Analysis of Health Industry Economics: Pricing and Physician Groups

This assignment delves into the business economics of the health industry, examining how economic forces influence pricing and the formation of physician groups. It explores the interplay of supply and demand in healthcare services, highlighting how the number of patients and physicians affects pricing. The paper discusses the potential for physician groups to act as an oligopoly, aiming to stabilize prices and provide better care, while also acknowledging the negative impacts on solo practitioners. It analyzes the advantages of physician groups, such as economies of scale, increased bargaining power, and improved patient access, and the importance of recognition by insurance companies and the government. The assignment also references academic sources to support its arguments, providing a comprehensive overview of the economic dynamics within the healthcare sector.

Running head: BUSINESS ECONOMICS1
Business Economics
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BUSINESS ECONOMICS2
First response
The health industry is composed of various services that
aimto maintain good health of human beings. The nature of the assorted services in
the sector makes it hard for the government to intervene and control the pricing of
these services(Feldstein, 2015). It is at this point, where the economic
forces play their role in controlling the pricing in the health sector services.
The forces operate based on demand and supply of patients and
the physicians. In cases where the patients are more than the number of patients available,
there is a likely hood for prices to increase and the vice versa is true. Physicians who come
together to form a group to influence the pricing of the services might seem to act
out of greed for money, but in the real sense they are in a position to provide better care
and referrals compared to those working individually. Such a group acts like an oligopoly
in an effort to stabilize the pricing in healthcare(Auer, & Schoenle, 2016).
In an economy where some actors are able to influence prises, there bound to be
some victims. Physicians who operate solely suffer the negative effect of the stabilized
prices due to their high costof operation. It is due to this case that most of them deliver
substandard health services.
However, in every economic setup different individuals share different values
hence the reason why some group physicians may deliver multi-disciplinary services
while other deliver specialized services. The same case others deliver quality while other
do not. Such differences end up breaking the oligopoly in this case the group of
physicians.

BUSINESS ECONOMICS3
Second response
There are many advantages associated with forming a group of physicians. A group of
physicians are able to utilize the economies of scale thereby reducing the operation cost and
increase profits without making their services worse off. For instance, the services provided at
the hospital and those provided by private clinics are very different from each
other. The group of doctors has a better bargaining power compared to
the single practitioner(Garcia, Foley, & Akuthota,
2017). These doctors pool their resources together and are able to provide better facilities
and services to the patient. In addition, the patient is able to access all the services under
one roof as compared to the single practitioner who offers only one service(Guterman,
2017). Therefore, services are deemed more expensive when
a patient goes toa group of physicians since they have to cater to the operating costs.
On the other hand, the group of physicians is likely to be recognized by
the insurance and the government. This means that it will offer services to insured patients
and pay higher taxes. However, the cost is minimized as it is distributed among
the members of the group. In addition, the cost of attending
to patients is greatly reduced due to the economies of scale. That
is conducting several operations and services under one premise.

BUSINESS ECONOMICS4
References
Auer, R.,& Schoenle, R. (2016). Market structure and exchange rate pass-through. Journal
of International Economics, 98, 60-77.
Feldstein, P. (2015). Health policy issues: an economic perspective (6th ed.). Chicago,
Illinois: Health Administration Press.
Garcia, M., Foley, B., & Akuthota, V. (2017). Single-specialty versus multi-specialty
group employment. PM&R, 1(9), 878-880. doi:10.1016/j.pmrj.2009.08.450
Guterman, S. (2017). Making Health Care Markets Work Better: The Role of Regulation |
Commonwealth Fund. [online] Commonwealthfund.org. Available at:
https://www.commonwealthfund.org/blog/2017/making-health-care-markets-
work-better-role-regulation