the market for health care professionals

8/8/2019 The Market for Health Care Professionals

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The Market for Health

Care Professionals


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Theory of Labor Markets

Input Pricing

Demand for Inputs

Human Capital Investments

Investment in Medical Education

The Rate to Return to Investment


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Input Pricing

It is based on the interaction of demand and

supply

It is determined by its marginal contribution in

the production process

It is quality will depend on the amount of the

final product desired for consumption

It is derived from the demand for the final

product and affected by the prevailing

conditions in the market for the final product.


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Demand for Inputs*

More productive inputs command higher

prices in the market, as do inputs that are

used in the production of highly valued

commodities.

In order to derive the demand curve for an

input, first determine the maximum price

that buyers are willing to pay

*GRAPH


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Human Capital Investment

Time spent in school valued by the

OPPORTUNITY COST of the INCOME

FOREGONE

2 ways schooling affects income:

A person is attending school, income is lower

due to forgone earnings.

After completing school the individuals

income will be higher


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Schooling

Way for an individual to improve his or her

marginal productivity

Investment in Medical EducationMajor Complication:

*most individuals exhibit a postive rate of time

preference


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The Rate of Return to Investment

Rate of Return

- the amount EARNED on an investment

translated into an ANNUAL interest rate

(-GRAPH-)


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The Market for Physicians Services

Specialty Distribution

Geographic Distribution

Physicians Compensation Pricing of Physicians Services

Organization of Physicians Practices

Variations in Practice Patterns


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Specialty Distribution

Primary care is defined as a family practice,

general internists and pediatricians.

In our society today, there are many active

physicians but according to statistics, most

physicians do not practice general primary

care.

There is a falling percentage of generalistsand an increasing percentage of specialists.


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Specialty Distribution (cont)

In conclusion, there would be a substantial

shortage of primary care physicians and a

surplus of specialists.

Policy concerns are based on the projected

number of patients compared to the number

of physicians required to provide for their

primary care needs. Physicians services market is identified a

mismatch between supply and demand.


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Geographic Distribution

Policy issue: access to medical care in many

rural and inner-city areas is inadequate

because of the relatively fewer physicians

and facilities

declining number of physicians willing to

practice in rural and inner-city areas

Problem: providing medical care in many

rural areas has reached critical stages


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Geographic Distribution(cont)

Nurse practitioners and physicians assistants

are filling some of these gaps.

Challenge: providing medical care to theselow-density, remote areas for the medical

care delivery system.


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Geographic Distribution (cont)

The nations inner cities face the same

challenge in attracting and keeping qualified

physicians. With a large minority and

indigent population, inner cities depend

heavily on hospital emergency rooms and

public clinics for substantial portion of their

medical care.


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Physician Compensation

Specialty care is the most dominant

The increasing number of specialist has beenaccompanied by more frequent use of the

latest diagnostic, therapeutic and the surgicalprocedures

Result: consumed large resources and servesas a primary cost driver

Physicians incomes are the primary cause ofhigh and rising health care spending


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Pricing of Physicians Services

o TRENDS IN PRICING

Medical inflation primary reason thathealth care spending is a growing problem

The rising cost of physicians services is theactual fees charged for office visits

The higher rate of increase in physicians fees

is the result of increased practice cost, moreextensive use of advanced technology andincreased physician compensation


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CAUSE

rising expenses

results to risingprices in the

physicians

services market

EFFECT

Responding to higher

practice cost, physicians

are increasingly forming

grouppractices to lower

the overhead cost per

physician and increases

the range of services

offered within the

practice


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EFFECT:

The shift to grouppractice has enhanced the full-

service capabilities ofphysicians practices and

contributed to the shift in services from the hospital

to ambulatory setting.

RESULT: Patients will benefit from the lower

operating cost when there is competition in the

market.

Competition forces providers to charge prices

reflecting these lower cost


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Variation in practice patterns

Policy Issue: Variations

in practice patterns

across geographic

regions result inpatients with similar

health condition being

treated differently.

Patient welfare may

actually be enhanced by

the variation because of

the treatmentalternatives available

across the region


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MODELSOF PHYSICIAN BEHAVIOR

The Physician as Monopolistic Competitor

Different variation means ofphysician

practices: Location ofpractices

Hospital affiliation

Quality of the care provided


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demand is less than perfectly elastic.

Availability of health insurances affects

patients responsiveness to changes in price. Physicians with market power are not price

takers, instead they vary the prices they

charge and patients respond to those price

variations. In other words,


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Inelastic demand does not change the basicimplications of the standard model. It merelyprovides the physician with opportunity to

change patients different prices for the sameservices based on the extent of their insurancecoverage.

*** Patients with more elastic demand arecharged lower prices and patients with moreinelastic demand on charged higher prices.


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the market for health care professionals

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