Shortage

You are currently browsing articles tagged Shortage.

The Downside of Concentrated Health Care Markets

April 23, 2012 in Current Events, Economics - General | No comments

Many recent healthcare policies aim to consolidate the provision of medical services.  For instance, Accountable Care Organizations consolidate providers with the goal of providing seamless, integrated patient care.  Consolidation can increase efficiency and (potentially) drive down prices.  If a market is highly concentrated, however, problems in a single supplier can lead to shortages.  Consider the case of Sandoz in Quebec.

“On March 4 a fire broke out at a Quebec manufacturing facility of the multinational generic drug manufacturer Sandoz. The fire halted production and led to medication shortages across the country….

The resulting shortage has hit hospitals especially hard because the Sandoz plant manufactures the vast majority of injectable medications used in Canada….But why was one factory manufacturing such a large proportion of so many important drugs?…

Hospitals in Ontario purchase most of their drugs through group purchasing organizations (GPOs). The two largest GPOs in Ontario are Medbuy and HealthPRO. Both organizations are governed by their member organizations, which are mainly hospitals and other health care providers. GPOs were established to increase efficiency for member hospitals. Instead of each hospital signing its own contracts with multiple different pharmaceutical companies, GPOs deal with the pharmaceutical companies and the hospitals only have to deal with GPOs.

GPOs drive down prices by buying in bulk. But the downside of negotiating aggressively is that sometimes only one manufacturer remains willing to supply a particular drug at the negotiated price. And what appears to have occurred in Canada is that Sandoz was the only willing manufacturer not just for one important medication, but for dozens.”

There are parallels in the car industry as well.

“The company is a chemical plant in a town called Marl. That explosion there killed two people. It was a tragedy, but did not seem to have global significance….Until car companies realized that Marl is vital to their business….

In [Marl], there’s a plant that makes a chemical…that is used in another material called Nylon-12, which is a material that is used – it’s a very basic material. It’s simply a coating that’s used in some of the critical parts of the vehicle, like fuel lines and brake lines.

It’s the kind of thing where it’s so specialized, that not a lot of companies make the product, but a lot of companies end up using it. The plant is one of very few – less than a handful – that make the chemical in the world.”

Concentrating production in a single company can produce economies of scale.  A lack of diversification of suppliers (whether its suppliers of medications or car parts) make producers vulnerable to disruptions in their global supply chain.

Tags: , , , ,

Will Nurses Steal Market Share from Physicians?

January 9, 2012 in Nurses | 2 comments

Currently, physicians are the dominant force in determining how health care is provided in the United States today.  Nurses, however, also play a vital role in the provision of health care services.  Although there are about 660,000 physicians in the U.S., there are 2.6 million registered nurses and another 750,000 LPNs.

Leveraging the skills of these nurses the utmost capacity is vital to maximizing the efficiency of the health care system.  In a recent report from the Institute of Medicine (IOM), the policy recommendations focused on four main issues:

  1. Nurses should practice to the full extent of their education and training.
  2. Nurses should achieve higher levels of education and training through an improved education system that promotes seamless academic progression.
  3. Nurses should be full partners, with physicians and other health professionals, in redesigning health care in the United States.
  4. Effective workforce planning and policy-making require better data collection and information infrastructure.

In general, although the recommendations are sensible, physicians may fear that nurses will begin taking some of their market share.  A more detailed explanation of my views of these recommendations is listed below.
Read the rest of this entry »

Tags: , , ,

Shortage! Shortage!…Shortage???

January 28, 2009 in Physician Compensation, Specialists, Supply of Medical Services | 3 comments

In the news, you often hear that there are shortages of nurses and physicians.  We need more nurses and physicians, right?  According to an editorial by Laurence Baker in Health Services Review, we should be a little skeptical of calls for more and more healthcare providers.  If supplier-induced demand is a problem, more providers will only increase the amount of medical care provided.  For instance:

  • Bunker (1970) found that in 1967, “there were 39 surgeons per 100,000 persons in the United States, and less than half as many—18 per 100,000—in England and Wales. America, he also found, had a much higher rate of surgery, about 7,400 surgeries performed per 100,000 people in 1965, about twice the 3,770 reported for 1966 in England and Wales.”
  • Fuchs (1978) “estimated that 10 percent increases in the surgeon/population ratio resulted in about a 3 percent increase in per capita utilization of surgeries.”
  • “Sloan and Schwartz (1983) concluded that a 10 percent increase in the supply of physicians would be associated with a 4 percent increase in spending for physician services.”
  • Fisher et al. (2003 a, b) “…argued that in the Medicare program, having more specialists per capita in an area is associated with higher surgery rates and higher procedure rates.”
  • “Baicker and Chandra (2004) showed that states with the more specialists tend to rank lower in quality than states with fewer, and vice versa for generalists.”

Does expanding supply the of physicians unambiguously improve health care quality?  No.  It is likely that increasing the supply of primary care physicians will increase quality and increase cost at a slower rate.  On the other hand, an increase in the supply of specialist may or may not improve quality and will almost certainly increase costs.  Increasing the supply of physicians may improve health care system, but it should not be dogma that this is always the case.

Tags: ,