VG

US Healthcare System - History, Hospitals, and Health Insurance (Lecture Notes)

Historical Perspective and Foundations of the US Health Care System

  • Overview and purpose of the lecture: trace the roots of the US health care system, compare with European systems, and connect historical development to current structure and policy frictions.
  • Emphasis on building a historical perspective to understand today’s health care mechanics, silos, and incentives.

Public health problems in 1850–1900: environmental drivers of disease

  • Major problems during 1850–1900 were epidemics driven by public health/environmental issues rather than medical care delivery.
    • Cholera linked to unsafe water supplies.
    • Yellow fever linked to mosquitoes.
  • This era highlighted the link between environment and population health, foreshadowing later public health and population health disciplines.
  • Note on public health vs clinical care: epidemics and environmental determinants were public health issues; clinical care evolved later as a separate domain.

Early public health, environment, and population health perspectives

  • Public health science and population health began to frame how environment and living conditions affect health outcomes.
  • Relevance for students entering public health and health policy: population health requires addressing environmental and social determinants, not only treating disease.
  • Example narrative connecting environment to health: models of asthma attacks using environmental data (Hetzmopolis project) to identify root causes and potential interventions (e.g., geographic clustering of rescue-inhaler use).
    • Demonstrates how data from patients (e.g., inhalers) can reveal environmental risk patterns and inform prevention.

Health insurance in the 1850–1900 period

  • First health-related insurer focusing on injuries rather than medical care: Franklin Insurance Company.
  • First more modern health-insurance style company: Travelers Insurance.
    • Travelers introduced a broader concept of health coverage, creating a “plateau effect” in branding and market recognition.
    • The plateau effect: the first entrant gains entrenched name recognition; later entrants must climb a steep hill of awareness and marketing to compete.
  • Branding examples illustrating plateau effects in other industries:
    • Travelers with the red umbrella as a symbol.
    • Coca-Cola as a long-standing brand with occasional reminders; new cola rivals (e.g., Pepsi) struggled to reach the same level of recognition.
    • Car insurance exemplars: GEICO, Farmers, Progressive, Aflac—all employ heavy marketing to climb the recognition plateau.
  • Implication for health care markets: branding and name-recognition dynamics shape competition and entry barriers for new insurers.

Ambulatory health care and the role of religious healing

  • Ambulatory health care (non-hospital care) in this period involved doctors who visited patients or patients who walked to physicians.
  • Limited scientific advances in this era; much of health care relied on religious or traditional healing frameworks.
  • Evolution toward Western medicine as the dominant paradigm; religious healing persisted in some settings and in hospital chaplaincy programs today.
  • Examples of integration of spiritual care:
    • Chaplaincy in major hospitals serving multiple faiths.
    • Historical anecdotes of religious healers and cross-cultural healing practices (e.g., Santería consultations in hospitals to address patients’ belief systems).
  • Takeaway: even as Western medicine grew, complementary spiritual care played a role in patient well-being and healing in some settings.

The roots of the US health system: hospitals, doctors, and silos

  • In the US, care often occurred in homes or doctors’ offices; hospitals were not yet the primary care locus for most people.
  • Institutions began to delineate three silos that persist today: hospitals, insurance, and physicians.
    • Physicians often had private practices with hospital privileges but not institutional employment.
    • Hospitals and insurers operated as separate entities, creating friction points in access and payment.
  • Contrast with Europe: some European systems integrated hospitals, insurance, and physicians into a more unified system under government or quasi-government support.
  • Early hospital use favored the poor; wealthy often received care at home. The concept of hospital as a social safety net evolves over time.

The hospital landscape graduates from public to community and voluntary models

  • Early public hospitals were government-funded or municipal institutions catering to the poor.
  • Seaport and quarantine facilities addressed contagious diseases among travelers and immigrants.
  • As medical science advanced, new hospital forms emerged:
    • Community hospitals: local, physician-led facilities serving a community.
    • Voluntary (often religious) hospitals: founded by religious groups and sections of the community; many retain religious naming.
  • Examples of hospital types and roots:
    • Public/government hospitals (e.g., Jackson Memorial Hospital) funded by taxes.
    • Private hospitals: for-profit and nonprofit; roots in community philanthropy and religious or charitable missions.
    • Voluntary hospitals: religiously affiliated (e.g., Mount Sinai, Saint Jude, Mercy, Holy Cross).
  • Notable historical pattern: wealthy individuals could access care at home; the poor relied more on charitable or public institutions.
  • Early hospital development in the United States laid the groundwork for today’s mixed system of government, nonprofit, and for-profit hospital ownership.

The evolution of hospital ownership: for-profit vs nonprofit

  • For-profit hospitals: owned by stockholders or private owners; goal is to maximize profits (difference between total revenue and total costs).
  • nonprofit hospitals: no owners; revenues are reinvested to support missions and charity care; the phrase “No margin, no mission” captures the balancing act of margin generation to fund care and services.
  • Tax status differences:
    • For-profit hospitals pay taxes and distribute profits to owners.
    • Nonprofit hospitals typically rely on donations and tax-exempt status; revenues are reinvested to advance mission.
  • A practical nuance: even nonprofit hospitals may engage in revenue-generating activities (e.g., gift shops, ancillary services) that generate taxable activities or require tax considerations depending on their structure.
  • Illustrative points about market structure:
    • Independent hospitals may be pressured to join national chains (e.g., HCA, Tenet) for scale, negotiating power, and capital;
    • Sale or merger outcomes affect local control, community sentiment, and access to care.
  • In the Miami area, discussion of Mercy Hospital (Catholic, nonprofit) being owned by a for-profit chain (HCA) illustrates cross-cutting ownership dynamics and tax/charity considerations in practice.
  • Conceptual takeaway: ownership structure shapes incentives, access, charity obligations, and community impact.

Case studies and boardroom decisions: community hospitals and buyouts

  • Boca Raton Community Hospital example: board debated selling to a for-profit chain (HCA or Tenet) vs remaining independent or selling to a smaller nonprofit chain.
  • Consultant’s scenario planning provided three options: (1) keep independent; (2) sell to for-profit chain; (3) sell to a smaller nonprofit chain.
  • Community response: strong protests against sale; concerns about loss of local control and mission.
  • Outcome in this case: sale occurred later at a lower price due to community opposition and financial dynamics.
  • Tulane University’s hospital system cited as another example of for-profit ownership (Tulane’s system is owned by a for-profit chain in some configurations).
  • Key lesson: governance, community expectations, and market pressure shape strategic decisions in hospital systems.

Government, public health, and the role of charities

  • Government hospitals exist (tax-funded) and provide essential services (e.g., Jackson Memorial).
  • Charitable care and subsidies are central to nonprofit hospitals; community benefit requirements and philanthropy support ongoing care access.
  • Public health infrastructure evolved to address contagious disease outbreaks and environmental health risks (sanitation, housing, water, air quality).
  • The environment for hospital design and operation includes: access to green space, natural light, and healing environments that contribute to patient outcomes.
  • Health care delivery involves a mix of public funding, private philanthropy, and private-capital investment, which produces a complex funding landscape.

Sanitation, public health, and the move toward modern medicine

  • The rise in medical science and hospital modernization followed improvements in sanitation, housing, food safety (pasteurization, sewage treatment), and public health policy.
  • Journalism and muckraking (yellow journalism earlier, then investigative reporting) helped push reform in housing, sanitation, and working conditions; this investigative pressure accelerated public health improvements.
  • As living conditions improved, public health interventions reduced environmental disease burdens, shifting the focus toward clinical medicine and hospital-based care.

Contagion, quarantine, and the evolution of disease control

  • Seaports and immigration centers historically required quarantine facilities for contagious diseases; similar practices re-emerged during COVID-19 (quarantine at ports/airports).
  • Basic public health routines for infectious disease were established long before modern vaccines and antivirals, and continue to inform today’s biosecurity and outbreak control.

The transition to modern medical science and the public health era

  • The early to mid-20th century saw a shift toward scientific medicine and hospital specialization.
  • Environmental improvements (sanitation, pasteurization) and better housing reduced infectious disease burdens.
  • Public health and environmental health concepts gained prominence, setting the stage for population health approaches and health services research.

Epidemics and pandemics: definitions, patterns, and historical data

  • Key definitions:
    • Epidemic: a disease outbreak that is actively spreading in a defined population.
    • Pandemic: a global spread of a disease across multiple continents.
  • Annual influenza deaths: approximately 35{,}000 in many years, reflecting seasonal epidemics.
  • Spanish flu (1918–1919) as a major pandemic with extraordinary mortality:
    • US war deaths in World War I: 54{,}000.
    • Pandemic deaths in the US: approximately 43{,}000 (pandemic-related deaths in addition to war casualties).
    • Global mortality: estimates commonly cited as between 30{,}000{,}000 and 45{,}000{,}000 (30–45 million) worldwide.
    • US population around 1918: approximately 100{,}000{,}000.
  • Regional mortality patterns and age effects in the Spanish flu:
    • Children under a certain age constituted about 0.30 ext{ to } 0.45 (30–45%) of those affected, reflecting unusually high pediatric impact in that pandemic.
    • Different pandemics show different age/race patterns; for example, COVID-19 disproportionately affected older adults and minority communities, while the Spanish flu disproportionately affected some younger populations.
    • Philadelphia example: up to 700 ext{/ day} deaths during peak episodes, illustrating the rapidity of mortality surges in cities.
  • The 1918 pandemic’s waves illustrated variability in age impact: subsequent waves did not affect all age groups uniformly; mortality patterns shifted by wave.
  • The Spanish flu’s global reach occurred during wartime mobility, illustrating how large-scale human movement accelerates disease spread.
  • The modern COVID-19 pandemic is discussed as a comparison to historical pandemics, highlighting differences in population structure, vaccination, and public health responses (acknowledging the speaker’s caveats and personal perspective).

Campus health events and public health lessons

  • Campus cases and responses to pandemics (e.g., Cornell University 2009 swine flu) demonstrate how universities manage outbreaks: isolation, stay-at-home guidance, and campus communications.
  • The discussion connects campus experiences to broader public health planning and risk communication.
  • The evolution of communicable disease response is iterative, with lessons from past pandemics informing present-day protocols.

Practical, ethical, and strategic implications

  • Market structure and patient access:
    • The siloed US system (insurance, hospitals, physicians) creates friction and affects patient access and payment.
    • In contrast, integrated systems in some European models illustrate potential advantages and challenges of different governance structures.
  • Financial incentives and mission:
    • For-profit hospitals seek to maximize net revenue and shareholder value; nonprofit hospitals reinvest earnings to fund care and charity; this creates tension between financial sustainability and access/charity obligations.
    • Tax status and community benefit obligations shape hospital behavior, service lines, and charity care programs.
  • Community influence and governance:
    • Community protests and local sentiment can shape hospital decisions about mergers or sales.
    • Board dynamics and external consulting can influence strategic choices under financial pressure.
  • Design and healing outcomes:
    • Evidence-based design considerations (natural light, garden views) may improve recovery and shorten lengths of stay for nonprofit facilities.
  • Ethical considerations:
    • Balancing profitability with patient-centered care and community needs remains a central ethical challenge.
    • The obligation to provide access to vulnerable populations (charity care) versus financial sustainability is ongoing in nonprofit systems.
  • Practical takeaways for exam preparation:
    • Understand the historical progression from public health/environmental determinants to hospital-based care and modern health care finance.
    • Be able to explain the plateau effect in health insurance branding and its impact on competition.
    • Recognize the differences between for-profit and nonprofit hospital models and the implications for patients and communities.
    • Distinguish between public, private nonprofit, and private for-profit hospital types and provide examples.
    • Explain the two-step process for pandemics (animal-to-human, then human-to-human) and the roles of antigenic drift vs. antigenic shift with examples (e.g., Spanish flu).
    • Connect environmental improvements and journalism’s role in public health reform to current health outcomes.

Quick reference: key numbers and concepts

  • Annual influenza deaths (epidemic level): 35{,}000
  • Spanish flu deaths in WWI era (US): 54{,}000 (war) + 43{,}000 (pandemic deaths) = total pandemic impact roughly 97{,}000 in the US during the period, with global mortality far higher.
  • Global pandemic deaths (Spanish flu): 30{,}000{,}000 ext{ to } 45{,}000{,}000
  • US population around 1918: 100{,}000{,}000
  • US population during COVID era for context: approx. 330{,}000{,}000
  • Hospital ownership examples: major for-profit chains include Hospital Corporation of America (HCA) and Tenet; major nonprofit hospital systems (e.g., Jackson Memorial as a government facility) rely on tax funding and philanthropic support.
  • Economic principle:
    • Profit-seeking behavior = maximize revenue minus costs.
    • Nonprofit behavior = maximize net revenues to fund mission, including charity care.
  • Ethical maxim: "No margin, no mission" highlights the necessity of margin to sustain charitable care and mission-based activities.

Connections to broader principles

  • Foundational economics: market structure, branding, and entry barriers shape health insurance competition and access.
  • Public health: environmental determinants, sanitation, and population health improvements reduce disease burden and shape the health care system’s evolution.
  • Health policy: the US system’s siloed design versus integrated models informs debates about health reform, patient access, and cost containment.
  • Ethics and equity: balancing profit motives with charitable obligations and access for low-income populations remains central to policy discussions.

Summary takeaways for exam preparation

  • The US health system emerged from a landscape of public health challenges, with hospitals, insurers, and physicians evolving into siloed institutions rather than a single integrated system.
  • Insurance branding strategies and market dynamics (the plateau effect) have long influenced who enters the market and how patients experience coverage.
  • Hospitals have evolved from charitable institutions serving the poor to a complex mix of public, nonprofit, and for-profit entities, with ongoing tensions over ownership, mergers, and community benefit.
  • Pandemics reveal the heterogeneity of disease patterns across ages, races, and times; the Spanish flu demonstrated dramatic global mortality with distinct population patterns compared to modern diseases like COVID-19.
  • Public health improvements, environmental reforms, and ethical considerations about access and charity care continue to shape policy and practice in health care today.