Research Study On Health Care Leadership

US Healthcare System

In the United States, different institutions provide healthcare services. Even though the government is a major player in healthcare service delivery, most healthcare facilities are operated by private sector businesses. The government plays a major role in the provision of health insurance for employees in the public sector through programs such as Medicaid, Medicare and Veterans health administration (Shi, & Singh, 2009). Private employers can pay health insurance for their employees and their families. Some of the healthcare seekers buy their own insurance from insurance companies.

Despite the existence of multiple avenues for insurance, over 15% of the US population is uninsured (Shi, & Singh, 2009). This has been one of the major talking points in discussions focusing on the efficacy of the US healthcare system. In addition, there is growing concern on the overall expenditure by the US government on healthcare. The US spends up to 15% of its GDP on healthcare provision (Shi, & Singh, 2009).

The US healthcare system has been a subject of political and social debate. Current debates on healthcare focus on right to access healthcare especially for illegal immigrants and the uninsured, efficiency in the delivery of healthcare services, quality of care, cost and choice of care. For instance, even though the US spends a considerable chunk of its resources on healthcare services, there is growing concern that the money spend is not equivalent to the value of the service delivered.

This notion is supported by the fact that the US reports higher rates of infant mortality that other industrialized nations. The life expectancy in the United States is also lower than in other G5 nations despite its comparatively higher spending in healthcare service delivery (Neumann et al, 2008). Whereas the US healthcare has been ranked favorably with respect to responsiveness, it is associated with high cost of care and poor quality of care when compared with nations at the same level. United States is among a few industrialized nations that have been unable to guarantee access to healthcare for its population.

This is largely due to lack of insurance which causes up to 45000 deaths annually (Sloan, 2009). This grim statistics point to critical failures in the American healthcare system that may need a relook at the business model adopted. This paper analyses the business model used by the American healthcare systems and proposes a new business model that will address some of the problems plaguing the current business model.


Hospitals in the United States are either owned by private entities and the government. Federal, state, country and even city governments own facilities that play a role in the delivery of healthcare services in the US. Most hospitals are non-profit making organizations driven by the goal of providing healthcare services for healthcare service seekers. Non-profit hospitals which make up about 70% of the healthcare service providers in the US are driven solely by humanitarian and health concerns.

Privately owned for-profit and government hospital make up the remaining 30% (Rouse, 2010.). Privately owned for profit hospitals are in the business of healthcare service provision with the aim of generating maximums revenues and earning profits. Government hospitals are mainly concerned with the provision of healthcare service as an important social amenity and service to the public.

Hospitals in the United States primarily offer inpatient care even though they also offer some outpatient care. Emergency rooms and specialty clinics are part of the inpatient and outpatient care. Emergency departments can also be setup to address sporadic problem focused care. For instance, hospice services are specialty services offered to terminally ill patients that expect to live for less than six months. The referral system is extensively utilized in the US healthcare system with the patients expected to use primary caregivers as the primary point of contact with the healthcare system (Sloan, 2009). After this initial contact, patients can be referred to primary and tertiary caregivers depending on their health conditions.

Hospitals in the US have been blamed for driving up the cost of healthcare. Even though the primary goal of hospitals is to offer healthcare services to service seekers, they are blamed for the high cost of healthcare service due to their approach to service delivery. Some estimates state that up to 30% of the spending in healthcare is wasted (Neumann et al, 2008). The factors that are responsible for this wastage include overtreatment of patients, administrative complexities associated with the healthcare system, fraud, complicated rules and failure to coordinate care (Kennedy, Mathis, &Woods, 2007).

The hospital system through the referral system is blamed for over treating patients as they move from primary to tertiary care. The referral system used is responsible for the challenges faced in coordinating care. The administrative complexities, fraud and complicated rules are largely a result of the failure to mainstream rules regarding to the third party payers (mainly insurance companies) interaction with hospitals and patients. In addition, hospitals are being blamed for dishonesty in billing insured patients. Such dishonesty is partly responsible for the perceived and observed high cost of healthcare in the US.

Insurance Companies (Third party payers)

Insurance companies play an important role in financing access to healthcare services. Persons that have enrolled in medical plans can access services that are covered in the plan without any out of pocket payment. This is however not always the case due to restrictions and regulations placed by the third party payers on the type of services that patients can access and the hospitals they can use. Most covers including Medicare and Medicaid require patients to access care from an allocated hospital.

In addition, the covers restrict the nature of services that patients can access leaving patients to make out of pocket payment for uncovered healthcare services (Shi, & Singh, 2009). Another issue is the administration of the different third party payers by hospital administrators. In efforts to remain competitive, the medical coverage packages offered by the third party payers differ significantly. This places hospital administrators in a tough spot since they have to monitor the care services covered by each plan.

Insurance companies’ goal in the healthcare system is to remain profitable whereas ensuring access to quality healthcare services to their clients (Lutz, 2008). This is attained through medical plans that clients can subscribe to and pay monthly subscription fees. Insurance companies are for profit companies, this can be seen in the multiple medical plans in existence, and the limitations placed on access to healthcare. Many subscribers are forced to make out of pocket payments when seeking services for uncovered medical conditions. In addition, the tight regulations placed by the insurance companies have left over 15% of American uncovered (Lutz, 2008). Insurance programs offered by the government are not for profit.

However, eligibility to such programs is limited to certain groups for instance the elderly. Since reimbursement rates are often negotiated between the insurance companies and the healthcare providers and are generally, lower than out of pocket payment for similar services, many healthcare providers opt to cover patients with higher reimbursement rates. Government insurance are generally associated with low reimbursement rates which has forced many healthcare providers to dissociate with government insurance resulting in difficulties in findings providers than can offer certain types of medical services for covered patients (Lutz, 2008).


Patients are the consumers in the healthcare system. Patients are mainly concerned with being able to access timely quality healthcare services. Accessibility of healthcare covers both the physical access to healthcare service providers and the ability to meet the financial implications associated with care. Patients are faced with a number of challenges in the quest for this goal. First, there is a large proportion of the uninsured in the US. This limits access to healthcare for this group.

In addition, the cost of healthcare is high. Cost of care for secondary and tertiary care is very high which limits timely access to care. The spiraling cost of care in the US despite federal government involvement is largely a result of the increased need for quality. Increased out of pocket payment for uncovered healthcare services is another critical issue from patients’ perspective (Rashford, 2007). Universal access to healthcare service for patients is limited by the services covered by their medical plans.

Due to the rigidity of plans, most patients are limited in the healthcare facilities they can access. The referral system is also responsible for limiting access to higher levels of care.

Physicians and Care Givers

These are professionals tasked with the provision of healthcare services at different levels. This group includes primary care physicians, nurses, consultants and specialists in different areas such as oncologists. Caregivers use their professional acumen and medical training to address various medical conditions.

Caregivers are motivated mainly by the need to apply their medical training, professional code of conduct and gainful employment (Stern, 2007). The US healthcare system has a poor caregiver to patient ratio when compared to healthcare systems in nations at the same level (Stern, 2007; Brzezinski, 2009). Caregivers working at primary level generally interact with more patients than specialists do. High job demands is another challenge faced by healthcare workers in the US.


The government is a major player in the US healthcare system. The government role in the healthcare system is not limited to overseeing rather it is also involved in financing healthcare through programs such as Medicaid and Medicare US (Smith, 2008). In addition, the government is tasked with the allocation of funds for healthcare through national, state and county budgeting.

The formulation of rules that determine the obligations and interaction of different entities that are involved in healthcare service provision is another important role played by the government. The US government is blamed for failing to provide (near) universal access to healthcare services and failing to control the spiraling cost of healthcare in the US (Smith, 2008).


Businesses are involved either in the supply of medical devices to the healthcare institutions or in the medical coverage of their employees. In either case, businesses are profit-making institutions that are often concerned with improving profitability. Most businesses restrict their employees in terms of the insurance covers they can access and therefore the healthcare service providers they can use (Lutz, 2008). Direct interaction between businesses and hospitals often involved supply of services and medical and non-medical equipment. Thus, businesses influence access and quality of care available to their employees.

New Business Model

In the long term, competitiveness is a result of the ability to build at low costs and high speeds than competitors (Prahalad, & Hamel, 1990). Core competencies often result in unanticipated products. Managerial ability to consolidate technologies and skills into competencies that empower individuals to adapt to dynamic opportunities is also vital in long-term competitiveness (Prahalad, & Hamel, 1990).

A critical examination of the US healthcare systems reveals that it lags behind in terms of the quality of care, universal access to healthcare services and lastly cost of care services. The proposed new business model has been developed with the aim of addressing these key issues and using the involvement of the government as a regulator and provider of healthcare services as a core competency.

Insurance Companies
Universal insurance
Private insurance
EDI and increased interaction
Increased interaction
Increased Cooperation
Quality focus
Quality focus
Private Insurance

Figure 1: The Proposed Business Model

The proposed model is expected to enhance access to healthcare by improving coverage, reduce the overall cost of healthcare and improve the quality focus. Under the proposed model, the government will offer access to universal insurance. Every US citizen will qualify for the universal insurance as long as they pay the premiums. In addition, the government in addition with insurance companies and hospitals will create unique classes of covers.

These classes will be adhered to by the government as an insurer and the insurance companies. This will address the administrative challenges associated with determining eligibility of a patient to certain services. The classes will be designed to allow for the coverage of the low, middle and upper classes of the society but with clearly defined minimum covered services.

This will encourage insurance companies to compete in terms of additional services associated with their cover rather than the basic medical services. Furthermore, the government will create regulations that reduce the influence of the employer (businesses) on the insurance cover that employees take. For instance, employees may choose to remain with government insurance even if the employer is willing to pay for a private insurer.

Any cost implications in such arrangements are offset by the employees pay. The government will also introduce price controls by demarcating the range of premiums for private insurance companies. The insurance companies will then be required to set their premiums within the price range.

The interaction between insurance companies and hospitals (including the administrators) is a major contributor to the challenges being faced by the American healthcare system. Different reimbursement rates, billing for services that were not offered to patients and fraud are some of the challenges that characterize the current relationship between insurance companies and hospitals (Smith, 2008). Relationship between hospitals and government insurance is strained due to delayed reimbursement and low reimbursement.

Through the implementation of Electronic data Interchange (EDI) and increased cooperation between insurance and hospitals such that insurance companies may place attaches in certain hospitals of interest, some of these challenges and their effect will be addressed.

The use of EDI will not be limited to administrators rather caregivers can also use the system to coordinate care of patients. This will require the creation of networks between hospitals that allow physicians and administrators to share information and data. Currently, there is adequate technology to support such initiatives. The current system where hospitals negotiate with insurance companies to determine the reimbursement rates will be retained. However, every hospital will be required by law to offer services to government insured healthcare seekers. A limit will be set for services after which the service seekers will have to make out of pocket payment.

This will limit the likelihood of patients that have low class covers to seek care services from high-class service. The compulsory provision of services to government-insured patients by all hospitals is likely to create a more even distribution of patients across hospitals thereby reducing congestion that currently characterizes hospitals that allow government insurance (Brzezinski, 2009).

The major appeal of the proposed model is the freedom it offers hospitals and physicians to influence the quality of care. By addressing the reimbursement issues, it is expected that hospitals and physicians will have the freedom and space required to improve the quality of services rendered. Through increased focus on patients’ needs, caregivers and hospitals will be able to design strategies that meet the specific needs of their patients. Such efforts require the support of the government in the long term.

The current poor caregiver to patient ratio should be addressed by strategies aimed at encouraging enrollment to medical and nursing schools. Offering opportunities for career advancement in the medical field is also likely to attract more people into this field. Building community hospitals and encouraging private entities to develop hospitals for profit through favorable licensing and collaborative effort between private investors and the government will also help address the deficit in primary care facilities. The improved caregiver to patient ratio and in the number of healthcare facilities will force hospitals to compete in terms of quality of care.

When an organization (healthcare service provision) is conceived of as a multiplicity of small business units (hospitals), no single entity may shoulder the responsibility of maintaining viable position for the core services (Prahalad, & Hamel, 1990). If the corporate management fails to impose a comprehensive view, business managers tend to underinvest (Prahalad, & Hamel, 1990). This has been the case in the American healthcare system with few entities willing to take the initiative needed. Lack of a clear leader (corporate management) to impose a comprehensive view is also to blame for this lack of initiative.

The propose business model places the government as a corporate manager responsible for charting a clear direction for healthcare service delivery and imposing various demands on different stakeholders. However, much of the duties are delegated to hospitals, administrators and caregivers who will be tasked with creating hospitals level strategies aimed at improving quality of care. The support from the government through reducing wastages (reimbursement and administration), availing professionals and supporting the development of new hospitals will help this group in attaining their quality goals.

The expected outcomes of the proposed model is the increased involvement of the government in regulating healthcare, universal availability of healthcare services, improved caregiver to patient ratio, competition between healthcare providers on the basis of quality of service and competition among insurance companies on the basis of extra services offered by medical covers rather than basic medical services.

The implementation of the new business model will require political commitment to change regulation governing price controls, insurance and education in the medical field. Resistance from insurance companies should be expected since some of the proposed changes may curtail their freedom in defining classes of cover and pricing. The cost of the proposed changes in the short term is likely to be high. However as the changes take root and hospitals start competing on the basis of quality, the cost is likely to stabilize thereby ensuring American enjoy accessible quality cost effective healthcare services.