The Market for General Practitioners in Perth Metro Area - Case Study Example

TITLE Name Course University City/State Date Over the past decades, General Practitioners (GPs) have played a critical role in determining the expenditure of health care services. This essay will critically assess this topic in a broader way. GPs have gone ahead to exploit their right or freedom to make their own pricing and ended up coming up with exaggerated prices that are too high thus it is hard for patients to come up with such cash to cater for their health care services. The essay will also evaluate the levels to which this high price set by GPs has changed in different regions; specifically in the western and northern suburbs of the Perth Metro area. In additional, the GPs have the ability to control both the cost and the operation of services. These are the two key apparatus of Health care expenditure. In other words what the GPs are trying to put across is that efficiency of the services that they offer can be made more efficient ad faster by an increase in the cost of the services that they offer. Recently several studies have documented a huge increase in the overall healthcare expenditure. One significant step in assessing the spending variation in how health care services are being offered by GP is by examining how the market structure for GPs in Perth metropolitan area has affected prices and operation of services. It is evident that Ceteris paribus (holding other things constant), a GP with a higher market power that is having a concentration in the 90th percentile is likely to charge higher prices. In return, this GP is likely to perform more service than a GP who has a low market power that is having a concentration in the 10th percentile. This means that higher expenditure boosts the level of service that GPs offer (Chernew, Hirth & Cutler, 2009). However, this idea of permitting the GPs set their own price has led to a bigger problem. A majority of patients have been denied access to essential medical checkup and treatment. This is because they cannot afford the services that these GPs have to offer. The market structure in the Perth Metropolitan has many buyers and less sellers of the health care service. The sellers are the price makers and therefore they have control of the entire market. This is one reason why several GP opts to move to the western suburb where they will have the freedom to determine the price of their services. This market structure is similar to an oligopoly market structure which is characterized by a small number of sellers who dominate a market and make large profits from having a very large client base (Salmon, 2010). The decision that is made by an individual health care facility affects the others. One facility cannot dictate the price of services offered. On the other hand, the type of service that they all have to offer is homogeneous. Therefore, proper marketing strategy, (both price and non-price) helps the GP to keep the constant competition. The GPs in the Perth Metropolitan have an incentive to conclude and keep prices higher. This is because high prices interpret higher income for all the GPs. Therefore, it is right to say that GPs in Perth Metropolitan area use an oligopoly type of market structure for their services. This is evident because the health care business is dominated by a small number of GPs. This is why the cost of services in the Perth Metro is higher than expected. To solve this problem strategic planning should be carried out by the GPs putting in mind that whatever decision they make is affecting other GPs and in return affecting lives of many especially the poor in the society. The GPs operate under the authority of the government thus giving them the authority to determine their price. The only significant way to restrict other GPs from entering the market is through limit pricing. This is setting a lower price that will keep off the other GPs who want to enter the market. This short-term sacrifice determines the long-term profits for the existing GPs in the Perth Metropolitan area. The oligopoly market structure faces a kinked demand curve at the existing price. Figure 1: Kinked demand curve for an oligopoly market structure. As the GPs try to solve this market power puzzle it is still clear that there is a lot that needs to be done. It is evident that there have been extensive researches regarding the health care facility's ability to leverage their market power into exaggerated fears. However, there seems to be little that is done regarding the GP's bargaining power. There is a distinct feature between the health facilities and the General Practitioners who work in these facilities relating to health care costs (Iredale, 2009). The government intervention comes into place because at some point the GPs tend to charge more than their base price. This leads to patient spending more cash from their own pocket to cater for the extra fees (Johar, Jones & Savage, 2013). The government involvement is to try to find a considerable variation in fees across GPs as well as enabling everyone to access quality health care services for instance the standard level B consultation. The reasons as to why there are sufficient GPs in the western suburbs but lesser GPs in the Eastern suburb are quite evident. One of the key factors that motivate GPs at their place of work is the freedom that they have to run their activities and come up with new ideas to implement. For instance, the freedom of GP to determine their own prices for the services that they offer is one reason why a majority of GPs is moving to the Western suburb where they can have a voice in what they should charge for their services (Cooper, Getzen, McKee & Laud, 2002). In figure 2, the change from P*- P' leads to an increase in sufficient offering of services by the GP from Q* - Q'. This change in price of the services offered is determined by the GPs and thus a majority of GPs chooses to move away from the eastern suburbs to the western suburb where they will receive much cash for the same services that they have been offering in the eastern suburb. The main reason why western suburb has four times the number of GPs is because of the higher income in that area (SMH news, 2013). Figure 2: Employment Decision Price (P) Q P' Price change P* Q* Q' Employment (Q) To have improved and sufficient GPs in all the suburbs, the standard theory of resource allocation should be implemented. This would lead to a greater improvement in the general practitioner in the long run. Theory of resource allocation basically entails assigning the available resources in an efficient and economic way. The key reason why the GPs use the theory of resource allocation is to have an equitable allocation of resources in this sector thus enabling the GPs to work efficiently thus leading to the realization of their long-term goal of offering quality health care services for all. They mostly rely on available resources that are required for the planned task as well as schedule the activities to be carried out by the GPs. In addition they also consider the time that they should use to work on their planned tasks. One of the many ways in which the government tries to lessen the GP sufficiency problem is by offering of 100% rebate for fees up to the schedule fee for a level B consultation. This consultation is the most common one in the Perth metro area. This strategy helps every patient to have access to health care services regardless of their financial background. Normally, the scheduled fees are lower for a shorter level A consultation, and for a longer consultation the fees are more expensive (Johar, Jones & Savage, 2013). The reason as to why the fee for a longer consultation is expensive is because this process is more complex. On the other hand the government through its leaders uses elections to promise its citizens support to curb the sufficiency and efficiency problem in the health care. This could be achieved by government support to add more GPs in Western Australia. To add more doctors it will require more funds from the government to curb the doctors’ shortage in Perth Metro area. For instance during the federal election in WA the government through Tony Abbott promised to support the doctors by spending $22 million to come up with a campus in Midland in Perth’s east (SMH news, 2013). Starting new medical school means that there would be more GPs thus offering of services would improve. In conclusion, the freedom for GPs to have bargaining powers is a significant aspect in the healthcare sector over the past decades. In addition, the use of the theory of resource allocation has also been implemented to try and make GPs to execute their duties efficiently. On the other hand, it is quite evident that the service delivery is directly correlated to the expenditure. The government needs to come in and try to regulate this price to assure patients access to the best health care services. References Chernew, M., Hirth, R., Cutler D. 2009 “Increased spending on health care: long-term implications for the nation.” Health Affairs vol. 28 no. 5 1253-1255 Cooper, R. A., Getzen, T. E., McKee, H. J., & Laud, P. 2002. Economic and demographic trends signal an impending physician shortage. Health Affairs, 21 (1), 140-154. Fairhead, L. 2013. A third medical school?: Consider the facts. Medicus, 53 (8), 50. Iredale, R. 2009. Luring overseas trained doctors in Australia: Issues of training, regulating and trading. International Migration, 47 (4), 31-65. Johar, Jones and Savage. 2013. Market power and the quality of primary care. Salmon, F. 2010. A guide to the market oligopoly system | Felix Salmon. Analysis & Opinion| Reuters. Retrieved October 10, 2013, from WA doctor shortage becomes an election issue. 2013. SMH News Online – Australian, Business & World News. Retrieved October 10, 2013, from Read More