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Related Experiment Videos

The hospital as a sales-maximizing entity.

S A Finkler

    Health Services Research
    |January 1, 1983
    PubMed
    Summary

    This study adapts the Baumol sales-maximization theory for non-profit hospitals, revealing that physician affiliation drives demand and hospital competition. Hospitals compete for physicians to maintain market share and enhance demand for services.

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    Area of Science:

    • Health Economics
    • Non-profit Management
    • Industrial Organization

    Background:

    • The Baumol sales-maximization theory traditionally explains firm behavior in for-profit industries.
    • The unique operational and financial structures of not-for-profit hospitals necessitate a distinct theoretical approach.
    • Understanding drivers of demand and competition is crucial for the sustainability of healthcare providers.

    Purpose of the Study:

    • To extend the Baumol sales-maximization theory to the not-for-profit hospital sector.
    • To model hospital demand considering price and physician affiliation.
    • To analyze the competitive dynamics within the hospital industry, focusing on physician recruitment.

    Main Methods:

    • Economic modeling of hospital demand as a function of price and affiliated physicians.
    • Analysis of interdependencies in demand based on a hospital's product scope.
    • Examination of competitive strategies centered on physician affiliation.

    Main Results:

    • Hospital demand is positively influenced by the number of affiliated physicians.
    • A broader service scope increases physician affiliation, thereby boosting demand for all hospital products.
    • Competition in the hospital industry is primarily physician-centric, not consumer-centric.

    Conclusions:

    • Physician affiliation is a key determinant of demand and market share for not-for-profit hospitals.
    • The extended Baumol model provides insights into non-profit hospital strategic behavior.
    • Hospitals compete by attracting physicians to enhance their market position and service demand.

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