Case Study MS120

Healthcare Services


Case author

Professor Charmi Patel, PhD, MSc, BA

Learning objectives After you completed this course module, you will be able to conceptually solve holistic management problems within a case study of the healthcare sector.

Lothian Health Authority (LHA) is one of 189 health authorities in Great Britain which serve populations ranging from 89,000 to 800,000. Lothian is one Scotland's larger health authorities, and services the health care needs of a population in excess of 600,000. Like all health authorities, Lothian is accountable to the NHS (National Health Service) which is in turn accountable to the Department of Health. LHA is run by a management team that consists of a chair (a part-time appointment only), a chief executive, four directors (with responsibilities for purchasing, planning, finance, and public health), a secretary, and five non-executive members. The Authority employs approximately 70 people in its core service functions (purchasing, planning, public health, and information and finance), of which 25 are purchasing strategy group (PSG) members. The role of the LHA includes responsibility for (1) the purchase of health care for its resident population; (2) the management of services provided by its directly managed units; (3) assessing the health care requirements of its resident population; and (4) public health. In order to conduct these duties efficiently and effectively, LHA is expected to work closely with family health services authorities (FSHAs), general practitioners (GPs), local authorities, and other relevant agencies. LHA is also required to consult with consumers (health service users) and their representatives.

Workload units 2
Reading extract Healthcare Services Case Study


Some introducing thoughts on healthcare services

Health care, the diagnosis, treatment, and prevention of diseases, illnesses, injuries, and physical and mental impairments generally, is the service of practitioners in medicine, dentistry, nursing, pharmacy, psychology, and allied professions in primary, secondary, and tertiary care and in public health.

Access to health care services varies according to economic conditions and public health policies and plans related to social goals. Health care systems and organizations vary among national and regional entities. In some jurisdictions, health care planning is for market providers and consumers, in others for central planners in governments or coordinating organizations. In all cases, according to the World Health Organization (WHO), a satisfactorily functional health care system requires robust financing, well-trained and well-paid workers, and well-maintained facilities and equipment.

Health care can be a major sector of a national economy. In 2011, health care represented an average of 9.3 percent of the gross national product per capita of the 34 members of the Organization for Economic Co-operation and Development (OECD). Biggest expenditures were in the USA (17.7 percent), the Netherlands (11.9 percent), France (11.6 percent), Germany (11.3 percent), Canada (11.2 percent), and Switzerland (11 percent). Life expectancy was highest in Australia, France, Iceland, Italy, Japan, Spain, and Switzerland (all 82+ years), while the OECD average overall exceeded 80 years for the first time, a gain of 10 years since 1970. In the USA (78.7 years), life expectancy ranked 26th of 34, but health care costs were highest. All OECD countries but Mexico and the USA have achieved nearly universal health coverage.


Primary Health Care

Primary care is the first element of a multi-phase process that may include secondary and tertiary levels. Health care can be either public or private. The primary care professional, the first consultant for patients of the health care system, is usually a physician in general practice, a physician assistant, or a nurse practitioner. Depending on the nature and severity of the health condition, the primary care consultant may refer the patient for secondary care.

Primary care covers the widest scope of health care, patients of all ages, all socioeconomic and geographic origins, and all acute and chronic physical, mental, and social health problems. Primary care practitioners must be knowledgeable in many areas. Continuity is key in primary care, as many patients prefer to consult the same practitioner for regular preventive care and whenever they need initial consultations about health problems.

Common chronic diseases and disorders usually treated in primary care are arthritis, asthma, back pain, chronic obstructive pulmonary disease, diabetes, and thyroid dysfunction. Primary care also covers many basic maternal, pediatric, and family planning services. In the USA, a 2013 Mayo Clinic survey found that skin conditions, osteoarthritis and joint disorders, back problems, metabolic disorders, and upper respiratory tract difficulties were the most common reasons why patients consulted primary care physicians.


Secondary Health Care

Secondary health care specialists generally do not have initial contacts with patients. Secondary care is sometimes acute, necessary treatment for a brief but serious illness, injury, or other condition as in a hospital emergency department, or it may be temporary attendance during childbirth, surgery, or medical imaging procedures.

The term "secondary care" is sometimes synonymous with "hospital care." Many secondary care providers, however, do not work in hospitals, and hospitals perform some primary care services. Some health care systems require patients to see primary care providers for referrals before they can access secondary care.

In the USA, where both the private sector and the state manage the economy, there is a mixed market health care system in which some physicians might limit their practice to secondary care by requiring referrals, or private or group health insurance plans may impose this restriction under the terms of payment agreements. In yet other cases, specialists may choose to see patients without referrals, and patients may decide to do without primary care.

In the United Kingdom and Canada, patient self-referral to medical specialists is rare under a policy of preference for prior referral from either a primary care physician or another specialist regardless of whether funded by private or government health insurance. In such systems, allied physical, respiratory, occupational, and speech therapists and dietitians also generally work in secondary care accessed through primary physician referral.


Tertiary Health Care

Tertiary health care is specialized and consultative, usually for inpatients, and on referral from primary or secondary health professionals in facilities with personnel and technology for advanced medical investigation and treatment. Examples are treatments for cancer management, cardiac surgery, plastic surgery, treatment for severe burns, advanced neonatology services, and complex medical and surgical interventions.


Quaternary Health Care

Quaternary care is an extension of tertiary care to advanced levels of medicine highly specialized and not widely accessed. Experimental medicine, clinical trials, and some uncommon diagnostic or surgical procedures are examples. These services usually are available at only a few regional or national health care centers. A quaternary care hospital may have virtually any procedure available whereas a tertiary care facility may not offer some subspecialties.


Home and Community Care

Among the many health care services of public health interest outside of clinics, hospitals, and medical offices are food safety surveillance programs and the services of professionals in residential and community settings in home care, long-term care, assisted living, treatment for substance use disorders, and other health and social care services. Community rehabilitation services assist with prostheses, orthotics, or wheelchairs for mobility and independent living after loss of limbs or functions. Many countries with increasingly aging populations have a health care system priority to help their seniors live independently in the comfort of their own homes. An entire health care sector helps seniors in daily activities essential to their well-being.



In 1873, there was virtually no formal health care system in the USA. There were only 178 hospitals with a total of 35,064 beds. Only 36 years later, in 1909, the numbers had grown to 4,359 hospitals with 421,065 beds and by 1929 to 6,665 hospitals with 907,133 beds (William L Dowling & Patricia A Armstrong, "The Hospital," in Introduction to Health Services 125, 127 (Stephen J. Williams & Paul R. Torrens, editors, 1980)), a rapid and substantial expansion of hospital capacity, but the Great Depression hit hospitals hard as patient receipts fell, bed occupancies dropped, and hospital deficits rose dramatically. In response, the American Hospital Association developed the Blue Cross concept to improve revenues.

Blue Cross insurance plans guaranteed payment of hospital costs. The American Medical Association took the position that medical ethics permitted insurance paid to patients only, that third-party payers as intermediaries eventually would determine medical treatment based on their rather than on patient interests. Nevertheless, state medical societies approved Blue Shield benefit plans for medical services. Like Blue Cross, Blue Shield proved extremely popular. Blue Cross and Blue Shield plans have become the largest providers of private medical insurance.

After the Second World War, the health insurance business grew significantly. As medical technology advanced, medical services became increasingly important, and employers began to use health care benefits as employee compensation, bringing commercial insurance companies into competition with the Blue Cross and Blue Shield plans. To compete, Blue Cross and Blue Shield adopted similar provisions and abandoned community ratings. Because individual ratings cost more, an increasing health care access gap developed between those who could afford the cost of health care services and those who could not.

In 1965, Congress created Medicare, which would reimburse physicians on the basis of "customary, prevailing, and reasonable charges," and Medicaid, under which state governments would determine physician compensation. Since 1965, Medicare and Medicaid have grown predictably and prodigiously. Medicare currently accounts for more than 35 percent of national health care expenditures and 40 percent of hospital revenues, and other institutional purchasers of health care typically follow Medicare's lead in medical payment schedules.

By 1986, public or private insurers made 70 percent of payments to health care providers. Private insurer reimbursement was on a fee-for-service model, government insurer on a cost or charge basis. Both created incentives to resort excessively to overpriced procedures. Neither offered any incentive to economize. Health care costs headed for the sky.

As insurers now attempt to contain costs by limiting what a physician or hospital receives for patient care, they seek to restrict physician decision-making by entering the managed care business with management in the hands of the third-party payer, not the physician or the patient.


Health Care Financing Generally

There are generally four primary methods of financing health care systems:

  • Direct payment, patient to provider
  • Government health insurance
  • Private health insurance
  • Charitable donations

In most countries, the financing of health care services mixes all five methods. In all jurisdictions, many factors can influence adoption of a specific policy for health care financing. With government health care insurance an entire population is eligible for regulated health care. Along with almost every government-funded health care scheme, a parallel private, for-profit system also operates to form a two-tier health care system.


Health Care Research

Health care research has made many important biomedical and pharmaceutical advances which form the basis for evidence-based medical practice. A great achievement of health care research was the worldwide eradication of smallpox in 1980, declared by the WHO as the first disease in human history to be eliminated by deliberate health care interventions. In pharmaceutical research and development, Europe spends a little less than does the USA, which accounts for 80 percent of the world's biotechnological research and development spending.

Health care research results lead to more efficient and equitable delivery of interventions as advanced through the health and disability social model, which emphasizes changes that can make populations healthier.


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