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Supply and demand in medical

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Supply and Demand in Medical Care
Posted on December 19, 2007 by Editors
The Imperfect Competitive Medical Marketplace
By Dr. David Edward Marcinko; MBA, CMP™
By Hope Rachel Hetico; RN, MHA, CMP™ http://medicalexecutivepost.com/2007/12/19/demand-
and-supply-in-medical-care/
The Business of Medical Practice: Transformational Health 2.0 Skills
for Doctors, Third Edition Hardcover
by David E. Marcinko (Editor), Hope Rachel Hetico (Editor)
Publisher: Springer Publishing Company; 3 edition (December 15, 2010)
The issue is not how to fill or reuse empty beds. In this changing environment, hospitals and health
systems must focus on streamlining and simplifying operational processes, facilitating case management,
promoting the least costly setting for care delivery, and optimizing resource sharing among departments.
When hospitals have addressed these issues, then solutions to the “bed problem” will be obvious.
-Cynthia Hayward, 1996
How and why the current healthcare imbroglio happened is very complex, but here is a brief synopsis of
current supply-demand inequalities.
A Definition of Medical Care
Medical care is defined as the finite examination and treatment of patients, for monetary compensation.
Among other reasons, changes in patient demand may occur as a result of the absence or presence of
health insurance plans or the encouragement of additional treatments by profit maximizing providers.
conclusion
There is no perfect test for demand inducement, but theory generates predictions that lead
to tests that are suggestive.
“It appears that, in response to economic considerations … physicians can induce
demand for their services, they sometimes do induce demand, but that such responses are
nether automatic nor unrestrained” (Elgar p. 265, citing Hurley and Lebelle, 1995).
Monopolistic
Many sellers
Ability to differentiate product by advertising and sales promotions
Profits can exist in the short run, but others bid them away in the long run
Equate MC with MR, but price off the downward sloping demand curve

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Short run profits. The firm
produces Q
SR
where MR=MC at
E above, but prices its products at P
SR
by reading off the demand curve which reveals
consumer willingness to pay
Short run loss. The firm suffers a loss in the current period following the same strategy of
operating at Q
SR
given by MC=MR at point E.
Supply summary Statistics (U.S.; 1994)
126 medical schools
16,000 graduates per year
550,000 practicing physicians
254 physicians per 100,000 residents
Average net income : $182,400
Average work hours: 55/week
Physicians work a lot and make a lot
Market forces or shortage?

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Supply and Demand in Medical?Care Posted on?December 19, 2007?by Editors The Imperfect Competitive Medical Marketplace By Dr. David Edward Marcinko; MBA, CMP? By Hope Rachel Hetico; RN, MHA, CMP??http://medicalexecutivepost.com/2007/12/19/demand-and-supply-in-medical-care/ The Business of Medical Practice: Transformational Health 2.0 Skills for Doctors, Third Edition?Hardcover by?David E. Marcinko?(Editor),?Hope Rachel Hetico?(Editor) Publisher:?Springer Publishing Company; 3 edition (December 15, 2010) The issue is not how to fill or reuse empty beds. In this changing environment, hospitals and health systems must focus on streamlining and simplifying operational processes, facilitating case management, promoting the least costly setting for care delivery, and optimizing resource sharing among departments. When hospitals have addressed these issues, then solutions to the "bed problem" will be obvious. -Cynthia Hayward, 1996 How and why the current healthcare imbroglio happened is very complex, but here is a brief synopsis of current supply-demand inequalities. A Definition of Medical Care? Medical care is defined as the finite examination and treatment of patients, for monetary compensation. Among other reasons, changes in patient demand may occur as a result of the absence or presence of health insurance plans or the encouragement of additional treatments by profit maximizing providers.? conclusion There is no perfect test for demand inducement, but theory generates pred ...
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