Question

The cost of health care is increasing at a rate higher than inflation. One popular suggestion by policy makers to lower the rate of this cost increase is to (i) rely more heavily on nurse practitioners instead of primary care doctors for certain medical treatments and (ii) to lower the average time patients stay in the hospital and to take care of them at home as soon as possible (in medical lingo this is substituting "outpatient care" for "inpatient care"). What does this imply about the "production function" of health care as a function of labor of doctors and nurses?

Answer 1

As per the information, Healthcare production function is determined by the function of labor of doctors and nurses. In any given time and location there is a fixed amount of doctors and nurses available per person.So in short term we can take the production function as fixed.(vertical line on the x axis, if production function is plotted on y-axis and quantity of labour supplied in healthcare on x-axis).

This entails from the fact that doctors have a limited time in which they can attend patients in hospital or their clinic.At the same time there is surge in demand of doctors for both basic and advanced treatment.Increasing number of patients combined with shortage of supply of healthcare labor drives the cost of healthcare upwards.

Here doctors can provide both basic and advanced medical treatment whereas nurses can provide or can be directed to to provide basic treatment only.

Now suppose policymakers are considering replacing/substituting primary care doctors with nurses. This will result in increase in supply of labour towards providing basic treatment.. Can nurses provide basic treatment with as much proficiency as primary care doctors?Will it actually help in curing and treating the patient completely without requiring further care ? Will patients be acceptable towards treatment from nurses at lesser cost as compared to primary healthcare doctors(who charge higher fees, prescribe more number of medical tests and medicines which may not be required)? These are some of the questions which needs to be answered before analysing the impact on healthcare production function.

Note: This is a market for asymmetric information. Patients do not know how severe the illness is and how long it will last. Only a qualified doctor can be trusted with this. So even if more resources are directed towards increasing the number of nurses it cannot be said with plausible explanation that it can reduce cost of healthcare.

Moreover whether increase in extensive care treatment will result in decreasing the cost of healthcare and is ambiguous here. If the demand for healthcare is primarly for advanced treatment which cannot be carried out except in hospitals then increase in supply of basic treatment will not cater to required demand.Further in remote or distant locations extensive care /outpatient care is difficult to provide.

Also regarding average time patient spends in hospital depends on no. of factors. They are -

• need for advanced medical treatment and intensive care,
• severity of disease,
• study of complex medical condition and cases which requires discussion by panel of doctors,
• availabilty of clean and hygenic conditions otherwise,
• need for surgery and constant health monitoring, etc

Can increase in supply of extensive medical treatment reduce the average time of patients in hospital again has to be studied after considering the above factors.