Factors Affecting Supply of the Product and Services
Question :
Describe the product or service you supply to your patients.
Identify the market structure of your industry and the analyze the key characteristics of your industry that lead to your identification of this market structure.
Given this market structure, evaluate how prices charged for your services/products are determined.
Evaluate how does the existence of private and public insurance influence the revenues you receive for this service/product.
Given the government regulations impacting the health industry that have been discussed in this class, identify and discuss a government regulation that has been implemented in this industry.
Identify a market failure(s) discussed in class that the government regulation attempted to address.
Be sure to include your name and in the subject line identify the health care entity you chose above. In order for your boss to easily review your report, please include section headers to correspond to the questions.
Answer :
To: The Boss
From: Health Service Manager
Date: November 29, 2019
Subject: Factors impacting the supply of the product and services
Introduction
This memo has been developed to study the impact of market structure on the quantity of products and services supplied as well as the prices of the product and services. There are different types of market structure such as perfect competition, oligopoly, duopoly, monopoly, etc. (Browning and Zupan, 2020). There are several determinants of quantity supplied as well as prices of the product and services in each of the markets. So, this memo focuses on analyzing the product and services provided by Baxter Regional Medical Center s small rural hospital in Mountain Home. In order to complete this memo, the determinants of quantity supplied by Baxter Regional Medical Center has been evaluated and analysed along with the determinants of prices of the product and services. Apart from this, the influence of private and public insurance on the revenue of the product and services has also been analysed. Moreover, the government regulations which have been implemented in the hospital industry have also been studied.
Product and services of the organization
Baxter Regional Medical Center is committed to providing quality care services to its patients in order to meet the needs of the community. The organization serves every patient with compassion as well as a hometown touch. The organization has trained its staff to provide a positive healthcare experience. The organization provides several services to its patients which are discussed below.
The organization provides cardiac services to its patients. It is the only hospital which provides a complete cardiac care program in North Central Arkansas. The following are the types of services provided by Baxter Regional Medical Center open heart surgery, interventional angiography, minimally invasive surgery, diagnostic angiography, cardiac rehab, etc. The organization also provides Orthopaedics services to its patients along with general surgery, neurosurgery (neck and spine), and rehabilitation.
Market structure of the industry
Market structure is determined by the number of buyers and sellers in the market. If there are a large number of buyers as well as sellers in the market, the structure of the market is known as perfect competition whereas if there are a large number of buyers but there is only one seller in the market, the market structure is known as monopoly market.
The healthcare industry in which Baxter Regional Medical Center is operating is an example of monopolistic competition. There are several hospitals which are operating in this industry and providing services to the patients. On the other hand, there is a large number of buyers as well in the market of the healthcare product and services (Kreps, 2019). The product and services of the organizations can be differentiated. They can also control the prices of the product and services up to some extent. Thus, it can be said that the market structure of the industry is monopolistic competition. Key characteristics of the industry are the following;
• There are a large number of buyers and sellers in the market which determine that the industry is monopolistic competition. However, it is also found in the perfect competition market. But there are some other characteristics that differentiate between perfect competition and monopolistic competition.
• Product differentiation: the services and the products provided by the organizations can be significantly differentiated (Parenti et al., 2017). Homogenous products are not provided by all the organizations in the market.
• There is no barrier to entry and exit of the firm. The organizations can enter into the market as well as exit the market on their own will. However, the government also plays an important role in this.
• There is a lack of perfect knowledge of the market which also makes this industry a monopolistic competition.
• Less mobility of the factors of production is also possible in this industry.
Determinants of prices
Prices of the products and services are flexible in nature in this industry. There are several factors which determine the prices of the product and services. The following are the factors that significantly determine the prices of the product and services of the organization.
The demand and supply of the product and services are the significant determinants of the prices of the product and services. If the demand is high, the prices of the product and services increase whereas if the demand for the product and services is low the prices will also be low (Teubner et al., 2017). On the other hand, supply also determines the price of the product and services. High supply leads to low prices and vice-versa.
The prices of the product and services of the competitors are also significant determinants of the prices. The organization charges prices of the products and services according to the prices of the competitors (Saylordotorg.github.io. (2019). If the competitors charge low prices of the product and services, the organization also charges low prices or vice-versa.
The policy of the government to control the price is also a significant determinant of price. The government can control the price of the products and services. Apart from this, the cost of production also determines the price of the product or services. The high cost of production leads to the high price of the product or service (Estelami et al., 2019). On the other hand, the low cost of production leads to a low price. The desire to make a high profit also determines the price. If the organization wants to make a high-profit margin, it will charge a high price for the products and services.
Influence of private and public insurance on the revenue of the product
The availability of public and private insurance significant affect the revenue of the product and services. Public and private insurance make the product and services of the organization affordable for almost every individual who has insurance. As the product and services of the organization are affordable, the people start using the product and services. The lower price of the product and services attract the people to purchase the product and services and hence it can be said that the demand for the product and services increases as the price of the product and services reduces (Liu, and Chollet, 2006). So, due to the availability of public and private insurance the demand for the product and services increases. Thus, the revenue of the product and services also increases. Therefore, it can be said that there is a positive influence on public and private insurance on the revenue of the product and services.
Government regulation
The government plays a very significant role in controlling the functions of the organization. The government formulates policies to control the prices of the product and services charged by the organization. The policies are formulated to provide standard services to the patients so that the needs and demands of the patients can be fulfilled. It is the priority of the government or it can be said that it is the responsibility of the government to ensure that every individual of the society can get healthcare services (Brennan and Berwick, 1996). Thus, the cost of the services of the healthcare should be affordable by every individual in the society and the government should regulate the industry for the same. The government can bring some programs through which the poor section of the society can get affordable healthcare services.
One of the regulations which have been implemented in the industry by the government is the Affordable Care Act of 2010. The then-president of the United States of America Brake Obama sanctioned the Affordable Care Act of 2010 in March 2010 which requires all the citizens of the country to apply for health insurance coverage. The main motive behind this is to cover all the citizens of the country under affordable healthcare services Nlm.nih.gov. (2019). It is to improve the health condition of the people of the country extensively.
A market failure that addressed by the government regulation
It was analysed that the cost of healthcare services is too high that every section of the society cannot afford. Day by day the cost of healthcare services was increasing. It was making very difficult for the poor section of the society to get healthcare services at the time of emergency. The emergency services were very costly. They could not afford healthcare services (Pope, 2013). Hence, the government decided to provide affordable healthcare services to all the citizens of the country. And hence, the government introduced the Affordable Care Act 2010 in order to make the healthcare service affordable by every citizen of the country.
References
Brennan, T. A., & Berwick, D. M. (1996). New rules: regulation, markets and the quality of American health care. BMJ, 312, 1108.
Browning, E. K., & Zupan, M. A. (2020). Microeconomics: Theory and applications. John Wiley & Sons.
Estelami, H., Estelami, N. N., & Lichtmann, J. (2019). Determinants of Prices for the Performing Arts. Journal of Promotion Management, 25(6), 890-906.
Kreps, D. M. (2019). Microeconomics for managers. Princeton University Press.
Liu, S., & Chollet, D. (2006). Price and income elasticity of the demand for health insurance and health care services: a critical review of the literature. Mathematica Policy Research.
Nlm.nih.gov. (2019). Health Economics Online Course. [online] Available at: https://www.nlm.nih.gov/nichsr/edu/healthecon/key.html [Accessed 1 Dec. 2019].
Parenti, M., Ushchev, P., & Thisse, J. F. (2017). Toward a theory of monopolistic competition. Journal of Economic Theory, 167, 86-115.
Pope, C. (2013). Legislating low prices: Cutting costs or care. The Heritage Foundation.(2834), 1-16.
Saylordotorg.github.io. (2019). Economics: Theory Through Applications - Table of Contents. [online] Available at: https://saylordotorg.github.io/text_economics-theory-through-applications/ [Accessed 1 Dec. 2019].
Teubner, T., Hawlitschek, F., & Dann, D. (2017). Price determinants on AirBnB: How reputation pays off in the sharing economy. Journal of Self-Governance & Management Economics, 5(4).
