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Health EconomicsHospital Markets
Doctor’s best patient
Doctor’s best patient
sick people who live long
All Hospitals
All Hospitals
organized as physician cooperatives
Patie
nts
Payers
Providers
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
Willie1 Year
Silent
Silent
Betrays
Eddie1 Year
EddieGoes Free
Willie10 Years
WillieGoes Free
Eddie10 Years
Willie5 Years
Eddie5 Years
Prisoner's
Dilemma
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 factorshuman motivation
Not-for-Profit
motivated by other factorshuman motivation
money
Not-for-Profit
motivated by other factorshuman motivation
moneystatus and prestige
Not-for-Profit
motivated by other factorshuman motivation
moneystatus and prestige
maximize personal utility
Not-for-Profit
motivated by other factorshuman motivation
moneystatus and prestige
maximize personal utility
Not-for-Profit
Not-for-Profit
prestige and salariesquantityquality
quantity and qualitymanagement expense
Quantity Maximize
Quantity Maximize
make as large as possibleboard and management
bigger than you
Quality Maximize
Quality Maximize
equipment inelastic demandquest for statusbetter 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 Pspay
perquisitespower
prestigepatronage
managers vs. directors
managers vs. directors
asymmetric information
who are you to question my expertise?
