ECON 440 Lecture Notes - Lecture 20: Physician Supply, Debt Relief, Market Structure
13 Jun 2018
School
Department
Course
Professor
Aggregate quantity and the meaning of provider shortages
•
Market structure
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Ownership
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Payment: mechanisms & level
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The economics of health care institutions - hospitals
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Outline
e.g. the number of physicians practicing per 1000 people
▪
Ignores substitution in production, technological changes, and costs
○
Traditionally measured from a medical perspective based on population morbidity
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Cost/price of services
▪
What it takes to manage chronic disease (productive efficiency)
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Diverse workforce, etc.
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Economists think more about how physicians change with respect to:
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Economic approaches incorporate behavioral responses by physicians and the idea that multiple
combinations of inputs can produce the same health output
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Physician and Other Provider "Shortages"
Economic analysis can also help inform policy alternatives aside from expanding medical school enrollment
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Payment method - Fee changes
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Alternatives to FFS payment
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Multi-disciplinary primary care models
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What doctors/nurses are legally allowed to provide
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Physicians want to maintain market/revenue stream and decide what services to provide,
therefore they may be more/less willing to change
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Scope of practice for other health professionals
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Incentivize people to work in rural areas
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Debt relief
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Categories of intervention to change the time/effort physicians expend:
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Managing Physician Supply
Allocatio, services provided, patiets accepted, patiet outcoes…
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Do they respond to incentives differently? Are patient outcomes different?
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Dominance of private, not-for-profits; fewer government owned or for-profit
•
The people running the hospital (BoG) don't have full control of what happen in the hospital
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Physicians working in the hospital are not "salaried employees" of the hospital - they get their
salary from charging insurance
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However - they do decide which services/care to provide
▪
Physicians largely determine how a hospital's resources are allocated, but are neither employed by, nor
fully independent of, the hospital
○
Incomplete vertical integration
•
The Economics of Hospital Markets and Organization
Competition to provide highest quality care at the lowest price ---> best outcome
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Competition to avoid the sickest patients (selection) ---> bad outcome
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Similar potential pros and cons as for choice and competition in insurance
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Do (or should) hospitals compete?
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These tend to be more profitable (private, for-profit hospitals are more likely to be located in this
sector)
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More rural places have less hospitals…looks like less copetitio
Local monopoly or oligopoly, especially for more specialized services
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Hospital Market Structure
Lecture 20 - Payment to Hospitals
Wednesday, March 28, 2018
10:07 AM
ECON 440 Page 1
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More rural places have less hospitals…looks like less copetitio
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Increasing competition from non-hospital providers, given advances in clinical medicine
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Perks and increased quality for physicians
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Competition over providers more often than over individual patients
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Increasing competition over payers, especially in the US and UK
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"Rational planner" sets budgets, determines which services are provided where, and approves purchase
of expensive new technologies
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Non-market (Canada)
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Regional health authorities purchase services from hospitals, which compete for contracts in an internal
market
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Public competition (UK)
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Regulation to encourage competition with anti-trust enforcement
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Hospitals compete for patients and contracts with payers
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Private market (US)
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Hospital Market Regulation
What are the impacts on quality, efficiency, patient outcomes, selection?
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Defining the market
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Outcomes that are not manipulable by hospitals' choices
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How can we measure the impacts?
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Both efficiency and equity
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With externally-determined prices, competition generally leads to improved outcomes
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Hospital Competition
Must re-invest any profit into the organization
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Must declare a "public purpose"
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Receive important tax advantages
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No shareholders - don't pay dividends
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Non-profits
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Invest in more quality than is profit-maximizing, especially types of quality that are not easily
observable
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Offer both profitable and unprofitable services
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Be less efficient (NFP managers have no claim to profits -- less incentive to be efficient)
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Predictions that NFPs will:
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How they perform/practice is not super different
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Lots of variation in NFPs and FPs - not as different as thought to be
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Some studies suggest better performance by NFPs (especially nursing homes)
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Variation within ownership types is greater than across them
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Empirical evidence is quite mixed; ownership probably worth so much focus
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Hospital Ownership
DRG: grouping patients together based on characteristics (~500 groups)
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Hospital has incentive to treat patients quickly
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The amount the hospital is paid for each DRG is fixed, conditional on patient being admitted
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Payment varies by patient-to-patient complexity (function of DRG)
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Case-based funding based on Diagnosis Related Groups (DRGs), fixed payment based on diagnosis
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Medicare adjusts for DRG payments
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Seeing more patients and more complicated cases = getting paid more --> good for reducing
selection
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Teaching hospitals, hospitals that treat a high percentage of low income/low insurance patients, and
high cost outlier cases:
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Some movement toward P4P, including patient satisfaction and readmission rates, by Medicare
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US
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Global budgets for operating expenses, negotiated with provincial government or regional health
authority
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Canada
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Hospital Payment
ECON 440 Page 2
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Document Summary
Aggregate quantity and the meaning of provider shortages. The economics of health care institutions - hospitals. Traditionally measured from a medical perspective based on population morbidity. Ignores substitution in production, technological changes, and costs e. g. the number of physicians practicing per 1000 people. Economic approaches incorporate behavioral responses by physicians and the idea that multiple combinations of inputs can produce the same health output. Economists think more about how physicians change with respect to: What it takes to manage chronic disease (productive efficiency) Economic analysis can also help inform policy alternatives aside from expanding medical school enrollment. Categories of intervention to change the time/effort physicians expend: Physicians want to maintain market/revenue stream and decide what services to provide, therefore they may be more/less willing to change. Dominance of private, not-for-profits; fewer government owned or for-profit. Physicians largely determine how a hospital"s resources are allocated, but are neither employed by, nor fully independent of, the hospital.
