Question 1

_______ occurs when changes to prices charged to payers changes as a compensating response to changes in administered prices of a different payer.

Accepted Answer

Cost-shifting occurs when providers increase prices charged to one payer in response to changes in administered prices of a different payer. For example, if Medicare reduces its reimbursement rates, hospitals may increase prices charged to private insurers to make up for the lost revenue. The cost shift is typically not borne by the patient, but rather by the other payers.

Question 2

Most hospitals in the U.S. operate as for-profit firms.

Accepted Answer

Most hospitals in the U.S. operate as non-profit or government-owned entities, not as for-profit firms.

Question 3

Which of the following best explains why there is little evidence of cost differences between hospital ownership-types?

Accepted Answer

The reason for little evidence of cost differences between hospital ownership-types is physicians seeking to maximize their incomes. This is because physicians who are paid based on the number of services they provide may be more likely to recommend and perform additional services regardless of hospital ownership, thus negating any potential cost differences. Certificates of need, consolidations, and increasing hospital occupancy rates may have an impact on overall healthcare costs, but they do not necessarily address the issue of cost differences between hospital ownership-types.

Question 4

An increased HMO presence in insurance markets will likely increase premiums for consumers.

Accepted Answer

HMOs (Health Maintenance Organizations) typically aim to reduce healthcare costs by focusing on preventive care and have negotiated rates with specific providers, which can lead to lower premiums for consumers compared to traditional health insurance plans.

Question 5

Which of the following accounts for the largest portion of hospital expenditures?

Accepted Answer

Government accounts for the largest portion of hospital expenditures through various health care programs, such as Medicare and Medicaid. Private insurance also plays a significant role, but overall government spending surpasses it. Out-of-pocket and charity care make up smaller proportions of hospital expenditures. "Other" is a vague category that could encompass a variety of miscellaneous expenses, but it is unlikely to be the largest contributor to hospital expenditures.

Question 6

_______ relates to productivity or quality improvements observed over time irrespective of the quantity produced.

Accepted Answer

Learning-by-watching refers to the improvements in productivity or quality that occur over time as individuals or firms observe and learn from others. This may involve observing the production processes of other firms or working alongside more experienced individuals. It is not related to sunk costs, system affiliation, scale economies, or scope economies.

Question 7

Which of the following hospital product characteristics has been shown to strongly affect consumer choice?

Accepted Answer

All of the listed characteristics (staff, physical facilities, convenience, and experience) have been shown to strongly affect consumer choice in the context of hospital services. These factors contribute to the overall perception of quality and satisfaction from a consumer's perspective.

Question 8

The managerial expertise model helps to explain why executives of non-profit hospitals may be overcompensated.

Accepted Answer

The managerial expertise model argues that executives with high levels of specialized skills and knowledge may be paid more than their peers in order to attract and retain their talents. This can apply to non-profit hospitals as well, where executives need to have a deep understanding of healthcare regulations, financial management, and other specialized areas. As a result, it is possible that the executives of non-profit hospitals may be overcompensated relative to other non-profit organizations or industries.

Question 9

According to the _______, new technology is most likely to be adopted by research and teaching hospitals first.

Accepted Answer

The quality maximization model suggests that institutions, particularly those focused on research and teaching, prioritize adopting new technologies to enhance the quality of care and outcomes. This model aligns with the goals of research and teaching hospitals, which often lead in implementing cutting-edge technologies to maintain high standards of care and contribute to medical advancements.

Question 10

Continued hospital consolidations have led to diminished market concentration in most metropolitan market areas.

Accepted Answer

Continued hospital consolidations typically lead to increased market concentration in most metropolitan areas, as fewer, larger entities control a greater share of the market.

Question 11

Which of the following reasons might serve as a barrier to entry within the hospital services industry?

Accepted Answer

A) Scale economies refers to the cost advantages that a company can achieve due to its size, such as discounts on bulk purchasing. Hospitals can achieve significant cost advantages due to their size, making it difficult for new entrants to compete.
B) Standardized products also represent a barrier to entry, as hospitals provide highly regulated services that must meet certain standards of care. It can be challenging for new entrants to meet these standards.
C) Certificate of need regulations require hospitals and other healthcare providers to obtain government approval before expanding or adding new services. This can be a significant barrier to entry, as governments limit the number of healthcare providers in a given area.
Therefore, both scale economies and certificate of need regulations are barriers to entry within the hospital services industry.

Question 12

Third-party payers representing a _______ market share have _______ negotiation power to obtain lower prices for hospital services.

Accepted Answer

Third-party payers with a large market share have greater negotiation power because they represent a significant portion of the hospital's potential revenue. Conversely, those with a small market share have reduced negotiation power due to their lesser impact on the hospital's business.

Question 13

Assume that there are 5 equally sized hospitals in a market area. If two of these hospitals decide to merge, what will be the increase in the Herfindahl-Hirschman index?

Accepted Answer

The answer of Assume that there are 5 equally sized...

Question 14

Demand for hospital services in the U.S. is considered to be _______.

Accepted Answer

Demand for hospital services in the U.S. is considered to be inelastic because it is essential for individuals' health, and people are willing to pay any amount to receive medical care when necessary. Therefore, changes in price do not have a significant impact on the quantity of services demanded.

Question 15

Certificates of need promote price competition amongst hospitals.

Accepted Answer

Certificates of need actually limit competition by requiring hospitals to prove a need for certain services before they can be offered, which can result in monopolies and higher prices.

Quiz 13: The Hospital Services Industry