HCS 552 / Read Me First

Read Me First HCS 552

Week Two

Introduction

The two maindriving forces of the economy are supply and demand. Demand refers to the amount of a good or service that people are both willing and able to buy. The demand curve measures the relationship between the price of a good and the amount of it demanded by consumers. Supply refers to the amount of a good or service available at any particular price. When speaking of the forces behind supply costs the economic impact depends on several factors, including:a) the cost of the production; b) technology; c) the price of other goods and services; and d) the ability to forecast demand (Getzen, 2007).

As we continue to learn about the impact of supply and demand on healthcare services, it is important to review what events and national trends are impacting healthcare changes. Over the years these trends have included:

  1. A healthcare system driven more by economics than by social and political power
  2. The healthcare industry responding to financial incentives, cleverly searching for the best reimbursement opportunities
  3. An increasing emphasis on community-based alternatives and a move away from institutionalization.
  4. An increasing demand for alternative and self-care products
  5. A sharp increase in our focus on the research for treatment and cures of new diseases
  6. An increasing resource demand for bioterrorism prevention
  7. An aging US population causing anincreasein chronic conditions
  8. The impact of medical technology costs and benefits on healthcare delivery
  9. Increasing electronic medical record usage
  10. The development of treatment standards and evidence-based practiceshaping care delivery
  11. Increasing immigration issues
  12. The role of managed care plans in managing health care costs
  13. The use of the Internet as a way to treat and empower patients (Shi & Singh, 2004)

After reviewing some of these major trends and looking at today’s health care market, students can better analyze the changes that are occurring.

An example of one of these trends is the resource scarcity and its impact onhealthcare service delivery. Many leaders are discussing the nursing shortage but there is also a change in the availability of physicians and allied health care workers. The shrinking supply of doctors coupled by an increasing demand for services makes some physician specialties a commodity. Some health care organizations have to pay physicians directly for their services. Stability in resource management is valued and thus a new and increasing trend for large health care systems is to hire their physicians (employed physicians) (Robeznieks, 2008).

Another issue to consider is the supplies used in delivering the services. According to Kane(2007), supply costs are soaring. Many health care systems have in the past identified labor as the leading expense but in recent years supply chain is gaining.Healthcare leaders are acting quickly to examine new methods to improve supply chain costs.

There are currently three common supply chain models that healthcare systems utilize. These include the following or some variation of the following models:

a)The outsourcing model – The health care industry outsources any process not considered core business. As this relates to supply management the facility can outsource the management of supplies to another company that is an expert in this function.

b)The in-house model – The health care industry may have total control in management of supplies within its own operations.

c)The hybrid model – The health care industry employs mechanisms of outsourcing and in-house models. Thus a facility may control the management of a portion of its supplies and for other specialized supplies they can outsource it to another company.

The issue of supply and demand is also a main focus this week. Climbing costs, high demand, and price control have a strong influence on health care, and Tomaselli (2008) explains that academic leaders believe the United States is running out of time as far as climbing health care costs and resource scarcity. Such factors as the critical work force crisis, aging consumers with more chronic illnesses, a dwindling medical and nursing faculty, and fewer physicians per capita impact health care supply and demand every day.

This week in relationship to the course and the program

During Week Two, students will identify the key implications of supply and demand in health care. Students should take time to research and examine the use of economic tools to forecast supply needs within their own organizations. As students research these economic tools and how they are used within their organizations they can compare the utilization of supplies to various population bases and socioeconomic factors. Some examples of these comparisons are: comparing how skilled nursing facilities manage supply costs for expensive pharmaceutical agents, examining the ways home health agencies adjust for rising costs in gas prices for their staff, and looking at how acute care facilities manage costs related to futile care.

Week Two will allow students an opportunity to begin to analyzethe impact of consumerism as a keyeconomic factor in current health care delivery. Consumerism is changing the way we deliver healthcare services and the way we supply these services. Students will examine how the impact of resource scarcity will impact the consumer.The following scenario provides one possible example: What if you were told by the hospital staff that you must have a family member stay with your loved one at all times because there were not enough nurses on hand to care for all the patients? This impact is difficult to describe and the overall impact of resource scarcity is even more challenging to grasp. What effects does the consumer demand have in various healthcare settings,and how will we service these requests?

Hints for a reading strategy of the assigned materials

You are starting out this week learning a new subject area related to economics, andyou will continue to learn new terms and concepts related to supply and demand.The chaptersfor this reading assignment help you to become more familiar with these terms and concepts. We have already highlighted supply and demand as foundational concepts for this week’s readings, and you should give special attention to the concepts ofsupply curve, demand curve, elasticity, equilibrium, competition, efficiency, and so forth. These concepts are important,as understanding them fully will help you apply dataresults gathered from economic toolsto adjust operations and service delivery.

Be sure to pay attention to information that will let you distinguish between various levels and types of service delivery,as well as how consumerism and supply/demand impact the various levels. Part of the reading for this week includes information about consumerism and the way it can impact health care economic and supply and demand. It is important to consider how consumerism can impact principles and values that are important to nurses. In addition, it is essential that you begin to analyze the health care industry using economic tools such as forecasting, consumer price index, inflation, etc.

Some questions to ask as you hone your critical thinking

As you read the material, create “why” and “what” questions that will sharpen your ability to apply these concepts. Start asking, “What skills and tools are needed to analyze supply and demand for services? How are these tools and/or skills different from those tools already used in healthcare?” Other questions you might ask while reading include “If I were a health care leader, how would these tools guide me to be better prepared for any changes in the economic forecast and lead my health care organization more efficiently into the future?” It might also be helpful to think of situations in which you’ve participated that could illustrate some of the ideas mentioned in the readings.

1)Do health care consumers have more or less control over their choices?

2)Is the health care market an example of perfect competition? Explain.

3)How do health care providers use economic tools to make strategic business decisions as well as reaching the goal of providing optimal health care services?

4)How would you suggest to the government ways to fix the resource shortage in health care?

Summary

In summary,this is an exciting week of learning where students are able to continue to expand their knowledge of healthcare economics and apply more detailed tools and concepts to their own work environment to see the true impact of how these tools can assist leaders. Supply and demand are two key concepts for healthcare economics; after this week, you’ll be able to identify and evaluate some central ideas related to supply and demand, such as health care supply costs and different models healthcare systems use to control those costs. In addition, this week may help you to put cost-saving ideas into action in your own work environment.

References

Getzen, T. E. (2007). Health economics and financing. (3rd ed.). John Wiley and Sons, Inc., Hoboken, NJ.

Kane, D. (2007, August) Strategies emerge to bring supply costs down. Supply Chain; p.32.

Robeznieks, A. (2008).Hotcommodity. Modern Healthcare. (38) 28; pg. 26-28.

Shi, L. & Singh, D. A. (2004) Delivering healthcare in America: A systems approach.(3rd ed.). Jones and

Bartlett, Inc. Sudbury, MA.

Tomaselli, K. P. (2008). Academic leaders work to ease work force crisis. American Medical News.

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