Transcript
Chapter 14 – Hospitals and Long-Term Care
Key Ideas
Hospitals are enormously complex institutions. The hospital industry has experienced rapid change, including reductions in the numbers of hospital beds and inpatient utilization, and significant growth in outpatient services.
Hospitals may compete in principle on the basis of price, or services rendered, the so-called “medical arms race” (MAR). Studies have suggested that through the 1980s, the MAR may have been important, but since then that other (cost-related) factors are becoming more important with increased competition.
The market for long-term care is growing, largely for demographic reasons. However, home health and other alternatives are growing rapidly in comparison to traditional nursing home care.
Teaching Tips
Students may not be aware of the changes that have occurred in the hospital sector. Table 14-1 shows how the number of hospital beds has decreased since 1980. Similarly, Table 14-2 shows the substantial changes in hospital costs.
Students may not have seen examples of game theory, and they usually enjoy working with it. The example in Box 14-1 illustrates the Prisoner’s dilemma, where both sides would be better off by not adopting, but the dominant strategy for each is to adopt. Instructors should show students that depending on the specific elements of the pay-off matrix, there may be other dominant strategies.
In many large cities, hospitals are consolidating or closing down. Boxes 20-1 and 20-2 (later in the book) also provide useful examples of the changes in the hospital industry. In most areas, there is also useful “local news” to bring to this analysis.
Chapter 14 – Hospitals and Long-Term Care - Multiple Choice
The number of hospital beds in the United States ____ from ______ to _______ between 1980 and 2008.
Increased; 6,201,000; 6,985,000.
Increased; 6,201,000; 6,649,000.
Decreased; 6,965,000; 5,815,000.*
Decreased; 6,965,000; 6,201,000.
National health care spending in the United States ____ from ______ billion to _______ billion between 1980 and 2008.
Decreased; $1,988; $246.
Increased; $246; $2,339.*
Increased; $27; $700.
Increased; $27; $2,339.
Hospital care is a(n) _______ percentage of national health care spending, accounting for about ______ in 2008.
decreasing; 39.
decreasing; 31.*
increasing; 35.
increasing; 39.
Using the game theory “pay-off” matrix for profits above, the dominant strategy regarding adoption of a new technology is:
Neither adopt.
Hospital B adopts and Hospital A does not.
Hospital A adopts and Hospital B does not.
Both adopt.*
Using the game theory “pay-off” matrix above, suppose the pay-off in the “northwest box” is 10, 10. The dominant strategy regarding adoption of a new technology is:
Neither adopt.
Hospital B adopts and Hospital A does not.
Hospital A adopts and Hospital B does not.
There is no dominant strategy.*
Using the game theory “pay-off” matrix for profits above, the dominant strategy regarding hospital advertising is:
Hospital B advertises and Hospital A does not.
Hospital A advertises and Hospital B does not.
Both advertise.*
Neither advertises.
If advertising is costly, is the new equilibrium “desirable” for them:
Yes, because they are making profits.
Yes, because they would be worse off if they did not advertise.
No, their costs have risen and their profits have fallen.*
No, it is unethical for hospitals to advertise.
Analysis from Table 14-1 suggests that from 1980 to 2008 hospitals have seen ____ occupancy rate, ____ length of stay, and _____ rate of outpatient visits:
an increasing; an increasing; an increasing.
a decreasing; a decreasing; a decreasing.
an increasing; a decreasing; a decreasing.
a decreasing; a decreasing; an increasing.*
In the short run hospitals will continue to remain open as long as:
marginal revenues will cover marginal costs.*
they are covering average costs.
they are covering fixed costs.
Answers (b) and (c) are correct.
In the long run hospitals will continue to remain open as long as:
marginal revenues will cover marginal costs.
they are covering average costs.*
they are covering fixed costs.
Answers (b) and (c) are correct.
The “medical arms race” literature suggests that hospitals might compete on the basis of:
costs.
costs and price.
quality.*
Answers (b) and (c) are correct.
Analyses in the past decade suggest that since the 1980s the medical arms race:
has accelerated with hospitals charging ever-higher prices for higher quality.
has led to more hospitals’ leaving rural markets.
has abated with hospitals facing competitive pressures with respect to price.*
Answers (b) and (c) are correct.
The MAR analysis was based on the premise that:
consumers wanted the highest quality care irrespective of costs
consumers were indifferent to the costs because insurers (or the government) would cover higher quality.*
hospitals colluded to raise costs.
Answers (b) and (c) are correct.
Analysts believe that although the MAR may have led to quality competition in the 1980s ________ has led to more price competition since the 1990s:
selective contracting through managed care.
prospective payment.
economies of scale.
Answers (a) and (b) are correct.*
With declining occupancy rates, hospitals have faced financial pressure. Hospital mergers lead to offsetting impacts with __________ leading to potentially lower costs, but _____ leading to potentially higher prices:
monopoly power; higher input prices.
economies of scale; monopoly power.*
increased revenue; higher input prices.
lower input prices; less regulation.
From 1963 to 2000 the nursing home population over age 65 grew by approximately _______:percent
52.
97.
170.
230.*
In the first decade of the twenty-first century, the nursing home population has:
grown at about 4 percent per year.
doubled.
dropped slightly.*
fallen in half.
Nursing home care is financed primarily by _______:
Medicare.
Medicaid.*
out-of pocket expenditures.
private insurance.
Troyer has examined nursing home quality available to Medicaid patients. She found that Medicaid patients are in _________ quality homes, and that private pay patients in these homes get ________ the Medicaid patients.
higher; lower quality care than.
lower; higher quality care than.
lower; equal quality care as.*
higher; equal quality care as.
Suppose that a hospital is covering its marginal costs C1 at Medicare reimbursement rate R1. The number of Medicare patients will be:
CD.
DE.*
CB.
CA.
If Medicare raises its reimbursement rate to R2, hospitals will:
charge more to private patients.
admit more Medicaid patients.
admit fewer private patients.
answers (a), (b), and (c) are correct.*
If Medicare stops covering benefits hospitals (that is, R = 0) the hospitals will serve patients at point:
A, to encourage more patients to use the hospital.
E, to fill all of the beds.
F, the point at which marginal revenue equals marginal costs.*
G, the point at which they maximize total revenue.
In the figure above, increased resources for home health care would plausibly move us from point ____ to point ____:
D; A.
C; D.
C; A.
A; D.*
In the figure above, increased costs of market goods would plausibly move us from point ____ to point ____.
D; B.
A; B.
E; A.
Answers (a) and (b) are correct.*
Despite the growth of the elderly population, only _____ of the elderly have long term care insurance
5 to 7 percent.
9 to 11 percent.*
12 to 14 percent.
15 to 19 percent
Hospice care is intended for the terminally ill. Most patients receive care _____ and the purpose is ____.
in hospices; to cure the patients
in hospices; to provide for patients’ physical and emotional comfort.
in their own homes; to cure the patients.
in their own homes; to provide for patients’ physical and emotional comfort.*
Home health care is less expensive than hospital or nursing home care because:
caregivers’ time costs nothing because they are not working outside the home.
caregivers only need be paid minimum wage.
the home care is much less capital intensive than care in institutions.*
Answers (b) and (c) are correct.
Suppose that a family employs a nurse at a wage of $20 per hours, for 20 hours per week, to care for an invalid relative. They then choose to provide the care themselves to save the money. The economic results of this decision may:
constitute gains to society, as long as the care-givers do not have to quit their jobs.
constitute reductions in earnings and/or leisure for family members.
impact the quality of care received by the relative.
Answers (b) and (c) are correct.*
Van Houtven and Norton recently looked at informal care by family members. They found that:
it is a substitute for outpatient surgery.
it is a complement to inpatient surgery.
it is a substitute for skilled nursing home and inpatient care.*
Answers (b) and (c) are correct.
Studies have found that consumers respond to hospital quality in the following ways:
Distance has a positive impact on demand.
Distance has a negative effect on demand.
Quality has a positive impact on demand.
Answers (b) and (c) are correct.*
