Transcript
Chapter 15 – The Physician’s Practice
Key Ideas
If it is up to the provider to determine how much care the patient needs, there may be an inducement to provide too much care. At one time, analysts called this conduct physician-induced-demand, but they now more generally now refer to it as supplier-induced demand or SID.
If a known form of medical care is effective, then why do we see such large variations in the amounts and types of care, even over small areas? This small area variation is called SAV and it introduces the possibility of inappropriate levels of care.
Teaching Tips
To note that SID is an information problem, students can relate it to situations where an appliance or an automobile is not working properly. We take it to the repair person, or a mechanic, and ask “what’s wrong.”
Box 15-1 provides a physician’s perspective on target income. Where a physician is available and willing, instructors may wish to ask him or her to visit a class and discuss issues of SID.
Ask students about drugs they may be taking for allergies – there will likely be many types taken, all of them about as effective. This is “small area variation.”
In the context of managed care, students may want to talk about the possibility of too much, or too little, care for particular conditions.
Chapter 15 – The Physician’s Practice – Multiple Choice
Supplier-induced demand refers to:
the idea that medical providers generate and perform unnecessary services in an effort to increase earnings.*
the idea that government subsidy payments to hospitals increase the demand for physician services.
the percentage of hospital beds being demanded by Medicare patients.
the problem of fully informed consumers increasing the demand for medical care.
Under the target-income model, it is expected that price controls will lead physicians to provide ________ services and ________ intensive medical care.
more; less.
more; more.*
less; less.
less; more.
Proponents of SID argue that an increase in the number of physicians leads to an______, which leads to _______.
increase in demand; an increase in supply.
increase in demand; a decrease in supply.
increase in supply; an increase in demand.*
increase in supply: a decrease in demand.
The _______ hypothesis suggests that physicians induce demand to achieve a particular level of income:
Roemer.
target income.*
Wennberg.
disutility of discretion.
In Figure 15-1, a change in physician wage from w3 to w1
increases the amount of labor provided.
decreases the amount of labor provided.*
has an indeterminate impact on the amount of labor provided .
cannot change the amount of labor provided because HMOs will not allow it.
In Figure 15-1, if wage changes from w1 to w2:
the amount of labor supplied increases.*
the amount of labor supplied decreases.
the amount of leisure decreases.
answers (a) and (c) are correct.
In Figure 15-1, if wage changes from w1 to w2, the amount of ____ increases because ______ has become _____.
work; leisure; more expensive*
leisure; work; more expensive
work; work; less expensive
answers (b) and (c) are correct.
In the figure above the profit rate is :
higher at point Z than at point Y.
higher at point Y than at point Z. *
equal at both points.
equal to 0.
Starting at point Z, reduced competition would lead to a net income line with:
a lower intercept and a less steep slope.
a lower intercept and a steeper slope.
a zero slope.
a higher intercept and a steeper slope.*
As drawn in the figure above, increased competition :
raises the profit rate from 0.75 to 2 and leads to more inducement.
raises the profit rate from 0.75 to 2 and leads to less inducement.
lowers the profit rate from 2 to 0.75 and leads to more inducement.*
lowers the profit rate from 2 to 0.75 and leads to less inducement.
If managed care is effective in limiting utilization:
physicians will increase their inducement efforts.
the slope of the income line will be effectively reduced and there will be less inducement.*
the intercept will fall because practice will become less profitable.
Answers (b) and (c) are correct.
As drawn in the figure above, a reduced profit rate leads to :
a large income effect that offsets a smaller substitution effect.*
equal size income and substitution effects.
zero income effect.
a negative income effect and a positive substitution effect.
The substitution effect occurs in the diagram above because :
labor substitutes for leisure.
less productive labor makes leisure more attractive.*
physicians want to retire earlier.
the income and substitution effects are equal.
Which of the following statements regarding the disutility of discretion model is false?
The marginal utility to inducement is negative.
Physicians always respond to increased competition by providing more induced services.*
If a physician decides to induce more services, a larger amount of income is necessary to compensate for the additional inducements.
With income on the vertical axis and inducement on the horizontal axis, the slope of the indifference curve must be positive.
How is advertising similar to physician inducement?
Both activities can generate increase revenue.
Both activities increase costs.
Both activities provide no social value.
Answers (a) and (b) are correct.*
The impact of SID in the health care market:
appears to be small, even though it is hard to measure.*
has rendered traditional demand and supply analysis useless.
is expected to be larger for services which have a low demand elasticity.
Answers (b) and (c) are correct.
The McGuire-Pauly synthesis examines the impacts of lowered profit rates. The ____ effect suggests that lowered profit would tend to reduce inducement, while the ____ effect suggests that lowered profit would increase inducement.
income; substitution.
substitution; income.*
income; information.
target income; substitution.
Possible sources of small area variation include
population characteristics such as income, education, and health status.
physician uncertainty regarding treatment effectiveness.
supplier-induced demand.
all of the above.*
In the figure above, initial supplier revenues equal:
400.
800.*
850.
1,360.
In the figure above, an increase in supply from S1 to S2:
indicates SID because quantity demanded rose from 10 to 13.
indicates excess supply because the price of services fell from 80 to 40.
indicates lower revenues for the service providers.
Answers (b) and (c) are correct.*
In the figure above, an increase in supply from S1 to S2, in the absence of SID:
increases total revenue to 1,360.
decreases total revenue to 1,360.
keeps total revenue constant.
decreases total revenue to 520.*
In the figure above, suppose in response to an increase in supply from S1 to S2, the new equilibrium quantity supplied and demand is point X on supply curve S2.
This example meets Reinhardt’s “fee test” indicating supplier-induced demand.*
This example does not meet Reinhardt’s “fee test” because the price has not risen.
This example does not meet Reinhardt’s “fee test” because quantity has risen by too large a percentage.
This example shows that providers desire more leisure.
In the figure above, if providers have target income of 800, and supply increases from S1 to S2, they will:
seek to induce demand high enough to raise their price back to 80.
seek to earn more than 80 per unit in order to meet the target income.
they will seek to induce demand high enough to raise the product of price and quantity to 800.*
seek to reach point X for price and quantity.
HS
P3
P2
Health P1
Status
0 MC
Medical care
Refer to the figure above. Which physician is the most optimistic about treatment effectiveness?
Physician 1.
Physician 2.
Physician 3.*
Insufficient information to answer.
The idea that physicians have different beliefs and knowledge about treatment outcomes, which in turn leads to variations in medical procedures, is called the:
Wennberg hypothesis.
practice style hypothesis.*
variation conundrum.
New England 12.
Studies by Phelps and Parente, and Escarce found that standard supply and demand variables explain _______of the variations in medical procedures.
almost a 100 percent
40 to 75 percent*
33 percent
none
Education, feedback, and surveillance programs are concerned with:
reducing the amount of inappropriate medical care.*
increasing patient access to the latest medical technology.
retaining a qualified hospital staff.
the low enrollments in medical school.
In the figure above, if MB* is the optimal level of care, then the loss to society at R1 is ____________ than at R2 because ______________.
greater; more care is always better than less care.
less; wasted care is being provided at R2.
greater; the disutility noted from triangle B is smaller than the disutility noted in triangle A.*
less; triangle A is greater than MC, whereas triangle B is less than MC.
In the figure above, suppose that R1 = 8, R2 = 12, and R3 = 15, and suppose that MC = 100. The slope of each MB curve is -10.
If everyone consumes 8 units, the loss per person will be 80.
If everyone consumes 15 units, the loss per person will be 45.
If everyone consumes 15 units, people will be better off because consuming too much is better than not consuming enough.
Answers (a) and (b) are correct.*
In the figure above, suppose that R1 = 8, R2 = 12, and R3 = 15, and suppose that MC = 100. The slope of each MB curve is -10. If half of the population consumes 8 units of care and half consumer 15 units of care:
The loss per person equals 45.
The loss per person equals 62.5.*
The loss per person equals 80.
There is no loss per person, because all are following their preferences.
