Exam 8: Hospitals

When a hospital's cardiac surgery center gets the Medicare certification as a surgical center of excellence, which of the following statements would be an incorrect projection of the likely consequences of this event?

Current scientific evidence suggests that there appears to be a substantial difference in the pricing practices between the nonprofit and for-profit hospitals.

Hospital competition on the basis of technology acquisition can lead to welfare losses at the societal level. An example occurs when a high tech robotic surgery assistant is acquired by two competing hospitals. If the machine at hospital B is only used half the time and the machine at hospital A is only used one quarter of the available time, there may be unrealized efficiencies from having only one hospital use the high tech robotic surgery assistant.

Discuss the importance of multiple sources of revenues (other than revenues from traditional in-patient care) to hospitals.

The majority of hospital expenses are for technologies such as CAT scans, PET scans, MRI, and X-Ray machines.

Hospital X and Hospital Y are both paid by Medicare using the DRG methodology. Assume that the reimbursement for the average Medicare patient (case weight of 1.0) is $3,000. Hospital X has a patient case-mix index of 1.25 and admits 36 patients who stay in the hospital a total of 100 days. Hospital Y. has a patient case-mix of 0.90 and admits 48 patients who stay in the hospital a total of 200 days. Hospital Y gets paid more per day than does Hospital X.

It is likely that hospitals' marketing of maternity care will be more focused on quality, while marketing of heart transplants will be more focused on price.

Cost shifting and price discrimination are some of the ways that hospitals can use to maintain their status as academic medical centers.

Explain why in those hospital markets that are structured on a basis of competing for physicians it is so difficult to incentivize hospitals to reduce costs.

Capitation is the most common form of hospital payment received from managed care organizations.