Introduction to the U.S. Health Care System


Intro to the U.S. Health Care System (HA3900)

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Last Revised by Dr. Dennis White on 02/21/2021


Format of the midterm:

  • 100 total points
    • 20 multiple choice questions (2 points each; 40 points total)
    • 10 short answer questions (5 points each; 50 total points)
    • 2 analysis questions (about three to five sentences each; 5 points each; 10 total points)


Example Multiple Choice Question

  • Health is defined by the World Health Organization (WHO) as:
    1. A complete state of physical, mental, and social well-being, and not merely the absence of disease or illness
    2. Not being sick
    3. Any deviation from a healthy, normal, or efficient condition
    4. All of the above
    5. None of the above

Example Short Answer Question:

  • How is an acute condition different than a chronic condition?

Example Analysis Question:

  • In your own words, please briefly describe: 1) the general trend(s) of what this graph is visually depicting, and 2) the implications of these trend(s):

STUDY GUIDE (based on the “red slides” and main points provided in each presentation):


Note:  The majority of the questions on the exam will be based on terms/concepts provided within this study guide.


Session 1: Introduction

  1. What are some examples of paradigm-shifts occurring in healthcare?
    1. Volume (quantity) to value (best outcomes at the lowest cost)
    2. Physician-centric to patient-centric care
    3. Individual to team-based care
    4. Use of scientific evidence in care (evidence based medicine)
    5. Dominance of technology in healthcare delivery


  1. What are the primary components of the Affordable Care Act (ACA)?
    1. Insurance reform (e.g., ending exclusions for pre-existing conditions)
    2. Insurance mandates (for individuals and employers), which includes the establishment of health insurance exchanges for the private market (and associated subsidies)
    3. Medicaid expansion (but the Supreme Court decision made this optional at the state level)
    4. Variety of financing measures (increased Medicare tax withholdings, etc.)
    5. Some support for quality improvement innovations (e.g., Accountable Care Organizations, ACOs)

Session 2: History and Terms

  1. Health is defined by the World Health Organization (WHO) as:
    1. “A complete state of physical, mental, and social well-being, and not merely the absence of disease or illness” (World Health Organization, WHO)


  1. Health care is defined by the World Health Organization (WHO) as:
    1. “Diagnosis and treatment of disease and the promotion, maintenance, and restoration of health” (World Health Organization, WHO)


  1. What are the three primary values associated with the U.S. health care system?
  2. Access, Costs, Quality (ACQ)


  1. What is the “triple aim”? (three primary goals of the U.S. health care system)
  2. Better health (i.e., improved outcomes); Better care (i.e., fewer errors); Lower costs
  3. Better Care, Smarter Spending, and Healthier People
  4. Better, Smarter, Healthier


  1. What are the six primary stakeholders in the U.S. health care system?
  2. Patients, Providers, Payers, Policy Makers, Producers, EmPloyers (6 Ps)


  1. Is the U.S. health care system entirely public, entirely private, or a mix of both?
  2. Mix of both


  1. What is “womb to tomb” care?
  2. The birth to death health care continuum in the U.S.


  1. Please list two “current” trends in U.S. health care?
  2. Rising costs
  3. Decreasing access (although the ACA will solve some of this)
  4. Varied quality
  5. Increased specialization
  6. Increased use of technology
  7. Data and science driven (e.g., Evidence Based Medicine)
  8. Volume-based (but moving toward value-based)
  9. Traditionally disease treatment (i.e., infectious disease) but moving toward chronic disease treatment (i.e., preventative and long-term)

Session 3:  Access

  1. How are the following types of access to health care different?
    1. Financial access: Ability to pay
    2. Geographical access: Rural/Urban
    3. Temporal access: Time (e.g., wait times)
    4. Sociocultural access: Health care disparities
    5. Physical access: Ability to get into the facility (e.g., handicapped access) or get to an appointment (e.g., difficulty with travel)


  1. Why is “financial access” a big concern in the U.S. health care system?
  2. Because we have to pay for the health services we receive (the government does not cover all health care costs) and, because costs are often high and prices are unknown, insurance is a prerequisite. However, obtaining insurance can be challenging if you don’t have full-time employment or qualify for a public insurance program (Medicaid or Medicare, for instance)


  1. What is the difference between uninsured and under-insured?
  2. Uninsured: No health insurance (from any source, incl. Medicare and Medicaid)
  3. Under-insured: Insured, but may have expenses that exceed insurance coverage


  1. Is Emergency Department care free?
  2. No, somebody has to pay whether it be the patient, payer, or if the hospital assumes it as uncompensated or charity care.


  1. What is “uncompensated care”?
  2. An overall measure of hospital care provided for which no payment was received from the patient or insurer. It is the sum of a hospital’s “bad debt” and the charity care it provides.


  1. If you have a job are you guaranteed health insurance?
  2. No, not all employers offer health insurance (especially smaller employers) and, typically, benefits are only offered if you are working full-time.


  1. What is the difference between access to health care and utilization of health care?
  2. Access: Is it available to you (financially, geographically, etc.)?
  3. Utilization: How much health care you actually use (e.g., how many times you go to the doctor)?

Session 4: Costs

  1. In general, are health care costs (expenditures) increasing or decreasing in the U.S.?
    1. Increasing


  1. Please list two reasons why health care costs (expenditures) are rising?
  2. Price Insensitivity (and price increases)
  3. Technological Progress
  4. Chronic Disease
  5. Generous Insurance
  6. Aging Population
  7. Fee-for-Service Reimbursement
  8. System Fragmentation
  9. Market Consolidation
  10. Defensive Medicine
  11. Skewed Distribution of Costs


  1. Give one example of a cost containment effort or idea in healthcare:
  2. Rationing
  3. Payment reform
  4. Constrain technologies or progress
  5. Improve efficiency
  6. Prevention

Session 5: Quality

  1. What is “quality” in health care?
  2. “Simply put, health care quality is getting the right care to the right patient at the right time – every time” (AHRQ)


  1. True or False: Overall health care quality (i.e. health outcomes—birth rate, expected life span, etc.) in the U.S. is number one in the world?
    1. False (e.g., some of our quality outcomes are lower than those in other countries)


  1. Quality in health care can be generally considered at three levels. What are the three levels (and what are the differences)?
  2. Structures: The conditions under which care is provided (e.g., clean facilities, licensed clinicians)
  3. Processes: The activities that constitute health care (e.g., screening and diagnosis)
  4. Outcomes: Changes attributable to health care (e.g., improved health)


  1. What is the difference between overuse, underuse, and misuse in regards to delivering quality health care?
    1. Overuse: When patients get services that are inappropriate for their medical condition, subjecting them to unwarranted risk and/or expense
    2. Underuse: When patients do not receive care that is indicated based on their medical condition
    3. Misuse: When a service is provided in a technically incorrect manner


  1. Please describe two reasons why quality of health and health care so varied in the United States?
  2. Fragmented system of care
  3. Our traditional emphasis on volume rather than value
  4. Recommended (i.e., evidence based) care is not always provided
  5. Access often limited by financial limitation, geography, health care coverage, etc.
  6. Patients often not empowered: Lacking information and control


  1. What is one way in which quality could be (or is being) improved?
  2. Coordinate care better.
  3. Translate the best available medical evidence into easily accessible practice guidelines.
  4. Invest in new information technologies that will help reduce medical errors, track the results of care and make important patient information available to doctors when they need it.
  5. Reward quality of care—not quantity.



Session 6: Pubic Health and Public Health Infrastructure:

  1. Public health is care for individuals or populations?
    1. Populations


  1. The three essential functions of public health are…?
  2. Assessment: Monitoring health statuses and investigating health problems
  3. Policy development: Inform, educate, and develop (policies and plans)
  4. Assurance: Enforce laws and regulations; evaluate outcomes (efficiency, effectiveness, and equity)


  1. Please provide one example of an instance where a public health policy was implemented to improve population health.
  2. g., Folic acid introduction into breads and cereals (flour)
  3. g., H1N1 vaccines free to the general public
  4. g., iodine in salt to address thyroid (goiter) problems
  5. g., fluoride in drinking water to prevent tooth decay


  1. What is the basic science of public health?
  2. Epidemiology: a method of causal reasoning based on developing and testing hypotheses pertaining to occurrence and prevention of morbidity and mortality; a tool for public health action to promote and protect the public’s health
  3. g., John Snow


  1. How would the perception of “tobacco usage” differ between a physician and a public health professional?
  2. Clinician: Medicine at an individual level:  Symptoms and disease treatment; cessation counseling, etc.
  3. Public Health Professional: Population-level assessment, policy development, and assurance associated with reducing overall tobacco usage (cigarette tax, public service announcements, etc.)


  1. Which HHS agency…?
  2. Provides data on healthcare in the US (Quality, efficiency, etc.)?
    1. AHRQ
  3. Prepares for and coordinates disease threats (e.g., H1N1)?
    1. CDC
  4. Manages Medicare and Medicaid?
    • CMS
  5. Responsible for the safety and effectiveness of foods, drugs, and medical devices?
    1. FDA
  6. Is the world’s largest source of funding for medical research?
    1. NIH
  7. Protects the integrity of HHS programs (i.e. stops fraud)?
    1. OIG
  8. Promotes development of a nationwide Health IT infrastructure?
    • ONC

Session 7: Private Infrastructure and Organization

  1. What is the difference between an inpatient and an outpatient?
    1. Inpatient (acute): Hospitalized (overnight)
    2. Outpatient (ambulatory): Leaves the same day


  1. How are the following clinics (outpatient) and/or hospitals (in-patient) different from each other?
    1. Sole Proprietorship Clinic: Owned by one person (typically a physician)
    2. Group Practice Clinic: Owned by multiple people (e.g., physician partners)
    3. Community Health Center: Primary care for those with low income (typically publically funded)
    4. Retail Clinic: Walk-in (often for profit) convenient care clinic focused on protocol based care for a limited number of conditions (i.e., low variability care)
    5. Urgent Care Center: Immediate care center for issues not serious enough for an ED
    6. Ambulatory Surgery Center: Same day surgical care
    7. Free Standing Emergency Department: ED that is not physically in the same location as a hospital
    8. Teaching/Research Hospital: Affiliated with a medical school (e.g., uses residents); addresses the most variety (and complexity) of cases
    9. Hospital System (aka Integrated Delivery System, IDS): 2 or more hospitals owned and governed by a single entity


  1. How is acute care different than chronic care?
  2. Acute: Recent onset, short-term treatment (definitely less than 1 year) (e.g., pneumonia)
  3. Chronic: Non-communicable condition that is expected to last 1 year or longer (e.g., diabetes)


  1. What is the difference between these two primary business processes within health care: clinical and administrative?
  2. Clinical: Delivery of care (and related functions)
  3. Administrative: Business functions (IT, finance, HR, etc.)



  1. What are some general current trends associated with hospitals in the U.S.?
  2. More employed physicians
  3. Larger hospital systems (that also include outpatient care and clinics)
  4. Move to a value-based continuum of care
  5. Will be measured by costs and quality


  1. Why might a U.S. hospital be referred to as a mixed good? (as opposed to social good or market good)
  2. Elements of both social goods (goods available to the public that can be consumed by everyone—e.g. a public park) and market goods (good that is purchased for private use, has property rights/ownership, and is a scarce resource)

Sessions 8 and 9:  Supporting Infrastructure and Innovations/Advancement

  1. What are the primary areas of supporting clinical infrastructure in the U.S. medical system?
  2. Medical Laboratories
  3. Radiology (imaging)
  4. Pharmacy
  5. Could also include “producers” in the supply chain
    1. Medical devices
    2. Medical instruments
  6. And, supporting workforce and agencies
    • Allied health


  1. What does a medical laboratory do?
  2. Primarily, runs diagnostic (lab) tests that are ordered by clinicians (physicians and mid-levels), performs analyses, and sends reports back to the ordering clinician.


  1. What does “imaging” mean?
  2. Radiology: Taking an image of the body for a clinician (ultrasound, x-ray, CT scan, MRI, etc.)


  1. Why does it take 13 to 15 years for a drug (pharmaceutical) to come to market?
  2. Long process of taking many compounds, narrowing them down to compounds that can make a difference (safely and effectively), and getting through the testing and regulatory process (FDA).


  1. What is a formulary?
    1. A list of prescription drugs available (and their “formations”).



  1. How do logistics play a big role in the operations of a hospital?
  2. Medical supply chain: Devices and instruments must be procured and made available for surgeries and patient needs


  1. Give one example of a recent medical innovation. What type of innovation is it (technological, process, business model)?  How might it (or has it already) caused significant change?
    1. Example Technology Innovation: EHR, Robotic Surgery, etc.
    2. Example of a Process Innovation: Patient Centered Medical Home (PCMH), Mobile Health Vehicles (e.g., Kaiser mobile van in Hawaii)
    3. Example Business Model Innovation: Retail Clinic

Session 10:  Overview of Financing

  1. What is “reimbursement”?
    1. A method of payment, usually by a third-party payer (insurance), for medical treatment or hospital costs.


  1. What is the difference between “private” and “public” health insurance?
  2. Funding source of the insurance: Private market (e.g., employers or marketplaces) or from a governmental entity (e.g., Medicare funded by the federal government)


  1. What is one example of a retrospective payment system?
    1. Fee-for-service – reimbursement for necessary and reasonable services that have already been rendered.


  1. What is one example of a prospective payment system?
  2. DRG: Fixed (average) reimbursement for a specific diagnosis code
  3. Capitation: Fixed fee per patient per month, for a fixed set of services

Session 11:  Public Health Insurance

  1. How is Medicare different from Medicaid?
    1. Medicare:
      1. Elderly (over 65) (or disabled)
      2. Federally funded (payroll taxes and premium payments)
    2. Medicaid
      1. Medicaid provides services particularly to low income individuals who are: pregnant, children, aged, blind, or disabled (and additional people if the state opts into Medicaid expansion, but this is not the case in Georgia)
      2. Mix of state and federal funding (from general tax revenues) 70% Federal, 30% State funding



  1. Is Medicare enrollment growing or shrinking?
  2. Growing: Medicare enrollment could nearly double in the next 30 years.


  1. Is Georgia going to participate in Medicaid expansion?
  2. No, Georgia has opted out (for now).


  1. What is a “dual eligible”?
  2. Someone who is eligible for Medicare and also for Medicaid (simultaneously)


  1. What was observed in the “Oregon Experiment” when Medicaid was offered as a lottery?
  2. Increased utilization (which also raised expenditures)
  3. More consistent care
  4. Improved individual financial security
  5. Improved self-report health


MACRA – Medicare Access & CHIP Reauthorization Act of 2015

The Merit-Based Incentive Payment System (MIPS) & Alternative Payment Models (APMs):  

Delivery System Reform, Medicare Payment Reform, & the MACRA

The MACRA makes three important changes to how Medicare pays those who give care to Medicare beneficiaries. These changes include:

  • Ending the Sustainable Growth Rate (SGR) formula for determining Medicare payments for health care providers’ services.
  • Making a new framework for rewarding health care providers for giving better care not more just more care.
  • Combining our existing quality reporting programs into one new system.

MACRA will help us to move more quickly toward our goal of paying for value and better care. 

It also makes it easier for more health care providers to successfully take part in our quality programs in one of two streamlined ways:

  1. Merit-Based Incentive Payment System (MIPS)
    Combines parts of the Physician Quality Reporting System (PQRS), the Value Modifier (VM or Value-based Payment Modifier), and the Medicare Electronic Health Record (EHR) incentive program into one single program based on:
    Quality, Resource use, Clinical practice improvement, Meaningful use of certified EHR technology
  2. Alternative Payment Models (APMs)
    From 2019-2024, pay some participating health care providers a lump-sum incentive payment.
    Increased transparency of physician-focused payment models.
    Starting in 2026, offers some participating health care providers higher annual payments.
    Accountable Care Organizations (ACOs), Patient Centered Medical Homes, and bundled payment models are some examples of APMs.

Accountable Care Organizations: (ACOs) – concept is one that is still evolving, but it can be generically defined as a group of health care providers, potentially including doctors, hospitals, health plans and other health care constituents, who voluntarily come together to provide coordinated high-quality care to populations of patients.

Medicare Bundled Payments for Care Improvement (BPCI): an initiative in which all the providers involved in an episode of care receive a set payment per patient episode, rather than payment for individual services rendered as part of that care


Session 12: Private Health Insurance

  1. Please define the following terms:
    1. Risk:
      1. Probability that an adverse event will occur
    2. Insurance:
      1. A mechanism to protect against unpredictable loss
    3. Risk Selection (by payers):
      1. Insuranceunderwriter’s determination of the class (such as preferred, standard, or substandard) to which a particular risk is deemed to belong its acceptance or rejection, and (if accepted) the premium rate.
        1. “Cherry picking”: Choose the healthiest (cheapest) enrollees
        2. “Lemon Dropping”: Get rid of the most expensive enrollees
      2. Provider Induced Demand (by providers):
        1. Excess services (and reimbursement) ordered by a provider due to fee-for-service reimbursement
      3. Adverse Selection (by patients):
        1. Systematic selection by high-risk (i.e., least healthy) consumers of insurance plans with greater degrees of coverage.
      4. Moral Hazard (by patients):
        1. The tendency to demand (use) more products or services because you are not required to pay the full cost. Health insurance that shields people from paying full costs may encourage the extra use of medical services that are of marginal value.


  1. What is the difference between “community rating” and “experience rating”?
  2. Community Rating: All subscribers pay the same amount (average premium = expenses / # of enrollees), without regard to age, gender, health status, occupation, or other factors
  3. Experience Rating: Premiums set by actual cost of providing care (a.k.a. “experience” or “history”)


  1. What is the difference between a traditional “indemnity” insurance plan and a “managed care” plan (e.g., HMO, PPO, EPO, POS, etc.)?
  2. Indemnity Plans
  3. Fee for service
  4. Simply provide reimbursement to providers
  • Less prevalent today
  1. Managed care plans (HMO, PPO, EPO, POS, etc.)
  2. Intended to reduce unnecessary health care costs through a variety of control mechanisms (reduce moral hazard, provider induced demand, overall prices, etc.)
  3. Integrate the financing and delivery of care through business models (e.g., Kaiser) or contracts (e.g., Blue Cross Blue Shield contract with Piedmont Hospital)


  1. What is one example of how a managed care plan “controls” health care prices and/or quantity? (Remember: Health spending = Price X Quantity)
  2. Price
  3. Networks of providers and discounts (through negotiation)
  4. Eliminates fee-for-service reimbursement (use capitation or per diems instead)
  5. Quantity
  6. Free preventative care
  7. Utilization Reviews / Authorizations
  • Gatekeeping


  1. Of the five primary types of managed care plans discussed in class (PPO, EPO, POS, HMO, HDHP) which one typically…?
  2. Offers the most choice (e.g., I can pick any doctor I want)?
  3. PPO
  4. Offers the least choice (e.g., only providers in-network qualify for reimbursement)?
  5. HMO
  6. Offers the least per month (premium) cost?
  7. HDHP (in trade for a much higher deductible)
  8. Is a balance between choice and cost?
  9. POS
  10. What is a…?
    1. Co-payment (Co-Pay): A fixed dollar amount a patient is responsible for when a medical service is received.
    2. Deductible: A fixed dollar amount during the benefit period – usually a year – that an insured person pays before the insurer starts to make payments for covered medical services.
    3. Co-Insurance: A form of medical cost sharing in a health insurance plan that requires an insured person to pay a stated percentage of medical expenses after the deductible amount, if any, was paid
    4. Out-of-Pocket Limit (or Max): The maximum dollar amount a group member is required to pay out of pocket during a year

Session 13:  The Hospital Revenue Cycle

  1. Why is the revenue cycle so complicated in health care?
  2. Third-party payers (insurance companies)
  3. A lot of steps (and variables), e.g.,
  4. Patient Flow à Scheduling/Pre-registration à Admitting (or registration) à Charge Capturing à Discharge (or visit completion) à Billing à Collections


  1. Briefly describe the concept of “zero to zero” in a provider’s revenue cycle?
  2. Individual owes nothing prior to health care encounter (e.g. hospital admission or outpatient visit) and owes nothing after the entire cycle is complete (and payment has been received).


  1. What is a “charge master”?
  2. The list of what the hospital charges for each service, procedure, and/or item.


  1. An Explanation of Benefits (EOB) is (as opposed to a “claim” or “bill”) …
  2. A document that explains how health services rendered have been coded, submitted, and evaluated for billing.



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