Models of Healthcare Delivery
A NextGen Tutorials in Medicine Article
Introduction
There is no perfect healthcare delivery system for a country. Some models seem to work better than others but each has its own advantages and drawbacks. Broadly, healthcare delivery models could be classified under tiered system or diffuse system.
The tiered system is made up of regionalized systems of healthcare delivery divided into Primary care, Secondary care and Tertiary care. Such a pyramidal system is more common in UK and in HMOs (Health Maintenance Organizations) in US.
- Primary care
- Refers to the activities concerned with prevention and treatment of common medical problems in outpatient setting. Care is delivered by primary care practitioners (PCPs) in the US or general practitioners (GPs) in the UK. A PCP could be responsible for 2000-3000 patients and is responsible for managing patient's overall care.
- Secondary care
- Concerns with treatment of disorders requiring specialist opinion or hospitalization. The patients are usually referred from Primary care and the physicians are affiliated to a hospital or a group practice.
- Tertiary care
- Provides medical and/or surgical management of complex disorders in an inpatient setting and usually requiring collaboration between multiple specialties. These are super-specialized standalone hospitals or specialty departments in a multi-specialty hospital.
In the diffuse system there is no such division. In this system patients can directly approach specialists without consulting GPs or PCPs first. The boundaries between GPs, internists, family practitioners and pediatricians are blurred. Many internal medicine specialists provide primary care, many family practitioners provide secondary care. However, some centers have designated "hospitalists" for inpatient care.
The diffuse system is the relatively more common in United States. It is a diamond type of system with most hospitals providing a mix of multi-specialty secondary and tertiary services. The stress is on getting the latest technology and advanced clinical care closer to home.
Models of healthcare delivery
In the late 19th and early 20th centuries, contract doctors existed in many parts of United States. Large organizations and philanthropic societies employed physicians under salaries or capitated (fixed pre-payment) contracts. In a capitated system, providers are paid a fixed amount per patient per month regardless of the quantum of services utilized. This slowly lost popularity due to increasing competition for contracts and price wars.
In the later half of 20th century, fee-for-service was the dominant model of healthcare delivery. The physicians were affiliated with a hospital as staff members and had admitting privileges. They wielded considerable power since they could chose to admit to the hospital of their choice. They were not employed by the hospital and the specialists were dependant on a referral network of physicians affiliated with the same hospital or a different group.
In a group practice, a number of physicians, usually from multiple specialties, come together to setup a group practice. Some of the senior physicians have ownership stake in the practice. Most of other physicians are compensated through a mix of salary and bonuses. The practice bills the insurance plans or the patients on a fee-for-service basis. The group practices try to coordinate care amongst physicians in the practice.
Community health centers were the earliest alternative to fee-for-service setups. They managed health of entire community rather focusing just on walk in patients. These took the form of neighborhood health centers, homeless clinics or clinics for immigrants providing a mix of clinical and public health services.
HMOs originated when large cooperatives or public sector employers started taking onus of delivering care for their members for a nominal fee. They evolved Health Insurance Plans where the employers paid a fixed amount per employee to the healthcare provider bringing together financing and delivery of care into one entity. This prepaid model of care was renamed HMOs which subsequently evolved into network HMOs.
An HMO which provides full services from primary to tertiary care is known as a Vertically Integrated HMO. It owns a health plan and either owns or has contracts with group practices or hospitals.
Some physicians may form groups or associations just for the purpose of negotiating and administering contracts. Independent Practice Associations (IPA) were formed when insurance companies, hospitals or local governments started contracting with individual fee-for-service physicians, office based physician group practices. The IPA is responsible for the network of physicians which is not linked to the HMOs plan. In some arrangements, physicians can contract with different HMOs or IPAs. A variance to this structure is Integrated Medical Group (IMG) in which physicians are employees rather than owners of their practices. IPAs and IMGs could also provide care under capitated system, assuming the financial risk of providing care.
IPAs, IMGs and HMOs operate in a largely similar structure; however, the "Virtual Integrated" groups enter into contracts for provision of all services putting them in contrast with the Vertically intergrated HMOs.
A POS (Point of Service) plan gives the HMO plan members to get healthcare services from physicians who are not on the HMO's provider panel. Usually they are required to pay higher co-pay for such services unlike in HMO where they would have paid the whole amount.
PPO (Preferred Provider Organization) plans differ from HMOs in the way they compensate their panel providers. The contracts are based on fee for service payments unlike HMOs limiting the financial risk to physicians and hospitals. The PPOs are able to negotiate reduced rates with providers in return of the increased availability of patient pool.
With the introduction of HMO model, the HMOs controlled the patient base through contracts removing physician's admitting discretion to their choice of hospital. This has given hospital administrator better position in the power equation. According to recent data, PPOs are becoming popular over HMO plans.
The other important systems are Medicare, Medicaid and governmental health programs. The Employers and Medicare beneficiaries pay into the federal Medicare program fund during their employment for subsequent coverage. The healthcare service provider they visit bills the insurer which gets its payment from Medicare. Under the Medicaid program, the Medicaid enrollee gets coverage from the program and the provider bills the payor, which gets payment from Medicaid program.
The Veterans Affairs, Department of Defense and Indian health service directly provide service to covered individuals since they act both as a payor and provider.
Integrated systems
Group practices: They may or may not contract with HMOs. Management Services Organizations (MSOs) are specialized agencies for the management of physician practices. Sometimes they also act as the source of capital. MSO services could include billing, claim processing, administration, contract management, utilization management, quality control. MSOs could also own the assets related to practice such as office space, equipment, support staff. Sometimes MSOs buy out physician practices using outside funding and becomes a Physician Practice Management company.Physician Hospital organization: A PHO is formed to exert greater negotiation power against MCOs. They are a type of arrangement between physicians and hospitals and are usually affiliated with one hospital. They can directly contract with employers too.
Integrated Delivery Systems (IDS): IDS are the strategic arrangements between hospitals, physicians and insurers to provide full spectrum of healthcare services to a given population. Managed care organizations contract with IDS instead of each of different players. Larger size of IDS can facilitate investment in capital expenditure.
Employer driven payment systems
Employer provides health insurance to individuals who seek care from provider which bills a payor or insurer. In the case of large employer which is self insured, the bills would come back to the employer and payor combination. In such cases the insurance companies usually act as ASOs (Administrative Service Organization) for the employers providing administrative support.
For individuals who are ineligible for group insurance, individual policies are available. In this system, the individuals who are self employed or on individual policies seek coverage from an insurer which reimburses the providers providing service to the individuals.
Conclusion
In United States, the healthcare administration is largely outside the governmental control. This leaves hospital capacity regulation, residency seat allocation and coordination of care amongst primary, secondary and tertiary centers in the hands of private entities. The physician groups control the policy, occupational standards and entry requirements for licensing. So their professional interests and favor for technology and inpatient capacity also led to expansion of hospital facilities. Over the last few decades, the healthcare has increasingly been delivered at hospitals rather than physician offices. With emerging consumer driven healthcare models and advanced surgical techniques, there is a gradual shift towards Ambulatory Clinics. This will introduce newer models of healthcare delivery. 
Pushwaz Virk, MD is a Heatlhcare Management fellow at Harvard University.