/Capitation

As noted, we have witnessed a tidal wave of change from traditional fee for service to more innovative models that put more risk on the side of the providers, including hospitals, physicians, and other providers. Paying on a “per member per month” (PMPM) basis should be an incentive for the provider to provide not only the proper care but to do so in a cost-effective manner. As with the traditional HMO model, the jury is still out on whether this “corporatization” of health care will yield high-quality care in an affordable manner.

Generate Revenue to Control Costs

Hospitals and other providers historically have utilized revenue generation in various endeavors as a means to offset those services that were not reimbursed or were reimbursed at less than their cost to provide the care. Classically, hospitals have increased charges to commercial insurers to offset the losses secondary to providing care for Medicare and Medicaid patients. This cost shifting has not escaped the critical eyes of the commercial payors. What can hospitals and other providers do if their bottom line depends on this cost shifting? The simple answer is to reduce their operating costs. In the late 1980s and early 1990s, hospitals were assaulted by various consultants desiring to “right size” hospital operations. While there were some successes, most of the institutions that followed this advice saw no significant or sustainable impact on their bottom line and, in many cases, have totally abandoned these tactics because they adversely affected quality and/or staff relations. We are seeing a resurgence of cost control endeavors, primarily secondary to the need for hospitals to survive in the economic climate of the new millennium.

Inpatient to Ambulatory

Does anyone remember the days when patients undergoing cataract surgery spent a week or more in the hospital? The vast majority of the short bread-and-butter procedures that were done on an inpatient basis are now done as outpatient routines; and hospitals that relied on these short procedures to support their bottom line have lost some or all of this valuable source of revenue to physicians and other providers who have moved these services from the acute care hospital into an outpatient facility, either independently or as a joint venture with the hospital.

Fragmented, Unrelated Providers and Care to Provider Network and Care Continuum

While the electronic medical record (EMR) promises to be the glue that binds health information across the spectrum of providers, this still lies around the corner for many institutions because of financial reasons. Second, for those hospitals implementing EMR, the challenge will be to create seamless information transfer and access to their physician colleagues, independent imaging centers, specialty physicians, and other providers.

Filling Beds to Keeping People Out of the Hospital

Many respiratory therapy managers can remember the day when daily census was the chief indicator of hospital activity and profitability. A census of 90% was much better than a census of 80%—both in terms of patient care need for RTs and as the bottom line. With many hospitals today at 60% or lower daily patient census, a figure that many experts indicate is the break-even point for hospitals to remain viable, it is clear that the system needs to focus on wellness, prevention, and less acute forms of care if we are to make the transition from a “sickness model” to a “wellness model.” The issue that looms large today is that virtually our entire reimbursement system is predicated on the sickness model, and changing this is not unlike quickly changing the course of a cruise ship to avoid the proverbial iceberg. A recently published article3 in the New England Journal of Medicine may bring renewed attention to the issue of “frequent fliers.” In short, the investigators found that nearly 20% of the Medicare beneficiaries who had been discharged from a hospital were rehospitalized within 30 days and 34% were rehospitalized within 90 days.

Treating Illness to Promoting Wellness

Most experts agree that we are not going to be able to afford to continue to provide the highest level of patient care if we stay on our present course of reimbursing primarily for treatment of disease and illness. These experts clearly indicate that the way out of the health care financial quagmire is to recognize the financial value of switching to wellness and disease prevention, which may cost more in the short term, but will yield a far more robust health care system in the long term.

Quality Defined by Provider to Quality Defined by Customer

Like many, if not most, businesses, hospitals and other providers of health care services have historically selected the quality indicators, measured performance, and communicated the performance internally. It is clear that performance has improved throughout the industry, as is witnessed by decreased medication errors, reduction in wrong site surgeries, and reduction in hospital-acquired infections. As providers, we communicated this information, with varying degrees of understandability. Over the past few years, however, we have witnessed a growing interest and sense of involvement by our customers—whether they are insurers, employers, patients, or our communities. The 100,000 Lives Campaign,4 which is well known to those in health care, was based on the premise that, while hospitals have made improvements, we need to be held accountable to a far higher level. This program posited that 100,000 lives could have been saved, and indeed should be saved, if we all rendered our care at a significantly higher quality performance level. Akin to the green movement focusing on environmental awareness, we are witnessing a growing interest in the quality of our care and are being tasked to deliver this expected level of quality and to communicate in a regular and understandable manner our performance. As stated earlier, the economic conditions are only intensifying these growing demands and we should expect that the higher quality expectations will be accompanied by a parallel goal of providing our services in a more cost-effective manner.

Meeting Needs of Hospital to Meeting Needs of Community

The age of the hospital existing to meet its internal needs without respect to assessing the needs of the community is only a memory for not-for-profit community-based hospitals. Not that community-based hospitals did not consciously think about their community’s needs, but many tended to focus first on internal operations and then consider what the community needed. Many, if not virtually all, community hospitals have changed their focus over the last decade or so. While some of this broadening of viewpoint has been financially motivated, I believe that this change has more to do with the leadership’s refocusing on the core values of health care and the reasons that our institutions were founded. While this may sound a bit too self-congratulatory, I truly believe that the movement we have witnessed in most hospitals will grow and will reestablish the stature of health care providers overall.

Quality Assurance to Continuous Improvement

Depending on the sources, quality can be defined in myriad ways. What I am suggesting in this article is a nearly universal movement from quality assurance to quality assessment to continuous improvement. While we must continue to perform quality assurance checks on the medical equipment that we utilize to diagnose and treat, what continuous quality improvement (CQI) infers is an impassioned and fervent focus on never being satisfied with the current level of performance, whether this is defined as customer service, quality outcomes, or financial performance. Manufacturing and other non-health care businesses are decades ahead of us in many ways. Readers who have not heard of the Toyota Production System,5 lean manufacturing,6 or Six-Sigma improvement systems7 have been asleep at the wheel. This migration in focus encompasses both incremental improvements (eg, reducing length of stay by 0.1 days per quarter for a particular diagnosis) as well as holistic and revolutionary increases in performance via innovation and creativity.

Functional Structure to Patient-Focused Organization

I had the opportunity to hear Patrick Dunne, RRT, FAARC, former AARC president, speak at the AARC’s International Congress in Anaheim, Calif, last December. What Patrick suggested to the audience is that the days of the “departmental silos” are over. If we are focused on improving quality, service, and cost-effective care to our patients by focusing only on the respiratory therapy department, we are seriously behind the times. Optimization of the parts does not mandate optimization of the whole and, in many cases, may result in suboptimal care for our patients. We are witnessing a growing trend of hospitals’ organizational charts being recast along the lines of the diseases and needs of the patients rather than the structural integrity of the departments. What is most important to our patients is the coordination of the care, diagnostic studies, meals, treatments, and exercise and not the proverbial cost center staff that provide the services. The value of rapid response teams (for which I hope all hospitals will abandon the RRT acronym to describe them) is well documented throughout the nation by having a nurse and RT respond proactively with the intent of reducing a full-blown code blue. This is not merely a nurse and a therapist responding to a call, but rather a coordinated team that is focused on the needs of the patient.

Employer Provides Health Insurance to None/Employee Stipend

Most of us have had the luxury of working for a hospital or other health care provider that provided a significant subsidy for our health insurance. As part of a class that I teach at the Harrisburg Area Community College (www.hacc.edu), I ask the students what their health insurance premiums are. For those who are paying their own premiums, the answers are quick and accurate. Those who do not pay the freight typically guess about 20% to 25% of the average monthly premium. For even those “seasoned” among us, many do not know what the value of this benefit is for ourselves and/or our families. Everyone in the human resources and financial services departments know the tab, however. Likewise, the business community knows to the penny what health care insurance costs them as well as what it means to the ticket price of their product. I recently heard a human resource professional state that not only have health insurance premiums more than doubled in the last decade, but this dramatic increase is several times the increase in wages. In addition to the cost of the insurance itself, the secondary cost is the administration of the program (eg, benefits coordination, co-payments, deductibles, etc) and the inherent incentive within most programs that provide a wealth of health care benefits with minimal investment on the part of the employee. Of the myriad newer forms of health care benefits programs, more businesses either have dropped their health insurance benefits entirely or have provided a stipend to each employee, with which the employee is free to use however they desire. While this trend has been steadily increasing over the past decade or so, we are seeing a escalation in these types of programs with the continuance of the current economic environment.


In this article we have examined some global trends in health care; next month we will look at specific forces in our health care system and examine what opportunities exist for respiratory therapy managers and respiratory therapists.

Garry Kauffman, RRT, FAARC, MPA, FACHE, is director, strategic implementation, Lancaster General Hospital, Lancaster, Pa. For further information, contact [email protected].


  1. World Health Organization. The World Health Report 2000—Health systems: improving performance. Available at: www.who.int/whr/2000/en. Accessed May 5, 2009.
  2. Organisation for Economic Co-operation and Development. OECD health data 2006: Statistics and indicators for 30 countries (15th edition). Paris: OECD Publishing; 2006.
  3. Jencks SF, Williams MV, Coleman EA. Rehospitalizations among patients in the Medicare fee-for-service program. N Engl J Med. 2009;360:1418-28.
  4. MEDITECH Hospitals involved in Campaign to Save 100,000 Lives. Available at: www.meditech.com/industrynews/pages/0401MThospitals100lives.htm. Accessed May 6, 2009.
  5. Toyota Production System. Available at: [removed]en.wikipedia.org/widi/Toyota_Production_System[/removed]. Accessed May 5, 2009.
  6. Lean manufacturing. Available at: [removed]en.wikipedia.org/wiki/Lean_manufacturing[/removed]. Accessed May 5, 2009.
  7. Six Sigma—What is Six Sigma? Available at: www.isixsigma.com/sixsigma/six_sigma.asp. Accessed May 6, 2009.