16 Economics Final Project Submission: Policy Research and Organizational Analysis Report Luz Rodriguez Southern New Hampshire University Economics Final Project Submission: Policy Research and Organizational Analysis Report In the current healthcare system, hospitals face diverse financial and economic decisions, which impact how they operate. It is crucial for hospital administrators to have sound economic and financial knowledge if they are to make the right decisions that will ensure their institutions continue operating in a sustainable manner. In this context, this paper gives a comprehensive discussion of various economic theories, economic principles, economic legislative issues, and disparities that impact healthcare institutions. The paper then applies these principles to The Johns Hopkins Hospital in Baltimore to provide a practical view of their importance in how hospitals operate. Economic Theories and Principles Economic Disparities The financial well-being of the industry has a huge bearing on the availability of healthcare. In this context, market and demand theories are instrumental in understanding the industry’s financial well-being. Looking at the example of The Johns Hopkins Hospital in Baltimore, it is clear that the economic principles of demand and market/consumer behavior have a profound impact on the entity’s financial statements. Consequently, there are times when there is a spike in revenue while there are periods when revenues drop. For instance, during holidays and festive periods, revenues spike due to a rise in the number of injuries and accidents associated with travel and other fun-related activities like overindulgence in alcohol. Also, hospital management performance has a huge bearing on an institution’s profitability (Lee & Park, (2015). The Johns Hopkins Hospital has increased its performance over the years. Thus, its patient satisfaction has also risen over the years, which explains why its financial statements continue to improve as time goes by. The aspect of demand also impacts the profitability of the institution. The ever-growing population implies that the institution has more clients to serve and profit from. The hospital has a steady supply of new patients due to the relatively steady mortality and birth rates. Finally, poor consumer lifestyle trends increase hospital visits and the institution’s profitability. Economic Theories There are certain economic theories that are useful when applied to the healthcare industry. First, there is market power, which refers to the ability of a firm to successfully impact how its services or products are priced in the marketplace. In healthcare planning, it is crucial for policymakers to facilitate the creation of an environment where healthcare institutions can freely define the prices for their services. This is crucial in ensuring that there is healthy competition for all healthcare providers (Frech et al., 2015). However, the drawback in such a cas ...

1. 16
Economics Final Project Submission: Policy Research and
Organizational Analysis Report
Luz Rodriguez
Southern New Hampshire University
Economics Final Project Submission: Policy Research and
Organizational Analysis Report
In the current healthcare system, hospitals face diverse financial
and economic decisions, which impact how they operate. It is
crucial for hospital administrators to have sound economic and
financial knowledge if they are to make the right decisions that
will ensure their institutions continue operating in a sustainable
manner. In this context, this paper gives a comprehensive
discussion of various economic theories, economic principles,
economic legislative issues, and disparities that impact
healthcare institutions. The paper then applies these principles
to The Johns Hopkins Hospital in Baltimore to provide a
practical view of their importance in how hospitals operate.
Economic Theories and Principles
Economic Disparities
The financial well-being of the industry has a huge bearing on
the availability of healthcare. In this context, market and
demand theories are instrumental in understanding the
industry’s financial well-being. Looking at the example of The
Johns Hopkins Hospital in Baltimore, it is clear that the
economic principles of demand and market/consumer behavior
have a profound impact on the entity’s financial statements.
Consequently, there are times when there is a spike in revenue
while there are periods when revenues drop. For instance,
during holidays and festive periods, revenues spike due to a rise

2. in the number of injuries and accidents associated with travel
and other fun-related activities like overindulgence in alcohol.
Also, hospital management performance has a huge bearing on
an institution’s profitability (Lee & Park, (2015). The Johns
Hopkins Hospital has increased its performance over the years.
Thus, its patient satisfaction has also risen over the years,
which explains why its financial statements continue to improve
as time goes by. The aspect of demand also impacts the
profitability of the institution. The ever-growing population
implies that the institution has more clients to serve and profit
from. The hospital has a steady supply of new patients due to
the relatively steady mortality and birth rates. Finally, poor
consumer lifestyle trends increase hospital visits and the
institution’s profitability.
Economic Theories
There are certain economic theories that are useful when
applied to the healthcare industry. First, there is market power,
which refers to the ability of a firm to successfully impact how
its services or products are priced in the marketplace. In
healthcare planning, it is crucial for policymakers to facilitate
the creation of an environment where healthcare institutions can
freely define the prices for their services. This is crucial in
ensuring that there is healthy competition for all healthcare
providers (Frech et al., 2015). However, the drawback in such a
case is that large institutions may offer lower prices to the
extent that small institutions will not have the ability to meet.
This can effectively drive such small institutions out of
business. Therefore, proper regulations should be done not to
allow such a scenario to occur.
Second, there is market concentration, which refers to the extent
to which a market’s sales are dominated by one or more entities.
Ideally, no single healthcare institution should dominate a
market. There should be several players in the healthcare

3. market. This is vital in ensuring that there is healthy
competition. In turn, healthcare institutions will offer better
quality services and ideal prices for their services. Without such
competition, monopolies may offer low-quality healthcare due
to no competition or have very high prices due to high demand.
Finally, there is choice, which refers to the ability of a firm or
client to make a decision on the resource, service, or product to
provide purchase from a specific range of options. Patients
should have a wide range of choices to select the healthcare
providers they want. More so, there should be various
healthcare insurance plans available for them. This ensures that
people can access healthcare effectively regardless of their
socioeconomic status. However, the aspect of choice should be
limited for the healthcare providers. This ensures that the types
of services and products they offer are standardized. In turn,
this ensures that healthcare institutions do not have the choice
to offer low-quality services or prescribe low-quality
medication.
Use of Economic Principles
Basic economic principles include trade, choice, opportunity
costs, scarcity, and the law of demand. Organizations utilize
economic principles to guide strategic short-term and long-term
decision making because, like any other industry, healthcare
institutions are characterized by the provision of healthcare
services and products in exchange for money. However, the
only difference is that in all cases, human life is at risk.
Therefore, the application of economic principles to the
healthcare industry is not as straightforward as it is in other
industries. On the one hand, there are potential positive impacts
of applying economic principles to the healthcare industry. For
example, a healthcare institution that applies economic
principles will maintain its profitability. Such an institution will
be well placed to make sound economic decisions, which will

4. guarantee its sustainability.
On the other hand, there are potential negative impacts of
applying economic principles to the healthcare industry. For
example, paying too much attention to economic principles may
put human lives at risk. When hospitals put too much focus on
profitability, healthcare practitioners may fail to protect human
life if doing so will not yield profits for their institution.
According to Scott, Solomon, and McGowan Jr. (2011), the
application of economic thinking to the comprehension of
resource utilization in healthcare is challenging considering the
complexities that exist in the delivery of care in a healthcare
institution. More so, it is vital to note that these economic
principles ensure that resources are generally very scarce and
cannot meet all the health needs of the general population.
For-Profit and Nonprofit
Financial Differentiation
On the one hand, a nonprofit organization is defined as an
entity, which qualifies for tax-exemption by the Internal
Revenue Service (IRS). The requirement is that such an
organization should have a purpose and mission aimed at
offering a public benefit and promoting a social cause.
Examples of such organizations include national charities,
universities, and hospitals (Laurett & Ferreira, 2018). The
financial and economic policies of these organizations are
structured in a way that allows these entities to make a profit.
However, all the profits made are not meant to meet the needs
of a specific individual but rather to facilitate the advancement
of the organization. Hence, all operational and financial
information must be made public to ensure everyone knows
where all received funds are going. During any fundraising
process, no taxes are levied on either the donor or the
organization receiving the funds.

5. On the other hand, a for-profit organization is created with the
major objective of making as much money as possible. Often,
such entities either sell services or products to their clients. The
owner of the organization earns an active income with investors
and shareholders benefiting as well from the profits made by the
organization. Examples of such organizations include
partnerships, sole proprietorships, LLCs, and corporations
(Heaslip, 2020). Unlike the nonprofit entities, for profit
organizations do not have to attain a social good and can be
structured to meet the individual goals of the owner.
Economic Differentiation
When it comes to taxation, most for-profit organizations are
subjected to the corporate income tax. The federal government
imposes a tax at a rate of 21 percent (Tax Policy Center, 2020).
These organizations can also be subjected to another form of
taxation at the individual shareholder level with regards to the
capital gains and dividend made from the sale of shares.
However, many for-profit organizations in the US are defined as
'pass-through entities,' which implies they are not subjected to
entry-level taxation. Instead, the profits made by the owners are
the ones that are taxed based on the rules guiding the collection
of the individual income tax. In contrast, nonprofit
organizations do not pay tax. This is based on the IRS tax code
subsection 501(c) (Leonard, 2019). Consequently, these
organizations are not subjected to things like property tax, sales
tax, or any other form of taxation. Overall, I believe that this
tax distinction is fair. Since nonprofit organizations strive to
achieve social and public good, not taxing them enhances their
chances of success since they have extra funds to pump into
their mission and vision.
Policy, Changes, and Disparities
Economic Policy and Disparities in Care

6. There are various disparities in care, which many people in the
country experience. Two major ones are race and socioeconomic
status. In the context of race, Ferdinand et al. (2017) asserts
that there is a huge disparity in healthcare outcomes between
whites and other minority groups such as blacks. For instance,
blacks have a higher likelihood of developing heart diseases,
hypertension, and diabetes (Ferdinand et al., 2017). When it
comes to service delivery, whites report better satisfaction
compared to minority groups (Mays et al., 2017). This can be
attributed to issues like language barriers and bias due to
stereotypes, among other reasons. In the context of
socioeconomic status, Kennedy, Wood, and Frieden (2017) note
that health insurance coverage among Americans is irregular.
Consequently, people with higher incomes are in a better
position to afford quality healthcare compared to those in the
low socioeconomic bracket. There is a distinct relationship
between economic policies and disparities in care. For example,
there is the use of insurance programs to facilitate healthcare
services to citizens rather than offer universal healthcare for all.
The use of insurance programs ensures that the richer a person
is, the better the insurance package he/she can afford. This
leads to the healthcare disparities described above.
Policy Changes
A recent legislative change that has a huge impact on healthcare
economic policy in general is the Coronavirus Aid, Relief, and
Economic Security (CARES) Act is the focus economic policy
of this paper. According to Bell (2020), the economic policy
attempts to minimize the economic downturn that the Covid-19
pandemic has facilitated. The budget that supports the
implementation of this policy is over $2 trillion making this
rescue package to be the largest in US history (Canady, 2020).
$100 billion has been set aside to fund healthcare organizations
as they try to cover the costs of dealing with Covid-19 cases, in

7. addition to aiding healthcare entities, which have lost a huge
chunk of their revenue due to the pandemic. The policy also has
a program that ensures healthcare service providers can receive
advanced or accelerated Medicare payments. These providers
can ask for six months’ worth of payments and are given a one-
year grace period to repay the loan. Additionally, the policy
allocates $80 million to the FDA to aid with vaccine
development and medical products manufacturing.
Disparities Planning
Disparities of care are factored into healthcare strategic
planning because they ensure that policymakers create
interventions, which suit the needs of patients from diverse
demographics. Consequently, organizations can handle issues
that may arise when making economic evaluations for their
strategic plans. Effectively handling these issues will ensure
there is the promotion of ideal healthcare outcomes for clients
in a cost-effective manner. The relevant strategic planning can
take three techniques into consideration. First, there is cost-
minimization analysis. This is where the organization will
assess several interventions, which have the same outcome to
determine the one that facilitates the cheapest way of delivering
the outcome (WHO, 2010). For example, if two vaccines for
polio have the same effectiveness level, this analysis technique
will reveal the cheaper one among the two. Second, there is
cost-effectiveness analysis. This technique evaluates the
outcome of an approach based on ‘natural units.’ Therefore, if
the objective is to lower pneumonia in children, this technique
may compare several vaccines to check the one that averts
pneumonia cases more cheaply. Finally, there is cost-utility
analysis. This technique evaluates the utility measures, which
depict people’s preferences (WHO, 2010).
Organizational Impact and Recommendations
Organization Introduction

8. The organization that is the focus of my report is ‘The Johns
Hopkins Hospital Baltimore, MD 21211-2226.’ The sub-
industry, which this organization belongs to is ‘Hospital.’ The
institution doubles up as a biomedical research facility and
teaching hospital. It focuses on both general and rehabilitative
health (ProPublica, 2021). The financial background of the
organization appears to be relatively strong. The revenue of the
institution has been steadily growing over the years. For
instance, in 2011, the institution had a total revenue of
$1,826,726,232. By 2017, this figure had grown to
$2,371,701,539 (ProPublica, 2021). The selected organization is
a nonprofit. The tax code designation given to the institution by
the IRS is 501(c)(3). This is because this institution has several
purposes including educational, scientific, and public safety
(ProPublica, 2021).
Nonprofit or For-Profit
The Johns Hopkins Hospital is a nonprofit organization. A
nonprofit organization is defined as an entity, which qualifies
for tax-exemption by the Internal Revenue Service (IRS). The
requirement is that such an organization should have a purpose
and mission aimed at offering a public benefit and promoting a
social cause. Examples of such organizations include national
charities, universities, and hospitals (Laurett & Ferreira, 2018).
Since the Johns Hopkins Hospital falls under the ‘hospital’
category, it qualifies to be a nonprofit entity. The financial and
economic policies of this organization is structured in a way
that allows it to make a profit. However, all the profits made are
not meant to meet the needs of a specific individual but rather
to facilitate the advancement of the organization. Hence, all
operational and financial information must be made public to
ensure everyone knows where all received funds are going.
During any fundraising process, no taxes are levied on either
the donor or the organization receiving the funds.

9. Being a nonprofit organization has a profound economic policy
impact on the Johns Hopkins Hospital. Since the Johns Hopkins
Hospital is a nonprofit organization, it does not pay tax. This is
based on the IRS tax code subsection 501(c) (Leonard, 2019).
Consequently, this organization is not subjected to things like
property tax, sales tax, or any other form of taxation. This tax
distinction is fair. Since the nonprofit entity strive to achieve
social and public good, not taxing it enhances its chances of
success since it has extra funds to pump into its mission and
vision.
Financials, Market, and Demand
Demand Theory
The aspect of demand impacts the profitability of the
institution. The ever-growing population implies that the
institution has more clients to serve and profit from. The
hospital has a steady supply of new patients due to the
relatively steady mortality and birth rates. The demand theory
applies to the relationship between each stakeholder and the
insurance industry. Currently, there is a high demand for
healthcare insurance since people have diverse healthcare needs.
As a result, insurance companies try to meet this demand using
various insurance plans. This in turn creates a relatively
profitable business for the companies who work with providers
to meet the needs of patients. Overall, insurance impacts the
quality of care provided by physicians. Since there are various
insurance plans, physicians will only offer care based on the
elements that are covered by individual plans. This implies that
people with better insurance covers will receive a higher quality
of care.
Market Behavior Impact
There are times when there is a spike in revenue while there are
periods when revenues drop. For instance, during holidays and

10. festive periods, revenues spike due to a rise in the number of
injuries and accidents associated with travel and other fun-
related activities like overindulgence in alcohol. Also, hospital
management performance has a huge bearing on an institution’s
profitability (Lee & Park, (2015). The Johns Hopkins Hospital
has increased its performance over the years. Thus, its patient
satisfaction has also risen over the years, which explains why
its financial statements continue to improve as time goes by.
Finally, poor consumer lifestyle trends increase hospital visits
and the institution’s profitability.
Economic Legislative Changes
Legislative Changes
A recent legislative change that is likely to impact the Johns
Hopkins Hospital is the Coronavirus Aid, Relief, and Economic
Security (CARES) Act. According to Bell (2020), the economic
policy attempts to minimize the economic downturn that the
Covid-19 pandemic has facilitated. The budget that supports the
implementation of this policy is over $2 trillion making this
rescue package to be the largest in US history (Canady, 2020).
$100 billion has been set aside to fund healthcare organizations
as they try to cover the costs of dealing with Covid-19 cases, in
addition to aiding healthcare entities, which have lost a huge
chunk of their revenue due to the pandemic. The policy also has
a program that ensures healthcare service providers can receive
advanced or accelerated Medicare payments. These providers
can ask for six months’ worth of payments and are given a one-
year grace period to repay the loan. Additionally, the policy
allocates $80 million to the FDA to aid with vaccine
development and medical products manufacturing.
Policy Changes and Impact
The CARES Act may impact the organizational policies of the

11. Johns Hopkins Hospital. For starters, legislative change is
expanding the use of tele-health services in the country. The
Johns Hopkins Hospital can alter its policies to ensure that such
technology can be adopted for use long after the pandemic is
gone to reduce pertinent healthcare-related costs. Second, the
Johns Hopkins Hospital can use the legislation to restructure its
policies so that the organization sets aside funds and guidelines
on how to deal with future crises. This will ensure the
healthcare institution is not caught off-guard in case of another
pandemic.
Statement Impact
There are several ways that the financial statements of the
organization could be impacted because of the legislative
changes in the CARES Act. First, the Act is sufficiently funded
to effectively meet the needs of the healthcare needs during the
pandemic. Providers have access to a $100 billion kitty to cover
their expenses (Coie, 2021). The Johns Hopkins Hospital can
tap into this kitty to cater to its expenses and improve its
financial statements. Second, the policy ensures providers have
access to accelerated Medicare payments. This is vital in
ensuring critical care institutions operate effectively without
money issues. This can also improve the Johns Hopkins
Hospital’s financial statements since Medicare payments will be
covered in time without delays. Third, the policy mitigates
shortages in drugs. Therefore, the FDA is compelled to expedite
drug reviews to protect the public from waiting too long for new
medication or vaccines. The Johns Hopkins Hospital will
adequately meet the needs of its clients leading to a high level
of patient satisfaction. This is vital for its financial statements
because satisfied patients will either come back to the
institution in future or refer other to the hospital.
Potential Disparities

12. The legislative changes in the CARES Act have the ability to
cause disparities in care that could further impact the Johns
Hopkins Hospital. For starters, this is a time-based policy.
Therefore, it only serves the short-term needs while ignoring
the long-term effects caused by the pandemic (Bivens &
Shierholz, 2020). The recommendation in this case is for the
hospital to take an active advocacy role in pushing
policymakers to come up with further legislative changes that
will cater for the long-term effects caused by the pandemic.
Second, there are no guardrails that make sure the funds are
directed toward saving the jobs of standard workers in the
healthcare industries (Bivens & Shierholz, 2020). Therefore, the
policy may fail to address shortage of healthcare workers in the
foreseeable future. The recommendation in this case is for the
hospital to take an active advocacy role in pushing
policymakers to come up with further legislative changes to
curb the shortage of healthcare workers. Finally, poor
accountability measures implies that the funds set aside to
implement the policy may be misappropriated. The
recommendation in this case is for the hospital to have an audit
team that effectively accounts for all the funds utilized under
the program.
The institution should also consider effectively handling these
issues in a cost-effective manner. The relevant strategic
planning can take three techniques into consideration. First,
there is cost-minimization analysis. This is where the
organization will assess several interventions, which have the
same outcome to determine the one that facilitates the cheapest
way of delivering the outcome (WHO, 2010). Second, there is
cost-effectiveness analysis. This technique evaluates the
outcome of an approach based on ‘natural units.’ Finally, there
is cost-utility analysis. This technique evaluates the utility
measures, which depict people’s preferences (WHO, 2010).
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