Competition in Physician Services - Assignment Example

Task Discuss How Enhanced Competition In The Physician Services Market Has Affected The Ability Of Physicians To Induce The Demand For Medical Services. Healthcare is an integral service as it takes care of the medical needs of all Americans who are vulnerable to sickness birth and death. Technological advancements have come in to improve how healthcare is administered, and it has been influenced by both economic and non economic factors. Despite the achievements that health care has achieved over the decades, its cost has been towering over time and has become a major issue for legislative and policy issues due to the need to make it reasonably priced and accessible to all populace (McGuire, 2000). The increase in access to healthcare services has placed significant stress on the government, households and insurance firms’ budgets as the towering cost take up a lot of incomes. The market for healthcare has thus developed, and this has resulted to competition since the government does not decide the price and quality at which providers will offer. The scenario that unfolds is rivals competing to satisfy consumer needs, and this implies that consumers will have to decide on the price and quality with which to go with and this has resulted to competition (U.S. Department of Justice, 2004). Consumers will make their own decisions while considering their preference and level of income among other factors that affect choice, and this makes the basis of enhanced competition in the physician services market. Furthermore, the government limits nurse practitioners and physician assistants from working alone without being under the supervision of a physician and this further increases competition I the field as the few physicians will have to meet the needs of the entire country, which implies that they will have to compete for the large market share. The induced demand comes in that physicians will be the only ones able to treat patients because of the barriers that avert nurse practitioners and physician assistants from administering the duties of a physician despite the fact that they can perform more than 70% of the job. Consumers will therefore rely on the few physicians available as they believe that they will offer better services and will not be willing to change a provider even when given a cheaper substitute. Physicians will create a target income level by using demand for their services, and this happens due to competition. Price sensitivity in healthcare implies that setting a low price for medical services will result to more consumers or more demand (Morrisey, 2005). An individual will not use higher insurance costs given a cheaper one, and this means that the healthcare sector is bound to compete for customers by controlling prices due to the high cost of healthcare (Whittington, 2008). To take advantage of the market, physicians will induce demand by coming together to form group practices so as to form monopolies. This will enable them to enjoy economies of scale, as they will share inputs, become reputable as they will be able to evaluate each other, reduce income variability as they will share income and have increased market power since they will be able to have more negotiating power with insurers. Because the number of physicians is small, when they join and form a monopolistic sector, they will control the market since consumers will have to pay for the costs of the services they receive. 2. Explain What Would Happen To the Level of Competition in the Physician Services Market If All the Statutes Limiting Activities of Physician Assistants and Nurse Practitioners Were Eliminated If the statutes limiting activities of physician assistants and nurse practitioners were eliminated, the level of competition in the physician services market would greatly increase. It is evident that physicians will take up most of the market share due to these restrictions and if they were eliminated there would be a significant change in the market as competition would increase with every medical provider trying to take up the larger share of the market. The government has placed restrictions on the basis of quality control despite the fact that nursing practitioners and physician assistants receive the same education and can perform services done by physicians (U.S. Department of Justice, 2004). These are the barriers of entry to the industry and license barriers will only allow physicians to diagnose and treat patients and the law bars nurse practitioners and physicians from receiving these licenses. These barriers will have the effect of limiting the availability of substitutes, and this means that the physicians will enjoy monopolistic competition. The regulatory framework of the federal government thus influences how competition will take place, and this is aimed at regulating both price and quality of healthcare. If the restrictions were eliminated, competition would increase because there would be more healthcare providers to diagnose and treat people. Consumers will want services from providers who ask for low prices, and this means that the practitioners w ill be forced to work with the laws of demand and supply thus eliminating monopolistic competition practiced by physicians (Morrisey, 2005). The nurse practitioners and physician assistants will be new entrants into the market, and this implies that they will apply low costs so as to attract customers. These low costs will impact heavily on the physicians since they will have to lower their costs too so that they can compete favorably in the market. Consumers act rationally and will want to access affordable healthcare, and this means that they will evaluate the market before choosing a healthcare provider, implying that they will choose one that does not take up much of their money and provides quality healthcare. Healthcare is also bound to improve because practitioners will be forced to improve quality so as to gain the greater marker share. Physicians and other practitioners will have to work with emerging trends so as to provide quality healthcare, and this means they will have to upgrade their systems for diagnosis and treatment. The overall effect of this will be increased competition as every healthcare provider will want to be the best as this will attract more consumers into their institutions. Therefore, eliminating the barriers will play a crucial role in improving healthcare by increasing competition and improving the quality of services offered. However, for this to be possible, the government must ensure that licensing of all healthcare providers follows the right protocol so as to eliminate chances of unqualified practitioners entering into the sector. References McGuire, T. G. (2000). Physician Agency. Handbook of Health Economics, Volume 1. Morrisey, M. A. (2005). Price Sensitivity in Health Care: Implications for Health Care Policy. National Federation of Independent Business Research Foundation. U.S. Department of Justice. (2004).Improving Healthcare: A Dose of Competition. A Report by the Federal Trade Commission and The Department Of Justice. Whittington, R. (2008). Introduction to Health Economics Concepts - A Beginners Guide. Flintshire: Rx Communications Read More