SECA 1D

Has supply (via changes in technology, input prices, or entry) been driving price?

In the healthcare industry, supply is affected by numerous factors. For example, physicians, drug companies, and hospitals play a pivotal role in the supply chain. Suppliers such as physicians, drug companies, and hospitals, are regulated for safety and quality by numerous government and federal agencies.  The American Medical Association, for instance, limits the number of physicians who can practice medicine through accreditation of medical schools and licensing requirements. The Joint Commission is the accreditation association for hospitals. This organization assures that every hospital meets the standards of Medicare and Medicaid.  With the strict guidelines of the Joint Commision, the number of hospitals within a given area is limited. Another factor that affects hospitals is the increase in cost of new diagnostic and therapeutic equipment. By this increase in cost, hospitals will be paying higher prices for tools that provide health care.  As far as the drug companies, the FDA has strict testing before a drug can be introduced. This tight regulation on the drug companies, limits the amount of new drugs in the market.  These tight regulations on physician, hospitals, and drug companies, shift the supply curve to the left.

Has demand (via income growth, changes in preferences, changes in the prices of substitutes) been driving price?

The demand of healthcare has increased on the last several years.  On prime example would be in the change in preferences of today’s population.  The attitudes of consumers have been influenced with television and magazines advertisement of new drugs and new medical procedures.  These new drugs (Viagra,Zocor) and new procedures (Botox, liposuction) seem to drive more patients to see physicians. This has caused patients to buy larger quantities of medical service at every price. Two, as the population increases, there will increase in demand of healthcare. As the population increase, we will see an increase in the age group of 65 and older.  This group of patients has more illnesses and requires more attention with physicians.  The increase in demand would shift the cure to the right. Another, topic that will increase the demand of healthcare service is the new healthcare reform. Because anyone can buy insurance without limitations on pre-existing conditions, people who will need extensive service will have access to insurance now. Even though most indigent person who did not have access to healthcare before reform, it will increase the demand when everyone can be seen just like an insured person.

Which factors are most likely to be most important over the next five years? 

The factors that will be the most important over the next five years will be the number of physicians needed to supply medical care service with the increase in demand secondary to the health care reform and the increase in the population. There will be a great need to increase the number of medical schools and nursing schools to meet this demand by the reform. This new reform will increase the number of sick people in the hospital requiring medical services. The increase in the elderly population will cause a significant rise in the demand for healthcare service. Now, the amount of physician assistants who are capable of seeing these people will be determined by their illness. Since majority of these individuals have never had no insurance or over the age of 65, when they arrive at the hospital, there diseases will be end-stage, requiring physician care rather than physician assistant help.

What are the implications of these observations for your organization?

With the increase in demand and restriction in supply, the healthcare industry will see a huge shortage. Individuals who are used to prompt service will probably see overcrowded waiting rooms, and increase in wait before seen by a physician. Physician may likely have to limit procedures to manage access to care. I have seen my organization shifting work to some lower level employees. For example, I have seen LVN and CNA nurses taking on more duties so that the R.N. will have more time to deal with more threatening issues. I have seen my organization also hiring physician assistants and nurse practitioners to see more primary care illnesses. Also, I see that we are implementing the electronic medical record system so that physician time is freed up.