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MHA 710 Exam 3: Healthcare Economics: Questions &
Answers
Which of the following statements is true about cost shifting in hospitals? a. Regardless of payer mix, hospitals are taking full advantage of their bargaining power with payers who are able to cost shift. b. Capacity-constrained medical providers are not able to cost shift. c. The positive correlation coefficient between cost-to-payment ratios for various payers indicates that cost shifting is taking place. d. The ability to cost shift depends on a hospital's payer mix. e. Classic Ramsey pricing can be interpreted in different ways, leading researchers into arguing that if it looks like cost shifting, it probably is cost shifting. (Ans- d. The ability to cost shift depends on a hospital's payer mix. This study was the catalyst for the early twentieth century reform of medical education in the United States. What was it? a. Hill-Burton Committee b. Mangrum Report c. Coolidge Commission d. Flexner Report
e. Kaiser Foundation Study (Ans- d. Flexner Report Changes caused by the shift from charge-based rates to negotiated rates has had which of the following results? a. Charging master rates serve as a powerful guide for optimal resource allocation in the industry. b. The change has increased the importance of Ramsey pricing principles in setting rates. c. Most hospitals experience a gap between the amount they receive from their payers and the amount billed, with receipts as low as 20 percent of amount billed. d. A growing percentage of patients with insurance are paying billed rates. (Ans- c. Most hospitals experience a gap between the amount they receive from their payers and the amount billed, with receipts as low as 20 percent of amount billed.
- If the market were perfectly competitive instead of dominated by a monopsonist, what would the equilibrium wage and level of employment be? a. W1 and E b. W2 and E c. W0 and E
Which of the following statements about the distribution of physicians among specialties is true in the United States? a. The majority of physicians specialize in general/family practice. b. There are twice as many generalists as there are specialists. c. There are twice as many specialists as there are generalists. d. The specialty distribution in the United States is similar to that of the rest of the world. e. None of the above. (Ans- c. There are twice as many specialists as there are generalists. According to surveys by the Medical Group Management Association, the average primary care physician earned approximately _______ in
a. $125, b. $150, c. $185, d. $200, e. $225,000. (Ans- d. $200, Surgical specialists earn more than general/family practice physicians. Which of the following statements is not true regarding this income differential?
a. Surgeons earn more because their practice costs, including medical malpractice insurance is higher. b. Surgeons earn more to compensate them for the extra years spent as residents. c. Physicians' incomes are determined to a large extent by supply and demand conditions with respect to each specialty. d. Surgeons will always earn more than general practitioners because they are smarter than general practitioners. e. Surgeons earn more than general practitioners because cutting into people is messy. (Ans- d. Surgeons will always earn more than general practitioners because they are smarter than general practitioners. The rate of return on an investment in medical education a. is inversely related to the length of time spent in formal schooling. b. is inversely related to income. c. will increase with an increase in the availability of student loans. d. is much higher than the rate of return on an undergraduate business degree. e. is inversely related to the number of years in the profession. (Ans- e. is inversely related to the number of years in the profession.
To address the shortage of physicians on the horizon, it will be necessary to a. build more medical schools. b. provide more grants and scholarships for medical education. c. allow the admission of more foreign-educated physicians. d. all of the above. (Ans- d. all of the above. In 2010, the medical specialty that earned the highest rate of return on investment was a. general primary care. b. Internal medicine. c. Pediatrics. d. orthopedic surgery. e. none of the above. (Ans- d. orthopedic surgery. Suppose the number of medical school graduates continues to increase over the next decade. Which of the following is true? a. Physicians' salaries must fall. b. Physicians' salaries must rise.
c. Physicians' salaries will fall only if the demand for medical services falls. d. Physicians' salaries will fall if the demand for medical services rises more than the supply of physicians rises. e. Physicians' salaries will rise if the demand for medical services rises more than the supply of physicians rises. (Ans- e. Physicians' salaries will rise if the demand for medical services rises more than the supply of physicians rises. Physicians' salaries increased substantially over the decade 1995- 2005 from an average of $215,000 to $315,000. What is the best explanation for this? a. Physicians were smarter in 2005 than in 1995. b. The supply of physicians has increased. c. The supply of physicians has decreased. d. The demand for physicians has increased. e. The demand for physicians has decreased. (Ans- d. The demand for physicians has increased. Starting salaries for female OB/GYNs are higher than those of male OB/GYNs. What is the best explanation for this? a. Female OB/GYNs have more human capital than male OB/GYNs. b. Female OB/GYNs are smarter than male OB/GYNs.
d. All of the above (Ans- d. All of the above The dominant factor affecting medical care delivery and finance in the 1960s was a. the Hill-Burton Act. b. prospective payment for hospitals. c. the creation of Medicare and Medicaid. d. the explosive growth of managed care. e. the passage of ERISA. (Ans- c. the creation of Medicare and Medicaid. The dominant factor affecting medical care delivery and finance in the 1980s was a. the Hill-Burton Act. b. prospective payment for hospitals. c. The creation of Medicare and Medicaid. d. the explosive growth of managed care. e. ERISA. (Ans- b. prospective payment for hospitals.
The dominant factor affecting medical care delivery and finance in the 1990s was a. the Hill-Burton Act. b. prospective payment for hospitals. c. creation of Medicare and Medicaid. d. the explosive growth of managed care. e. ERISA. (Ans- d. the explosive growth of managed care. Which of the following statements is true concerning the trend in hospital care between in-patient and out-patient services since the mid- 1980s? a. Both have been declining. b. Out-patient services have been static, while in-patient services have been declining. c. Out-patient services have increased substantially because admissions are down. d. Both have been growing. e. There has been no noticeable trend in either in-patient or outpatient services. (Ans- c. Out-patient services have increased substantially because admissions are down.
a. The profit motive corrupts human behavior. b. For-profit hospitals do not provide charity care. c. Private not-for-profit hospitals engage in most of the medical research. d. The not-for-profit form provides the most benefits to physicians. e. All of the above. (Ans- d. The not-for-profit form provides the most benefits to physicians. In order to be a successful price discriminator, a provider must have a degree of market power (depicted by a downward-sloping demand curve) and meet what other condition(s)? a. Customers cannot know that different prices are being charged. b. Markets must be segmentable, identifying differences in ability to pay. c. Demand for services must be relatively price elastic. d. Profitable service expansion opportunities must be limited. e. The provider must have excess capacity to accommodate the extra business. (Ans- b. Markets must be segmentable, identifying differences in ability to pay. Legislation considered by Congress to restrict legal immigration would: a. surprise many policymakers because Congress finds it difficult to agree on much of anything regarding immigration.
b. improve employment prospects for native-born Americans. c. have little effect on medical markets, as so few physicians practicing medicine in the United States are foreigners. d. raise the costs of operating in many of the nation's rural and inner- city hospitals. e. allow more Americans trained abroad to compete for openings in United States' residency programs. (Ans- d. raise the costs of operating in many of the nation's rural and inner-city hospitals. Physicians who own their own diagnostic testing facilities tend to order more tests, charge higher fees for them, and have higher total bills to patients. This practice of self-referral is an example of: a. cognitive dissonance. b. physician-induced demand. c. moral hazard. d. adverse selection. e. res ipsa loquitur. (Ans- b. physician-induced demand. Which of the following statements is true concerning the trend in community hospital care between inpatient and outpatient services since the mid-1980s? a. Both inpatient and outpatient services have been declining.
d. provides patients with higher quality of care. e. does not provide charity care. (Ans- a. allows for the transfer of assets. What is the most significant cost of attending medical school? a. Books and incidentals b. Room and board c. Tuition and fees d. The income foregone (Ans- d. The income foregone Using the physician-control model to explain hospital behavior leads to which of the following conclusions? a. Other medical inputs tend to be overused to maximize physicians' productivity. b. All investment decisions will be based on optimal resource use. c. The use of operating rooms will be maximized with little excess capacity. d. Physicians will strive to use the nursing staff efficiently. (Ans- a. Other medical inputs tend to be overused to maximize physicians' productivity. Economies of scale exist when: a. long-run average costs decline as output increases.
b. long-run average costs increase as output increases. c. long-run average costs are constant. d. short-run average costs decline. e. short-run average costs increase. (Ans- a. long-run average costs decline as output increases. Which of the following statements about the distribution of physicians among specialties is true in the United States? a. There are twice as many generalists as there are specialists. b. The majority of physicians specialize in general/family practice. c. There are twice as many specialists as there are generalists. d. The specialty distribution in the United States is similar to that of the rest of the world. (Ans- c. There are twice as many specialists as there are generalists. Starting salaries for female obstetricians/gynecologists are higher than those of male obstetricians/gynecologists. What is the best explanation for this? a. There are more males in obstetrics/gynecology residency programs than females. b. The demand for female obstetricians/gynecologists is greater than the demand for male obstetricians/gynecologists.
a. W0 and E b. W2 and E c. W0 and E d. W0 and E e. W1 and E1 (Ans- c. W0 and E The following diagram depicts the market for physicians' services that is originally in equilibrium at the point where demand and supply (D0 and S0) intersect. As physician supply increases from S0 to S1, an even larger concurrent shift in demand from D0 to D1: a. will increase demand for physicians' services, but not spending. b. will cause overall spending on physicians' services to increase. c. will result in a new equilibrium at P2 and Q2. d. will result in a decrease in the price of physicians' services. e. will force physicians to limit the number of patients they see. (Ans- a. will increase demand for physicians' services, but not spending. The merger of two community hospitals located in the same geographic market is called: a. a conglomerate merger.
b. a leveraged buyout. c. horizontal integration. d. vertical integration. e. a real shame, as one of the hospitals will likely close. (Ans- c. horizontal integration. The expanded use of prospective payment in hospitals has changed the nature of competition in that market. Which of the following statements is true? a. After an initial drop in operating margins shortly after the introduction of diagnosis-related groups (DRGs), Medicare margins have improved and most hospitals are generating 5-8 percent surpluses on all their Medicare business. b. The switch to diagnosis-related group payments in the 1980s has actually had little effect on competition because so much of hospital spending comes from the federal government. c. Savings from prospective payments are substantial and due primarily to fewer hospital admissions and shorter hospital stays. d. Because patients pay such a small percentage of hospital bills, prospective payment has had little effect on hospital operations. (Ans- c. Savings from prospective payments are substantial and due primarily to fewer hospital admissions and shorter hospital stays. Suppose the market for nursing services in a local community is so dominated by a single community hospital that, for all practical
