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Health Care Costs and Financing

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Increasing the cultural competence of health care organizations can make business sense

The growing ethnic and cultural diversity of the U.S. population underscores the need to make sure that health care providers and organizations are culturally competent in order to reduce ethnic/racial disparities in health care. Health care organizations, however, are not likely to become culturally competent spontaneously, according to a review of the issue by Cindy Brach, M.P.P., and Irene Fraser, Ph.D., of the Center for Organization and Delivery Studies, Agency for Healthcare Research and Quality.

According to the authors, health care organizations are likely to adopt cultural competence techniques when it makes business sense for them to do so. The authors identify the major financial incentives that constitute the business case for health care organizations to increase their cultural competence and the limitations inherent in these incentives.

The first incentive for health care organizations to become culturally competent is to increase their appeal to minority consumers, thereby enlarging their market share. Minority groups accounted for 70 percent of the total U.S. population growth between 1988 and 1998. By advertising their cultural competence, health care organizations could attract the business of minority group members. However, it is not clear that health care organizations as a whole have decided it is to their financial advantage to seek out minority markets.

A second financial incentive for cultural competence could be to secure more private business by improving the organization's performance on quality measures of interest to private purchasers. However, few tools are available to purchasers to measure cultural competence, and these tend to be weak. Furthermore, evidence suggests that employers are not systematically bringing about improvement in quality in general.

Third, Medicare, Medicaid, and other public purchasers are placing increased emphasis on cultural competence and quality. But without precise measures and definitions and more attention to monitoring and enforcement, these mandates are unlikely to have a major impact.

Finally, culturally competent health care that results in prevention, earlier detection, and more appropriate treatment can be cost effective but only if financial incentives are properly aligned. Financial arrangements should be developed between plans and providers that would allow plans to reap the rewards of investments in cultural competence and give providers incentives to use cultural competence techniques.

Although health care organizations have some financial incentives to consider introducing culturally competent interventions, they are often weak, unclear, and mixed with counter-incentives. These limitations need to be overcome if culturally competent techniques are to become widely adopted, conclude the authors. In addition, more evidence is needed that particular cultural competence techniques and the organizational structures necessary to implement them will have the desired medical and financial impact.

For more information, see "Reducing disparities through culturally competent health care: An analysis of the business case," by Ms. Brach and Dr. Fraser, in Quality Management in Health Care 10(4), pp. 15-28, 2002.

Reprints (AHRQ Publication No. 02-R081) are available from the AHRQ Publications Clearinghouse.

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