Question

Economics classes typically focus on the simplest type of market, “perfect competition,” because that is the simplest analysis to teach and perhaps because it is the easiest to understand. But no markets are really perfect and the healthcare industry is no different. All markets stray from perfection to various degrees and a better description of most real-world markets is a more complex model called monopolistic competition. (Pettinger, 2018) The main difference is that in this model, competitors differentiate their products so that they aren’t selling perfect substitutes with numerous other competitors. That allows each firm to raise prices above their marginal costs, and it also encourages excessive investment in fixed costs which raises overall costs and results in inefficient scale (excessive capacity). This describes the hospital and healthcare industry well. (Hilsenrath, 1991) There is no price competition for any customer because emergencies often dictate and necessitate the geographic accessibility for help. People seek aid without price competition. It is doubtful that someone having a heart attack will negotiate the price of their treatment mid attack, much less transfer to a cheaper competitor several miles away. However, this is kept in check by government oversite and regulations and if it were not, the hospitals would keep raising their prices encouraging additional hospitals to be built. This would translate into excessive overcapacity and the need to raise prices to cover the fixed costs of maintaining so many hospitals and staff that mostly sit idle waiting for patients. (Hilsenrath, 1991). Healthcare seems to also demonstrate some form of Monopolistic competition and not a true Monopoly. In a monopoly, entry into the sector is restricted and exit is also highly regulated as government regulations dictate everything from staffing ratios to acceptable infection rates. Yet the healthcare products are unique and public utility have to be taken into consideration. Of note, profit is reduced (regulated) by the government. This is slightly different in a monopolistic competition and the healthcare industry seems to adopt this. In this competition, there is slight product differentiation (stroke centers vs. a children’s hospital) this is necessary otherwise the “product” is easily replaceable and beatable in the market. Because there are few sellers but less than oligopoly, Product differentiation is relatively easy to do and “product” differentiation can drive market share and resultant profits. So, what opportunities exist in a monopolistic competition for a hospital? As mentioned, if there is excess capacity in a hospital, the equilibrium quantity is smaller than the lowest cost quantity at the minimum point on the average cost curve. The hospital could provide care at a lower cost by increasing services to the level where average costs are minimized. This could be effective provided the government loosened some of its over site instead of micromanaging medicine. The government has yet to figure out the regulations cause a higher than marginal cost pricing (P> MC).

What can be done differently?

Answer 1

1. This article basically revolves around the efficient management of the resources available in any organisation.There is no need to change the employees but it is more important to use the resources to its fullest.For the purpose of the HIA 310 Advanced Quality Management and Performance Improvement in Healthcare ,this article provides ideas that the introduction of various tools and techniques are very important in case of proper management.This article has introduced a sot of management tools and Techniques known as LEAN. In this article we see that the healthcare system has introduced various tools in improving the overall quality to be delivered to the patients.In one example it is mentioned that the authority changes from one preson to another in different departments.This techniques help in overall development of each and every employee and all of them started to knaow what and where the problem is and from where it can be solved.This experiment not only help the hospital to improve its quality and satisfaction level of the patients but it has motivated employees too for serving better.The employees have learn better time management which is very important in Health care sector.The working efficency has improved drastically helping in the overall development of the healthcare sector.

2. In every field we have to be very sure about the services which we are going to deliver.Efficient management whether it be time,resouces or any other factor it must be fully utilised.This article helps in studying more about the improved management skills and improved quality to be delivered.We can apply this principle in any field.As we have read in the article that the priciples used in a motor company are very well applied in healthcare sector. The imrovement in quality is very necessary to gain profit and reduce the cost of providing the services.These can be taken as the guiding priciples in every other field because at the end of the day customer satisfaction is the top priority.