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Pick one of the following healthcare industries listed below. Using what you have learned so far about market structure and the impact on supply and demand, write a 7 page report (double-spaced) addressing the following questions:
Choose one of the following industries to discuss the answers to the above questions:
I choose 4) any physician specialty 9e.g. Cardiology, ophthamology, etc) |
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Expert Solution Preview
Introduction: The healthcare industry comprises various market structures that impact supply and demand, price, and availability of services. In this assignment, we will explore the market structure of physician specialties, including cardiology, ophthalmology, and others, and analyze the implications of third-party payers like Medicare and Medicaid on demand and supply in this industry.
1. From research you have done online, what is the market structure of physician specialties?
Physician specialties, including cardiology, ophthalmology, and others, operate in an oligopolistic market structure. This structure is characterized by a limited number of large firms dominating the industry, with significant barriers to entry for new entrants. The oligopolistic structure in physician specialties results from high entry barriers such as regulatory requirements, expensive equipment, and long years of training.
2. What are the implications of the market structure on the demand and supply curve and the price of the services offered?
In an oligopolistic market, firms have market power and can influence prices and output levels. Physician specialized services are priced higher than those offered by general practitioners. The demand curve is downward sloping, while the supply curve is upward sloping, meaning the firms will increase prices when demand is high. They may also limit the output of services to ensure the prices remain high.
3. What is the implication of third-party payers like private health insurance or federal programs like Medicare and Medicaid on demand and supply in this industry?
Medicare and Medicaid are the largest third-party payers in the physician specialties industry. Third-party payers can influence demand and supply through price regulations, reimbursement rates, and coverage policies. The policies may also affect entry barriers and competition levels. Third-party payers can increase demand by covering more medical services, ensuring more people can access specialty services. However, they may also decrease the supply by limiting reimbursements to the physicians, creating lower incentives to supply specialty services.
