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Health Economics
Hospital Markets
Doctor’s best patient
Doctor’s best patient
sick people who live long
All Hospitals
All Hospitals
organized as physician
cooperatives
Patients
PayersProviders
Hospitals are a business
Hospitals are a business
revenues from whatever
source must exceed costs
or they disappear
Hospital productivity
Hospital productivity
beds
admissions
inpatient days
revenue per inpatient days
Hospital types
Hospital types
primary
secondary
tertiary
quaternary
Primary
Primary
ob-gyn
internal
general surgery
radiology and lab
Secondary
Secondary
cardio
respiratory
physical therapy
more sophisticated eqp
Tertiary
Tertiary
heart surgery
chemo
even more sophisticated
Quaternary
Quaternary
university research
most sophisticated
Concentration
Concentration
most are small and local
Barriers to Entry
Barriers to Entry
Certificate of Need
CON
high construction cost
learn by watching or doing
Buyers
Buyers
3% individual consumers
40% insurance
57% government
Monopoly - Oligopoly
Monopoly - Oligopoly
one seller
few sellers
Monopsony - Oligopsony
Monopsony - Oligopsony
one buyer
few buyers
Advertising
Advertising
industry expansion
market share increase
protection against payer
Eddie
Willie
Betrays
Willie
1Year
Silent
Silent
Betrays
Eddie
1Year
Eddie
Goes Free
Willie
10Years
Willie
Goes Free
Eddie
...
Collusion
Collusion
agree not to compete
not advertise
Society wants
Society wants
low cost
high quality
Society wants
Society wants
low cost
high quality
Not-for-Profit
Not-for-Profit
motivated by other factors
Not-for-Profit
motivated by other factors
human motivation
Not-for-Profit
motivated by other factors
human motivation
money
Not-for-Profit
motivated by other factors
human motivation
money
status and prestige
Not-for-Profit
motivated by other factors
human motivation
money
status and prestige
maximize personal utility
Not-for-Profit
motivated by other factors
human motivation
money
status and prestige
maximize personal utility
Not-for-Profit
Not-for-Profit
prestige and salaries
quantity
quality
quantity and quality
management expense
Quantity Maximize
Quantity Maximize
make as large as possible
board and management
bigger than you
Quality Maximize
Quality Maximize
equipment
inelastic demand
quest for status
better than you
Quality
Quantity
Quality
Quantity
Quality
Who decides?
Quantity
Quality
Who decides?
A
Quantity
Quality
Who decides?
A
B
Quantity
Quality
Who decides?
A
B
increase status?
Managerial Expense Model
Managerial Expense Model
management uses authority
to divert funds to serve
their self-interests
Five Ps
Five Ps
pay
perquisites
power
prestige
patronage
managers vs. directors
managers vs. directors
asymmetric information
who are you to question my
expertise?
Hen 368 lecture 12 hospital market
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Hospital Market

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Hen 368 lecture 12 hospital market

  1. 1. Health Economics Hospital Markets
  2. 2. Doctor’s best patient
  3. 3. Doctor’s best patient sick people who live long
  4. 4. All Hospitals
  5. 5. All Hospitals organized as physician cooperatives
  6. 6. Patients PayersProviders
  7. 7. Hospitals are a business
  8. 8. Hospitals are a business revenues from whatever source must exceed costs or they disappear
  9. 9. Hospital productivity
  10. 10. Hospital productivity beds admissions inpatient days revenue per inpatient days
  11. 11. Hospital types
  12. 12. Hospital types primary secondary tertiary quaternary
  13. 13. Primary
  14. 14. Primary ob-gyn internal general surgery radiology and lab
  15. 15. Secondary
  16. 16. Secondary cardio respiratory physical therapy more sophisticated eqp
  17. 17. Tertiary
  18. 18. Tertiary heart surgery chemo even more sophisticated
  19. 19. Quaternary
  20. 20. Quaternary university research most sophisticated
  21. 21. Concentration
  22. 22. Concentration most are small and local
  23. 23. Barriers to Entry
  24. 24. Barriers to Entry Certificate of Need CON high construction cost learn by watching or doing
  25. 25. Buyers
  26. 26. Buyers 3% individual consumers 40% insurance 57% government
  27. 27. Monopoly - Oligopoly
  28. 28. Monopoly - Oligopoly one seller few sellers
  29. 29. Monopsony - Oligopsony
  30. 30. Monopsony - Oligopsony one buyer few buyers
  31. 31. Advertising
  32. 32. Advertising industry expansion market share increase protection against payer
  33. 33. Eddie Willie Betrays Willie 1Year Silent Silent Betrays Eddie 1Year Eddie Goes Free Willie 10Years Willie Goes Free Eddie 10Years Willie 5Years Eddie 5Years Prisoner's Dilemma
  34. 34. Collusion
  35. 35. Collusion agree not to compete not advertise
  36. 36. Society wants
  37. 37. Society wants low cost high quality
  38. 38. Society wants
  39. 39. Society wants low cost high quality
  40. 40. Not-for-Profit
  41. 41. Not-for-Profit motivated by other factors
  42. 42. Not-for-Profit motivated by other factors human motivation
  43. 43. Not-for-Profit motivated by other factors human motivation money
  44. 44. Not-for-Profit motivated by other factors human motivation money status and prestige
  45. 45. Not-for-Profit motivated by other factors human motivation money status and prestige maximize personal utility
  46. 46. Not-for-Profit motivated by other factors human motivation money status and prestige maximize personal utility
  47. 47. Not-for-Profit
  48. 48. Not-for-Profit prestige and salaries quantity quality quantity and quality management expense
  49. 49. Quantity Maximize
  50. 50. Quantity Maximize make as large as possible board and management bigger than you
  51. 51. Quality Maximize
  52. 52. Quality Maximize equipment inelastic demand quest for status better than you
  53. 53. Quality
  54. 54. Quantity Quality
  55. 55. Quantity Quality Who decides?
  56. 56. Quantity Quality Who decides? A
  57. 57. Quantity Quality Who decides? A B
  58. 58. Quantity Quality Who decides? A B increase status?
  59. 59. Managerial Expense Model
  60. 60. Managerial Expense Model management uses authority to divert funds to serve their self-interests
  61. 61. Five Ps
  62. 62. Five Ps pay perquisites power prestige patronage
  63. 63. managers vs. directors
  64. 64. managers vs. directors asymmetric information who are you to question my expertise?

Hospital Market

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