1. The Supply
of Health
Services

2. Supply of health care goods and services is
different from other commodities because
it is composed of MULTIPLE INPUTS.

3. • Cars need steel, rubber, wires and
garments and uses labor to have an end
product – a CAR
• Health care goods and services are inputs
that need to be combined with each other
to produce an end product – BETTER
HEALTH

4. For a sick person to be healthy, he needs the
ff inputs:
• An expert advice from a physician/health
personnel
• Hospital/clinic facilities
• Pharmaceuticals
• Medical technology

5. • Manpower
– MD, RN, RM, DMD, PT
• Health infrastructure
– Facilities needed to carry out the delivery of health services
(clinics, hospitals, health centers)
• Drugs
– OTC, prescription, herbal drugs
• Others
– Other inputs which may be required to produce health like
research and trainings.

6. Manpower
• Highly-skilled manpower is the most important input in
the supply of health services.
• Often there is a trade-off between abundant supply and
high quality manpower.
• Physicians play a crucial role.
• 80% of all spending are influenced by physicians’
decisions.

7. Role of physicians
1. They recommend a particular course of action for their patients
– Patient don’t have perfect knowledge of their conditions and
would require the expertise of health professionals.
2. Physicians while making crucial decisions for the patients, also
participate in actual delivery of health services
– Surgery
– Giving immunizations
– consultations

8. • Unlike other inputs, manpower takes a
long time to produce.
• It takes years to be a typical specialist
physician practitioner in the Phil from high
school onwards.

10. • Highly specialized manpower tend to self-
regulate.
• PRC
• Different specialty organizations
• Regulatory boards

11. • Specialist physician groups “auto-regulate”, meaning
they regulate the production of themselves. This may
be used to:
– Assure the quality and skills of specialists
– Distribute specialist manpower more effectively and
efficiently (in different parts of the country)
– “ward off” potential competitors in a certain
geographic medical practice area.

12. Health Facilities
• Hospitals, Clinics, Labs, Ambulatory
Centers etc.
• Supply of Hospital Services
– Service Capacities
– Geographic Distribution
– Emphasis on Technology
– Hospital Networking

13. Different categories for health facilities:

14. Technology and Specialization
• Technology improvement in diagnostics and therapeutics has
improved the outcomes of medical intervention.
• Specialization in specific areas and at all levels of hospital
manpower has increased the accuracy of diagnoses and
therapeutics
• It also improved the outcomes of medical and surgical
intervention

15. Hospital Capacity and
Geographic Distribution
• As of early 2000
– 1,942 hospitals (registered in Phil Hospital
Association)
– 90,766 beds
– 80 million Filipinos
– 1 hospital bed = 850 Filipinos

16. Hospital Capacity

17. • The better the preventive and promotive health
programs, the more likely it is that there will be less
people seeking hospitalization
• Demand side
– Population and the effectiveness of the preventive and
promotive health programs
• Supply side
– Depends on the capabilities of each and every hospital bed
who depends on other input like adequacy and competence
of medical manpower, medical technology, pharmaceuticals,
among others

18. Pharmaceuticals (Branded and Generics) and
other medical supplies
• 10-12% of sales are generics and 88-90%
are
branded

19. Drugs as Other Inputs
• Cost components:
1. Research and development
• Most expensive
• Cost of “inventing” or “innovating” new drugs
• For a new drug to be introduced in the market, company
takes $800 M in research and development
• To recover a pharmaceutical firm’s R&D expenses, “patents” are
awarded to drugs.
• For 15 yrs, no one is allowed to produce and market a certain drug-
monopoly
• This gives the company the capability of pricing the drug high

20. • After the patent period expires, monopoly over the drug stops and
the drug becomes “generic.”
• This entitles others to produce and sell the same drug, allowing
competition to set in.
• This unpatented drug then becomes a cheap alternative.
2. Drug manufacturing cost-raw materials, packaging
3. Marketing cost
4. Distribution cost

21. Supplier-Induced Demand
• Physicians decides what a patient needs-is
also the supplier of the product/service
– Ex. A pediatrician during consultation,
decides or recommends for a baby patient a
vaccine which the pedia may also be
supplying