Short Paper
Economics can relate to competition as well as choice in the world of healthcare. For example market concentration in healthcare is when there are only a select few companies who produce and sell their products to the majority of the healthcare facilities around the country. In other words, these products may be limited and not many companies may make them, so selling them to most of healthcare facilities will create a larger selling market for them. Therefore, it is a useful economic tool because it reflects the degree of competition within the healthcare market. According to Riley (2011), “If concentration is low, than the industry is considered to be competitive and if the concentration is high, than the industry will be
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For example, the higher the amount the calculation is, the better of a chance that company has to having high market power. Consequently, it is important to understand that the HHI takes into account the size distribution of the companies in the healthcare market and the higher the points a company has, the more control they have over other companies and the overall market. Unfortunately, a company with complete market power can raise their prices without losing any of customers to their competitors, but on the contrary, little to no market power will make any company extremely competitive with other …show more content…
Market economics, especially in healthcare has advantages and disadvantages. For example, market economies are based on the concept that people are free to make their own choices about what services or products to purchase within the healthcare industry. This system can be efficient because a capitalist market system aims to produce goods with a minimum of wasted resources (Metcalf, 2012). Then on the downside a market economy will produce what people want, not necessarily what they need, which can raise prices for the average consumer/patient. For instance, the more consolidated a healthcare system is the greater the drawbacks. In other words, higher healthcare prices resulting from greater market power. “Market power increases because it is difficult for insurers to bargain successfully with one of only a few health systems and clinicians gain market power through consolidation by raising prices to the payers” (Cutler & Morton, 2013). Therefore, there are many decisions healthcare facilities need to consider before opening up to the public such as looking for a less concentrated area, identifying new sources of patients for referrals, offering something unique to differentiate from other providers, and creating a healthcare market that has not been built
The current health care landscape has been characterized by large scale consolidation and vertical integration of payers and providers. This has led to a handful of dominate players with substantial influence, and an increasing overlap in responsibilities between payers and providers. Although payers and providers have traditionally been on opposing sides, battling each other about quality of care versus cost-effective care, they are shifting to working together to achieve better value.
As individuals, we tend to hope for the better but that is just hope. Reality could bring unpredictable situations at any given time. When I wake up in the morning, I have no idea of what could surface in my healthcare. I can be doing great today and be on the verge of a healthcare crisis the next. Moreover, the healthcare industry does not always provide quality care and cost are unknown (Porter 2009, 110). If you have insurance, you are somewhat ready for unpredictable happenings but if you are uninsured, then your actual cost for services increases. The healthcare arena is always a topic of discussion for improving. Quality of care needs to be priority as we shift from a volume to value based care (Porter 2009, 112). Accountable Care Organizations (ACO’s) is a great example of a healthcare model that is creating value. ACO’s work by providing specialized care to Medicare patients by providing superior care that lowers overall cost (Devers 2009). Maybe other health care sectors could follow ACO models in the
A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for the good relatively inelastic thereby enabling monopolies to extract positive profits. It is this monopolizing of drug and process patents that has consumer advocates up in arms. The granting of exclusive rights to pharmacuetical companies over clinical a...
Individuals experience different access to health-care depending on their social location. “A lack of access is illustrated by a person who has had an unmet health-care need for which he or she felt he or she had needed, but had not received, a health-care service in the past year” (Ives, Denov, & Sussman, 2015, p. 170). Health-care access in Canada is often unequally distributed, leaving vulnerable individuals unable to secure sufficient assistance. Changes in health-care delivery in Canada have affected individuals’ access to services. Vulnerable groups such as low-income, rural, and immigrant families experience pronounced difficulty adjusting to Canada’s health-care system.
Although monopolies appear damaging at times, there are arguments that they are an advantage to society. Monopolies in the pharmaceutical industry drive companies to pursue research and development (R&D) efforts to gain new patents. According to a 1992 study, among the 24 US. Industry groups, pharmaceuticals dedicated 16.6% of their amounts to basic research, while all other industries averaged at 5.3% (Sherer 1307). This fact validates the incentive pharmaceutical companies have to get a patent and acquire more power. Pfizer encourages R&D because of the incentives and a want to obtain patents to receive more profit. Pfizer has to promote itself to be successful, creating a good brand image that consumers will trust. If the company can advertise successfully, more consumers will purc...
6. The special characteristics of the U.S. health care market are Ethical and equity considerations, asymmetric information, spillover benefits, and third-party payments: insurance. Each one of these characteristics affects health care in some way. For example, ethical and equity considerations affect health care in the way that society does not consider unjust for people to be denied to health care access. Society believes that it is the same thing as not owning a car or a computer. Asymmetric information also gives health care a boost in prices. People who buy health care have no information on what procedures and diagnostics are involved, but on the other hand sellers do. This creates an unusual situation in which the doctor (seller) tells the patient(buyer) what services he or she should consume. It seems like the patient has to buy what the doctor tells him. The topic of spillover benefits also cause a rise in prices. This meaning that immunizations for diseases benefit not only the person who buys it but the whole community as well. It reduces the risk of the whole population getting infected. And the last characteristic is third-party insurance. Which involves all the insurance money people have to pay. This causes a distortion which results in excess consumption of health care services.
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
The United States health care system is one of the most expensive systems in the world yet it is known as being unorganized and chaotic in comparison to other countries (Barton, 2010). This factor is attributed to numerous characteristics that define what the U.S. system is comprised of. Two of the major indications are imperfect market conditions and the demand for new technology (Barton, 2010). The health care system has been described as a free market in
Extreme capitalist capitalism adopts non-interference in markets and leaves it to provide community health care. This would be acceptable if all members of the community were able to access health care on their own resources and found a competitive market for health service providers from insurance companies and health care institutions. The competitive market requires several things, the most important of which is the availability of similar information among a large number of service providers and goods and demand. Historically, historical experiences in all countries and societies have proven that markets fail to provide health care to all members of society. In general, markets fail to provide satisfactory health care because the goal of health service producers is to maximize profits, while society aims to maximize health benefits.
Particularly in the UK, due to the long history of NHS with the motto “free, from the cradle to the grave”, there is a common mind-set that healthcare is completely free. For a long time, the treatment prescribed by the doctor to the patient normally incurs zero cost both to patient and the doctor, as it is paid out of the state budget. As a result, patients and doctors usually have little or no awareness of the costs incurred by the treatments. Thus, thinking of healthcare as an economic good like any other would make consumers and doctors more conscious of medical price tags. This could result in the increase of the burden of the decision of whether or not to bear the cost of treatment on the patient, just like with any other economic good, leading to increased patient cost
Markets differ in a variety of ways including the degree of concentration and competitiveness, a fact which is reflected in the concept of ‘market structure’. Economists’ models link the structural characteristics of a market to the behaviour of firms in that market and subsequently to their performance. A key question therefore is how far a firm’s strategic decisions are shaped by the structure of the market in which it operates.
What is competition? What is performance? Competition is the activity or condition of competing. Performance is the action or process of carrying out or accomplishing an action, task, or function. When it comes to competition, people in America typically recognize only two legitimate positions: enthusiastic support and qualified support. We can consider competition as bad news, but really it’s how people overdue or misapply it to be considered on the bad side. The actual trouble lies within competition itself. The best amount of competition for the children is none at all, and the very phrase "healthy competition" is actually a contradiction in terms.
Service area is the geographical area that majority if the customers reside. For healthcare, it is the area where majority of patients are being served. The service might be difficult to provide in areas beyond the service area due to multiple factors, like: distance, time to travel, cost. Healthcare entities should examine and know its service area, its demographics, and disease patterns, lifestyle patterns to better know and serve its population. In addition, the service area competitor analysis should also be part of environmental analysis.
The cost of US health care has been steadily increasing for many years causing many Americans to face difficult choices between health care and other priorities in their lives. Health economists are bringing to light the tradeoffs which must be considered in every healthcare decision (Getzen, 2013, p. 427). Therefore, efforts must be made to incite change which constrains the cost of health care without creating adverse health consequences. As the medical field becomes more business oriented, there will be more of a shift in focus toward the costs and benefits, which will make medicine more like the rest of the economy (Getzen, 2013, p. 439).
Whereas private hospitals are made privately and are not run under the government’s budget. These can cost people a lot. Private hospitals cannot be afforded by everyone but can only be afforded by rich citizens. Most of the rich citizens claim to prefer private hospitals because they provide treatments of various diseases and illness that a government hospital cannot provide as government’s annual budget cannot afford to handle expenses for some serious diseases. Private hospital provides space to treat patients perfectly. A private hospital is equipped with new equipment which makes the treatment more costly. Private hospitals usually have fixed costs for every treatment. Students in economics study that every economic enterprise has a fixed, variable, and increment costs.