1、History of hospitals19th century hospitals could be fatal places to go to for medical careHigher mortality rates in the hospital than at homeLate 1800s innovations helped lift hospital reputationGerm theory of diseaseAntiseptic techniquesAnesthesiaX-ray technologyIncreased demand for hospital surger
2、ies led to increased need for more hospital resourcesHistory of hospitalsIn 1946,the Hill-Burton Act increased the number of hospitals in the USCongress gave monies for building hospitalsAny hospital receiving money had to provide free/low cost care to the poorResult:more hospitals and more hospital
3、 bedsHistory of hospitalsTechnology advances have reduced recovery timesInsurer increasingly design hospital payment to incentive shorter hospital staysTrend towardIncreased outpatient visitsDecreased length of stayCh 6:The Hospital IndustryTHE RELATIONSHIP BETWEEN HOSPITALS AND PHYSICIANSDifferent
4、modes of hospital-physician relationshipsModes:“Physicians workbench”(Majority in US)Physicians not directly employed by hospitalDirect employees(UK NHS;US“hospitalists”)Physician-owned hospitals(Japan;US)Tradeoffs between the different modes:o Physician loyalty to hospital or the patient?o Doctors
5、without connection to the hospital may overuse hospital resourcesSurgical mortality rates decrease with increased hospital volumeLearning-by-doing hypothesisHigh volume leads to good outcomesSelective-referral hypothesisGood outcomes leads to high volumePositive volume-outcome correlation Does hospi
6、tal experience or physician experience matter?Should you prefer having your surgery with an experienced physician or in an experienced hospital?McGrath et al.(2000)findHospitals with more surgical experience have fewer complications than physicians with high experienceFinding makes sense if teams of
7、 medical workers collaborate on surgeries,so individual physician experience less impactful Ch 6:The hospital industryTHE RELATIONSHIP BETWEEN HOSPITALS AND HOSPITALSDifferentiated product oligopolyHospital industry is a differentiated product oligopolyStrict barriers to entryBuildings,technology,st
8、aff,administration,etc.Few firms(oligopoly)Services provided by each firm are not perfect substitutes(differentiated products)Herfindahl-Hirschman IndexHHI=si2si=market share for a firmIf HHI closer to 1 means few firms in the market(highly concentrated)If HHI closer to 0 means a large number of fir
9、ms in the marketLimited competitionNot just due to barriers to entry.Also:Because of insurance,Prices not transparentMoral hazard for insured patients Government often sets pricesEmergency nature of health care means that patients are unable to search for the“best”and“cheapest”hospital Is hospital c
10、ompetition good for patients?Typically,competition improves quality and lowers prices.BUT Ubiquity of insurance hinders price competition Patients are typically referred to hospitals by physicians,so hospitals compete for physiciansMedical arms race hypothesis:greater competition among hospitals for
11、 physicians can result in redundancy in and overconsumption of medical technologies.This can actually increase costs without improving quality Lots of empirical research about the effect of hospital competition on patient outcomes:mixed findings and different policy implications.For-profit and nonpr
12、ofit hospitalsUS hospital industry has both for-profit and nonprofithospitalsMajority of hospitals are nonprofit 2009:75%of private hospitals organized as nonprofits Benefits of nonprofit status:Exempt from taxesDonors receive a tax deductionCosts of nonprofit status:Cannot sell stockCannot distribu
13、te profits to ownersRestricted to certain charitable activitiesWhy do nonprofits exist?Theories for nonprofit existence1.Altruistic-motive theorySome entrepreneurs prefer altruism over profits2.Government-failure theoryPolitics ineffectively help those in need3.Asymmetric informationDonors trust non
14、profits more with money4.Nonprofits are for-profits in disguise“profits”are distributed as higher wages or non-monetary benefitsMixed study resultsCh 6:The hospital industryTHE RELATIONSHIP BETWEEN HOSPITALS AND PAYERSPrices vary greatly across hospitalsAccording to public price lists or“chargemaste
15、rs”,the cost of a chest x-ray in 2004 ranged between$120 and$1,519 across seven California hospitalsTremendous variability!But in actuality,buyers(both insurers and patients)rarely pay the chargemaster priceInstead,hospitals and insurers-both private and public-periodically negotiate ratesRates vary
16、 with relative bargaining power of hospital&insurerThe same hospital may receive different rates from different insurer Who pays for uncompensated care?Ultimately,someone has to pay for uncompensated care.Unpaid hospital care is paid for through cost-shiftingRich patients pay for poor patients care(
17、cross-subsidization)In the US,reimbursement rates much higher for private insurers than for Medicaid or MedicareUncompensated care:hospital charges not covered by out-of-pocket payments,public insurance,or private insurance.Last-resort laws mandate that hospitals treat all patients who enter their emergency rooms.What happens when a patient lacks the resources and insurance to pay for this care?
