The Business of Health Care

MDContent's Business of Health Care curriculum spans the systems and management foundations of health care. Each 30-minute module in this robust library frames key concepts, applies them to specific health care settings, and offers practical guidance to the participant. Pre/post tests, case studies, and interactive slides are used to engage participants and demonstrate their competency in systems-based practice or maintenance of certification. Continuing Medical Education (CME) credits are also available. Click a course title to view its description and objectives.

Economics and Cost Accounting
• What It Costs to Deliver Care

  1. Description: Health care requires large up-front investments in physical, financial, human resource, and intellectual capital. As such, fixed costs are high, meaning that a large fraction of the health system's expenses are sunk and do not vary with the level of patient activity. This module explains how we measure costs in such environments. Our cost measures include fixed, variable, marginal, and opportunity costs. Using real data from a variety of health care settings, we show how these different cost measures inform and guide better clinical decisions. Objectives: Participants learn basic economic measures of cost, and how to apply them to health care.

• Allocating Overhead

  1. Description: This module outlines the basics of "activity-based" cost accounting, including variable direct, fixed direct, and indirect costs. Variable direct costs measure incremental resources that can be identified with the care of a particular patient. Fixed direct and indirect costs, respectively, capture unit overhead and health system overhead. We illustrate the importance of each of these cost measures. This module explains how accountants allocate overhead. It defines different marign (i.e., profit) measures, including total margin, direct margin, and contribution margin; and it shows how each of these profit measures informs clinical decisions. Objectives: Participants learn how their health systems measure and report costs and margins, and how to interpret and apply these measures to improve decision-making.

• The Throughput Imperative

  1. Description: Since the majority of patient care expenditures involve fixed and up front infrastructure investments, among the most effective ways to reduce costs is to spread ("amortize") these investments over many patients. This module shows the imperative to use expensive fixed assets intensively -- to strive for "throughput" -- and it illustrates the payoffs in various clinical settings. Because assets have limited capacity, often the greatest obstacle to high utilization is the congestion that arises when these limits are exceeded. Long run costs are minimized by choosing capacity to balance the benefits of fuller amortization against incremental congestion costs. Objectives: Participants learn that health care involves integrated systems of expensive and highly valuable assets, and that these assets can be managed in ways that align clinical and financial payoffs.

• Who Pays for Health Care?

  1. Description: Patients themselves pay directly ("out-of-pocket") for only a fraction of their care. Instead, their health care dollars flow through a variety of financial intermediaries, which are described in this module. For example, working Americans typically purchase health care coverage through their employers, who in turn contract with such intermediaries as Blue Cross. These health plans provide employees with various options. Workers also contribute a portion of their wages to a Medicare trust fund that provides health insurance for elderly Americans. This module provides a broad overview of how health care is financed, and how different health plans are organized. Objectives: Participants learn where the resources come from to pay for patient care.

• How Hospitals are Paid

  1. Description: Hospitals are reimbursed for the patient care they provide by many different financial intermediaries, each using different algorithms in different settings (e.g., inpatient versus outpatient). This module describes these reimbursement methodologies, and it explains the steps that clinicians and administrators must take to secure reimbursement. These steps may include (but are not limited to) recording the patient's diagnoses and procedures, capturing charges, and grouping the patient diagnostically. The module explains the links between a hospital's "mix" of third-party payers, its effectiveness at documenting care, its prospects for reimbursement, and its financial health. Objectives: Participants learn where the resources come from to provide hospital care, and the importance to both hospitals and payers of good financial stewardship.

• How Physicians are Paid

  1. Description: Like hospitals, physicians are reimbursed for the patient care they provide by many different financial intermediaries, each using different algorithms in different settings (e.g., inpatient versus outpatient). This module describes these reimbursement methodologies (many focused on "relative value units"), and it explains the steps that physicians must take to secure reimbursement. These steps may include (but are not limited to) recording the patient's diagnoses and procedures and capturing charges. Objectives: Participants learn where the resources come from to compensate physicians.

• Historical Background

  1. Description: To understand health care's current circumstances and future prospects, some historical context is needed. This module spans 1980 - present, emphasizing key supply and demand forces that on a macroeconomic level are enduring or evolve slowly (e.g., the physician workforce and the number of hospitals and beds). It also reconciles these overarching drivers with the ongoing upheaval that we observe within specific clinical domains. It thereby frames many of the management principles that make up this guide to health care. Objectives: Participants learn that the economic forces that buffet health care have arisen over time, and are likely to drive the industry going forward.


Operations Management
• Introduction to Operations Management

  1. Description: Operations management is the discipline that seeks to improve the processes by which goods and services are produced. The four modules that make up this topic area revolve around "Little's Law," which is a simple equation that links the three key operational metrics of any enterprise: inventories, flow time, and throughput. This module introduces the discipline of operations management through Little's Law, and it describes some of the many ways in which OM can guide marked improvements in health care delivery. Objectives: Participants learn that effective health care operations can be organized conceptually around a single relationship, Little's Law.

• Little's Law

  1. Description: This module uses examples, illustrations, and mini-cases to reinforce the foundations of operations management, as framed by Little's Law. It shows, for example, how reductions in flow time can contribute to higher throughput. It focuses on the physical constraints that Little's Law imposes -- in any operational setting we can choose only two of these three key operational metrics. Objectives: Participants learn the relationship between operations management's three key metrics, and the impact of managing these metrics in specific health care settings.

• Bottlenecks and Critical Pathways

  1. Description: In any physical process, the throughput (or capacity) of the entire system is dictated by its most constrained resource, called the "bottleneck." In processes with multiple pathways, the flow time (length of stay) of the entire system is determined by the slowest, "critical" pathway. This module describes the benefits of focusing resources and effort on "breaking" bottlenecks and expediting critical pathways, and using specific health care applications it shows the dramatic clinical, operational, and financial payoffs that can result. Objectives: Participants learn how to apply Little's Law to specific health care settings, and how remedial efforts at breaking bottlenecks and expediting critical pathways can yield markedly better patient care.

• Managing Variability

  1. Description: Busy health systems that use assets and resources intensively are often plagued by chronic and sometimes acute congestion. This congestion is driven by high asset utilization coupled with high variability. This module shows how variability drives congestion; it provides a long list of remedial measures to reduce variability; it explains the clinical, operational, and financial benefits that come with reduced variability; and it offers specific applications to health care settings. Objectives: Participants learn how variability drives congestion, how variability can be managed, and how improvements directly contribute to better patient care and improvements in system performance.


Financial Stewardship
• Health Systems' Financial Underpinnings

  1. Description: Most health care costs derive from enormous up front investments in "brick & mortar," equipment, human capital, information technology, intellectual capital, and other infrastructure. As such, health care is among the world's most capital-intensive industries. This module summarizes a topic area on the basics of corporate finance, and it explains the challenges and overarching financial imperatives facing all health systems. Objectives: Participants learn that there is a rigorous and practical framework for good financial stewardship, and that this framework transcends "for profit" and "not for profit" organizational models.

• Introduction to Corporate Finance

  1. Description: This module explains the "time value" of money and introduces the basic building blocks of corporate finance. The terms and concepts covered here include present value, future value, annuities, the cost of capital, and internal rates of return. The concepts are reinforced with simple numerical examples. Objectives: Through intuitive concepts and simple exercises, participants learn the core building blocks of corporate finance; and they gain an appreciation for the myriad ways in which these building blocks can be applied.

• Applying Finance to Health Care Settings

  1. Description: This module applies the tools described in the previous module to specific and realistic health care settings. It also links the financial assumptions underlying these settings to other management disciplines such as operations management (e.g., throughput) and cost accounting (e.g., allocated overhead). Objectives: In simple but realistic and familiar settings, participants learn how to conduct rudimentary financial analyses, and they come to understand on an intuitive level the specific factors that drive financial performance.

• The Capital Budgeting Process

  1. Description: This module describes the formal process by which health systems decide how to allocate their limited investment dollars, and how a representative capital budgeting process works in practice. Objectives: Participants learn the organizational framework within which capital is budgeted, and they gain practical insights into how they can navigate this process.

• Case Study: A CT-Scanner for the ED

  1. Description: This case features a hypothetical emergency department proposal to purchase a $1.5 million CT-scanner. The case formally considers the dozens of key assumptions and variables that comprise a financial model and discover how some considerations loom much larger than others. The module also shows how financial analyses can accommodate non-financial elements in reasonable and insightful ways. Objectives: Participants learn that financial analyses weight some assumptions (e.g., throughput, overhead costs) more than others, and that modest changes in key variables can markedly affect the case for a proposed investment.


Institutional and Legal Safeguards
• Health Care Compliance

  1. Description: Institutions in every industry must conform to clearly defined policies, standards, and laws. Compliance refers to formal systems that ensure conformity and mitigate the consequences of non-compliance. This module describes the basics of a health system compliance program. The overarching goal is to engage the entire institution in efforts to guarantee the trust and integrity of the clinical system for each and every patient encounter. Effective compliance programs i) enhance clinical care, ii) buttress rules, regulations, and institutional guidelines that ensure patient safety and protect health information, and iii) prevent, monitor, and report incidents of fraud and abuse. Objectives: Participants learn the core elements of a health system compliance program and understand how clinicians interface with it.

• Conflict of Interest

  1. Description: Physicians advocate for many interests, including their patients, their group practices, their health systems, third-party payers, their families, and others. Physicians often have research and teaching interests, as well, and one or more of these interests may conflict. Physicians also face conflicts of commitment, which revolve around where they spend their professional time, energy, and loyalties. This module discusses conflicts of interest and commitment, explains how health systems mediate them, and offers up several examples and illustrations. Objectives: Participants learn to recognize conflicts, to understand how their health systems manage them, and to navigate these conflicts more effectively.

• Quality Assurance

  1. Description: Quality assurance is a process-driven, step-wise, and goal-oriented approach to verifying or determining whether products or services meet or exceed stakeholder expectations. Quality assurance considers design, development, production, and service. Performance improvement involves methods for measuring and analyzing performance problems, as well as systems to raise performance. This module surveys the history of quality assurance and process improvement, and it outlines some of the applied tools, such as Haddon's Matrix and Reasons Swiss Cheese model, that clinicians can apply in their own domains. Objectives: Participants learn how institutions can take a structural approach to quality assurance and performance improvement, and they are introduced to specific methods to address their own systems' performances.

• Medical Liability

  1. Description: Under specific circumstances, health care providers are legally accountable for injuries that their patients incur. This module describes the nature and extent of this liability, and its legal and medical foundations. It reviews the goals underlying this liability, the specific factors that contribute to lawsuits, and some empirical and legal aspects of the ongoing crisis in medical liability. The module also provides some basic metrics for tracking a practice as it relates to its medical malpractice exposure. Objectives: Through a basic understanding of medical liability, participants learn how to manage and mitigate the attendant risks.


Physician Organization and Leadership
• The Medical Staff and Its By-Laws

  1. Description: Physicians have many employment and contractual relations with the health systems where they work, but in every hospital they are joined together in a self-governing body known as the "medical staff." The medical staff's by-laws determine how the physicians relate to one another and to the health system. This module describes the medical staff, and the members' rights and responsibilities to one another, to the health system, and to patients. Objectives: Participants learn how physicians within a health system are organized, how they govern themselves, and how they are accountable for the quality of care throughout the health system.

• Physician Group Practices

  1. Description: Physician groups vary from small, single-specialty practices to large, multi-specialty organizations. They span many different employment relationships, business models, academic orientations, and governance structures. This module surveys these different arrangements, highlighting key similarities and differences. It also describes the trade-offs physicians make when choosing to join one group practice over others. Objectives: Participants learn how to assess key aspects of different group practice models, and the impact that these models have on the groups' organizations, financing, incentives, operations, and cultures.

• Physician Leadership I

  1. Description: This module distinguishes between good management and effective leadership. Good management involves rigorous, systematic application of proven methods from business and medicine. Management focuses on optimizing existing processes and resources. Effective leadership requires good management but extends further. This module identifies core management skills that physician leaders should exhibit. It goes on to define leadership in a clinical context, and it describes the role of physician leaders in the governance of healthcare organizations. Objectives: Participants learn that effective physician leaders must have a core set of management skills, and they learn of the challenging roles that physician leaders play throughout their health systems.

• Physician Leadership II

  1. Description: This module opens with a discussion of some essential qualities of an effective leader and a description of the process of leadership development through "graded responsibility". Participants are invited to assess their own leadership attributes, potential, and aspirations. Within this graded responsibility lens, the focus then turns to practical methods of leading successful projects, for example, through personal credibility and a commitment to successful change. Objectives: Participants learn that effective physician leadership is typically a "graded" developmental process that requires essential skills and qualities, as well as practical guidance.