Discussion: Porters Five Forces of Competition Kaiser Permanente Question

Discussion: Porters Five Forces of Competition Kaiser Permanente Question ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Discussion: Porters Five Forces of Competition Kaiser Permanente Question Organizations’ long-term health and viability are dependent on many factors, including the structure of the market the organization is competing in—and healthcare is no exception. Understanding the competitive forces in the industry will help in planning for the future. As discussed in this course, the more competition an organization faces, the more economic risk there is; and this makes long-term planning difficult. Discussion: Porters Five Forces of Competition Kaiser Permanente Question Professor Michael Porter, of the Harvard Business School, has prepared a grid of the five forces of competitive advantage. Based on a healthcare organization you are familiar with, prepare a report on the competitive forces affecting the organization using Porter’s five forces as your guideline. Length: 10-15 pages, not including title and reference pages Resources: Include a minimum of 5-7 scholarly resources related to your issue. health_economics_week_8.pdf week_8_the_effect_of_physician_and_hospital_market_structure_on_medical_technology_diffusion.pdf week8_profits__market_structure__and_market_power.pdf week_8_the_competitve_forces_that_shape_strategy.pdf week_8_competitive_effects_analyses_of_hospital_mergers.pdf MHA-5009 V1: Health Economics (3578369450) – MHA-5009 V1: Health Economics (3578369450) 3/2/21, 5:09 PM MHA-5009 V1: Health Economics (357836945… FB Sec!on 3: Market Structure and Compe!!ve Advantage The structure of markets is cri!cal in determining the financial viability of organiza!ons, including healthcare organiza!ons. Compe!!on from compe!tors, the rela!onship between the organiza!ons and their suppliers, and the rela!ve posi!on of the organiza!on to its customers (pa!ents) all play cri!cal roles in the long-term health of the organiza!ons. In this final sec!on, the various market structures and the market structures will be explained. In addi!on, other forces of organiza!on compe!!ve advantage will be explained, as well as a common methodology to analyze the compe!!ve advantage and posi!on of organiza!ons. 0 % 0 of 8 topics complete Week 8 Market Structure and Compe!!ve Advantage https://ncuone.ncu.edu/d2l/le/content/251482/printsyllabus/PrintSyllabus Page 1 of 5 MHA-5009 V1: Health Economics (3578369450) – MHA-5009 V1: Health Economics (3578369450) 3/2/21, 5:09 PM The structure of a market will be a major determining factor in the long-term health of any organiza!on. There are markets where compe!!on is huge and profits are limited due to the compe!!on. Other markets are less compe!!ve, and organiza!ons have a greater ability to earn profits and profits are more reliable and steady. Investopedia provides great defini!ons for the following terms. The major types of market structures are: ” Launch in a separate window In the United States, governmental policy favors the perfect compe!!on model. An!-trust laws have been established to https://ncuone.ncu.edu/d2l/le/content/251482/printsyllabus/PrintSyllabus Page 2 of 5 MHA-5009 V1: Health Economics (3578369450) – MHA-5009 V1: Health Economics (3578369450) 3/2/21, 5:09 PM ensure firms do not develop an advantage over individuals driving up prices to the individual. This does not mean that all markets need to be the perfectly compe!!ve model. If other models naturally develop, those structures would not be subject to an!trust laws. Organiza!ons are constantly looking at their market in hopes of structuring the market so they can have a compe!!ve advantage and earn profits which are reasonable and reliable. One model, which has gained wide acceptance, was developed by Michael E. Porter, an economist from the Harvard Business School. Dr. Porter has wri”en extensively on compe!!ve strategy and compe!!ve advantage and lately has focused on healthcare. His model has five forces of compe!!ve advantage, listed below. The five forces are (Porter, 1980): 1. Barriers to entry: How easy is it to enter the market? If very easy, firms will face increasing compe!!on; if not easy, compe!!on will be low. 2. Bargaining power of suppliers: If there are many suppliers of items, a firm uses that compe!!on keeps input prices low. If there are only one or a few suppliers, the firm may not have the ability to nego!ate input prices. In a hospital, for example, there may be only a few suppliers of implants; therefore, the hospital’s ability to nego!ate price is limited. Likewise, if there is a drug on patent, the ability to nego!ate price is limited. However, there may be other items for which there are many suppliers; and in those cases, the hospital will have the ability to nego!ate price. https://ncuone.ncu.edu/d2l/le/content/251482/printsyllabus/PrintSyllabus Page 3 of 5 MHA-5009 V1: Health Economics (3578369450) – MHA-5009 V1: Health Economics (3578369450) 3/2/21, 5:09 PM Most firms will have a wide range of suppliers with varying levels of bargaining power. 3. Bargaining power of buyers: In healthcare who is the buyer? Thousands of individuals may use your service; but due to health insurance, they could be represented by only a few major players.Discussion: Porters Five Forces of Competition Kaiser Permanente Question There are markets in the United States where only two or three major insurance firms represent 90% of the pa!ents—in this case, they’d have major bargaining power over the healthcare providers. One strategy of healthcare providers to gain bargaining power is to combine together to have the size to compete against insurance firms. 4. The threat of subs!tutes: Are there subs!tutes for your service? Outpa!ent surgical centers now compete with hospitals, urgent care centers with emergency rooms, and at-home services with long-term care facili!es, to name a few. 5. The intensity of Rivalry: Are there many or few compe!tors? If many, what strategies can be used to reduce the compe!!on? References: Porter, M. E. (1980.) Compe!!ve strategy: Techniques for analyzing industries and compe!tors. New York, NY: The Free Press. Investopedia. (n.d.). Monopolis!c compe!!on. Investopedia. (n.d.). Monopoly. Investopedia. (n.d.). Oligopoly. https://ncuone.ncu.edu/d2l/le/content/251482/printsyllabus/PrintSyllabus Page 4 of 5 MHA-5009 V1: Health Economics (3578369450) – MHA-5009 V1: Health Economics (3578369450) 3/2/21, 5:09 PM Investopedia. (n.d.). Monopsony. Investopedia. (n.d.). Perfect compe!!on. Books and Resources for this Week 7 Week 8 – Signature Assignment: Perform a Market Structure Analysis a Healthcare System Assignment Due March 7 at 11:59 PM https://ncuone.ncu.edu/d2l/le/content/251482/printsyllabus/PrintSyllabus Page 5 of 5 Health Services Research © Health Research and Educational Trust DOI: 10.1111/1475-6773.12506 RESEARCH ARTICLE The Effect of Physician and Hospital Market Structure on Medical Technology Diffusion Pinar Karaca-Mandic, Robert J. Town, and Andrew Wilcock Objective. To examine the in?uence of physician and hospital market structures on medical technology diffusion, studying the diffusion of drug-eluting stents (DESs), which became available in April 2003. Data Sources/Study Setting. Medicare claims linked to physician demographic data from the American Medical Association and to hospital characteristics from the American Hospital Association Survey. Study Design. Retrospective claims data analyses. Data Collection/Extraction Methods. All fee-for-service Medicare bene?ciaries who received a percutaneous coronary intervention (PCI) with a cardiac stent in 2003 or 2004. Each PCI record was joined to characteristics on the patient, the procedure, the cardiologist, and the hospital where the PCI was delivered. We accounted for the endogeneity of physician and hospital market structure using exogenous variation in the distances between patient, physician, and hospital locations. We estimated multivariate linear probability models that related the use of a DES in the PCI on market structure while controlling for patient, physician, and hospital characteristics. Principal Findings. DESs diffused faster in markets where cardiology practices faced more competition. Conversely, we found no evidence that the structure of the hospital market mattered. Conclusions. Competitive pressure to maintain or expand PCI volume shares compelled cardiologists to adopt DESs more quickly. Key Words. Market structure, medical technology diffusion Over the last 50 years, innovation in medical technology has been a key driver in improving life expectancy (Cutler and McClellan 2001) and escalating health care costs (Newhouse 1992; Smith, Newhouse, and Freeland 2009).Discussion: Porters Five Forces of Competition Kaiser Permanente Question The evidence suggests that medical technology innovations have been costeffective in improving population health, but the distribution of these gains has been uneven. Several studies have proposed that specialization in intensive treatments can lead to greater treatment variation (Chandra and Staiger 579 580 HSR: Health Services Research 52:2 (April 2017) 2007; Chandra and Skinner 2009; Skinner and Staiger 2009). Overall, the observed geographic variation suggests that new medical technologies are often under- and overutilized, and that the diffusion of medical care technology may not be optimal. Given the large cost and health consequences of over- and underuse, the welfare loss from nonoptimal diffusion of medical technologies is likely signi?cant. The literature on medical technology diffusion dates back to the 1960s (Coleman et al. 1966). Most studies have focused on variations in diffusion across hospitals (Chandra, Malenka, and Skinner 2014) and have primarily looked at hospital-level diffusion of high-cost procedures (Bloom, Hillman, and Schwartz 1991; Fendrick et al. 1994) like magnetic resonance imaging and computed tomography scanners (Banta 1980; Hillman et al. 1984; Hillman and Schwartz 1985; Steinberg, Sisk, and Locke 1985a,b; Baker and Wheeler 1998). However, physicians are the key agent in determining whether a patient receives a given medical technology. This suggests that understanding the forces that affect physician technology adoption is necessary to address disparities in medical technology use. Research on physician technology adoption is scarce, and most studies that do exist have only focused on a limited set of physician characteristics such as age, urban versus rural location, and type of practice (solo/group) (Freiman 1985; Forte et al. 2008; Hollingsworth et al. 2008). In this paper, we examined the role market structure played in the diffusion of new medical technology. In general, market structure describes the number and relative size of providers in a market. The role of provider market structure on medical technology diffusion is unknown, but empirical research from nonhealth care industries has demonstrated that new technology diffusion occurs more quickly in the presence of more competition (Levin, Levin, and Meisel 1987; Seim and Vaiard 2011). Using a 100 percent fee-for-service Medicare population, we investigated the adoption of drug-eluting stents (DESs), a breakthrough medical technology that was introduced into the U.S. market in April 2003 for use in percutaneous coronary intervention (PCI), a common interventional cardiology procedure used to widen constricted coronary arteries. Our focus was Address correspondence to Pinar Karaca-Mandic, Ph.D., School of Public Health, Division of Health Policy and Management, University of Minnesota and NBER, 420 Delaware Street SE, MMC 729, Minneapolis, MN 55455; e-mail: pkmandic@umn.edu. Robert J. Town, Ph.D., is with The Wharton School, Colonial Penn Center, University of Pennsylvania and NBER, Philadelphia, PA. Discussion: Porters Five Forces of Competition Kaiser Permanente Question Andrew Wilcock, M.A., is with the School of Public Health, Division of Health Policy and Management, University of Minnesota, Minneapolis, MN. Market Structure and Medical Technology 581 whether variation in the use of DESs was related to the PCI market structure cardiologists and hospitals faced when the technology was ?rst introduced. BACKGROUND ON DESs AND MARKET I NTRODUCTION Stents are used in PCI. A PCI typically involves the insertion of a catheter from an artery in the groin to a narrowed or blocked artery of the heart. The balloon in?ates and widens the constricted artery, thereby restoring blood circulation to the heart. Traditionally, the main complication of PCI has been restenosis, where the affected artery re-narrows, requiring patients to undergo repeat PCIs (Shih and Berliner 2008). Drug-eluting stents comprised the latest breakthrough in stent technology for PCI. The DES is a stent coated with drugs designed to prevent or slow restenosis (Groeneveld et al. 2008b). At the time of its introduction, the DES was largely considered a signi?cant improvement over other stent technologies for most patients. The Cypher stent (produced by Cordis Corporation, a subsidiary of Johnson & Johnson; Fremont, California, USA) was the ?rst DES approved for use in the United States and was released into the PCI market in April 2003. The new technology spread quickly, and within 6 months, the Cypher stent was being used in 60 percent of all PCIs (Malenka et al. 2008). Cypher controlled the DES market until March 2004 when the Taxus stent (produced by Boston Scienti?c; Marlborough, MA, USA) was approved for use by the FDA. By June 2004, with both DES products on the market, 90 percent of PCI procedures were using the new technology (Rao et al. 2006; Groeneveld et al. 2008a; Malenka et al. 2008). CONCEPTUAL F RAMEWORK AND HYPOTHESES ON MARKET STRUCTURE Providers are interested in delivering quality health services to their patients, but they are also motivated by the pro?tability of those services. While new technology impacts both objectives directly, we conjectured that the returns from adoption are not uniform across different market structures. Markets with more competition over patient volume likely create stronger incentives to develop comparative advantages over rivals to retain or attract patients. Adopting the latest technology is believed to be a strong and apparent signal 582 HSR: Health Services Research 52:2 (April 2017) of care quality, an important factor for patients (or their primary care physicians) deciding over providers. On the other hand, markets with greater competition may also operate under smaller price-cost margins and weaker bargaining positions with payers. This increases the chance that incremental cost differences between old and new technologies will prevent providers from adopting the new technology. These competing notions have a strong theoretical basis. The Fudenberg and Tirole (1985) model predicted that markets with more ?rms will speed up technology adoption by increasing the opportunities for stealing business. The Reinganum (1981) model, on the other hand, predicted that market structure has an ambiguous effect on innovation: more ?rms may increase incentives to adopt technology early to gain a competitive advantage, but more ?rms will also reduce postadoption gains as the incentives will be split across a larger number of agents. The market for PCI with stent technology has several features that allow us to make more de?nitive hypotheses at the cardiologist and hospital level. Acquiring materials for inpatient procedures like PCI is typically an institutional responsibility. This means that it is the hospital that directly faces the incremental supply costs from adoption. As gainsharing agreements between cardiologists and their hospitals were largely nonexistent during our study period (Wilensky, Wolter, and Fischer 2007), we believe cardiologists were not directly sensitive and possibly indifferent about the incremental costs associated with adopting DESs. In addition, cardiologist payments from the Centers for Medicare & Medicaid Services (CMS) did not vary by stent type, meaning there was no ?nancial incentive pushing them to use DES technology. Discussion: Porters Five Forces of Competition Kaiser Permanente Question In the absence of price-cost differences, technology adoption at the cardiologist level would have only been driven by the desire to improve the effectiveness of PCI and the desire to attract patients. It is likely that the pressure to retain or expand PCI volume share following the introduction of a breakthrough stent technology would have been more compelling in PCI markets where patients had more choice over cardiologists. We conjectured that markets with more competition among cardiologists (or cardiology practices) delivering PCI would have experienced faster technology diffusion. This compulsion would hold at the hospital level as well. Hospitals make substantial investment in institutional assets necessary to deliver PCI (i.e., catheterization laboratories), and the relative pro?tability of inpatient cardiology programs. Institutional cardiology programs typically compete for patients through their admitting cardiologists, and by offering the latest stent technology, hospitals could attract cardiologists interested in using DESs. Market Structure and Medical Technology 583 Indeed, surveys suggest that “a new medical arms race” had emerged during this period, in large part to the waning in?uence of managed care and the entry of specialty care hospitals and clinical service lines (Devers, Brewster, and Casalino 2003; Berenson, Bodenheimer, and Pham 2006). We conjectured that DES technology would have diffused faster in these markets with higher competition among hospitals. However, understanding adoption at the hospital level requires more explanation. Unlike cardiologists, the hospital price-cost margin changed with DES. The list price of the ?rst DES technology, the Cypher stent, was $3,195, approximately $2,000 more per stent than bare-metal stent (BMS) technology (Hodgson et al. 2004). While some hospitals received substantial discounts on the list price (Avery et al. 2004), the decision to adopt came with a steep increase in material costs. Because DES was believed to signi?cantly improve the effectiveness of PCI, CMS created two new DRGs that reimbursed hospitals on average $1,800 more per PCI to offset the higher price of the new technology. After adjusting this base amount by geographic location and other factors, the average hospital was believed to have received $2,200 more per PCI under these new DRG codes (Hodgson et al. 2004). This means that inserting a DES over BMS was only slightly more pro?table for the average hospital. Factors such as urban location, charity care, teaching status, and hospital size (e.g., volume discounts) would have improved the price-cost margin on DES, yet many hospitals did not have these advantages.Discussion: Porters Five Forces of Competition Kaiser Permanente Question Therefore, in the case of hospitals, it is ultimately an empirical question whether more competitive market structures were associated with more DES use, supporting our compulsion story, or if more competitive structures were associated with less DES use, supporting the notion that insuf?cient incentives existed in these markets to adopt the new technology. Market structure is only one of several possible reasons for provider variation in DES use. Indeed, differential rate of DES use across cardiologists or hospitals could re?ect a natural heterogeneity in preferences toward new technology and in perceived adoption costs. For example, large hospitals that are more established may possess economies of scale when purchasing DESs, resulting in lower per unit costs. Teaching hospitals, higher quality hospitals, higher volume hospitals, or cardiac intensive care hospitals may have better resources for informing physicians and staff on the bene?ts of DESs. These hospitals also may have received preferential marketing from Cordis or Boston Scienti?c, making DES adoption more likely. Similarly, older physicians, those with longer work history, better reputations, or higher volumes may have more information on the bene?ts of the DES. These more experienced 584 HSR: Health Services Research 52:2 (April 2017) physicians may have been involved in the initial DES clinical trials, making them more informed and comfortable adopting the new technology. Overall, we hypothesized that these physician and hospital heterogeneities, which are likely related to the perceived bene?ts and costs from adopting a new technology, will in?uence DES use. In our analysis of the association between DES adoption and market structure, we controlled for these characteristics to better isolate our relationship of interest. M ETHODS Data Sources and Study Sample Our primary data sources were the Medicare Standard Analytic Files (SAF), the ?nal action claim records submitted by noninstitutional providers. Our study sample included all Medicare Fee-for-Service (FFS) bene?ciaries identi?ed in the Medicare Carrier SAF (Part B or physician claim record) as having received a PCI in either 2003 or 2004. The PCIs were identi?ed in the Carrier SAF using Current Procedural Terminology codes of 92980, 92981, 92982, or 92984. The cardiologist performing the PCI and the cardiologist’s practice were identi?ed on each PCI claim in the Carrier SAF by the performing physician identi?er (UPIN) and the tax-identi?er (TAXNUM). The ZIP code of the performing physician was also identi?ed on each PCI cla … Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10

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