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A "minimum wage"...for hospitals?

Greenbeard

Greenbeard

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Well, this is a prickly one. The idea is a floor to what hospitals get paid, with the intent of helping lower paid, often struggling community hospitals get closer to their better-paid competitors. The means either paying more to hospitals overall and raising costs for the entire system (e.g., through higher insurance premiums), or taking from some hospitals and giving back to others. Good idea? This is the question Massachusetts is grappling with.

A 'minimum wage' paid to hospitals? Massachusetts lawmakers are tackling the controversial proposal
Several reports have documented big discrepancies in how much insurers pay different hospitals in Massachusetts, Dayal McCluskey reports. Community hospitals, which lack the bargaining power that larger hospitals have, often end up receiving significantly lower rates for similar services, according to Dayal McCluskey.

The issue has attracted state officials' attention, prompting them to establish a commission to look at hospital reimbursement. Last year, the commission recommended tighter controls on hospital pricing. Further, the group supported a pay bump from insurers for community hospitals.

Community hospital leaders warn that, without higher rates from insurers, they won't be able to invest in their facilities and attract patients so they can stay sustainable. Kim Hollon, president and CEO of Brockton Hospital in Massachusetts, said his hospital is "perpetually underpaid." He added, "(If) other competitors can continue to add new equipments, new buildings, they will continue to grow, you'll continue to stay right where you are."
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That's why some community hospital leaders are calling for lawmakers to set a price floor to close the gap between what insurers pay them and what insurers pay other hospitals.

Specifically, the community hospital leaders are seeking a "minimum wage" that would bring hospitals at the lower end of the pay scale within 90% of the average reimbursement for medical services, Dayal McCluskey reports. The proposal would increase costs by $180 million annually, with funding spread among more than two dozen hospitals in communities throughout the state. According to Dayal McCluskey, the proposal would make up less than 1% of commercial health spending in Massachusetts.

Community hospital leaders argue that the legislation would be reasonable and affordable. Spiros Hatrias, CEO of Holyoke Medical Center, said the amount they're looking for amounts to essentially "a rounding error."'

However, some experts say the increase could lead to higher premiums for consumers and overall higher health spending. With that in mind, community hospital leaders say another option would be to redistribute hospital payments by giving bigger hospitals lower-than-expected increases in reimbursement in order to fund higher increases at community hospitals.
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OP-er, to the extent that you pose question with the implicit assumption that hospital care be delivered under the monopolistic competition (MC) market structure, I suspect the solution MA have proposed will work to the satisfaction of some and dissatisfaction of others, and may well leave disaffected even more folks than presently. So, in the MC context, no, I don't think the solution idea presented is a good one; I think it's just a "different" poor solution. I do, however, acknowledge that it's an easier solution to effect than is anything that strikes me as being an actually good solution.

That said, I am of the mind that hospitals must either (find a way to) compete effectively in a monopolistically competitive market or perish, which is what happens to any organization that "plays" unsuccessfully in such a setting. If "compete successfully" means tailoring their marketing mix to include only those goods and services that they can profitably provide, then that's what it means. To wit:
  • A facility/organization that is currently operating unsuccessfully (financially) as "full service" hospital may have to revise its offerings so as to function as a "limited service" facility.

On a personal level, I, Xelor, don't much care whether hospitals and everything else about health care is provided, as is now, under MC. I am certain, though, that many people don't at all like that MC is the applied structure for U.S. healthcare. Others are likely largely indifferent about it other than that they have a vested profit interest in healthcare being provided under MC. I am of the mind that everything directly related to healthcare delivery and payment (most especially payment) should occur under the market structure of natural monopoly. (Note: A natural monopoly market structure is not at all the same thing as a competitively achieved monopoly such as Rockefeller's Standard Oil and the Carnegie Steel monopolies of days long gone.)

Of course, a structural transition from monopolistically competitive to natural monopoly is no mean accomplishment. It will surely eliminate some organizations, and it will result in a cap on the profitability of those that remain; however, it'll also produce a standard level of care that is provided "universally." It's worth noting that a natural monopoly structure allows "niche" firms to continue to exist profitably, very profitably, in fact, though they won't be inclined, for the most part, to offer services/products that compete with what hospitals offer and health insurance plans cover.
 
Greenbeard said:
Well, this is a prickly one. The idea is a floor to what hospitals get paid, with the intent of helping lower paid, often struggling community hospitals get closer to their better-paid competitors. The means either paying more to hospitals overall and raising costs for the entire system (e.g., through higher insurance premiums), or taking from some hospitals and giving back to others. Good idea? This is the question Massachusetts is grappling with.

A 'minimum wage' paid to hospitals? Massachusetts lawmakers are tackling the controversial proposal
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Another doomed proposal.

The fundamental problem is the insurance market. Oh and also government spending issues. Until those get addressed.. its just a dog chasing its tail.
 
Xelor said:
That said, I am of the mind that hospitals must either (find a way to) compete effectively in a monopolistically competitive market or perish, which is what happens to any organization that "plays" unsuccessfully in such a setting. If "compete successfully" means tailoring their marketing mix to include only those goods and services that they can profitably provide, then that's what it means. To wit:
  • A facility/organization that is currently operating unsuccessfully (financially) as "full service" hospital may have to revise its offerings so as to function as a "limited service" facility.
Click to expand...

This situation would seem to suggest there's too much hospital capacity in Massachusetts to be adequately financed/supported today (although if you buy the struggling community hospitals' argument that the market is being distorted and funds are being inappropriately siphoned off by hospitals with market power, then that could be questioned). But people tend to put a premium on convenience and easy access to a local hospital, which is why closing or scaling back facilities tends to become as much a political issue as an economic one.
 
In other words, small rural hospitals are inefficient and need subsidies to be viable.

And the GOP voters are in the areas where those hospitals are, and the subsidies are going to come from urban hospitals.

But the GOP is vehemently against ‘socialism’.

I can see why the Party has no one with any good ideas on healthcare.
 
Greenbeard said:
This situation would seem to suggest there's too much hospital capacity in Massachusetts to be adequately financed/supported today (although if you buy the struggling community hospitals' argument that the market is being distorted and funds are being inappropriately siphoned off by hospitals with market power, then that could be questioned). But people tend to put a premium on convenience and easy access to a local hospital, which is why closing or scaling back facilities tends to become as much a political issue as an economic one.
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"People" politicize the contraction because they don't have a positive-economics leg to stand on; thus we are "flooded" with a ton of political acrimony about a matter that "people" could fix by behaving in an economically rational way. But that's not what "people" do.

"People" want to (1) behave in economically irrational ways, and (2) have "convenient and easy access" to a full-service hospital, and (3) "bitch and moan" (i.e., politicize the matter) when hospital administrators/owners make economically rational decisions about whether (and/or to what nature and extent) to exit or remain in a given geographic market, and (4) not pay higher taxes to compensate the hospital for behaving irrationally (economically inefficiently) to satisfy "people."

Whom do I blame for the above three elements' persistence? "People" and politicians. "People" because they are willfully ignorant about the irrationality of their economic behavior and politicians because they haven't the "balls" to simply show "people" that they cannot expect or demand hospitals to do so too and not pay (via taxes or fees or something) for hospitals doing so.

Greenbeard said:
...people tend to put a premium on convenience and easy access to a local hospital, which is why closing or scaling back facilities tends to become as much a political issue as an economic one.
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While "convenience" is typically understood as a type of luxury, it's not clear to me whether, and possibly how, you distinguish "easy access" from "convenience." I can see you've noted them as two separate qualities, yet it's also possible that you construe them as synonymous. (Economists consider "convenience" and "easy access" as the same qualities -- they'd have written, "....on convenience, easy access, to a local...." -- but "convenience" and "access" are different things.) There is also the matter of the ambiguity of "premium." Do you mean "put a premium" in an explicit or latent context? I'd think you mean it explicitly, but "people's" behavior doesn't comport with that context.

How you think of convenience and easy access affects the nature of positive economics concepts I'd apply in considering your remarks, but since you chose neither precise terms nor were expositive enough for me to infer from context how you mean the terms you used, I don't know what concepts to apply. Because I cannot be sure which context you had in mind, I can't choose the appropriate one on which to focus my remarks. Consequently, I will simply point to the following which address the matter.
Aggregating the concepts from the above documents, ask yourself....
  • Who's purchasing the "convenience and easy access?"
    • What, respectively, are the buyer's and seller's cost components?
  • Who's receiving the "convenience and easy access?"
...and upon consider the answers in light of the referenced content, it becomes clear why hospital facilities/services don't lend themselves to being provided, as they are, under monopolistic competition.
 
Threegoofs said:
In other words, small rural hospitals are inefficient and need subsidies to be viable.

And the GOP voters are in the areas where those hospitals are, and the subsidies are going to come from urban hospitals.

But the GOP is vehemently against ‘socialism’.

I can see why the Party has no one with any good ideas on healthcare.
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Actually.. you are pretty much on the money. Its one of the main reasons.. if not the main reason that the GOP could not repeal Obamacare... because the GOP knew what it would do to their constituents local economies if you suddenly cut Medicaid and OBamacare spending. Healthcare in many areas.. rural or otherwise is a main employer.
 
Xelor said:
"People" politicize the contraction because they don't have a positive-economics leg to stand on; thus we are "flooded" with a ton of political acrimony about a matter that "people" could fix by behaving in an economically rational way. But that's not what "people" do.

"People" want to (1) behave in economically irrational ways, and (2) have "convenient and easy access" to a full-service hospital, and (3) "bitch and moan" (i.e., politicize the matter) when hospital administrators/owners make economically rational decisions about whether (and/or to what nature and extent) to exit or remain in a given geographic market, and (4) not pay higher taxes to compensate the hospital for behaving irrationally (economically inefficiently) to satisfy "people."

Whom do I blame for the above three elements' persistence? "People" and politicians. "People" because they are willfully ignorant about the irrationality of their economic behavior and politicians because they haven't the "balls" to simply show "people" that they cannot expect or demand hospitals to do so too and not pay (via taxes or fees or something) for hospitals doing so.



While "convenience" is typically understood as a type of luxury, it's not clear to me whether, and possibly how, you distinguish "easy access" from "convenience." I can see you've noted them as two separate qualities, yet it's also possible that you construe them as synonymous. (Economists consider "convenience" and "easy access" as the same qualities -- they'd have written, "....on convenience, easy access, to a local...." -- but "convenience" and "access" are different things.) There is also the matter of the ambiguity of "premium." Do you mean "put a premium" in an explicit or latent context? I'd think you mean it explicitly, but "people's" behavior doesn't comport with that context.

How you think of convenience and easy access affects the nature of positive economics concepts I'd apply in considering your remarks, but since you chose neither precise terms nor were expositive enough for me to infer from context how you mean the terms you used, I don't know what concepts to apply. Because I cannot be sure which context you had in mind, I can't choose the appropriate one on which to focus my remarks. Consequently, I will simply point to the following which address the matter.
Aggregating the concepts from the above documents, ask yourself....
  • Who's purchasing the "convenience and easy access?"
    • What, respectively, are the buyer's and seller's cost components?
  • Who's receiving the "convenience and easy access?"
...and upon consider the answers in light of the referenced content, it becomes clear why hospital facilities/services don't lend themselves to being provided, as they are, under monopolistic competition.
Click to expand...

honestly.. when I look at your post.. I think of the phrase "if you can't dazzle with brilliance.. baffle with BS".

Not for nothing but convenience in healthcare usually means that you don't have to travel far to find a facility. Access usually means that you can get in to see them easily either because there is enough providers or they accept your insurance etc.
 
jaeger19 said:
honestly.. when I look at your post.. I think of the phrase "if you can't dazzle with brilliance.. baffle with BS".

Not for nothing but convenience in healthcare usually means that you don't have to travel far to find a facility. Access usually means that you can get in to see them easily either because there is enough providers or they accept your insurance etc.
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I didn't inquire about what convenience "usually" means; I want to know what you meant when you used the word. Ditto "access." Are the "usual" meanings you note above the one's you had in mind when you wrote post 4? I want to know what "convenience" and "access" as you used them because I'm responding to your remarks about them.




Economists consider what you assert as the "usual" meanings of convenience and access as aspects of the same thing, convenience. To wit, "ABC hospital is convenient because...":
  • It's near to one's home/office.
  • It's quick to get into and out of the building, parking lot, etc.
  • The facility routinely has open "near-term" slots for one to be seen for non-emergent matters. (I.e., if one calls "now," one will be given an appointment to be seen, and the appointment won't be farther into the future than "however long one considers to be too long.")
The "accepts one's insurance" has to do with affordability, more so than convenience, though I suppose there're people (non-economists) who equate affordability with convenience.

If you separate convenience and access as you claim is "usually" done, that's fine, but I can't respond to your comment precisely without knowing whether you do or whether you have some different delineation for the those two terms as applied to hospitals and the services/goods they provide.



I provided the links I did in post 6 so that you could see for yourself convenience's (be it, in your mind, distinct or not from access) complementary "good" relationship with elasticity of demand and utility (total and marginal). Economics/economists would classify convenience itself (not convenience goods) as a complementary "good" because while one (no matter who) does indeed pay for convenience, convenience is an intangible quality rather than something one directly purchases (that relationship is what was explained in the "Convenience and Variety" paper I liked), something having a price tag. Convenience is one of the qualities that make convenience-store-sold goods be higher priced than the same goods sold by a grocery or "big box" store.

I know "everyone" would economics to be simple, but it isn't. It's concepts aren't too hard to understand (they're not "fall off a log" easy" either), but the breadth and interaction among the concepts is anything but simple. Math, accounting, and Newtonian physics are much the same in those regards.
 
Xelor said:
I didn't inquire about what convenience "usually" means; I want to know what you meant when you used the word. Ditto "access." Are the "usual" meanings you note above the one's you had in mind when you wrote post 4? I want to know what "convenience" and "access" as you used them because I'm responding to your remarks about them.




Economists consider what you assert as the "usual" meanings of convenience and access as aspects of the same thing, convenience. To wit, "ABC hospital is convenient because...":
  • It's near to one's home/office.
  • It's quick to get into and out of the building, parking lot, etc.
  • The facility routinely has open "near-term" slots for one to be seen for non-emergent matters. (I.e., if one calls "now," one will be given an appointment to be seen, and the appointment won't be farther into the future than "however long one considers to be too long.")
The "accepts one's insurance" has to do with affordability, more so than convenience, though I suppose there're people (non-economists) who equate affordability with convenience.

If you separate convenience and access as you claim is "usually" done, that's fine, but I can't respond to your comment precisely without knowing whether you do or whether you have some different delineation for the those two terms as applied to hospitals and the services/goods they provide.



I provided the links I did in post 6 so that you could see for yourself convenience's (be it, in your mind, distinct or not from access) complementary "good" relationship with elasticity of demand and utility (total and marginal). Economics/economists would classify convenience itself (not convenience goods) as a complementary "good" because while one (no matter who) does indeed pay for convenience, convenience is an intangible quality rather than something one directly purchases (that relationship is what was explained in the "Convenience and Variety" paper I liked), something having a price tag. Convenience is one of the qualities that make convenience-store-sold goods be higher priced than the same goods sold by a grocery or "big box" store.

I know "everyone" would economics to be simple, but it isn't. It's concepts aren't too hard to understand (they're not "fall off a log" easy" either), but the breadth and interaction among the concepts is anything but simple. Math, accounting, and Newtonian physics are much the same in those regards.
Click to expand...


Whatever.
 
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