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1) It has been found that completed years of education at age 30 is a good predictor of whether an individual is a smoker at age 30. However, the same study found that completed years of education at age 30 was also a good predictor of whether someone was a smoker at age 16. In other words, individuals who had more years of education at 30 were less likely to be smokers (measured at either age 16 or 30). What does this result tell you about whether worse health habits are caused by education?

2) You are a health economics consultant for a major political campaign. Your client notes recent research that individuals in worse health tend to live further from health facilities. Therefore, building more health facilities in rural areas should improve overall health for those individuals. Do you think that this proposal is likely to be effective at improving overall US health?

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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You are a health economics consultant for a major political campaign. Your client notes recent research that individuals in worse health tend to live further from health facilities. Therefore, building more health facilities in rural areas should improve overall health for those individuals. Do you think that this proposal is likely to be effective at improving overall US health?

CDC study says cigarette price hike would cut demand

ATLANTA (Reuters) -- A 50 percent increase in cigarette prices would cut overall consumption by 12.5 percent, with even greater declines in smoking among minorities and young adults, federal health experts said Thursday. The Centers for Disease Control and Prevention (CDC) said a statistical analysis of smoking habits since 1976 suggested that raising cigarette prices by 50 percent would result in about 60 billion fewer cigarettes smoked per year

Increasing the price of cigarettes by 50 percent would cut consumption by 7 percent among Caucasian-Americans, 16 percent among African-Americans, and almost 95 percent among Hispanic-Americans, the CDC's mathematical model predicted. "If there is a price increase, there will be much more of a decline in consumption among minority groups than there will be among Caucasian-Americans," said Michael Eriksen, director of the CDC's Office on Smoking and Health. The agency said that for sampling and statistical reasons, the estimated huge reduction in smoking among Hispanic-Americans was subject to greater error than the figures for Caucasian-Americans or African-Americans. The study was based on national cigarette price and sales figures and a National

Health Interview Survey of 355,246 people, almost one-third of them smokers, conducted between 1976 and 1993.

Younger Hispanic-Americans may be more likely to quit

"We really don't think a 50 percent price increase would eliminate smoking in Hispanic-Americans. It might virtually eliminate it in some younger Hispanic-Americans," said Terry Pechacek, a visiting scientist at the Office on Smoking and Health. The CDC said younger smokers would be more likely than older smokers to quit or reduce the amount they smoked because of price increases. The study predicted a 50 percent price increase would cause consumption to decline 29 percent among those aged 18 to 24. Researchers said price increases would also lead to declines in smoking among African-Americans and Hispanic-Americans above age 25. "The tobacco industry has been trying to scare the public, saying that a price increase would be unfair and hit minorities the hardest. In fact, it will actually have the greatest benefit from a public health standpoint in minority communities, particularly in the Hispanic community," Eriksen said.

'Price is only one weapon'

Smokers whose family incomes were at or below average were more than five times as likely as higher-income persons to quit smoking because of price hikes.

Researchers said that even after controlling for income and other factors, Hispanic-American and African-American smokers were more likely than Caucasian-American smokers to quit because of price increases. The study said a 10 percent price increase would prompt one-fourth of Hispanic smokers aged 18 to 24 to quit and reduce consumption among African-Americans aged 18 to 24 by 10 percent. Smoking would be expected to drop less than 1 percent among young Caucasian-Americans, the CDC said. Eriksen said the relative lack of price sensitivity among Caucasian-Americans indicated that "price is only one weapon to reduce smoking." "You need to combine price increases with regulations, with education and prevention programs, and cessation. Anyone element alone will fall short in achieving the type of change that's possible," he said.

a. According to the Center for Disease Control and Prevention (CDC) Study discussed in the CNN article above, what is the overall price elasticity of cigarettes? Based on the estimated elasticity value, is the demand for cigarettes elastic or inelastic? Does this accord with your expectations? Explain why.

b. What are the CDC estimates of price elasticity for Caucasian-Americans, African-Americans, and Hispanic-Americans?

c. Age seems to be a relevant factor for responsiveness to cigarette price increases. What is the estimated price elasticity for young people (aged 18 to 24)? Is this higher or lower than the overall price elasticity calculated in (part a) above? Does this accord with your expectations? Why or why not?

d. The CDC study also presents information for estimates of price elasticity for young Hispanic-Americans, young African-Americans, and young Caucasian-Americans. Calculate the elasticities for each of these three groups, and comment on whether they are elastic or inelastic.

e. Which of the factors that determine elasticity can be identified in the CDC study as being influential in causing differences in the observed elasticity across ethnic groups and age of consumers?

f. The government has taxed the cigarette industry quite extensively over the past decades. According to your analysis thus far, why would the government be so inclined to tax tobacco?

St. Joseph Health Center in St. Charles, Missouri, is on a quest to improve quality. Although good quality is important in any organization, it is especially vital (and urgent) in a medical setting. St. Joseph is one of 20 hospitals in four states that are operated by SSM Health Care Corp., which is sponsored by the Franciscan Sisters of Mary. In any given year, SSM hospitals admit about 150,000 patients and treat more than 1 million people on an outpatient basis. And SSM was the first health-care organization to win the Malcolm Baldrige National Quality Award, which recognizes the outstanding quality performance of US businesses and nonprofits.

Managers at the 364-bed St. Joseph facility have pursued continual improvment for more than 15 years. Early on, Dr. Filippo Ferrigni, head of the intensive-care unit, found that staff members used slightly different methods for measuring the blood pressure of different patients. He quickly standardized measurements for blood pressure, temperature, and other vital signs. Later, he read research showing that high blood-sugar levels are linked to higher infections risks. Knowing that patients sometimes become infected while in the hospital, he suggested the goal of lowering the blood-sugar levels of intensive-care patients.

Because his colleagues were concerned about possible adverse reactions to such treatment, Dr. Ferrigni initially sought very radual improvements. The results were quite impressive: over-all mortality among intensive-care patients dropped by 40%. To make this new process work, the nurses had to check each patient's blood-sugar level 12 times per day instead of 4 times per day; however, the results convinced them that the extra effor and additional tests were worthwhile. Building on the intensive-care unit's success, hospital management then set a quality goal of lowering the blood-sugar levels of all patients - a decision that cut the facility's overall mortality rate by 28% within three years. Treating a serious infection can cost $35,000 per patient, so reducing incidences of infection not only saved patients' lives, it saved the hospital many thousands of dollars.

The 30/30 program, another of St. Joseph's quality-improvement initiatives, requires emerfency room staff to evaluate seriously ill patients within 30 seconds and complete the patient admission process for in-hospital treament in 30 minutes or less. When the 30/30 program began, the facility was chieving its emergency-room objectives only 65% of the time. After two years, it was meeting its objectives 94% of the time. Management had to hire more staff members to achieve this improvement, which raised the cost of providing emergency-room care by $200,000 annually. The higher cost was more than offset by increases in admissions as St. Joseph gained a higher share of the local market for emergency medical treatment.

Quality improvements have led to financial improvements for St. Joseph and its parent company, SSM. Although SSM had no profits in 1999, it was reporting a net profit of $17 million by 2002, the year it was honored with the Baldrige Award. Winning was wonderful, but as Bill Thompson, SSM's senior vice president for strategic planning, says, "It's not thw award, it's the process that shows how to improve quality." In the course of applying for the award and having its results reviewed by examiners, SSM's management refined the processes for analyzing patient-care operations, setting quality-improvement standards, and assessing performance from internal and external perspectives.

St. Joseph's executives, like the top managers of all SSM institutions, are responsible for fomulating the hospital's strategy for serving the community and making decisons about which medical specialties will be offered. As in other SSM hospitals, senior managers evaluate results in terms of the number of procedures completed, market share, patient and staff satisfaction, revenue, and other measures. Patients benefit, staff members benefit, and the community benefits from SSM's focus on performance: "If the activity's not getting the results we want, then we change the activity. It's the result that's improtant."

Questions
1. Would you recommend that St. Joseph's top managers put more emphasis on efficiency or on effectiveness? Explain.
2. How have St. joseph's quality-improvement initiatives affected capacity strategy and product strategy?
3. Do you think that St. Joseph's executives should use management by exception for controlling emergency-room activites? Explain.

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