HM 48700 Final Study Guide

Please give two examples of a variable cost for a hospital admission.

Medication and supplies and wages

15)Do you agree with the ruling by a federal judge that mergers of nonprofit hospitals should not be subject to the same antitrust laws as mergers of for-profit hospitals?

Mergers of nonprofit hospitals should be subject to the same antitrust laws as mergers of for profit hospitals because their mergers still have the same concept. A nonprofit that merges can still gain market power and impose price increases on insurers and employers, just like for profit hospitals.

22)How does NICE use QALYs in determining whether to approve a new drug?

NICE uses cost per QALY to determine effectiveness and which treatments to cover in the NHS. When deciding how effective a treatment is a $66,000 per QALY threshold is used. If the treatment cost per QALY is higher than this, NICE will generally deny the treatment.

The medical care people receive today is far superior to treatments received 30 years ago. Does that mean that the medical care system is more efficient today than in the past?

No, because payments to hospitals and physicians do not provide them with appropriate efficiency incentives No. People use too much medical care because their insurance pays for most of their care (ch3)

Is the number of malpractice claims generally uniform among all physicians?

No. About 1 percent of physicians incur about 30 percent of malpractice claims. (ch.14)

Which of the following statements describes how the financing of US healthcare has changed over time?

Out-of-pocket payments represent less than 15 percent of total healthcare expenditures. (ch.1)

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A change in the hospital's variable costs change the hospital's profit maximizing price because raising or lowering the price will only reduce profits. The variable cost changes due to wages and increased supply costs, which means the hospital will find it profitable to change its price

In terms of our reading, what does ACO stand for?

Accountable Care Organization (ch.17)

16) 1

After Medicare and Medicaid were introduced, hospital expenditures rose rapidly because hospitals were paid for the costs of services rendered to the aged and poor. Expenditures rose due to an increase in hospital prices and the cost was not much of a concern to patients or purchasers of services. Medicare and Medicaid provided extensive coverage for hospital services by private and public payers, which removed patients' incentive to be concerned about the costs of hospital care. Hospitals also lacked a profit motive and were assured of their survival because of the payment methods, which means they had no incentive to be efficient. The cost for care rose rapidly and insurance insulated patients from the true cost of care.

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An increase in a hospital's fixed cost or an increase in the number of uninsured cared for by the hospital will not change the hospital's profit maximizing price because fixed costs do not vary as output changes and variable costs do vary. Raising or lowering the price will only reduce profits. If the hospital's fixed costs increase, the hospital shouldn't change its price, if it does it will make even less profit. When there is an increase in fixed costs, profit will decline at every quantity sold.

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Antitrust laws are meant to encourage competition among hospitals. The laws are designed to prevent hospitals from acting anti competitively. When hospitals are proposing a merger, they are questioned by the FTC to determine whether the merger will lessen hospital competition in that market. Antitrust laws also try to prevent price fixing agreement, barriers that prevent competitors from entering a market, and anticompetitive mergers. To impede entry into the market CONs can also be used.

How is Medicare Part B financed?

By a premium paid 75 percent by the aged and 25 percent by the government, with the patient responsible for a deductible and copayment.

How is Medicaid administered?

By each state (ch.1)

22)What are the advantages of CER?

CER provides additional information to physicians and their patients regarding the effectiveness of alternative treatments. CER has the ability to improve patient outcomes and reduce medical costs.

What is the leading cause of death in the United States?

Cardiovascular disease (ch3)

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Cost shifting can occur when carriable costs have increased as expenses for wages and supplies have risen and changes in the hospitals payer mixes. The growth in proportion of patients who are less price sensitive may enable them to raise their mark ups on certain types of private patients.

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Cost shifting occurs because hospitals charge more based on a patient's ability to pay. Some patients pay more because others are paying less. Price discrimination occrus based on an individuals willingness to pay. A larger employer or HMO that is willing to direct its employees or enrollees to a particular hospital will receive a lower price for the same service compared to a single patient negotiating with the same hospital.

Nonteaching, private nonprofit hospitals and for-profit hospitals, on average, differ in the quality of care provided to their patients.

False (ch.15)

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Hospital costs will continue to grow faster than inflation due to increasing labor costs and salaries/benefits. The use of new technology such as equipment, technicians and expensive drugs are good investments that are likely to improve quality and reduce costs, but they will require hospitals to incur debt. This incurred debt will add to the hospital's cost structure and the cost of caring for patients will continue to rise. The revenue to cover costs depends on the future utilization and payments received from the public and private sector.

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Hospital mergers increase hospitals' bargaining power over insurers because when hospitals face less competition, they are able to negotiate higher prices with private insurers. Hospital consolidation and physician integration enable hospitals to raise prices and gain market power, which positions the hospital system to bill higher prices. When hospitals merge, they decrease the number of competitors that insurers can contract with and the new demand curve will be less price elastic, enabling them to raise prices and increase total revenue.

Which events led to price competition among hospitals and physicians?

Hospitals and physicians began to experience excess capacity and were willing to compete on price to increase their volumes. Private insurers were pressured to reduce hospital costs by employers that were concerned about the rising costs of insuring employees. The US Supreme Court ruled that the antitrust laws applied to the healthcare sector. All correct (ch.16)

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Hospitals are able to charge different purchasers different prices for the same medical services because some purchasers may be more price sensitive than others. Previously, private patients had either indemnity insurance or Blue Cross hospital coverage. As a result of the hospital having a close relationship with Blue Cross, they were charged a lower price than the indemnity insurers. The price-quantity for those with indemnity insurance represented the average relationship for everyone in the indemnity plan. This shows that differing payer mixes create different prices for the members of each group

How are hospitals reimbursed by Medicare according to diagnosis-related groups?

Hospitals are paid a fixed price according to the Medicare patient's diagnosis. (ch.17)

13)What are the different types of capital partners available to medical groups? What do they expect in return for providing capital?

Hospitals may provide capital to medical groups in exchange for inpatient referrals. When hospitals provide capital to medical groups they hope to negotiate joint contracting arrangements with a health plan. Capital can also come from the physicians within a group or sometimes from health insurers.

Before DRG reimbursement, why did hospitals engage in nonprice competition?

Hospitals were reimbursed their costs, and purchasers had little incentive to be concerned with the cost of care. (ch.16)

22)What are disadvantages of using CER for federal payments?

If CER findings were used for reimbursement or coverage decisions, some patients may suffer adverse health consequences and the medical system could end up becoming less innovative. The use of CER for federal payments could limit access to treatments for patients because the payer could refuse to pay for drugs that are more expensive.

19)What are the advantages and disadvantages of permitting patients to buy out of the price controlled medical system?

If patients were allowed to buy out of the price controlled medical system it would negatively impact lower income patients because they would not be able to afford the cost of buying out. This could then cause greater disparities of care. An advantage of allowing patients to buy out of a price controlled medical system is that it would allow some people to avoid waiting lists and may encourage suppliers to increase the supply of services.

15)What conditions should be imposed on nonprofit hospitals to retain their tax exempt status?

In order for a nonprofit hospital to retain their tax exempt status, they should be required to deliver a minimum amount of charity care. If a nonprofits tax exemption is linked to the value of charity care or community benefits, the measures to be used and amount of care provided must be defined. Nonprofit hospitals can utilize a community needs assessment and when they show little to no progress to meeting the identified needs of the community, they will risk losing their tax exempt status.

When hospitals had excess capacity, insurers were able to increase their bargaining power over hospitals. What occurred to enable hospitals to reverse the situation? Circle all correct answers.

Insurers expanded their provider networks to provide enrollees greater choice in providers and thereby reduced the patient volume going to lower-cost hospitals. Hospitals merged and thereby decreased the number of hospital competitors.

The physician-to-population ratio technique compares the current (or preferred) ratio with the ratio likely to occur in a future period. Use of the ratio technique has what shortcoming(s)?

It fails to consider increases in physician productivity. It fails to recognize that there may be factors that change the demand for physicians, such as new medical advances. It fails to indicate the importance of a divergence in the two ratios, such as the size of a shortage or a surplus. All responses (ch.11)

21)Is it the responsibility of a competitive market to subsidize care for those with low income?

It is not the responsibility of a competitive market to subsidize care for those with low incomes. It is instead the responsibility of the government to subsidize care for those who cannot afford healthcare. In a competitive market, this can be achieved through the use of vouchers for health insurance.

21)Why is it said that competition in medical care has failed?

It is said that competition in medical care has failed because per capita healthcare spending is rising, middle class families are finding insurance to be too expensive, life expectancy is lower and infant mortality is higher than some other countries with lower healthcare expenditures. Competition in medical care has failed to improve the U.S healthcare system.

What is meant by balance-billing?

It occurs when the physician charges the patient an amount above the Medicare-approved fee. (ch. 10)

13)Why do large medical groups have market power?

Large medical groups have market power because they have an advantage in negotiating. These large groups have a greater bargaining power over health plans and are able to negotiate higher payments. Large medical groups have a competitive advantage due to contracting, quality review and referral mechanisms. They also have a greater leverage over hospitals because large medical groups control a greater number of enrollees and determine their referrals

Please define what "LCME" stands for.

Liaison Committee on Medical Education

20)What is managed care, and what are managed care techniques?

Managed care is a healthcare delivery system organized to manage cost, utilization and quality. It provides deep discounts for medical services with relationships between physicians and hospitals willing to discount their prices. Some managed care techniques include physician incentives, negotiation of large provider discounts, limited provider networks, gatekeepers, utilization management, drug formularies, and changing physician practice patterns.

20)Why did managed care occur?

Managed care occurred as a response to the wasteful excess of traditional healthcare delivery, which resulted in an inefficient system and rapidly rising healthcare costs. Under the physician FFS payment system, healthcare costs rose and patients were not concerned with costs because they were insulated from the trust cost of care by insurance companies.

21)How well does medical care meet the criteria of a competitive market?

Medical care does not meet the criteria of a competitive market because the market does not perform efficiently. This is caused by demand side failures, such as tax exempt employer paid health insurance and lack of consumer information. Supply side failures also contribute because they include anticompetitive state regulations and reduced competition due to provider consolidation.

13)Why do medical groups occasionally break up?

Medical groups occasionally break up for a number of different reasons. Medical groups may have a difficult time developing the group's culture because the physicians may not share the same values or accept the same assumptions about the external environment, mission or relationships. Medical groups may also dissolve due to disputes among physicians over their compensation. The lack of management expertise to handle clinical and financial responsibilities can result in medical groups breaking up too. The lack of capital can cause medical groups to break up because they do not have adequate funds available to reinvest in expanding their group.

How has the medical education industry, with its record of poor performance, been able to survive?

Medical schools are heavily subsidized and do not depend solely on tuition for their revenues. (ch.12)

Why is there excess demand for medical schools?

Medical schools have no incentive to expand their spaces even though demand exceeds the number of spaces.

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Medicare DRGs caused hospital and purchaser incentives to change. Medicare began to pay hospitals a fixed price per admission, which varied based on the type of admission. Fixed prices gave hospitals an incentive to reduce the costs of caring for aged patients and also reduce the lengths of stay for inpatients. DRGs caused hospitals to become more concerned with physician practice behavior, if physicians ordered too many tests or kept patients in the hospital longer than necessary then the hospital lost money. This resulted in an increased use of outpatient care.

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Medicare hospital payments have changed over time from cost based payments to paying fixed prices. Originally, hospitals were paid according to the hospital's cost of treating patients. Payments then shifted to a prospective payment in 1983, using a fixed price per admission. The ACA also changed payments by realizing that greater efficiency incentives could be achieved by including a better continuum of care within a fixed price. The ACA established bundled episode based payments and payments to ACOs. The payment varies according to the financial risk that the ACO is willing to bear.

15)How has price competition affected the ability of nonprofit hospitals to achieve their mission?

Price competition has negatively affected the ability of nonprofit hospitals when providing the level of charity care some believe as necessary to maintain their tax exempt status by decreasing "profits" or the surplus available for care. As competition reduces the prices charged to privately insured patients, "profits" are reduced and less money is available for charity care. Competitive pressures lead to a lower income available for charity care.

19)Why do price controls cause shortages, and why do these shortages increase over time?

Price controls cause shortages because they limit the expansion of supply, but demand for medical services continues to increase. These shortages increase over time because the price is no longer an equilibrium and increases in prices are not there to drive down demand. As medical costs increase, price controls limit a hospital's ability to retain staff and the shortage is increased.

19)Why do price controls require hospitals to make a trade off between quality of medical services and number of patients served?

Price controls require hospitals to make a trade off between quality of medical services and number of patients served because they limit supply. This means a hospital has to choose between caring for fewer, more costly patients or they can choose to spread that care out to a larger number of patients and not provide the same level of service.

Which of the following actions are anticompetitive?

Price-fixing agreements among competitors Barriers that prevent competitors from entering a market all correct (ch.16)

Assuming a hospital sets a profit-maximizing price (the price that will achieve maximum profits), what is likely to occur if the hospital then decides to increase its price?

Profits will decrease (ch.18)

22)How are QALYs used in cost effectiveness analysis?

QALYs are used as an outcome measure in a cost effectiveness analysis to compare alternative interventions when determining which intervention offers the lowest cost per QALY

22)What are QALYs?

Quality Adjusted Life Years or QALY, indicate the increased utility achieved as a result of an intervention. QALYs incorporate multiple outcomes that could increase the length of life and quality of life. When QALYs are used as an outcome measure it allows comparisons to be made across different disease conditions.

If the relationship between price and quantity of hospital services is price inelastic (less price sensitive), what would be the effect on the quantity and revenue if the hospital raised its price?

Quantity would decrease, and revenue would increase. (ch.18)

20)What are report cards, and what effects are they expected to have on managed care competition?

Report cards are information on patient satisfaction, quality process measures and outcome data on health plans and their providers. In regards to managed care competition, report cards are expected to drive plans to compete on their patient satisfaction and outcome measures, as well as premiums.

RBRVS stands for ________________________________.

Resource base relative value scale (ch. 10)

What is an important economic reason that medical associations are opposed to retail medical clinics?

Retail medical clinics are substitutes to physicians and would decrease physician income.

Which category has the largest number of hospitals?

Short-term general not-for-profit (ch.15)

Which size of physician practice has been declining the most over time?

Smallest (ch.13)

Why did the Affordable Care Act prohibit the development of new physician-owned single-specialty hospitals?

The American Hospital Association wanted to eliminate a competitor to community hospitals. (ch.13)

What has occurred since 2007 to account for the slowdown in hospital spending?

The Great Recession caused many people to become unemployed and lose their health insurance. All Responses are correct? More employees chose high-deductible health plans with lower premiums.? The percentage of employees with employer-paid health insurance declined.?

21)Explain why the cost of Medicare Part D drug benefit has been lower than its projections.

The cost of Medicare Part D drug benefit has been lower than its projections because it makes the beneficiary responsible for the additional cost of choosing a more expensive drug plan. The part D drug benefit pays for 75% of the costs while the patient pays for 25%. This has increased the use of less expensive generic drugs. It uses a choice based approach, the beneficiary chooses among competing drug plans to select one that meets their needs the best.

What is the economic rationale that determines the number of hospitals in a market?

The cost-size relationship of hospitals (economies of scale) and the size of the market (population served) (ch.16)

Why is there a concern that this country is spending too much on medical care?

The country is not receiving sufficient value for what it spends on healthcare. (ch.2)

21)What are the criteria for a competitive market?

The criteria for a competitive market includes information, consumer incentives, consumer choice, supplier incentives, price markups, and redistribution.

14)How effective is the deterrence function of the malpractice system?

The deterrence function of the malpractice system is not very effective because only few negligence claims are filed. Malpractice insurance can also insulate some physicians from the cost of negligence. The deterrence function does not penalize physicians for negligence due to a low filed claim rate and incompetent physicians are not penalized by having higher premiums. There are not enough injuries prevented in the current system to justify the high cost of practicing defensive medicine, determining fault, and prosecuting claims. It is also difficult to determine if a patient's outcome is a result of physician negligence, poor communication of risks involved, or the patient's underlying health conditions.

20)What are the different types of managed care plans?

The different types of managed care plans include Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), Point of Service (POS), Conventional health insurance and high deductible health plans with savings options (HDHP/SO). HMOs provide comprehensive healthcare services to a voluntarily enrolled membership for a prepaid fee. PPOs are third party payer contracts with a group of medical providers who agree to furnish services at negotiated fees in return for prompt payment and increased patient volume. POS plans permit enrollees to access non-participating providers if the enrollees are willing to pay a high copayment each time they use that provider. Conventional plans allow the patient to go to any provider and pay on a FFS basis, the patient also pays a small annual deductible plus 20% of the providers charge. HDHP/SO are consumer driven health plans that work like a PPO with in-network and out-of-network benefits for covered services.

What is an important reason for the growth of single-specialty groups?

The emergence of new imaging and surgical technologies made it possible to provide imaging and surgical services outside the hospital where the specialists could receive the facility fees. (ch.13)

How would a nonprofit hospital engage in cost shifting?

The hospital would set prices to private insurers below their profit-maximizing price but increase those prices when the government reduces the price it pays for Medicare or Medicaid patients. (ch.15)

In calculating the rate of return of a medical education, what is the most important opportunity cost that a student should include?

The income that could have been earned had the student taken a job. (ch. 11)

13)Describe how an IPA functions

The independent practice association or IPA allows physicians to be associated with each other and contract payments together, but still maintain practices on their own. When physicians are under an IPA, they continue to practice in their own offices, see their own patients, hire and pay their own staff, and do their own billing. When the IPA contracts with a health plan, IPA physicians are paid on a discounted FFS basis.

Which of the following describes enterprise liability?

The liability for a negligent physician's action shifts to the organization the physician is a part of, such as a hospital or managed care plan. (ch.14)

15)In what ways, if any, are nonprofit hospitals different from for-profit hospitals?

The main legal distinction between nonprofit hospitals and for-profit hospitals is that nonprofits can not distribute profits to shareholders and their earnings and property are exempt from federal and state taxes. They are also allowed to receive donations. Compared to nonprofits, for profit hospitals have more precise organizational goals based around making a profit. The for profit hospital is straightforward and shareholders have an incentive to monitor the performance of managers in these hospitals and make necessary changes when performance is lacking

14)How well does the malpractice system compensate victims of negligence?

The malpractice system does not compensate victims of negligence very well. There is a very low percentage of negligence claims filed and no compensation is available if the recoverable damages are less than the litigation cost. The cost of administering the compensation system is very high due to overhead and legal fees, and only a small portion of malpractice premiums are returned to those injured through negligence

How does the market for medical education differ from other markets?

The method used to finance medical education (subsidized tuition) is inequitable; large subsidies go to students from high-income families. Medical schools operate inefficiently (high cost) and require too many years of a student's time. Before taking licensing exams, students must first graduate from approved medical schools; this prevents competition from more efficient firms that do not meet the accrediting criteria. All responses (ch. 12)

Which of the following is an important determinant of how price sensitive the relationship is between the hospital's price and quantity?

The number of competing hospitals and how good a substitute they are to the hospital (ch.18)

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The number of competitors in a market depends on the particular service. When there are few specialized services that exist in a market, the geographic market is likely to be much larger. This is because the highly specialized services are usually not as emergent and patients are willing to travel farther to access them. Obstetric services will have a relevant geographic market served that is smaller compared to transplant services. The number of competitors in a market can be determined by economies of scale (cost-size relationship of hospitals) and the size of the market (population served).

13)Why has the size of multispecialty medical groups increased?

The size of multispecialty medical groups has increased due to the growing use of managed care plans. In order for medical groups to remain competitive they are forced to increase in size so that they can increase their bargaining power with insurance companies. The increased size of multispecialty medical groups also creates more risk sharing and economies of scale (ch.13)

15)Discuss the differences and similarities among theories on why many hospitals are nonprofit

The theories on why hospitals are nonprofit are based around the importance of trust, the provision of community benefits, and the financial interests of physicians. Patients are more likely to rely on nonprofit providers because they believe that these providers are not profit motivated and will not take advantage of a patient who lacks information or is seriously ill. Health managers and the board of directors want to be part of a nonprofit because their activities are subject to limited community oversight. This means there is more flexibility to pursue various policies that reflect their own preferences. Many hospitals are nonprofit because it benefits the physicians financial interest by allowing them to exercise greater control over hospital policies, services offered and investments made in facilities and equipment.

What economic advantages do large medical groups have over other size groups of physicians?

They are able to achieve informational economies of scale, given patients' lack of information on the quality of individual physicians in the community. They have more bargaining power with insurers and HMOs. They are able to take advantage of economies of scale, such as with supplies, equipment, and staff. all responses correct (ch.13)

Why do nonprofit hospitals merge with other hospitals?

To be able to gain market power and increase prices To assist a failing hospital, in the case of a merger between a financially secure hospital and a failing hospita To achieve greater efficiency from being larger all correct

What is the purpose of the Federal Trade Commission's review of hospital mergers?

To see whether the merger will lessen competition in the hospital market

In 2015, Congress approved a new Medicare physician payment system called MACRA. What were the objectives of MACRA?

To transition physicians away from fee-for-service to alternative payment models. To replace the SGR payment system requiring a 21 percent reduction in Medicare physician payments. To change Medicare physician payment incentives from rewarding number of visits, tests, and procedures performed to rewarding or penalizing physicians based on the value of the care provided. All responses ( ch.10)

14)Do you think the costs of defensive medicine would be reduced under a no fault system?

Under a no fault system the cost of defensive medicine would be reduced because physicians would try even harder to avoid any complication, regardless of it being caused by negligence or not. This is because patients would be paid for their injuries regardless.

14)Discuss the advantages and disadvantages of no-fault insurance

Under no-fault insurance, the litigation costs would be lower because proving who was at fault for the injury would not be necessary and the savings could be used to increase victim compensation. No-fault insurance may be beneficial because all injured patients would receive compensation. No-fault insurance has some disadvantages, there would be no deterrence mechanism to weed out incompetent providers or encourage physicians to exercise caution. There would be no clear line drawn between injuries resulting from negligence, injuries not due to negligence, unfavorable treatment outcomes caused by the patients health conditions and lifestyle, and the outcomes of risky procedures.

19)What are various ways in which a provider can "game" the system under price controls?

Under price controls, providers can "game" the system by decreasing the time devoted to each visit when they are paid on a FFS basis. This enables them to see more patients and bill for more visits, or decrease the time spent with each patient in order to increase volume. Providers can also unbundle their services by dividing a treatment or visit into its separate parts and charge for each individually. Price controls give providers an incentive to upcode the type of services that are provided, for example billing a brief office visit as a comprehensive exam.

What is an indication that a physician shortage exists in the Medicare market?

Waiting times to make an appointment with a physician have increased. Physicians may prescribe more imaging tests for Medicare patients. Physician visits with Medicare patients are shorter. All responses (ch.11)

What is defensive medicine?

When a physician prescribes additional tests and procedures to protect against malpractice claims (ch.14)

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When developing future strategies, hospitals should consider that under the ACA, Medicare hospital payments will be reduced to the point that hospitals will receive less and less. In order to minimize utilizations of inpatient admissions, public and private payers will look for ways to have more care or services performed in a less costly setting, such as outpatient centers, or patients homes. This will accelerate the shift from types of payers from FFS and toward episode based or capitation reimbursement.

20)When managed care enrollment increases in a market, how does it affect other insurers and providers?

When managed care enrollment increases in a market, non managed indemnity insurers adopt managed care techniques to lower costs and to be able to compete with managed cares with lower premiums. Hospitals and physicians also begin to compete in order to attain managed care contracts and accept utilization review. This decreases medical costs and creates outcomes for coordinated care and disease management.

19)What costs do price controls impose on patients?

When price controls are imposed on patients it can lead to rationing. They can cause waiting lists to be created to determine who can get medical services due to shortages. Price controls can also cause quality to deteriorate because they may not represent the quality differences between hospitals.

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When responding to new payment system changes, hospitals look more at capitation payments where a single payment per enrollee for all medical services is required. As Medicare payments for hospitals and physicians are lowered over time, the broader payment systems offer providers an opportunity to deliver care in a more efficient and effective manner. Under the broader payment system, there is more incentive for the organization to be innovative in reducing medical costs. Under episode based and capitation payments, hospitals and physicians have an incentive to form an integrated organization and the measurement of quality and care outcomes becomes easier compared to under FFS.

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When there is only one hospital in a market the hospital is a monopolist in providing services and does not have an incentive to respond to purchaser demands for lower prices, quality information and patient satisfaction. These monopolist hospitals are unlikely to achieve high performance, and have little incentive to be efficient or to respond to purchaser and patient demands. When ten hospitals are in the market competing for a large employer's employees, several of these hospitals would be willing to negotiate on prices and meet any demands for information on quality and patient satisfaction in order to gain new patients from the employer. These hospitals must respond to purchaser demands because they rely on purchaser revenue to survive. When hospitals compete on quality, satisfaction, price and other purchaser demands, their performance is the opposite of a monopoly provider.

The current malpractice system compensates

a very small fraction of patients injured by negligence. (ch.14)

Evaluate the possible effects of the following on deterrence and victim compensation:

a) Limiting lawyers' contingency fees: There is a decreased financial incentive for a lawyer to invest in cases that have smaller rewards. This means lawyers would be less likely to take claims that are not really negligence. b) Special health courts: This would create a system of justice based on accepted medical standards resulting in a reduced need for defensive medicine. Special health courts would have more effective administration, a quicker process and more expertise about the subject matter. More patients would be compensated, it would be less costly to file a claim but, the compensation amount would be much smaller. c) Limiting the size of malpractice awards: Limiting the size of malpractice awards would decrease malpractice premiums. Patients may not receive full damages to make them whole. d) Placing the liability for malpractice on the healthcare organization to which the physician belongs: This would incentivize HCOs to increase quality assurance measures and risk management programs. It would enable insurers to experience rate organizations. This would result in HCOs devoting more resources to monitoring quality of care and also disciplining physicians for poor performance.

The relationship between the benefits of an additional visit and the number of visits is

decreasing (ch.2)

As more is spent on a health input, the marginal (additional) improvement in health

increases at a decreasing rate (ch3)

State and federal governments typically try to limit medical expenditure increases by

instituting provider price controls. (ch2)

An effect of government regulating physician-fee increases to reduce rising Medicare physician expenditures was that An effect of government regulating physician-fee increases to reduce rising Medicare physician expenditures was that

physician participation rates in Medicare declined. access to care for Medicare patients declined. (ch.1)

Studies examining the various factors that improve life expectancy have found that the marginal contribution of medical care is

relatively low (ch3)

A physician shortage exists when

the demand for physician services exceeds the supply of physician services at a given price. (ch.11)

Economic waste occurs when

the expected benefits of an intervention are less than the expected costs. (ch2)

Generally, physicians who join an independent practice association do so because

they want to be associated with other physicians (on a nonexclusive basis) for the purpose of joint contracting with a health plan. (ch.13)