Assignment 4: Human Resource Business Partner (HRBP) Development

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Assignment 4: Human Resource Business Partner (HRBP) Development

Due Week 10 and worth 250 points

Your previous contributions addressing a variety of important topics outlined in all previous assignments for this course are deemed essential in supporting the business’ overall organizational structure and competitive advantage strategy. It is now time to consider developing your own HR department team to ensure they have the requisite skills and competencies necessary to perform at high levels over time. Effective and motivated HR business partners (HRBP) will be the key to translating HR and business strategy into action. The Society for Human Resource Management (SHRM) Body of Competency and Knowledge (BoCK) can be an invaluable resource to help develop and certify HR professionals. You must now explain to the management team the components of this model and how it can be leveraged to achieve operational success for the HR department. A 1-hour meeting has been scheduled and the CEO will be in attendance.

Create a 20-slide minimum PowerPoint presentation in which you:

  1. Include cover, presentation agenda, conclusion, and reference list slides, all of which may count toward total slide count.
  2. Provide a slide with an overview on the importance of having a highly developed staff of HR business partners. Be clear with your position. HINT: http://www.scottmadden.com/wp-content/uploads/userFiles/misc/8d0d88c7547b6e2b8f6f6fcba6a9d6b3.pdf
  3. Provide 1-4 slides introducing the SHRM BoCK model and its components. Be sure to highlight each of the areas of the model. NOTE: It is highly recommended to insert an image of the actual SHRM BoCK model into the presentation.
  4. Include in the remaining slides the following required presentation information:
  • Provide a minimum of three (3) to four (4) bullet points (more if needed) of information or discussion describing specifics on the SHRM-BoCK’s “Behavioral Competencies”
  • Provide a minimum of three (3) to four (4) bullet points (more if needed) of information or discussion describing specifics on the SHRM-BoCK’s “HR Expertise; Domains 1 & 2”
  • Provide a minimum of three (3) to four (4) bullet points (more if needed) of information or discussion describing specifics on the SHRM-BoCK’s “HR Expertise: Domains 3”
  • Provide a minimum of three (3) to four (4) bullet points (more if needed) of information or discussion describing specifics on certifying your HRBP’s.

5. Use at least four (4) quality academic resources in this assignment. Note: You may only use the textbook for this course, HR textbooks from other HR courses, or journal articles specifically about HR management. You may also use any of the HR certification references listed in the student guide.

Your assignment must follow these formatting requirements:

  • Select any one of three professional PowerPoint templates provided by the instructor and located in the course information section (Required). Not using any required template will result in 5 deducted points.
  • Have headings for each major section that has the same font and size throughout the presentation. Font preference is Times New Roman and size at least 24 pt and no more than 28 pt.
  • Bullet information aligned neatly and properly using the same font as heading and at least 16 pt and no more than 20 pt. for text.
  • Images may be used but must be professional and relevant to the topic. The source(s) of all images must be credited with both citation and reference. Check with your professor for any additional instructions.
  • Include throughout presentation citations and references for all information received from other sources.
  • All bullet point information must be descriptive and have a minimum of 3-4 full sentences. Presentation notes are not required as long as requirements for bullet points are met.

The specific course outcomes associated with this assignment are:

  • Defend the importance of having a highly-developed staff of HR business partners
  • Convince stakeholders of the value in using the SHRM BoCK model to achieve HR operational success.
 
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APA FORMAT ESSAY Case Study – Eliminating The Gender Pay Gap: Gap Inc. Leads The Way

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A research team led by Kellie McElhaney and Genevieve Smith, including Nitisha Baronia and Krupa Adusumilli, developed this case, assisted by Case Writer Susan Thomas Springer. We would like to give special thanks to the following individuals who provided critical insights at Gap Inc.: Art Peck, Michelle Banks, Debbie Edwards, Nancy Green, Julie Gruber, Dan Henkle, Danielle Katz, Erin Nolan, Andi Owen, Peter Pawlick, Sheila Peters, Lauri Shanahan, Bobbi Silten, Sabrina Simmons, Amy Solliday and Keith White. Copyright © 2017 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored, or transmitted in any form or by any means without the express written permission of the Berkeley-Haas Case Series.

 

July 1, 2017

KELLIE MCELHANEY GENEVIEVE SMITH

Eliminating the Gender Pay Gap: Gap Inc. Leads the Way

 

“If change continues at the slower rate seen since 2001, women will not reach pay equity with men until 2152.”

The Simple Truth About the Gender Pay Gap, Spring 2017 Edition,

American Association of University Women (AAUW)

“Frankly, I would have always assumed that women were getting paid the same amount as men. I mean, they were doing

the same jobs. But, back when we started Gap… I don’t think it occurred to many people that women could be leaders.

I’m glad to know that things have changed.”

Doris Fisher, Co-Founder of Gap Inc. On Monday mornings, one Gap Inc. executive used to open his staff meetings chatting about a topic common across America’s corporate offices—the weekend’s football games. But thanks to Gap Inc.’s inclusive culture, one female employee felt comfortable sharing that the many non-football fans around the table felt left out of that conversation. So, he started warming up his meetings with less gender- specific topics. The corporate culture at Gap Inc. broke gender norms from the beginning. In 1969, Don and Doris Fisher opened the first Gap store in San Francisco as equal partners selling Levi’s and vinyl records simply

B5892

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because they had a hard time buying a pair of jeans. The husband and wife founders grew the company together at a time when there were few women business leaders—yet they made pay equity and female leadership part of the company’s heritage. Today that store has grown into a global brand with e- commerce sites, 3,200 company-operated stores, and about 450 franchise stores in more than 90 countries worldwide. At the time of writing, The Gap Inc., a publicly traded company since 1976, was composed of five divisions: Gap, Banana Republic, Old Navy, Athleta, and Intermix. In 2014, Gap Inc. made history by becoming the first Fortune 500 company to announce that it pays female and male employees equally for equal work, on average across all its locations (controlling for observable variables). They commissioned a leading gender and diversity consulting firm named Exponential Talent to validate the methodology and numbers. Exponential found no meaningful or statistically significant difference in pay by gender across the global organization. Furthermore, when comparing pay of the median male and median female full-time employee, the female to male ratio was at parity,1 signifying the high representation of women at all levels of leadership and in managerial positions. Gap Inc.’s leadership in equal pay and gender equality has been publically recognized—for example, the company won the 2016 Catalyst Award.2 Since Gap Inc.’s announcement, other companies have followed suit in claiming “equal pay,” and the attention towards mitigating the gender pay gap by companies and governments continues to grow. On June 15, 2016, thousands of men and women gathered at the White House for the first United States of Women Summit, discussing issues such as leadership, educational opportunity, and equal pay for women. Leaders and change-makers from around the world—from celebrities such as Oprah Winfrey to political leaders including President Barack Obama—gathered to advance the state of women and the U.S. economy.3 At the conference, 28 companies signed the Equal Pay Pledge4 to take concrete actions, such as conducting annual pay analyses, to lower the national gender wage gap. Gap Inc. took the pledge as well, noting that despite having an exemplary track record for equal pay, they are committed to continuing their work. Gap Inc.’s company culture has enabled women to rise in the ranks through a variety of policies and practices including diminishing psychological barriers, encouraging mentorship, being family-friendly, and more. This culture of collaboration, inclusion, and close relationships – which can be considered more feminine traits – has built itself over time, creating a structure for women’s advancement and equal pay. U.S. Pay Gap History Today, women make up nearly half of the workforce in the United States; however, women continue to earn less than men. In 2016, the U.S. Census Bureau reported that the female-to-male earnings ratio (based on the median earnings of men and women in 2015) is 0.8.5 Even when women do the same jobs as men, and controlling for observable variables, a gap persists: women earn between 93-95% of their

1 Peter Pawlick. Personal Communication, October 31, 2016. 2 See more here: http://www.catalyst.org/media/catalyst-announces-winner-2016-catalyst-award. 3 (2016). The united state of women. The United State of Women. Retrieved from http://www.theunitedstateofwomen.org/. 4 The pledge, which can be taken online, requires that companies “…commit to conducting an annual company-wide gender pay analysis across occupations; reviewing hiring and promotion processes and procedures to reduce unconscious bias and structural barriers; and embedding equal pay efforts into broader enterprise-wide equity initiatives.” Signing companies must also “…identify and promote other best practices that will close the national wage gap to ensure fundamental fairness for all workers.” Businesses that have taken the pledge have noted their specific commitments here. 5 Bernadette D. Proctor, Jessica L. Semega, Melissa A. Kollar. Income and Poverty in the United States: 2015. United States Census Bureau. Retrieved from https://www.census.gov/library/publications/2016/demo/p60-256.html

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male counterparts’ salaries.6 The wage gap, which is due to a variety of variables including social and cultural norms and unconscious bias, results in significant lost wages that add up over a woman’s lifetime and contribute to gender inequality. At the current pay gap, women will not see equal pay in the U.S. until 2059. For women of color, the rate is slower, with black women having to wait until 2124, and Hispanic women having to wait until 2248 for equal pay.7 Historically, there have been two important factors in decreasing the wage gap: the increase of females in the job market and reduction of occupational segregation. Ever since women entered the job market in larger numbers in the 1950s to work during the interwar and World War II periods, the rise of women in the job market has continued. Indeed, between 1947 and 2008, female employment among working-age women increased by approximately 0.6 percentage points per year. This growth has been due to several reasons, including medical advances (e.g., improved contraception and better maternal care) and technological advances that have made childcare and household work easier and more accessible to working women.8 This increased labor participation influenced wage convergence, and legislation for equal pay further pulled women into labor markets. There has been considerable progress in reducing the extent of occupational segregation. Since 1970, women have reduced their over-representation in administrative support and service jobs and have made significant inroads into management and traditionally male professions.9 However, trends have differed across educational groups. Highly educated women have made substantial progress moving into formerly male managerial and professional occupations, while less-educated women have made smaller gains integrating into traditionally male blue-collar occupations.10 Finally, (and related to reductions in occupational segregation) evolving social norms have naturally eased the gender pay gap as well.11

Measurement Methods There are multiple ways to explore “equal pay” and measure the gender wage gap within an organization.12 Organizational Pay Gap Analysis The broadest option is to compare the average salaries that women and men earn across an organization, at all levels. This high-level analysis tends to result in a larger wage gap, as many companies have a disproportionate number of men in higher paying managerial and leadership positions. As a result, women may seem to be earning a lower average salary than men in the company, not necessarily because each

6 C. Corbett and C. Hill. (2012). ERIC—Graduating to a pay gap: The earnings of women and men one year after college. American Association of University Women. 7 (2014). The gender wage gap: 2014. IWPR. Retrieved from http://www.iwpr.org/publications/pubs/the-gender-wage-gap-2014/. 8 C. Olivetti and B. Petrongolo. (2016). The evolution of gender gaps in industrialized countries. Working paper. National Bureau of Economic Research. 9 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 10 F. Blau and L. Kahn (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 11 C. Olivetti and B. Petrongolo. (2016). The evolution of gender gaps in industrialized countries. Working paper. National Bureau of Economic Research. 12 WGEA.Pay equity toolkit. Retrieved on October 12, 2016 from https://www.wgea.gov.au/sites/default/files/pay_equity_tookit_managers.pdf.

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woman is being offered a lower salary than her male counterpart, but because of a leadership gap illustrating that women are not moving up to the higher paying roles in the company. Level Pay Gap Analysis Compare average male and female pay at each level in the organizational hierarchy (analyst, manager, etc.) across all functional verticals, looking at pay gaps within each management tier regardless of their functional division. This mediates for some of the leadership representation gap; however, it does not consider how jobs within different functional divisions may be assigned different market values. Further, it may fail to account for the disproportionately high number of women in back-end or support positions. Like-For-Like Pay Gap Analysis Also called equal pay for work of “equal or comparable value,” this is perhaps the most detailed pay gap analysis and it is at this level of analysis that the gender wage gap often seems most narrow. This illustrates the direct difference in the salary that men and women earn in similar occupations, which is much smaller once the leadership gap is accounted for. Defining work that is of “equal or comparable value” can be difficult and requires a deep level of analysis and understanding of comparable work. The gender pay gap includes both explained (measurable) and unexplained (often difficult to measure) components. Measurable factors (other than type and level of work) include, for example, age, tenure in position, number of subordinates, and geography. Even when all measurable factors are considered, an unexplained gender pay gap persists. This reflects discrimination, implicit biases, social norms, and other factors that are difficult to measure—including possible gender differences in risk-taking, mobility, and ambition.

How Gap Inc. Measures Pay At Gap Inc., managers are provided with pay data for their overall team plus salary information that reflects the external market at minimum once each year during a pay review process. Sabrina Simmons, former CFO of Gap Inc., looked at the entire group as a whole to see where people were ranked and paid when a request for higher pay came in. Through this she examined and corrected for any disparities. Gap Inc. analyzes pay data annually and provides information to empower managers. Initially, Gap Inc. found limited research and a lack of existing methodologies to create a model to examine equal pay. After some study, they chose two methods of analysis. First, they performed organizational pay gap analysis, which shows a ratio of pay for full-time male versus female employees, not controlling for any variables or levels in the organization. Second, they performed like-for-like analysis, which shows a ratio of pay for all male and female employees, controlling for work of equal value and other measurable factors. In 2014, Gap Inc. conducted an analysis of both the median pay and average pay for all 34,114 female versus male full-time employees globally, not controlling for any variables or levels in the organization. The median female to male pay ratio was at parity. The average female to male ratio was slightly lower for women. However, this is representative of the fact that Gap has a higher percentage of women at entry-level positions. Moving into more senior positions in headquarters, the percentage of women and men even out.

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Another analysis was conducted to find the pay ratio between male and female employees when controlling for levels and measurable factors for all 129,387 employees (excluding Senior Vice Presidents and above), including part-time workers.13 In the case of part-time workers, hourly rates were annualized at 40 hours per week and monthly rates were annualized. Gap used a geographically sensitive method of comparing employee pay rates in like jobs across the entire organization. Pay ratios for male versus female employees were developed for each like job by controlling for select variables, including region (as the cost of labor varies by location). Those jobs were then grouped within defined job levels based on the employee’s contribution level,14 job responsibilities and skill/experience required. Other variables including time in position and team size were not controlled for in the analysis but provided additional context. The findings were statistically validated by an external management firm, that found that no significant or meaningful gender wage difference at Gap Inc. globally or within any of their major regions. While there have been minor fluctuations by level over the past 3 years, the results are consistent.

Gap Inc. Empowers Managers and Employees Gap Inc. strives to minimize unconscious bias impacting pay through several mechanisms. First, Gap Inc. provides leaders with pay data for their teams at least once per year, and includes market-relevant pay ranges for each role, taking into account geography. They also provide managers with criteria and filters in making pay decisions. Not only do these practices reduce unconscious bias in pay, but according to Mercer (2016), organizations with a robust pay equity process and a dedicated team also have greater female representation. Mercer highlights that only 35% of organizations report a pay equity analysis process built on a robust statistical approach.15 The team that oversees pay at Gap Inc. shares with managers and HR partners where their employees are positioned relative to pay ranges that reflect the external market. Managers are provided with a distribution of employee pay in the pay range and are then free to make decisions in terms of paying talent appropriately. The data does not necessitate action from managers, but rather provides them with data to make informed decisions. A promotion/equity budget is a part of the overall annual pay increase budget and can be used to address equity issues. In discussing the pay data provided to managers, Senior Vice President of Loss Prevention at Gap Inc., Keith White says: “When operating eyes wide open and not just treating people as if they are in a vacuum, gender inequality in pay becomes a non-issue.” Gap Inc. has eliminated performance ratings in HQ and Distribution/Call Centers, and is in the process of expanding this change to stores in several brands. Eliminating performance ratings, which can have gender biases baked into them, does not mean that Gap Inc. has walked away from a focus on performance against goals. They established a Company performance standard and encourage managers to have more frequent and honest touch-base conversations about performance against goals. A team from Stanford recently analyzed the language of hundreds of performance reviews from technology and professional-service firms and found that managers are significantly more likely to critique female

13 Peter Pawlick. Personal Communication, October 17, 2016. 14 To determine contribution level, Gap has a methodology to level jobs looking at characteristics such as leadership, functional knowledge, area of impact, interpersonal skills, etc. These characteristics are then scored and ranked to drive the contribution level. There is inherently some subjectivity in this process. 15 Mercer. (2016). When women thrive, businesses thrive.

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employees for coming on too strong. In addition, women’s accomplishments are more likely to be seen as the result of team—rather than individual—efforts.16 Gap Inc. does not require that applicants provide previous salary information when submitting an employment application. One positive outcome is that for applicants who have been unfairly compensated for their skill and experience in prior positions, their new salary is not anchored to the past. The impact of this hiring policy has been most pronounced among women and minorities.17 Typically at Gap Inc., applicants choose to provide salary information and it is discussed during the hiring process, potentially used as a factor in salary negotiations. Also, Gap Inc. publishes the company’s compensation practices on GapWeb (the Company’s intranet site), which employees can access to understand the company’s pay practices. However, while managers receive pay data for employees on their team, employees can’t see specific pay ranges unless their managers choose to provide them with that information.

The Business Case for Gender Pay Equality Art Peck, CEO of Gap Inc., says other companies are realizing that recruiting and retaining more women capitalizes on talent and produces a win-win, because diverse teams result in stronger financial performance. Morgan Stanley’s 2016 report “Why it Pays to Invest in Gender Diversity” reveals that higher gender diversity translates to increased productivity, greater innovation, better decision making, and higher employee retention and satisfaction. Companies with more diversity tended to have a higher level of forward one-year return on equity (ROE), on average 0.7% better than their regional sector peers and 1.1% above those with low representation of women in the workplace.18 Simply put, Peck says, “What’s good for women is good for business.” Achieving equal pay at the organizational level signals more equal female representation at higher levels of the company. Evidence is becoming clearer that gender diverse teams and women in leadership make business sense by creating teams with a higher level of collective intelligence and skills. Diverse teams are smarter, more effective,19 and more creative.20 Indeed, gender diverse workforces perform better financially: a 2015 McKinsey study found that companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry means.21 Research continues to accrue regarding the business benefits for women in leadership positions. Companies with more women in executive management have been shown to financially outperform companies that have no women in senior roles. According to a U.S. study, Fortune 500 companies with the highest representation of women on their top management teams experienced better financial performance on measures of ROE (35.1% higher) and Total Return to Shareholders (34% higher) than

16 R. Silverman. (2015). “Gender bias at work turns up in feedback.” Wall Street Journal. Retrieved from http://www.wsj.com/articles/gender-bias-at-work-turns-up-in-feedback-1443600759. 17 (2016). Leave no one behind: A call to action for gender equality and women’s economic empowerment. United Nations Secretary General’s High-Level Panel on Women’s Economic Empowerment. Retrieved from http://www.womenseconomicempowerment.org/reports/. 18 Morgan Stanley (2016). Why it Pays to Invest in Gender Diversity. https://www.morganstanley.com/ideas/gender-diversity- investment-framework 19 A. Williams. (2010). Evidence for a Collective Intelligence Factor in the Performance of Human Groups. Science, 330: 686 20 J. Marinova, J. Plantegna, and C. Remery. (2016). Gender diversity and firm performance: evidence from Dutch and Danish boardrooms,” The International Journal of Human Resource Management, 27/15: 1777-1790. 21 (2015). Diversity matters. Mckinsey & Company.

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companies with the lowest women’s representation.22 Recent data from the International Monetary Fund (IMF) (2016) reveals that the more women in senior managerial positions and in corporate boards, the more profitable firms are.23 Further, firms with a larger share of women in senior roles have a significantly higher return on assets (ROA), even within narrowly defined industries.24 At the very top, the correlation between women at the C-suite level and firm profitability is demonstrated repeatedly, and magnitude of the estimated effects is not small: A profitable firm at which 30% of C-suite leaders are women could expect to add more than 1 percentage point to its net margin (which represents a 15% boost to profitability) compared to otherwise similar firms with no female leaders.25 Other companies, whose leaders recognize that doing the right thing is also good for business, are acting to reduce gender inequality. Marc Benioff, Co-Founder and CEO of Silicon Valley tech giant Salesforce, launched Women Surge in 2013 with the goal of achieving 100% equity for men and women in pay promotion and requiring meetings to include 30% women.26 HeForShe, a global movement that engages men for gender equality, has ten CEO Corporate Champions spanning ten industries, who employ more than one million people and have committed to accelerate progress towards parity in their workforce.27 Equal Pay Barriers Various factors inhibit women from entering the workforce—particularly full-time jobs—and impact their ability to advance. Cultural and Societal Barriers Many women who participate in the job market tend to self-select for lower paying, part-time, or flexible jobs—or stay out of the job market—largely due to unpaid care responsibilities and domestic work. Part- time work enables flexibility but often at the cost of lower hourly pay, reduced access to social protection, and weakened long-term career prospects.28 In this vein, women face a “motherhood penalty,” a difference in earnings between women with and women without children, that can be quantified. This results from attempts to balance work and family responsibilities that may involve part-time employment or career breaks. For the OECD countries, the gender pay gap increases steeply during childbearing and childrearing years.29 A business poll of the

22 Catalyst.org. (2004). The bottom line: Connecting corporate performance and gender diversity. 23 IMF. (2016). Unlocking female employment potential in Europe: Drivers and benefits. 24 L. Christiansen, L. Huidan, J. Pereira, P. Topalova, and R. Turk. (2016). Gender diversity in senior positions and firm performance: Evidence from Europe. IMF. 25 M. Noland, T. Moran, and B. Kotschwar. (2016). Is gender diversity profitable? Evidence from a global survey. Working paper, Peterson Institute for International Economics. 26 J. Bort. (2015). This is the woman that convinced Marc Benioff to guarantee equal pay for women at Salesforce. Business Insider. Retrieved from http://www.businessinsider.com/leyla-seka-inspired-benioff-on-equal-pay-2015-4. 27 Corporate Champions include: AccorHotels, Barclays, Koch Holding, McKinsey & Company, PwC, Schneigder Elextric, Tupperware Brands, Twitter, Unilever, and Vodafone. (2016). Corporate parity report. HeForShe. 28 ILO. (2016). Women at work: Trends 2016. J. Kahn, J. García-Manglano, and S. Bianchi. (2014). “The motherhood penalty at midlife: Long-term effects of children on women’s careers.” Journal of Marriage and Family, 76/1: 56-72. 29 OECD. (2012). Lack of support for motherhood hurting women’s career prospects, despite gains in education and employment. Retrieved from http://www.oecd.org/newsroom/lackofsupportformotherhoodhurtingwomenscareerprospectsdespitegainsineducationandemploym entsaysoecd.htm.

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Department for International Development (DFID) in the United Kingdom revealed that the three most commonly cited barriers preventing women from advancing in the workplace were all related to the difficulties of balancing domestic and professional responsibilities.30 There is also some evidence of a premium for men, highlighting a positive relationship between a man’s wage and his number of children.31 Occupational Segregation Academic sorting and choices in education lead to “occupational segregation” when girls become older.32 Although women represent most of those in tertiary education globally, female university graduates remain less likely to receive degrees in scientific, technical, engineering, and mathematical (STEM) disciplines associated with careers in higher paying fields. Women are more likely to work in sectors that have lower average pay. Importantly, occupational choice is affected by social norms (tracing back to academic sorting), stereotypes, lack of role models, and lack of information about opportunities and pay differentials.33 Within all industries, a gender pay gap exists, although with significant variation. Interestingly, female- dominated industries—such as healthcare, social assistance, and insurance services—have particularly high gender pay gaps, likely because a fundamental issue remains that women are clustered in comparatively lower positions even in these industries.34 A study of U.S. census data from 1950 to 2000 found that when women moved into industries in large numbers, companies in those industries began paying less even after controlling for education, work experience, skills, race, and geography. This research demonstrates that when women take over a male- dominated field, pay for an industry drops by up to 57% (as is the case in the field of recreation). On the flipside, female-dominated industries that become dominated by men (e.g., computer programming) see an increase in pay.35 Research highlights that employers placed a lower value on work done by women.36 Employment in Lower-Level Positions Regardless of the sector, women tend to be employed in lower-level positions. There is a persistent gender gap at higher ranks of management and leadership. Data of Fortune 500 companies from 2011 reveal that while women are nearly half of managers, they are only 14.3% of executive officers, 3.8% of CEOs, and hold 16.6% of board seats.37 Occupation is the largest single factor accounting for the gender pay gap, with the second being industry—together they contribute to over 50% of the gender wage gap (see figure 3). Research reveals that the largest gender pay gap is in higher-paying white collar jobs.38 30 DFID. (2016). Women’s economic empowerment: DFID business survey. 31 ILO. (2016). Women at work. 32 S. Doughty. (2015). Why do we have a pay gap? The diversity perspective. Retrieved from http://www.victoria.ac.nz/som/clew/files/3-Doughty-Equal-Pay-Presentation-0515-.pdf. 33 McKinsey & Company. (2013). Women matter 2013: Gender diversity in top management: Moving corporate culture, moving boundaries. 34 Commonwealth Government of Australia. (2013). What is the gender pay gap? Workplace Gender Equality Agency. Retrieved from https://www.wgea.gov.au/addressing-pay-equity/what-gender-pay-gap. 35 R. Oldenziel. (2001). Making technology masculine: Men, women and modern machines in America, 1870-1945. Amsterdam University Press. 36 P. Allison, P. England, and A. Levanon. (2009). “Occupational feminization and pay: Assessing causal dynamics using 1950- 2000 U.S. Census Data,” Social Forces, 88/2: 865-891. 37 (2011). Fortune 500 women executive officers and top earners. Catalyst Census. 38 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf.

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Lower representation of women at higher levels could be due to limited female talent in the pipeline or barriers that prevent women’s advancement, such as the glass ceiling. These barriers include discrimination, work-family conflicts, and reduced interest in high-level positions. Oftentimes higher- paying white-collar jobs demand longer and less flexible hours resulting in work-family conflicts.39 In addition, several studies find that women are less likely to be promoted, all else equal, while other studies highlight that women instead exit at higher rates by choice.40 Lower proportions of women in managerial and leadership roles further perpetuate pay and promotion gaps, because managers often promote based on those who meet their own characteristics. This trend, known as “ingroup favoritism,” prevents women from climbing up the career ladder in companies where there are not many women in leadership.41 Personal and Psychological Traits Research finds that men place a higher value on money, have higher self-esteem, believe that they control their own fate, and are less risk averse, more competitive, more self-confident, and more disagreeable than women. These traits can contribute towards the pay gap. For example, women are slightly less likely to opt for jobs that include performance pay, as they are less attracted to competitive environments than men, which may decrease their ability to overcome the wage structures that they are already within.42 In addition, women are less likely than men to negotiate for themselves.43 When they do choose to negotiate, one study found that women ask for an average of $7,000 less than the men.44 Also, their managers are less likely to want to work with them due to violating gender norms about appropriate female negotiating behavior.45 Discrimination and Unconscious Bias Unconscious biases are the automatic, mental short-cuts used to process information and make decisions quickly. These biases are based on experience and cultural stereotypes. Unexplained factors contributing to the gender pay gap (or unconscious bias) accounts for 38% of the gender pay gap overall.46 (Exhibit 1)

39 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 40 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 41 “Why the ‘position gap’ is more important than the wage gap for women in tech.” Washington Post. Retrieved on October 12, 2016 from https://www.washingtonpost.com/news/the-switch/wp/2015/04/14/why-the-position-gap-is-more-important-than-the- wage-gap-for-women-in-tech/. 42 A.Manning, and F. Saidi. (2010). “Understanding the gender pay gap: What’s competition got to do with it?” Industrial and Labor Relations Review, 63/4: 681-698. 43 L. Babcock. (2003). “Nice girls don’t ask.” Harvard Business Review. Retrieved from https://hbr.org/2003/10/nice-girls-dont- ask. 44 NPR.org. Why women don’t ask for more money. Retrieved on October 12, 2016 from http://www.npr.org/sections/money/2014/04/08/300290240/why-women-dont-ask-for-more-money. 45 (2016). Leave no one behind: A call to action for gender equality and women’s economic empowerment. United Nations Secretary General’s High-Level Panel on Women’s Economic Empowerment. Retrieved from http://www.womenseconomicempowerment.org/reports/. 46 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf.

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GAP INC. 10

Factors Supporting Equal Pay Diving deeper into Gap Inc.’s culture, practices and policies illustrate how other companies can achieve equal pay and a higher representation of female leadership.

Part of the DNA Gap Inc. was formed on the principles of equality from day one when founders Don and Doris Fisher created the company by each investing an equal amount of money to open their first store.47 Both were heavily involved in the development of the Gap brand and laid the groundwork for a culture of inclusivity and equality. Dan Henkle, former President of Gap Foundation and Senior Vice President of Global Sustainability says, “Gap Inc. has had senior women around the table from the beginning, including Doris. Both made decisions and set the tone that all employees have a voice, and that no matter where one sits in the organization he or she can influence where the company is going.” Amy Solliday, Vice President of Old Navy Store Operations says, “The moral compass as a company has absolutely come from the Fishers. Don and Doris had an equal partnership.” Solliday sees these core principles in action when employees are given raises and promotions based on their own merits, leadership abilities and skills. Solliday says that gender equality and diversity are important topics to female Gap Inc. employees, specifically career growth and how to talk to managers about compensation. In describing the Gap Inc. culture today, leadership highlights a culture with traditionally feminine leadership characteristics. The most common words describing the culture are: collaborative, team/relationship-driven, and nice/friendly. The company was also consistently described as values- driven. Gap Inc.’s values extend to its Diversity and Inclusion (D&I) Council that guides the company’s strategy and serves as an advisory group, comprised of executives throughout the company that work closely with human resources, corporate, and store leaders. Keith White, who leads the D&I Council, says they are “not your father’s diversity council” and aren’t afraid to lean in on big issues, from racially motivated shootings to discriminatory bills against transgender people. The Council connects its activities with business outcomes and supports employee activities such as business resources groups (BRGs), which provide opportunities for learning, mentoring, and networking. The largest BRG is focused specifically on women: Women in Leadership (GapWIL). It has more than 800 male and female members, including members from headquarters, field, and global offices. GapWIL was first envisioned to help women wanting to progress to senior leadership but soon included other topics of importance to employees including flexibility, pay, and mobility. For example, GapWIL allows women to network while learning about personality types and tendencies in the workplace. This heritage story has stuck with the company and influenced principles and accompanying practices over time and geography. Sheila Peters, Senior Vice President of Human Resources at Old Navy, shared an illustrative example: “When working with Bill Fisher (son of Don and Doris) to expand the company to Japan, where there are immense gender inequalities in the world of work, Gap had the opportunity to hire female talent at a lower price than male counterparts. In response to being encouraged to do so, Bill Fisher responded, ‘Why would we do that?’”

47 Gender equality principles: Gap Inc. equal pay for equal work. Gender Equality Principles. Retrieved on October 13, 2016 from http://genderprinciples.org/index.php?p=107.

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GAP INC. 11

Role Models Along with history is the importance of role models. As of October 2016, 53% of Gap Inc.’s leadership team (8 of 15) were women, and 80% of brand presidents (4 of 5) were women48—compared to 13% of the average number of women executives in the retail sector.49 In recruiting and retaining women, representation of women in leadership proves critical. A 2016 study by Rockefeller Foundation finds that 66% of Americans believe it is especially important for women starting their careers to have women in leadership positions as role models. The desire is especially immense among millennial women (82%). The same study found that the presence of women in leadership positions is an important consideration in choosing where to work—with 76% of women saying it is somewhat important to them.50 Sheila Peters says there have “always been strong women in leadership who attracted other women.” Simply, more women in leadership roles provide more motivation for women to succeed. A Catalyst survey found that 64% of women see the absence of role models as a barrier to their career development.51 Overall, having women at all levels may contribute towards a culture in which men are accepting of women as leaders and women are confident that they can rise in the ranks. This may create a cyclical effect of gender equality and inclusion. CEO Peck along with many male and female Gap Inc. executives say gender inequality at their company is simply “a non-issue.” Peck says women in leadership is a priority and that he values the collaboration and leadership styles in many women that “bring groups together.” Peck has promoted and hired more women than men to the leadership team, and in October 2016, 80% of brand presidents were women. Peck says, “It’s about core values and the best talent.”

Female Representation In addition to the role model impact of having women in leadership, research shows that when women are more highly represented at higher ranks, women at the lower ranks fare better in terms of representation and wages.52 Women make up 75% of employees at Gap globally, ensuring a strong female pipeline. (Exhibit 2) Indeed, over 80% of current female and 74% of current male executives were promoted internally or rehired. This representation does not extend to the board of directors, where women comprise 27% (or 3 of 11) members (2016); however, this is still above the average of 16.6% women on Fortune 500 boards. While gender equality and representation through the ranks has not been a specific effort or targeted initiative, bringing women on the board has been.

Mentorship and Sponsorship A 2016 study by Rockefeller Foundation found that among women who had mentors in the workplace, 63% say their mentor was another woman; this number rises to 72% for millennial women.53 At Gap Inc.,

48 (2016). Internal data, Danielle Katz, Gap. Email. 49 Women in leadership. U.S. Chamber of Commerce. Retrieved on October 16, 2016 from https://www.uschamberfoundation.org/sites/default/files/legacy/cwb/Women_in_Leadership_Research_Center_for_Women_in_ Business.pdf. 50 Rockefeller Foundation & Global Strategy Group. (2016). Women in leadership: Why it matters. Retrieved on October 13, 2016 from https://assets.rockefellerfoundation.org/app/uploads/20160512082818/Women-in-Leadership-Why-It-Matters.pdf. 51 McKinsey & Company. (2007). Women matter: Gender diversity, a corporate performance driver. 52 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 53 (2016). Women in leadership: Why it matters. Rockefeller Foundation & Global Strategy Group. Retrieved on October 13, 2016 from https://assets.rockefellerfoundation.org/app/uploads/20160512082818/Women-in-Leadership-Why-It-Matters.pdf.

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GAP INC. 12

mentorship and sponsorship of young women has been a trend over time. Solliday recalled a mentor of hers from the past who, “Saw something in me that she believed in… And she gave me a sense of confidence that I might not have had.” In addition to mentorship, the importance of sponsorship is seen in the promotion of women and the development of a strong pipeline of female talent. Sponsors are frequently managers who believe in the personal value and potential of their protégés.54 They can decide on the promotion of their protégés and allow them to act independently and to take risks. In addition to mentoring and sponsoring other women, female leaders have the ability to affect policy and cultural change within the company. Nancy Green, President of Athleta, recalls having fewer female role models earlier in her career that were working mothers, which has changed over time. The company realized that “they needed to adapt and be a company that could support women having children.” Green was one of the trailblazers who helped adapt the company to be more accommodating for women with children. After having her first child and deciding to resign, a mentor told her, “You have so much potential… If we can’t figure it out then shame on us. Come back and give it a try.” Green stayed and has since climbed through the ranks, now serving as President & CEO of Athleta. Overall, women in leadership at Gap Inc. have historically asked about, observed, and understood what other women need— and acted on this information. Women at Gap Inc. talk about trying to leave only to have their managers ask what would it take for them to stay? Green considers it important to “pay it forward” so she mentors and sponsors other women. Also, she ensures that when women on her team have kids, she creates a supportive environment including the same conditions that were created for her, such as flexible working schedules. Green is not alone. Andi Owen, former Global President of Banana Republic, describes it as a “huge responsibility to pave the way for those behind you” through giving advice and mentoring people informally and formally. Owen notes that at any one time, she has four to 10 mentees that she supports. Former Executive Vice President of Global Talent and Sustainability, Bobbi Silten, encourages women to “fight for their worth” and respects women asking for higher salaries. This open encouragement is important: studies reveal that when it is explicitly stated that wages are negotiable, the gender difference in negotiation disappears and even reverses; suggesting that, for women, the gender difference in negotiation can be overcome if it’s signaled to be appropriate.55

Flexible and Family-Friendly Practices Flexible work has become the norm in many departments of Gap Inc. “If you have to drop off your kids in the morning, it’s fine,” says Solliday. “It’s no one’s business what you are doing, as long as you are getting your work done. Whether you are male or female, you have a life and obligations that don’t fit on the weekends.” Silten uses a “three-tier escalation policy” so staff can enjoy a child’s soccer game without feeling they need to constantly check their devices. Employees get an email if something is not urgent, a text if it’s somewhat urgent, and a call if it needs immediate attention. Silten says that working styles regarding 54 S. Hewlett. (2013). Forget a mentor, find a sponsor: The new way to fast-track your career. Boston, MA: Harvard Business School Publishing Corporation. 55 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf.

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GAP INC. 13

flexible time depend on the manager. She tells employees: “I’m not interested if you’re at your desk at 9. Get your work done, that’s what matters.” Flexible schedules aren’t just important for women but for all employees. Keith White, father of three, says having a “flexible work schedule was invaluable. I remember taking half the calls from the truck in the parking lot while my son was playing baseball. Gap Inc. really promotes the flexible schedule and is able to leverage technology to allow people to manage their lives with more balance and freedom.” The fact that employees in leadership positions are also taking advantage of flexible work signals affirms that it is an appropriate behavior for all employees. Leadership has continued to shape culture over time and has influenced HR policies to provide support systems for women, specifically mothers. One specific example of leadership influencing policies and culture is demonstrated by Lauri Shanahan, a past Chief Administrator Officer and Chief Legal Officer at Gap. She took advantage of a family-friendly approach to maternity leave which she created. Gap Inc.’s phase in/phase out program allows employees to temporarily reduce their work hours before, during or after maternity or family leaves of absence. Both Gap Inc. employees and existing research show that flexible working opportunities are important to female representation at higher levels of a company. A 2016 survey of 1,030 individuals in Australian business, government, and not-for-profit organizations by Bain & Company found that: “An organization with flexible arrangements as the norm signals a workplace with progressive policies and actions, and more engaged employees.” Further, women working flexibly were stronger advocates for their organizations than women who were not working flexibly, and are equally, if not more, committed to reaching their full career potential.56 While flexibility can be important for women in particular, research highlights that choosing flexibility can traditionally result in wage penalties because it comes at the cost of choosing part-time work or lower paying sectors and occupations.57 In 2009, Gap Outlet implemented a pilot program offering flexible scheduling called the Results-Only Work Environment (ROWE). The results-driven model allows employees to work when and where they like, given they achieve expected business results. Following the positive results of the pilot, which included higher job and life satisfaction levels, in 2010-2011 the company expanded ROWE and encouraged individual business leaders to adopt their own flexible work arrangements based on their business needs. In the U.S., departments that elected to participate in ROWE appointed a lead who attended training through HR and then introduced ROWE to interested team members. The concept of ROWE is also introduced during new employee orientation for non-retail employees58 who are encouraged to raise the subject directly with their managers. The company has also made efforts to improve scheduling stability and flexibility for store employees by providing advance notice of work schedules and eliminating unpredictable on-call shifts. The range of Gap Inc.’s available family-friendly policies varies by location, based on local policies and requirements. For example, in the UK, Gap Inc. is currently one of only a few retail organizations offering to match enhanced maternity pay to both parents under the local Shared Parenting Leave policy. Gap Japan offers flexible working options and summer hours, including half-day Fridays during the summer, that give employees more autonomy.

56 Bain & Company. (2016). The power of flexibility: A key enabler to boost gender parity and employee engagement. Retrieved from http://www.bain.com/publications/articles/the-power-of-flexibility.aspx. 57 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 58 Non-retail employees include all employees that do not work in physical Gap retail stores (e.g., marketing, corporate, legal, finance departments).

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GAP INC. 14

In addition to maternity and paternity leave, companies need to be aware of and work to combat maternity/paternity leave bias, which is often an unconscious byproduct on the part of managers and peers. Employees who take maternity/paternity leave tend to suffer disproportionately lower ratings when it comes time for promotions or performance evaluations primarily because they are compared with their peers who did not take any time off. In a Mercer (2016) survey, only 29% of organizations said they give their managers training to counter unconscious bias and support employees through the maternity/paternity leave and return-to-work processes. Companies should thus include training for managers on unconscious bias related to maternity/paternity leave, and how to support employees in the return to work. Overall, Gap Inc. leadership emphasizes that the culture celebrates new parents. Peters says, “When someone has a baby, there is no bias about it… It’s seen as an opportunity for another person to get an opportunity.” This “glass-half-full perspective” allows other employees to take on greater roles and prove themselves. Finally, Gap Inc. has several mechanisms to support child and elderly care.59 First, U.S. employees, including part-time and seasonal workers, can register for free on Care.com, which is a resource and referral service for child and elder care, as well as other support services such as pet care and personal care. Second, for full-time U.S. employees, Gap Inc. offers 10 subsidized back-up childcare visits per employee per calendar year when an employee’s regular care is unavailable. Third, full-time U.S. employees have preferred and priority access to day care: if employees enroll in one of the many Gap Inc. partner centers, registration fees are credited upon enrollment and certain centers offer a tuition discount.60 Gap Inc. executives who are mothers have emphasized the value of a childcare center near headquarters that is a partner of Gap Inc. Providing paid paternity leave helps distribute childcare more evenly between parents, tackles gender stereotyping, and increases a mother’s productivity.61 Offering paid paternity leave is not a novel concept: over half of OECD countries offer fathers paid paternity leave.62 There are benefits for both the parents and the workplace. For example, in Sweden, each additional month a father remained on parental leave increased a mother’s earnings by almost 7%.63 In addition, while flexibility is critical to keeping a strong pipeline of female staff through the leadership ranks, it’s valuable for companies to provide some boundaries beyond office hours and weekends. Technological advances have blurred work/home boundaries and encourage consistent connection. Given the societal and cultural norms that place higher expectations on women to care for children, elderly, and

59 It is important not only to have support for caring of children, but also the elderly; caring for the elderly may reduce female labor force participation and hours worked. 60 (2016). Gap policies. Personal communication. 61 (2016). Leave no one behind: A call to action for gender equality and women’s economic empowerment. United Nations Secretary General’s High-Level Panel on Women’s Economic Empowerment. Retrieved from http://www.womenseconomicempowerment.org/reports/. 62 OECD. (2016). Backgrounder on father’s leave and its use. Retrieved from https://www.oecd.org/els/ family/Backgrounder- fathers-use-of-leave.pdf. 63 (2016). Leave no one behind: A call to action for gender equality and women’s economic empowerment. United Nations Secretary General’s High-Level Panel on Women’s Economic Empowerment. Retrieved from http://www.womenseconomicempowerment.org/reports/.

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GAP INC. 15

the household, women in leadership ranks will continue to face challenges in balancing work and life responsibilities until these norms change. For Every Generation Gap Inc. has stayed ahead of its time to embrace the next generation of employees and customers. Nobody knows that better than Nancy Green, who began as a merchandising trainee with Gap in 1986, worked her way up through multiple Gap Inc. divisions plus two other retailers, became the President and CEO of Athleta, and had four children along the way. Through the years, Green has thrived in a culture where she views the core values as challenging, dynamic, and supportive. Employees who weren’t in tune with that spirit became dinosaurs who didn’t last. Today’s Gap Inc. leadership, true to the company’s pioneering founders, continues to look ahead at cultural expectations and best business practices to stay progressive tomorrow. Case Discussion Questions 1. Gender equality and women in leadership have been part of Gap’s DNA since it was founded in 1969

by a husband and wife team. Since most companies lack that cultural heritage, how would you lead your company to instill the value of pay equality? What obstacles in corporate culture and hiring and promotion practices would you have to change?

2. Is it feasible to change a company’s culture around diversity and inclusion, or does this have to be

something that is instilled from when a company is founded? 3. One particularly important issue is that women tend to leave the workforce and not return in their

child-bearing years, or feel that they fall behind in this time (note, this stems from women tending to be the primary caretakers and conducting the majority of “unpaid care”). What are some ways companies can support new parents who take parental leave and provide an environment to keep those workers in the workforce? What are the larger cultural shifts that are needed? What roles can and should companies play in tackling these larger cultural shifts?

4. Do you think equal pay should be examined at the organizational level or at the like-for-like

level? What factors in compensation (other than simply pay) could and should be analyzed in pay reviews?

5. Some cities, states, and countries have moved to require companies to gather pay data and report

publicly. Do you think that this should be a role of government? Do you think this approach will work? Do you think the carrot or the stick is a better method?

6. What may be some of the unintended consequences of attempts to mitigate the gender pay gap? How

can we ensure that conversations about the gender pay gap also recognize that certain minorities, particularly Hispanic and African American, make much less?

7. How could Gap continue to improve its pay equity processes?

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GAP INC. 16

Exhibit 1 Explanatory Variables for the Gender Wage Gap64

Variables 2010 Effect of Gender Gap in Explanatory Variables (% of Gender Gap Explained)

Education -5.9% Experience 14.1% Region .3% Race 4.3% Unionization -1.3% Industry 17.6% Occupation 32.9% Total explained 62% Total unexplained 38% Total pay gap 100%

Source: IZA Exhibit 2 Average corporate talent pipeline vs. Gap Inc.’s talent pipeline 65

Source: Women in the Workplace

64 F. Blau and L. Kahn. (2016). The gender wage gap: Extent, trends, and explanations. IZA, No. 9656. Retrieved from http://ftp.iza.org/dp9656.pdf. 65 Women in the Workplace, in which LeanIn.org and McKinsey examined the employee pipeline of 118 corporations.

0

20

40

60

80

Entry-level Manager/ Sr. Manager

Vice Presidents

C-Suite

45 37

17 17

73 61.7

51 53

% w

om en Avg. Pipeline, 2015, %

Gap Inc. Pipeline, 2016, %

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GAP INC. 17

Exhibit 3 What are other companies doing? To make the transition from childbirth to working more accessible to new parents, Salesforce introduced a gradual return program that offers new parents the flexibility to work reduced hours—still at full pay—for the first four consecutive weeks of returning to work. Accenture, through its Maternity Returners Program, provides career guidance to newly returning mothers to help them transition back into their roles.66 Sources: Salesforce, Accenture Various companies have instituted childcare support structures that span over the course of parenthood for many women and men. Child care options can range anywhere between cash bonuses as seen with Facebook where couples who give birth or adopt get $4,000 in “baby cash,” to “on-campus child care and “mother’s rooms,” as seen at Google. Patagonia, a leader in the “on-campus child care” space has found that 100% of moms have returned to work at Patagonia over the past 5 years after they instituted an on-site child care center. Patagonia has demonstrated a business case for on-site childcare through tax benefits, increased employee engagement, and employee retention.67 Sources: Fortune, Fast Company Google guarantees birth moms receive 18 weeks of paid maternity leave, up from 12 weeks in 2007. Google’s increase in paid maternity has led to “new mothers at Google being no more likely to quit than the average employee.” Google also offers primary caregivers, regardless of gender, up to 12 weeks of paid baby-bonding leave. This includes adoptive and surrogate caregivers. Microsoft offers 12 weeks of full paid maternity and paternity leave, with an additional eight weeks of paid leave for mothers. Outside of the tech sector, Bank of America, for example, offers 16 weeks of paid maternity, paternity, and adoption leave.68 Sources: Bohnet, I., Entrepreneur

66 (1) “Equality at Salesforce: The Equal Pay Assessment Update,” Salesforce Blog, accessed October 12, 2016, https://www.salesforce.com/blog/2016/03/equality-at-salesforce-equal-pay.html. (2) Accenture, “Accenture Careers for Women,” accessed October 12, 2016, https://www.accenture.com/us-en/careers/team-culture-diversity-women#block-empowering-women. 67 (1) Fortune, 2013: http://fortune.com/2013/10/14/which-tech-company-offers-the-best-child-care/. (2) Fast Company, 2016: https://www.fastcompany.com/3062792/second-shift/patagonias-ceo-explains-how-to-make-onsite-child-care-pay-for-itself_. 68 Source: (1) Bohnet, I., 2016, “What Works: Gender Equality by Design.” (2) https://www.entrepreneur.com/slideshow/249467

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  • Measurement Methods
  • How Gap Inc. Measures Pay
    • Gap Inc. Empowers Managers and Employees
  • The Business Case for Gender Pay Equality
    • Part of the DNA
    • Female Representation
    • Mentorship and Sponsorship
    • Flexible and Family-Friendly Practices
 
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Case Study C W Williams Community Center: A Community Asset

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Bright Dark Blues Grays Night

16 CASE C. W. Williams

Health Center: A Community Asset

The Metrolina Health Center was started by Dr. Charles Warren “C. W.” Williams and several medical colleagues with a $25,000 grant from the Department of Health and Human Services. Concerned about the health needs of the poor and wanting to make the world a better place for those less fortunate, Dr. Williams, Charlotte’s first African American to serve on the surgical staff of Charlotte Memorial Hospital (Charlotte’s largest hospital), enlisted the aid of Dr. John Murphy, a local dentist; Peggy Beckwith, director of the Sickle Cell Association; and health planner Bob Ellis to create a health facility for the unserved and underserved population of Mecklenburg County, North Carolina. The health facility received its corporate status in 1980. Dr. Williams died in 1982 when the health facility was still in its infancy. Thereafter, the Metrolina Comprehensive Health Center was renamed the C. W. Williams Health Center.

“We’re celebrating our fifteenth year of operation at C. W. Williams, and I’m celebrating my first full year as CEO,” commented Michelle Marrs. “I’m feeling really good about a lot

This case was written by Linda E. Swayne, The University of North Carolina at Charlotte, and Peter M. Ginter, University of Alabama at Birmingham. It is intended as a basis for classroom discussion rather than to illustrate either effective or ineffective

handling of an administrative situation. Used with permission from Linda Swayne.

C E N T E R : H E A LT H A C O M M U N I T Y A S S E T C . W. W I L L I A M S

Exhibit 16/1: C. W. Williams Health Center Mission, Vision, and Values Statements

Mission

To promote a healthier future for our community by consistently providing excellent, accessible health care with pride, compassion, and respect.

Values

Respect each individual, patient, and staff member as well as our community as a valued entity that must be treasured. Consistently provide the highest quality patient care with pride and compassion. Partner with other organizations to respond to the social, health, and economic development needs of our community. Operate in an efficient, well-staffed, comfortable environment as an autonomous and financially sound organization.

Vision

Committed to the pioneering vision of Dr. Charles Warren Williams, Charlotte’s first Black surgeon, we will move into the twenty-first century promoting a healthier and brighter future for our com munity. This means: C. W. Williams Health Center will offer personal, high-quality, affordable, comprehensive health services that improve the quality of life for all. C. W. Williams Health Center, while partnering with other health care organizations, will expand its high-quality health services into areas of need. No longer will patients be required to travel long distances to receive the medical care they deserve. C. W. Williams Health Center will come to them! C. W. Williams Health Center will be well managed using state-of-the-art technology, accelerating into the twenty-first century as a leading provider of comprehensive community-based health services. C. W. Williams Health Center will be viewed as Mecklenburg County’s premier community health agency, providing care with RESPECT: R eliable health care E fficient operations S upportive staff P ersonal care E ffective systems C lean environments T imely services

of things – we are fully staffed for the first time in two years, and we are a significant player in a pilot program by North Carolina to manage the health care of Medicaid patients in Mecklenburg County (Charlotte area) through private HMOs. We’re the only organization that’s approved to serve Medicaid recipients that’s not an HMO. We have a contract for primary care case management. We’re used to providing care for the Medicaid population and we’re used to providing health education. It’s part of our original mission (see Exhibit 16/1) and has been since the beginning of C. W. Williams.”

H E A LT H

1 6 :

Exhibit 16/2: Michelle Marrs, Chief Executive Officer of C. W. Williams Health Center

Michelle Marrs had over 20 years’ experience working in a variety of health care settings and delivery systems. On earning her BS degree, she began her career as a community health educator working in the prevention of alcoholism and substance abuse among youth and women. In 1976 she pursued graduate education at the Harvard School of Public Health and the Graduate School of Education, earning a masters of education with a concentration in administration, planning, and social policy. She worked for the US Public Health Service, Division of Health Services Delivery; the University of Massachusetts Medical Center as director of the Patient Care Studies Department and administrator of the Radiation Oncology Department; the Mattapan Community Health Center (a comprehensive community-based primary care health facility in Boston) as director; and as medical office administrator for Kaiser Permanente. Marrs was appointed chief executive officer of the C. W. Williams Health Center in November 1994.

Michelle continued, “I’ve been in health care for quite a while but things are really changing rapidly now. The center might be forced to align with one of the two hospitals because of managed care changes. Although we don’t want to take away the patient’s choice, it might happen. In order for me to do all that I should be doing externally, I need more help internally. I believe we should have a director of finance. We have a great opportunity to buy another location so that we can serve more patients, but this is a relatively unstable time in health care. Buying another facility would be a stretch financially, but the location would be perfect. The asking price does seem high, though. . . .” (Exhibit 16/2 contains a biographical sketch of Ms. Marrs.)

Community Health Centers1

When the nation’s resources were mobilized during the early 1960s to fight the War on Poverty, it was discovered that poor health and lack of basic medical care were major obstacles to the educational and job training progress of the poor. A system of preventive and comprehensive medical care was necessary to battle poverty. A new health care model for poor communities was started in 1963 through the vision and efforts of two New England physicians – Count Geiger and Jack Gibson of the Tufts Medical School – to open the first two neighborhood health centers in Mound Bayou, in rural Mississippi, and in a Boston housing project. In 1966, an amendment to the Economic Opportunity Act formally established the Comprehensive Health Center Program. By 1971, a total of 150 health cent ers had been established. By 1990, more than 540 community and migrant health centers at 1,400 service sites had received federal grants totaling $547 million to supplement their budgets of $1.3 billion. By 1996, the numbers had increased to 700 centers at 2,400 delivery sites providing service to over 9 million people. Community health centers had a public health perspective; however, they were similar to private practices staffed by physicians, nurses, and allied health pro fessionals. They differed from the typical medical office in that they offered a broader range of services, such as social services and health education. Health

C O M M U N I T Y

Exhibit 16/3: Ethnicity of Urban and Rural Health Center Patients

Urban Health Center African American/Black Patients 37.0% Rural Health Center African American/Black Patients 19.6%
White/Non-Hispanic Native American 29.9% 0.8% White/Non-Hispanic Native American 49.3% 1.1%
Asian/Pacific Islander 3.2% Asian/Pacific Islander 2.9%
Hispanic/Latino Other 27.2% 1.9% Hispanic/Latino Other 26.5% 0.6%

centers removed the financial and nonfinancial barriers to health care. In addi tion, health centers were owned by the community and operated by a local volunteer governing board. Federally funded health centers were required to have patients as a majority of the governing board. The use of patients to govern was a major factor in keeping the centers responsive to patients and generating acceptance by them. Because of the increasing complexity of health care delivery, many board members were taking advantage of training opportunities through their state and national associations to better manage the facility.

Community Health Centers Provide Care for the Medically Underserved

Federally subsidized health centers must, by law, serve populations that are identified by the Public Health Service as medically underserved. Half of the medically underserved population lived in rural areas where there were few medical resources. The other half were located in economically depressed inner city communities where individuals lived in poverty, lacked health insurance, or had special needs such as homelessness, AIDS, or substance abuse. Approximately 60 percent of health center patients were minorities in urban areas whereas 50 percent were white/non-Hispanics in rural areas (see Exhibit 16/3). Typically, 50 percent of health center patients did not have private health insur ance; nor did they qualify for public health insurance (Medicaid or Medicare). That compared to 13.4 percent of the US population that was uninsured (see Exhibit 16/4).

Exhibit 16/4: Insurance Status of US Health Center Patients, C. W. Williams Health Center

Patients, the US Population, and North Carolina Population

Health Center Patients US Population North Carolina Population C. W. Williams Health Center Patients
Uninsured Private Insurance 42.7% 13.9% 13.4% 63.2% 14% 64% 21% 10%
Public Insurance 42.9% 23.4% 22% 69%

H E A LT H

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Over 80 percent of health center patients had incomes below the federal poverty level ($28,700 for a family of four in 1994). Most of the remaining 20 percent were between 100 percent and 200 percent of the federal poverty level.

Community Health Centers Are Cost Effective

Numerous national studies have indicated that the kind of ongoing primary care management provided by community health centers resulted in significantly low ered costs for inpatient hospital care and specialty care. Because illnesses were diagnosed and treated at an earlier stage, more expensive care interventions were often not needed. Hospital admission rates were 22 to 67 percent lower for health center patients than for community residents. A study of six New York city and state health centers found that Medicaid beneficiaries were 22 to 30 percent less costly to treat than those not served by health centers.2 A Washington state study found that the average cost to Medicaid per hospital bill was $49 for health center patients versus $74 for commercial sector patients.3 Health center indigent patients were less likely to make emergency room visits – a reduction of 13 per cent overall and 38 percent for pediatric care. In addition, defensive medicine (the practice of ordering every and all diagnostic tests to avoid malpractice claims) was less frequently used. Community health center physicians had some of the lowest medical malpractice loss ratios in the nation.

Not only were community health centers cost efficient, patients were highly satisfied with the care received. A total of 96 percent were satisfied or very satisfied with the care they received, and 97 percent indicated they would recommend the health center to their friends and families.4 Only 4 percent were not so satisfied, and only 3 percent would not recommend their health center to others.

Movement to Managed Care

In 1990, a little over 2 million Medicaid beneficiaries were enrolled in man aged care plans; in 1993 the number had increased to 8 million; and in 1995 over 11 million Medicaid beneficiaries were enrolled. Medicaid beneficiaries and other low-income Americans had higher rates of illness and disability than others, and thus accumulated significantly higher costs of medical care.5

C. W. Williams Health Center

C. W. Williams was beginning to recognize the impact of managed care. Like much of the South, the Carolinas had been slow to accept managed care. The major reasons seemed to be the rural nature of many Southern states, markets that were not as attractive to major managed care organizations, dominant insur ers that continued to provide fee-for-service ensuring choice of physicians and hospitals, and medical inflation that accelerated more slowly than in other areas.

Major changes began to occur, however, beginning in 1993; by 1996 managed care was being implemented in many areas at an accelerated pace.

Challenges for C. W. Williams

Michelle reported, “One of my greatest challenges has been how to handle the changes imposed by the shift from a primarily fee-for-service to a managed care environment. Local physicians who in the past had the flexibility, loyalty, and availability to assist C. W. Williams by providing part-time assistance or volunteer efforts during the physician shortage are now employed by managed care organizations or involved in contractual relationships that prohibit them from working with us. The few remaining primary care solo or small group practices are struggling for survival themselves and seldom are available to provide patient sessions or assist with our hospital call-rotation schedule. The rigorous call-rotation schedule of a small primary care facility like C. W. Williams is frequently unattractive to available physicians seeking opportunities, even when a market competitive compensation package is offered. Many of these physician recruitment and retention issues are being driven by the rapid changes brought on by the impact of managed care in the local community. It is a real challenge to recruit physicians to provide the necessary access to medical care for our patients.”

She continued, “My next greatest challenge is investment in technology to facili tate this transition to managed care. Technology is expensive, yet I know it is crucial to our survival and success. We also need more space, but I don’t know if this is a good time for expansion.”

She concluded, “One of the pressing and perhaps most difficult efforts has been the careful and strategic consideration of the need to affiliate to some degree with one of the two area hospitals in order to more fully integrate and broaden the range of services to patients of our center. Although a decision has not been made at this juncture, the organization has made significant strides to comprehend the needs of this community, consider the pros and cons of either choice, and continue providing the best care possible under some very difficult circumstances.”

Hospital Affiliation

Traditionally, the patients of C. W. Williams Health Center that needed hospital ization were admitted to Charlotte Memorial Hospital, a large regional hospital that was designated at the Trauma 1 level – one of five designated by the state of North Carolina to handle major trauma cases 24 hours a day, 7 days per week (full staffing) as well as perform research in the area of trauma. Uncompensated inpatient care was financed by the county. Charlotte Memorial became Carolinas Medical Center (CMC) in 1984 when it began a program to develop a totally inte grated system. In 1995, C. W. Williams provided Carolinas Medical Center with more than 3,000 patient bed days; however, the patients were usually seen by their

H E A LT H

Services

1 6 :

regular C. W. Williams physicians. As Carolinas Medical Center purchased physi cian practices (over 300 doctors were employed by the system) and purchased or managed many of the surrounding community hospitals, some C. W. Williams patients became concerned that CMC would take over C. W. Williams and that their community health center would no longer exist.

“My preference is that our patients have a choice of where they would prefer to go for hospitalization. Our older patients expect to go to Carolinas Medical, but many of our middle-aged patients have expressed a preference for Presbyterian. Both hospitals have indicated an interest in our patients,” according to Michelle. She continued, “We may not really have a choice, however. We recently received information that reported the 12 largest hospitals in the state, including the teach ing hospitals – Duke, University of North Carolina at Chapel Hill, Carolinas Medical Center, and East Carolina – have formed a consortium and will contract with the state to pay for Medicaid patients. At the same time all 20 of the health centers in the state – including us at C. W. Williams – are cooperating to develop a health maintenance organization. We expect to gain approval for the HMO by July 1997. Since 60 percent of our patients are Medicaid, if the state contracts with the new consortium, then we will be required to send our patients to Carolinas Medical Center.”

  1. W. Williams Health Center provides primary and preventive health services including: medical, radiology, laboratory, pharmacy, subspecialty, and inpatient managed care; health education/promotion; community outreach; and transporta- tion to care (Exhibit 16/5 lists all services). The center was strongly linked to the Charlotte community, and it worked with other public and private health services to coordinate resources for effective patient care. No one was denied care because
  2. f an inability to pay. A little over 20 percent of the patients at C. W. Williams were uninsured.

The full-time staff included five physicians, two physician assistants (PAs), two nurses, one X-ray technician, one pharmacist, and a staff of 28. Of the five physicians, one was an internist, two were in family practice, and two were pediatricians. The PAs “floated” to work wherever help was most needed. With the help of one assistant, the pharmacist filled more than 20,000 prescriptions annually.

Patients at C. W. Williams

All first-time patients at C. W. Williams were asked what type of insurance they had. If they had some type of insurance – private, Medicare, Medicaid – an appointment was immediately scheduled. If the new patient had no insurance, he or she was asked if they would be interested in applying for the C. W. Williams discount program (the discount could amount to as much as 100 percent, but

Exhibit 16/5: C. W. Williams Health Center Services

Primary Care and Preventive Services Diagnostic Laboratory Diagnostic X-ray (basic) Pharmacy EMS (crash cart and CPR-trained staff) Family Planning Immunizations (MD-directed as well as open clinic – no relationship required) Prenatal Care and Gynecology Health Education Parenting Education Translation Services Substance Abuse and Counseling Nutrition Counseling Diagnostic Testing:

HIV Mammogram Pap Smears TB Testing Vision/Hearing Testing Lead Testing Pregnancy Test Drug Screening

every person was asked to pay something). The discount was based on income and the number of people in the household. If the response was “no,” the caller was informed that payment was expected at the time services were rendered. Visa, Mastercard, cash, and personal check (with two forms of identification) were accepted. At C. W. Williams, all health care was made affordable. C. W. Williams made reminder calls to the patient’s home (or neighbor’s or relative’s telephone) several days prior to the appointment. When patients arrived at the center, they provided their name to the nurse at the front reception desk and then took a seat in a large waiting room. The pharmacy window was near the front door for the convenience of patients who were simply picking up a prescription. The reception desk, pharmacy, and waiting room occupied the first floor.

When the patient’s name was called, he or she was taken by elevator to the second floor where there were ten examination rooms. After seeing the physician, physician assistant, or nurse, the patient was escorted back down the elevator to the pharmacy if a prescription was needed and then to the reception desk to pay. Pharmaceuticals were discounted and a special program by Pfizer Pharmaceuticals provided over $60,000 worth of drugs in 1995 for medically indigent patients. The center’s patient population was 64 percent female between the ages of 15 and 44 (see Exhibit 16/6). Nearly 80 percent of patients were African Americans, 18 percent were white, and 2 percent were other minorities. Patients

H E A LT H C E N T E R : C . W. W I L L I A M S A C O M M U N I T Y 1 6 : C A S E A S S E T

Exhibit 16/6: C. W. Williams Health Center Patients by Age and Sex

Females

<1 1–4 5–11 12–14 15–17 18–19 20–34 35–44 45–64 65+

Males

<1 1–4 5–11 12–14 15–17 18–19 20–34 35–44 45–64 65+

Total

1991

343 434 322 376 361 264 749 869 583 400 4,701

367 439 440 171 180 126 296 313 229 151 2,712 7,413

1992

408 552 572 197 168 152 1,250 617 567 488 4,971

471 516 644 175 133 67 389 296 316 248 3,255 8,226

1993

263 692 494 150 146 85 967 479 617 531 4,424

328 707 598 128 79 28 219 182 273 190 2,732 7,156

1994

198 647 641 148 121 82 964 532 658 527 4,518

199 625 846 120 76 23 187 205 294 190 2,765 7,283

1995

101 417 658 124 92 67 712 467 658 524 3,820

119 410 738 104 155 69 126 132 235 181 2,269 6,089

Exhibit 16/7: Patient Satisfaction Study

Rank

1 2 3 4 5 6

Selected Service Indicators

Helpfulness/attitudes of medical staff Clean/comfortable/convenient facility Relationship with physician/nurse Quality of health services Ability to satisfy all medical needs Helpfulness/attitudes of nonmedical staff

Mean Score

3.82 3.65 3.58 3.28 3.20 2.72

were quite satisfied with the services provided as indicated in

patient sur veys conducted by the center. Paralleling national studies, 97 percent of C. W. Williams patients would recommend the center to family or friends. Selected service indicators by rank from the patient satisfaction study are included as Exhibit 16/7.

C. W. Williams Organization

The center was managed by a board of directors, responsible for developing policy and hiring the CEO.

BOARD OF DIRECTORS

The federal government required that all community health centers have a board of directors that was made up of at least 51 percent patients or citizens who lived in the community. The board chairman of C. W. Williams, Mr. Daniel Dooley, was a center patient. C. W. Williams had a board of 15, all of whom were African Americans and four of whom were patients and out of the workforce. Two mem bers of the board were managers/directors from the Public Health Department (which was under the management of CMC). There were two other health professionals – a nurse and a physician. Other board members included a CPA, a financial planner, an insurance agent, a vice president for human resources, an executive in a search firm, and a former professor of economics. A majority of the board had not had a great deal of exposure to the changes occurring in the health care industry (aside from their own personal situations); nor were they trained in strategic management.

The center was operated by Michelle Marrs as CEO, who had an operations officer and medical director reporting to her (see Exhibit 16/8 for an organiza tion chart).

Eventually the director of finance, who had worked at the center for over ten years, resigned. “She was offered another position within C. W. Williams,” said Michelle, “but she declined to take it. Frankly, I have to have someone with greater expertise in finance. With capitation on the horizon, we need to do some very critical planning to better manage our finances and make sure we are receiving as much reimbursement from Washington as we are entitled.” There were some disagreements between the board and Ms. Marrs over responsi bilities. Employees frequently appealed to the chairman and other members of the board when they felt that they had not been treated fairly. Ms. Marrs would prefer the board to be more involved in setting strategic direction for C. W. Williams. “A two-year strategic plan was developed late in 1995 that has not been moved along, embraced, and further developed. Committees have not met on a regular basis to actualize stated objectives.”

THE STAFF

C. W. Williams Was Financially Strong

The center received an increasing amount of federal grant money for the first ten years of its operation as the number of patients grew, but leveled off as most government allocations were reduced (see Exhibit 16/9). Although the amount collected from Medicare was increasing, the amount collected compared with the full charge was decreasing (see Exhibit 16/10). Exhibits 16/11 to 16/14 provide details of the financial situation.

Carolina ACCESS – A Pilot Program

In fiscal year 1994 ( July 1, 1994 to June 30, 1995), North Carolina served more than 950,000 Medicaid recipients at a cost of over $3.5 billion. The aged, blind, and disabled accounted for 26 percent of the eligibles and 65 percent of the expenditures. Families and children accounted for 74 percent of the eligibles and 35 percent of the expenditures. Services were heavily concentrated in two areas: inpatient hospital – accounting for 20 percent of expenses – and nursing facility/intermediate care/mentally retarded services – accounting for 34 percent of expenses. Mecklenburg County had the highest number of eligibles within the state at 50,849 people, representing 7 percent of the Medicaid population. What started out in 1986 as a contract with Kaiser Permanente to provide medi cal services for recipients of Aid to Families with Dependent Children in four counties became a complex mixture of three models of managed care. Carolina ACCESS was North Carolina Medicaid’s primary care case management model of managed care. It began a pilot program named “Health Care Connections” in Mecklenburg County on June 1, 1996.

Exhibit 16/9: C. W. Williams Funding Sources

Funding Source

Grant (Federal) Medicare Medicaid Third-Party Pay Uninsured Self-Pay Grant (Miscellaneous)

Total

1991

740,000 152,042 381,109 25,673 300,748 0 1,599,572

1992

1993

666,524 157,891 453,712 14,128 441,508 0 1,733,763

1994

1995

689,361 258,104 641,069 84,347 174,992 0 1,847,873

720,584 260,389 562,380 90,253 262,817 11,500 1,907,923

720,584 301,444 456,043 51,799 338,272 48,000 1,916,142

Exhibit 16/10: Funding Accounts Receivable

Exhibit 16/10: Funding Accounts Receivable
Full Charge 1994 Amount Collected Full Charge 1995 Amount Collected
Medicare Medicaid 436,853 914,212 260,389 562,380 369,306 725,175 301,444 456,043
Insured Patient Fees 99,202 899,055 90,253 262,817 61,021 754,864 51,799 338,272

H E A LT H C E N T E R : C . W. W I L L I A M S A C O M M U N I T Y 1 6 : C A S E A S S E T

Exhibit 16/11: C. W. Williams Health Center Balance Sheets

1992–1993 1993–1994 1994–1995 1995–1996
Assets Current Assets Cash 280,550 335,258 339,459 132,925
Certificates of Deposit Accounts Receivable (net) 23,413 213,815 24,496 285,934 25,446 202,865 529,826 160,230
Accounts Receivable (other) 5,661 4,721 2,936 10,069
Security Deposits Notes Receivable 1,847 -0- 97 -0- -0- 29,825 -0- 10,403
Inventory Prepaid Loans 26,191 12,087 23,777 21,605 30,217 9,722 26,844 11,159
Investments 269 269 269 51,628
Total Current Assets 563,833 696,157 640,739 933,084
Property and Equipment Land 10,000 10,000 10,000 10,000
Building Building Renovations 311,039 904,434 311,039 904,434 311,039 909,754 311,039 915,949
Equipment Less Depreciation 282,333 (393,392) 312,892 (452,432) 328,063 (523,384) 387,178 (597,275)
Total Property and Equipment 1,114,414 1,085,933 1,035,472 1,026,891
Total Assets 1,678,247 1,782,090 1,676,211 1,959,975
Liabilities and Net Assets Liabilities
Accounts Payable Vacation Expense Accounts 11,066 36,694 31,582 42,857 13,136 19,457 34,039 28,144
Deferred Revenue 42,641 37,910 43,400 59,433
Total Liabilities 90,401 112,349 75,993 121,616
Net Assets Unrestricted Temporary Restricted -0- -0- -0- 1,838,350 -0-
Total Net Assets 1,587,846 1,669,741 1,600,218 1,838,350
Total Liabilities and Net Assets 1,678,247 1,782,090 1,676,211 1,959,976
Health Care Connections

The state of North Carolina wanted to move 42,000 Mecklenburg County Medicaid recipients into managed care. The state contracted with six health plans and C. W. Williams, as a federally qualified health center, to serve the Mecklenburg County Medicaid population. Because one organization was dropped from the program, Medicaid recipients were to choose one of the following plans to provide their health care:

Atlantic Health Plans (type: HMO; hospital affiliation: Carolinas Medical Center, University Hospital, Mercy Hospital, Mercy South, Union Regional Medical, Kings Mountain Hospital). Kaiser Permanente (type: HMO; hospital affiliation: Presbyterian Hospital, Presbyterian Hospital – Matthews, Presbyterian Orthopedic, Presbyterian Specialty Hospital). Maxicare North Carolina, Inc. (type: HMO; hospital affiliation: Presbyterian Hospital, Presbyterian Hospital – Matthews, Presbyterian Orthopedic, Presbyterian Specialty Hospital). Optimum Choice/Mid-Atlantic Medical (type: HMO; hospital affiliation: Presbyterian Hospital, Presbyterian Hospital – Matthews, Presbyterian Orthopedic, Presbyterian Specialty Hospital). Plan of NC, Inc. (type: HMO; hospital affiliation: Carolinas Medical The Wellness Center, University Hospital, Mercy Hospital, Mercy South, Union Regional Medical, Kings Mountain Hospital). C. W. Williams Health Center (type: partially federally funded, community health center; hospital affiliation: Carolinas Medical Center, University Hospital, Mercy Hospital, Mercy South, Union Regional Medical, Kings Mountain Hospital or Presbyterian Hospital, Presbyterian Hospital – Matthews, Presbyterian Orthopedic, Presbyterian Specialty Hospital).

Exhibit 16/12: Statement of Support, Revenue, Expenses, and Change in Fund Balances

Contributed Support and Revenue 1992–1993 1993–1994 1995–1996 1994–1995
Contributed 720,584 720,712 732,584 768,584
Earned Revenue Patient Fees 1,186,497 1,213,919 1,183,904 1,129,030
Medicare Contributions 465,248 5,676
Interest Income Dividend Income 7,228 9,666 12,567 14,115 2,387
Rental Income 1,980
Miscellaneous Income 5,962 5,941 11,055 4,772
Total Earned Total Contributed Support and Revenue 1,227,109 1,202,104 1,947,821 1,922,688 1,201,243 1,629,491 1,933,827 2,398,075
Expenses Program 1,782,312 1,840,447 2,157,768 2,002,633
Other 442 349 2,166 217
Total Expenses 1,782,754 1,840,796 2,002,850 2,159,934
Increase (decrease) in Net Net Assets (beginning of Assets year) 81,892 165,062 1,587,849 1,310,155 (69,523) 238,141 1,600,218 1,669,741
Adjustment 112,629* -0- -0- -0-
Net Assets (end of year) 1,587,846 1,669,741 1,600,218 1,838,359

*Federal grant funds earned but not drawn down in prior years were not recognized as revenue. The error had no effect on net income for fiscal year ended March 31, 1992.

H E A LT H C E N T E R : C . W. W I L L I A M S A C O M M U N I T Y A S S E T 1 6 : C A S E

Exhibit 16/13: Statement of Functional Expenditures, Fiscal Year Ended March 31

Personnel Salaries 1992–1993 937,119 1993–1994 1,016,194 1995–1996 1994–1995 1,181,639 1,102,373
Benefits 190,300 210,228 210,674 211,705
Total 1,127,419 1,226,422 1,313,047 1,393,344
Other
Accounting Bank Charges 5,250 840 5,985 300 6,397 7,200 1,001 213
Building Consultants Maintenance 38,842 26,674 54,132 2,733 49,586 53,828 44,923a 39,565
Contract MDs Dues/Publications/Conferences -0- 17,371 -0- 21,655 87,159 -0- 24,258 22,066
Equipment Insurance Maintenance 28,732 15,182 27,365 3,146 30,402 27,352 3,215 3,292
Legal Fees 688 2,774 3,582 3,652
Marketing Patient Services 6,358 28,959 1,958 28,222 15,730 5,734 43,815 35,397
Pharmacy Physician Recruiting 271,542 14,171 237,761 32,929 188,061 225,762 56,173 21,395
Postage Printing 8,435 729 11,622 963 14,182 10,019 2,405 9,696
Supplies Telephone 73,020 16,755 62,828 17,967 84,064 72,977 20,914 25,002
Travel – Board Travel – Staff 2,713 13,889 1,202 14,576 3,476 4,977 15,978 12,631
Utilities 15,782 18,305 16,548 16,536
Total Other 585,932 546,423 618,633 690,530
Total Personnel and Other 1,713,351 1,772,845 1,931,680 2,083,874
Depreciation (68,966) (67,604) (70,952) (73,891)
Total Expenses 1,782,317 1,840,449 2,002,632 2,157,765
aIncludes contracted medical director.

An integral part of the selection process was the use of a health benefits advisor to assist families in choosing the appropriate plan. By law, none of the organiza tions was permitted to promote its plan to Medicaid recipients. Rather, the Public Consulting Group of Charlotte was awarded the contract to be an independent enrollment counselor to assist Medicaid recipients in their choices of health care options.

“More than 33,000 of the Medicaid recipients were women and children. Sixty percent of the group had no medical relationship. Slightly over 50 percent of C. W. Williams’s patients are Medicaid recipients,” said Michelle Marrs. See Exhibit 16/15 for C. W. Williams users by pay source.

Exhibit 16/14: C. W. Williams Health Center Statement of Cash Flows, Fiscal Year Ended

March 31

March 31
Net Cash Flow from Operations 1992–1993 1993–1994 1995–1996 1994–1995
Increase in Net Assets Noncash Income Expense Depreciation 81,892 165,062 68,966 67,604 (69,523) 238,141 73,891 70,952
Increase in Deposits Decrease in Receivables (1,750) 1,750 (86,620) (71,179) -0- -0- 55,028 65,328
(Increase) in Prepaid Expenses (2,277) (9,518) (1,437) 11,980
(Increase) Decrease Increase in Payables in Inventory (4,105) 2,414 14,094 20,516 (6,440) 3,373 (18,445) 20,903
Increase (Decrease) (Increase) in Notes in Vacation Expense Accrual Receivable (8,583) 6,163 -0- -0- (23,400) 8,688 -0- (10,403)
Increase in Deferred Revenue (2,992) (4,731) 5,490 16,032
Net Cash Flow from Operations 141,795 94,911 25,642 414,516
Cash Flow from Investing in Fixed Assets (52,547) (39,120) (20,491) (65,311)
Purchase Marketable Securities -0- -0- -0- (51,359)
Net Cash Used by Investments (52,547) (39,120) (20,491) (116,670)
Net Cash from Financing Activities 112,629 -0- -0- -0-
Increase in Cash 201,877 55,791 297,846 5,151
Cash + Cash Equivalents Beginning of Year April 1 130,274 332,151 387,942 393,093
End of Year March 31 387,942 332,151 393,093 690,939

“We have about 8,000 patients coming to us for about 30,000 visits,” accord ing to Michelle (see Exhibit 16/16). “So there are approximately 4,000 people who currently come to us for health care that are now required to choose a health plan. The state decided that an independent agency had to sign people up so that there would be no ‘bounty’ hunting for enrollees. In the first month, about 2,300 Medicaid recipients enrolled in the pilot program. Almost half of the people who signed up chose Kaiser Foundation Health Plan. It has a history of serving Medicaid patients. We received the next highest number of enrollees, because we too have a history of serving this market. We had 402 enrollees dur ing that first month. Of those, only 38 were previous patients. What we don’t know yet is whether we have lost any patients to other programs. The lack of up-to-date information is frustrating. We need a better information system.” Michelle continued, “We decided that we could provide care for up to 8,000 Medicaid patients at C. W. Williams. I embrace managed care for a number of reasons: patients must choose a primary care provider, patients will be encour aged to take an active role in their health care, and there will be less duplication of medical services and costs. In the past, some doctors have shied away from Medicaid patients because they didn’t want to be bothered with the paperwork, the medical services weren’t fully compensated, and Medicaid patients tended to have numerous health problems.”

Exhibit 16/15: Users by Pay Source

Exhibit 16/15: Users by Pay Source
Source Percent of Number of Users Users Income to C. W. Williams Number of Encounters
1994–1995
Medicare Medicaid 13% 791 56% 3,410 301,444 456,043 2,392 10,305
Full Pay 10% 609 318,424 1,840
Uninsured 21% 1,279 42,421 3,865
1993–1994 6,089 1,118,332 18,402
Medicare Medicaid 12% 1,037 53% 4,579 195,352 585,446 2,880 12,720
Full Pay 11% 950 178,525 2,640
Uninsured 24% 2,074 101,569 5,760
1992–1993 8,640 1,060,892 24,000
Medicare Medicaid 10% 853 36% 3,072 189,927 401,355 2,304 8,294
Full Pay 10% 853 158,473 2,304
Uninsured 44% 3,755 186,708 10,138
1991–1992 8,533 936,463 23,040
Medicare Medicaid 20% 1,614 30% 2,419 162,980 312,680 4,032 6,048
Full Pay 10% 806 157,101 2,016
Uninsured 40% 3,225 159,855 8,064
8,064 792,616 20,160

Exhibit 16/16: C. W. Williams Health Center Patient Visits

Primary Care Visits

Internal Medicine Family Practice Pediatrics Gynecology Midlevel Practitioners

Total

Subspecialty/Ancillary Service Visits

Podiatry Mammography Immunizations Perinatal X-ray Dental Pharmacy Prescriptions Hospital Laboratory Health Education Other Medical Specialists

Total

8,248 4,573 2,643 236 3,609 19,309

82 101 1,766 429 1,152 17 20,868 1,762 13,103 412 1,032 40,724

“There are seven different companies that applied and were given authority to provide health care for Medicaid recipients in Mecklenburg County. Although I understand one had to withdraw, we are the only one that is not an HMO. Although we don’t provide hospitalization, we do provide for patients’ care whether they need an office visit or to be hospitalized. Our physicians provide care while the patient is in the hospital.”

She continued, “Medicaid beneficiaries have to be recertified every six months. We are three months into the sign-up process or approximately halfway. Kaiser has enrolled the highest number, about one-third of the beneficiaries (see Exhibit 16/17). We have enrolled over 12 percent. The independent enrollment counselor is responsible for helping Medicaid recipients enroll during the initial 12 months. I expect the numbers to dwindle for the last six months of that time period. Changes will primarily come from new patients to the area and patients who are unhappy with their initial choice.”

Medicaid patients were going to be a challenge for managed care. Because many of them were used to going to the emergency room for care, they were not in the habit of making or keeping appointments. Some facilities overbooked appointments to try to utilize medical staff efficiently; however, the practice caused very long waits at times. Other complicating factors included lack of telephones for contacting patients for reminder calls or physician follow-ups, lack of trans portation, the number of high-risk patients as a result of poverty or lifestyle factors, and patients that did not follow doctors’ orders.

Health Connection Enrollment

Medicaid recipients were required to be recertified every six months in the state of North Carolina. During this process, a time was allocated for the Public Consulting Group of Charlotte to make a presentation about the managed care choices avail able. The presentation included a discussion of:

managed care and HMOs and how they were similar to and different from previous Medicaid practices; benefits of Health Care Connections such as having a medical home, a 24-hour, seven-day-a-week hotline to ask questions about medical care, physician choice, and plan choice; and

Exhibit 16/17: ACCESS Enrollment Data for the Week Ended September 6, 1996

Atlantic

Week Totals Month-to-date Year-to-date

229 229 3,708 Project-to-date 3,708

Kaiser Permanente

347 347 5,384 5,384

Maxi-care

66 66 1,164 1,164

Optimum Choice

114 114 1,507 1,507

Wellness

C. W.

Plan Williams

189 189 2,238 2,238

Total

124 124

1,069 1,069 2,016 16,017 16,017 2,016 16,017 16,017

H E A LT H

1 6 :

methods to choose a plan based on wanting to use a doctor that the patient had used before, hospital choice (some plans were associated with a specific hospital), and location (for easy access).

If Medicaid recipients did not choose a plan that day, they had ten working days to call in on the hotline to choose a plan. If they had not done so by that deadline, they were randomly assigned to a plan. Public Consulting Group’s health benefits advisors (HBAs) made the presentations and then assisted each individual in determining what choice he or she would like to make and filling out the paperwork. More than 80 percent of the Medicaid recipients who went through the recertification process and heard the presentation decided on site. Most others called back on the hotline after more carefully studying the information. About 3 percent were randomly assigned because they did not select a plan. New Medicaid recipients were provided individualized presentations because they tended to be new to the community, had recently developed a health prob lem, or were pregnant. Because they might have less information than those who had been “in the system” for some time, it took a more detailed explanation from the HBA.

HBAs presented the information in a fair, factual, and useful manner for ses sion attendees. For the first several months they attempted to thoroughly explain the difference between an HMO and a “partially federally funded community health center,” but the HBAs decided it was too confusing to the audience and did not really make a difference in their health care. For the past month they explained “managed care” more carefully and touched lightly on HMOs. C. W. Williams was presented as one of the choices, although some of the HBAs mentioned that it was the only choice that had evening and weekend hours for appointments.

Strategic Plan for C. W. Williams

With the help of Michelle Marrs, the C. W. Williams Board of Directors was beginning to develop a strategic plan. Exhibit 16/18 provides the SWOT analysis that was developed. “Part of our strategic plan was to go to the people – make it easier for our patients to visit C. W. Williams by establishing satellite clinics. We recently became aware of a building that is for sale that would meet our needs. The owner would like to sell to us. He’s older and likes the idea that the building will ‘do some good for people,’ but he’s asking $479,000. The location is near a large number of Medicaid beneficiaries plus a middle-class area of minority patients that could add to our insured population. I just don’t know if we should take the risk to buy the building. We own our current building and have no debt. We are running out of space at C. W. Williams. We have two examination rooms for each physician and all patients have to wait on the first floor and then be called to the second floor when a room becomes free.

I know that ideally for the greatest efficiency we should have three exam rooms for each doctor.”

W H AT T O D O

Exhibit 16/18: C. W. Williams Health Center SWOT Analysis

Strengths

Community-based business Primary care provider with walk-in component Large patient base Fast, discounted pharmacy Cash reserve Laboratory/X-ray Clean facility in good location Satellites Good reputation with community and funders Resources for disabled patients Strong leadership/management Growth potential Property owned with good parking Excellent quality of care Culturally sensitive staff Nice environment Dedicated board and staff

Opportunities

Many in the community are uninsured and have

multiple medical care needs

A number of universities are located in the

Charlotte area Health care reform Oversupply of physicians means that many will not set up private practices or be able to join just any practice Managed care Charlotte market

Weaknesses

Need for deputy director Lack of RN/triage director Staffing and staffing pattern Managed care readiness Number of providers Recruitment and retention Limited referrals Limited services No social worker/nutritionist/health educator No on-site Medicaid eligibility Weak relationship with community MDs Limited hours of operation Transportation Organizational structure Management information systems Market share at risk of erosion Staff orientation to managed care

Threats

Uncertain financial future of health care in

general

Health care reform Competition from other health care providers

for the medically underserved

Loss of patients as they choose HMOs rather

than C. W. Williams Managed care Reimbursement restructuring Shortage of health care professionals

“We have had an architect look at the proposed facility. He estimated that it would take about $500,000 for remodeling. According to the tax records, the building and land are worth about $250,000. Since we don’t yet know how many patients we will actually receive from Health Care Connection or how many of our patients will choose an HMO, it’s hard to decide if we should take the risk.”

What to Do

“At the end of the week I sometimes wonder what I’ve accomplished,” Michelle stated. “I seem to spend a lot of time putting out fires when I should be concen trating on developing a strategic plan and writing more grants.”

H E A LT H

NOTES

1 6 :

  1. This section is adapted from Mickey Goodson, A Quick History (National Association of Community Health Centers Publication, undated).
  2. Utilization and Costs to Medicaid of AFDC Recipients in New York Served and Not Served by Community Health Centers (Columbia, MD: Center for Health Policy Studies, June 1994).
  3. Using Medicaid Fee-for-Service Data to Develop Com- munity Health Center Policy (Seattle, WA: Washington Association of Community Health Centers and Group Health Cooperative of Puget Sound, 1994).
  1. Key Points: A National Survey of Patient Experiences in Community and Migrant Health Centers (New York: Commonwealth Fund, 1994).
  2. Health Insurance of Minorities in the US (Report by the Agency for Health Care Policy and Research, US Department of Health and Human Services, 1992) and Green Book, Overview of Entitlement Programs Under the Jurisdiction of the Ways and Means Committee (US House
    • f Representatives, 1994).

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Using Information In Human Resources

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Read assignment brief to follow it as checklist

Identify a problem for the research project

Write a research question

Identify the stakeholders – CEO/Managers/Employees/Customers etc

Find at least 3-4 research articles that are relevant to your study

Make notes against each study and then identify similar or different themes Write your literature review – must include compare and contrast of author  viewpoints

Add in a critique of the literature

Write recommendations and conclusions based on your research

I need you to confirm the research question with me before you complete the paper

The organization should be Saudi Aramco

You must follow the instruction in Live Session Slides file

How to best tackle this assessment (Hints and Tips)

• This is a study of the purpose, value and relevance of secondary research

• Do not carry out topic related primary research

• Pick an area of the business / organisation that would benefit from improvement – include a graph/pie chart (your own work)

• Select three key secondary sources

• Critically review them

• Feel free to make assumptions about the methodology (primary research) used

• Write a report (2500 words +/- 10%)

• Draw conclusions from your review of these texts

• Make recommendations to your identified key stakeholder

 
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Hcs 499 Benchmark Assignment—Goals For Stevens District Hospital, Part 2

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For Part 2 of the Goals for Stevens District Hospital assignment, you will use the same format you used in Week Three. In this assignment, you will identify 3 additional goals that support the mission and vision of the hospital. For each goal, you will write a 260- to 350-word analysis based on your review of the data provided in the Stevens District Hospital strategic planning scenario and your SWOT analysis.

Financial or Economic Goal

Identify a clear, actionable, and measurable financial or economic goal for the organization that clearly supports the mission and vision.

Analyze how this goal supports the mission and vision of the hospital.

Explain how you would measure progress toward the goal.

  • Discuss milestones necessary for progress.
  • Discuss the criteria you would use to measure that the goal was completed.

Legal or Regulatory Goal

Identify a clear, actionable, and measurable legal or regulatory goal for the organization that clearly supports the mission and vision.

Analyze how this goal supports the mission and vision of the hospital.

Explain how you would measure progress toward the goal.

  • Discuss milestones necessary for progress.
  • Discuss the criteria you would use to measure that the goal was completed.

Risk or Quality Management Goal

Identify a clear, actionable, and measurable risk or quality management goal for the organization that clearly supports the mission and vision.

Analyze how this goal supports the mission and vision of the hospital.

Explain how you would measure progress toward the goal.

  • Discuss milestones necessary for progress.
  • Discuss the criteria you would use to measure that the goal was completed.

References (format using correct APA guidelines)

Cite 4 peer-reviewed, scholarly, or similar references to support your assignment.

Use correct APA in-text citation guidelines and include references above.

 
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2000-2500 Word Essay (8-10 Pages) In APA Format On Ponzi Schemes

/in /by

Running Head: Ponzi Schemes 1

Ponzi Schemes 11

Running head (Header not in proper APA format)

Ponzi Schemes Comment by Lamar, Angelo: Center please.

Latoya Smith

Bethel University

 

MOD 450

Dr. Angelo Lamar

February 14, 2019

 

Abstract

Ponzi schemes date back in 1920’s when Charles Ponzi got involved in a disreputable money generating scheme. Initially the scheme had been tried without success but Charles managed to be the first person to embezzle millions from rather ignorant and innocent credulous people. This is the main reason the scheme bears Ponzi’s name. Later in 2008, one of the Ponzi’s conspirators was brought to the light. Madoff had conned investors of their money for close to thirty years. Unfortunately, the conned investors were all classy and literate. This paper is aimed at providing brief history of the Ponzi schemes and an illustration of how Ponzi schemes work. The second aim of the paper is to give examples of historically popular Ponzi schemers. In addition the paper provides some common characteristics of Ponzi schemes to be able to facilitate easy identification of illegal Ponzi schemes. The paper ends by providing hints on how to avoid unlawful and notorious Ponzi schemes. Comment by Lamar, Angelo: Keep up the good work here.

 

Introduction Comment by Lamar, Angelo: The title to your paper should go above this heading.

Ponzi schemes are typical fraudulent investments in which the owner promises the investors abnormally high financial returns from their investment. The scheme operator does not invest the investors’ money; instead, the operator uses the funds from new investors to pay the already existing investors their dividends. The schemes operate smoothly until they lack adequate subsequent investors to sustain payment of dividends to existing investors. This is according to the federal bureau of investigation’s definition of Ponzi schemes. A Ponzi scheme may also seize to operate when the notorious, illegal and fraudulent business is discovered by the government or any other legal authority. Comment by Lamar, Angelo: If so, where is the citation? If information does not come from you then give credit to where it came from.

According to the business dictionary Ponzi schemes are scams which operate on the hope of continued increase in the number of incoming investors to facilitate paying the returns to the former investors. The operations come to a halt when the amount of money getting out of the business exceeds the incoming amount. However, the schemers are wise enough to flee before the business crashes down. In this scenario the schemer tends to escape with large sums of money belonging to the investors and this equates to theft, cheat and may lead to legal interventions. Comment by Lamar, Angelo: If so, where is your citation? If information does not come from you then give credit to where it came from.

History of Ponzi schemes

Ponzi scheme has its history dating back in 1920 when Charles Ponzi got involved in a disreputable money generating scheme. Initially the scheme had been tried without success but Charles managed to be the first person to embezzle millions from rather ignorant and innocent credulous people. Today Ponzi schemes refer to an investment deception in which the conniver promises investors of deriving high returns from an investment that is said to have little or no risks involved. However, the conniver uses the money contributed by a new investor to pay the former investors. The secret behind Ponzi schemes is the ability of the schemer to continue attracting new investors to be able to pay returns to the already recruited investors without redress. Ponzi schemes however tend to be discovered when the schemer fails to convince and recruit new investors lacking sufficient funds to pay returns to the existing investors. The scheme may also fail when the legal channels become aware of the business operations. Comment by Lamar, Angelo: Where is your citation?

Ponzi schemes have their names derived from Charles Ponzi who was an Italian fraud and cheat who made money by deceiving investors. The embezzler used to promise investors a fifty percent returns on investments in approximately three months. Annually, banks would charge interest rates of 5% which made Ponzi preferable (Dulitzky), 2018). Ponzi schemes became international within a very short period of time. Eventually, Ponzi began to use new investor’s funds to pay the existing investors. With Ponzi schemes new amounts of money were involved and this made his strategy to become popular unlike previous attempts to carry out this fraudulent business and hence the name Ponzi schemes (Surendranath R. Jory, 2011). Comment by Lamar, Angelo: Why did you close the parentheses twice? Everything belongs within. Comment by Lamar, Angelo: Author’s last name only with date.

Popular Ponzi schemers

Bernard Madoff is one of Ponzi’s historical conspirators ((Dulitzky), 2018). He ran a Ponzi scheme for over thirty years. In his business at Madoff Securities, Madoff managed to embezzle millions of funds from intellectuals who found themselves victims of this fraudulent business. It is bewildering that indeed educated, professionals, intellectuals, society respectable figures could so easily get swindled into losing millions of dollars to a scheme that was formed by a simple man named Charles Ponzi. Comment by Lamar, Angelo: What format is this?

Madoff will remain the most popular Ponzi schemer because of the thousands who became victims of his fraudulent business. In December 2008, Madoff’s business was exposed and handed over to the authorities. He pled guilty and majority questioned his great reputation. After discovery of Madoff’s scam many other schemes got exposed because financial authorities became vigilant in securitizing investors in this market. Madoff’s scheme was however the largest Ponzi scheme in the US. In approximation, Madoff had accumulated 65 billion US dollars. Investors lost estimated 17.3 billion (Maglich, 2012). Half of the investors lost money was recovered by Irving Picard by May 2012.

Allen Stanford is another fraudster through the Stanford bank investment. He was the chairman of the Stanford Financial group. Allen operated businesses aimed at selling certificates of deposits to investors (Maglich, 2012). This business contained virtually zero risk. In return Allen promised his investors high returns that are not common in ideal investments. Stanford was arrested, and the court ruling was postponed when Stanford claimed a prison beating caused him to have amnesia. Stanford was later convicted and imprisoned for twenty years in the federal correction facility. Approximately, 4.5 to 6 Billion were lost by investors under this scheme.

Peter’s group worldwide is another Ponzi scheme that was owned and operated by Thomas Petters. He was a businessman in the popular brands Polaroid and Sun Country Airlines. Petters business was betrayed by two of his employees who confessed to the FBI about a Ponzi scheme that had accumulated about 4Billion US dollars (Maglich, 2012). The operator typically engineered bank statements to obtain loans to funders. Subsequently, Petters would then formulate purchase orders to attract more lenders. Eventually, loans that were unpaid accumulated and this prompted Petters to seek more from other lenders. The airlines went bankrupt and then Petters was arrested and convicted in 2009 for conspiracy and fraud. He was imprisoned for fifty years in 2010. Comment by Lamar, Angelo: All paragraphs are to be indented.

Rothstein Rosenfeldt Adler (lawyer) is another scam that involved the sale of interests to settle lawsuits by Scott Rothstein (Maglich, 2012). This was pure fraud because there were no actual lawsuit settlements. Scott constructed bank statements and legal documents in an attempt to sway and persuade investors that the scheme was legal. Investors continued to buy shares which supplied the scheme with incoming funds to pay the initial investors. The scheme was later discovered by law firms and Scott immediately fled to morocco carrying along millions of investors’ money. Later on Scott was lured to return to the US and was charged with fraud and imprisoned for fifty years upon pleading guilty. Estimated 1.4 billion of investors’ money was lost in this Scheme. Comment by Lamar, Angelo: Indent Paragraph

Another popular Ponzi scheme is the MRI International Inc. that was operated by Fujinaga Edwin that led to the loss of eight hundred million US dollars of mainly Japanese investors (Maglich, 2012). MRI International Inc. was basically a non-existing business and the name was used to convince investors that it was a real business. Fijinaga and MRI International Inc. managed to convince investors that they bought accounts from US medical and insurance advisors. This Ponzi scheme promised investors huge profits once the targeted amount was collected from the insurance company. The investors were offered tour to the US to visit the MRI International Inc. office that was located in Las Vegas and more than eight thousand investors were conned in this scheme. Comment by Lamar, Angelo: Indent Paragraph

Zeek Rewards is also a Ponzi scheme that led to the loss of approximately 600 million US dollars of investors’ money. The Securities and Exchange Commission filed a lawsuit in 2012 seeking to investigate the scheme (Maglich, 2012). The court mandated the duty to Kenneth Bell to investigate the scheme who found that the scheme had over 2 million members who had invested in Zeek Rewards. The scheme sold interests to investors through an online platform popularly linked by zeekler.com that was not licensed. Zeekrewards.com was an online auction site, were you could bid on products like iPad for as low as $1, and basically it was used for, investors who needed to cash out their money requested it online and had to wait for the check. Zeek rewards CEO Paul Burks, however was convicted in 2016 and sentenced to twenty years in prison for running one of the historical Ponzi schemes in the US. Comment by Lamar, Angelo: Cite here.

Nevin Shapiro founded Capitol Investment USA Inc. that promised investors exemplary returns through a grocery business (Maglich, 2012). The business involved buying of groceries that were lowly priced and reselling them at higher prices. The schemer described the business as risk free and with higher returns. The investors were promised between 10 and 26% returns from their investment. The schemer managed to accumulate close to a billion US Dollars using funds from new investors to repay returns to older investors. In 2011, Nevin was charged with fraud and sentenced to, to 20 years in jail (Maglich, 2012).

Illustration of a Typical Ponzi scheme

To elaborate how a Ponzi scheme manages to extract funds form investors without them noticing that it is fraud, a tabular presentation of a Ponzi scheme promising a 20% return on investment is used.

Year Funds Needed Amounts Raised ($1,000s) # of Investors
0 $ 100,000  $ 50.00  $ 50.00 2
1 $ 120,000  $ 40.00  $ 40.00  $ 40.00 3
2 $ 144,000  $ 48.00  $ 48.00  $ 48.00 3
3 $ 172,800  $ 43.20  $ 43.20  $ 43.20  $ 43.20 4
4 $ 207,360  $ 41.47  $ 41.47  $ 41.47  $ 41.47  $ 41.47 5
 

Source: https://www.onefpa.org/journal/Pages/Ponzi%20Schemes%20A%20Critical%20Analysis.aspx

From the table above, it is clear that initially, 100,000 US dollars was required to start the scheme. This implies that the schemer needed two investors each to contribute half of the amount. A 29% return on the investment requires the schemer to repay 120,000 US dollars to the first two investors, 600,000$ each. To generate the 120,000$ in the first year, the scheme will need to convince 3 new investors each to contribute 40,000$ making a total of the needed amount for the first two investors (Surendranath R. Jory, 2011). Comment by Lamar, Angelo: Indent paragraph Comment by Lamar, Angelo: Author’s last name and date only.

By the second year, the schemer would need 144,000$ to repay the three new investors which will force him to recruit four new investors each to contribute 48,000$. By the end of the third year, the schemer will be required to repay 57,600 $ which will force recruitment of four new investors each to contribute 43,200$. The trend will continue until more and more investors have been recruited into the scheme (Surendranath R. Jory, 2011). Comment by Lamar, Angelo: Indent paragraph

Ponzi schemes are however are not as simple to run as shown in the figure above. Usually, they seek to attract many initial investors and high initial contribution. For example, in the Madoff’s Ponzi scheme, the scheme contained thousands of investors and contributions were in billions of dollars. Clients who are investors in the Madoff scheme included firms such as Tremont group holdings, Greenwich advisors, international banks, pension funds, insurance and medical companies, rich individuals all representing the diverse origin of schemes victims. Comment by Lamar, Angelo: Indent

Detecting Ponzi Schemes

To be able to avoid falling victims of Ponzi Schemes, individuals need to be aware of the warning signs of a Ponzi fraudulent scheme. Ponzi schemes can be detected easily because they bear a common set of characteristics. These characteristics are the red flags that people should get conversant with to be able to protect themselves and their friends and relatives from falling victims of Ponzi schemes. Comment by Lamar, Angelo: Indent.

The most common feature of Ponzi scheme is high investment returns zero or minimal risk (Surendranath R. Jory, 2011). Basically, no single investment literally lacks some percentage risk. There are no guaranteed zero risk investment and this statement should serve as a warning that the business is a scam.

The second characteristic is the abnormally consistent high returns (US SEC, 2018). Normal businesses fluctuate and rise periodically. An investment that promises consistent returns stand to be questioned. Market conditions are the factors that dictate business returns depending with the seasons. Comment by Lamar, Angelo: Move up

The third feature is the lack of registration (US SEC, 2018). Ponzi schemes are not legally registered because they operate unlawful businesses. The schemes do not conform to state and federal laws and thus cannot be registered. Comment by Lamar, Angelo: Move up.

Financial investments are required by law to be operated by professionals who must be licensed under federal and state laws (Surendranath R. Jory, 2011). For schemers, the operators are not professionals and neither are they licensed(US SEC, 2018). This means that operators are unrecognized and firms are unregistered and unacknowledged.

Ponzi schemes operate in cagey, complicated and private premises with complex strategies and unreliable structures. Investments need to understandable and with clear information from which to draw information. Comment by Lamar, Angelo: Move up

Another common feature of Ponzi Schemes is that they have no qualifications for investing. Instead investment is open to all. Ponzi schemes do not embrace technological based data records but rely on paperwork (US SEC, 2018).

This is to prevent existence of evidence of fraud. Paper records can be easily erased and manipulated. With Ponzi schemes investors cannot easily access their investment funds. Some usually advise investors to accumulate investment returns into greater returns which never become a reality. Comment by Lamar, Angelo: Move up

The last common feature of Ponzi scheme is that they make use of affinity fraud. This entails use of a trusted individual to bring more investors into the scheme. Comment by Lamar, Angelo: Move up

Avoiding and Regulating Ponzi Schemes

Individuals have been provided with checklists and the red flags of Ponzi schemes to prevent them from falling victims. However, people still become victims either because they trust the promoter or because they do not have adequate knowledge regarding the schemes. Comment by Lamar, Angelo: Indent.

When one becomes a prey in a Ponzi scheme, they are encouraged to seek help from a financial advisor. There are legal punishments that are accorded participation in this fraudulent illegal business. However, a victim must seek legal redress to expose a fraudulent business. Upon exposure, a Ponzi scheme is sued by the Securities and Exchange Commission and the legal system appoints a legal trustee to recover the lost money. This benefits even the other investors who had not realized that the investment was a scam. The money is recovered from assets, and the consequences may extend to the bankers of the Ponzi scheme perpetrator. Comment by Lamar, Angelo: Indent

In cases where a Ponzi scheme perpetrator had contributed to charity using the embezzled funds, the amount donated may be required to be returned when the scheme is exposed regardless of the state of the receiver. Comment by Lamar, Angelo: Indent

Conclusion

In conclusion, Ponzi schemes are fraudulent investments that began as early as the 1920’s. The business involves incorporating investors into a non-existent investment promising high returns on the investment. Investors are paid using the funds of new investors who are convinced into the scheme by an influential character into the scheme. Technology and innovation in this fraudulent business are also perceivable. The industry has grown and its products also diversified. People need to be vigilant and be on the lookout for the warning signs of a Ponzi scheme to avoid becoming victims. It is imperative that investors differentiate between legal pyramid schemes and fraudulent Ponzi schemes. Comment by Lamar, Angelo: Indent.

 

References

(Dulitzky), D. K. (2018, March 5). The Challenges of Identifying and Preventing Ponzi Schemes. Retrieved Feb 7, 2019, from NYU JLB: https://www.nyujlb.org/single-post/2018/03/05/The-Challenges-of-Identifying-and-Preventing-Ponzi-Schemes

Maglich, J. (2012, May 20). Top Pozi Schemes. Retrieved Feb 11, 2019, from Ponzitracker: http://www.ponzitracker.com/top-ponzi-schemes/

Schain, P. J. (2011). The Never Ending Attraction of the Ponzi Scheme. Retrieved Feb 7, 2019, from Sacred Heart University: https://digitalcommons.sacredheart.edu/cgi/viewcontent.cgi?referer=http://int.search.myway.com/search/GGmain.jhtml?p2=&ptb=53C68D6A-8052-4221-9DC4-FD2622AF635B&n=&cn=US&ln=en&si=&tpr=hpsb&trs=wtt&brwsid=48bce492-f84d-4e2c-953e-d2c542921485&st=tab&searchfo

Surendranath R. Jory, P. a. (2011). Ponzi Schemes: A Critical Analysis. Journal of Financial Planning.

US SEC. (2018). Ponzi schemes Using virtual Currencies. Investor Education, 1-3.

Ms. Smith please find my comments above as it relates to your assignment. I have pointed out several errors that appear to repeat itself over and over throughout your assignments. Try to make a mental note or write them down and keep it close to you when writing to avoid these errors in the future. The information written in the assignment itself is good along with sentence structure and flow of thoughts, but one huge thing you forgot is that the majority of the information used was to come from your coursebook and not what is considered as secondary sources. You did not learn anything in class from the listed references so how can you construct a paper from them? You write the majority of information from the book you learn from. There is enough information in there to write your own book if you desired. Remember this in the future. Have a good weekend and I enjoyed you in class.

 
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Assignment: Application Case 13-1

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Read Application Case 13-1, Dunkin’ Donuts and Domino’s Pizza: Training for Quality and Hustle, on pages 426-428 in the text. Analyze the case and thoroughly answer the three questions at the end of the case.

Discussion Questions

1.  What are the strengths and shortcomings of a decentralized approach to training managers and hourly employees? Discuss.

2.  Develop a plan for determining the training needs of the hourly-paid staff of a Domino’s Pizza franchise.

3.  In your opinion, why was the turnover rate among management trainees in Dunkin’ Donuts’ centralized program so high?

 
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2000-2500 Word Essay (8-10 Pages) In APA Format On Ponzi Schemes

/in /by

Running Head: Ponzi Schemes 1

Ponzi Schemes 11

Running head (Header not in proper APA format)

Ponzi Schemes Comment by Lamar, Angelo: Center please.

Latoya Smith

Bethel University

MOD 450

Dr. Angelo Lamar

February 14, 2019

 

Abstract

Ponzi schemes date back in 1920’s when Charles Ponzi got involved in a disreputable money generating scheme. Initially the scheme had been tried without success but Charles managed to be the first person to embezzle millions from rather ignorant and innocent credulous people. This is the main reason the scheme bears Ponzi’s name. Later in 2008, one of the Ponzi’s conspirators was brought to the light. Madoff had conned investors of their money for close to thirty years. Unfortunately, the conned investors were all classy and literate. This paper is aimed at providing brief history of the Ponzi schemes and an illustration of how Ponzi schemes work. The second aim of the paper is to give examples of historically popular Ponzi schemers. In addition the paper provides some common characteristics of Ponzi schemes to be able to facilitate easy identification of illegal Ponzi schemes. The paper ends by providing hints on how to avoid unlawful and notorious Ponzi schemes. Comment by Lamar, Angelo: Keep up the good work here.

 

Introduction Comment by Lamar, Angelo: The title to your paper should go above this heading.

Ponzi schemes are typical fraudulent investments in which the owner promises the investors abnormally high financial returns from their investment. The scheme operator does not invest the investors’ money; instead, the operator uses the funds from new investors to pay the already existing investors their dividends. The schemes operate smoothly until they lack adequate subsequent investors to sustain payment of dividends to existing investors. This is according to the federal bureau of investigation’s definition of Ponzi schemes. A Ponzi scheme may also seize to operate when the notorious, illegal and fraudulent business is discovered by the government or any other legal authority. Comment by Lamar, Angelo: If so, where is the citation? If information does not come from you then give credit to where it came from.

According to the business dictionary Ponzi schemes are scams which operate on the hope of continued increase in the number of incoming investors to facilitate paying the returns to the former investors. The operations come to a halt when the amount of money getting out of the business exceeds the incoming amount. However, the schemers are wise enough to flee before the business crashes down. In this scenario the schemer tends to escape with large sums of money belonging to the investors and this equates to theft, cheat and may lead to legal interventions. Comment by Lamar, Angelo: If so, where is your citation? If information does not come from you then give credit to where it came from.

History of Ponzi schemes

Ponzi scheme has its history dating back in 1920 when Charles Ponzi got involved in a disreputable money generating scheme. Initially the scheme had been tried without success but Charles managed to be the first person to embezzle millions from rather ignorant and innocent credulous people. Today Ponzi schemes refer to an investment deception in which the conniver promises investors of deriving high returns from an investment that is said to have little or no risks involved. However, the conniver uses the money contributed by a new investor to pay the former investors. The secret behind Ponzi schemes is the ability of the schemer to continue attracting new investors to be able to pay returns to the already recruited investors without redress. Ponzi schemes however tend to be discovered when the schemer fails to convince and recruit new investors lacking sufficient funds to pay returns to the existing investors. The scheme may also fail when the legal channels become aware of the business operations. Comment by Lamar, Angelo: Where is your citation?

Ponzi schemes have their names derived from Charles Ponzi who was an Italian fraud and cheat who made money by deceiving investors. The embezzler used to promise investors a fifty percent returns on investments in approximately three months. Annually, banks would charge interest rates of 5% which made Ponzi preferable (Dulitzky), 2018). Ponzi schemes became international within a very short period of time. Eventually, Ponzi began to use new investor’s funds to pay the existing investors. With Ponzi schemes new amounts of money were involved and this made his strategy to become popular unlike previous attempts to carry out this fraudulent business and hence the name Ponzi schemes (Surendranath R. Jory, 2011). Comment by Lamar, Angelo: Why did you close the parentheses twice? Everything belongs within. Comment by Lamar, Angelo: Author’s last name only with date.

Popular Ponzi schemers

Bernard Madoff is one of Ponzi’s historical conspirators ((Dulitzky), 2018). He ran a Ponzi scheme for over thirty years. In his business at Madoff Securities, Madoff managed to embezzle millions of funds from intellectuals who found themselves victims of this fraudulent business. It is bewildering that indeed educated, professionals, intellectuals, society respectable figures could so easily get swindled into losing millions of dollars to a scheme that was formed by a simple man named Charles Ponzi. Comment by Lamar, Angelo: What format is this?

Madoff will remain the most popular Ponzi schemer because of the thousands who became victims of his fraudulent business. In December 2008, Madoff’s business was exposed and handed over to the authorities. He pled guilty and majority questioned his great reputation. After discovery of Madoff’s scam many other schemes got exposed because financial authorities became vigilant in securitizing investors in this market. Madoff’s scheme was however the largest Ponzi scheme in the US. In approximation, Madoff had accumulated 65 billion US dollars. Investors lost estimated 17.3 billion (Maglich, 2012). Half of the investors lost money was recovered by Irving Picard by May 2012.

Allen Stanford is another fraudster through the Stanford bank investment. He was the chairman of the Stanford Financial group. Allen operated businesses aimed at selling certificates of deposits to investors (Maglich, 2012). This business contained virtually zero risk. In return Allen promised his investors high returns that are not common in ideal investments. Stanford was arrested, and the court ruling was postponed when Stanford claimed a prison beating caused him to have amnesia. Stanford was later convicted and imprisoned for twenty years in the federal correction facility. Approximately, 4.5 to 6 Billion were lost by investors under this scheme.

Peter’s group worldwide is another Ponzi scheme that was owned and operated by Thomas Petters. He was a businessman in the popular brands Polaroid and Sun Country Airlines. Petters business was betrayed by two of his employees who confessed to the FBI about a Ponzi scheme that had accumulated about 4Billion US dollars (Maglich, 2012). The operator typically engineered bank statements to obtain loans to funders. Subsequently, Petters would then formulate purchase orders to attract more lenders. Eventually, loans that were unpaid accumulated and this prompted Petters to seek more from other lenders. The airlines went bankrupt and then Petters was arrested and convicted in 2009 for conspiracy and fraud. He was imprisoned for fifty years in 2010. Comment by Lamar, Angelo: All paragraphs are to be indented.

Rothstein Rosenfeldt Adler (lawyer) is another scam that involved the sale of interests to settle lawsuits by Scott Rothstein (Maglich, 2012). This was pure fraud because there were no actual lawsuit settlements. Scott constructed bank statements and legal documents in an attempt to sway and persuade investors that the scheme was legal. Investors continued to buy shares which supplied the scheme with incoming funds to pay the initial investors. The scheme was later discovered by law firms and Scott immediately fled to morocco carrying along millions of investors’ money. Later on Scott was lured to return to the US and was charged with fraud and imprisoned for fifty years upon pleading guilty. Estimated 1.4 billion of investors’ money was lost in this Scheme. Comment by Lamar, Angelo: Indent Paragraph

Another popular Ponzi scheme is the MRI International Inc. that was operated by Fujinaga Edwin that led to the loss of eight hundred million US dollars of mainly Japanese investors (Maglich, 2012). MRI International Inc. was basically a non-existing business and the name was used to convince investors that it was a real business. Fijinaga and MRI International Inc. managed to convince investors that they bought accounts from US medical and insurance advisors. This Ponzi scheme promised investors huge profits once the targeted amount was collected from the insurance company. The investors were offered tour to the US to visit the MRI International Inc. office that was located in Las Vegas and more than eight thousand investors were conned in this scheme. Comment by Lamar, Angelo: Indent Paragraph

Zeek Rewards is also a Ponzi scheme that led to the loss of approximately 600 million US dollars of investors’ money. The Securities and Exchange Commission filed a lawsuit in 2012 seeking to investigate the scheme (Maglich, 2012). The court mandated the duty to Kenneth Bell to investigate the scheme who found that the scheme had over 2 million members who had invested in Zeek Rewards. The scheme sold interests to investors through an online platform popularly linked by zeekler.com that was not licensed. Zeekrewards.com was an online auction site, were you could bid on products like iPad for as low as $1, and basically it was used for, investors who needed to cash out their money requested it online and had to wait for the check. Zeek rewards CEO Paul Burks, however was convicted in 2016 and sentenced to twenty years in prison for running one of the historical Ponzi schemes in the US. Comment by Lamar, Angelo: Cite here.

Nevin Shapiro founded Capitol Investment USA Inc. that promised investors exemplary returns through a grocery business (Maglich, 2012). The business involved buying of groceries that were lowly priced and reselling them at higher prices. The schemer described the business as risk free and with higher returns. The investors were promised between 10 and 26% returns from their investment. The schemer managed to accumulate close to a billion US Dollars using funds from new investors to repay returns to older investors. In 2011, Nevin was charged with fraud and sentenced to, to 20 years in jail (Maglich, 2012).

Illustration of a Typical Ponzi scheme

To elaborate how a Ponzi scheme manages to extract funds form investors without them noticing that it is fraud, a tabular presentation of a Ponzi scheme promising a 20% return on investment is used.

                   
Year Funds Needed Amounts Raised ($1,000s) # of Investors
0 $ 100,000          $ 50.00    $ 50.00       2
                         
1 $ 120,000        $ 40.00    $ 40.00    $ 40.00     3
                         
2 $ 144,000        $ 48.00    $ 48.00    $ 48.00     3
           
3 $ 172,800      $ 43.20    $ 43.20    $ 43.20    $ 43.20   4
           
4 $ 207,360    $ 41.47    $ 41.47    $ 41.47    $ 41.47    $ 41.47 5

Detecting Ponzi Schemes

To be able to avoid falling victims of Ponzi Schemes, individuals need to be aware of the warning signs of a Ponzi fraudulent scheme. Ponzi schemes can be detected easily because they bear a common set of characteristics. These characteristics are the red flags that people should get conversant with to be able to protect themselves and their friends and relatives from falling victims of Ponzi schemes. Comment by Lamar, Angelo: Indent.

The most common feature of Ponzi scheme is high investment returns zero or minimal risk (Surendranath R. Jory, 2011). Basically, no single investment literally lacks some percentage risk. There are no guaranteed zero risk investment and this statement should serve as a warning that the business is a scam.

The second characteristic is the abnormally consistent high returns (US SEC, 2018). Normal businesses fluctuate and rise periodically. An investment that promises consistent returns stand to be questioned. Market conditions are the factors that dictate business returns depending with the seasons. Comment by Lamar, Angelo: Move up

The third feature is the lack of registration (US SEC, 2018). Ponzi schemes are not legally registered because they operate unlawful businesses. The schemes do not conform to state and federal laws and thus cannot be registered. Comment by Lamar, Angelo: Move up.

Financial investments are required by law to be operated by professionals who must be licensed under federal and state laws (Surendranath R. Jory, 2011). For schemers, the operators are not professionals and neither are they licensed(US SEC, 2018). This means that operators are unrecognized and firms are unregistered and unacknowledged.

Ponzi schemes operate in cagey, complicated and private premises with complex strategies and unreliable structures. Investments need to understandable and with clear information from which to draw information. Comment by Lamar, Angelo: Move up

Another common feature of Ponzi Schemes is that they have no qualifications for investing. Instead investment is open to all. Ponzi schemes do not embrace technological based data records but rely on paperwork (US SEC, 2018).

This is to prevent existence of evidence of fraud. Paper records can be easily erased and manipulated. With Ponzi schemes investors cannot easily access their investment funds. Some usually advise investors to accumulate investment returns into greater returns which never become a reality. Comment by Lamar, Angelo: Move up

The last common feature of Ponzi scheme is that they make use of affinity fraud. This entails use of a trusted individual to bring more investors into the scheme. Comment by Lamar, Angelo: Move up

Avoiding and Regulating Ponzi Schemes

Individuals have been provided with checklists and the red flags of Ponzi schemes to prevent them from falling victims. However, people still become victims either because they trust the promoter or because they do not have adequate knowledge regarding the schemes. Comment by Lamar, Angelo: Indent.

When one becomes a prey in a Ponzi scheme, they are encouraged to seek help from a financial advisor. There are legal punishments that are accorded participation in this fraudulent illegal business. However, a victim must seek legal redress to expose a fraudulent business. Upon exposure, a Ponzi scheme is sued by the Securities and Exchange Commission and the legal system appoints a legal trustee to recover the lost money. This benefits even the other investors who had not realized that the investment was a scam. The money is recovered from assets, and the consequences may extend to the bankers of the Ponzi scheme perpetrator. Comment by Lamar, Angelo: Indent

In cases where a Ponzi scheme perpetrator had contributed to charity using the embezzled funds, the amount donated may be required to be returned when the scheme is exposed regardless of the state of the receiver. Comment by Lamar, Angelo: Indent

Conclusion

In conclusion, Ponzi schemes are fraudulent investments that began as early as the 1920’s. The business involves incorporating investors into a non-existent investment promising high returns on the investment. Investors are paid using the funds of new investors who are convinced into the scheme by an influential character into the scheme. Technology and innovation in this fraudulent business are also perceivable. The industry has grown and its products also diversified. People need to be vigilant and be on the lookout for the warning signs of a Ponzi scheme to avoid becoming victims. It is imperative that investors differentiate between legal pyramid schemes and fraudulent Ponzi schemes. Comment by Lamar, Angelo: Indent.

References

(Dulitzky), D. K. (2018, March 5). The Challenges of Identifying and Preventing Ponzi Schemes. Retrieved Feb 7, 2019, from NYU JLB: https://www.nyujlb.org/single-post/2018/03/05/The-Challenges-of-Identifying-and-Preventing-Ponzi-Schemes

Maglich, J. (2012, May 20). Top Pozi Schemes. Retrieved Feb 11, 2019, from Ponzitracker: http://www.ponzitracker.com/top-ponzi-schemes/

Schain, P. J. (2011). The Never Ending Attraction of the Ponzi Scheme. Retrieved Feb 7, 2019, from Sacred Heart University: https://digitalcommons.sacredheart.edu/cgi/viewcontent.cgi?referer=http://int.search.myway.com/search/GGmain.jhtml?p2=&ptb=53C68D6A-8052-4221-9DC4-FD2622AF635B&n=&cn=US&ln=en&si=&tpr=hpsb&trs=wtt&brwsid=48bce492-f84d-4e2c-953e-d2c542921485&st=tab&searchfo

Surendranath R. Jory, P. a. (2011). Ponzi Schemes: A Critical Analysis. Journal of Financial Planning.

US SEC. (2018). Ponzi schemes Using virtual Currencies. Investor Education, 1-3.

Ms. Smith please find my comments above as it relates to your assignment. I have pointed out several errors that appear to repeat itself over and over throughout your assignments. Try to make a mental note or write them down and keep it close to you when writing to avoid these errors in the future. The information written in the assignment itself is good along with sentence structure and flow of thoughts, but one huge thing you forgot is that the majority of the information used was to come from your coursebook and not what is considered as secondary sources. You did not learn anything in class from the listed references so how can you construct a paper from them? You write the majority of information from the book you learn from. There is enough information in there to write your own book if you desired. Remember this in the future. Have a good weekend and I enjoyed you in class.

 
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CHAPTER 26 The Military Managed Care Health System M. NICHOLAS COPPOLA, RONALD P. HUDAK, FOREST S. KIM, LAWRENCE FULTON, JEFFREY P. HARRISON, AND BERNIE J. KERR, JR.

 

STUDY OBJECTIVES

• Understand the difference between direct care and purchased care • Understand the importance of readiness in the military health system • Understand the governance process in military managed care • Understand TRICARE performance metrics • Understand the in�luence of outside stakeholders on military health care policy • Understand the current and future challenges faced by the military health system • Understand the relationships and competing priorities of actors within the Managed Care Quaternion

DISCUSSION TOPICS

1. Discuss the following statement made by a former Assistant Secretary of Defense for Health Affairs, “The military health system operates the only health maintenance organization that goes to war.” Why is this statement important in understanding the military health system?

2. Discuss key legislative events in military health care that resulted in the implementation of the current TRICARE program. 3. Discuss key differences and advantages of TRICARE Prime, Extra, and Standard. What other TRICARE programs are available for speci�ic

bene�iciaries? 4. Discuss the historical events that resulted in “TRICARE for Life” becoming a right for eligible bene�iciaries. 5. Discuss opinions on how best to ensure the survival of the military health system. 6. Discuss and describe the Parity of Healthcare.

 

 

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INTRODUCTION

This chapter discusses the Military Health System (MHS). The MHS operates a specialized form of managed care called TRICARE and responds to the challenge of maintaining medical combat readiness while providing health services for all eligible bene�iciaries. TRICARE brings together the worldwide health resources of the Army, Navy, Air Force, Coast Guard, and Commissioned Corps of the Public Health Service (often referred to as direct care) and supplements this capability with network and non-network civilian health professionals, hospitals, pharmacies, and suppliers (referred to as purchased care) to provide better access and quality service while maintaining the capability to support military operations. In essence, TRICARE can be considered a group of health plans within the MHS.

On the direct care side, the MHS, worldwide, oversees over 50 military hospitals and medical centers, 364 medical clinics, and 282 dental clinics at the time of publication. The MHS also operates a fully accredited medical school, graduate programs, and 36 medical research laboratories. It also offers scholarships at a number of major universities as well as broad programs in medical research and development. Each service’s medical department is headed by a Surgeon General who is the senior of�icer, meaning general of�icers in the Army and Air Force and an admiral in the Navy.* (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26fn1) Each military Surgeon General is responsible for the care provided in his or her respective service’s military treatment facilities (MTFs). MTFs are analogous to civilian medical centers, hospitals, and health clinics.

In the purchased care side, there are over 380,000 network providers and over 60,000 retail pharmacies. In a typical week, the MHS does more than 23,000 inpatient admissions; 1.8 million professional encounters (outpatient); 2,400 births; 230,000 behavioral health outpatient services; and �ills 2.6 million prescriptions. In addition, over 3.5 million claims are processed and 12.6 million electronic health record messages are completed.1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en1)

TRICARE offers a range of primary, secondary, and tertiary care health services to almost 10 million eligible bene�iciaries with an annual cost of over $49 billion. Approximately 3.7 million are enrolled in the direct care system, 1.6 million are enrolled in TRICARE’s purchased care contractor networks, and the remainder are in other TRICARE programs. A unique aspect of military managed care is the MHS’s readiness mission. Readiness is de�ined as the ability of forces, units, technical systems, and equipment to deliver the output for which they were designed.2 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en2) Readiness is also associated with maintaining the health status of active duty personnel well above the health standing associated with nonmilitary personnel. Furthermore, readiness is synonymous with ensuring ef�icient supplies are available for national disasters and war, and ensuring that appropriate processes are in place to support mobilizations. This means that readiness is associated with the ability of certain elements of brick-and-mortar health care facilities to become mobile and deploy worldwide when necessary. Finally, readiness is concerned with operations management processes and the ef�icient and effective use associated with the transformation of inputs into outputs. No other managed care plan in the United States—or the world—has a similar focus and responsibility. Former Assistant Secretary of Defense for Health Affairs Dr. Sue Bailey once said that the military health system operates the only health maintenance organization (HMO) that goes to war.3 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en3)

To understand the current structure and process of military managed care, it is �irst necessary to review the seminal events in military managed care evolution. Factors affecting military managed care evolution stem from issues in war, directives from Congress, bene�iciary demands, and adoption of civilian best practices over 200 years. In contrast, some civilian managed care practices may have antecedent roots in earlier military health programs. The end result is a civilian managed care system with undeniable ties to military initiatives and a military managed care system that is similar to civilian managed care in many ways while still maintaining distinctiveness in mission and purpose. In essence, the MHS can be considered:

• A provider of health care; • An employer of health care professionals; • An insurer of bene�iciaries; • An educator of clinical and nonclinical personnel, unique within the U.S. health care industry; • A military component prepared to go anywhere, anytime in defense of our nation.

 

 

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26.1 BRIEF HISTORY OF THE MILITARY HEALTH SYSTEM

Military health care began when the country did, and has undergone considerable and continual change. The history of the military health system is brie�ly described next.

The Revolutionary War through Post World War II

The history of military health care traces its origins to the establishment of the Army Medical Department on July 27, 1775. During the American Revolution, military health care was delivered in the �ield, often in churches and barns. After 1777, several �ixed facility hospitals were established in various northern states. On March 2, 1799, Congress established An Act to Regulate the Medical Establishment. This legislation gave the Physician General (renamed from the Director General and Chief Physician) the authority and responsibility of overseeing the development of (primarily) Army hospitals. That same year, General George Washington approved the construction of one of the �irst military hospitals in the Colonies, in Morristown, New Jersey. Although the act did not provide for dependants of one service to be treated in the hospital of another branch of service, both the Army and the Navy routinely took care of members from their sister service.4 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en4) , 5 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en5)

One of the other unique features of the 1779 Act was a directive to collect prospective payments for health care services. The 1779 Act also directed the Secretary of the Navy to deduct 20 cents a month from the pay of sailors and marines for their care in civilian treatment facilities. Proceedings suggest that the practice of collecting money for health care services not received—but promised at some future time and place—may represent the �irst time in U.S. managed care history that prospective health services were established in the United States health system.6 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en6)

From the Revolutionary War through the Civil War, the military attempted to differentiate between care for dependants and active duty access. However, the westward growth of the nation required Army posts to be located in remote areas with no alternative access to health care. As military posts expanded west, families accompanied soldiers. Although departmental regulations prohibited military surgeons from treating civilians, some exceptions were granted. Finally, in 1834, the Adjutant General ruled that military surgeons had permission to treat civilians when it did not interfere with their required military duties.7 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en7) This policy established the bene�it—and later entitlement—to free health care for authorized dependants of the military that currently exists. More important, this may also be the �irst instance in U.S. health care that nonmonetary bene�its, speci�ically health care bene�its, were granted by an organization to family members of the employed person. The preponderance of the civilian sector did not adopt a similar provision for providing free health care to an employed person’s family on a regular basis until the next century, as described in Chapter 1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i9#ch01) .

CHAMPUS and the Modern Military Health Care Era

In 1956, in an effort to keep up with a growing civilian trend to offer health care bene�its and entitlements to retired persons, Congress enacted the Dependants Medical Care Act. This act provided that “medical and dental care in any medical facility of the uniformed services may, under regulations prescribed jointly by the Secretaries of Defense and Health, Education and Welfare, be furnished upon request and subject to the availability of space, facilities, and capabilities of the medical staff, to retired members of uniformed services.” The act additionally applied to dependants of uniformed retirees. The signi�icance of the Act was that it legitimized standing policies already in widespread application throughout the military health system.8 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en8) In 1965, Congress created Medicare and Medicaid. One of the original goals of Medicare was to provide health care for retired workers who were no longer covered by a health plan after retirement. However, a problem existed for many military personnel who often retired from a military career in their mid- to late 40s. As a result of the space availability clause of the Dependants Medical Care Act, a problem arose where some military retired members could not gain access to MTF—and were too young to participate in Medicare. As a result, some service members found themselves paying for medical care in civilian institutions out of pocket.

In an effort to address the inability to gain access to health care for some categories of bene�iciaries, Congress amended the Dependants Medical Care Act and created the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). CHAMPUS was created under Public Law 89-614, the Military Medical Bene�its Amendments Act of 1966. Modeled after the Blue Cross and Blue Shield options of the time, CHAMPUS was a fee-for-service bene�it that provided for comprehensive medical care when there was no space available in the MTF.9 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en9) For the �irst time in the history of the military, two different systems existed to provide care to bene�iciaries. The resulting composite organization was composed of a direct military care system for active duty personnel that used all available military hospitals and clinics, and a second system monitored through CHAMPUS that acted as a gatekeeper to the civilian care system.10 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en10) Although CHAMPUS did not require a monthly premium like Medicare did (for Part B only; see Chapter 24 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i283#ch24) ), CHAMPUS had an annual deductible and a cost share for care received outside of the MTF.

Through the late 1980s, CHAMPUS bene�its remained relatively stable and unchanged. However, spiraling health care costs in the 1980s affecting civilian health care organizations also began affecting CHAMPUS. As a result, the Department of Defense (DOD) began to explore options and alternatives to control costs, monitor access, and maintain health care quality. One option centered on closing inef�icient military hospitals. The second option focused on reengineering military health care.

 

 

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The �irst option implemented by Congress to control military health care costs was the Base Realignment and Closure (BRAC) initiative. From 1987 through 1997, Congress mandated a 35% reduction of military health care assets.11 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en11) The second option focused on quality and access and resulted in a series of �ive notable demonstration projects initiated from 1986 through 1993. These demonstration projects were conducted to validate the ability to use de�ined civilian networks effectively to treat military bene�iciaries as well as to conduct a cost-bene�it analysis between purchased civilian health care services and CHAMPUS expenditures. These demonstrations included the CHAMPUS Reform Initiative (CRI), the New Orleans managed care demonstration, Catchment Area Management (CAM) projects, the Southeast Region Preferred Provider Organization (PPO) demonstration, and the Contracted Provider Arrangement (CPA) in Norfolk, Virginia.12 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en12) –14 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en14) For a more detailed review and historical presentation of these projects, readers are referred to the third edition of The Managed Health Care Handbook.15 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en15)

CHAMPUS Demonstration Project Outcomes and the Creation of TRICARE

In 1993, the CHAMPUS demonstration projects suggested a reorganization of military health care by providing some evidence that civilian managed care techniques could help the military contain costs, improve quality, increase access, and advance patient satisfaction. In 1994, Congress enacted the National Defense Authorization Act (NDAA). The NDAA directed the DOD to prescribe and implement a health bene�it option for bene�iciaries eligible for health care under Chapter 55 of Title 10, United States Code (USC). The NDAA also directed the military health system to implement health programs modeled on managed care plans in the private sector.

In response to the DOD and Congress, the military health system developed the military managed care plan called TRICARE. TRICARE’s name was coined to represent the three primary military services involved in providing health care to DOD bene�iciaries (Army, Navy, and Air Force). The name also represents the three managed care options originally developed to administer care, called TRICARE Prime, TRICARE Extra, and TRICARE Standard (Table 26-1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26tab1) ). Although several others have been added since TRICARE’s inception, most MHS bene�iciaries are enrolled in these three options. Overall, TRICARE adopted several successful managed care features, such as primary care managers, gatekeeper access, enrolled bene�iciaries, and empanelled providers. The program also includes case, disease, risk, and utilization management principles.

Enhanced TRICARE Bene�its

TRICARE continually seeks to enhance the bene�it offered to uniformed service members, their families, and retirees and their families. As a result, in addition to the managed care options of Prime, Standard, and Extra, several niche-speci�ic programs and adaptations have evolved to provide bene�its to a larger population of bene�iciaries. The preponderance of these programs resulted from initiatives in Congress to improve health care access and quality of care. One of the most signi�icant changes to TRICARE came about with the signing of Public Law 106-398 as part of the 2001 NDAA. Dr. J. Jarrett Clinton, the acting Assistant Secretary of Defense for Health Affairs in 2001, said, “Collectively, this act represents the most signi�icant change to military healthcare bene�its since the implementation of the CHAMPUS in 1966.”16 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en16) The 2001 NDAA authorized several key TRICARE improvements, including the following:

1. Established TRICARE as the secondary payer for Medicare-eligible military retirees (MEMR); 2. Established a pharmacy bene�it for MEMR called TRICARE Senior Pharmacy Program (TSPP); 3. Established a MEMR Healthcare Trust Fund (HCTF); 4. Eliminated copayments for TRICARE Prime active duty family members; 5. Expanded TRICARE Prime Remote; 6. Introduced chiropractic care for active duty soldiers; 7. Established the Individual Case Management Program (ICMP) for persons with extraordinary conditions; and 8. Reduced the catastrophic cap from $7,500 to $1,000 for active duty families and $3,000 for all others.17

(http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en17)

 

Other mentionable bene�its included in this Act were permanent health bene�its for Medal of Honor recipients and their families, extension of medical and dental bene�its for survivors of deceased active duty soldiers, and authorization of payment for school physicals. The 2001 NDAA also authorized the DOD to expand TRICARE health bene�its to niche-speci�ic programs. The signi�icant programs that were eventually enacted as a result of the original 2001 NDAA—and subsequent amendments—included TRICARE for Life, TRICARE Reserve Select, and the TRICARE Dental Program.

 

 

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26.2 THE TRICARE PROGRAM

The components of the TRICARE program are discussed next.

TRICARE and the Patient Protection and Affordable Care Act

TRICARE is an entitlement program, meaning anyone who quali�ies as eligible can enroll in TRICARE (eligibility is discussed next). Because it is an entitlement program, it is not affected by the Patient Protection and Affordable Care Act (ACA). The two other major entitlement programs, Medicare (Chapter 24 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i283#ch24) ) and Medicaid (Chapter 25 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i298#ch25) ), are addressed speci�ically in the ACA, but as separate Titles within the Act, not by inclusion with the new nonentitlement health bene�its coverage requirements; TRICARE, however, is not addressed in the ACA at all.

Long before passage of the ACA, TRICARE already met all but one of the major coverage requirements, bene�its, and prohibition on various limitations that the ACA now requires for commercial coverage by 2014. The only one it didn’t meet, extending coverage to children of covered individuals up to age 26 if those children do not have access to coverage through their own work, was resolved when the NDAA of �iscal 2011 authorized the premium-based Young Adult Program that provides for this type of coverage extension. The ACA is not addressed further in the chapter.

TABLE 26-1 TRICARE Bene�iciary Costs, 2010

Source: TRICARE: Summary of Bene�iciary Costs, www.tricare.mil/mybene�it/Download/Forms/Bene_Cost_Br_L_011510.pdf (http://www.tricare.mil/mybene�it/Download/Forms/Bene_Cost_Br_L_011510.pdf) . Accessed November 2, 2010.

TRICARE Eligibility

TRICARE is the health care program serving active duty uniformed service members, National Guard and Reserve members, retirees, their families, survivors, and certain former spouses worldwide of the U.S. Army, U.S. Navy, U.S. Air Force, U.S. Marine Corps, U.S. Coast Guard, as well as the Commissioned Corps of the U.S. Public Health Service and the National Oceanic and Atmospheric Administration. Family members include spouses, unmarried children under age 26, and stepchildren adopted by the sponsor. National Guard and Reservists become eligible for TRICARE when called to active duty for more than 30 days. All who are eligible for TRICARE must be listed in the Defense Department’s worldwide, computerized database, the Defense Enrollment Eligibility Reporting System (DEERS). The following are not

 

 

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eligible for TRICARE bene�its: parents and parents-in-law of active duty service members, or retirees and people who are eligible for health bene�its under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). Out-of-pocket costs for each TRICARE option are provided in Table 26-1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26tab1) .

TRICARE Governance

To implement and administer TRICARE, in 1994, the DOD originally reorganized the military health system into 12 joint-service regions. All 12 regions were subordinate to the TRICARE Management Agency (TMA). The decision to separate contracts for different TRICARE regions was made in an effort to prevent any one contractor from having too much control over the care delivered to DOD bene�iciaries.

In 2004, the Assistant Secretary of Defense (Health Affairs) and the services’ Surgeons General established a governance structure consisting of three TRICARE regions. The new governance structure is designed to monitor performance and resolve problems at the lowest possible level for managing the military health bene�it with force readiness as the �irst priority, followed closely by bene�iciary satisfaction. Each of the three TRICARE regions in the United States has a regional contractor to coordinate medical services available at the MTF and the civilian network. The regional contractors work with the TRICARE regional of�ices (TROs) to manage TRICARE at a regional level. Both the regional contractors and the TROs receive overall guidance from the TMA. The three TRICARE regions are organized geographically into a North, South, and West region, as depicted in Figure 26-1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26�ig1) .

Governance of the three TRICARE service regions remains complex. The TRICARE regional of�ices are responsible for planning, coordinating, and monitoring all health care delivered throughout their region. Additionally, each region establishes contracts with civilian health care organizations to provide medical care to bene�iciaries. However, both military commanders and civilian contractors struggle with dual missions to maintain wartime readiness requirements and peace time bene�iciary health care with limited budgets in a not-for-pro�it environment.

TRICARE Program Options

The TRICARE program has three main options: TRICARE Prime, TRICARE Standard, and TRICARE Extra. There are also three additional options available under certain circumstances: TRICARE for Life, TRICARE Reserve Select, and TRICARE Retired Reserve.

TRICARE Prime

TRICARE Prime is the HMO-like plan in which bene�iciaries enroll in this bene�it option where it is offered. Each enrollee chooses, or is assigned, a primary care manager (PCM), a health care professional who is responsible for helping the patient manage his or her health, promoting preventive health services (e.g., routine exams, immunizations), and arranging for specialty provider services as appropriate. Prime offers enrollees additional bene�its such as access standards in terms of maximum allowable waiting times to obtain an appointment, emergency services (24 hours per day, 7 days per week), and waiting times in doctors’ of�ices, as well as preventive and wellness services (routine eye exams, immunizations, hearing tests, mammograms, Pap tests, prostate examinations). A point-of-service (POS) option permits enrollees to seek care from non-network providers, but with signi�icantly higher cost-sharing.

Active duty service members must enroll in TRICARE Prime and must receive all health care bene�its at an MTF unless otherwise authorized. All health care bene�its are free, and there are no out-of-pocket costs to service members. TRICARE Prime is also available to other eligible bene�iciaries, such as family members of active duty service members and retirees under age 65. If enrolled in TRICARE Prime, active duty family members must also receive health care at an MTF unless otherwise directed. Retirees not eligible for Medicare can enroll in TRICARE Prime; however, they must pay an annual enrollment fee as well as copayments for care received in civilian facilities. TRICARE Prime enrollees must follow well-de�ined rules and procedures. Failure to follow strict TRICARE Prime guidelines may result in refusal of care, refusal of payment, and costly POS option charges.

FIGURE 26-1 TRICARE Regions Source: TRICARE Choices: Your Guide to Selecting the TRICARE Program Option That’s Best for You. Available at: www.tricare.mil/mybene�it/Download/Forms/Choices_Handbook.pdf (http://www.tricare.mil/mybene�it/Download/Forms/Choices_Handbook.pdf) . Accessed

 

 

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November 2, 2010.

In addition to low to no out-of-pocket costs, an advantage of being enrolled in TRICARE Prime is the policy-directed access to care standards for appointments. Access to care standards differ by the level of care sought. For emergency care, MHS bene�iciaries have the right to access emergency health care services when and where the need arises. For urgent (acute) care, the standard is an appointment within 24 hours and within 30 minutes travel time; routine care within 7 calendar days and within 30 minutes drive time; for wellness and specialty care, the appointment must be within 28 days and within 1 hour drive time from the bene�iciary’s residence. If these access standards cannot be met, TRICARE offers the bene�iciary a referral and authorization to seek care in the civilian network. Moreover, TRICARE access standards state that of�ice waiting times in nonemergency circumstances shall not exceed 30 minutes for Prime enrollees.

For service members and their families who do not live near an MTF, TRICARE offers TRICARE Prime Remote (TPR). TPR is speci�ic to certain geographic locations, and eligibility is based on residence and/or work address. To be eligible for TPR, active duty members and their families must live and work more than 50 miles—or approximately 1 hour drive time—from the nearest MTF. TPR offers the same access standards and low out-of-pocket costs as TRICARE Prime. Like TRICARE Prime, enrollment in TPR is required.

Another TRICARE Prime option is the Uniformed Services Family Health Plan (USFHP) and is available to active duty family members, retirees, and their eligible family members (including those age 65 and older regardless if they are enrolled in Medicare Part B). The USFHP is available through networks of community-based, not-for-pro�it health care systems in six areas of the United States. Enrollment in USFHP is required and enrollment fees apply for retirees and their eligible family members. If enrolled in USFHP, access to care at an MTF or use of MTF pharmacies is excluded. This managed care option has the same coverage and costs as Prime, but also offers additional services at the local level.

TRICARE Standard

TRICARE Standard is the traditional indemnity bene�it, also known as fee-for-service (FFS), and formerly known as CHAMPUS. It is open to all eligible Department of Defense bene�iciaries, except active duty service members and, until recently, Medicare eligibles. No enrollment is required to obtain care from civilian providers. TRICARE Standard gives bene�iciaries the option to see any provider. Advantages include a wider selection of providers and health care facilities and the option to participate in TRICARE Extra. There is no required annual enrollment, and the option offers comprehensive health care coverage for bene�iciaries not enrolled in TRICARE Prime.

While Standard offers the greatest �lexibility in choosing a provider, the plan also has the most out-of-pocket cost-sharing by the bene�iciary; for example, TRICARE Standard requires that the bene�iciary satisfy a yearly deductible before TRICARE cost-sharing begins. Furthermore, the plan requires bene�iciaries to pay copayments or cost shares for outpatient care, medications, and inpatient care. Another disadvantage is that the patient may also be required to �ile his or her own claims. Finally, the option also does not provide a PCM bene�it.

TRICARE Extra

TRICARE Extra is based on a civilian PPO model in which bene�iciaries eligible for TRICARE Standard may decide to use preferred civilian network providers on a case-by-case basis (they may switch between the Standard and Extra bene�its). TRICARE Extra is open to any TRICARE-eligible bene�iciary who is not active duty, not otherwise enrolled in Prime, and not eligible for TRICARE for Life (discussed next). TRICARE Extra requires no enrollment and there is no enrollment fee. Under this option, bene�iciaries can see civilian providers and go to civilian health care organizations that are on an approved list of TRICARE providers called the TRICARE Provider Directory.

TRICARE Extra is essentially an option for TRICARE Standard bene�iciaries who want to save on out-of-pocket expenses by making an appointment with a TRICARE Prime network provider. TRICARE Extra requires the same deductible as TRICARE Standard; however, by using network providers, bene�iciaries reduce their cost-sharing by 5%. An advantage of TRICARE Extra is that the Extra option user can expect that the network provider will �ile all claims forms—similar to TRICARE Prime. An additional advantage is that the access to the authorized provider may be more geographically convenient to the Extra user. However, disadvantages include extra fees associated with deductibles and copayments, the loss of a PCM, some restrictions on specialty care access, and limited provider choice.

TRICARE for Life

Over the years, military recruiters marketed “free health care for life” to potential recruits, promising this bene�it for the recruit and certain family members if they served a certain amount of time in uniform.18 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en18) However, in 1956, Public Law 569 changed the century-old, quasi–health care for life entitlement to a bene�it. PL 569, Section 301, changed from: “Hospital space SHALL be made available” to “Hospital space MAY be made available [sic].”19 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en19) Despite the change in law, retirees and family members continued to receive bene�its well into the early 1990s. However, in the mid-1990s, under congressional and presidential guidance, these bene�iciaries were required to use a civilian health care provider, use a civilian organization, and rely on Medicare or other health insurance (OHI) as payers.20 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en20)

The Pentagon estimated that approximately 1.5 million personnel, approximately 20% of the bene�iciary base, were locked out of the military health system in the late 1990s.21 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en21) Based partially on the grassroots response to restricted access to health care options, TRICARE for Life (TFL) was signed into public law (PL 106-398) as part of the 2001 NDAA.

TFL effectively ful�ills the promise of lifetime health care made to older retirees for a career in uniform. TFL restores TRICARE coverage for all Medicare-eligible retired bene�iciaries regardless of age or place of residence who are enrolled in Medicare Parts A and B.22 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en22) Congress established TFL as a “fully funded entitlement program” by means of a new

 

 

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Medicare-Eligible Retiree Health Care Trust Fund.23 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en23) To qualify for TFL, a retiree must have served at least 20 years in the uniformed services (including retired members of the National Guard and the Reserves). There are no enrollment fees, premiums, or deductibles for TFL. Bene�iciaries receive most of their care from civilian providers and Medicare is the �irst payer, whereas TRICARE (or other health insurance) serves as the secondary payer. TFL makes TRICARE a secondary payer to Medicare at no cost to a retiree.

Another option available to eligible TFL bene�iciaries is TRICARE Plus. TRICARE Plus affords bene�iciaries the opportunity to receive primary care and specialty care at their local MTF, provided that facility has space available. There are no charges or fees for TRICARE Plus, if offered by the MTF. Another bene�it of TRICARE Plus is that bene�iciaries are entitled to the same primary care access standards as bene�iciaries in TRICARE Prime. For example, the bene�iciary would be assured of a primary care appointment within one week. However, TRICARE Plus is not available at all MTFs due to the availability of care. Also, the MTF commander may limit the program to only certain bene�iciary categories, again based on local staf�ing and other considerations.

Another limitation is that bene�iciaries already enrolled in TRICARE Prime, a purchased care HMO, or a Medicare HMO are not eligible. Basically, TRICARE for Life (bene�its received from civilian providers) and TRICARE Plus (care received at MTFs) give bene�iciaries more coverage while simultaneously allowing the military health system the ability to control costs and access due to local, medically related considerations. The enactment of TFL represents one of the many military managed care outcomes that can be traced to antecedent activist actions by constituents.

TRICARE Reserve Select

The NDAA of 2005 authorized a program called TRICARE Reserve Select (TRS). TRS is a premium-based health plan for eligible Reserve component members. TRS offers comprehensive health care coverage similar to TRICARE Standard and TRICARE Extra. TRS members and covered family members can access care by making an appointment with any TRICARE authorized provider, hospital, or pharmacy or TRICARE network or non-network. TRS members may access care at an MTF on a space-available basis only; however, pharmacy services are available from an MTF pharmacy, the TRICARE Mail Order Pharmacy, or TRICARE network and non-network retail pharmacies. Medical coverage (direct care at the MTF) is available when the member is activated. When ordered to active duty for more than 30 consecutive days, Reserve component members and their families have comprehensive health care coverage under TRICARE.24 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en24)

TRICARE Retired Reserve

TRICARE Retired Reserve (TRR) provides comprehensive coverage for a speci�ied group of bene�iciaries. Eligibility for this program is limited to retired Reserve individuals who are quali�ied for nonregular retirement and their families. Also, they must be under the age of 60 and not eligible for, or enrolled in, the Federal Employees Health Bene�its Program (FEHBP).25 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en25)

In addition, survivors of retired Reserve members may be quali�ied if they meet certain requirements: the Reserve member was covered by TRR at time of death; the survivors must be immediate family members and the spouse must not have remarried; and the coverage would begin before the Reserve member would have turned 60. However, eligibility for FEHBP is not necessary for the survivors.

TRR is a premium-based plan that offers TRICARE bene�its worldwide by TRICARE-authorized providers. Similar to other TRICARE programs, there are annual deductibles and copays. However, unlike some of the other TRICARE plans, the law does not provide any government subsidy, therefore, enrollees pay the full cost of the program. Nevertheless, the cost is less if the providers are in the TRICARE network.

Other advantages of the program include bene�iciaries being authorized to receive care in military hospitals on a space-available basis. Also, the bene�iciary may visit any TRICARE-authorized provider whether or not that provider is in the network. However, if the provider is in the network, the bene�iciary will pay less and the provider will �ile the claim on behalf of the bene�iciary. There is no referral, although some medical services may require preauthorization by TRICARE. Finally, continuity of care may be enhanced because there is no requirement for eligible Reserve personnel to change providers if they already have one. A description of all of the TRICARE program options is provided in Table 26-2 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26tab2) .

TABLE 26-2 TRICARE Program Descriptions

 

 

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Source: TRICARE Choices: At a Glance. Available at: www.tricare.mil/tricaresmart�iles/Prod_539/TRICARE_Choices_At_a_Glance_Br_10_LoRes.pdf (http://www.tricare.mil/tricaresmart�iles/Prod_539/TRICARE_Choices_At_a_Glance_Br_10_LoRes.pdf) . Accessed November 2, 2010.

TRICARE Pharmacy Program

The MHS provides comprehensive prescription drug coverage to all its bene�iciaries including active duty service members and their families, retirees and their families, and bene�iciaries who are over age 65. Also, this coverage is the same regardless of the TRICARE program in which the bene�iciary is enrolled. Pharmaceuticals may be obtained at MTFs or through the TRICARE Pharmacy program (TPharm), which includes home delivery, retail network pharmacies, and non-network pharmacies.

TPharm is a contractor-provided bene�it, which provides convenience and low cost to bene�iciaries. TPharm has the combined features of a home delivery (by mail order) service and a retail pharmacy. In addition to not requiring enrollment, there are several other advantages to bene�iciaries:

• A single call center and a help desk are available for convenience; • Prescriptions are easily transferred between pharmacies regardless of whether they are retail, military, or mail order; and • Although the prescription drug coverage is the same regardless of health plan, there are �inancial incentives for bene�iciaries to utilize

home delivery (mail order) rather than retail pharmacies.26 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en26)

TRICARE Dental Programs

The TRICARE Dental Program (TDP) is a voluntary dental insurance program that is available to eligible active duty family members, select reserve component personnel, Individual Ready Reserve (IRR) members, select retirees, and other eligible bene�iciaries. This premium- based program has annual costs and deductibles for both family members of active duty personnel as well as other classes of bene�iciaries.27 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en27) The plan covers ordinary dental procedures such as annual screenings, preventive care, and standard dental treatments.

Another dental program exists solely for active duty and activated Reserve and National Guard service members. This program, the Active Duty Dental Program (ADDP), is administered by a civilian contractor who provides care for service members who live and work more than 50 miles from a military dental clinic as well as service members in the U.S. Virgin Islands, Puerto Rico, as well as the Paci�ic islands of Guam,

 

 

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American Samoa, and the Northern Mariana Islands. Although there is no enrollment feature, treatment must be provided by the contractor’s network provider.

Other TRICARE Programs

Beyond the programs that have already been discussed, other TRICARE programs include TRICARE Overseas, transitional health care bene�its such as the Transitional Assistance Management Program and the Continued Healthcare Bene�it Program (CHCBP), and programs for special needs bene�iciaries.

TRICARE Overseas

Because there are over 500,000 TRICARE bene�iciaries living overseas, TRICARE contracts exist in three geographical regions: Latin America-Canada, Eurasia-Africa, and the Paci�ic. In these areas, MTFs provide primary care to bene�iciaries but the host nations provide specialty care. The contract vendors are responsible not only for ensuring care is provided to the bene�iciaries, but also for provider relations in the host nations and some medical evacuations. TRICARE Prime Overseas allows service members and their families who live overseas to get their health care under a TRICARE Prime–like option. Active duty service members must enroll in TRICARE Prime Overseas; however, family members can select between two options: TRICARE Overseas Prime and TRICARE Standard Overseas. TRICARE Standard Overseas also extends to military retirees and their families. TRICARE Extra is not available in overseas locations.

Transitional Assistance Management Program and the Continued Healthcare Bene�it Program

Individuals who lose TRICARE eligibility or other coverage under the military health system are eligible for two transitional health care options: the Transitional Assistance Management Program (TAMP) and the Continued Health-care Bene�it Program (CHCBP). TAMP provides 180 days of transitional health bene�its after leaving active duty with the option to enroll in TRICARE Prime or receive coverage under TRICARE Standard and TRICARE Extra. CHCBP is a premium-based health care program administered by a private contractor that provides temporary transitional health coverage (18–36 months) after TRICARE eligibility ends. CHCBP offers similar bene�its and operates under most of the rules of TRICARE Standard. To obtain this coverage, the member must enroll in CHCBP within 60 days after separation from active duty or loss of eligibility for military health care.28 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en28) , 29 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en29)

Extended Care Health Option

TRICARE offers three enhancements to the traditional TRICARE program for active duty family members with special needs: TRICARE Extended Care Health Option (ECHO), ECHO Home Health Care (EHHC), and EHHC Respite Care. ECHO delivers �inancial assistance and additional bene�its, including supplies and services, beyond those available from the basic bene�it in TRICARE Prime, Standard, or Extra. The bene�it increased from $1,000 (through the Program for Persons with Disabilities) to $2,500 per eligible family member in �iscal year 2004 under ECHO. Additionally, bene�iciaries who are homebound may qualify for extended in-home health care through ECHO.

ECHO Home Health Care provides medically necessary skilled services to eligible homebound bene�iciaries who generally require more than 28–35 hours per week of home health services or respite care. This bene�it helps eligible bene�iciaries stay home rather than having to go to an institutional/acute-care facility or skilled nursing home. Similarly, the EHHC Respite Bene�it provides temporary relief or a rest period for the primary caregiver to promote well-being for both the caregiver and the homebound bene�iciary. This bene�it offers 8 hours of respite care per day up to 5 days per calendar week.30 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en30)

 

 

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26.3 MONITORING MHS PERFORMANCE

Like all managed health care plans, the performance of the MHS is continually monitored, often using the same metrics and measures used by commercial payers. But the MHS is not exactly the same as all other managed health care plans, so it must monitor performance in some unique ways.

The MHS Quadruple Aim

In 2009, MHS leaders recognized that the MHS strategic plan was consistent with the concept of the Triple Aim proposed by the Institute for Healthcare Improvement (IHI). The Triple Aim describes the results that can be achieved when all the elements of a health care system work together to serve the needs of a population. Because the MHS is a system dedicated to the health of the military family, it was appropriate to adopt the Triple Aim as its strategic vision with the addition of one key element: readiness. Readiness re�lects the core mission of the MHS and its reason for being. Figure 26-2 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26�ig2) shows the MHS Quadruple Aim.

The MHS Quadruple Aim is comprised of the following elements:

• Readiness—ensuring that the total military force is medically ready to deploy and that the medical force is ready to deliver health care anytime, anywhere in support of the full range of military operations, including humanitarian missions.

FIGURE 26-2 The MHS Quadruple Aim Source: 2011 MHS Stakeholders’ Report, www.health.mil/About_MHS/StakeholdersReport.aspx (http://www.health.mil/About_MHS/StakeholdersReport.aspx) . Accessed March 2, 2011.

• Population Health—improving the health of a population by encouraging healthy behaviors and reducing the likelihood of illness through focused prevention and the development of increased resilience. • Experience of Care—providing a care experience that is patient and family centered, compassionate, convenient, equitable, safe, and of

high quality. • Per Capita Cost—creating value by focusing on quality, eliminating waste, and reducing unwarranted variation and considering the

total cost of care over time, not just the cost of an individual health care activity.

The MHS monitors a number of metrics to assess its strategic performance. When appropriate, the MHS uses existing measures found in the civilian sector in order to benchmark its performance. Some examples of these measures include those taken from the Healthcare Effectiveness Data and Information Set (HEDIS®), the Consumer Assessment of Health Plans Study (CAHPS®), and the Overall Hospital Quality Index (ORYX®). Emphasis on speci�ic metrics changes as the needs of the population change.* (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26fn2)

Performance Metrics for TRICARE Contractors

TRICARE contractors are charged with providing or arranging for delivery of high-quality, timely health care services and accurate, timely processing of claims received into their custody, whether for network or non-network care. In addition, the contractor must provide courteous, accurate, and timely response to inquiries from bene�iciaries, providers, the TMA, and other legitimately interested parties. TMA has established standards of performance that are monitored by TMA and other government agencies to measure contractor performance. Key performance standards include such measures as preauthorizations/authorizations, referrals, and claims processing timeliness requirements.31 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en31)

Outcomes of the TRICARE Program

Initial results of the TRICARE reengineering initiative, combined with other improvements within the military health system, suggest that cost containment and quality improvement were achieved through (at least) 2004.32 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en32) However, from 2001 through 2010, expenses associated with military health care rose 167%, resulting in an increase of costs from $19

 

 

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billion to $51 billion in the same period of time. This increase represents over 10% of the defense budget. Projected costs are estimated to reach $65 billion by 2015. To compound issues, TRICARE fees have not increased since 1995. The result has been a less cost-ef�icient military health system.33 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en33) , 34 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en34)

However, quality indicators suggest that military hospitals have higher Joint Commission scores than civilian organizations. Additionally, military report cards suggest that military hospitals have a higher percentage of board-certi�ied doctors, administrators, and allied health personnel than civilian hospitals.

Bene�iciaries who are enrolled in the purchased care plan are generally more satis�ied than those enrolled in the direct care plan. Issues being addressed include aligning incentives for both bene�iciaries and providers, enhancing continuity of care, and maintaining access standards in both military health care facilities and the civilian network.35 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en35) , 36 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en36)

Although there is mixed research and opinion on whether military health care is more or less cost effective per quality outcomes than civilian health care, Congress, the DOD, TMA, and the bene�iciary base largely consider TRICARE a success. As a result, in an effort to maintain satisfaction with key stakeholders, the military health system is continually developing process improvement initiatives and incorporating progressive management practices to maintain optimal cost, quality, and access. Such examples in recent years have included the adoption of both a balanced scorecard and lean six sigma initiatives.

 

 

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26.4 CURRENT AND FUTURE CHALLENGES

Many of the current and future challenges for the MHS parallel those in the commercial sector, but some are unique.

Continually Rising Costs

Like health care bene�its in the commercial sector, and in Medicare and Medicaid, the biggest threat to the military health plan is its cost. Between �iscal year 2007 and 2010 alone, costs increased almost 10%. About half of this increase was in the purchased care part of TRICARE, meaning private sector providers. Major causes of this increase were the retail pharmacy network, the TFL bene�it, and an increased number of bene�iciaries. In response, the pharmacy bene�it has been restructured to encourage home delivery. However, there are limited options to reduce the cost of TFL. Similarly, it can be expected that there will be more bene�iciaries as the population’s life span increases and more National Guard and Reserve bene�iciaries enroll.

In 1995, bene�iciaries paid approximately 27% of their health care costs; however, in 2010, bene�iciaries paid only 12% of their own health care costs. The result is a more generous military medical bene�it to bene�iciaries. Unfortunately, in an effort to control health care costs in the civilian market, many employers of military bene�iciaries (including state agencies) have encouraged them to forgo participating in the employee health plan in lieu of extra wages and income. The new employer avoids an increase in the company’s bene�its costs, but only because the burden of providing medical care to the military bene�iciary base remains with TRICARE.

In addition to bene�it enhancements, increased use by an increased number of bene�iciaries and no increases in cost-sharing have resulted in the MHS experiencing the same health care in�lation as all health plans in the nation. The MHS implemented a number of management initiatives designed to reduce the costs of delivery and to enhance performance within its health system. For example, an Out-patient Prospective Payment System has been implemented. This seeks to leverage the Medicare program by aligning hospitals’ outpatient payment rates with the rates approved by Medicare. Similarly, tighter management controls have been implemented to constrain per member per month costs as well as emergency department utilization.

Having the enormous responsibility and accountability to be a good steward of taxpayers’ dollars often makes the MHS a keen concern of Congress. Because the health care industry is the largest service industry in the United States, and health care costs have historically shown a trend of rapid increase, it is little wonder that health care expenditures are a signi�icant issue in terms of the annual military budget and a potential threat to the TRICARE program.

The Next Generation of Tricare Contracts

The military health system is continually adapting the structure of its health care delivery system to meet DOD requirements. The current contracts were awarded in 2010 for a maximum of 5 years. Soon after these contracts were awarded, the DOD began an initiative to assess the requirements for the next generation of TRICARE contracts. To determine the scope of the contracts, this initiative assessed national security, health care, and the economic climate as well as such factors as various health care delivery and �inance models, scope of coverage, leveraging best practices and knowledge management, and individual choice and �inancial implications. Throughout the assessment, key considerations were maintaining the military’s readiness, strengthening continuity of care, and focusing on health vis-à-vis health care.37 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en37)

Caring for Wounded Warriors

In addition to providing health care through the direct care and purchased care TRICARE program, the MHS remains focused on optimizing the health and quality of life of wounded service members and their families. To accomplish this, MHS centers of excellence (CoE) have been established for research and treatment. These CoEs are addressing how to treat the most serious injuries including psychological health and traumatic brain injury, amputations, neuroscience and regenerative medicine, and vision.38 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en38)

Representative of the comprehensive approach to research and treatment is the Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury (DCOE). This center is the focal point for a number of interdisciplinary resources to assist the families in understanding and coping with the injuries of their service members. In addition to providing information on the nature of psychological and traumatic brain injuries, this assistance includes providing state-of-the-art advice regarding issues including preventing suicide, helping children whose mother/father has deployed or just returned, adjusting to changes, taking care of family members, and understanding the stress of service members who are transitioning in their careers (e.g., relocating or returning to civilian life). DCOE also provides a free, 24/7 outreach center, which consists of experts who provide information by telephone, e-mail, or online chat.

Since the beginning of hostilities in Iraq, the MHS has treated substantial numbers of severely wounded, ill, and injured (WII) service members. However, subsequent to the 2007 media coverage regarding the quality and effectiveness of care, management, and support systems for the WII, a number of additional initiatives were implemented. Also, the National Defense Authorization Act of 2008 required the Secretaries of Defense and Veterans Affairs to develop policies regarding the WII’s care, management, and transition into the civilian community.

 

 

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Within the Department of Defense, there are several organizational elements to accomplish these goals. The Of�ice of Wounded Warrior Care and Transition Policy (WWCTP) was established in November 2008 and was charged with providing oversight, establishing policy, and collaborating with other agencies to ensure that WII service members receive quality health care while in a patient status and, when appropriate, the necessary support during their transition to either civilian life or return to active duty.

The of�ice has a number of responsibilities, including providing recovery care coordinators, administering the Disability Evaluation System (DES), and maintaining the National Resource Directory as well as the Transition Assistance Program. The DES initiative is administered in coordination with the Department of Veterans Affairs. The intent is to ensure that the WII service member is provided only one medical examination that will ensure a faster, more equitable, and more transparent disability determination.

The Recovery Coordination Program consists of recovery care coordinators who work with the military departments’ recovery care teams to ensure that all nonmedical needs of WII service members are met in a timely and comprehensive manner. The Transition Assistance Program is responsible to ensure that WII service members are connected with a comprehensive range of services and resources. These include counseling and brie�ings in such areas as bene�its, transition to civilian life, post-military employment and career changes, and resources for WII service members with disabilities. The National Resource Directory is a robust website that offers information pertaining to important topics such as bene�its and compensation, employment, family and caregiver support, health care, housing and transportation, and education and training.39 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en39)

In support of the WWCTP and the military services, the MHS provides health care as well as coordination and transition services for its WII service members through the services’ wounded warrior programs. The core attribute of these programs is the comprehensive and personalized health care and nonmedical case management of each WII service member and his or her family.

The largest program is the Army’s Wounded Warrior Program (AW2), with the mission to assist and advocate for its severely wounded, ill, and injured soldiers, veterans, and their families for as long as it takes. It provides individualized services to this population by means of a designated advocate whose responsibility is to provide personal assistance. Although this advocate is a nonmedical manager, he or she is also responsible to ensure that appropriate health care is received as indicated. The second largest program is the Marine Corps Wounded Warrior Regiment. Similar in mission to the AW2, the Wounded Warrior Regiment “provides and facilitates assistance to wounded, ill, and injured Marines, Sailors attached to or in support of Marine units, and their family members in order to assist them as they return to duty or transition to civilian life.”40 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en40)

Although supporting a substantially smaller WII population, the Navy’s Safe Harbor and the Air Force Wounded Warrior programs also provide individualized and enhanced assistance to their service members and families during and after active duty.

The features of AW2 are representative of the other services’ programs, although there may be differences in some operational aspects due to service philosophy, numbers of WII service members, or other service-speci�ic considerations. As noted above, AW2’s key feature is individualized support provided to WII service members, who are de�ined as those Army soldiers who are expected to require at least 6 months of rehabilitation as well as complex medical management. Each soldier is assigned a non-medical case manager who is called an AW2 Advocate. This Advocate is located in an area as close as possible to the soldier. Typically, the Advocate is located where there are large concentrations of WII service members, including military installations, VA facilities and polytrauma centers, and urban areas. The Advocate is required to personally maintain contact with the soldier and assist him or her for the long term, hence the AW2’s philosophy of “for as long as it takes.” The Advocate’s assignment is not limited by the soldier’s recovery or rehabilitation time and, if the soldier moves, another local Advocate will be assigned.41 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en41)

Balancing Stakeholder Priorities

The most signi�icant struggle the military managed care system has grappled with from the inception of TRICARE to the present is the careful balance between elements of the Coppola’s Managed Care Quaternion (MCQ)42 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en42) –44 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en44) and Kissick’s Iron Triangle.45 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en45)

When juxtaposed together, the two models create a new decision-making paradigm Coppola coined, “The Parity of Health Care,”46 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en46) as shown in Figure 26-2 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26�ig2) . Coppola developed the Parity of Health Care concept and model to assist in explaining to military health care leaders why consensus on any single aspect of health care is dif�icult. The model has gained popular support within governmental organizations, as well as some state Medicaid agencies, as an aid to health planning and policymaking. It has also been used to forecast future health care needs in many civilian organizations and entities as well.47 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en47)

Managed Care Quaternion

The term Managed Care Quaternion was coined in the Army-Baylor Graduate Program in Health and Business Administration in 2003. The Army-Baylor Program has been responsible for training and educating the next generation of military health care executives since 1953. The Quaternion has been used for several years to help explain the complex interactions among employers, patients, providers, and payers in regard to partisan and competing views about health care.

Understanding the careful balance between stakeholders in military health care policy and strategy formulation is critically important. This reality becomes more important as leaders rise in positions of increased responsibility, from running health care organizations to directing

 

 

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policy for entire health systems. Key stakeholders in the military are similar to any civilian health care entity, and are comprised of military and civilian individuals, groups, and associations. While the numbers of stakeholders in health organizations can be numerous, there are four main types of stakeholders to consider in any health care decision making: patients, payers, providers, and employers.

The Iron Triangle

The concept of the Iron Triangle was developed by Kissick in the early 1990s during the managed care revolution in America. Kissick coined the term Iron Triangle to demonstrate the dif�iculty in selecting priorities for health as they relate to health care costs, quality, and access.* (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26fn3) Kissick suggested that an understanding of these resource elements would assist managed care organizations in setting logistical priorities. Kissick’s model is a vital tool to health leaders; however, the model itself fails to take into account outside actors and agents. In this regard it is incomplete by itself for dynamic organizational analysis.

Parity of Health Care

The Parity of Health Care model juxtaposes the Managed Care Quaternion and the Iron Triangle models together in a manner that allows military and civilian leaders to strategically plan and forecast the impact of new policy decisions that may affect the organization, such as patient care, payment arrangements, external costs, outside stake-holder satisfaction, program ef�iciency and effectiveness, quality, and other policies affecting organization survivability. Patients, payers, employers, and providers all play a vital role in the operations of any health organization. With any one of the four major stakeholders of the Managed Care Quaternion omitted in the decision-making process for a health care entity, failure at some level is sure to occur. For example, a military primary care clinic without extended and weekend of�ice hours may be regarded as low quality to the patient because of the inconvenience factor; however, the same clinic may be regarded as high quality to the DOD (i.e., the payers) because of the cost ef�iciency of the clinic. However, if patients continue to perceive lack of extended and weekend of�ice hours as low quality, dissatisfaction with the overall clinic may result regardless of the quality of provided care. As a result, health professionals must be cognizant of the constant struggle between stakeholders to maintain high satisfaction with all elements of the Managed Care Quaternion.

As seen from in Figure 26-3 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26�ig3) and Figure 26-4 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26�ig4) , even a slight variation in the prioritization of Iron Triangle options results in myriad interrelated and intrarelated competing priorities that can be hard for even the stakeholders to resolve themselves, let alone in tandem with other stakeholders along the continuum of care.

Sword of Damocles

In continuing to understand the dif�icult nature of the relationships between the Iron Triangle and the Managed Care Quaternion, we offer a metaphor from classical literature called the Sword of Damocles. In Greek mythology, the Sword of Damocles represents “ever-present peril.” It is also used as a metaphor to suggest a “frailty in existing relationships.” For example, in the Parity of Health Care, the Sword of Damocles represents an inability of any one stakeholder to reach sustained consensus for priorities of cost, quality, and access.

With health priorities constantly changing due to environmental demands, it is no wonder why agreements on health policy are dif�icult to reach. However, an understanding of the Parity of Health Care can be helpful to health leaders for strategically forecasting threats to relationships amid stakeholders, while also balancing priorities among those stakeholders. If anything is apparent, continuous external and internal assessment and evaluation and relationship building among stakeholders are critical to leadership success.

FIGURE 26-3 Parity of Health Care

 

 

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FIGURE 26-4 Parity of Health Care Competing Priorities and Possible Combinations

As a result, both military and civilian health planners must be cognizant that solutions developed to solve health problems in the current environment may not be valid solutions to tomorrow’s new issues. As environmental demands continue to place pressures on the relationships within the Parity of Health Care, health leaders must renegotiate priorities. Health planners and leaders should be aware of this fact and view change as a new opportunity for success and not simply problems of the dynamic environment. Always consider the Sword of Damocles represents the frailty of established relationships among stakeholders, and that constant maintenance and attention is required. An understanding of the Parity of Health Care can be helpful in the military health system for strategically forecasting threats to relationships amid actors—and also balancing priorities among actors.

A Different Health Care Environment

The military health system operates in a unique cost environment. MTFs operate in a typical government �iscal bureaucracy. Under this paradigm, health care dollars are allocated to the MTF at the beginning of the �iscal year on October 1. The hospital commander (similar to a civilian hospital CEO) is then encouraged to spend all the allocated monies prior to September 30 of the following year. Typically, hospital commanders attempt to exhaust all allocated dollars by the end of August—and then request more year-end funds. Under this federal bureaucracy and paradigm, military health leaders have little incentive to conserve resources, seek synergies, or save money. All money not used by September 30 of the �iscal year is lost. Ironically, then, commanders and health leaders failing to spend all their allocated dollars may be considered poor �inancial managers under this paradigm. However, a signi�icant advantage of this philosophy is that MTFs are able to consider aspects of quality and access over costs in some cases.

Until September 11, 2001 (9/11), this placed the military health system in a unique situation where it was able to focus attention and resources on matters of self-interest �irst rather than key stakeholder and actor priorities. Since 9/11 and the Global War on Terror, priorities have changed.

Congress closely monitors military health care budgets and major health care expenditures. Although MTFs still operate on a 12-month exhaustible account, MTFs’ budgets are closely reviewed for super�luous spending. Additionally, under revised �inancing initiatives, MTFs are moving toward a value-based �inancing system whereby facilities are paid based on the quantity and quality of services delivered rather than traditional budget allocations.48 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i314#ch26en48) Additionally, as the retiree and bene�iciary population continues to increase, non–active duty bene�iciaries have found they have a voice in Congress and the power to in�luence military health policy. The passing of the TRICARE for Life and the TRICARE Reserve Select options are only two of the examples of stake-holder in�luence on the modern military health system.

Finally, the local MTF commander now �inds him- or herself in competition with the local TRICARE network. Because certain classi�ications of bene�iciaries have a choice of enrolling in TRICARE Prime (care at the local military treatment facility) or choosing TRICARE Extra or Standard (care rendered through the civilian network), for every one patient that elects not to enroll (or disenroll) in TRICARE Prime, the local MTF commander loses money. As a result, contrary to the friendly relationship that existed between the TRICARE contractor and the local MTF in the 1990s, both the TRICARE contractor and the military hospital are competing more and more for the same health care dollars that are associated with every one DOD bene�iciary.

As a result, if the military health system is to continue to survive, military health leaders must understand the parity of health care. Furthermore, the military health system must, in essence, discontinue thinking “military” and adopt best practices and processes used by civilian peers. Military health leaders must consider aspects of the Managed Care Quaternion when formulating policy. Additionally, federal health care leaders must consider the consequences of cost, quality, and access to care actors. Failing to consider the complex relationships associated with the parity of health care will affect the ef�iciency, effectiveness, and survival of military health care in the future.

 

 

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CONCLUSION

The MHS operates the oldest form of organized health care delivery in the United States. Originally founded in 1775, the military health system has more than 235 years of experience in the effective operation and delivery of military medicine and management. The success of the military health system is caused in part by its ability to adapt to changes in the internal and external environments to maintain effectiveness.

Developing initially as colloquial health programs designed to treat speci�ic categories of bene�iciaries and active duty service personnel, the military medical system eventually developed comprehensive direct care and purchased care systems. The purchased care system, called CHAMPUS, provided health care to a large standing military throughout the Cold War era. However, in response to changes in the health care environment, the military developed and implemented TRICARE. TRICARE is the DOD’s managed care model that delivers health care to approximately 10 million bene�iciaries worldwide.

Although it struggled through its initial growing pains during the late 1990s, the TRICARE program has become a viable model of success. Signi�icant advantages of TRICARE include high-quality care and the lowest out-of-pocket costs as compared to civilian managed care models. Threats include costs associated with implementing TRICARE, providing care to an aging retiree population, and the additional mission of providing care to select Reserve members. Additional threats include a loss of stakeholder satisfaction and the stretching of scarce military health assets and dollars. Finally, the military health system is grappling to achieve equi�inality with Coppola’s Parity of Health Care. However, if past success predicts future behavior, the military health system will continue to be a relevant and ready health care entity for the rest of the century.

ACKNOWLEDGMENTS

The authors wish to thank Army-Baylor University Graduate Program in Health and Business Administration (Joint MBA/MHA program) classes of 2005 and 2006 and Army-Baylor students Eric McClung, Joseph Edger, and Joe Phillips for contributions to the chapter version used in the �ifth edition of this book, which is still valuable. Our thanks are also extended to Lieutenant Colonel (Ret) Dawn Erckenbrack, PhD, as an author and contributor to the �ifth edition’s chapter. We kindly appreciate the contributions of Captain Cheryl Anne Borden from the United States Public Health Service, and Michael Dinneen, MD, PhD, from the Of�ice of the Assistant Secretary of Defense (Health Affairs) for their assistance as subject-matter experts in verifying the content of this chapter. Finally, a small portion of this chapter detailing issues with the CHAMPUS Reform Initiative was adapted from Boyer and Sobel’s chapter, “CHAMPUS and the Department of Defense Managed Care Programs.” In: Kongstvedt PR, ed. The Managed Health Care Handbook. 3rd ed. (Gaithersburg, MD: Aspen Publishers; 1996), which is now out of print.

DISCLOSURE

The opinions or assertions contained herein are those of the authors and do not necessarily re�lect the view of the Department of Defense.

Endnotes 1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i309#ch26-en1) 2011 MHS Stakeholder’s Report. Presented at: The

2011 MHS Conference; January 24, 2011; National Harbor, MD. 2 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i309#ch26-en2) Joint Chiefs of Staff. Policy Memorandum of Policy

No. 172. Pentagon, Washington, DC; 1983. 3 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i309#ch26-en3) Bailey S. Keynote address. Presented at: TRICARE

Conference; 1999; Washington, DC. 4 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en4) Holcolm RC. A Century With the Naval Hospital in

Portsmouth. Portsmouth, VA: Printcraft Publishing Company; 1930, p. 543. Cited by: Garrigues RM. The Serendipitous History of Discovery and Development Surrounding the Hospital Point Area and Its Naval Hospital in Portsmouth. Available at: www- nmcp.mar.med.navy.mil/aboutus/nmcphist/nmcphist.asp (http://www-nmcp.mar.med.navy.mil/aboutus/nmcphist/nmcphist.asp) . Accessed December 10, 2010.

5 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en5) Coppola MN. Correlates of military medical treatment facility (MTF) performance: Measuring technical ef�iciency with the structural adaptation to regain �it (SARFIT) model and data envelopment analysis (DEA). Doctoral dissertation; Medical College of Virginia Campus, Virginia Commonwealth University, Richmond, VA; August 2003.

6 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en6) Gillett MC. The Army Medical Department 1775– 1818. Washington, DC: Government Printing Of�ice; 1981.

7 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en7) Ibid. 8 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en8) Military Healthcare Reclamation Group. Detailed

history of healthcare issues. White Paper. Military Grass Roots Group Priorities 2003/4 (Tab E); 2002. Available at: http://rebel.212.net/mhcrg/tabe.htm (http://rebel.212.net/mhcrg/tabe.htm) . Accessed February 15, 2004.

 

 

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9 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en9) Burrelli DF. Report for Congress on military healthcare: The issue of “promised” bene�its. 2002. Congressional Research Service Publication No. 98–1006F; Washington, DC: Library of Congress.

10 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en10) Government Accountability Of�ice. DOD’s managed care program continues to face challenges. Washington, DC: GAO; 1995.

11 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en11) Zwanziger J, Hart KD, Kravitz RL, Sloss EM. Evaluating large and complex demonstrations: The CHAMPUS reform initiative experience. Health Serv Res. 2001;35(6):1229–1244.

12 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en12) Boyer JF, Sobel LS. CHAMPUS and the Department of Defense managed care programs. In: Kongstvedt PR, ed. The Managed Health Care Handbook. 3rd ed. Gaithersburg, MD: Aspen; 1996. [Editor’s note: This book is out of print.]

13 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en12) Sloss EM, Hosek SD. Bene�iciary access and satisfaction. Santa Monica, Calif: RAND National Defense Research Institute; 1993. Evaluation of the CHAMPUS Reform Initiative; vol. 2, R- 4244/2-HA.

14 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en14) RAND National Defense Research Institute. Evaluation of the CHAMPUS Reform Initiative. Vols. 3 and 6. Santa Monica, CA: RAND National Defense Research Institute; 1993 and 1994. R-4244/3-HA and R-4244/6-HA.

15 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en15) Op cit: Boyer JF and Sobel LS. 16 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en16) Mientka M. TRICARE for Life in need of

supplemental. US Medicine. 2021 L Street, #400, Washington, DC. April 2001. Available at: www.google.de/search? hl=de&q=%22TRICARE+for+Life+in+need+of+ supplemental%22&btnG=Google-Suche&meta (http://www.google.de/search? hl=de&q=%22TRICARE+for+Life+in+need+of+supplemental%22&btnG=Google-Suche&meta) . Accessed February 22, 2004.

17 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i310#ch26-en17) TRICARE Management Activity Policy Memo, TRICARE Management Activity. Sky 5, Suite 810, 5111 Leesburg Pike, Falls Church, VA 22041-3206; Washington, DC, 2006.

18 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en18) Coppola MN, Hudak R, Gidwani P. A theoretical perspective utilizing resource dependency to predict issues with the repatriation of Medicare eligible military bene�iciaries back into TRICARE. Mil Med. 2002;167(9):726–731.

19 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en19) Public Law 569, The Dependants Medical Care Act (37 USC, Chapter 7 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i79#ch07) ); 1956.

20 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en20) The Retired Enlisted Association (TREA). July, 2001. History of lost bene�its: The creation of the military health care system. Unpublished white paper. Legislative Affairs Of�ice, 909 North Washington Avenue, Suite 301A.

21 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en21) Op cit.: Coppola MN, Hudak R, Gidwani P. 22 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en22) National Defense Authorization Act of 2001. 23 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en23) US Medicine Institute. TRICARE for Life—

Roundtable forum addressing the impact of provisions of the National Defense Authorization Act for 2001. Washington, DC: Charles Sumner Museum and Archives; January 16, 2001.

24 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en24) Op Cit: TRICARE Management Activity Policy Memo.

25 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en25) Army Reserve Non-regular Retirement Information Guide. Compiled by United States Army Reserve Command and Retirement Services, USAR LNO, February 12, 2009. Available at: www.armyg1.army.mil/rso/docs/ARReserveRetirementGuide.doc (http://www.armyg1.army.mil/rso/docs/ARReserveRetirementGuide.doc) . Accessed January 5, 2011.

26 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en26) TRICARE Operations Manual 6010.56-M, February 1, 2008; Chapter 23 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i276#ch23) , Section 1, TRICARE Pharmacy (TPharm), TRICARE Management Activity; Washington, DC.

27 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en27) Op cit.: TRICARE Management Activity Policy Memo.

28 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en28) Op cit.: TRICARE Management Activity Policy Memo, and TRICARE Operations Manual.

29 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en29) TRICARE Operations Manual 6010.56-M, February 1, 2008; Chapter 23 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i276#ch23) , Section 1, TRICARE Pharmacy (TPharm), TRICARE Management Activity; Washington, DC.

30 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i311#ch26-en30) TRICARE Management Activity, Extended Care Health Option. Available at: www.tricare.mil/mybene�it/Pro�ileFilter.do;jsessionid=Nn6QLhR1qS8yL4 kXM1XBGL1YdZGRXTXNWT9�j3dn4V3nppBhFLhK!1467275286?puri=% 2Fhome%2Foverview%2FSpecialPrograms%2FECHO (http://www.tricare.mil/mybene�it/Pro�ileFilter.do;jsessionid=Nn6QLhR1qS8yL4kXM1XBGL1YdZGRXTXNWT9�j3dn4V3nppBhFLhK!1467275286? puri=%2Fhome%2Foverview%2FSpecialPrograms%2FECHO) . Accessed January 2, 2011.

31 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-en31) TRICARE Operations Manual 6010.51-M, August 1, 2002,Chapter 1 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i9#ch01) , Section 3, TRICARE Processing Standards. TRICARE Management Activity; Washington, DC.

 

 

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32 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-en32) Op Cit: TRICARE Management Agency Policy Memo.

33 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-en33) Ackerman S. Daily Pentagon jackpot: Health care edition. WIRED. July 14, 2010. Available at: www.wired.com/dangerroom/tag/daily-pentagon-jackpot/ (http://www.wired.com/dangerroom/tag/daily-pentagon-jackpot/) . Accessed January 2, 2011.

34 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-en34) Bumiller E, Shanker T. Gates seeking to contain military health costs. New York Times. November 29, 2010. Available at: www.nytimes.com/2010/11/29/us/29tricare.html (http://www.nytimes.com/2010/11/29/us/29tricare.html) . Accessed January 2, 2011.

35 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-en35) Evaluation of the TRICARE Program, Fiscal Year 2010 Report to Congress.

36 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-en36) Gillette B. Vulnerable system no longer taking chances on claims. Managed Healthcare Executive. February 2003:38–39.

37 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en37) The Future of TRICARE Regional Contracts: T-4 Kickoff Meeting. September 20, 2010. Available at: www.health.mil/libraries (http://www.health.mil/libraries) . Accessed January 2, 2010.

38 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en38) Gagliano DA. 2010 military health system conference, lessons learned: CoE support to families and wounded through a patient center approach. Sharing knowledge: Achieving breakthrough performance. A Joint DoD/VA vision center of excellence. January 25, 2010. Available at: www.health.mil/Libraries/2010_MHS_Conference_Presentations/ Lessons_Learned_CoE_Support_to_Families_and_Wounded_Through_a_ Patient-Centered_Approach.pdf (http://www.health.mil/Libraries/2010_MHS_Conference_Presentations/Lessons_Learned_CoE_Support_to_Families_and_Wounded_Through_a_Patient- Centered_Approach.pdf) . Accessed January 2, 2010.

39 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en39) Warrior Care: We stand together. Available at: www.warriorcare.mil (http://www.warriorcare.mil) . Accessed January 2, 2010.

40 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en40) Wounded Warrior Regiment. Available at: www.woundedwarriorregiment.org (http://www.woundedwarriorregiment.org) . Accessed January 2, 2010.

41 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en41) Hudak RP, Morrison C, Carstensen M, Rice JS, Jurgersen BR. U.S. Army wounded warrior program (AW2): A case study in designing a nonmedical case management program for severely wounded, injured, and ill service members and their families. Mil Med. 2009;174(6): 566–571.

42 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en42) Coppola MN, Harrison J, Kerr B, Erckenbrack D. The Military Managed Care Health System. In: Kongstvedt PR, ed. Essentials of Managed Care. 5th ed. Sudbury, MA: Jones and Bartlett; 2007: 633–653.

43 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en42) Ledlow J, Coppola MN. Leadership in The Health Professions: Classics of Leadership Theory, Practical Applications and Essential Skills. Boston: Jones and Bartlett; 2011.

44 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en44) Coppola MN, Erckenbrack D, Ledlow GR. Stakeholder Dynamics. In: Johnson JA. Health Organizations: Theory, Behavior, and Development. Boston: Jones and Bartlett; 2009: 255– 278.

45 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en45) Kissick WL. The Past Is Prologue in Medicine’s Dilemmas: In�inite Needs versus Finite Resources. New Haven, CT: Yale University Press; 1994.

46 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en46) Op cit.: Coppola MN, Harrison J, Kerr B, Erckenbrack D.

47 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en47) Op cit.: Ledlow J, Coppola MN; and Coppola MN, Erckenbrack D, Ledlow GR.

48 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-en48) West TD, Cronk MW, Goodman RL, Waymire TR. Increasing accountability through performance-based budgeting. J Gov Financ Manag. 2010;59(1): 51–55.

 

* (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i309#ch26-fn1) The Navy is also responsible for providing medical care to the Marine Corps.

* (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i312#ch26-fn2) HEDIS is maintained by the National Committee on Quality Assurance (NCQA), and CAHPS is maintained by the federal Agency for Healthcare Research and Quality (AHRQ); both are addressed in Chapter 15 (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i199#ch15) . ORYX is maintained by The Joint Commission and is not within the scope of this book.

* (http://content.thuzelearning.com/books/Kongstvedt.2332.17.1/sections/i313#ch26-fn3) A variation of this was used by the consulting �irm Ernst & Young, LLP around the same time: cost, access to all providers, and high level of bene�its coverage.

 

 
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Discussion 1:

Question:

What should be included in disaster planning for a large employer in Annapolis, Maryland, that is concerned about natural disasters such as floods and snowstorms that might shut down the company and parts of the city?

 

In the United States of America you never know when a natural disaster might strike.  If it happens during the work day you have to have a plan as an organization.  Employees need to know exactly what to do and not have to think about it or ask questions.  Sometimes you don’t have much time to get yourself to safety when a natural disaster happens.  The last thing an organization wants is one or multiple employees get hurt or possibly killed during a natural disaster.  If there is a big flood that might happen it is important to prepare.  Understand where the highest ground is at your location.  Let employees know the evacuation plans and make sure they are prepared to have to leave work early and get to safety.  Rushing water can sweep cars away and prevent people from driving so it is important to pay attention to news outlets and make sure people get to safety before the disaster happens (Prepare for Emergencies, n.d.).  If you are afraid the power might go out during a snowstorm or rainstorm you have to make sure you protect your companies data.  Losing all of the data your company has could really make it where your business collapses.  Businesses should back up all of their files multiple times to ensure they keep their data during a disaster (Swanciger, n.d.).  It could be hard for suppliers to make deliveries during the days after a disaster so it is important to communicate with employees, customers, and vendors about possible delays.  Natural disasters are a scary time for all humans so it is important to make sure everyone is safe and your business is safe during these times.

 

 

Discussion 2:

Question:

What should be included in disaster planning for a large employer in Annapolis, Maryland, that is concerned about natural disasters such as floods and snowstorms that might shut down the company and parts of the city?

 

 

Emergency and disaster planning involve a coordinated, co-operative process of preparing to match urgent needs with available resources. The phases are research, writing, dissemination, testing, and updating. Hence, an emergency plan needs to be a living document that is periodically adapted to changing circumstances and that provides a guide to the protocols, procedures, and division of responsibilities in emergency response. Emergency planning is an exploratory process that provides generic procedures for managing unforeseen impacts and should use carefully constructed scenarios to anticipate the needs that will be generated by foreseeable hazards when they strike

Emergency response involves a mixture of plans, procedures, and improvisation. To some extent, the last of these is inevitable, but it needs to be limited by preparedness. It is axiomatic that planning and procedures should not be improvised during an emergency when they should have been thought through and created beforehand. The consequence of unwonted improvisation is inefficiency in emergency response, which may have serious or tragic consequences. A degree of uniqueness present in each new disaster means that improvisation cannot be avoided, but foresight and preparedness can constrain it to a necessary minimum.

Moreover, emergencies are always occasions for learning, and a significant part of the body of experience on which plans are based comes from the mistakes, inefficiencies, and improvisations of the past. Although many publications have the phrase “lessons learned” in their titles, there is no guarantee that a lesson will indeed be learned. If that does indeed happen, measurable positive change will result directly from the lesson. For example, lack of search-and-rescue equipment may be keenly felt in structural collapses that trap people. Hence, probes, props, and personal protection equipment may be acquired and personnel trained in how to use them.

Emergency and disaster planning is a relatively new field, and one that is evolving rapidly, driven by intensifying hazards, burgeoning vulnerabilities, and emerging risks. Hence, there is no established formula according to which a plan should be prepared. Nevertheless, there are canons and practices that must be respected.

 
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