Question

1 Price discrimination is common in healthcare. Discuss why most healthcare providers are able to charge different groups of consumers different prices for the same products.

2 Assuming that you are the manager of a not-for-profit hospital in a competitive market and decide to charge your consumers less than the profit-making price, discuss what effect this decision will have on your profit and on your career?

3 According to you what is the best incentive method for healthcare providers, keeping in mind efficiency and quality of services?

Answer 1

1.

They are able to charge different prices to different group of consumers, because different groups of consumers have different level of price sensitiveness towards the health care services. It means that price elasticity of demand is different for different groups of consumers. A highly elastic consumers would like to pay competitive price, so it is charged to them. A price inelastic consumers can pay higher price, then they are charged higher price by the service providers. Further, it is the asymmetric information about the services, that makes service providers to charge different prices and consumers do not about the alternative course of health care. S, they end up paying different prices though, they could get the different and equally effective treatment at lower price.

==

2.

If price is less than profit making price, then not for profit organization will either be able to recover its ATC and remain viable to incur losses. Hence, the  not for profit organization is going to make no any economic profit. though, it can incur losses. It will make not for profit organization be operational in short run, but can be closed in long run if ATC is not met by the price put on products and services. It will make career to be running in short run, but uncertain in the long run.

==

3

Best incentive method will be the fee for services method that will help health care service providers to get incentives given on per patient basis and in accordance with the cost incurred while maintaining the quantity and efficiency in delivering the services. It will make health care service providers to deliver quality in services while recommending expensive services to the customers so that they can get bigger incentive.